TaxTMI Updates e-Newsletter
Apr 21,2022

Summary order. Notice issued; Dasti permitted; notice waived for respondent No.1; matters to be tagged with SLP (C) No.12936 of 2020 and connected cases and listed together on 20-9-2021; office to circulate report if any matter is unready.

Review of the order - Special Leave Petition - Imposition of penalty - Duty to explain penalty computation

Special Leave Petition - Review of the order - Duty to explain penalty computation - Whether the petitioner can pursue the present challenge by filing a Special Leave Petition when counsel was unable to explain the basis for the penalty and whether liberty should be given to seek review instead. - HELD THAT: - The Court observed that counsel for the Department did not answer the specific question posed in paragraph 5 as to how three times the monthly SGST tax was taken as the principal and a 100% penalty imposed. The bench accepted the explanation that counsel may not have been able to assist on the first date of hearing. Given that omission, the Court held that the appropriate remedy for the petitioner is to file an application seeking review of the order rather than seek special leave to appeal. On this basis the Court declined to entertain the SLP and granted the petitioner liberty to seek review so that the matters concerning the computation and justification of the penalty can be addressed in that proceeding. [Paras 5]

Special Leave Petition dismissed with liberty to the petitioner to file an application for review; pending application disposed of.

Final Conclusion: The Special Leave Petition is dismissed because counsel did not explain the basis of the penalty; the petitioner is granted liberty to seek review of the order and the pending application is disposed of.

Exclusion of period for limitation - computation of limitation - condonation of delay - fresh consideration on merits - extension of limitation by the Supreme Court

Exclusion of period for limitation - computation of limitation - extension of limitation by the Supreme Court - Whether the impugned dismissal of the appeal for non-filing of the certified copy within time was erroneous in view of the Supreme Court's order excluding the period from limitation. - HELD THAT: - The High Court accepted the petitioner's submission that the period excluded by the Supreme Court in re: Cognizance for Extension of Limitation (Special Bench order dated 23.09.2021) - namely the period from 15.03.2020 to 02.10.2021 (and extensions) - had to be taken into account in computing limitation for filing appeals. Applying that exclusion, the Court found that the relevant period covering the present appeal falls within the excluded period. Consequently, dismissal of the appeal solely on the ground that the certified copy was not filed within the statutory time was incorrect. The Court therefore set aside the impugned order which had rejected the appeal on limitation grounds and held that the petitioner is entitled to the benefit of the exclusion ordered by the Supreme Court.

Impugned order set aside insofar as it dismissed the appeal for delay; the petitioner entitled to benefit of the exclusion of the specified period for limitation.

Condonation of delay - fresh consideration on merits - Whether the delay in filing the certified copy should be condoned and the appeal remitted for fresh adjudication on merits. - HELD THAT: - Having concluded that the excluded period applied, the High Court exercised its discretion to condone the delay in filing the certified copy. The Court directed that the delay be condoned and that the respondents consider the appeal afresh on merits under the WBGST Act, thereby remitting the matter for substantive disposal. The order provides for reconsideration by respondent nos. 3 and 4 without treating the earlier limitation-based dismissal as a bar.

Delay in filing the certified copy condoned; appeal directed to be considered afresh on merits by the respondents.

Final Conclusion: The impugned order dismissing the appeal for non-filing of the certified copy within time is set aside; the delay is condoned and the appeal is remitted to the respondents for fresh consideration on merits in accordance with the exclusion of the specified period of limitation by the Supreme Court.

Operation of Rule 86A(3) - one-year life of direction blocking Input Tax Credit - Automatic expiry of action blocking Input Tax Credit by operation of law - Petitioner's decision not to press challenge to a statutory rule

Petitioner's decision not to press challenge to a statutory rule - The petitioner abandoned the challenge to the validity of Rule 86A of the Uttar Pradesh GST Rules, 2017 and the corresponding prayer was not pressed. - HELD THAT: - The petitioner, through learned counsel, expressly stated that it did not intend to press the challenge to Rule 86A. The Court recorded that the first prayer in the writ petition was declined as not pressed. [Paras 3, 4]

Challenge to the validity of Rule 86A was not pressed and the first prayer was declined.

Operation of Rule 86A(3) - one-year life of direction blocking Input Tax Credit - Automatic expiry of action blocking Input Tax Credit by operation of law - The direction dated 10-07-2020 blocking the petitioner's Input Tax Credit expired by efflux of time after one year and therefore stood terminated on 09-07-2021; no order was shown to continue the block beyond that date. - HELD THAT: - The Court examined the counter-affidavit and noted that the impugned order under Rule 86A was passed on 10-07-2020. Applying the clear language of sub rule (3) of Rule 86A, the Court held that the life of such a direction is limited to one year from its inception. Consequently, the blocking of the petitioner's Electronic Credit Ledger ceased automatically on 09-07-2021, and there was no material before the Court showing any continuance of the block beyond that date. [Paras 5, 6]

The blocking order dated 10-07-2020 expired by operation of sub rule (3) of Rule 86A on 09-07-2021 and the Input Tax Credit could not remain blocked thereafter in the absence of any further order.

Final Conclusion: Writ petition disposed: the challenge to Rule 86A was not pressed and declined accordingly; the order blocking the Input Tax Credit dated 10-07-2020 expired by operation of law on 09-07-2021, and the parties are left free to take such further action as the law permits regarding the previously blocked credit.

Violation of principles of natural justice - ex parte order without reasons - quashing of assessment and demand orders - remand for fresh decision on merits - interim restraint on coercive action

Violation of principles of natural justice - ex parte order without reasons - quashing of assessment and demand orders - Validity of the impugned show cause notice, ex parte order, summary of order and demand order for the period 2019-20 - HELD THAT: - The Court held that the impugned orders were ex parte and did not afford the petitioner a fair opportunity of hearing nor did they assign reasons intelligible from the record as to how the amount due was determined. On this short ground of breach of natural justice and absence of reasons, the Court concluded that the orders were bad in law and liable to be quashed. The Court therefore quashed and set aside the impugned show cause notice dated 9-12-2020, the ex parte order dated 11-1-2021, the summary of order dated 11-1-2021 and the demand order dated 11-1-2021 issued by the Assistant Commissioner of State Tax, East Circle, Muzaffarpur, insofar as they relate to the petitioner for the period 2019-20. [Paras 5]

Impugned orders quashed for violation of natural justice and for being ex parte and non-speaking.

Remand for fresh decision on merits - speaking order - interim restraint on coercive action - Disposition of the matter on remand and interim directions pending fresh adjudication - HELD THAT: - The Court remitted the matter to the Assessing Authority to decide the case afresh on merits after affording the petitioner adequate opportunity of hearing and after permitting production of relevant documents and material. The Assessing Authority was directed to pass a speaking order assigning reasons and to decide the matter expeditiously, preferably within two months from appearance. Interim directions include acceptance of the petitioner's statement regarding deposit (ten per cent) or requirement to make such deposit, an additional undertaking to deposit ten per cent of the demand within four weeks, refund if found in excess, de-freezing/de-attaching of bank accounts if attached, and a prohibition on coercive steps during the pendency of proceedings. The Court expressly left all issues on merits open and preserved liberties to challenge fresh orders or pursue other remedies in accordance with law. [Paras 5]

Matter remanded to the Assessing Authority for fresh adjudication in accordance with principles of natural justice; interim protective directions issued.

Final Conclusion: The writ petition is disposed of by quashing the impugned ex parte assessment and demand orders for 2019-20 on grounds of breach of natural justice and absence of reasons, with the matter remitted to the Assessing Authority for fresh, reasoned adjudication after affording opportunity of hearing and subject to specified interim directions, including restraint on coercive action.

Composite supply of works contract - predominantly earth work (more than 75% of value) - concessional rate for sub-contractor under Sr. No. 3(x) of Notification No. 11/2017 - non-applicability of Sr. No. 3A of Notification No. 12/2017 - effect of amendment removing "Governmental Authority" and "Government Entity" from Sr. No. 3(x) w.e.f. 01.01.2022

Non-applicability of Sr. No. 3A of Notification No. 12/2017 - Applicant cannot avail the NIL rate under Sr. No. 3A of Notification No. 12/2017 for the impugned contract. - HELD THAT: - The Authority applied the reasoning adopted in the Advance Ruling on the Principal Contractor's application and held that the impugned contract (involving excavation, earthworks and related construction activities) is not covered by Sr. No. 3A of Notification No. 12/2017. The Principal Contractor's supply was earlier held to be a composite works contract and, on that basis, the Authority concluded that the applicants (as sub-contractors) cannot claim the NIL rate available under Sr. No. 3A. The finding follows the Authority's prior examination of the nature of the contract and its reliance on the ratio in the related advance ruling on the Principal Contractor's application. [Paras 5]

Answer to Question 1 is in the negative; benefit of Sr. No. 3A (NIL rate) is not available to the applicant.

Composite supply of works contract - predominantly earth work (more than 75% of value) - concessional rate for sub-contractor under Sr. No. 3(x) of Notification No. 11/2017 - effect of amendment removing "Governmental Authority" and "Government Entity" from Sr. No. 3(x) w.e.f. 01.01.2022 - Applicant's supply as a sub-contractor is covered by Sr. No. 3(x) of Notification No. 11/2017 and eligible for the concessional rate, but only up to 31.12.2021. - HELD THAT: - The Authority examined the nature of the services supplied by the applicant (excavation, removal of excavated material, rock bolting, reinforcement, concreting, drainage etc.) and reiterated that the Principal Contractor's supply is a composite works contract involving predominantly earth work (over 75% of the contract value). Applying the conditions of Sr. No. 3 of Notification No. 11/2017, the Authority held that composite supplies provided by a sub-contractor to a main contractor who in turn supplies the services specified in item (vii) to a Governmental Authority/Government Entity fall within Sr. No. 3(x). Consequently the applicant (as sub-contractor) is eligible for the concessional rate under Sr. No. 3(x). The Authority further noted that Notification No. 15/2021 amended Sr. No. 3(x) by omitting the references to "a Governmental Authority" and "a Government Entity" with effect from 01.01.2022; therefore, the concessional treatment under Sr. No. 3(x) ceases to be available for such supplies from 01.01.2022 onwards. The Authority limited the affirmative answer to the period prior to that amendment. [Paras 5]

Answer to Question 2 is in the affirmative, but only until 31.12.2021; the concession under Sr. No. 3(x) does not apply with effect from 01.01.2022 due to the amendment.

Final Conclusion: The applicant cannot claim the NIL rate under Sr. No. 3A of Notification No. 12/2017. The applicant's supplies as a sub-contractor qualify for the concessional rate under Sr. No. 3(x) of Notification No. 11/2017, but that benefit is confined to the period up to 31.12.2021 because an amendment effective 01.01.2022 removes Governmental Authority/Government Entity from the scope of Sr. No. 3(x).

Maintainability of departmental appeal - CBDT Circular No.21 of 2015 dated 10.12.2015 - departmental appeals threshold - penalty under Section 271(1)(c) of the Income Tax Act - jurisdiction of Additional Commissioner to grant approval as Joint Commissioner

Maintainability of departmental appeal - CBDT Circular No.21 of 2015 dated 10.12.2015 - departmental appeals threshold - penalty under Section 271(1)(c) of the Income Tax Act - Whether the Revenue's appeal to the High Court was maintainable in view of the CBDT Circular dated 10.12.2015 limiting departmental appeals where the tax effect is below the specified threshold. - HELD THAT: - The Court held that maintainability must be assessed with reference to the relief actually challenged before the Tribunal and the High Court. The Revenue had impugned the original penalty of Rs. 29,02,743/-; that sum formed the subject-matter of the appeals before the Tribunal and the High Court. A subsequent reduction in the penalty by the Commissioner (Appeals) and a later demand for a lesser amount do not oust the jurisdiction of the High Court to entertain an appeal challenging the earlier order that was brought before the Tribunal. The High Court correctly examined this aspect (as recorded in paragraph 17 of its judgment) and the Supreme Court agreed with that conclusion, finding that the CBDT circular did not render the Revenue's appeal before the High Court non-maintainable where the original penalty under challenge exceeded the threshold. [Paras 2]

The Revenue's appeal before the High Court was maintainable notwithstanding the subsequent reduction in penalty; the High Court correctly held the appeal maintainable.

