TaxTMI Updates e-Newsletter
Apr 16,2021

Supply - Supply of services under Schedule II Entry 5(e) - agreeing to the obligation to refrain from an act, or to tolerate an act or a situation - Valuation - inclusion of interest or late fee in value of supply under Section 15(2)(d) of the CGST Act, 2017 - Reverse charge liability - Pure agent - exclusions from value of supply under Rule 33 of the CGST Rules, 2017 - Consideration - scope under Section 2(31) of the CGST Act, 2017

Supply of services under Schedule II Entry 5(e) - agreeing to the obligation to tolerate an act - Valuation - inclusion of interest or late fee in value of supply under Section 15(2)(d) - Reverse charge liability - Liability to pay GST on reverse charge on interest charged for late payment of invoices for imported goods, and the rate applicable. - HELD THAT: - The Authority held that interest charged by the foreign supplier for delayed payment of import invoices constitutes a supply of services falling under Entry 5(e) of Schedule II (agreeing to tolerate an act or situation). Further, Section 15(2)(d) expressly includes 'interest or late fee or penalty for delayed payment' in the value of supply. As the interest is connected to the imported goods and forms part of the consideration, GST is leviable on such interest. The rate of tax on the interest is to follow the rate applicable to the imported goods; accordingly, the GST on the interest shall be the same as the IGST rate applicable to those goods. [Paras 8]

The applicant is liable to pay GST on reverse charge basis on interest for late payment; the rate is the same as the IGST rate applicable to the imported goods.

Pure agent - Rule 33 CGST Rules, 2017 - Consideration - Section 2(31) - Valuation - exclusion from value of supply under Rule 33 - Reverse charge liability - Whether reimbursement of stamp tax paid by the foreign supplier as alleged 'pure agent' is excluded from the value of supply or is liable to GST on reverse charge basis. - HELD THAT: - The Authority examined Rule 33 and its Explanation and the definition of 'consideration' in Section 2(31). It found that exclusion under Rule 33 applies only if all conditions in Rule 33(i)-(iii) and Explanation (a)-(d) are satisfied. The applicant failed to produce a contractual authorisation showing the supplier acted as a pure agent, did not show that the reimbursed amount was separately indicated in the invoice for the supply of goods, and could not demonstrate that the supplies procured were additional to services supplied by the supplier on its own account. Documentary evidence to prove absence of mark-up (such as financial records) and English translations of foreign documents were not furnished; a mere supplier letter and receipt were insufficient. The Authority therefore concluded that the supplier does not satisfy the conditions of a 'pure agent' and that the reimbursed stamp tax forms part of the consideration for the supply and is taxable. Consequently, GST is payable on reverse charge basis on the reimbursement amount. [Paras 9]

The reimbursement of stamp tax paid by the supplier is not excluded under Rule 33 and is liable to GST on reverse charge basis.

Final Conclusion: The Authority ruled that (i) GST is payable on reverse charge basis on interest charged for late payment of import invoices, at the IGST rate applicable to the imported goods; and (ii) reimbursement paid to the foreign supplier for stamp tax is part of the consideration and is taxable on reverse charge, since Rule 33 conditions for 'pure agent' exclusion were not satisfied on the available record.

Renewable energy devices & parts for their manufacture - interpretation of Tariff heading and sub heading - integral part of a capital/plant system - self assessment and requisite documentary satisfaction for concessional rate - deemed bifurcation of value of goods and services for mixed supplies

Interpretation of Tariff heading and sub heading - renewable energy devices & parts for their manufacture - Whether the XLPE cables supplied by the applicant fall under Sub heading 8544 of Chapter 85 and thereby satisfy the chapter requirement of Entry 234 of Schedule I. - HELD THAT: - The Authority examined Sub heading 8544 of Chapter 85 of the First Schedule to the Customs Tariff Act, 1975 and found that insulated wire and cables are covered by sub heading 8544. On that basis the Authority was satisfied that the first condition for invoking Entry No.234 - viz., that the goods fall under Chapter 84, 85 or 94 - is met in respect of the XLPE cables manufactured by the applicant. [Paras 14]

XLPE cables are covered by Sub heading 8544 of Chapter 85.

Renewable energy devices & parts for their manufacture - integral part of a capital/plant system - self assessment and requisite documentary satisfaction for concessional rate - deemed bifurcation of value of goods and services for mixed supplies - Whether supply of the applicant's XLPE cables to solar power projects is liable to GST at the concessional rate of 5% under Entry No.234 of Schedule I, having regard to (a) their use as parts of a Solar Power Generating System and (b) whether the transaction includes taxable services requiring value bifurcation. - HELD THAT: - The Authority accepted that XLPE cables form an integral part of a Solar Power Generating System based on the technical write up and functional role of cables in the system. However, to determine applicability of Entry No.234 at 5% the supplier must satisfy the documentary requirements (supply contracts/orders or equivalent) as contemplated in CBIC Circular No.80/54/2018 GST. The amendment to Entry No.234 and insertion of Serial No.38 in Notification No.8/2017 (effective 01.01.2019) introduces an explanation providing for a deemed bifurcation of the gross consideration where goods are supplied along with services covered by Serial No.38 - 70% being deemed as value of goods (taxable at concessional rate) and 30% as value of services (taxable at the prescribed rate for such services). The amendment thus requires examining the contract to ascertain whether the present supplies are accompanied by taxable services (construction/engineering/installation/technical services) and, if so, to apply the deemed bifurcation. The applicant failed to produce the contract/agreement/tender originally sought; only an amendment to the purchase order and email correspondence were furnished. Absent the contract and related documents, the Authority could not determine whether the transaction is pure supply of goods to which Entry No.234 applies or a composite/mixed supply requiring valuation split under the explanation. [Paras 15, 16, 17]

Not finally adjudicated; determination of applicability of 5% under Entry No.234 and, where relevant, the application of deemed bifurcation for goods and services cannot be made in view of non submission of the contract/agreement/tender and related documents.

Final Conclusion: The Authority held that the XLPE cables fall under Sub heading 8544 (Chapter 85). However, it declined to rule on the substantive question whether the supplies attract the concessional 5% rate under Entry No.234 because the applicant did not produce the contract/agreement/tender and other documents necessary to determine whether the supplies are goods only or are supplied along with taxable services (which, after 01.01.2019, require deemed bifurcation of value). Consequently no final ruling on the 5% applicability was given.

Classification under the Customs Tariff/HSN - Beverages containing milk - Exclusion of beverages from Chapter 04 - Definition of "milk" (Note 1 to Chapter 4) - HSN Explanatory Notes - Advance Ruling under GST

Classification under the Customs Tariff/HSN - Beverages containing milk - Exclusion of beverages from Chapter 04 - Definition of "milk" (Note 1 to Chapter 4) - HSN Explanatory Notes - Classification of the applicant's flavoured milk (Power Sip). - HELD THAT: - The Authority examined the product composition and manufacturing process and applied the Section/Chapter Notes and Explanatory Notes of the First Schedule to the Customs Tariff (HSN). Note 1 to Chapter 4 defines "milk" as full cream or partially/completely skimmed milk, but the HSN Explanatory Notes to heading 0402 expressly exclude "beverages consisting of milk flavoured with cocoa or other substances" from CTH 0402. The product in question is a ready-for-consumption drink, flavoured and sweetened milk marketed for direct consumption. It does not fall within CTH 0402 because beverages based on milk are excluded by the Explanatory Notes, and it is not properly classifiable under CTH 0404. The Explanatory Notes to Chapter 22 (heading 2202) cover "other non-alcoholic beverages" including beverages with a basis of milk and list "beverages containing milk" under tariff item 2202 99 30. The Authority placed weight on prior Advance Rulings and the GST Council record which treated flavoured milk as classifiable under HS 2202. Applying the rules for interpretation of the First Schedule and the HSN Explanatory Notes, the Authority concluded that the product is a beverage with a basis of milk and falls within tariff item 2202 99 30. [Paras 12, 14]

Flavoured milk sold as Power Sip is classifiable under Tariff Item 2202 99 30 (beverages containing milk).

Final Conclusion: The Advance Ruling records that the applicant's flavoured milk (Power Sip) is a "beverage containing milk" and is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975.

Advance Ruling - Applicability of a notification - Classification of construction services - Composite supply of works contract - Sub-contractor to main contractor - Prospective operation of statutory amendment - Effective date of notification

Composite supply of works contract - Sub-contractor to main contractor - Applicability of a notification - Effective date of notification - Prospective operation of statutory amendment - Whether work-contract services supplied by the applicant as a sub-contractor were taxable at 12% for the period prior to 25.01.2018. - HELD THAT: - The Authority examined the entries in Notification No. 11/2017-CT (Rate) dated 28.06.2017 and the amendment effected by Notification No. 01/2018-CT (Rate) dated 25.01.2018 which inserted specific entries dealing with composite supply of works contract provided by a sub-contractor to a main contractor supplying services to government or government entities. The amended entry prescribing the lower rate was inserted by a notification issued and published on 25.01.2018. An amendment by notification is prospective in absence of an express clarificatory provision and takes effect from the date of its issue/publication in the Gazette. Reliance was placed on the settled proposition that a notification takes effect from its publication in the Official Gazette. Applying these principles, the Authority held that the 12% rate introduced by Notification No. 01/2018 applies from 25.01.2018 and not for periods prior to that date. [Paras 23, 24, 25, 26]

The services supplied by the applicant as a sub-contractor are not taxable at 12% for the period prior to 25.01.2018; the 12% rate is effective from 25.01.2018.

Final Conclusion: Advance Ruling: The amendment inserting the sub-contractor entries and prescribing GST at 12% took effect from the date of the notification, 25.01.2018; therefore the applicant's sub-contractor services are not chargeable at 12% for the period prior to 25.01.2018.

Classification of electrical transformers under Chapter Heading 85 / Tariff Heading 8504 - eligibility as "solar power generating system" device or parts for their manufacture under Entry No. 234 of Schedule I - deemed bifurcation of gross consideration (70% goods : 30% services) - applicability of Entry No. 38 for services related to setting up of solar power generating system - composite/indivisible contract for supply of goods and provision of related services - effective combined GST rate by application of deemed value bifurcation

Classification of electrical transformers under Chapter Heading 85 / Tariff Heading 8504 - eligibility as "solar power generating system" device or parts for their manufacture under Entry No. 234 of Schedule I - Whether the Aluminium Foil Type Winding Inverter Duty Transformer and its parts are covered by Entry No. 234 (renewable energy devices & parts) and satisfy the description of parts of a Solar Power Generating System. - HELD THAT: - The Authority found that the impugned Inverter Duty Transformer falls under Tariff Heading 8504 and that its function and features (including inverter-duty design, multiple windings, galvanic isolation and role in photovoltaic installations) make it an essential component of a Solar Power Generating System. The Authority relied on common parlance description of solar systems and prior excise jurisprudence recognizing components and sub-assemblies as parts of a solar power plant to conclude that the transformer and its parts satisfy the description in Entry No. 234 and thereby qualify as renewable energy devices/parts for their manufacture. [Paras 25, 26]

The transformer and its parts are covered by Entry No. 234 as devices/parts of a Solar Power Generating System.

Composite/indivisible contract for supply of goods and provision of related services - deemed bifurcation of gross consideration (70% goods : 30% services) - applicability of Entry No. 38 for services related to setting up of solar power generating system - effective combined GST rate by application of deemed value bifurcation - Whether the Explanation to Entry No. 234 (deeming 70% of gross consideration as goods and 30% as service) applies despite separate purchase orders for goods and for supervision/services, so that GST liability must be determined on the deemed bifurcated value. - HELD THAT: - The Authority examined the Purchase Orders and the single Technical Specification which together show an integrated scope covering design, engineering, manufacture, testing, supply, transit and supervision of erection, testing and commissioning. Although the buyer issued separate P.O.s for supply and for supervision, the technical specification and contract clauses demonstrate that the supplies of goods and services are inextricably linked and form one indivisible contract for setting up the transformer. Both conditions for invocation of the Explanation were satisfied: (i) the goods supplied are covered by Entry No. 234 and (ii) taxable services related to setting up a solar power generating system (Entry No. 38) were supplied along with the goods. Consequently the Explanation inserted by Notification No. 24/2018 (w.e.f. 01.01.2019) applies, mandating a deemed bifurcation of the gross consideration into 70% for goods and 30% for services, and taxation accordingly at 5% on the deemed goods value and 18% on the deemed services value. [Paras 29, 30, 31, 32, 33]

The Explanation to Entry No. 234 applies; the gross consideration is to be deemed 70% on account of goods and 30% on account of services, and GST is payable accordingly.

Final Conclusion: The Authority ruled that the Aluminium Foil Type Winding Inverter Duty Transformer and its parts qualify as parts of a Solar Power Generating System under Entry No. 234 and, because the supply of goods and related taxable services are indivisible, the Explanation to Entry No. 234 applies. The gross consideration must be deemed 70% for goods and 30% for services, with tax charged at 5% on the goods portion and 18% on the services portion, yielding an effective combined rate of 8.9%.

Classification of flavoured milk - beverage containing milk - exclusion of beverages with a basis of milk from Chapter 04 - application of HSN explanatory notes for tariff interpretation - inapplicability of PFA/other food standards where HSN is unambiguous

Exclusion of beverages with a basis of milk from Chapter 04 - application of HSN explanatory notes for tariff interpretation - Flavoured milk is not classifiable under Chapter 04 (CTH 0402 or 0404). - HELD THAT: - Comparing the product composition and presentation with the CTH 0402 and 0404 Explanatory Notes, the Authority found that beverages consisting of milk flavoured with cocoa or other substances are specifically excluded from CTH 0402. The product at hand is a ready to consume drink with added sugar, flavours and marketed as beverages; it does not fall within the descriptions covered by CTH 0402 or as whey/products lacking natural milk constituents under CTH 0404. Accordingly, the flavored milk is not classifiable under either CTH 0402 or CTH 0404. [Paras 14, 15]

Not classifiable under CTH 0402 or CTH 0404.

Beverage containing milk - classification of flavoured milk - application of HSN explanatory notes for tariff interpretation - Flavoured milk is classifiable under Tariff Item 2202 99 30 as a 'beverage containing milk'. - HELD THAT: - The Authority applied the Explanatory Notes to Heading 22.02 and concluded that 'other non alcoholic beverages' include ready to consume beverages with a basis of milk. Flavoured milk, being directly consumable and prepared by adding sweeteners and flavours to standardized milk, falls within the description of beverages containing milk under CTH 2202.99.30. The Authority also relied on prior administrative decisions and the GST Council record recognising flavoured milk under HS code 2202 to support the classification. [Paras 17, 18, 20]

Classifiable under Tariff Item 2202 99 30 as a beverage containing milk.

Inapplicability of PFA/other food standards where HSN is unambiguous - classification of flavoured milk - PFA standards and other food safety specifications cannot be transposed to alter tariff classification where the HSN and its explanatory notes are clear. - HELD THAT: - The applicant's reliance on PFA standards and prior Central Excise precedents concerning the nature of milk (e.g., skimmed/partly skimmed) was examined. The Authority held that when the Customs Tariff (HSN) and its Explanatory Notes unambiguously describe the scope of Chapter 04 and Chapter 22, it is not proper to import standards from the PFA or treat those standards as decisive for tariff classification. Consequently, PFA norms were not applied to re characterise the product under Chapter 04. [Paras 16, 17]

PFA/other food standards are not applied to override the HSN explanatory notes where the tariff classification is unambiguous.

Final Conclusion: The Authority ruled that the applicant's flavoured milk products are not classifiable under Chapter 04 (CTH 0402/0404) but are classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975 as 'beverages containing milk'.

Confiscation of goods under Section 130 for unaccounted stock - Fine in lieu of confiscation under Section 130(2) - Penalty for failure to maintain accounts and for storing goods liable to confiscation under Section 122 - Imposition of penalty on person aiding or abetting under Section 122(3) - Maintenance of accounts obligation under Section 35 and Rule 56 - Admissibility of statements recorded under Section 70 as substantive evidence

Confiscation of goods under Section 130 for unaccounted stock - Admissibility of statements recorded under Section 70 as substantive evidence - Maintenance of accounts obligation under Section 35 and Rule 56 - Seized finished goods found in excess of book records were liable to confiscation; in view of earlier release of goods, fine in lieu of confiscation was imposed. - HELD THAT: - The adjudicating authority's finding that the excess goods were not deliberately kept unaccounted was reversed. The appellate authority accepted the visiting officers' physical verification which showed excess stock against entries in stock registers, and placed weight on contemporaneous statements of the accountant, manager and partner recorded under Section 70. Those statements disclosed non maintenance and back calculation of production/stock and admission of clandestine practices (the so called 'kachha system'), which the authority treated as substantive evidence. The adjudicating authority had not independently examined the books and the genuineness of records relied upon by the assessee and had given undue credence to later post search submissions; these defects led the appellate authority to hold that the statutory ingredients of Section 130(1)(ii) and (iv) were satisfied. Because the goods had already been released by the adjudicating order, confiscation could not be effected and, accordingly, a fine in lieu of confiscation was imposed under Section 130(2).

Seizure found justified; confiscation ordered but, goods having been released, a fine in lieu of confiscation was imposed.