Jurisdiction of Additional Commissioner to grant approval as Joint Commissioner - Whether the Additional Commissioner had power to grant approval for initiation of penalty proceedings, treated as approval by a Joint Commissioner. - HELD THAT: - The Court examined the definitions in the Income Tax Act (Section 2(28C) read with Section 274(2)) which treat a 'Joint Commissioner' as including an Additional Commissioner. Given that approval for imposition of penalty under Section 271(1)(c) was obtained from the Additional Commissioner, the Supreme Court saw no reason to interfere with the High Court's findings upholding the validity of that approval. The Court therefore accepted the High Court's merits-based conclusion on the powers of the Additional Commissioner. [Paras 2]

The Additional Commissioner validly granted the approval required and the High Court's conclusion on this jurisdictional point is sustained.

Final Conclusion: The appeal is dismissed; the High Court's order allowing the Revenue's appeal and setting aside the ITAT order was correctly considered on the issues decided and no interference with the High Court's findings is warranted.

Disallowance of commission expenditure - concurrent finding of fact - question of fact versus substantial question of law - evidentiary sufficiency of emails and agreement - perversity test in appellate review - principle of consistency

Disallowance of commission expenditure - concurrent finding of fact - evidentiary sufficiency of emails and agreement - perversity test in appellate review - Validity of the Tribunal's sustainment of the disallowance of commission expenditure on the ground that the assessee failed to prove that the agent rendered the relevant services. - HELD THAT: - The Court held that whether an agent rendered services is a question of fact. The authorities below recorded concurrent findings that the assessee failed to prove that Mr. D.N. Pandey rendered any service. The Tribunal found that production of some emails was insufficient to prove service, the agent's Profit & Loss account showed substantial payments towards labour and loading/unloading, and the agreement did not specify a scope of services. These findings were neither perverse nor susceptible to interference in exercise of the appellate perversity test. Reliance on precedents pointing out that the existence of service is primarily a factual issue supported the conclusion that no substantial question of law arose. [Paras 6, 7]

The Tribunal's disallowance was upheld as based on concurrent findings of fact which were not perverse; no substantial question of law arises and the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal's concurrent factual findings sustaining the disallowance of the commission expenditure are not perverse, and no substantial question of law arises for consideration.

Addition under Section 68 on account of unexplained share capital and share premium - remand report certifying identity, creditworthiness and genuineness of share applicants - revenue's locus to appeal against its own remand findings - maintainability of appeal under Section 260A

Addition under Section 68 on account of unexplained share capital and share premium - remand report certifying identity, creditworthiness and genuineness of share applicants - revenue's locus to appeal against its own remand findings - Whether the Tribunal was right in deleting the addition made under Section 68 by relying on the remand report and in holding that the revenue had no locus to challenge the remand findings. - HELD THAT: - The Tribunal noted that the Assessing Officer, on remand, certified the genuineness of the transaction and the identity and creditworthiness of the share applicants. The Tribunal affirmed the CIT(A)'s reliance on that remand report and held that the revenue could not maintain an appeal against findings recorded by its own officer in the remand report. The Tribunal placed reliance on precedents including a decision of the High Court of Madras and a coordinate Bench of the Tribunal to support this principle. The High Court finds no error in the Tribunal's approach or conclusions and sees no grounds to interfere with the deletion of the addition where the remand report sustained the genuineness and creditworthiness of the transactions.

The Tribunal's deletion of the addition under Section 68 was upheld and the appeal by the revenue dismissed.

Final Conclusion: The appeal is dismissed; the substantial questions of law are answered against the revenue and the stay application is dismissed.

Immunity under Section 270AA - Penalty under Section 270A for underreporting of income - Distinction between underreporting and misreporting - Conditions for grant of immunity under Section 270AA - No prejudice from Revenue delay/default in passing statutory order

Immunity under Section 270AA - Conditions for grant of immunity under Section 270AA - Penalty under Section 270A for underreporting of income - Whether the petitioner was entitled to immunity under Section 270AA for Assessment Year 2018-19 on satisfaction of statutory conditions - HELD THAT: - The Court examined the statutory scheme of Section 270AA and identified three fundamental conditions for grant of immunity: payment of the tax demand, non-institution of an appeal, and that penalty proceedings have been initiated on account of underreporting (and not misreporting) of income. Applying these conditions to the facts, the Court found that tax had been paid on the additions, no appeal had been filed, and the penalty proceedings were initiated for underreporting as reflected in the penalty notice. On these findings the petitioner acquired a right to be granted immunity under Section 270AA. The Court relied on the legislative intent to incentivise taxpayers to fast-track settlement, recover tax demand and reduce protracted litigation, and held that the revenue action denying immunity was contrary to that intent.

Petitioner entitled to immunity under Section 270AA for Assessment Year 2018-19 and direction issued to grant immunity.

No prejudice from Revenue delay/default in passing statutory order - Immunity under Section 270AA - Whether the Assessing Officer's failure to pass an order within the statutory time-limit under Section 270AA disentitles the assessee from immunity - HELD THAT: - The Court held that inaction or delay by the Assessing Officer in passing an order under Section 270AA within the statutory timeline cannot prejudice the assessee. It reaffirmed the settled principle that an assessee should not suffer on account of delay/default by the Revenue. Consequently, the lapse in the AO's statutory timeline could not be relied upon to deny the statutory immunity when the substantive conditions for immunity were otherwise satisfied.

Delay by the Assessing Officer in passing the Section 270AA order does not bar the grant of immunity where the statutory conditions are met.

Final Conclusion: Impugned order under Section 270A set aside; respondent directed to grant immunity under Section 270AA to the petitioner for Assessment Year 2018-19.

Stay of penalty proceedings pending appeal - initiation and prosecution of penalty proceedings under the Act of 2015 - limitation for completion of penalty proceedings - effect of filing appeal on continuation of penalty proceedings

Stay of penalty proceedings pending appeal - effect of filing appeal on continuation of penalty proceedings - Whether penalty proceedings under the Act of 2015 should be stayed pending disposal of the appeal preferred against the assessment order - HELD THAT: - The Court noted that the petitioner had preferred an appeal against the assessment order but had not obtained any stay from the appellate authority. Although an administrative order had placed a part of the tax liability in abeyance, the petitioner's relief sought was that the authority initiating penalty proceedings should exercise discretion to suspend those proceedings until the appeal is decided. The Court observed that the petitioner did not challenge the jurisdiction of the authority to initiate penalty proceedings and that mere filing of an appeal does not itself operate as a stay of penalty proceedings. On the prima facie materials before it and having regard to the absence of an appellate stay, the Court declined to exercise its discretion to stay the penalty proceedings. The Court, however, left open the petitioner's right to approach the authority or forum later if coercive action is taken after any penalty order is passed.

Application for stay of penalty proceedings pending appeal is rejected; petitioner may seek appropriate relief if coercive steps are taken after any penalty order.

Limitation for completion of penalty proceedings - initiation and prosecution of penalty proceedings under the Act of 2015 - Whether the mandate of the statute regarding limitation for completion of penalty proceedings militates against staying the penalty proceedings - HELD THAT: - The Court took into consideration the statutory limitation scheme which requires completion of penalty proceedings within a specified period once notice under the Act of 2015 is issued. Noting the respondents' submission that initiation and continuation of penalty proceedings are constrained by that limitation and that a notice under the relevant provision had already been issued to the petitioner, the Court found that the authority is obliged to proceed within the period of limitation. That statutory mandate weighed against granting a stay which would risk rendering the penalty proceedings time-barred. This consideration contributed to the refusal to grant interim relief.

Statutory limitation for completion of penalty proceedings is a relevant factor militating against staying ongoing penalty proceedings; the court refused to grant a stay for that reason.

Final Conclusion: Petition for stay of penalty proceedings is dismissed on the ground that no appellate stay exists and the statutory limitation for completion of penalty proceedings requires prosecution of the proceedings; petitioner remains free to seek appropriate relief if coercive steps are taken after any penalty order.

Faceless assessment - Personal hearing through video conference - Principles of natural justice - Mandatory compliance of Section 144B(7)(vii) - Recorded VC as evidence of opportunity - Remand for fresh hearing with timelines - Interim security and stay of recovery

Faceless assessment - Personal hearing through video conference - Principles of natural justice - Mandatory compliance of Section 144B(7)(vii) - Recorded VC as evidence of opportunity - Whether the assessment order dated 17.09.2021 was vitiated for non-observance of the mandatory requirement to afford an effective opportunity of personal hearing through video conference and thereby violative of principles of natural justice. - HELD THAT: - The Court viewed the recorded video-conference and found that although a VC session occurred, technical failures, late scheduling (less than a day's notice), absence of functional hyperlink for confirming/adjournment requests, inability to upload submissions and an abrupt termination of audio/video resulted in an ineffective hearing. The Court held that the faceless assessment regime and Section 144B(7)(vii) require an effective opportunity of personal hearing; non-observance cannot be treated as a mere formality. Reliance was placed on published precedents holding that the right to personal hearing under the provision is mandatory and that non-observance of natural justice is itself prejudicial. The Court also noted that material furnished by the assessee in response to the draft assessment did not find any reflection in the final order, reinforcing that the hearing was ineffectual. For these reasons the procedural lapse was held to vitiate the assessment. [Paras 8, 9, 11, 12, 13]

The assessment order dated 17.09.2021 is quashed and set aside on grounds of failure to afford an effective personal hearing through video conference and consequent breach of principles of natural justice; the notice of penalty dated 17.09.2021 is also quashed.

Remand for fresh hearing - Interim security and stay of recovery - The manner in which the matter should proceed after quashing and whether interim measures are required pending fresh consideration. - HELD THAT: - The Court directed that proceedings shall continue from the stage of availing the opportunity of hearing through video conference, fixing the time of such conference within two weeks of receipt of the order and endeavouring to complete the entire process within eight weeks. The Court earlier granted interim protection by staying demand and penalty and accepted an undertaking regarding specified fixed deposits, directing that such deposits not be withdrawn. The quashing is limited to procedural infirmity; merits of assessment were expressly left open for fresh adjudication by the income-tax authority. [Paras 15, 16, 17]

Proceedings remanded to the assessing authority to afford a fresh effective hearing (virtual or physical) and to complete assessment as directed within the prescribed timelines; interim directions regarding the specified fixed deposits and stay of recovery shall continue as ordered.

Final Conclusion: The High Court quashed the assessment order dated 17.09.2021 and the penalty notice dated 17.09.2021 for failure to afford an effective personal hearing through video conference in accordance with Section 144B(7)(vii) and principles of natural justice; the matter is remitted to the assessing authority to proceed from the stage of hearing with specified timelines and interim protections continuing as directed.

Jurisdiction of CPC under section 143(1)(a) - presumptive taxation under Section 44AD and Section 44ADA - characterisation of receipts based on TDS entries in Form 26AS - necessity of scrutiny assessment under section 143(3) or reopening under section 147 for questions of fact

Jurisdiction of CPC under section 143(1)(a) - characterisation of receipts based on TDS entries in Form 26AS - presumptive taxation under Section 44AD and Section 44ADA - necessity of scrutiny assessment under section 143(3) or reopening under section 147 for questions of fact - Whether CPC in processing under section 143(1)(a) could make an adjustment by treating manpower supply turnover as professional income and add presumptive income on the basis of TDS entries in Form 26AS. - HELD THAT: - The Tribunal held that the adjustment made by CPC was beyond the limited scope of processing under section 143(1)(a) because the matter involved a question of fact as to the characterisation of receipts from manpower supply. The assessee had declared total turnover and opted for presumptive taxation under section 44AD; the contested manpower turnover was included in that declared turnover. Mere reflection of TDS under section 194J in Form 26AS is not conclusive of the nature of the assessee's receipts and cannot be the sole basis for recharacterising business receipts as professional income during summary processing. Where classification of income is debatable and requires examination of records and facts, the correct course is to examine the issue in a scrutiny assessment under section 143(3) or, if applicable, by reopening under section 147. Absent such enquiry, CPC lacked jurisdiction to make the impugned addition while processing the return under section 143(1)(a).

Adjustment made by CPC under section 143(1)(a) treating manpower turnover as professional income and adding presumptive income is deleted; CPC had no jurisdiction to make the impugned adjustment.

Final Conclusion: Appeal allowed: impugned addition made by CPC while processing the return under section 143(1)(a) is deleted because the question involved determination of facts and classification of income which required scrutiny under section 143(3) or reopening under section 147 rather than summary processing.