Penalty for failure to maintain accounts and for storing goods liable to confiscation under Section 122 - Maintenance of accounts obligation under Section 35 and Rule 56 - Penalty under Section 122(1)(xvi) and (xviii) was imposable on the assessee firm for failure to maintain proper accounts and for having goods liable to confiscation. - HELD THAT: - The appellate authority concluded that the assessee had not maintained proper stock records as required by Section 35 and Rule 56; production entries were not up to date and stock was not reflected in books contemporaneously. In light of the physical excess stock and admissions in statements recorded at the time of search, the authority found that the conditions for penalties for failure to keep/maintain books (clause (xvi)) and for supplying/transporting/storing goods liable to confiscation (clause (xviii)) were fulfilled. The adjudicating authority's reliance on the assessee's post search completion of books without sufficient verification of genuineness was rejected, and penalty was imposed on the firm.

Penalty under Section 122(1)(xvi) and (xviii) upheld and imposed on the assessee firm.

Imposition of penalty on person aiding or abetting under Section 122(3) - Admissibility of statements recorded under Section 70 as substantive evidence - Penalty under Section 122(3) was imposable on the partner who was found to be a key person involved in the affairs of the firm. - HELD THAT: - The authority examined Section 122(3), which penalises persons who aid, abet or otherwise deal with goods they know or have reason to believe are liable to confiscation. The partner was found to be a key person handling the firm's affairs; his statement recorded during search admitted lapses and endorsed other employees' statements. On this basis the appellate authority held the partner could not be excluded from liability and imposed the prescribed penalty under Section 122(3).

Penalty under Section 122(3) imposed on the partner of the firm.

Final Conclusion: The appellate authority allowed the departmental review appeal in part: it held the seized goods to be liable to confiscation under Section 130 (but imposed a fine in lieu since the goods had already been released), and upheld imposition of penalties on the assessee under Section 122(1)(xvi) and (xviii) and on the partner under Section 122(3).

Reopening of assessment - applicability of CBDT Circular No.09/2014 - amortization of BOT project expenditure - deduction under Section 80IA - escapement of income/tax - reasoned order after opportunity of hearing - remand for fresh consideration

Escapement of income/tax - deduction under Section 80IA - reasoned order after opportunity of hearing - remand for fresh consideration - Impugned order quashed for failing to consider whether reassessment based on alleged escapement of income was negated or affected by the assessee's entitlement to deduction under Section 80IA; matter remanded for fresh reasoned decision after hearing. - HELD THAT: - The Court found that the objection order disposing of reopening under Sections 147-150 did not address the specific question whether there could be an escapement of tax given the assessee's entitlement to deduction under Section 80IA. As the reassessment proceedings were premised on escapement of income, the Commissioner ought to have examined tax neutrality arising from the 80IA deduction (noting that the year in question was the last year of the ten-year 80IA benefit). The Court declined to decide the applicability of CBDT Circular No.09/2014 on the merits. Because the determinative question of escapement linked to 80IA remained unanswered, the impugned order was set aside and the matter remanded to the Commissioner to pass a further reasoned order after granting the petitioner an opportunity of hearing and to deal with all points including the effect of the 80IA deduction on alleged escapement.

Impugned order quashed and set aside; matter remanded to the Commissioner to decide, after hearing, whether escapement of tax arises in view of deduction under Section 80IA and to pass a reasoned order addressing all points.

Final Conclusion: Writ petition disposed of by quashing the objection order; Commissioner of Income Tax directed to grant hearing and pass a fresh reasoned order dealing inter alia with whether alleged escapement of tax survives in view of the assessee's deduction under Section 80IA for assessment year 2015-16.

Deduction under Section 80P of the Income Tax Act - treatment of co-operative banks for tax exemption - liberal construction of benevolent tax exemptions - pre-deposit requirement for stay of demand - stay of recovery pending determination of statutory appeal

Deduction under Section 80P of the Income Tax Act - treatment of co-operative banks for tax exemption - pre-deposit requirement for stay of demand - stay of recovery pending determination of statutory appeal - Whether the appellate authority should be directed to decide the pending statutory appeal without insisting on payment of the mandatory pre-deposit and whether recovery under the assessment order should be stayed pending disposal of the appeal. - HELD THAT: - The petition concerned rejection of the assessee's claim of deduction under Section 80P in the assessment order and the Assessing Officer's communication that the petition for stay was rejected for non-payment of the mandatory 20% pre-deposit. The Court relied on the observation of the Honourable Supreme Court in Mavilayi Service Co-operative Bank Ltd. emphasizing that Section 80P is a benevolent provision to be read liberally in favour of the assessee and clarifying the scope of the provision as it applies to co-operative societies engaged in banking business. Applying that reasoning, and having regard to earlier decisions of this Court in similar matters, the Court held that the appellate authority should not insist upon pre-deposit/payment of tax as a condition for entertaining the statutory appeal and directed the 2nd respondent to decide the appeal expeditiously. Pending disposal of the appeal, the Court deferred recovery under the assessment order. The directions flow from the legal principle that benefit of a concessional provision must be given effect to and that insistence on pre-deposit in such cases would be inappropriate where the entitlement is arguable and governed by the Supreme Court's interpretation. [Paras 5, 6, 7]

The appellate authority is directed to decide the pending appeal expeditiously and recovery under the assessment order is stayed until disposal of the appeal.

Final Conclusion: The petition is disposed of by directing the appellate authority to decide the statutory appeal expeditiously and by deferring recovery under the assessment order until the appeal is disposed of.

Power of Assessing Officer under Section 220(6) to treat assessee as not being in default - requirement of a speaking order when disposing stay applications under Section 220(6) - trinity test of prima facie case, financial hardship and balance of convenience in stay applications - administrative instructions and circulars as guidelines (Instruction No.1914 / OM dated 29.02.2016 and 31.07.2017) - Instruction No.95 (21.08.1969) held to have ceased to exist by Board letter dated 01.12.2009 - Assessing Officer's discretion to fix deposit lower than 20% in appropriate cases as clarified by Supreme Court

Requirement of a speaking order when disposing stay applications under Section 220(6) - power of Assessing Officer under Section 220(6) to treat assessee as not being in default - Validity of the Assessing Officer's order under Section 220(6) which was non-speaking - HELD THAT: - The Court found the impugned order under Section 220(6) to be absolutely non-speaking. While acknowledging that the petition filed by the assessee was itself brief, the statutory provision and Board instructions require the assessing officer to consider relevant factors and communicate a reasoned decision. In exercise of the quasi-judicial power under Section 220(6) the AO must apply relevant principles and pass an order setting out reasons, not a perfunctory communication; failure to do so renders the order unsustainable. [Paras 13]

The impugned non-speaking order under Section 220(6) is set aside.

Instruction No.95 (21.08.1969) held to have ceased to exist by Board letter dated 01.12.2009 - administrative instructions and circulars as guidelines (Instruction No.1914 / OM dated 29.02.2016 and 31.07.2017) - Whether failure to refer Instruction No.95 (1969) vitiates the order of the Assessing Officer - HELD THAT: - The Court examined the provenance of Instruction No.95 (1969) and noted the Board's letter dated 01.12.2009 which clarified that Instruction No.95 has ceased to exist and that Instruction No.1914 (1993) continues to be operative. Consequently, non-reference to Instruction No.95 cannot be said to vitiate the AO's order. Nonetheless, the AO remains bound to follow the presently applicable guidelines (including Instruction No.1914 and subsequent OMs) which require consideration of relevant factors and issuance of a speaking order. [Paras 7, 10]

Failure to refer Instruction No.95 does not vitiate the order; the assessing officer must, however, apply the currently operative instructions and pass a reasoned order.

Trinity test of prima facie case, financial hardship and balance of convenience in stay applications - Assessing Officer's discretion to fix deposit lower than 20% in appropriate cases as clarified by Supreme Court - administrative instructions and circulars as guidelines (Instruction No.1914 / OM dated 29.02.2016 and 31.07.2017) - Directions for fresh consideration of the petition under Section 220(6) and parameters to be applied on remand - HELD THAT: - The Court directed that the matter be remitted to the assessing officer to decide afresh. The AO must consider the petition in light of the appeal memorandum and apply the established parameters (existence of a prima facie case, financial stringency/irreparable hardship, and balance of convenience). The AO may impose conditions including security or reasonable deposits or instalments and must state reasons for any such condition. The Court also noted the Supreme Court's clarification that authorities may, on facts, order deposits lower than 20% and that higher deposits require reference to supervisory authorities. The assessee was permitted to file a supplementary petition with additional particulars; all contentions are to be considered by the AO. [Paras 8, 9, 12, 15]

Matter remitted to the Assessing Officer to decide the Section 220(6) petition afresh in accordance with law and applicable instructions; petitioner may file supplementary particulars.

Final Conclusion: The non-speaking order passed by the Assessing Officer under Section 220(6) is set aside. Failure to refer Instruction No.95 (1969) does not invalidate the order in view of the Board's 2009 letter; however, the Assessing Officer must follow the presently operative guidelines and the trinity test (prima facie case, financial hardship, balance of convenience), may impose reasoned conditions (including deposits, which may be lower than 20% on facts), and is directed to decide the petition afresh after affording opportunity to the petitioner to file supplementary particulars.

Deemed dividend under Section 2(22)(e) of the Income-tax Act - jurisdiction to invoke Section 153C of the Income-tax Act - Respondent may support order on grounds decided against him (Rule 27, Appellate Tribunal Rules, 1963) - condonation of delay / sufficient cause for delay - remand for fresh consideration of jurisdictional compliance

Jurisdiction to invoke Section 153C of the Income-tax Act - Respondent may support order on grounds decided against him (Rule 27, Appellate Tribunal Rules, 1963) - Assessees could raise before the ITAT the question of non-fulfillment of jurisdictional parameters for initiating proceedings under Section 153C even without filing cross-objections. - HELD THAT: - The Court held that where the CIT(A) had decided the matter in favour of the assessees and the Revenue alone appealed, the assessees as respondents were entitled under Rule 27 to support the favourable order and to urge that the jurisdictional preconditions of Section 153C were not satisfied, without the necessity of filing cross-objections. The Court relied on authorities and procedural analogies (including Order XLI Rule 22 CPC as applied by the Supreme Court) to conclude that insisting on cross-objections in such circumstances would render Rule 27 otiose and improperly deprive the respondent of the right to support a decree in its favour by challenging findings adverse to it. The Court therefore answered the additional substantial question of law in favour of the assessees and against the Revenue, holding that the ITAT ought not to have precluded the assessees from raising the jurisdictional issue for want of cross-objections. [Paras 31, 34, 36, 37, 38]

Assessees need not file cross-objections to raise the jurisdictional compliance issue under Section 153C when they seek to support the CIT(A)'s favourable order; ITAT erred in precluding them.

Condonation of delay / sufficient cause for delay - jurisdiction to invoke Section 153C of the Income-tax Act - The assessees established sufficient cause for condonation of the delay in filing cross-objections and the ITAT erred in refusing condonation by relying on irrelevant considerations. - HELD THAT: - The Court applied the established principles requiring a liberal approach to condonation of delay (noting that the length of delay is not decisive and that absence of mala fides or dilatory intent is controlling). It observed that the ITAT focused improperly on why the assessees had not raised the jurisdictional issue earlier rather than on whether the explanation for the 248-day delay in filing cross-objections constituted sufficient cause. Given that the CIT(A) order was entirely in the assessees' favour and that the assessees sought to support that order, the Court held that the ITAT should have considered the explanation and the authorities favouring liberal condonation and that the ITAT's refusal amounted to a misapplication of the relevant legal principles. [Paras 40, 41, 42, 43, 48]

Sufficient cause was shown for condonation of the 248-day delay; ITAT's refusal to condone was unsound.

Remand for fresh consideration of jurisdictional compliance - jurisdiction to invoke Section 153C of the Income-tax Act - The ITAT's impugned order is set aside insofar as it precluded the assessees from raising the Section 153C jurisdictional issue; the matter is remanded to the ITAT for fresh consideration with directions to permit the assessees to raise that issue and for full opportunity to both parties. - HELD THAT: - Although the High Court decided that assessees could raise the jurisdictional challenge without cross-objections and that sufficient cause existed for condonation, it did not itself adjudicate whether the jurisdictional parameters under Section 153C were in fact fulfilled. The Court noted that the departmental representative before the ITAT had offered to produce additional material and that factual verification might be required. In the interest of allowing the ITAT to examine the jurisdictional facts and any additional material, the High Court remanded the appeals to the ITAT with directions to admit the assessees' challenge and to consider all contentions afresh, expressly keeping other issues open. [Paras 49, 50, 51, 52]

Impugned ITAT order set aside insofar as it barred the assessees; matters remanded to ITAT to permit raising and adjudication of the Section 153C jurisdictional issue.

Final Conclusion: The appeals are allowed in part: the High Court held that the assessees could raise the question of non-compliance with Section 153C without filing cross-objections and that sufficient cause existed to condone the delay; the impugned ITAT order is set aside to the extent it precluded the assessees, and the matters are remanded to the ITAT for fresh consideration of the jurisdictional issue with all parties given full opportunity; other contentions are left open.

Condonation of delay under Section 119(2)(b) of the Income Tax Act - Writ jurisdiction to challenge refusal to accept belated return - Justice-oriented and lenient approach in exercise of discretionary powers - Remand for reconsideration without adjudication on merits

Condonation of delay under Section 119(2)(b) of the Income Tax Act - Justice-oriented and lenient approach in exercise of discretionary powers - Remand for reconsideration without adjudication on merits - Order refusing to condone the delay in filing the return for the assessment year 2015-16 was set aside and the matter remanded for reconsideration. - HELD THAT: - The Court found the ratio of the precedents relied upon by the petitioner to be applicable and held that the revenue authority adopted an unduly pedantic approach in refusing to condone the delay. The order dated 25th August, 2020 was set aside and the Principal Chief Commissioner of Income Tax (International Taxation) was directed to reconsider the petitioner's application for condoning the delay and accepting the return for assessment year 2015-16. The Court did not decide the merits of the condonation application; the direction is limited to fresh consideration in a justice-oriented and lenient manner within a specified timeframe. The petitioner was directed to communicate the Court's order to the authority, which must decide the matter within two months from being approached.

Order refusing condonation of delay for AY 2015-16 set aside; matter remanded to the Principal Chief Commissioner (International Taxation) for fresh, justice-oriented consideration within two months; merits not adjudicated.

Final Conclusion: The writ petition is allowed to the extent that the impugned order refusing condonation of delay for assessment year 2015-16 is set aside and the matter is remitted for fresh consideration by the Principal Chief Commissioner (International Taxation) within two months; no adjudication on merits and no order as to costs.

Reopening of assessment under section 147 of the Income-tax Act - Validity of notice issued under section 148 of the Income-tax Act - Applicability of section 153C prior to its amendment and jurisdictional scope - Borrowed satisfaction and requirement of independent application of mind - Change of opinion as a ground for reopening assessment - Admissibility and evidentiary value of loose papers/seized documents in search proceedings - Application of section 68 - unexplained cash credits

Reopening of assessment under section 147 of the Income-tax Act - Validity of notice issued under section 148 of the Income-tax Act - Applicability of section 153C prior to its amendment and jurisdictional scope - Borrowed satisfaction and requirement of independent application of mind - Change of opinion as a ground for reopening assessment - Assessee's challenge to the validity of reopening the completed assessment (notice under section 148 and proceedings under section 147) was dismissed and the Tribunal upheld the jurisdiction of the Assessing Officer. - HELD THAT: - The Tribunal examined three principal contentions raised by the assessee: (i) that jurisdiction, if any, should have arisen only under section 153C (pre-amendment) and not under section 147; (ii) that the AO's reasons rested on a 'borrowed satisfaction' based solely on material from the searched person without independent application of mind; and (iii) that the reassessment amounted to an impermissible change of opinion. The Tribunal found that (i) no express satisfaction was recorded by the AO of the searched person that the seized documents 'belonged to' the assessee so as to trigger section 153C, and therefore the AO was entitled to proceed under section 147 after fulfillment of statutory conditions; (ii) the reasons recorded and the pre-verification steps conducted by the AO showed that he analyzed the seized material and undertook verification against the assessee's records before forming a prima facie belief, so the satisfaction was not merely 'borrowed' but an independent belief reached after application of mind; and (iii) the seized material, discovered after completion of the original assessment, introduced new facts and was relevant to form a prima facie belief of escapement of income-final proof is not required at the reopening stage and a mere past examination does not bar reopening where fresh incriminating material emerges. On these bases the Tribunal agreed with the CIT(A) that the jurisdictional action under sections 148/147 was valid and dismissed the assessee's challenge. [Paras 14]

Objection to assumption of jurisdiction under sections 147/148 dismissed; reopening held valid.

Application of section 68 - unexplained cash credits - Admissibility and evidentiary value of loose papers/seized documents in search proceedings - Addition of Rs. 4 crore as unexplained cash credit under section 68 was found unsustainable and the addition was deleted. - HELD THAT: - On merits the Tribunal reviewed the AO's reliance on loose papers and an unaccounted 'day cash book' seized from the searched person and the statement of the searched person's accountant. The Tribunal noted that the seized documents were not part of the assessee's regular books, that the accountant's statement only stated he wrote entries on directions of the searched person's principals and did not have knowledge of the source of cash, and that no meaningful inquiry was made of the key persons of the searched group whose evidence could have provided direct corroboration. The AO failed to establish a proximate nexus or cogent corroborative evidence to show that the assessee paid cash to the searched person and received banking credits as accommodation entries. Further, the assessee's books disclosed prior advances and repayments which provided an alternative and plausible explanation for the bank receipt. Given the lack of direct or reliable circumstantial evidence shifting the onus onto the assessee, the Tribunal concurred with the CIT(A) that the addition under section 68 lacked rational basis and was rightly deleted. [Paras 15]

Addition under section 68 deleted; reassessment addition unsustainable on the evidence.