Allowability of interest on delayed payment of TDS as business expenditure - Compensatory versus penal nature of statutory interest - Distinction between interest on delayed payment of TDS/service tax and interest on delayed payment of advance tax - Deduction under general business expenditure principles where tax deducted is tax of a third party

Allowability of interest on delayed payment of TDS as business expenditure - Compensatory versus penal nature of statutory interest - Distinction between interest on delayed payment of TDS and interest on delayed payment of advance tax - Interest paid on late payment of TDS under section 201(1A) is allowable as a deduction. - HELD THAT: - The Tribunal examined whether interest paid for delayed remittance of TDS is penal or compensatory in nature and whether it is allowable as a business expenditure. The court distinguished liabilities arising from delayed payment of advance tax (which relate to the assessee's own tax and for which interest has been held not to be an allowable business deduction) from liabilities for delayed remittance of TDS/service tax. The assessee deducts TDS on behalf of third parties and the TDS represents the tax liability of those third parties, not of the assessee. Consequently, interest charged for delay in remitting such third-party tax is compensatory in nature and connected to the expenses claimed in the profit and loss account. The Tribunal followed consistent precedent of a coordinate bench (STUP Consultants Pvt Ltd) and other authorities holding that interest on delayed payment of service tax and TDS is compensatory and therefore deductible, and rejected the reliance on authorities concerning advance-tax defaults (such as Bharat Commerce Industries Ltd.) as distinguishable on facts. Applying this reasoning, the Tribunal held the interest under section 201(1A) to be allowable and directed that the claim be allowed. [Paras 5, 6]

Assessee's claim for deduction of interest paid on delayed payment of TDS under section 201(1A) allowed.

Final Conclusion: The appeal is allowed: interest paid on delayed remittance of TDS is compensatory in nature and deductible for AY 2015-16; the Tribunal directs allowance of the claim.

Revisional jurisdiction under section 263 - record includes all records available at the time of examination - erroneous and prejudicial to the interest of the revenue - post-search assessment under section 153A - enquiry and verification of identity, creditworthiness and genuineness - initial burden under section 68 - Malabar Industries twin condition test

Revisional jurisdiction under section 263 - record includes all records available at the time of examination - post-search assessment under section 153A - enquiry and verification of identity, creditworthiness and genuineness - erroneous and prejudicial to the interest of the revenue - Whether the Principal Commissioner of Income-tax validly exercised revisional jurisdiction under section 263 without taking into account the post assessment (search) proceedings and records for the same assessment year. - HELD THAT: - The Tribunal examined whether the twin conditions for invoking section 263 (an order of the AO being both erroneous and prejudicial to the revenue) were satisfied, applying the Malabar Industries formulation of the test. The statutory Explanation to section 263 and the decision in Shreeman Junathesware establish that "record" for revisional purposes includes all records relating to the proceeding available at the time of examination, and the revisional authority may consider subsequent material and enquiries recorded in the assessment folder. In the present case the AO in post search proceedings under section 153A (order dated 23.03.2015) had issued enquiries (including notices under section 133(6)) to the twenty five subscribers, received their replies and, after verification, did not draw any adverse inference in respect of share capital and premium. Those proceedings thus formed part of the records available to the Principal CIT when he examined the matter under section 263. The Principal CIT confined his examination to the original assessment order dated 28.03.2011 and declined to consider the 153A proceedings on the ground that the Tribunal had set aside only the 2011 order; that narrow approach was held to be contrary to the statutory deeming provision and the settled judicial exposition that subsequent enquiries and material available at the time of examination must be considered. Because the Principal CIT failed to consider the post search enquiries and the AO's verification and acceptance in the 153A order, he ignored relevant material necessary to determine whether the AO's order was truly erroneous and prejudicial to revenue; such omission rendered his exercise of revisional jurisdiction unsustainable. Applying these principles, the Tribunal quashed the revisional order. [Paras 22, 23, 24]

The Principal CIT's order dated 30.03.2021 under section 263 is quashed for failure to examine the post search assessment records (order dated 23.03.2015) which formed part of the record available at the time of examination.

Final Conclusion: Appeal allowed. The revisional order of the Principal Commissioner dated 30.03.2021 is quashed for not considering the post search assessment records pertaining to AY 2009-10; the matter is disposed accordingly.

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interest of the revenue - Set-off of brought forward business loss under Section 72(1)(i) - Character of income versus head of assessment - Deemed short term capital gain under Section 50 - Application of Malabar Industries ratio

Set-off of brought forward business loss under Section 72(1)(i) - Character of income versus head of assessment - Deemed short term capital gain under Section 50 - Whether brought forward business losses could be set off against deemed short term capital gain arising from long-term leases - HELD THAT: - The Tribunal held that Section 72(1)(i) permits carry forward business loss to be set off against profits or gains "of any business or profession carried on by him and assessable for that assessment year", and that there is no requirement that such profits or gains must be assessed under the head 'Profits and gains of business or profession'. Where the income (though assessed under the head 'Capital Gain' by virtue of the deeming fiction in Section 50) bears the character of profits or gains derived from the assessee's leasing business, it is income "of the business" and therefore eligible for set-off under Section 72(1)(i). The Tribunal applied the principle that the commercial character of the income determines its nature for set-off purposes, relying on the reasoning of the Apex Court in Cocanada Radhaswami Bank Ltd. and following decisions of High Courts and the Tribunal which accepted that business losses may be set off against capital gains which are in substance business income (including Hickson & Dadajee , Digital Electronics , Nandi Steels , Alcon Developers ). The Tribunal noted that the assessee's leasing activity was the core business, the constructed spaces were business assets (fixed assets), and the deemed short term capital gain on long-term leases retained the character of business-derived profit; accordingly the set-off claimed for AY 2017-18 was permissible and correctly allowed by the Assessing Officer. [Paras 9, 11, 12, 19]

Brought forward business loss could be set off against the deemed short term capital gain arising from long-term leases in AY 2017-18; the Assessing Officer correctly allowed the set-off.

Revisional jurisdiction under Section 263 - Erroneous and prejudicial to the interest of the revenue - Application of Malabar Industries ratio - Whether the Principal Commissioner of Income-tax validly exercised revisional jurisdiction under Section 263 by setting aside the AO's assessment order - HELD THAT: - Applying the twin conditions in Malabar Industries that an order of the Assessing Officer must be both erroneous and prejudicial to the interest of the revenue before Section 263 can be invoked, the Tribunal examined whether those conditions were satisfied. The Assessing Officer had considered and accepted identical treatment in earlier assessment years (AY 2015-16 and AY 2016-17) after specific enquiry; the assessee had furnished explanations and legal precedents to the Principal CIT in response to the show-cause. The Principal CIT did not independently examine the issue on merits or record findings to demonstrate that the AO's order was unsustainable in law; instead he set aside the assessment directing a fresh decision by the AO. The Tribunal held that where the AO has conducted enquiry and adopted one of the courses permissible in law, the Principal CIT cannot set aside the assessment without forming his own satisfaction on the merits that the view taken by the AO is unsustainable. Following the Malabar Industries principle and precedent (including the authority of the Delhi High Court in D.G. Housing Projects Ltd. on the need for independent satisfaction), the Tribunal concluded that the Principal CIT's action was improper and constituted an unjustified usurpation of jurisdiction under Section 263. [Paras 4, 23, 25, 26]

The Principal CIT's exercise of revisional jurisdiction under Section 263 was invalid; the revisionary order setting aside the AO's assessment is quashed.

Final Conclusion: The appeal is allowed: the Assessing Officer correctly permitted set-off of brought forward business losses against the deemed short term capital gain for AY 2017-18, and the Principal Commissioner's order under Section 263-having not formed independent satisfaction that the AO's view was unsustainable-was an improper exercise of revisional jurisdiction and is quashed.

Unexplained credits under section 68 - unexplained investment under section 69 - penalty under section 271(1)(c) - right to be heard - remand for fresh adjudication

Unexplained credits under section 68 - right to be heard - remand for fresh adjudication - Addition of unexplained credits treated as income under section 68 remitted for fresh consideration after affording opportunity of hearing. - HELD THAT: - The Tribunal recorded that the assessee failed to appear before the ld. CIT(A) and did not produce materials to substantiate the excess bank credits. The ld. CIT(A) though granted opportunities, did not consider merits because of non-appearance; however, in view of the principles of natural justice the Tribunal held that the merits ought to be examined after the assessee is afforded a hearing. The Tribunal therefore set aside the ld. CIT(A)'s order insofar as the addition under section 68 is concerned and remitted the matter to the ld. CIT(A) for fresh adjudication after giving the assessee an opportunity to substantiate its case. [Paras 4]

Order of ld. CIT(A) confirming the addition under section 68 set aside and matter remitted to ld. CIT(A) for fresh adjudication with opportunity of hearing.

Unexplained investment under section 69 - right to be heard - remand for fresh adjudication - Addition of unsecured loan treated as unexplained investment under section 69 remitted for fresh consideration after affording opportunity of hearing. - HELD THAT: - The Assessing Officer treated the unsecured loan shown in the balance sheet as unexplained investment under section 69 because details were not furnished. The ld. CIT(A) confirmed the addition in the absence of the assessee, without addressing merits. The Tribunal concluded that the ld. CIT(A) should examine the claim on merits and therefore set aside the appellate order and remitted the issue to the ld. CIT(A) to decide afresh after giving the assessee a chance to produce relevant details and be heard. [Paras 4]

Order of ld. CIT(A) confirming the addition under section 69 set aside and matter remitted to ld. CIT(A) for fresh adjudication with opportunity of hearing.

Penalty under section 271(1)(c) - right to be heard - remand for fresh adjudication - Levy of penalty under section 271(1)(c) remitted for fresh consideration after affording opportunity of hearing. - HELD THAT: - Penalty was confirmed by the ld. CIT(A) in the assessee's absence. The Tribunal observed that the ld. CIT(A) did not consider the merits of the penalty since the assessee neither appeared nor produced materials before the ld. CIT(A). Applying natural justice, the Tribunal held that the penalty's continuation must be reassessed by the ld. CIT(A) after giving the assessee an opportunity to be heard and to place material on record, and accordingly set aside the ld. CIT(A)'s order and remitted the matter for fresh adjudication. [Paras 4]

Order of ld. CIT(A) confirming penalty under section 271(1)(c) set aside and matter remitted to ld. CIT(A) for fresh adjudication with opportunity of hearing.

Final Conclusion: Both appeals allowed for statistical purposes; the Tribunal set aside the ld. CIT(A)'s orders and remitted the matters relating to additions under sections 68 and 69 and penalty under section 271(1)(c) to the ld. CIT(A) for fresh adjudication after affording the assessee an opportunity of being heard.

Characterisation of receipt as long term capital gains - sale consideration and cost of acquisition in capital gains computation - taxability under the head "Income from Other Sources" versus capital gains - accrual of income on exercise of contractual forfeiture rights

Characterisation of receipt as long term capital gains - sale consideration and cost of acquisition in capital gains computation - The receipt of Rs.7 crores (being Rs.15 crores received less Rs.8 crores advanced) is taxable as long term capital gains by treating Rs.15 crores as sale consideration and Rs.8 crores as cost of acquisition. - HELD THAT: - The Tribunal accepted the finding that the assessee had advanced 100% of the cost of the proposed property pursuant to the purchase letter dated 01.07.2006 and that the parties thereafter recorded a settlement by which the developer paid Rs.15 crores as a refundable security deposit with conditional forfeiture/settlement terms. On the facts, the Tribunal concurred with the ld. CIT(A) that the payment represented a discharge of the developer's obligation in lieu of delivering the agreed property and accordingly amounted to consideration for extinguishment of the assessee's proprietary/right-to-acquire interest. Applying this characterisation, the Tribunal directed taxation as long term capital gains by treating Rs.15 crores as sale consideration and Rs.8 crores as cost of acquisition subject to indexation, and dismissed the assessee's grounds seeking to treat the amount as non-taxable capital receipt or refundable deposit. [Paras 5]

Assessee's contention rejected; receipt held taxable as long term capital gains and direction to compute LTCG by treating Rs.15 crores as sale consideration and Rs.8 crores as cost of acquisition.