Final Conclusion: The Tribunal dismissed the assessee's challenge to the reopening (sections 148/147) and concurrently upheld the CIT(A)'s deletion of the addition of Rs. 4 crore under section 68; both the Revenue's appeal and the assessee's cross-appeal were dismissed and the cross-objection by the assessee was rendered infructuous.

Section 56(2)(viib) - deeming fiction - amalgamation under court-approved scheme - share issued at face value - capital reserve not share premium - Accounting Standard AS-14 - object and purpose of taxing share premium - tripartite nature of consideration in amalgamation - interpretation in light of explanatory memorandum, budget speech and CBDT circular - interaction with section 47(vii)

Section 56(2)(viib) - amalgamation under court-approved scheme - share issued at face value - capital reserve not share premium - deeming fiction - object and purpose of taxing share premium - Whether the deeming provision in Section 56(2)(viib) applies to shares issued at face value by an amalgamated company pursuant to a court approved scheme of amalgamation where net assets of the amalgamating company exceed the nominal value of shares issued and a capital reserve (by way of revaluation) is credited in the books. - HELD THAT: - The Tribunal held that Section 56(2)(viib) does not apply to the facts of this case. The provision was inserted to tax disproportionate share premium received by closely held companies and to deter conversion of unaccounted money into share capital; it taxes consideration received for issue of shares that exceeds face value and thereafter only the excess over fair market value. In the present case shares were issued at face value pursuant to a court approved amalgamation scheme and no consideration in cash or share premium was received by the issuing company from subscribers. The excess numerical difference arose from revaluation of land accounted as capital reserve under Accounting Standard AS 14 and the scheme; such capital reserve is not a share premium or consideration for issue of shares. The deeming fiction in Section 56(2)(viib) must be confined to its purpose and cannot be extended to import another fiction to cover court supervised amalgamations where the issue of shares operates as discharge of consideration under the scheme. The statutory proviso and the scheme of the Act (including the exemption for transfers on amalgamation under section 47(vii)) support the view that the clause was not intended to reach tripartite vesting arrangements in amalgamation. Contemporaneous legislative material (explanatory memorandum, Finance Minister's speech and CBDT circular) confirms that the provision targets unjustified share premiums and not notional gains on revaluation in amalgamation accounted as capital reserve. On these grounds the CIT(A)'s deletion of the addition under Section 56(2)(viib) was held to be correct. [Paras 10, 11, 12, 13]

Section 56(2)(viib) is not attracted by shares issued at face value pursuant to the court approved amalgamation; the addition made under that clause is deleted.

Final Conclusion: The Revenue's appeal and the assessee's cross objection are dismissed; the first appellate order deleting the addition under Section 56(2)(viib) is confirmed.

Section 68 unexplained cash credit - identity, creditworthiness and genuineness of shareholders - initial onus on assessee and shift of burden to Revenue - proof by banking channel and documentary evidence - requirement of investigation/verification by Assessing Officer

Section 68 unexplained cash credit - identity, creditworthiness and genuineness of shareholders - initial onus on assessee and shift of burden to Revenue - proof by banking channel and documentary evidence - requirement of investigation/verification by Assessing Officer - Addition under section 68 on account of share capital/premium received from two corporate investors was not sustainable. - HELD THAT: - The Tribunal held that the assessee discharged the initial onus by producing PAN, ROC records, RBI registration as NBFCs, audited balance-sheets, assessment intimations, bank statements showing payments by banking channel, Board resolutions, Form 2 and confirmations from the investor companies, and by facilitating personal deposition of directors. The Assessing Officer did not dispute the identity of the investor companies, nor did he undertake independent verification to rebut the documentary evidence. The sole ground for the AO's disbelief was that the investors showed low income in their returns, which the Tribunal found to be an insufficient basis to impugn creditworthiness where bank records and balance-sheets demonstrated available funds and source of funds was explained. The Tribunal applied the settled principle that once an assessee discharges the primary onus under section 68, the burden shifts to the Revenue to produce positive material showing that the amounts actually emanated from the assessee or that the investors are fictitious; absent such enquiry or contrary evidence the addition cannot be sustained. Reliance was placed on authorities holding that mere suspicion or non-inquiry by the AO does not justify treating the share subscriptions as undisclosed income.

Addition of Rs. 2,12,50,000 under section 68 deleted; order of CIT(A) confirmed and departmental appeal dismissed.

Final Conclusion: The Tribunal confirmed the CIT(A)'s deletion of the addition under section 68 in respect of share capital/premium received from the two corporate investors for A.Y. 2012-2013, holding that the assessee had discharged the initial onus and the Assessing Officer failed to rebut the documentary evidence or conduct adequate verification.

Addition of notional interest from alleged foreign bank accounts - Ownership of foreign bank balances and requisite proof for taxation - Binding effect of coordinate-bench decisions in the assessee's own cases - Consequential deletion of penalty for concealment where quantum addition is deleted

Addition of notional interest from alleged foreign bank accounts - Ownership of foreign bank balances and requisite proof for taxation - Binding effect of coordinate-bench decisions in the assessee's own cases - Deletion of the addition of Rs. 1,47,12,333/- as undisclosed interest income linked to alleged HSBC, Geneva accounts was upheld. - HELD THAT: - The Tribunal accepted the coordinate-bench reasoning in the assessee's own case for other assessment years, which had deleted the primary addition of balances in the foreign bank accounts and held that absent a finding of ownership of those balances the notional interest could not be taxed in the assessee's hands. The Revenue's contention of factual distinction (assessment under different provisions in earlier years) and assertion of perversity in the coordinate-bench order were not demonstrated before this Bench. In the face of the coordinate-bench findings and absent any substantiated showing of perversity, the Tribunal followed that precedent and found no reason to interfere with the CIT(A)'s deletion of the interest addition for the year under consideration. [Paras 6]

The deletion of the notional interest addition was affirmed and the Department's quantum appeal dismissed.

Consequential deletion of penalty for concealment where quantum addition is deleted - Binding effect of coordinate-bench decisions in the assessee's own cases - Deletion of penalty under the concealment provision was upheld as consequential to the deletion of the quantum addition. - HELD THAT: - The Tribunal held that since the primary addition of income had been upheld as deleted, there was no basis to sustain the penalty imposed for concealment in respect of that addition. The Revenue's penalty appeal was therefore dependent on the outcome of the quantum appeal; having dismissed the quantum appeal, the Tribunal found no reason to disturb the CIT(A)'s deletion of the penalty. [Paras 8, 9]

The deletion of the penalty was affirmed and the Department's penalty appeal dismissed.

Final Conclusion: Both appeals filed by the Department were dismissed: the Tribunal affirmed the CIT(A)'s deletion of the addition of notional interest arising from alleged foreign bank accounts and, consequentially, upheld the deletion of the penalty for concealment.

Treatment of sale of carbon credits as capital receipt - receipt from sale of carbon credits as an offshoot of environmental concern and not business income - entertainment of a fresh claim not made in the original return - reliance on judicial precedent for classification of receipts

Treatment of sale of carbon credits as capital receipt - receipt from sale of carbon credits as an offshoot of environmental concern and not business income - reliance on judicial precedent for classification of receipts - Sale proceeds of Certified Emission Reductions (carbon credits) are capital receipts and not includible in taxable income for the assessment year 2009-10. - HELD THAT: - The Tribunal considered the assessee's claim, admitted as an additional ground after applying the principle permitting fresh claims not made in the original return (relying upon Goetze India Ltd. and Ramco Cements as cited in the appellate order), and examined jurisdictional and other High Court authorities. The learned CIT(A) had followed High Court decisions holding that carbon credits are not an offshoot of the assessee's business operations but arise from environmental considerations, and therefore amounts realized on their transfer lack the element of profit or gain and constitute capital receipts. The Tribunal noted and applied the consistent findings in Ambiko Cotton Mills Vs. ACIT , CIT Vs. My Home Power and M/s. S.P. Spinning Mills Pvt. Ltd. Vs. ACIT , which treated sale of carbon credits as capital receipts. On that basis, and after considering the facts and precedents relied upon by the authorities below, the Tribunal found no error in the CIT(A)'s conclusion and upheld the exclusion of the carbon credit sale proceeds from taxable income. [Paras 8, 9]

The CIT(A)'s direction to treat sale of carbon credits as capital receipt not liable to tax is upheld and the Revenue's appeal is dismissed.

Entertainment of a fresh claim not made in the original return - The appellate authority properly entertained the assessee's additional ground claiming capital treatment for sale of carbon credits. - HELD THAT: - The CIT(A) admitted and adjudicated the additional ground by applying the settled principle that an appellate authority may entertain a fresh claim not made in the original return, as reflected in the decisions cited in the appellate order. The Tribunal accepted the exercise of that power and proceeded to decide the substantive classification issue on merits. [Paras 10]

Admission and adjudication of the additional ground by the CIT(A) was proper.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s finding that receipts from the sale of carbon credits are capital receipts and not includible in the assessee's taxable income for assessment year 2009-10; the admission of the additional ground by the CIT(A) was also upheld.

Validity of show cause notice under section 274 read with section 271(1)(c) - requirement to specify limb of section 271(1)(c) (concealment of particulars of income or furnishing inaccurate particulars) - necessity of recorded satisfaction for initiation of penalty proceedings - penalty under section 271(1)(c) - distinction between concealment and furnishing inaccurate particulars - principles of natural justice in quasi criminal penalty proceedings - effect of assessee's death and conduct of legal representative on levy of penalty

Validity of show cause notice under section 274 read with section 271(1)(c) - requirement to specify limb of section 271(1)(c) (concealment of particulars of income or furnishing inaccurate particulars) - principles of natural justice in quasi criminal penalty proceedings - The penalty notice which did not specify the particular limb of section 271(1)(c) on which penalty was proposed is invalid and the consequent penalty is unsustainable. - HELD THAT: - The Tribunal held that a show cause notice must clearly specify whether penalty is proposed for concealment of particulars of income or for furnishing inaccurate particulars of income so that the assessee can meet the precise charge. Reliance was placed on coordinate decisions and higher authority establishing that penalty proceedings under section 271(1)(c) are quasi criminal and must comply with principles of natural justice; a printed form or a notice leaving both limbs unstruck/offered does not satisfy this requirement. Where the initiation of penalty does not specify the charge with certainty and the penalty order ultimately records an incorrect or mixed charge (using slash or both limbs without proper initiation), the penalty order is liable to be quashed. Applying these principles, the Tribunal found the Assessing Officer issued a show cause notice which did not firmly specify the limb and subsequently levied penalty on both grounds, rendering the penalty order not sustainable in law. [Paras 5, 6, 8]

Penalty deleted as the show cause notice failed to specify the charge under section 271(1)(c) and the penalty order was premised on an incorrect/uncertain charge.

Effect of assessee's death and conduct of legal representative on levy of penalty - requirement of proof beyond mere failure to explain deposits for establishing concealment - application of Explanation 1(B) to section 271(1)(c) and onus on assessee/legal representative - On merits, penalty was not sustainable because the deposits and bank particulars were disclosed in the return and the unexplained part arose from the legal representative's inability (after the assessee's death) to establish source; such failure did not ipso facto establish concealment of particulars of income. - HELD THAT: - The Tribunal examined facts showing that the deceased assessee had disclosed bank accounts and transactions in the return, and that during scrutiny the Assessing Officer accepted substantial receipts from contract services and garment business. The addition arose from amounts the widow/legal representative could not specifically explain after the assessee's death. The Tribunal held that mere inability of the legal heir to explain certain deposits does not automatically demonstrate concealment or furnishing of inaccurate particulars; the particulars were disclosed and explanations were bona fide. Consequently, even on merits the penalty could not be sustained and deletion was warranted. [Paras 5, 9]

Penalty deleted on merits as well because disclosure existed and the unexplained deposits resulted from the legal representative's inability to explain, which does not ipso facto constitute concealment or furnishing inaccurate particulars.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) for AY 2008 09 is quashed and deleted because the show cause notice failed to specify the limb of section 271(1)(c) and, on merits, the levy was not sustainable given the disclosures and the bona fide explanations (or inability of the legal representative) following the assessee's death.

Disallowance under section 40A(3) for payments not made by account payee cheque - proviso to section 40A(3) increasing monetary limit to Rs.35,000 for plying/hiring goods carriages - exceptions to section 40A(3) for unavoidable circumstances/business exigency and genuine transactions - inapplicability of section 40A(3) to capital asset purchases - application of Rule 6DD in relation to payments to agents and truck drivers

Disallowance under section 40A(3) for payments not made by account payee cheque - exceptions to section 40A(3) for unavoidable circumstances/business exigency and genuine transactions - application of Rule 6DD in relation to payments to agents and truck drivers - Whether cash payments made to agents/truck drivers for purchase of coal could be disallowed under section 40A(3). - HELD THAT: - The Tribunal found that the coal purchases were genuine, necessary for continuous production and that cash payments to agents/truck drivers arose from business exigency and the practicalities of supply through agents. The assessee produced VAT/CST evidence (including C-Forms) and the purchases were not disputed by VAT authorities; genuineness of transactions was not doubted by lower authorities. The Tribunal relied on the view in New Kalpana Ent. Udyog v. ITO and held that such payments fall within the rationale of the proviso/Rule 6DD and the exceptions for unavoidable circumstances and bona fide transactions, rendering disallowance under section 40A(3) unjustified in these facts. [Paras 13]

Disallowance under section 40A(3) in respect of cash payments for purchase of coal is deleted.

Disallowance under section 40A(3) for payments not made by account payee cheque - proviso to section 40A(3) increasing monetary limit to Rs.35,000 for plying/hiring goods carriages - exceptions to section 40A(3) for unavoidable circumstances/business exigency and genuine transactions - Whether cash payments made to truck drivers for freight inward expenses are liable to disallowance under section 40A(3). - HELD THAT: - The Tribunal accepted the assessee's explanation that cash payments to truck drivers for freight were compelled by exigencies of coal supply and that the genuineness of freight expenses was not doubted by the authorities. The Tribunal applied the proviso to section 40A(3), which raises the threshold to Rs.35,000 for payments for plying/hiring goods carriages, observed that most payments were below that limit, and followed the Tribunal decision in New Kalpana Ent. Udyog. On these facts the technical denial of deduction under section 40A(3) was not warranted. [Paras 14]

Disallowance under section 40A(3) in respect of freight inward cash payments is deleted and the AO directed to delete the addition.

Disallowance under section 40A(3) for payments not made by account payee cheque - exceptions to section 40A(3) for unavoidable circumstances/business exigency and genuine transactions - Whether cash payments for urgent machinery repairs could be disallowed under section 40A(3). - HELD THAT: - The Tribunal noted that only a small portion of overall machinery repair expense was paid in cash and that the payments were made due to sudden breakdowns necessitating immediate repairs to avoid production loss. The genuineness of the expenditure was not questioned by the authorities and, in view of the extraordinary and exigent nature of the expenditure, the technical bar under section 40A(3) should not inhibit allowance of the deduction. [Paras 15]

Disallowance under section 40A(3) in respect of cash payments for machinery repairs is deleted.

Inapplicability of section 40A(3) to capital asset purchases - disallowance under section 40A(3) for payments not made by account payee cheque - Whether payment made in cash for purchase of a mobile phone (shown as a fixed asset) is liable to disallowance under section 40A(3). - HELD THAT: - The Tribunal accepted that the mobile phone was capitalised in the balance sheet and not claimed as an expenditure in the profit and loss account. Following the Hyderabad Bench decision in Kalyan Constructions (as relied upon), the Tribunal held that section 40A(3) does not apply to purchases of capital assets, and therefore the disallowance recorded by the authorities was not sustainable. [Paras 16]

Disallowance under section 40A(3) in respect of the mobile phone (capital asset) is set aside and the addition deleted.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the CIT(A)'s sustainment of disallowances under section 40A(3) in respect of coal purchases, freight inward payments, machinery repairs and the mobile phone (capital asset), and directed the AO to delete those additions.

Arm's length price - voluntary transfer pricing adjustment - deduction under section 10A - comparability in transfer pricing (turnover and functional filters) - working capital adjustment - inter-unit set off of business losses - disallowance under section 40(a)(ia) - deduction under section 57(iii) (income from other sources) - exclusion of specified expenses from export and total turnover for section 10A

Voluntary transfer pricing adjustment - arm's length price - Treatment of the assessee's voluntary TP adjustment for computation of ALP and treatment in assessment proceedings - HELD THAT: - The Tribunal held that a voluntary transfer pricing addition made by the assessee in the revised return cannot be ignored by the TPO/AO for computation of the proposed adjustment to the international transaction. Section 92C requires computation of income with regard to ALP but where the assessee itself has offered additional income in the return and recorded it in Form 3CEB, that amount is relevant for computing the price received and the proposed adjustment. The Tribunal therefore directed that the voluntary addition be considered for computing the TP adjustment. Separately, as to whether the voluntary adjustment qualifies for deduction under section 10A, the Tribunal accepted the assessee's position that the first proviso to section 92C(4) applies to adjustments made by the AO/TPO and not to voluntary adjustments; accordingly the assessee may be entitled to claim 10A deduction on the voluntary addition provided the AO verifies required factual conditions (receipt/bringing of foreign exchange, supporting invoices, and that the adjustment is properly recorded), and the AO is directed to carry out that verification after affording opportunity to the assessee. [Paras 37, 38, 39, 44, 47]

Voluntary TP adjustment must be considered for ALP computation; entitlement to 10A deduction on such voluntary adjustment is subject to verification by the AO-directed verification and opportunity to assessee.