Taxability under the head "Income from Other Sources" versus capital gains - accrual of income on exercise of contractual forfeiture rights - Revenue's contention that the receipt is a forfeited security deposit and hence taxable as income from other sources was rejected. - HELD THAT: - The Tribunal examined the terms of the 01.04.2010 settlement letter, the factual matrix of advance payment of the entire purchase price, the subsequent classification and conduct of the parties, and the appellate authority's reasoning. Concluding that the developer's payment operated as satisfaction of the developer's obligation in lieu of delivering the property and extinguished the assessee's right in the subject property, the Tribunal held that the characterisation as capital receipt/consideration for transfer was correct. Consequently, the argument that, in absence of a capital asset or transfer, the amount must be taxed under the head 'Other Sources' was dismissed. [Paras 6]

Revenue's ground dismissed; receipt not taxed under 'Income from Other Sources' but as capital gains as directed.

Accrual of income on exercise of contractual forfeiture rights - The assessee's alternative plea that, if taxable, the amount should be taxed only in the year when the developer accounts for the amount in its books was rejected. - HELD THAT: - The Tribunal noted that the ld. CIT(A) examined the assessee's returns for subsequent years and found that the amount was not offered to tax thereafter. On the factual record and the appellate reasoning, the Tribunal agreed with the ld. CIT(A)'s conclusion that the assessee's plea was without merit and correctly rejected. The accrual and characterisation for tax purposes depend on the substantive rights and settlement between the parties rather than the developer's bookkeeping date invoked by the assessee. [Paras 5]

Alternative plea rejected; timing contention not accepted.

Final Conclusion: On the facts and documentary record the Tribunal upheld the ld. CIT(A)'s characterisation of the receipt as consideration giving rise to long term capital gains (treating Rs.15 crores as sale consideration and Rs.8 crores as cost), dismissed the Revenue's plea to tax it as income from other sources, rejected the assessee's alternative contentions, and dismissed both appeals.

Scope of limited scrutiny under CASS - revisional jurisdiction under section 263 - order erroneous and prejudicial to the interests of revenue - CBDT instructions limiting enquiry in limited scrutiny cases - Explanation 2(a) to section 263 - enquiry or verification which should have been made

Revisional jurisdiction under section 263 - order erroneous and prejudicial to the interests of revenue - Explanation 2(a) to section 263 - enquiry or verification which should have been made - Validity of the Principal Commissioner's order revising the assessment under section 263 - HELD THAT: - The Tribunal found that the Pr. CIT invoked section 263 on the basis that the assessing officer's order was erroneous and prejudicial to revenue by allegedly not verifying genuineness of unsecured loans and source of fresh capital. The record, however, showed the case had been selected for limited scrutiny, the AO issued notices under section 142(1), received documentary evidence (including bank statements, capital account entries, confirmations and returns) and, after examination, accepted the returned income. The Pr. CIT's show cause and revisional action constituted a disagreement with the view taken by the AO rather than a finding of lack of any enquiry or verifications which a reasonable and prudent AO ought to have carried out. Applying the settled legal tests (including the requirement that both error and prejudice must be shown and that mere existence of another possible view does not render an order erroneous), the Tribunal held that the revisional exercise was beyond permissible scope where the AO had taken a possible view after verification. Consequently the order under section 263 was quashed. [Paras 6, 11]

Order passed by the Principal Commissioner under section 263 was quashed as the AO had examined the limited-scrutiny issues and taken a possible view; revisional jurisdiction was not rightly invoked.

Scope of limited scrutiny under CASS - CBDT instructions limiting enquiry in limited scrutiny cases - revisional jurisdiction under section 263 - Whether the AO exceeded the scope of limited scrutiny or failed to verify matters falling within limited scrutiny - HELD THAT: - The Tribunal recorded that the assessment notice under section 143(2) specifically identified 'Interest expenses' and 'Increase in Capital' as the limited-scrutiny issues. The AO pursued those issues, examined documents produced by the assessee (including capital account entries and personal bank statements) and accepted the return after being satisfied. The Pr. CIT did not indicate that the AO had failed to consider or verify the limited-scrutiny issues; instead the Pr. CIT preferred a different view. In light of CBDT instructions restricting expansion of enquiry in limited scrutiny cases and the material on record showing that enquiries were made, the Tribunal held that the Pr. CIT could not, under section 263, substitute his view merely because he disagreed with the AO's conclusion on matters within the limited scope. [Paras 6, 10]

AO did not travel beyond or fail to verify the limited-scrutiny issues; the Pr. CIT was not justified in setting aside the assessment on that basis.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the revision order passed by the Principal Commissioner under section 263, and held that the AO had examined and verified the issues identified for limited scrutiny and taken a permissible view; revisional jurisdiction was not properly invoked.

Mismatch between Form No. 26AS and books of account - addition on account of undisclosed sales - embedded portion of profits - net profit rate - restriction of addition to a percentage of undisclosed turnover

Mismatch between Form No. 26AS and books of account - embedded portion of profits - net profit rate - restriction of addition to a percentage of undisclosed turnover - Whether, in case of a difference between gross receipts as per audited accounts and amounts reflected in Form No. 26AS, the assessing officer can add the entire turnover to the assessee's income or only the embedded portion of profit determined by applying a net profit rate. - HELD THAT: - The Tribunal accepted coordinate-bench precedents holding that where there is a discrepancy between the assessee's books and Form No. 26AS, the correct approach is not to treat the entire unreported turnover as income but to compute addition only on the embedded portion of profits by applying an appropriate net profit rate. Having regard to those decisions and the facts of the case, the Tribunal found no justification for adding the whole turnover. Applying the accepted principle, the Tribunal exercised its discretion to restrict the addition to 5% of the undisclosed turnover and directed the assessing officer to give effect to that limited addition. [Paras 5, 6]

Addition limited to 5% of the undisclosed turnover; appeal allowed.

Final Conclusion: The appeal is allowed: the addition made by the assessing officer on account of mismatch between Form No. 26AS and the assessee's gross receipts is restricted to 5% of the undisclosed turnover and the AO is directed to give effect to this limitation.

Return by whom to be signed - Section 140(c) - signing and verification of company return by managing director or director and limited Power of Attorney exception - Power of Attorney for signing returns and appeals - Validity of verification/signature of appeal under Rules 45 and 47 of the Income-tax Rules - Appeal defective for want of competent signature - incurable on record

Return by whom to be signed - Section 140(c) - signing and verification of company return by managing director or director and limited Power of Attorney exception - Validity of verification/signature of appeal under Rules 45 and 47 of the Income-tax Rules - Whether the appeal filed by the assessee was invalid/defective because it was not signed by the competent person as required under section 140 and the appellate rules, the memorandum being signed by the General Manager (CT&GST) without record of a valid Power of Attorney. - HELD THAT: - The Tribunal examined section 140 and the corresponding verification provisions under the Income-tax Rules. It noted that section 140 establishes distinct categories of persons authorised to sign returns: individuals and companies are permitted in specified circumstances to have returns signed by a holder of a valid Power of Attorney only where the proviso permits; other classes do not enjoy that privilege. Clause (c) applicable to companies permits signature and verification by the managing director or, if unavailable for unavoidable reasons, by any director; a proviso allows signing by a PoA-holder only where expressly provided and the PoA is attached. The Tribunal observed that appellate verification provisions (Rules 45 and 47) require the appeal to be verified by a person authorised to verify the return under section 139(1) as applicable, thereby linking appellate verification to the categories in section 140. The memorandum of appeal in this case was signed by the General Manager (CT&GST), BESCOM, and there was no record on file of a valid Power of Attorney authorising that person to verify the appeal as required by section 140(c) and the Rules. The Tribunal further noted that an amendment to section 140(c) w.e.f. 1.4.2020 (allowing other prescribed persons) does not, on the material before it, demonstrate that the General Manager was authorised at the relevant time. In the absence of evidence that the signatory was competent under the statutory scheme to verify the appeal, the appeal was held to be defective and was dismissed in limine. [Paras 6, 7, 8, 9, 10]

The appeal was dismissed in limine for being defective/invalid for want of competent signature; no proof of a valid Power of Attorney or authorised signatory was on record.

Final Conclusion: The Tribunal dismissed the assessee's appeal in limine for want of competent verification/signature under section 140 and the appellate rules, as the memorandum was signed by the General Manager without evidence of a valid Power of Attorney or other authority to verify the appeal.

Classification of goods - burden of proof on the Revenue in classification - acceptability of importer s declared description in bill of entry - general rules for the interpretation of import tariff - residual "other" in tariff groupings - Explanatory Notes as an interpretative aid (not binding) - inadmissibility of promotional material and conjecture as sole basis for reclassification

Burden of proof on the Revenue in classification - acceptability of importer s declared description in bill of entry - Whether the Revenue discharged the onus to reclassify the imported vessels contrary to the classification declared in the bills of entry. - HELD THAT: - The Tribunal applied settled precedent that classification is a chargeability matter where the burden to establish an alternative heading lies on the Revenue and that the importer s declared description in the bill of entry must be accepted by default unless the Revenue adduces independent evidence to justify displacement. The authorities below relied on catalogues, promotional materials and absence of manufacturer s invoices but led no cogent evidence to establish that the goods did not fall within the declared description. Reliance on collateral material and adverse inference from non-production of a manufacturer s invoice (a valuation-related power) does not discharge the Revenue s burden on classification. Consequently, the requisite onus was not discharged and the declared classification could not be set aside. [Paras 5, 6, 8, 10]

The Revenue failed to discharge the burden to reclassify; the importer s declared description must prevail.

General rules for the interpretation of import tariff - residual "other" in tariff groupings - Explanatory Notes as an interpretative aid (not binding) - Whether the impugned vessels fall within the residual "other" of heading 8903 rather than within the description claimed by the importer under heading 8901. - HELD THAT: - The Tribunal examined the structure and semantics of chapter 89 and emphasised that the General Rules require identification of the most appropriate heading before resort to residual sub-headings. The Court noted that Explanatory Notes, while an interpretative tool, are not binding and cannot supplant the statutory pyramidal approach. The grouping in heading 8903 shows that the tariff-item residual "other" is intended primarily for yachts, and the authorities below did not establish that the imported Monterey 180 FSW fit within the specific enumerations in heading 8903. Absent such a showing, the residual "other" could not be used to displace the declared classification. [Paras 4, 7, 8, 11]

The impugned vessels were not shown to belong to the residual "other" of heading 8903; the alternative classification advanced by the authorities was not substantiated.

Inadmissibility of promotional material and conjecture as sole basis for reclassification - acceptability of importer s declared description in bill of entry - Whether the promotional literature and dealer invoices could justify rejecting the seller s invoice and the importer s declared classification. - HELD THAT: - The Tribunal found that the lower authorities gave undue weight to pictorial and promotional materials that did not specifically and reliably identify the imported model and indulged in conjecture. The rejection of the seller s invoice because a manufacturer s invoice was not produced was improper, since the power to require manufacturer s invoice relates to valuation and not to the threshold acceptability of the declared description. The impugned authorities reliance on such materials and inferences was therefore insufficient to invalidate the declared classification. [Paras 8, 9, 10]

Promotional literature and conjecture could not justify discarding the seller s invoice or the declared classification; such material did not warrant reclassification.

Final Conclusion: The Tribunal set aside the impugned order and upheld the classification declared in the bills of entry, holding that the Revenue failed to discharge the burden to reclassify and that the alternative classification was not substantiated by admissible evidence.

Shore tank receipt as basis for levy of customs duty - ullage report - assessment of bulk liquid cargo - measurement after liquid settles - binding effect of Tribunal orders and Board Circular No.96/2002-Cus

Shore tank receipt as basis for levy of customs duty - ullage report - binding effect of Tribunal orders and Board Circular No.96/2002-Cus - Shore tank receipt quantity, and not the ship's ullage report, is to be taken as the basis for levy of customs duty on imported bulk liquid cargo. - HELD THAT: - The Tribunal reaffirmed the settled position that for liquid bulk imports the shore tank receipt must be reckoned for assessment of duty, following the Supreme Court decision in Commissioner of Customs v. National Organic Chemical Indus. Ltd. and the Board's Circular directing field formations to adopt shore tank quantities for levy of duty. The Commissioner (Appeals) correctly followed the Tribunal's earlier decisions and the Board circular; the Revenue's contention that the Commissioner (Appeals) erred in doing so was rejected. The fact that the Revenue has chosen to challenge one prior Tribunal order does not vitiate the precedential value of earlier unchallenged Tribunal decisions or the Board's direction to assess on shore tank receipts. [Paras 5, 12, 13]

Assessment must be made on the shore tank receipt quantity and not on the ship's ullage report; the Commissioner (Appeals) acted correctly in following the settled law and Tribunal precedent.

Measurement after liquid settles - assessment of bulk liquid cargo - Dip measurement and temperature for calculating shore tank quantity must be taken after the liquid has settled in the shore tanks. - HELD THAT: - The Tribunal held that turbulence, froth or bubbles produced while pumping liquid cargo into shore tanks can affect dip readings and temperature-based calculations; accurate measurement is possible only after the liquid settles. The Board circular's silence on a specific time limit does not justify accepting measurements taken while turbulence or froth persists. The Commissioner's Public Notice directing measurements after settling was upheld as a practical and legally sound requirement to ensure correct assessment. [Paras 3, 14]

Dip measurements and temperature for shore tank computations must be taken only after the liquid has settled to ensure accurate assessment.

Final Conclusion: All four appeals filed by the Revenue were rejected and the Commissioner (Appeals)'s orders upholding assessment on shore tank receipts and requiring measurements after settling were affirmed.

Classification of goods under the Customs Tariff - application of Rule 1 and Rule 6 of the General Rules for the Interpretation of Import Tariff - distinction between mounts and heads for scent sprays and general-purpose aerosol valves - jurisdiction and admissibility of advance ruling where question already decided by Appellate Tribunal or any Court (proviso to Section 28-I(2)) - Chapter Note 2 - preference among headings based on function

Jurisdiction and admissibility of advance ruling where question already decided by Appellate Tribunal or any Court (proviso to Section 28-I(2)) - time-bar and constructive resubmission under CAAR Regulations, 2021 - Whether the application for advance ruling was maintainable before the Authority notwithstanding earlier proceedings and judicial decisions on related goods. - HELD THAT: - The Authority found that the original application received on 19-3-2020 had become time-barred for the earlier body (para 3) but, on being invited, the applicant affirmed the earlier declarations on 9-7-2021 and sought continuation (paras 4-5). The Authority examined the proviso to Section 28-I(2) which disallows applications where the question is "same as in a matter decided already by the Appellate Tribunal or any Court." After comparing the impugned goods with products dealt with in prior Tribunal decisions (Cipla, Avinka Leathers, Kumar Aerosols and Speciality Valves), the Authority held that the precise product described as "aerosol valve" in this application had not been previously decided by a Tribunal or Court (paras 10.3-10.5). The Authority therefore concluded that the proviso did not oust its jurisdiction and allowed the application to be adjudicated on merits (paras 10.1-10.5). [Paras 3, 4, 5, 10]

Application maintained and allowed to be decided on merits; proviso to Section 28-I(2) not attracted as the precise question had not been previously decided in the applicant's case or in other cases.

Classification of goods under the Customs Tariff - application of Rule 1 and Rule 6 of the General Rules for the Interpretation of Import Tariff - distinction between mounts and heads for scent sprays and general-purpose aerosol valves - Chapter Note 2 - preference among headings based on function - Correct tariff classification of the imported goods described as "aerosol valves" (whether under Heading 8424, Heading 8481 or Heading 9616). - HELD THAT: - The Authority examined the product description, sample and submissions (paras 11, 11.1-11.2). Heading 9616 is limited to scent sprays and mounts/heads for toiletry/scent sprays; while an aerosol valve could potentially be mounted on a scent spray can, the applicant's product is of general-purpose use across insecticides, pharmaceuticals, paints etc., and thus does not fall within the precise scope of Heading 9616 (para 11.3). Heading 8481 relates to specific valves for oleohydraulic or pneumatic transmission and, on the facts and components supplied, classification under 8481 did not appear appropriate (para 11.2; applicant's submissions at paras 8.2-8.3). Heading 8424 covers mechanical appliances for projecting, dispersing or spraying liquids or powders; the features of the impugned goods-hand-operated components for spraying liquids (aerosols)-fit within Heading 8424. Applying Rule 1 and Rule 6 of the GRI and Chapter Note 2 where relevant, the Authority concluded that the goods are classifiable under Heading 8424 and specifically under sub-heading 8424 89 90 (paras 11.4-11.5). [Paras 8, 11]

Goods described as "aerosol valves" are classifiable under Heading 8424, specifically under sub-heading 8424 89 90; they do not merit classification under Heading 9616 or under Heading 8481 on the facts before the Authority.

Final Conclusion: The Authority allowed the application as maintainable and ruled that the imported items described as "aerosol valves" are classifiable under Heading 8424 (sub-heading 8424 89 90); classification under Heading 9616 or 8481 was not found appropriate on the material before the Authority.

Sanction of Scheme of Demerger under Sections 230-232 of the Companies Act, 2013 - Vesting of assets and liabilities on demerger - Continuation of employees and preservation of employment benefits on demerger - Dispensation of meetings of shareholders and creditors - Compliance with statutory notice and publication requirements - Consideration and disposal of Registrar of Companies/Regional Director observations - Competition law: undertaking as to non-requirement of approval of the Competition Commission of India - Treatment of existing income-tax demands and devolution of tax liabilities under the Scheme - Filing of certified copy and Registrar formalities consequent to sanction - No exemption from stamp duty, taxes or other statutory compliances

Sanction of Scheme of Demerger under Sections 230-232 of the Companies Act, 2013 - No exemption from stamp duty, taxes or other statutory compliances - The Scheme of Demerger between the Demerged Company and the two Resulting Companies is sanctioned and declared binding on shareholders and creditors subject to statutory liabilities and compliances. - HELD THAT: - The Tribunal examined the petition, the statutory compliance affidavits, auditor certificates regarding accounting treatment, and responses to statutory authorities. Having found that objections raised had been addressed and that requisite publications, notices and consents (where applicable) were on record, the Tribunal approved the Scheme and declared it binding on all concerned. The sanction is expressly without prejudice to payment of any stamp duty, taxes or other charges and without conferring any exemption from statutory provisions. [Paras 19, 20]

Scheme of Demerger sanctioned and declared binding; approval does not exempt parties from stamp duty, taxes or other statutory compliances.

Dispensation of meetings of shareholders and creditors - Compliance with statutory notice and publication requirements - Dispensation of convening meetings of equity shareholders and creditors (where applicable) was proper and the required newspaper publications and service on statutory authorities were complied with. - HELD THAT: - The petitioner companies had earlier applied for and obtained dispensation of meetings; compliance affidavits and original newspaper copies were placed on record. The Tribunal noted the First Motion order directing publication and service and accepted the filed proofs (including publications in The Economic Times and Sanjevani and proof of service on statutory authorities) as satisfying those requirements. [Paras 2, 3, 4]

Dispensation of meetings sustained and publication/notice requirements held complied with.

Consideration and disposal of Registrar of Companies/Regional Director observations - The observations raised by the Registrar of Companies and Regional Director were considered and found to have been adequately addressed by the petitioners. - HELD THAT: - The RD/ROC reports raised queries regarding asset identification, tax impact, unsecured creditors, related party transactions and bank charges/NOCs. The petitioners filed a detailed reply addressing each point, including that asset details are set out in the Scheme, reasons for demerger and anticipated commercial/tax outcomes, consent affidavits of unsecured creditors and bank consent affidavits already on record. The Tribunal found these responses satisfactory and recorded that there was no impediment to approval. [Paras 12, 13, 19]

RD/ROC observations disposed of as satisfactorily replied; no impediment to sanction.

Competition law: undertaking as to non-requirement of approval of the Competition Commission of India - The petitioners' undertaking that Competition Commission approval is not required for the Scheme was accepted for purposes of sanction. - HELD THAT: - The Competition Commission noted that filings under the Competition Act may be required if thresholds are met. The petitioners submitted a reply and gave an express undertaking that the transaction does not amount to a 'combination' requiring CCI approval. On the basis of that undertaking and the materials before it, the Tribunal proceeded to sanction the Scheme. [Paras 14, 15, 20]

Petitioners' undertaking regarding non-requirement of CCI approval accepted for sanction purposes.

Treatment of existing income-tax demands and devolution of tax liabilities under the Scheme - Outstanding income-tax demands (if any) shall devolve in accordance with the Scheme and the petitioners shall follow up with tax authorities; sanction is without prejudice to tax authorities' rights. - HELD THAT: - The Income Tax Department informed of outstanding demands against the Demerged Company. Petitioners replied that they would pursue resolution with the tax authorities and pointed out that the Scheme provides for liabilities of the Demerged Undertakings to devolve on the respective Resulting Companies. The Tribunal recorded these submissions and clarified by its sanction-order that approval does not exempt parties from compliance under the Income Tax Act and that tax authorities are at liberty to take appropriate action. [Paras 16, 17, 20]

Tax demands to be pursued with authorities; liabilities to devolve under the Scheme; sanction without prejudice to Income Tax Act rights.

Vesting of assets and liabilities on demerger - Continuation of employees and preservation of employment benefits on demerger - Filing of certified copy and Registrar formalities consequent to sanction - On the Effective Date, specified division-wise assets, liabilities, pending proceedings and employees shall stand transferred to the respective Resulting Companies; petitioners to file schedule of properties and furnish certified copy to Registrar for record consolidation; certain deposits directed. - HELD THAT: - The Tribunal ordered that all property, rights, liabilities and pending proceedings of the respective divisions shall transfer to and vest in the Resulting Companies without further act or deed and subject to existing charges. Employees of the divisions shall become employees of the Resulting Companies on terms no less favourable and with continuity for benefits. The Tribunal directed filing of Form CAA 7 and affidavit with schedule of freehold and leasehold properties for formal orders, delivery of certified copy to Registrar of Companies to consolidate files, and payment of directed deposits to specified offices/funds within prescribed time. [Paras 20, 21]

Assets, liabilities, proceedings and employees to vest/continue in Resulting Companies; Registrar formalities and directed deposits to be completed as ordered.

Final Conclusion: The Tribunal sanctioned the Scheme of Demerger between Southfield Paints Limited and the two Resulting Companies, having found statutory publication, service and replies to regulatory observations satisfactory; the vesting of division-wise assets, liabilities, proceedings and employees in the Resulting Companies is ordered, subject to existing charges and without any exemption from stamp duty, taxes or other statutory compliances, and consequential formalities and deposits are directed to be completed within the time stipulated.

Insolvency resolution process costs - management of operations as a going concern - inclusion of wages/salaries in CIRP costs subject to actual service rendered - workmen's dues and priority in the distribution waterfall - exclusion of provident fund, pension fund and gratuity from the liquidation estate

Insolvency resolution process costs - management of operations as a going concern - inclusion of wages/salaries in CIRP costs subject to actual service rendered - Whether wages/salaries of workmen/employees for the CIRP period can be included in the insolvency resolution process costs and given first priority in distribution. - HELD THAT: - The Court held that only wages/salaries of those workmen/employees who actually worked during the CIRP while the Interim Resolution Professional/Resolution Professional managed the corporate debtor as a going concern can be included in the insolvency resolution process costs. Inclusion cannot be automatic merely because the RP had the statutory duty to endeavour to manage the corporate debtor as a going concern; factual determination is required whether the corporate debtor was in fact operated as a going concern and whether particular employees rendered services during CIRP. Wages/salaries of such persons, if proved, form part of CIRP costs and rank for payment in full under the first priority of the distribution waterfall. Wages/salaries of other employees who did not actually work during CIRP are to be dealt with under the ordinary priority scheme applicable to workmen's/employee dues. [Paras 9, 10, 11, 14]

Wages/salaries for CIRP period are includible in CIRP costs and payable with first priority only where it is proved that the RP managed the corporate debtor as a going concern during CIRP and the concerned employees actually worked during that period; otherwise their claims are to be governed by the regular priority provisions.

Exclusion of provident fund, pension fund and gratuity from the liquidation estate - workmen's dues and priority in the distribution waterfall - Whether sums due to workmen/employees from provident fund, pension fund and gratuity fund form part of the liquidation estate and are subject to the liquidation distribution waterfall. - HELD THAT: - The Court observed that the statutory scheme excludes all sums due to any workman or employee from the provident fund, pension fund and gratuity fund from the liquidation estate. Consequently, such sums are not available for recovery in liquidation and are not to be distributed under the waterfall; the Liquidator has no claim over those funds and entitled employees are to be paid from those excluded funds. [Paras 13, 14]

Dues from provident fund, pension fund and gratuity fund are outside the liquidation estate and are to be disbursed to entitled workmen/employees; they are not subject to the distribution under the liquidation waterfall.