Comparability in transfer pricing (turnover and functional filters) - arm's length price - Exclusion/inclusion of specific comparable companies in the benchmarking set - HELD THAT: - The Tribunal applied the established principle that turnover and functional similarity are relevant filters in comparability. Following precedents referenced, it directed exclusion of high turnover and functionally dissimilar corporates (including Larsen & Toubro Infotech Ltd., Infosys Ltd., Kals Information Systems Ltd. (seg), Persistent Systems Ltd., Tata Elxsi Ltd. (seg), Sasken Communications Tech. Ltd.) from the comparables when comparing a captive low risk contract service provider. R.S. Software India Ltd. was held to be functionally comparable and directed to be included. The Tribunal also excluded ICRA Techno Analytics Ltd. on the ground of functional dissimilarity (diversified activities and lack of segmental data). [Paras 80, 85, 86, 87, 88]

Directed exclusion of specified high turnover or functionally dissimilar comparables and inclusion of R.S. Software India Ltd.; ICRA Techno Analytics Ltd. excluded for functional dissimilarity.

Comparability in transfer pricing (related party transactions filter) - remand for verification - Assessee's contention for inclusion of Akshay Software Technologies Ltd. and Quintegra Solutions Ltd. - HELD THAT: - The Tribunal found that the TPO had rejected these companies applying related party transaction/on site revenue filters which were not uniformly applied; because the record did not establish the RPT percentage conclusively, the Tribunal remanded the matter to the TPO for verification of related party transaction percentage and other factual filters. If RPT is found to be less than 25% and other filters satisfied, the comparables are to be included. [Paras 67, 68]

Remanded to TPO for verification of related party transactions and other filters; inclusion if verification shows compliance.

Working capital adjustment - Rule 10B(3) - Validity and direction regarding working capital adjustment applied to comparables - HELD THAT: - The Tribunal held that a working capital adjustment is supportable under Rule 10B(3) and consistent coordinate bench decisions; since the assessee is captive and funded by its AE, the Tribunal found the TPO's negative adjustment inappropriate and directed that a positive working capital adjustment in actuals be applied to comparables when determining their profit margins so as to bring comparables on par with the low risk captive assessee. [Paras 69, 70, 72]

Directed AO/TPO to grant positive working capital adjustment in actuals to comparables.

Inter-unit set off of business losses - deduction under section 10A - Allowability of set off/carry forward of business loss of Noida unit against business income after claiming section 10A deduction by other units - HELD THAT: - Following the Supreme Court's decision in Yokogawa and subsequent High Court and Tribunal authorities, the Tribunal held that section 10A deduction is to be given at the level of the eligible undertaking and that inter unit set off of business losses (under section 70) is allowable in computing business income. The Tribunal thus allowed the assessee's claim for inter unit set off of the Noida unit loss against business income. [Paras 73, 74, 77, 78]

Assessee entitled to inter unit set off of the Noida unit loss; ground allowed.

Disallowance under section 40(a)(ia) - depreciation on capitalized software - Whether depreciation on capitalized software can be disallowed under section 40(a)(ia) for non deduction of TDS on purchase of software - HELD THAT: - The Tribunal followed earlier coordinate bench precedent holding that depreciation is a statutory allowance under section 32 and is not an outgoing expenditure subject to section 40(a)(ia). Once the payment is capitalized and only depreciation is claimed, section 40(a)(ia) is not attracted; the appropriate remedy for non deduction of TDS is under sections dealing with TDS liability and not denial of depreciation. Applying that view to the facts, the Tribunal found no infirmity in deleting the disallowance. [Paras 92, 93, 94]

Disallowance under section 40(a)(ia) in respect of depreciation on capitalized software deleted; revenue's ground dismissed.

Deduction under section 57(iii) (income from other sources) - sub lease income and related expenditure - Allowability of sublease-related expenditure as deduction against sublease income under section 57(iii) - HELD THAT: - The Tribunal noted that DRP directed the AO to allow expenditure incurred in relation to the sublease income under section 57(iii) as deduction from income from other sources. Following precedent (including the Tribunal's own earlier decision for AY 2009 10 and Karnataka High Court decisions), the Tribunal directed the AO to examine whether the claim has been doubly claimed against the STPI business profits and, after verification and affording opportunity to the assessee, to allow the deduction under section 57(iii) if not so claimed. [Paras 98, 100, 104, 105, 106]

Directed AO to verify and, subject to no double claim against STPI unit profits, allow deduction under section 57(iii) against sublease income.

Exclusion of specified expenses from export and total turnover for section 10A - Whether communication, insurance and foreign currency expenses are to be excluded from export turnover and total turnover while computing deduction under section 10A - HELD THAT: - The Tribunal followed the Supreme Court's decision in HCL Technologies Ltd. and held that communication expenses, insurance expenses and expenditure incurred in foreign currency are to be excluded from both export turnover and total turnover for computation of deduction under section 10A. Accordingly the revenue's challenge on this point was dismissed. [Paras 108, 109, 111, 112]

Expenses to be excluded from both export turnover and total turnover for section 10A; revenue's ground dismissed.

Admission of additional grounds - remand for factual verification - Admissibility of additional grounds raised by the assessee before the Tribunal - HELD THAT: - The Tribunal exercised its discretion to admit the additional grounds raised by the assessee because they arose out of the record before the Tribunal, required no new evidence, and were necessary to determine the correct taxable income. The Tribunal observed there was no estoppel preventing the assessee from raising such issues at the appellate stage and admitted the grounds for adjudication. [Paras 2, 4, 6, 7]

Additional grounds admitted for adjudication.

Final Conclusion: The Tribunal admitted the assessee's additional grounds and, on merits, directed the TPO/AO to consider the voluntary TP addition for ALP computation and to verify eligibility for section 10A deduction; excluded several high turnover and functionally dissimilar comparables while directing inclusion of certain functionally similar comparables and remanding others for verification; directed positive working capital adjustment to comparables; allowed inter unit set off of the Noida unit loss; deleted the disallowance under section 40(a)(ia) for depreciation on capitalized software; directed verification and allowance of sublease expenditure under section 57(iii) if not doubly claimed; and held that certain specified expenses are to be excluded from both export and total turnover for section 10A, with appeals disposed accordingly.

Best judgment assessment - natural justice - remand report and duty to examine evidence - estimation of income on ex parte assessment - method of accounting provided in section 145(1) - unexplained cash credit - trade payables verification - burden of proof in payments to commission agents - foreign exchange loss as business deduction - verification of depreciation claim

Best judgment assessment - natural justice - remand report and duty to examine evidence - Assessment completed ex parte under section 144 where Assessing Officer did not examine documents - whether matter should be remanded for fresh adjudication or decided on merits - HELD THAT: - The Tribunal found from the remand report and record that the assessee had filed documents during assessment and remand proceedings which the Assessing Officer did not examine. The Assessing Officer's remand report was cryptic and did not controvert the substantive filings; the CIT(A) recorded that necessary facts for assessment were on record. Considering the Assessing Officer's failure to examine filings and absence of adverse comments on the merits, the Tribunal held the case was not a fit one to be set aside for fresh adjudication and proceeded to decide the contested additions on merits rather than remit for fresh inquiry. [Paras 11]

Not remanded; Tribunal declines to set aside assessment for fresh adjudication and decides issues on merits.

Burden of proof in payments to commission agents - Disallowance of commission payments challenged as unsupported - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance. It relied on earlier Tribunal findings in the assessee's own cases that the assessee had filed bills, party-wise sales particulars and confirmations, and that once the assessee discharged the primary onus the AO could not treat payments as bogus without material to the contrary. The Department failed to distinguish those findings or point to adverse material in the remand report. [Paras 13]

Addition in respect of commission payments deleted for both years.

Unexplained cash credit - Additions on account of unsecured loans/unexplained cash credits from corporates and directors - HELD THAT: - For AY 2013-14 and AY 2014-15 the CIT(A) found that confirmations, loan details and tax-audit schedules were on record and that the AO made no adverse findings in the remand report nor undertook enquiries (such as enforcing attendance or verifying records) before completing ex parte assessments. The Tribunal noted inconsistent treatment by the AO across years and absence of specific adverse comments; accordingly the CIT(A)'s deletion of additions was upheld. [Paras 14]

Additions as unexplained loans/cash credits deleted for both years.

Unexplained cash credit - Unexplained cash deposits recorded in bank - treatment - HELD THAT: - CIT(A) found the cash deposits were recorded in regular books and details were furnished to the AO; Department did not controvert these factual findings. The Tribunal saw no infirmity in treating those deposits as part of regular accounts and deleting the addition. [Paras 15]

Additions in respect of bank cash deposits deleted for both years.

Trade payables verification - Additions by treating sundry creditors/trade payables as unexplained - HELD THAT: - The CIT(A) recorded that trade payables and sundry creditors appeared year-to-year in the assessee's books, that earlier assessments accepted the same creditors with addresses on file, and that the AO did not verify his own records or issue enquiries before passing the ex parte order. Remand reports contained no adverse merit findings. Given the AO's failure to make requisite enquiries and the existence of supporting schedules, the Tribunal upheld deletion of the additions. [Paras 16]

Additions on account of trade payables deleted for both years.

Estimation of income on ex parte assessment - method of accounting provided in section 145(1) - Addition by estimating net profit at prescribed percentage and separate inclusion of other receipts - HELD THAT: - The AO estimated net profit (2% of turnover or higher) alleging lack of faith in books but did not point to specific deviations from the accounting method under section 145(1) or identify mistakes in the accounts. CIT(A) noted comparable gross/net profit rates in prior years and that the AO had the comparative figures yet gave no reason for rejecting them. The AO also separately added receipts already part of trading income. Absent material showing books were unreliable and given the accepted past records, the Tribunal upheld deletion of the estimated profit additions. [Paras 17]

Additions by estimation of profit deleted for both years.

Trade payables verification - Addition on account of other current liabilities (AY 2014-15) - HELD THAT: - CIT(A) examined the schedule to the balance sheet, observed bifurcation of the current liabilities and that supporting details and agreements (including for a security deposit) were on record. The AO made no adverse merit comments in remand reports and did not verify available records before completing ex parte assessment. The Tribunal found these factual conclusions uncontroverted and sustained deletion. [Paras 18]

Addition on account of current liabilities deleted for AY 2014-15.

Foreign exchange loss as business deduction - Disallowance of foreign exchange loss treating it as speculation loss - HELD THAT: - CIT(A) recorded that the foreign exchange loss arose in the course of export business, was shown in trading account as cost of goods sold and certified by the auditor; the AO did not doubt genuineness nor make adverse comments in the remand report. Applying settled principle that business losses from exchange fluctuations are deductible, the Tribunal upheld deletion. [Paras 19]

Addition treating foreign exchange loss as speculative deleted for AY 2014-15.

Verification of depreciation claim - Disallowance of depreciation on newly acquired assets - HELD THAT: - CIT(A) found purchases of plant, machinery and computers reflected in the tax-audit report and supported by purchase evidence filed by the assessee; AO had not produced material to discredit the tax-audit certification. CIT(A) directed AO to verify the factual claim and afford opportunity to the assessee to produce documents. Department did not controvert these findings; Tribunal upheld the approach and allowed the ground for statistical purposes subject to verification. [Paras 20]

Disallowance of depreciation not sustained; matter directed to be verified but addition deleted for present purposes.

Final Conclusion: Both appeals filed by the Revenue are dismissed and the assessee's cross-objection in support of the CIT(A)'s orders is dismissed; the Tribunal upholds the CIT(A)'s deletions and factual findings for AY 2013-14 and AY 2014-15, having examined the records and remand report and finding no justification for remand or the additions made by the Assessing Officer.

Depreciation rate on set-top boxes - classification as computers vs plant and machinery - Economic life and applicable rate of depreciation - Disallowance under section 36(1)(iii) - capitalization of interest and utilisation of own funds - Disallowance under section 14A read with Rule 8D - absence of exempt income - Substance over form in lease transactions - finance/loan arrangement vs lease and consequence for lease rental deduction

Depreciation rate on set-top boxes - classification as computers vs plant and machinery - Economic life and applicable rate of depreciation - Whether set-top boxes (STBs) were entitled to depreciation at the higher rate applicable to computers (60%) rather than being treated as plant & machinery attracting lower rate. - HELD THAT: - The Tribunal upheld the CIT(A)'s decision to admit and decide the additional ground and to allow higher depreciation on STBs by following the coordinate Bench's decisions in the assessee's earlier years. The coordinate Bench had examined the lease arrangements, TRAI tariff provisions and the economic life of STBs (taken as three years) and concluded that, having regard to the economic life and substance of the transactions, STBs fall for the higher rate of depreciation applicable to computers. The Tribunal found no material change in facts and accepted that the identical issue was squarely covered by the coordinate Bench, thus justifying application of the same conclusion for the years under appeal. [Paras 10]

Findings of the CIT(A) allowing depreciation at the higher rate were upheld; Revenue's grounds on this issue dismissed.

Disallowance under section 36(1)(iii) - capitalization of interest and utilisation of own funds - Whether interest attributable to capital work in progress was liable to disallowance having regard to availability of sufficient interest free own funds. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition made by the AO by following the coordinate Bench which had held that where the assessee possessed sufficient own interest free funds (share capital and reserves) to meet the investment, the presumption is that the advances/investments were made out of own funds and not interest bearing borrowings. The coordinate Bench relied on binding High Court and Supreme Court authorities and precedent of the coordinate Bench itself. As there was no material change in facts, the Tribunal found the CIT(A)'s deletion to be in accordance with those decisions and refused to interfere. [Paras 14]

Deletion of the addition under section 36(1)(iii) upheld; Revenue's ground dismissed.

Disallowance under section 14A read with Rule 8D - absence of exempt income - Whether disallowance under section 14A (read with Rule 8D) was warranted where the assessee had not earned any exempt income during the year. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the s.14A disallowance by following the coordinate Bench's reasoning and several High Court decisions which have held that no disallowance under s.14A is warranted in the absence of exempt income. Given that the assessee had not earned exempt income in the relevant year and there was no change in material facts, the Tribunal found the deletion by the CIT(A) to be in line with settled jurisprudence and declined to interfere. [Paras 18]

Deletion of the s.14A disallowance affirmed; Revenue's ground dismissed.

Substance over form in lease transactions - finance/loan arrangement vs lease and consequence for lease rental deduction - Whether lease rentals paid to CISCO were allowable as revenue deduction or whether the arrangement was in substance a finance/loan transaction thereby precluding claim of lease rent and affecting depreciation/claim treatment. - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion (following the coordinate Bench) that the agreement with CISCO, read in light of its operative clauses and surrounding facts, amounted to a finance/loan arrangement in substance. The coordinate Bench held that the lessor's role was limited to financing, the lessee effectively exercised ownership rights and bore risks, and therefore the principal component could not be claimed as revenue expenditure while depreciation (if applicable) would be governed by ownership/substance principles. Applying that reasoning to the present years and noting no material change in facts, the Tribunal upheld the CIT(A)'s confirmation of the AO's disallowance of lease rental claims and dismissed the assessee's cross objections.

Findings of the CIT(A) treating the transaction as finance/loan in substance were upheld; cross objections against disallowance of lease rental dismissed.

Final Conclusion: The Tribunal, following coordinate Bench precedents and finding no material change in facts, upheld the CIT(A)'s orders: allowed the assessee's claims for higher depreciation on STBs, deleted the additions relating to interest on CWIP and the s.14A disallowance, and confirmed the disallowance of lease rental claimed from CISCO; accordingly the Revenue's appeals and the assessee's cross objections are dismissed.

Prima facie case for stay of show-cause notice - jurisdiction and authority of D.R.I. to issue show-cause notice - application of judicial precedent in administrative action - opportunity to file affidavit-in-opposition and procedural compliance - alternative security for provisional release - dispute resolution under SAFTA Agreement

Prima facie case for stay of show-cause notice - application of judicial precedent in administrative action - Existence of a prima facie case for staying the show-cause notices in light of the Supreme Court judgment in M/s. Canon India Pvt. Ltd. - HELD THAT: - The High Court noted that, having heard the parties and perused the material, there is a prima facie case for staying the impugned show-cause notices following the reasoning in the cited Supreme Court decision. The Court expressly refrained from adjudicating the merits of the underlying contentions at this stage but observed that the Canon judgment casts doubt on the continued authority to issue the notices in the manner challenged by petitioners. The observation is interlocutory and confined to the threshold satisfaction required to entertain further relief or interim protection. [Paras 7, 8]

Court recorded a prima facie case for staying the show-cause notices and therefore directed further proceedings to be conducted with that interlocutory posture in mind.