Management of operations as a going concern - inclusion of wages/salaries in CIRP costs - Remand for adjudication and verification of claims concerning whether the corporate debtor was a going concern during CIRP and whether individual workmen/employees actually worked during that period. - HELD THAT: - Given contested facts as to operational status of the Dahej Yard and whether specific employees rendered services during CIRP, the Court directed that appellants must submit individual claims to the Liquidator. The Liquidator - notwithstanding whether the RP had earlier included such claims as CIRP costs - must independently adjudicate each claim on its merits, determine whether the corporate debtor was operated as a going concern during CIRP, and ascertain which employees actually worked during that period. If established, those claims are to be treated as CIRP costs and paid with the first priority; otherwise they will be dealt with under the ordinary priority provisions. [Paras 11, 15]

Claims are remanded to the Liquidator for independent adjudication; the Liquidator to verify evidence, determine entitlement as CIRP costs or otherwise, and complete the exercise within twelve weeks, with the previously earmarked amount kept aside pending adjudication.

Final Conclusion: The appeal is partly allowed: wages/salaries during CIRP qualify as CIRP costs and get first priority only if proved that the RP managed the corporate debtor as a going concern and the employees actually worked during CIRP; provident fund, pension and gratuity dues are excluded from the liquidation estate and payable to entitled employees; appellants' individual claims are remitted to the Liquidator for adjudication within twelve weeks and the earmarked funds are to be kept aside pending determination.

Contempt for wilful disobedience of judicial direction - formalisation and maintainability of a scheme under Sections 230-232 of the Companies Act - duty and powers of the liquidator to liquidate assets where no scheme is filed - effect of interlocutory directions pending consideration of a proposed scheme

Contempt for wilful disobedience of judicial direction - effect of interlocutory directions pending consideration of a proposed scheme - The action of the Liquidator in selling the corporate debtor's assets whether amounted to contempt of the Adjudicating Authority's order dated 08/01/2020. - HELD THAT: - The Tribunal found that no scheme under Sections 230-232 of the Companies Act was ever formalised or filed despite directions and opportunities. The Adjudicating Authority's earlier interim direction restrained confirmation of sale "pending any decision on any proposed scheme being accepted by the Liquidator"; however, the extended time for settlement granted by the High Court expired on 31/07/2020 and the financial creditor declined further relaxation. In the absence of any scheme being filed or accepted within the prescribed/extended timeframe and given the Adjudicating Authority's subsequent order permitting liquidation, the Liquidator's public auction and sale of the assets could not be characterised as wilful disobedience of the order of 08/01/2020. The Tribunal emphasised that where no scheme was formalised and the NCLT/NCLAT directions had been overtaken by the final order directing liquidation, the element of contempt was not made out. [Paras 11]

Contempt was not established; the Liquidator's sale of assets does not constitute wilful disobedience of the Adjudicating Authority's order.

Formalisation and maintainability of a scheme under Sections 230-232 of the Companies Act - duty and powers of the liquidator to liquidate assets where no scheme is filed - Whether, in the absence of any scheme having been formalised under Sections 230-232, the Liquidator was entitled to proceed with liquidation and public auction of the corporate debtor's assets. - HELD THAT: - The Tribunal examined the chronology including the OTS letter with timelines, the Tribunal's earlier direction to proceed in terms of Y Shivaram Prasad, the Adjudicating Authority's record that no settlement under Section 230 had been arrived at, and the NCLT order of 15/07/2020 noting the High Court extension to 31/07/2020 and the financial creditor's refusal to grant further relaxation. It was an admitted fact that no scheme was filed or consummated; minutes of stakeholder meetings recorded that the corporate debtor was not a going concern. Given that the orders permitting liquidation had attained finality and more than two years had elapsed without any scheme being formalised, the Liquidator acted within the scope of the orders permitting liquidation and compliance with directions to liquidate. Accordingly, sale by public auction was not impermissible in those circumstances. [Paras 6, 9, 10]

In the absence of a formalised scheme and following finalised directions permitting liquidation, the Liquidator was entitled to proceed with liquidation and auction of assets.

Final Conclusion: The appeal is dismissed: no contempt was made out against the Liquidator and, having regard to the absence of any formalised scheme under Sections 230-232 and the finality of orders permitting liquidation, the Liquidator's public auction and sale of the corporate debtor's assets were lawful.

Transfer of institutional property subject to transfer policy - provisions of the Code overriding other laws - public authority's statutory control over disposal of its property - filing claim of pre-CIRP dues before the liquidator

Transfer of institutional property subject to transfer policy - public authority's statutory control over disposal of its property - provisions of the Code overriding other laws - Whether the Adjudicating Authority's direction that the Appellant 'shall transfer' the auctioned plot to the auction purchaser ousted the Appellant's obligation to consider transfer in accordance with its Transfer Policy and statutory powers. - HELD THAT: - The Tribunal held that the Adjudicating Authority's direction must be read as directing the Appellant to consider the transfer of the plot to the auction purchaser but did not and could not compel the Appellant to effect transfer without compliance with its Transfer Policy. Relying on the principle that Section 238 of the IB Code cannot be pressed to curtail a third party public authority's statutory duty and control over disposal of its properties, the NCLT order cannot be interpreted as overriding the Appellant's statutory/policy regime governing transfers. Accordingly, the mandatory phrase 'shall transfer' in the impugned order is to be construed as requiring consideration of the transfer application under the existing Policy rather than an absolute command to transfer irrespective of policy compliance. The Court therefore read down the impugned direction to preserve the Appellant's obligation and discretion to act in accordance with the Transfer Policy while complying with the Code's scheme. [Paras 12]

NCLT's direction to 'shall transfer' is read down: the Appellant is to consider transfer in accordance with its Transfer Policy and its statutory powers; Section 238 does not permit overriding the Appellant's regulatory control over its property.

Filing claim of pre-CIRP dues before the liquidator - transfer of institutional property subject to transfer policy - Whether the Respondent's Transfer Application dated 16.02.2022 should be considered and the manner in which prior dues are to be treated. - HELD THAT: - The Tribunal recorded that the Respondent has submitted the Transfer Application in the prescribed proforma and is ready to comply with the Transfer Policy. The Appellant and Respondent are agreed that any pre-CIRP dues of the Appellant must be filed as a claim before the Liquidator and such dues cannot be insisted upon as a pre-condition to considering the transfer application. The Tribunal directed that the Appellant must consider the Transfer Application dated 16.02.2022 on merits in accordance with law and dispose of it at an early date, preferably within two months, and noted that the earlier rejection dated 03.03.2022 on account of pendency of court cases should not be relied upon. [Paras 11, 12, 13]

Transfer Application dated 16.02.2022 to be considered by the Appellant on merits under the Transfer Policy and decided preferably within two months; pre-CIRP dues to be claimed before the Liquidator and not imposed as a transfer condition.

Final Conclusion: Appeal disposed by reading down the Adjudicating Authority's direction so as to require consideration (and not unconditional transfer) under the existing Transfer Policy; the Appellant directed to consider the Transfer Application dated 16.02.2022 on merits in accordance with law and decide it preferably within two months, with parties bearing their own costs.

Maintainability of joint application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - requirement of individual Section 8 demand notice by each operational creditor - role of an authorised representative to act on behalf of an operational creditor - existence of operational debt and notice of dispute

Maintainability of joint application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - requirement of individual Section 8 demand notice by each operational creditor - A joint petition under Section 9 by two or more operational creditors is not maintainable; each operational creditor must issue his own Section 8 demand notice and file Section 9 application individually. - HELD THAT: - The Tribunal held that the scheme of Sections 8 and 9 requires an operational creditor to issue a demand notice individually and to file the Section 9 petition individually. Form 3 and Form 4, read with Rule 5(1) and the statutory provisions, contemplate separate notices and separate entries of particulars (including individual dates), making joint petitions impractical and inconsistent with the statutory format. The Tribunal relied on the ratio in Uttam Galva Steels (AT) to the same effect and distinguished authorities relied on by the appellants, noting that decisions permitting representative or union-type filings did not permit two distinct operational creditors to join in a single Section 9 application. Applying these principles to the facts, the Tribunal found no illegality in the Adjudicating Authority's dismissal of the joint petition as not maintainable. [Paras 9, 10, 16, 17, 18]

The impugned order dismissing the joint Section 9 application as not maintainable is upheld.

Role of an authorised representative to act on behalf of an operational creditor - existence of operational debt and notice of dispute - The first appellant was not established to be a valid authorised representative of the second appellant in respect of consultancy services claimed, and material on record did not establish an undisputed operational debt in favour of the second appellant. - HELD THAT: - The Tribunal observed that an operational creditor may file through an authorised person, but the authorised person must establish his relation and position vis-a -vis the operational creditor. On the record, there was no documentary agreement evidencing consultancy services by the second appellant; the corporate debtor had terminated the first appellant's services as an employee and had raised a dispute. Given the absence of documentary proof of consultancy and the existence of a termination and dispute, the appellants failed to establish entitlement to relief under Section 9 on merits or to show that the first appellant validly acted on behalf of the second appellant. [Paras 5, 12, 14]

The contention that the first appellant validly represented the second appellant and that there was an undisputed operational debt is rejected.

Final Conclusion: The appeal is dismissed; the Tribunal found no infirmity in the Adjudicating Authority's order dismissing the joint Section 9 application as not maintainable and further held that the appellants failed to establish that the first appellant validly represented the second appellant or that an undisputed operational debt existed.

Finality of Committee of Creditors' approval of resolution plan - binding effect of CoC-approved resolution plan inter se the CoC and the successful resolution applicant - timelines under the Insolvency and Bankruptcy Code and the circumscription of CIRP - power of Adjudicating Authority to direct reconsideration of an approved resolution plan - commercial wisdom of the Committee of Creditors - late and unsolicited bids after close of CIRP - opportunity to be heard and procedural fairness

Finality of Committee of Creditors' approval of resolution plan - binding effect of CoC-approved resolution plan inter se the CoC and the successful resolution applicant - timelines under the Insolvency and Bankruptcy Code and the circumscription of CIRP - late and unsolicited bids after close of CIRP - Validity of the Adjudicating Authority's direction permitting the Committee of Creditors to consider a resolution plan submitted after the CoC had approved the Appellant's plan and after the close of CIRP - HELD THAT: - The Tribunal held that the CoC had approved the Appellant's resolution plan by 98.55% voting share within the extended CIRP period and an application for approval of that plan was pending before the Adjudicating Authority. The proposed plan of Respondent No.3 was first manifested by e-mail dated 13.12.2021, after the CIRP timeline had expired and after CoC approval; the CoC had, on 18.12.2021, declined to consider that proposal and the Resolution Professional communicated that decision to Respondent No.3. Relying on the Supreme Court's decisions emphasising the time-bound nature of CIRP and the binding effect of a CoC-approved plan inter se the CoC and successful applicant, and on precedents of this Tribunal, the Court held that permitting consideration of a fresh plan at that stage would undermine both the finality of the CoC's approval and the statutory timelines, and would amount to allowing late/unsolicited bids which the jurisprudence discourages. Consequently, no valid reason was shown to direct reconsideration of the already approved plan or to allow a person who was not part of the CIRP to be admitted at that late stage. [Paras 17, 18, 21, 26, 28]

The direction to permit the CoC to consider the Respondent No.3's plan was unsustainable; the CoC's earlier approval of the Appellant's plan and the timelines under the Code precluded consideration of the late plan.

Opportunity to be heard and procedural fairness - power of Adjudicating Authority to direct reconsideration of an approved resolution plan - commercial wisdom of the Committee of Creditors - Whether the impugned order was vitiated by procedural impropriety in passing directions without hearing the Resolution Professional and the CoC - HELD THAT: - The Tribunal observed that the impugned order records issuance of notice to the RP and CoC and indicates that they were not heard before the Adjudicating Authority directed that the CoC 'may take a call' and that the RP file an affidavit. The NCLT ought not to have passed an order directing consideration of the late plan without hearing the affected parties and without being apprised of the CoC's prior decision to decline the proposal. The absence of contemporaneous reasons in the impugned order to justify breach of timelines or disturbance of the CoC's commercial decision rendered the order legally infirm on procedural grounds as well. [Paras 11, 14, 18, 23]

The impugned order was procedurally unsustainable for being passed without hearing the Resolution Professional and the CoC and without valid reasons to override the CoC's earlier decision.

Final Conclusion: Allowing the Appeal, the Tribunal set aside the Adjudicating Authority's order dated 18.01.2022 and dismissed I.A. No. 43 of 2022; the CoC's approval of the Appellant's plan and the timelines under the Code precluded consideration of the late plan, and the parties shall bear their own costs.

Duty to cooperate with Resolution Professional under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 - signing of financial statements in accordance with the Companies Act, 2013 - authority of the Resolution Professional to manage affairs of the Corporate Debtor during CIRP - MCA circular on e form filing by IRP/RP and its procedural scope - conflict resolution: procedural filing protocol cannot displace statutory requirement of directors' signatures

Duty to cooperate with Resolution Professional under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 - signing of financial statements in accordance with the Companies Act, 2013 - MCA circular on e form filing by IRP/RP and its procedural scope - authority of the Resolution Professional to manage affairs of the Corporate Debtor during CIRP - Appellants (suspended directors) are obliged to cooperate and provide signed financial statements for FY 2019-2020 as directed by the Adjudicating Authority; the MCA filing circular does not absolve them of the Companies Act requirement to sign. - HELD THAT: - The Tribunal held that suspension of directors' powers under CIRP does not release them from statutory duties to assist the Resolution Professional; Section 19(2) of the Code mandates personnel of the Corporate Debtor to extend assistance and cooperation to the RP and the Adjudicating Authority may compel such cooperation. The MCA circular relied upon by the Appellants only prescribes procedural filing protocol for e-forms by IRP/RP and does not displace the statutory requirement under the Companies Act, 2013 that financial statements be approved and signed as prescribed. The record showed repeated requests by the RP and that the same statutory auditor had prepared and shared draft statements; the Appellants had earlier signed quarterly statements and their present refusal amounted to delay in time bound CIRP. In these circumstances the Adjudicating Authority's direction to the Appellants to sign the financial statements within two weeks was lawful and not liable to be set aside. The Tribunal declined to remit the matter for fresh consideration, finding no illegality in the impugned order and emphasising the directors' continuing duty to cooperate with the RP in compliance with both the Code and the Companies Act. [Paras 9, 10]

Appeal dismissed; the impugned order directing the Appellants to cooperate and sign the financial statements for FY 2019-2020 is upheld.

Final Conclusion: The Tribunal affirms that suspended directors must cooperate with the Resolution Professional and sign the financial statements for FY 2019-2020; the MCA circular does not override Companies Act signing requirements. The appeal is dismissed and the Adjudicating Authority's order is upheld.

Acknowledgement of liability under Section 18 of the Limitation Act, 1963 - Effect of balance sheet as acknowledgement of debt - Application under Section 7 of the Insolvency and Bankruptcy Code and limitation - One Time Settlement proposals and their effect on limitation - Permissibility of filing/addition of documents at appellate stage

Acknowledgement of liability under Section 18 of the Limitation Act, 1963 - Effect of balance sheet as acknowledgement of debt - Whether the Balance Sheet for the Financial Year 2016-17 constitutes an acknowledgement of liability under Section 18 of the Limitation Act, 1963 and thereby extends the period of limitation for filing the Section 7 application. - HELD THAT: - The Tribunal examined the audited Balance Sheet and the accompanying auditor's disclosure (Note 27) which expressly recorded defaults and amounts outstanding as on 31.03.2017. Citing the settled principles that a statement in a balance-sheet may, depending on its contents and surrounding circumstances, amount to an unequivocal acknowledgement of liability, the Tribunal applied the ratio of the Supreme Court in Asset Reconstruction Company (I) Ltd v. Bishal Jaiswal and other precedents. The Balance Sheet for the year ending 31.03.2017, being prepared and authenticated by the auditors and adopted in the statutory manner, evidenced a subsisting jural relationship and an admission of liability within the prescribed three year period from the date of default. Consequently the Balance Sheet satisfies the requirements of Section 18 for extending limitation. [Paras 11, 13, 17]

The Balance Sheet for Financial Year 2016-17 amounts to an acknowledgement of liability under Section 18 of the Limitation Act, 1963 and extends the limitation period.

One Time Settlement proposals and their effect on limitation - Whether the One Time Settlement (OTS) proposals dated after June 2018 operate as acknowledgements within Section 18 to extend limitation. - HELD THAT: - The Tribunal accepted that the first OTS proposal was dated June/August 2018, which is after the prescribed three year period from the date of default (June 2014). Section 18 requires acknowledgement to be made before expiry of the prescribed period; therefore an OTS made after expiry cannot operate as a valid acknowledgement to extend limitation. While OTS letters may indicate a jural relationship, they do not assist the appellant in extending limitation where they are first made after the three year period. [Paras 7, 8]

OTS proposals made after the prescribed period do not constitute acknowledgement under Section 18 and do not extend limitation.

Permissibility of filing/addition of documents at appellate stage - Whether the Appellate Tribunal could consider the Balance Sheet filed as additional documents before it despite the Balance Sheet not having been placed on record before the Adjudicating Authority. - HELD THAT: - Relying on the Supreme Court's observations that there is no absolute bar to amendment of pleadings or filing additional documents in insolvency proceedings, the Tribunal held that permitting the appellant to place the audited Balance Sheet on record before this Tribunal was not impermissible. Given legal precedents allowing filing of additional documents and amendment in appropriate cases, and considering the appellant had earlier pleaded limitation and acknowledgements before the Adjudicating Authority, the Tribunal found it not fatal that the Balance Sheet was brought on record at the appellate stage. [Paras 14, 15, 16]

Permitting and considering the Balance Sheet filed before the Appellate Tribunal was proper in the circumstances; it could be relied upon for deciding the limitation question.

Application under Section 7 of the Insolvency and Bankruptcy Code and limitation - Whether the Adjudicating Authority was justified in dismissing the Section 7 application as barred by limitation in view of the acknowledged liability in the Balance Sheet for 2016-17. - HELD THAT: - Having held that the audited Balance Sheet for 2016-17 embodies an acknowledgement of liability within Section 18 and that OTS proposals did not extend limitation, the Tribunal concluded that the Adjudicating Authority's finding of time bar was unsustainable. The Tribunal applied the principles in Dena Bank and related authorities that acknowledgement before expiry of the prescribed period extends limitation for proceedings under the IBC, and that where such acknowledgment exists the Section 7 petition would not be barred. [Paras 12, 13, 17]

The Adjudicating Authority erred in holding the Section 7 application barred by limitation; that finding is set aside.

Application under Section 7 of the Insolvency and Bankruptcy Code and limitation - Remand for fresh consideration of admission of the Section 7 application in accordance with law. - HELD THAT: - Although the Tribunal accepted the Balance Sheet as an acknowledgement extending limitation, it did not decide the ultimate question of admission on merits. Instead, after setting aside the impugned dismissal, the Tribunal remitted the matter to the Adjudicating Authority with a directive to consider admission of the Section 7 application afresh and in accordance with law, expeditiously. [Paras 18]

Matter remitted to the Adjudicating Authority to decide admission of the Section 7 application in accordance with law.

Final Conclusion: The Appeal is allowed; the impugned order dismissing the Section 7 application as barred by limitation is set aside. The Tribunal holds that the audited Balance Sheet for Financial Year 2016-17 constitutes an acknowledgement of liability under Section 18 of the Limitation Act, 1963, and remits the matter to the Adjudicating Authority to decide admission of the Section 7 application in accordance with law, expeditiously.

Sale of assets on "as is where is" basis - e-auction terms and conditions regarding encumbrances - liquidator's non-liability for third party encumbrances - power under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to grant directions - effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - liability of purchaser for pre-existing dues including road tax

Sale of assets on "as is where is" basis - e-auction terms and conditions regarding encumbrances - liability of purchaser for pre-existing dues including road tax - power under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to grant directions - effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - Whether the applicant, a successful bidder in the liquidator's e-auction, is entitled under Section 60(5) or Section 238 of the IBC to direct the RTO to issue duplicate RC books and waive pre-existing road tax demands. - HELD THAT: - The Tribunal held that the vehicles were sold pursuant to an e-auction subject to an express clause that the property is sold with all existing and future encumbrances and that the liquidator would not be responsible for third party claims. That clause in the terms and conditions, read with the 'as is where is' nature of the sale, informed the bidders that encumbrances reflected in the RC were known and that the successful bidder took the assets subject thereto. The applicant, having participated in the e-auction and paid the sale consideration, could not invoke Section 238 or Section 60(5) of the IBC to obtain directions overriding the contractual auction terms or to compel the RTO to dispense with pre-existing statutory dues. Further, the applicant did not implead the hypothecation charge-holder, despite its charge being reflected in the RC, and therefore had not pursued the proper route against the actual stakeholder. The Tribunal therefore found that purchase at liquidation by e-auction does not absolve a buyer from payment of prior dues and that directions against the RTO to transfer registration or waive taxes were not warranted in the circumstances.

Application dismissed; successful bidder is not entitled to directions to the RTO to issue duplicate RCs or waive pre-existing road tax on the basis relied upon.

Final Conclusion: The application for a direction to the RTO to issue duplicate RC books and to waive past road tax demands was rejected because the vehicles were sold on an "as is where is" basis subject to auction terms that placed the burden of encumbrances and pre-existing dues on the bidder; the applicant had not impleaded the hypothecation holder and must pursue appropriate remedies against the proper parties.

Malicious initiation of insolvency proceedings - penalty under Section 65 of the IBC - abuse of process - harassment of resolution professional - constructive belief or speculative allegation - non-cooperation of suspended directors - avoidance actions under Sections 43 and 66 of the IBC - remand for joint disposal with related applications - disposal of interlocutory application with observations

Malicious initiation of insolvency proceedings - penalty under Section 65 of the IBC - abuse of process - Allegation that Respondents No. 1-3 instituted CIRP maliciously for a purpose other than resolution and are liable to penalty - HELD THAT: - The Bench examined the material on record and found that Respondent No. 1 had filed a Section 9 application for unpaid salaries which was admitted ex parte because the Corporate Debtor did not appear or cooperate. The Resolution Professional's allegation of collusion between Respondents No. 1-3 and the suspended board, and that the petition was filed with malicious intent, could not be established to the satisfaction of the Bench from the materials produced. Consequently, the prayer to impose maximum penalty on Respondents No. 1-3 under Section 65 was declined. The Bench, however, recorded that if the Operational Creditors (R1-R3) make further attempts to harass the RP or obstruct the CIRP, appropriate proceedings will be initiated against them. [Paras 12]

Allegation of malicious initiation not proved; penalty prayer declined, with warning against future harassment

Constructive belief or speculative allegation - Treatment of the allegation by Respondent No. 4 that the suspended board 'may have' arranged the filing through Respondent No.1 - HELD THAT: - The Bench accepted Respondent No. 4's explanation that his statement about a possible arrangement was expressed as a belief based on conduct and 'may have' should not be construed otherwise. The submission by R4 was therefore accepted and he was not made culpable on that basis. [Paras 13]

R4's statement accepted as belief; not to be construed as established collusion

Absence of allegations against erstwhile IRP - Whether the erstwhile IRP (Respondent No. 5) faced allegations warranting action in this IA - HELD THAT: - On review of the replies and materials, the Bench found no sustainable allegations against the erstwhile IRP. The reply of R5 was accepted and there were no proceedings to be continued against him in respect of the matters raised in this IA; the matter of his fees had already been settled. [Paras 14]

No allegations sustained against R5; his reply accepted and he is not proceeded against

Non-cooperation of suspended directors - avoidance actions under Sections 43 and 66 of the IBC - remand for joint disposal with related applications - Claims against the suspended directors (Respondents No. 6 & 7) and disposition of related avoidance and fraudulent/ wrongful trading applications - HELD THAT: - The record and transaction auditor's material showed that the suspended directors continued to be non-cooperative with the RP, impeding completion of CIRP. The RP had filed separate applications alleging preferential transactions and fraudulent/wrongful trading under Sections 43 and 66. The Bench directed that the issues concerning R6 and R7 would be disposed of along with those two IAs, indicating that adjudication on those allegations would proceed in the context of the separate avoidance/fraud applications rather than in the present IA. [Paras 15]

Issues relating to R6 & R7 to be adjudicated along with the RP's separate IAs under Sections 43 and 66

Disposal of interlocutory application - Final disposition of IA No. 37 of 2021 (the present interlocutory application) - HELD THAT: - Having considered the submissions and record, and finding no sufficient substance to proceed further on the specific penal allegations against R1-R3, the Bench disposed of IA No. 37 of 2021. Observations and directions recorded in the order accompany that disposal. [Paras 16]

IA No. 37 of 2021 disposed of with the Bench's observations and directions

Final Conclusion: The Tribunal declined to impose penalties on Respondents No. 1-3 for maliciously initiating insolvency proceedings, accepted the explanatory stance of Respondent No. 4 and the reply of the erstwhile IRP (R5), found suspended directors (R6 & R7) non-cooperative and directed that allegations against them be considered with separate avoidance/fraud IAs, and disposed of IA No. 37 of 2021 with observations and directions.