Opportunity to file affidavit-in-opposition and procedural compliance - Procedural direction to afford the respondents opportunity to file affidavit-in-opposition and for the matter to be listed later. - HELD THAT: - The Court directed that an affidavit-in-opposition be filed within four weeks and that any reply thereto be filed within two weeks, thereby ensuring respondents an opportunity to place material and arguments before the Court. The matter was directed to appear in the combined monthly list of July, 2021. The direction preserves the respondents' right to supplement their case and to rely on such material, including authorities they propose to place on record, before final adjudication. [Paras 9]

Affidavit-in-opposition to be filed in four weeks, reply in two weeks, and matter listed in the combined monthly list of July, 2021.

Alternative security for provisional release - Liberty to petitioners to move for acceptance of an alternative security for the bank guarantees furnished for provisional release of goods. - HELD THAT: - The Court observed that bank guarantees furnished in 2018 remain alive and are causing commercial inconvenience to petitioners, who seek release of the blocked funds by offering alternative security. The Court recorded that no alternative security has been shown in the present petitions and accordingly granted the petitioners liberty to make an appropriate application to the authorities to provide alternative security. This is a procedural liberty to apply and does not constitute an adjudication on the suitability or acceptance of any proposed alternative security. [Paras 10, 11, 12, 13]

Petitioners are at liberty to make an application for providing alternative security; no alternative security shown in these petitions.

Final Conclusion: The High Court, while not finally deciding the merits, recorded a prima facie case for staying the show-cause notices in light of the cited Supreme Court authority, directed filing of affidavits and subsequent listing for hearing, and granted petitioners liberty to seek acceptance of alternative security for the existing bank guarantees.

Mandamus - determination of ownership before coercive steps - attachment and sale of jointly owned property of a defaulter - application of the Customs (Attachment of property of Defaulters for Recovery of Government Dues) Rules, 1995 - attachment limited to defaulter's share and prohibition on alienation of third party's share

Mandamus - determination of ownership before coercive steps - attachment and sale of jointly owned property of a defaulter - Whether the writ petition seeking a mandamus to restrain auction and sale of the property was satisfied by prior administrative determination of ownership and consequent limitation of the proposed auction to the defaulter's share. - HELD THAT: - The Court directed the petitioners to be heard by the Assistant Commissioner of Customs and required the Customs authorities to determine ownership prior to taking coercive steps. The Customs authority thereafter recorded that fifty percent of the property vests with the petitioners and their wife and that the proposed auction related only to the portion vesting with the petitioner's brother and his wife. Having received that determination and the confirmation of the learned counsel for the Customs respondents, the Court held that the relief sought by way of mandamus had been achieved and disposed the writ petition on that basis.

Writ petition disposed as the determination that half the property vests with the petitioners and that auction would be confined to the defaulter's share satisfied the mandamus sought.

Application of the Customs (Attachment of property of Defaulters for Recovery of Government Dues) Rules, 1995 - attachment limited to defaulter's share and prohibition on alienation of third party's share - attachment and sale of jointly owned property of a defaulter - Whether the Customs authorities should consider the petitioners' submission that, under the said Rules, where property is jointly owned the attachment can extend only to the defaulters' share and the third party's share cannot be alienated. - HELD THAT: - The Court did not decide the legal question on the merits. Instead, it directed that the petitioners' contention based on the Customs Rules - that only the defaulter's share may be attached and that alienation of the third party's share is impermissible - be placed before the Customs authorities for consideration prior to proceeding with any proclamation or auction. The matter was left to the administrative authority for determination.

Petitioners' submission under the Rules directed to be considered by the Customs authorities prior to any further proclamation or auction; no substantive adjudication on that legal point by the Court.

Final Conclusion: The writ petition was disposed after the Customs authority determined that fifty percent of the property vests with the petitioners and that auction would be limited to the defaulter's share; the petitioners' legal contention under the Customs Rules that attachment cannot affect the third party's share was directed to be submitted to and considered by the Customs authorities before any further action.

Refund of duty paid under mistake of law or fact - applicability of statutory limitation under Section 27 of the Customs Act, 1962 - remedy by Limitation Act for amounts paid without authority of law - rectification of clerical or arithmetical error under Section 154 of the Customs Act, 1962 - doctrine of unjust enrichment

Applicability of statutory limitation under Section 27 of the Customs Act, 1962 - remedy by Limitation Act for amounts paid without authority of law - refund of duty paid under mistake of law or fact - doctrine of unjust enrichment - Whether the authorities were correct in rejecting the appellant's refund claim by applying Section 27 of the Customs Act, 1962. - HELD THAT: - The Court held that where an amount has been paid without authority of law (i.e., by mistake of law or fact) such payment does not acquire the character of a duty leviable under the Customs Act and therefore the limitation regime prescribed by Section 27 is not the sole or necessarily applicable remedy. Relying on the ratio of Mafatlal Industries Ltd., the Court concluded that claims for refund of amounts paid without authority of law can be governed by the law of limitation (Limitation Act) rather than the one-year period in Section 27. The Court observed that the excess customs duty in this case was paid due to an admitted arithmetical/clerical error and thus the department was liable to refund the excess irrespective of strict application of Section 27. The Tribunal and lower authorities erred in treating the claim as exclusively attractable to Section 27 and in rejecting the refund on that basis, thereby overlooking the principle that payments without legal authority are recoverable outside the statutory one year bar applicable to refunds of duties properly leviable under the Act. [Paras 14, 17, 18]

Section 27's one year limitation is not determinative where duty was paid without authority of law; the authorities erred in rejecting the refund claim solely under Section 27.

Rectification of clerical or arithmetical error under Section 154 of the Customs Act, 1962 - refund of duty paid under mistake of law or fact - doctrine of unjust enrichment - Whether the refund application filed by the appellant on 06.01.2010 was within permissible time or otherwise entitled to relief despite the delay. - HELD THAT: - The Court found that the excess payment arose from an admitted clerical/arithmetic error in assessing the duty and that the appellant acted promptly once the error was identified. The authorities had initially directed the importer to seek reassessment, and the importer's proceedings and the department's conduct contributed to the delay. Given that the excess payment was not a duty properly leviable in law and that rectification under Section 154 (clerical/arithmetic correction) was available, the appellant could not be denied relief merely on the basis of the time taken by the departmental processes and the importer's actions. The Court held that, in the circumstances, the appellant was entitled to refund and that the Tribunal erred in treating the appellant's delayed filing as fatal when the payment itself lacked authority of law. [Paras 15, 19, 20]

The appellant's claim could not be defeated by the delay relied upon by the authorities; on the facts the appellant was entitled to refund despite the contested timeline.

Final Conclusion: The substantial questions of law are answered in favour of the appellant; the Tribunal's order is set aside and the appellant is entitled to refund of the excess customs duty paid pursuant to the admitted clerical/arithmetic error.

Misuse of Advance Licence / Advance Authorisation - confiscation under Section 113(i) of the Customs Act - penalty under Section 114(iii) and Section 114AA of the Customs Act - reliance on test report for stainless steel grade - redemption of Advance Licence and issuance of Export Obligation Discharge Certificate - redemption under para 4.2.6 of Handbook of Procedure - consequential benefits upon redemption

Misuse of Advance Licence / Advance Authorisation - confiscation under Section 113(i) of the Customs Act - reliance on test report for stainless steel grade - redemption of Advance Licence and issuance of Export Obligation Discharge Certificate - consequential benefits upon redemption - Whether the order of confiscation, redemption fine and penalties imposed for alleged misuse of Advance Licence could be sustained in view of redemption certificates and discharge of export obligation issued by the Ministry of Commerce. - HELD THAT: - The Tribunal found that the controversy centred on alleged contravention of Advance Licence conditions and consequent confiscation and penalties based on the Revenue laboratory report regarding grade of stainless steel. The Ministry of Commerce issued redemption letters and Export Obligation Discharge Certificates in respect of the Advance Licences, certifying that the appellant had realised the requisite FOB/CIF values and had met the export obligations in full both in value and in quantity proportionate to imports, and that the licences were redeemed under the applicable procedure. In view of those official certifications that the Advance Licences stood discharged, the foundational allegation of misuse of imported inputs under the Advance Licence no longer subsisted. The Tribunal therefore held that the impugned order of confiscation and the fines/penalties imposed could not be sustained and set aside the impugned order. The appellant was held entitled to consequential benefits in accordance with law. [Paras 10, 11, 13]

Impugned order set aside; appeal allowed and appellant entitled to consequential benefits in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, set aside the order of confiscation, fine and penalties in view of the Ministry of Commerce's redemption letters and Export Obligation Discharge Certificates certifying discharge of the Advance Licences, and granted consequential relief in accordance with law.

Re-determination of assessable value - consent to reassessment and waiver of show cause notice and personal hearing - Section 17(5) speaking order exception - Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation under Section 111(m) - redemption fine under Section 125 - penalty under Section 112(a) read with Section 114AA

Re-determination of assessable value - consent to reassessment and waiver of show cause notice and personal hearing - Section 17(5) speaking order exception - Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Validity of reassessment where the importer accepted the enhanced value in writing and waived issuance of a show cause notice and personal hearing - HELD THAT: - The Tribunal held that where the proper officer has reason to doubt the declared value under Rule 12 and undertakes re-determination, Section 17(5) requires a speaking order except in cases where the importer confirms acceptance of the reassessment in writing. In the present case the importer expressly accepted the enhanced value, requested that no show cause notice or hearing be held and undertook to pay fine and penalty. Reliance was placed on earlier decisions of the Bench that an express consent to enhancement effectively converts the consented amount into the transaction value and relieves the revenue of the obligation to further establish valuation. Given the written acceptance and waiver, the reassessment was final and not vitiated by absence of a speaking order or further proceedings. [Paras 10, 11]

Reassessment was valid and final because the importer accepted the reassessed value in writing and waived show cause notice and personal hearing.

Confiscation under Section 111(m) - Whether confiscation of the goods was justified for mis-declaration of value - HELD THAT: - The Tribunal found that the declared value (about 2% of the re-determined value) did not correspond with the actual value of goods as established by physical examination and comparison with contemporaneous imports. Such mis-declaration renders the goods liable to confiscation under Section 111(m), and therefore the Adjudicating Authority was justified in ordering confiscation subject to the statutory redemption provisions. [Paras 12]

Confiscation under Section 111(m) was justified on account of mis-declaration of value.

Redemption fine under Section 125 - penalty under Section 112(a) read with Section 114AA - Validity and adequacy of the quantum of redemption fine and penalty imposed and reduced on appeal - HELD THAT: - The Tribunal applied the statutory limits and principles: the second proviso to Section 125 caps the redemption fine by reference to market/assessable value, and Section 112(a) provides penalties for acts rendering goods liable to confiscation with a prescribed ceiling (including percentage limits tied to duty sought to be evaded), while Section 114AA permits heavier penalties for use of false or incorrect material. In the case at hand the redemption fine (initially imposed and reduced on appeal) amounted to a modest percentage of the assessable value, and the penalty imposed (and reduced on appeal) was within the permissible range in relation to the duty sought to be evaded. On the facts and considering the extent of undervaluation and statutory ceilings, the Tribunal found the quantum of fine and penalty to be fair and not excessive. [Paras 14]

Quantum of redemption fine and penalty as fixed (and reduced by the First Appellate Authority) is sustainable and requires no interference.

Final Conclusion: The impugned order of the Commissioner (Appeals) was upheld; the reassessment stood confirmed by the appellant's written acceptance, confiscation was justified for mis-declaration, and the redemption fine and penalty as fixed on appeal were held to be fair; the appeal is rejected.

Permission to avail loans and credit facilities - creation of security and encumbrance - majority board approval for borrowing - protection of the company's interests in receivership or dispute - effect of COVID-19 pandemic on corporate liquidity and operations - interim relief to enable ongoing business operations

Permission to avail loans and credit facilities - majority board approval for borrowing - interim relief to enable ongoing business operations - Applicant No.1 Company permitted to incur fresh secured and unsecured indebtedness and to avail the credit facility from Janata Sahakari Bank Ltd., Pune, subject to borrowing limits and security approved by the majority of its board. - HELD THAT: - The Tribunal accepted that the COVID-19 pandemic and resultant lockdown caused severe disruption to the Company's operations, creating an urgent need for liquidity to meet fixed costs, wages and to resume production. Earlier orders of the CLB and the Bombay High Court acknowledged the company's need for external funding. Balancing the protection of the Company's interests against the objections that the application would amount to a modification of earlier orders, the Bench held that permitting fresh borrowing - including the Janata Sahakari Bank sanction - was necessary to preserve the business, protect stakeholders and enable the Company to service liabilities once operations resume. The Tribunal therefore authorised the Company to raise funds within borrowing limits and by offering such security as approved by the majority of the Board, implicitly preserving existing judicial protections while allowing the requested financing to proceed as an interim and practical measure to avert shutdown or insolvency.

Application allowed; Company permitted to avail secured and unsecured loans, including the Janata Sahakari Bank facility, as per borrowing limits and security approved by the majority of its Board; no costs.

Final Conclusion: The Tribunal allowed the application, authorising the Company to raise secured and unsecured funds (including the Janata Sahakari Bank facility) within board approved limits and security, on the view that such financing was necessary to protect the Company's business and stakeholders in the exceptional circumstances caused by the pandemic.

Binding effect of an adjudicating authority's approval of a resolution plan - extinguishment of claims not part of approved resolution plan - operational debt including statutory dues payable to Central/State/local authorities - clarificatory/declaratory amendment and retrospective effect - paramountcy of Committee of Creditors' commercial wisdom and limited judicial review under Sections 30 and 31 - overriding effect of the Insolvency and Bankruptcy Code

Binding effect of an adjudicating authority's approval of a resolution plan - extinguishment of claims not part of approved resolution plan - operational debt including statutory dues payable to Central/State/local authorities - overriding effect of the Insolvency and Bankruptcy Code - The legal effect of approval of a resolution plan by the Adjudicating Authority and whether such approval binds creditors including the Central Government, State Governments and local authorities - HELD THAT: - The Court held that once a resolution plan is approved by the Adjudicating Authority after being satisfied that the plan meets the requirements of subsection (2) of Section 30, the plan becomes binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. The scheme of the Code, read with the information memorandum and requirements of Section 30(2), aims to enable the successful resolution applicant to start on a clean slate; allowing post approval surprise claims would defeat that purpose. Section 238 gives the I&B Code overriding effect over inconsistent enactments. The Court further explained that statutory dues fall within the definition of "operational debt" and operational creditors (including tax or other statutory authorities) are encompassed by the Code's definitions; therefore such authorities are bound by an approved plan and cannot continue or initiate proceedings in respect of claims not included in the plan. [Paras 61, 62, 87, 91, 95]

An approved resolution plan is binding on all creditors and stakeholders, including the Central Government, State Governments and local authorities; claims not included in the approved plan stand extinguished and no proceedings in respect thereof may be initiated or continued.

Clarificatory/declaratory amendment and retrospective effect - Statement of Objects and Reasons and parliamentary speech as aids to interpretation - Whether the 2019 amendment to Section 31 is clarificatory/declaratory (and thus retrospective) or substantive (prospective) - HELD THAT: - Having examined the Statement of Objects and Reasons of the 2019 Amendment and the Rajya Sabha speech of the Finance Minister, and applying principles of statutory interpretation (including precedents recognising clarificatory/declaratory amendments), the Court concluded that the amendment was intended to cure an obvious omission and to clarify legislative intent that an approved resolution plan binds Government and statutory authorities. The amendment therefore is declaratory/clarificatory in nature and operates retrospectively to the inception of the Code. The Court also reasoned that even absent the amendment, the Code's definitions already covered statutory dues as "operational debt", supporting the retrospective, clarificatory character of the amendment. [Paras 77, 82, 87, 90, 95]

The 2019 amendment to Section 31 is clarificatory and declaratory in nature and is retrospective; it confirms that statutory dues owed to Governmental authorities, if not part of an approved plan, are extinguished.

Paramountcy of Committee of Creditors' commercial wisdom and limited judicial review under Sections 30 and 31 - extinguishment of claims not part of approved resolution plan - Whether a creditor, including Governmental authorities, may initiate or continue recovery proceedings for dues not included in an approved resolution plan - HELD THAT: - The Court reiterated that the Code grants primacy to the commercial wisdom of the Committee of Creditors and limits the scope of judicial review to the compliance checkpoints in Section 30(2) and Section 31. Allowing creditors to pursue proceedings for claims not included in an approved plan would undermine the statutory scheme and the objective of enabling the successful resolution applicant to take over the corporate debtor free from undisclosed liabilities. Consequently, after approval of a resolution plan by the Adjudicating Authority, no person - including Governmental authorities - may initiate or continue proceedings in respect of claims not forming part of the approved plan for the period prior to approval. [Paras 53, 54, 62, 63, 95]

After Adjudicating Authority's approval, creditors including Governmental authorities are not entitled to initiate or continue proceedings to recover dues that are not part of the approved resolution plan; such claims stand extinguished.

Final Conclusion: The Court declares that an adjudicating authority's approval of a resolution plan binds the corporate debtor and all creditors and stakeholders, including Central/State Governments and local authorities; the 2019 amendment to Section 31 is clarificatory and retrospective; and any statutory or other dues accruing prior to the approval date that are not included in the approved resolution plan stand extinguished and cannot be pursued by those creditors or authorities.

Direction to file written submissions - service of written submissions and judgments on opposing party - procedural autonomy of appellate tribunals - power of NCLAT to regulate its procedure under the Insolvency and Bankruptcy Code, 2016 - judicial interference in tribunal procedural directions - costs for frivolous or non bonafide litigation

Direction to file written submissions - service of written submissions and judgments on opposing party - Validity of NCLAT directions requiring parties to file brief written submissions and copies of judgments and to serve those upon the opposing party. - HELD THAT: - The Court examined the impugned NCLAT orders which directed parties to file brief written submissions and copies of judgments and to supply those to other parties. The High Court held that it is customary and proper for Courts and Tribunals to direct filing of written submissions and relevant judgments to crystallise issues, streamline oral hearings and facilitate early decision making. The apprehension that service of such material will improperly reveal litigation strategy was rejected as misplaced. Consequently the directions to file and serve written submissions and copies of cited judgments were not found to be legally objectionable. [Paras 6, 7, 8]

The directions by NCLAT for filing and service of brief written submissions and copies of judgments are valid and not interfered with.

Procedural autonomy of appellate tribunals - power of NCLAT to regulate its procedure under the Insolvency and Bankruptcy Code, 2016 - judicial interference in tribunal procedural directions - Whether the High Court should intervene in NCLAT's exercise of its procedural powers under the IBC by setting aside the impugned directions. - HELD THAT: - The Court observed that NCLAT, as the duly constituted appellate tribunal under the IBC, is entitled to regulate its procedure and the manner in which it conducts hearings, including issuing directions for filing written submissions and judgments. Given this procedural autonomy, and the utility of such directions in adjudication, the High Court declined to interfere with the NCLAT's directions. The petitioner's challenge to the orders as beyond jurisdiction and contrary to procedure was therefore rejected. [Paras 9]

No interference with NCLAT's procedural directions; NCLAT is free to regulate its procedure in this manner.

Costs for frivolous or non bonafide litigation - Appropriateness of imposing costs on the petitioner for conduct deemed not bona fide. - HELD THAT: - The Court recorded that the petitioner's repeated representations and previous conduct (including an earlier dismissed petition containing slang language) indicated lack of bona fides. In light of this conduct and the absence of merit in the challenge to routine procedural directions, the Court exercised its discretion to dismiss the petition and impose costs. The costs were directed to be paid to the specified High Court legal aid fund within the stipulated time. [Paras 10, 11]

Petition dismissed with costs; petitioner directed to deposit the prescribed costs within two weeks.

Final Conclusion: The writ petition challenging NCLAT orders directing filing and service of brief written submissions and cited judgments is dismissed. The High Court upheld NCLAT's procedural power to issue such directions under the IBC and imposed costs on the petitioner for non bona fide conduct.

Limited judicial review - commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan - change of line of business under a resolution plan - duties of the resolution professional under Section 30(2) - interests of all stakeholders including employees and workmen - grounds of appeal under Section 61(3) of the IBC - mandatory contents and evaluation under CIRP Regulations (Regulations 37-39)

Change of line of business under a resolution plan - feasibility and viability of a resolution plan - Whether approval of a resolution plan which proposes a change in the corporate debtor's line of business (from printing to data centres) is contrary to the scope and object of the Code. - HELD THAT: - The Tribunal applied the Code, Regulations 37-39 and the legislative intent in the BLRC report to hold that neither the Code nor the regulations prohibit a resolution applicant from proposing a different line of business where the existing business is obsolete or non viable. The court noted that the CIRP scheme expressly contemplates measures such as change in portfolio of goods or services and change in technology for maximization of asset value. The adjudicatory scrutiny is limited; a plan that proposes to demerge a non viable business and continue viable parts as a going concern can be feasible and viable if it demonstrably addresses sustainability, implementation and value maximisation. The Tribunal further relied on Supreme Court precedents emphasising deference to commercial decisions of the CoC subject to the limited review under Sections 30 and 31.

Approval of the resolution plan that proposes change of business was not in contravention of the Code and is permissible where the change furthers feasibility, viability and maximisation of value.

Commercial wisdom of the Committee of Creditors - limited judicial review - grounds of appeal under Section 61(3) of the IBC - Whether the Adjudicating Authority / Tribunal could judicially revisit the commercial decision of the CoC in approving the Sify plan. - HELD THAT: - The Tribunal reiterated that the statutory scheme vests commercial decisions with the CoC and limits judicial interference to the grounds specified in Section 61(3). Reliance was placed on K. Sashidhar and subsequent Supreme Court authority to emphasise that NCLT/NCLAT cannot substitute their view for the CoC's commercial wisdom. The appellate jurisdiction is confined to testing whether the approved plan contravenes any law, whether there was material irregularity in exercise of powers by the RP, whether operational creditors' dues were provided for as prescribed, whether IRP costs were provided for, or whether the plan fails to comply with Board specified criteria.

The Tribunal will not interfere with the CoC's commercial decision absent any of the limited statutory grounds; no such interference was warranted on the facts.

Duties of the resolution professional under Section 30(2) - mandatory contents and evaluation under CIRP Regulations (Regulations 37-39) - material irregularity in exercise of powers by the resolution professional - Whether the Resolution Professional or the CoC committed material irregularity or failed to comply with Section 30(2) and relevant regulations while examining and approving the Sify resolution plan. - HELD THAT: - The Tribunal examined the CoC minutes, evaluation matrix and the RP's compliance steps. It observed that both competing plans were evaluated under the prescribed criteria, that the CoC recorded scores and voted with requisite majority, and that the RP acted in accordance with the Code and regulations in submitting compliant plans to the CoC. The Tribunal found no material irregularity in the RP's conduct; even where CoC sought revisions, the final comparison and voting at the 18th meeting demonstrated due deliberation and approval by a 70.05% majority in favour of Sify.

No material irregularity by the RP was found and the requirements of Section 30(2) and Regulations 37-39 were satisfied on the record.

Interests of all stakeholders including employees and workmen - feasibility and viability of a resolution plan - Whether the approved resolution plan failed to protect the interests of stakeholders, particularly employees and workmen. - HELD THAT: - The Tribunal reviewed the resolution plan's Schedule V which specifically addressed stakeholder interests, including continued employment of a defined number of employees, provision for upskilling and earmarked payments for workmen, statutory dues and EPF. The minutes and the payment schedules reflected allocations for financial creditors and operational/statutory claims. On this basis the Tribunal concluded that the plan materially addressed the interests of stakeholders and the contention that employees' interests were ignored was not sustainable.

The approved plan adequately dealt with interests of stakeholders including employees and workmen; this did not furnish a ground for setting aside approval.

Feasibility and viability of a resolution plan - change of line of business under a resolution plan - Whether a resolution plan may be treated as an auction or be invalidated because it does not preserve the erstwhile business in its original form. - HELD THAT: - The Tribunal accepted that the CIRP is not an auction or mere sale, but held that evaluating feasibility and viability may legitimately lead to adoption of a plan that restructures or repurposes assets to render the corporate debtor viable. The printing industry realities and technological obsolescence were relevant considerations; converting or demerging non viable printing operations and using assets for data centre business was a plausible commercial strategy that could maximize value and create employment. Therefore divergence from the exact historical business model does not by itself invalidate a plan.

A resolution plan need not rigidly continue the historical business; restructuring or change of business for viability is permissible and not equatable to an auction.

Final Conclusion: The Tribunal dismissed the appeal by the unsuccessful resolution applicant and upheld the Adjudicating Authority's approval of Sify's resolution plan: on the limited grounds of judicial review under the Code there was no contravention of law, no material irregularity by the RP, and the plan adequately addressed feasibility, viability and stakeholder interests; accordingly Company Appeal (AT) (Insolvency) No. 744 of 2020 was dismissed and Company Appeal (AT) (Insolvency) No. 417 of 2020 rendered infructuous.

Pre-existing dispute - admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - effect of reply to demand notice - application under Section 9 summary adjudication - Mobilox Innovations v. Kirusa Software principle

Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - effect of reply to demand notice - application under Section 9 summary adjudication - Existence of a pre-existing dispute between the parties and its effect on admission of the Section 9 application. - HELD THAT: - The Adjudicating Authority examined the record including emails and legal notices exchanged prior to the demand notice dated 22nd May, 2019. The material on record-specifically communications dated in November 2017 and legal notices in March-April 2018-indicated that the Corporate Debtor had raised complaints about delay, incomplete or non-working project deliverables and had threatened legal action and arbitration. Applying the principle in Mobilox Innovations v. Kirusa Software, the Tribunal held that the reply and earlier communications disclosed a pre-existing dispute over services rendered which could not be resolved in the summary Section 9 proceeding. The Appellants' contention that those disputes were concocted or irrelevant was held to be a matter not amenable to determination at the admission stage of a Section 9 application. [Paras 38, 46]

The existence of a pre-existing dispute was found; the Section 9 application was rightly rejected and the appeal is dismissed.

Final Conclusion: The Tribunal found that antecedent communications and legal notices disclosed a pre-existing dispute regarding services rendered, which precluded admission of the Section 9 petition; the impugned order rejecting the Section 9 application is affirmed and the appeal is dismissed.

Moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - Recovery of property occupied by or in the possession of the corporate debtor - Effect of a termination/possession notice issued during the CIRP - Possession under the SARFAESI Act vis-a -vis possession of the corporate debtor - Overriding effect of the Insolvency Code in the period of moratorium

Moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - Effect of a termination/possession notice issued during the CIRP - Overriding effect of the Insolvency Code in the period of moratorium - Whether the notice dated 08.11.2019 terminating the lease and seeking possession is prohibited by the moratorium under Section 14(1)(d) of the Code. - HELD THAT: - The Tribunal held that Section 14(1)(d) protects recovery of property that is "occupied by" or in the possession of the corporate debtor and that a termination/possession notice addressed to the corporate debtor during the CIRP falls within the statutory moratorium. Applying the authoritative reasoning in Rajendra K. Bhutta, the Bench rejected respondents' reliance on decisions distinguishing applicability where pre CIRP show cause notices existed or where the asset was not occupied by the corporate debtor. The Tribunal found that the statutory freeze under Section 14 is intended to preserve status quo so the CIRP may proceed unhindered and thus a notice of termination issued during the currency of CIRP is hit by Section 14(1)(d).

The notice dated 08.11.2019 terminating the lease and seeking possession is hit by the moratorium under Section 14(1)(d) and is accordingly quashed to the extent it seeks to take coercive possession during CIRP.

Recovery of property occupied by or in the possession of the corporate debtor - Possession under the SARFAESI Act vis-a -vis possession of the corporate debtor - Whether the corporate debtor (through the Applicant/RP) was in possession of Plot B 11 on the insolvency commencement date such that Section 14 protection applies. - HELD THAT: - The Tribunal examined the impugned notice and observed its terms (including offer to accept physical possession and to refund premium subject to deductions), which, in the Bench's view, unequivocally indicated that the corporate debtor was in possession of the leased land. On that factual finding the respondents' contention that possession had vested exclusively with financial institutions under SARFAESI or by assignment to R2 was rejected for the purpose of this application. Consequently the property was treated as being occupied by the corporate debtor for application of Section 14(1)(d).

The Applicant was in possession of the leased plot on the relevant occasion and therefore entitled to the protection of Section 14(1)(d).

Effect of a termination/possession notice issued during the CIRP - Overriding effect of the Insolvency Code in the period of moratorium - Whether the Tribunal should grant interim relief restraining the respondent from taking coercive steps to repossess the leased land until the pending application for approval of the resolution plan is heard. - HELD THAT: - Given the Tribunal's legal conclusion that the termination/possession notice dated 08.11.2019 is caught by the moratorium and the factual finding of possession by the corporate debtor, the Bench held that coercive steps by the lessor during CIRP would prejudice the resolution process. The Tribunal therefore exercised its powers under Section 60(5)(c) to preserve the status quo and protect the CIRP from actions that would render the resolution process futile or unstable.

The application is allowed; respondents are restrained from taking coercive steps for possession of the leased land until the application for approval of the resolution plan (MA No. 3960 of 2019) is heard; MA No. 3960 of 2019 is listed forthwith for hearing.

Final Conclusion: Application under Section 60(5)(c) is allowed: the termination/possession notice dated 08.11.2019 is quashed to the extent it seeks to take coercive possession during CIRP; respondent MIDC is restrained from taking coercive steps in respect of the leased land until the pending MA for approval of the resolution plan is heard.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - overriding effect of Section 238 of the Insolvency and Bankruptcy Code - jurisdiction of the Adjudicating Authority under Section 60(5)(c) of the Insolvency and Bankruptcy Code to decide questions of priorities arising out of or in relation to insolvency resolution or liquidation - proceedings before the Adjudicating Authority under the Prevention of Money Laundering Act are civil in nature - provisional attachment under the Prevention of Money Laundering Act vis a vis insolvency moratorium - protection under Section 32A of the Insolvency and Bankruptcy Code for property upon approval of a resolution plan

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - provisional attachment under the Prevention of Money Laundering Act vis a vis insolvency moratorium - Whether the moratorium under Section 14 of IBC bars institution and continuation of proceedings before the Adjudicating Authority under PMLA in respect of properties of a corporate debtor undergoing CIRP. - HELD THAT: - The Tribunal held that proceedings before the Adjudicating Authority under PMLA for confirmation of provisional attachment are civil in nature and therefore fall within the ambit of "proceeding" prohibited by the moratorium under Section 14(1)(a) IBC once CIRP commences. The provisional attachment dated 29.05.2018 and corrigendum, and the Adjudicating Authority's subsequent actions in relation to properties of the corporate debtor, were held to be hit by the moratorium and therefore to have no binding force in relation to those properties during CIRP. The reasoning relied on (a) statutory indicia in PMLA showing adjudicatory/civil character of attachment/confirmation proceedings, (b) precedents treating adjudication under PMLA as civil for such purposes, and (c) the need to protect the CIRP process and permit the Resolution Professional to take control of assets to preserve value. The Tribunal therefore affirmed that continuation of PMLA attachment proceedings qua the corporate debtor's properties is barred by Section 14 during CIRP. [Paras 8, 9, 39, 40]

The moratorium under Section 14 IBC applies to and bars the institution and continuation of proceedings before the Adjudicating Authority under PMLA in respect of the corporate debtor's properties during CIRP; the provisional attachment in respect of those properties is to be treated as a nullity for the purposes of CIRP.

Overriding effect of Section 238 of the Insolvency and Bankruptcy Code - jurisdiction of the Adjudicating Authority under Section 60(5)(c) of the Insolvency and Bankruptcy Code to decide questions of priorities arising out of or in relation to insolvency resolution or liquidation - Whether IBC (including Section 238) and the jurisdiction conferred by Section 60(5)(c) empowers the Adjudicating Authority to set aside or ignore PMLA attachment insofar as it obstructs CIRP. - HELD THAT: - The Tribunal held that Section 238 IBC, being a later and specific legislative code for insolvency resolution, operates notwithstanding inconsistent provisions in other laws; where an attachment or other enforcement action under another law obstructs duties and powers conferred on the IRP/RP/liquidator (such as taking custody, valuing and realising assets to preserve value), the obstruction must yield to IBC. Such questions concerning priority of rights and impediments to the insolvency process constitute "any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings" and fall within Section 60(5)(c). The Tribunal emphasized that IBC's regime is time bound and seeks value maximisation for creditors and stakeholders, and therefore assets of the corporate debtor must be made available to the RP for achieving those objectives unless protected by later statutory safeguards (e.g., Section 32A upon plan approval). [Paras 8, 41, 42]

Section 238 IBC and the jurisdiction conferred by Section 60(5)(c) empower the Adjudicating Authority to override inconsistent enforcement steps under PMLA that impede the CIRP; accordingly such attachments obstructing CIRP may be disregarded so that the RP can take charge of the corporate debtor's assets.

Proceedings before the Adjudicating Authority under the Prevention of Money Laundering Act are civil in nature - provisional attachment under the Prevention of Money Laundering Act vis a vis insolvency moratorium - Whether proceedings for confirmation of provisional attachment under PMLA are civil in nature and thus susceptible to the moratorium under IBC. - HELD THAT: - The Tribunal accepted the characterization that the Adjudicating Authority's functions in confirming provisional attachment under PMLA are civil (adjudicatory) in nature, as supported by statutory provisions (e.g., powers akin to a civil court under Section 11 of PMLA) and pronouncements treating the Adjudicating Authority's role as not determining criminality or imposing punishment. Given that characterisation, the Tribunal concluded that such proceedings constitute "proceedings" under Section 14(1)(a) IBC and are therefore prohibited during moratorium in respect of the corporate debtor's properties. The conclusion followed both from PMLA's own scheme and from authorities cited to the Adjudicating Authority and Tribunal. [Paras 18, 37, 39]

Confirmation proceedings under PMLA before the Adjudicating Authority are civil in nature and are therefore covered by the moratorium under Section 14 IBC when they concern the corporate debtor's properties during CIRP.

Protection under Section 32A of the Insolvency and Bankruptcy Code for property upon approval of a resolution plan - Whether Section 32A of IBC bears on the present dispute and the scope of protection to property of the corporate debtor. - HELD THAT: - The Tribunal noted that Section 32A (introduced subsequently) provides statutory protection to the property of a corporate debtor once a resolution plan is approved (subject to specified conditions and exceptions), and that the constitutional validity of Section 32A has been upheld. While Section 32A does not directly apply prior to plan approval, the legislative intent behind Section 32A and its protective scheme reinforces the policy aim of IBC to enable successful resolution applicants to take a clean slate and to encourage participation by removing impediments relating to pre CIRP offences once statutory conditions are met. The Tribunal observed that Section 32A addresses post approval protection and does not negate the applicability of the moratorium and IBC jurisdiction during CIRP. [Paras 23, 24, 27]

Section 32A affords protection to corporate debtor's property upon approval of a resolution plan under the conditions stated therein; it reinforces the legislative scheme favouring availability of assets for resolution, but does not limit the conclusion that moratorium and IBC jurisdiction operate during CIRP to prevent attachment actions obstructing insolvency proceedings.

Power of the Adjudicating Authority under Section 60(5) of IBC - jurisdictional limits described in Embassy Properties (Supreme Court) - Whether the Resolution Professional's recourse to NCLT under Section 60(5) IBC to secure assets of the corporate debtor was permissible in the facts of these matters. - HELD THAT: - The Tribunal considered the Supreme Court's guidance in Embassy Properties that Section 60(5) cannot be used to arrogate jurisdiction over public law matters outside insolvency's ambit, but emphasized that application of that principle depends on factual context. Here, the question was not a pure public law decision but a conflict between an attachment under PMLA and the RP's statutory duties to take control and preserve assets under IBC. The Tribunal held that where an attachment obstructs the IRP/RP from performing time bound duties critical to CIRP (valuation, preservation, sale/realisation), such a dispute about priority and impediment arises out of or in relation to insolvency proceedings and hence falls within Section 60(5)(c). Consequently the Resolution Professional's invocation of the Adjudicating Authority under IBC to secure custody and control of the corporate debtor's properties was appropriate. [Paras 19, 20, 41]

Given the factual matrix, the Resolution Professional properly invoked NCLT jurisdiction under Section 60(5)(c) to resolve the priority/impediment caused by PMLA attachment so as to protect the CIRP; Embassy Properties does not prohibit such recourse where the matter squarely relates to insolvency proceedings.

Final Conclusion: The appeals are dismissed. The Tribunal upheld the NCLT's orders declaring the provisional attachment and corrigendum in respect of the corporate debtors' properties to be null and of no effect for the purposes of CIRP, holding that the moratorium under Section 14 IBC and the Code's overriding scheme (including Section 238 and Section 60(5)(c)) require that assets of the corporate debtor be made available to the Resolution Professional to preserve value and conduct the insolvency process; Section 32A was noted as a subsequent protective measure upon plan approval but does not detract from the Tribunal's conclusions.

Article 137 of the Limitation Act applies to applications under Section 7 of the Insolvency & Bankruptcy Code - date of default as the accrual of the right to apply under the Code - acknowledgement of liability under Section 18 of the Limitation Act - Section 25(3) of the Indian Contract Act as exception in relation to time barred debts - Article 62 of the Limitation Act not applicable to initiation of CIRP under Section 7 - Section 5 of the Limitation Act - condonation of delay

Article 137 of the Limitation Act applies to applications under Section 7 of the Insolvency & Bankruptcy Code - date of default as the accrual of the right to apply under the Code - Article 62 of the Limitation Act not applicable to initiation of CIRP under Section 7 - The limitation period for filing an application under Section 7 of the Code is governed by Article 137 of the Limitation Act and the right to apply accrues on the date of default. - HELD THAT: - The Bench applied the consistent decisions of the Supreme Court (including B.K. Educational Services, Babulal Vardharji Gurjar, Swiss Ribbons, K. Shashidhar and related authorities) to hold that an application under Section 7 is governed by Article 137 and that the trigger for the right to apply is actual default when the debt becomes due and payable. The Court rejected the proposition that Article 62 or the commencement date of the Code can be treated as the starting point of limitation for Section 7 proceedings. On the admitted facts the Petition pleads a date of default in 1998 and was filed in 2019, well beyond the three year period under Article 137 absent any valid ground for condonation under Section 5 of the Limitation Act.

Article 137 governs limitation for Section 7 applications; the right to apply accrued on the date of default pleaded in 1998 and the petition filed in 2019 is time barred unless condonation is available.

Acknowledgement of liability under Section 18 of the Limitation Act - Section 5 of the Limitation Act - condonation of delay - Section 18 (acknowledgement) does not avail the petitioner on these facts because the alleged acknowledgements and documents post date the relevant limitation period and no foundation for reliance on acknowledgement was pleaded in the petition. - HELD THAT: - Even assuming Section 18 principles could be relevant to extend limitation for applications under the Code, the Tribunal held that the necessary preconditions were not satisfied here. The Assignment Agreement, deed of mortgage and the letter of acknowledgement relied upon are all executed well after the three year limitation period measured from the original date of default, and the petition itself did not plead any acknowledgement or alternative date of default on which reliance could be placed. The Bench therefore found that Section 18 cannot be invoked to revive or extend the time for filing this Section 7 petition on the present pleadings and materials.

Section 18 cannot extend limitation in this case because the purported acknowledgements occurred after the relevant limitation period and were not pleaded as a foundation for extending time.

Section 25(3) of the Indian Contract Act as exception in relation to time barred debts - Section 25(3) of the Contract Act and the Assignment Agreement do not operate to revive or render the debt 'due and payable' for the purpose of initiating CIRP under Section 7 on the facts before the Tribunal. - HELD THAT: - The Tribunal distinguished proceedings for recovery from initiation of CIRP and observed that arguments premised on Section 25(3) - which may be invoked in recovery proceedings to render a time barred debt enforceable by agreement - do not alter the operation of Article 137 for Section 7 applications where the date of default pleaded belongs to the pre assignment era and the assignment and subsequent documents post date the three year limitation. The Bench further held that the Petition cannot be re characterised to rely on a fresh cause of action arising from the post assignment documents because the application as filed consistently pleads the original default date and lacks requisite pleadings/evidence to found any alternative date of default or acknowledgment.

Section 25(3) and the Assignment Agreement do not assist the petitioner to overcome the limitation bar in this Section 7 proceeding on the present facts.

Final Conclusion: The petition under Section 7 is rejected as time barred: the claimed debt is not a debt 'due and payable' for the purposes of the Code because the right to apply accrued on the date of default in 1998 and the application filed in 2019 is barred by Article 137 of the Limitation Act; neither acknowledgement nor the Assignment Agreement on the materials before the Tribunal extends or revives the limitation period.

Initiation of Corporate Insolvency Resolution Process - existence of debt and occurrence of default - limitation for filing section 7 petition - moratorium under sections 13 and 14 of the IBC - appointment of Interim Resolution Professional - remedy in rem - MSME exception to eligibility criteria (section 29-A/section 240A context)

Existence of debt and occurrence of default - limitation for filing section 7 petition - Whether the petition under section 7 is maintainable on the ground of existence of debt, default and limitation. - HELD THAT: - The Tribunal examined the loan documents, statements of account and certificate under the Banker's Book of Evidence Act filed with the petition and recorded that the Corporate Debtor availed multiple credit facilities from the Financial Creditor and that debt in excess of the statutory threshold exists. The date of default is recorded as 30.03.2018 and the petitioner filed the section 7 application on 08.01.2021. The petition also annexes acknowledgements of debt by the Corporate Debtor on earlier dates and evidence of registration of charges. On the basis of these materials the Adjudicating Authority was satisfied that a debt was due and payable, default had occurred and the petition was filed within the period of limitation. [Paras 3, 11]

Section 7 petition is maintainable; existence of debt and default established and petition filed within limitation.

Initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under sections 13 and 14 of the IBC - Admission of the section 7 petition, declaration of moratorium and appointment of the Interim Resolution Professional. - HELD THAT: - Having found the petition complete and the requirements of section 7 satisfied, the Adjudicating Authority admitted the I.B. petition and declared moratorium under the provisions governing moratorium, thereby prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security and related actions. The Tribunal appointed the nominated Insolvency Professional as Interim Resolution Professional and directed him to make the public announcement and perform duties under the Code, Rules and Regulations. The Tribunal also relieved the earlier Special Officer and directed handover of records to the IRP. [Paras 3, 4, 5, 6, 7]

IB petition admitted; moratorium declared with effect from the date of order; proposed IRP appointed and directed to act as required under the Code.

Remedy in rem - SARFAESI proceedings and IBC coexistence - Effect, if any, of pendency of SARFAESI or other proceedings on the power of the Financial Creditor to initiate CIRP. - HELD THAT: - The Tribunal recorded the settled position that the pendency of SARFAESI proceedings or other disputes does not prevent a Financial Creditor from initiating CIRP because the remedy under the Code is a 'remedy in rem' against the corporate debtor. Accordingly, initiation of insolvency proceedings was not barred by parallel recovery proceedings. [Paras 1]

Pendency of SARFAESI proceedings does not preclude initiation of CIRP under the IBC.

MSME exception to eligibility criteria (section 29-A/section 240A context) - commercial viability considerations in resolution planning - Guidance to IRP/CoC regarding treatment of interest and applicability of MSME exception while preparing a resolution plan. - HELD THAT: - The Tribunal observed that the Corporate Debtor is an MSME unit yet to commence operations and highlighted commercial realities-such as falling interest rates-when framing a viable resolution plan. It advised the Committee of Creditors to explore capping interest at the Applicant Bank's one year MCLR or one year MCLR plus 1% until approval of the resolution plan and reminded the IRP and CoC of the statutory provision exempting MSME resolution applicants from certain clauses of section 29-A (referred via section 240A). These observations are advisory directions to enable formulation of a viable, implementable resolution plan. [Paras 8, 9, 10]

IRP and CoC to consider commercially viable interest loading (as suggested) and to take into account the MSME exception while finalizing a resolution plan.

Final Conclusion: The Tribunal admitted the section 7 IBC petition against Cleanopolis Energy Systems India Private Limited (admission dated 07.04.2021), declared moratorium under the Code, appointed the proposed Interim Resolution Professional, and directed compliance with the Code; it further recorded that SARFAESI proceedings do not bar CIRP and gave advisory directions to the IRP/CoC regarding interest treatment and the MSME-related exception in resolution planning.

Approval of Resolution Plan under Section 30(6) and Section 31 - Compliance with Section 30(2) requirements - Committee of Creditors' commercial wisdom and limited judicial review - Liquidation value and viability assessment by registered valuers - Form-H compliance certificate under Regulation 39(4) - Statement dealing with stakeholders' interests under Regulation 38(1A) - Priority of payment and distribution under Section 53 - Ineligibility under Section 29A

Approval of Resolution Plan under Section 30(6) and Section 31 - Compliance with Section 30(2) requirements - Form-H compliance certificate under Regulation 39(4) - Statement dealing with stakeholders' interests under Regulation 38(1A) - Liquidation value and viability assessment by registered valuers - Committee of Creditors' commercial wisdom and limited judicial review - Ineligibility under Section 29A - The Resolution Plan as approved by the Committee of Creditors meets the requirements of Section 30(2) of the Code and relevant Regulations and is fit for approval by the Adjudicating Authority. - HELD THAT: - The Tribunal examined whether the Plan, as approved by the CoC, satisfies the statutory requirements of Section 30(2) and the Regulations. The Plan provides for payment of CIRP costs, repayment to operational creditors and financial creditors as required, management and implementation mechanisms post-approval, and a certification by the RP that the Plan does not contravene any law. Liquidation value was determined by two registered valuers and the Plan offers more than the average liquidation value (para 8). The RP filed the Compliance Certificate in Form-H and the Plan contains the statement required by Regulation 38(1A) dealing with stakeholders' interests; these documents were found to be in order (paras 9-10). The Bench noted aspects of the funding plan (sale of non-core assets and staged infusion) and sought clarification on sources and realisation; the RP furnished audited and provisional financial statements of the Resolution Applicant, which the Bench found acceptable (para 10). The Tribunal applied the limited scope of judicial scrutiny confined to the matters in Section 30(2), following the approach in K Sashidhar v. Indian Overseas Bank & Others and CoC of Essar Steel , observing that the Adjudicating Authority must not trespass upon the commercial wisdom of the CoC. The CoC had approved the Plan with the requisite majority and the Tribunal found no contravention of Section 29A. On the basis of the foregoing, the Plan was held to meet the statutory and regulatory requirements and therefore to merit approval (para 13). [Paras 9, 10, 11, 12, 13]

Application allowed; the Resolution Plan annexed to the Application is approved and shall become effective from this date.

Final Conclusion: The Adjudicating Authority approved the CoC approved Resolution Plan as meeting the requirements of Section 30(2) of the Code and applicable Regulations, directed that the Plan become effective, declared it binding on the corporate debtor and stakeholders, and recorded that the RP shall supervise implementation and forward records to the IBBI; the moratorium under Section 14 ceases from this date.

Effect of acknowledgment and payment under Sections 18 and 19 of the Limitation Act on limitation for IBC proceedings - TDS payments as acknowledgment or part-payment extending period of limitation - Applicability of the Limitation Act to applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code - Establishment of financial debt and default for admission under Section 7 of the IBC

Effect of acknowledgment and payment under Sections 18 and 19 of the Limitation Act on limitation for IBC proceedings - TDS payments as acknowledgment or part-payment extending period of limitation - Intermittent deposit of TDS on interest by the Corporate Debtor extended the period of limitation for filing the Section 7 application under Sections 18 and 19 of the Limitation Act. - HELD THAT: - The Tribunal found that the Corporate Debtor made intermittent deposits of TDS on interest, the last tranche being on 31.03.2019, and accepted the petitioner's contention that such payments fall within the ambit of Section 19 (payment on account of debt or of interest) and, read with Section 18, give rise to a fresh period of limitation computed from the date of payment. The Bench observed that while the date of default (foundation of the debt) remains unchanged, payments made within the prescribed period operate to restart limitation under Sections 18 and 19. The Tribunal also noted that the sums deposited as TDS are treated, for income-tax purposes, as deemed receipt by the creditor and thus constitute an acknowledgement/part-payment sufficient to attract the Limitation Act provisions and extend the time for instituting proceedings under the Code. [Paras 23, 25, 28]

Payments of TDS on interest made by the Corporate Debtor, culminating on 31.03.2019, operate as part-payment/acknowledgement under Sections 18 and 19 of the Limitation Act and extend the limitation period for the Section 7 application.

Applicability of the Limitation Act to applications under Sections 7 and 9 of the Insolvency and Bankruptcy Code - The Limitation Act applies to applications under Section 7 of the IBC and Articles governing limitation (including Article 137) are engaged; Sections 18 and 19 of the Limitation Act can operate in IBC proceedings where facts so warrant. - HELD THAT: - The Tribunal followed the settled position in Supreme Court and NCLAT decisions that the Limitation Act is applicable to Section 7 applications and the right to file accrues on occurrence of default. The Bench observed that earlier case law did not hold Sections 18 and 19 inapplicable to the Code generally; rather applicability depends on facts. The Tribunal relied on precedents and NCLAT decisions recognising that acknowledgements and payments can create a fresh period of limitation for IBC applications, and applied that principle to the facts of the case. [Paras 21, 26, 27, 28]

The Limitation Act governs Section 7 applications; Sections 18 and 19 may apply to create a fresh limitation period where there is an acknowledgement or part-payment.

Establishment of financial debt and default for admission under Section 7 of the IBC - The petitioner established existence of financial debt and default by the Corporate Debtor and the Section 7 petition was liable to be admitted. - HELD THAT: - The Tribunal accepted documentary evidence of the loan (acknowledgement letters, loan extension letters, demand promissory notes and post-dated cheques) and ledger entries showing non-repayment. The bench found that the Corporate Debtor acknowledged receipt of the loan, failed to repay, and that intermittent payment of TDS on interest corroborated the subsisting liability. Applying the limitation analysis above, the Tribunal concluded that the ingredients of Section 7 (debt and default) were satisfied and admission was warranted. [Paras 6, 18, 19, 28, 29]

The petition under Section 7 is admitted: debt and default are established and the claim is within the extended limitation period.

Final Conclusion: The Tribunal held that intermittent TDS payments on interest by the Corporate Debtor amounted to acknowledgment/part-payment under Sections 18 and 19 of the Limitation Act, thereby extending the limitation for filing the Section 7 petition; the Limitation Act applies to Section 7 proceedings; and on the facts the petitioner established financial debt and default, leading to admission of the Section 7 petition and appointment of an interim resolution professional.

Provisional attachment under PMLA - Right of third-party claimants to be heard before the Adjudicating Authority - Availability of alternative and efficacious remedy before the Adjudicating Authority - PMLA as a complete code ousting writ remedy in respect of provisional attachment - Appellate remedy under section 26 of the PMLA

Provisional attachment under PMLA - Right of third-party claimants to be heard before the Adjudicating Authority - Challenge to the provisional attachment order before the High Court versus remedy before the Adjudicating Authority - HELD THAT: - The Court examined the provisions of Section 5 (provisional attachment) and Section 8 (adjudication) of the PMLA and observed that the statute itself provides the procedure for dealing with attached property and for persons claiming interest in such property to be heard. The Adjudicating Authority is required to consider replies, hear the aggrieved person and the Director and to give an opportunity to persons other than those issued notice to prove that the property is not involved in money-laundering. Consequently, third-party purchasers or persons claiming interest have the statutory forum and process to assert their claims and seek release of property or designated public amenities from attachment. The High Court held that because the statutory scheme contemplates this adjudicatory mechanism, the petitioners must avail the remedy before the Adjudicating Authority rather than obtain relief by writ at this stage. [Paras 5]

Petitioners must pursue their claim before the Adjudicating Authority under Section 8 of the PMLA which is empowered to hear and decide claims to attached property.

Availability of alternative and efficacious remedy before the Adjudicating Authority - PMLA as a complete code ousting writ remedy - Appellate remedy under section 26 of the PMLA - Maintainability of writ petition in view of statutory remedies and appellate recourse - HELD THAT: - The Court noted that the PMLA provides a complete code for attachment, adjudication and consequent confiscation or release of property. It emphasized that orders of provisional attachment are temporary and subject to confirmation or vacation by the Adjudicating Authority; further, orders of the Adjudicating Authority are appealable under Section 26. Given the availability of this statutory adjudicatory and appellate scheme, the petitioners are not remedy-less and the High Court declined to entertain the writ challenge to the provisional attachment, leaving open the statutory remedies. [Paras 5, 6]

Writ petition dismissed with liberty to invoke the remedy under the PMLA and, if necessary, the appellate remedy under Section 26.

Final Conclusion: The writ petition challenging the provisional attachment is disposed of by declining interference; petitioners are granted liberty to press their claims before the Adjudicating Authority under the PMLA and to avail the statutory appellate remedy thereafter.

Cenvat credit - input service as defined under Rule 2(l) of the Cenvat Credit Rules - classification of service at the hands of the service provider is not a ground to deny credit to the recipient - advertising agency services vis-a -vis business auxiliary services - entitlement to credit where invoice is paid and tax is discharged by the recipient

Cenvat credit - input service as defined under Rule 2(l) of the Cenvat Credit Rules - classification of service at the hands of the service provider is not a ground to deny credit to the recipient - entitlement to credit where invoice is paid and tax is discharged by the recipient - Whether the appellant is entitled to cenvat credit of service tax paid on invoices raised by advertising agencies despite a contention that the underlying activity should be classified as Business Auxiliary Service in the hands of the service provider. - HELD THAT: - The Tribunal held that the show cause notice and demand were misconceived insofar as they sought to deny credit by re classifying the service at the recipient's end. The appellant had received the input service, paid the invoices including service tax, and availed credit through ISD challans. Under Rule 2(l) of the Cenvat Credit Rules an input service includes services used in relation to advertisement or sales promotion, and such services are eligible for credit when utilised in manufacturing of dutiable goods or provision of taxable output services. The Court relied on precedent holding that the classification of the service by the provider cannot be used to deny cenvat credit to the recipient, and accordingly set aside the impugned orders. The Tribunal noted prior findings that the Department had not properly considered the assessee's submissions and that most of the amounts originally proposed for recovery comprised credits unrelated to the narrow contention about canvassing/commission. Applying the legal principle that a recipient who has paid the invoice and discharged the tax is entitled to take credit of the input service, the appeal was allowed and the demand set aside, with consequential benefits to the appellant.

Impugned orders set aside; appellant entitled to cenvat credit of the input service and granted consequential relief.

Final Conclusion: The appeal is allowed. The adjudicating orders rejecting cenvat credit were set aside and the appellant is held entitled to the claimed cenvat credit for the periods in dispute, with consequential relief as per law.

Distribution of Cenvat credit under Rule 7 of the Cenvat Credit Rules, 2004 - entitlement of an Input Service Distributor to distribute credit - penalty under Rule 15(3) of the Cenvat Credit Rules - non-application of mind - binding precedent of the jurisdictional High Court - remand for fresh decision in accordance with law

Distribution of Cenvat credit under Rule 7 of the Cenvat Credit Rules, 2004 - entitlement of an Input Service Distributor to distribute credit - binding precedent of the jurisdictional High Court - non-application of mind - Quashing of the Tribunal's order for being cryptic, not assigning reasons and for failing to consider the binding decision of this High Court in CCE vs. ECOF Industries Pvt. Ltd. - HELD THAT: - The Tribunal's order merely recorded conclusions without assigning reasons and did not consider the decision of this High Court in CCE vs. ECOF Industries Pvt. Ltd., which holds that a registered Input Service Distributor is entitled to distribute credit subject to conditions in Rule 7. For these reasons the Tribunal's order suffers from non-application of mind. The omission to apply and consider the jurisdictional High Court precedent rendered the appellate decision inadequate and legally unsustainable. [Paras 10, 11]

The Tribunal's order dated 29.10.2015 is quashed for want of reasons and for failure to consider the binding High Court decision; the substantial question of law is answered in favour of the assessee.

Remand for fresh decision in accordance with law - penalty under Rule 15(3) of the Cenvat Credit Rules - Remittance of the matter to the Tribunal for fresh decision on merits in accordance with law, without expressing any opinion on the merits. - HELD THAT: - Given the quashing of the Tribunal's order, the Court directed that the appeal be decided afresh by the Tribunal; the Tribunal must consider the binding High Court precedent and the provisions of Rule 7 regarding distribution by an Input Service Distributor, and determine any question of penalty under Rule 15(3) on the applicable legal test. The High Court expressly refrained from expressing any view on the merits of the claim and confined its order to remand for expeditious disposal. [Paras 12]

Matter remitted to the Tribunal to decide expeditiously and in accordance with law; no opinion expressed on merits.

Final Conclusion: The appellate order dated 29.10.2015 is quashed for being cryptic and for failure to consider the binding High Court precedent; the matter is remitted to the Tribunal for fresh adjudication in accordance with law, with no expression of opinion on the merits.

Doctrine of bias - reasonable apprehension of bias - reasonable likelihood of bias - recusal - natural justice - no man to be judge in his own cause - right to an effective appeal - appeal versus review

Doctrine of bias - reasonable apprehension of bias - recusal - right to an effective appeal - Whether the First Appellate Authority (Shri Ashok Rane) ought to have recused himself from hearing and deciding the petitioner's appeal for Assessment Year 2010-11 on grounds of reasonable apprehension of bias. - HELD THAT: - The Court found that Shri Ashok Rane, as Assessing Officer, had earlier passed an adverse order dated 27.03.2012 in respect of Assessment Year 2008-09 and had correctly recused himself from hearing the connected appeal against that order. The appeal in respect of Assessment Year 2010-11 involved virtually identical facts and the same question of law. In these peculiar facts the petitioner's apprehension that Shri Rane could not objectively decide the 2010-11 appeal was reasonable. The correct test is not actual bias but whether a litigant could reasonably apprehend that bias might operate. Absent any distinguishing features between the two assessments, principles of natural justice required recusal; allowing the same officer to test the correctness of a decision he had effectively reached in an identical earlier order would reduce appellate jurisdiction to review and render the appeal illusory. Applying precedent emphasising that justice must not only be done but must appear to be done, the Court held that Shri Rane should not have taken up and disposed of the 2010-11 appeal. [Paras 16, 18, 19, 20, 21]

Shri Ashok Rane ought to have recused himself from hearing and deciding the petitioner's appeal for Assessment Year 2010-11; his disposal of that appeal was improper.

Doctrine of bias - reasonable apprehension of bias - recusal - restoration of appeal - appeal versus review - Whether the Goa Administrative Tribunal erred in rejecting the petitioner's bias objection and whether the impugned orders should be set aside and the appeal restored for fresh adjudication. - HELD THAT: - The Tribunal rejected the bias challenge by observing that recusal is for the judge to decide, but the High Court found that the Tribunal misconstrued the precedent relied upon and failed to appreciate the comparable facts and legal issue between the two assessments. Given the reasonable apprehension of bias in the specific circumstances, the Tribunal's refusal to uphold the petitioner's contention amounted to a failure to properly exercise its jurisdiction. Consequently the orders of the First Appellate Authority and the Tribunal were set aside. The Court restored the petitioner's appeal against the order dated 29.03.2014 (Assessment Year 2010-11) to the file of the First Appellate Authority and directed disposal on merits and in accordance with law within two months from production of an authenticated copy of the order; both connected appeals (2008-09 and 2010-11) were to be heard by the First Appellate Authority (other than Shri Rane). All other contentions of the parties were left open. [Paras 15, 21, 22, 23, 25]

The Tribunal erred in rejecting the bias objection; the impugned orders of the First Appellate Authority and the Tribunal are set aside, the 2010-11 appeal is restored for fresh adjudication and both connected appeals are to be disposed of on merits by the First Appellate Authority (other than Shri Rane).

Final Conclusion: The Court allowed the petition on the bias ground: the First Appellate Authority should not have heard the 2010-11 appeal; the appellate orders impugned were set aside, the 2010-11 appeal was restored to the First Appellate Authority for fresh adjudication (to be completed within two months after production of an authenticated copy), both connected appeals to be heard by the First Appellate Authority other than Shri Ashok Rane, and all other contentions were left open.

Penalty under Section 53(12)(a) for contravention of Section 53(2) - sufficient cause for non-compliance - penalty attracted only upon attempt to evade tax - power of revisional authority under Section 64(1) - judicial review of sufficiency of cause by revisional forum

Penalty under Section 53(12)(a) for contravention of Section 53(2) - sufficient cause for non-compliance - penalty attracted only upon attempt to evade tax - Whether penalty could be sustained where e-sugam was not produced at the time of interception but was subsequently generated and produced, and whether sufficient cause was shown to preclude imposition of penalty. - HELD THAT: - The Court accepted the First Appellate Authority's finding that the goods moved in the course of a bona fide consignment sale between registered dealers, the invoices disclosed the transaction particulars, and there was no material to indicate any attempt to evade tax. The First Appellate Authority recorded that e-sugam, though not produced at the moment of interception, was subsequently generated at the branch and furnished at 10:30 p.m., and it accepted the explanation that the person responsible for issuing e-sugam had gone for dinner. Under Section 53(12)(a) penalty is levyable only where sufficient cause is not shown; established authorities require an attempt to evade tax before a penalty can be imposed. Applying these principles, the Court held that on the record the cause shown was sufficient and the requirement for invoking penalty was not satisfied. [Paras 10]

Penalty set aside - the explanation was sufficient and no attempt to evade tax was established.

Power of revisional authority under Section 64(1) - judicial review of sufficiency of cause by revisional forum - Whether the Revisional Authority (Additional Commissioner) was justified in invoking Section 64(1) to reverse the order of the First Appellate Authority and restore the penalty order. - HELD THAT: - The Court reiterated that it is for the fact-finding authority to assess whether the cause shown is sufficient. Once the First Appellate Authority affirmed the sufficiency of the dealer's explanation in the facts of the case, the Revisional Authority was not justified in exercising revision to overturn that finding. Reliance on the Court's prior decision in Abhay Solvents confirmed that a revisional power cannot be used to supplant the appellate authority's assessment of sufficiency of cause where that assessment is supported by material on record. Consequently, the orders of the Additional Commissioner invoking Section 64(1) to set aside the appellate order and restore the penalty were unsustainable. [Paras 11, 12]

Revisional orders set aside - power under Section 64(1) was not properly exercised to reverse the appellate finding of sufficient cause.

Final Conclusion: Appeals allowed. The orders dated 27.04.2015, 29.04.2015 and 28.04.2015 of the Additional Commissioner are set aside, the penalty orders of the Deputy Commissioner are quashed, and the substantial question of law is answered in favour of the appellant.

Entitlement to concessional rate against Declaration in 'C' forms for inter State purchase of High Speed Diesel - Applicability of the Central Sales Tax Act post GST to purchasing dealers - Right to registration under the CST Act independent of seller's liability - In rem effect of High Court decisions binding on assessing authorities - Freedom of trade under Article 301 read with Article 304(b) - Obligation on Revenue to permit online downloading of 'C' forms

Entitlement to concessional rate against Declaration in 'C' forms for inter State purchase of High Speed Diesel - Applicability of the Central Sales Tax Act post GST to purchasing dealers - Right to registration under the CST Act independent of seller's liability - In rem effect of High Court decisions binding on assessing authorities - Claim for issuance of 'C' forms and entitlement to concessional CST treatment for purchase of High Speed Diesel from suppliers in other States was allowed. - HELD THAT: - The Court applied the earlier decision in M/s Ramco Cements Ltd. and subsequent Division Bench reasoning confirming that purchasing dealers retain rights under the CST Act to obtain registration and to claim concessional rate by submitting Declaration in 'C' forms. A conjoint reading of subsections of Section 7 shows registration may be obtained by dealers independently of the seller's liability, and the restriction of the definition of 'goods' to specified items post GST does not extinguish the right of purchasing dealers to claim concessional treatment under Section 8(3)(b). High Court and appellate pronouncements operate in rem and are binding on Assessing Authorities until stayed or reversed. Consequently the departmental practice of restricting 'C' forms to parties to the Ramco decision or blocking online access was held impermissible and the department was directed to apply the rationale of the Ramco decisions to all eligible dealers and to permit online downloading of 'C' forms.

Writ petition allowed; respondents directed to extend the benefit of 'C' forms and concessional rate to all eligible purchasing dealers for inter State purchases of High Speed Diesel in accordance with the Court's consistent rulings and to permit online downloading of such Declarations; no costs.

Final Conclusion: The writ petition is allowed in accordance with the Court's application of the Ramco Cements line of authority; the revenue is directed to implement the decision for all eligible dealers and to enable online access to 'C' forms; connected miscellaneous petition closed; no costs.

Summary order. Appeals dismissed for default; substantial questions of law left open.

Invisible loss ratio - input tax credit refund for exports - inspection of manufacturing process before determining invisible loss - waiver of procedural or substantive benefit by the assessee - error apparent on the face of the record - jurisdiction under Section 84 of the Tamil Nadu Value Added Tax Act

Invisible loss ratio - inspection of manufacturing process before determining invisible loss - waiver of procedural or substantive benefit by the assessee - Acceptability of determining the invisible loss ratio at 5% on the basis of the assessee's written submission without inspection of the manufacturing process despite earlier judicial mandate. - HELD THAT: - The Court examined whether the assessing authority acted contrary to the earlier Madras High Court mandate that the invisible loss ratio should be worked out after inspection of the manufacturing process. The record showed that the petitioner himself submitted letters calculating and accepting an invisible loss ratio of 5%, and the assessing officer adopted that figure without alteration. The Court held that an assessee can, by written submission, forego a procedural advantage and that acceptance of the petitioner's own computation does not amount to an error apparent on the face of the record. Consequently, the assessing authority could lawfully act on the petitioner's written acceptance and there was no basis to treat the adoption of 5% as arbitrary in the circumstances of this case.

The acceptance of the 5% invisible loss ratio based on the petitioner's written submission did not constitute error apparent on the face of the record and was not objectionable.

Jurisdiction under Section 84 of the Tamil Nadu Value Added Tax Act - error apparent on the face of the record - Whether the rectification/recall proceeding under Section 84 could be exercised to alter the accepted invisible loss ratio. - HELD THAT: - The Court considered the scope of the authority's power under Section 84 to rectify orders only where there is an error apparent on the face of the record. Having found that the assessing officer had acted on the petitioner's own written computation and that there was no demonstrable error apparent on the face of the record, the Court concluded that the jurisdiction under Section 84 could not be invoked to disturb the assessment. The absence of rebuttal to the counter-affidavit and production of the petitioner's letters reinforced that there was no legal ground to set aside the accepted figure.

There was no jurisdictional basis under Section 84 to interfere; the rectification challenge failed for want of any error apparent on the face of the record.

Final Conclusion: Writ petition dismissed. The assessing authority lawfully accepted the assessee's written computation of a 5% invisible loss; there is no error apparent on the face of the record to warrant intervention under Section 84 of the Tamil Nadu Value Added Tax Act.

Service of assessment order - belated statutory appeal - proof of intimation of change of address - signature verification years later - benefit of doubt - reception of appeals notwithstanding limitation for consideration on merits

Service of assessment order - proof of intimation of change of address - signature verification years later - belated statutory appeal - benefit of doubt - Whether appeals returned as belated could be received where the assessee asserted non-receipt of assessment orders after having intimated change of place of business and produced a dispatch register entry bearing an officer's scrawl. - HELD THAT: - The Court accepted the petitioner's case that the petitioner had intimated its change of place of business to the department in June 2012 and that the petitioner only became aware of the assessment orders when coercive recovery measures were initiated. The first respondent had rejected the appeals because no officer in the department in 2020 could be identified whose signature corresponded to the 2012 entry. The Court observed that after an eight-year interval personnel would likely have changed, making such signature comparison unrealistic. In that factual matrix, and in absence of any charge of mala fides or fabrication against the petitioner, the Court held that the benefit of doubt must be given to the petitioner and that the technical disbelief of the earlier intimation based solely on inability to match a scrawled signature years later was not a justification for refusing to admit the appeals as time barred. [Paras 5, 6]

Impugned order returning the appeals as belated set aside; the first respondent directed to receive the appeals as maintainable.

Reception of appeals notwithstanding limitation for consideration on merits - consideration on merits - Whether, having received the appeals, the appellate authority should consider them on merits despite the limitation objection. - HELD THAT: - The Court, after directing that the appeals be received, further directed that the TNVAT and CST appeals, if re-presented within two weeks, shall be taken on file without reference to limitation and considered on merits. The Court recorded that payments asserted by the petitioner (100% for TNVAT matters and 25% for CST matters) were undisputed, and ordered expeditious consideration and orders on merits by the Registry of the first respondent. [Paras 6]

If re-presented within two weeks, the Registry shall admit the appeals without reference to limitation and the appeals shall be considered on merits expeditiously.

Final Conclusion: The writ petitions succeed. The order returning the seven statutory appeals as belated is set aside; the first respondent is directed to receive the appeals as maintainable and, if re-presented within two weeks, to take them on file without reference to limitation and decide them on merits expeditiously. Connected petitions closed; no costs.