Summary order. Notice issued returnable on 27-10-2021; caveat counsel accepted notice on behalf of respondents; respondents granted leave to produce certain documents; parties permitted to file written submissions not exceeding five pages before the next date of hearing.

Competence of show cause notice - classification of taxable service - doctrine against raising a case beyond the SCN - retrospective exemption for maintenance or repair of road - distinction between repair/maintenance and improvement/construction - works contract versus specified service entries - binding precedent of Larsen & Toubro on classification

Competence of show cause notice - doctrine against raising a case beyond the SCN - Demand confirmed under categories not proposed in the SCN (Cleaning Services; Erection, Commissioning and Installation Service) could not be sustained. - HELD THAT: - The Tribunal found that nowhere in the show cause notice were demands proposed under Cleaning Services or Erection, Commissioning and Installation services, yet the adjudicating authority confirmed demand under those heads. Applying the principle that the Revenue cannot build a new case not taken in the SCN, the confirmations in those categories were held to travel beyond the allegations and were set aside. [Paras 6]

Confirmations under Cleaning Services and Erection, Commissioning and Installation Service set aside as beyond the SCN.

Retrospective exemption for maintenance or repair of road - classification of taxable service - Demand for repair and maintenance of road from 16.06.2005 onwards could not be sustained in view of the retrospective exemption. - HELD THAT: - The Tribunal noted Notification No.24/2009 which retrospectively exempted maintenance or repair of road for the period from 16.06.2005 onwards. The adjudicating authority had ignored this exemption when confirming demand. Consequently, even if the services were classifiable as repair or maintenance, the retrospective exemption precluded sustaining the demand for the relevant period. [Paras 7, 9]

Demand relating to repair and maintenance of road from 16.06.2005 onwards set aside pursuant to the retrospective exemption.

Distinction between repair/maintenance and improvement/construction - classification of taxable service - Activities constituting improvement of infrastructure efficiency at level crossings are construction services and not maintenance or repair services. - HELD THAT: - The Tribunal accepted the assessee's submission and the circularal distinction that maintenance/repair aims to keep or restore existing condition, whereas the works in question involved improvement of infrastructure efficiency and thus amounted to construction related to railways. Those construction services were outside the purview of Commercial or Industrial Construction Service for the period in dispute, and therefore the classification as maintenance/repair was incorrect. [Paras 7]

Activities of improvement at level crossings treated as construction (not maintenance/repair); demand based on maintenance classification set aside.

Works contract versus specified service entries - binding precedent of Larsen & Toubro on classification - Department could not sustain demands by classifying activities under other service entries when those activities fell within the ambit of Works Contract Service and Larsen & Toubro prohibits taxing works contracts under alternate service entries. - HELD THAT: - Relying on the Supreme Court's decision in Larsen & Toubro and subsequent Tribunal precedents, the Tribunal held that composite contracts properly classifiable as works contracts cannot be taxed under entries such as Commercial/Industrial Construction Service or Erection, Commissioning and Installation Service for periods where works contract treatment applies. The adjudicating authority's approach of refusing registration under Works Contract Service and treating the activity under other heads was unsustainable. Consequently, demands premised on such reclassification could not be sustained. [Paras 8, 9]

Demands premised on classification contrary to Larsen & Toubro and on recharacterisation in place of Works Contract Service set aside.

Final Conclusion: The assessee's appeal is allowed on merits and the confirmed demands are set aside for the reasons stated; the Revenue's appeal is dismissed as withdrawn, and both appeals are disposed of accordingly.

Cenvat credit admissibility where supplier has paid duty - Power to re determine assessable value / reassessment of shipping bill - Jurisdictional limits of investigative officers (DGCEI) in assessment and scrutiny of returns - Remedy by appeal before Commissioner (Appeals) versus issuance of show cause notice under Section 11A

Cenvat credit admissibility where supplier has paid duty - Circular clarifications on credit of duty paid by supplier - CENVAT credit taken by the recipient (Blue Whale) on inputs for which the supplier (Unicorn) had paid central excise duty could not be denied on the ground that the supplier over valued the goods. - HELD THAT: - The Tribunal held that where duty is shown as paid in valid duty paying documents and the inputs are received and used by the manufacturer, CENVAT credit at the recipient's end cannot be denied merely because the supplier allegedly declared a higher transaction value. The adjudicating authority correctly relied on the Board's Circular dated 01.02.2016 and binding precedents to conclude that once central excise duty has been paid, credit cannot be questioned at the receiver's end in the absence of allegations such as non receipt of goods, forged documents or non payment of duty by the supplier. The scheme of the CENVAT Credit Rules entitles the recipient to credit of duty indicated in the duty paying documents, and nothing in the notification conferring refund to the supplier empowers authorities to reduce the recipient's credit on the basis of an asserted over valuation at the supplier's end. [Paras 5, 6, 22, 24]

The CENVAT credit claimed by Blue Whale was admissible and the proposal to deny it was rightly rejected.

Power to re determine assessable value / reassessment of shipping bill - Jurisdictional limits of investigative officers (DGCEI) in assessment and scrutiny of returns - Remedy by appeal before Commissioner (Appeals) versus issuance of show cause notice under Section 11A - Officers of DGCEI did not have the jurisdiction to re determine the assessable value of goods already declared/assessed in returns or shipping bills, and the proper remedy to challenge assessment is by appeal to Commissioner (Appeals) or by proceeding under Section 11A by a Central Excise officer within its statutory scope. - HELD THAT: - The Tribunal examined the statutory scheme (assessment being primarily self assessment under the Rules and scrutiny by the proper officer) and held that DGCEI officers lack power to scrutinise or re assess returns or shipping bills assessed by customs or the jurisdictional Superintendent. Section 12E allows exercise of powers only among Central Excise officers in the hierarchical structure and does not confer on DGCEI a power to reassess. Section 11A is confined to instances of non levy, short levy, non payment, short payment or erroneous refund and may be invoked only by a Central Excise officer within limitation; it does not permit investigative officers to supplant transaction value by re determining export values for goods already assessed and exported. Judicial precedents were applied to hold that modification of an assessed shipping bill can be effected only by the proper appellate remedy and not by DGCEI issuing a show cause notice to re determine value post export. [Paras 13, 15, 18, 25]

The proposal by DGCEI to re determine the assessable value of goods and to reduce the declared export value was beyond its jurisdiction and unsustainable.

Final Conclusion: The impugned order dropping proceedings was upheld; the show cause notice issued by DGCEI seeking denial of CENVAT credit and re determination of export value was unsustainable and the appeals by Revenue are rejected.

Continuation of statutory tenure after expiry - consent of parties cannot validate an order contrary to law - statutory scheme for appointment and tenure of tribunal members - interim extension of office as stop gap measure - validity of acts done by incumbent under interim order

Continuation of statutory tenure after expiry - statutory scheme for appointment and tenure of tribunal members - Whether the interlocutory order extending the tenure of the Technical Member of the West Bengal Taxation Tribunal after expiry of his five year term was sustainable. - HELD THAT: - The Court examined the statutory provisions governing constitution, appointment and tenure of the Tribunal, including the requirement that a Technical Member be appointed by the Governor on recommendation of a Selection Committee and that a Judicial or Technical Member holds office for a term of five years and shall not hold office after attaining the age of sixty five years. The Act contains no provision for automatic continuation after the expiry of the five year term unless reappointment is made. The impugned order contained a one line extension by consent without recording facts, legal basis or any ground justifying an interim direction. In view of the statutory scheme and the absence of any legal foundation recorded by the Single Judge, the extension could not be sustained. The Court thus set aside the interlocutory order while noting that fresh applications before the Single Judge may be considered in accordance with law. [Paras 8, 10, 11, 12, 16]

Interlocutory order extending the tenure of the Technical Member after expiry is set aside for lack of statutory basis and absence of reasons.

Consent of parties cannot validate an order contrary to law - Whether the consent of parties recorded in the impugned order can validate an extension contrary to statutory provisions. - HELD THAT: - The Court observed that consent of parties was recorded but the High Court Administration was not present, and more importantly a consent that is contrary to law cannot validate an order. Reliance was placed on the principle that concessions or consent on points of law cannot bind the State or justify an order inconsistent with statutory provisions. Because the Single Judge granted the extension on the basis of such consent without addressing the legal prohibition on continuation, the order could not be sustained. [Paras 8, 9, 16]

Consent of parties cannot validate an order that is contrary to statutory law; the extension granted on such a basis is invalid.

Validity of acts done by incumbent under interim order - Whether orders passed by the Administrative Member during the period of his continuance under the impugned interim order are open to challenge on the ground of his continuance. - HELD THAT: - Noting that the Administrative Member continued in office by virtue of the interim order which is now set aside, the Court preserved the validity of actions taken by him during that interim period. The Court expressly saved the orders passed in the meanwhile from challenge on the ground of his continuance, thereby protecting third party and administrative consequences of the interim arrangement. [Paras 17]

Orders passed by the Administrative Member during his continuance under the interim order are saved from challenge on the ground of his continuance.

Interim extension of office as stop gap measure - Whether the matter should be reconsidered and the process of appointment expedited. - HELD THAT: - The Court directed that if a fresh prayer for stay is made before the learned Single Judge it shall be considered in accordance with law taking into account the statutory scheme and other relevant aspects. The Court also observed that the petition should be taken up expeditiously and directed the State Government to take expeditious steps for appointment of the Technical Member in view of the tribunal's functioning being affected by the vacancy. [Paras 16, 18, 19]

Matter remitted for fresh consideration of any interim prayer; State directed to expedite appointment of the Technical Member.

Maintainability of proceedings by a society under its authorization rules - Whether the writ petition filed by the Taxation Tribunal Bar Association was maintainable in the absence of authorization as envisaged under the Societies Registration Act. - HELD THAT: - The Court recorded that maintainability, by reference to the requirement of authorization under Section 19 of the West Bengal Societies Registration Act, 1961, had been urged before it as one of the aspects not considered by the Single Judge. Although the Court noted this defect as part of the reasons for setting aside the impugned order, it did not finally adjudicate the maintainability on merits and left issues to be considered afresh by the Single Judge. [Paras 14, 16]

Maintainability challenge on account of lack of society authorization was noted as a relevant aspect; not finally decided and to be considered afresh by the Single Judge.

Final Conclusion: The single sentence interlocutory extension of the Technical Member's tenure by the Single Judge, granted by consent without legal foundation or reasons and contrary to the statutory scheme, is set aside; orders passed by the incumbent during the interim period are preserved; the Single Judge shall consider any fresh interim prayer in accordance with law and the State is directed to expedite the process of appointment of the Technical Member.

Rebuttal of presumption raised by presentation of cheque - presumption as to existence of debt or legally enforceable liability from cheque - maintainability of complaint against partners of a firm in individual capacity - re-appreciation of evidence by appellate court - scope of revisional jurisdiction - imposition of fine and sentence in cheque dishonour prosecutions

Rebuttal of presumption raised by presentation of cheque - presumption as to existence of debt or legally enforceable liability from cheque - The Trial Court did not err in holding that the petitioner failed to rebut the presumption arising from the cheque and in accepting the evidence of PWs.1 and 2. - HELD THAT: - The Court examined the documentary and oral evidence adduced by the petitioner (including Ex. D1 and Ex. D3) and the complainant (Exs. P1, P2 and oral testimony). Although the petitioner alleged that the cheque anteceded the pleaded transaction (claiming issuance in 1993), no bank statements or other material were produced to show that the cheques marked Exs. P1 and P2 were not connected with the 2004 transaction. The petitioner admitted in cross-examination that the complainant had the capacity to lend the money and that the firm maintained a bank account; the document relied on by the defence (Ex. D3) contained overwritings and did not establish from whom or to whom advances were made. In the absence of cogent evidence negativing the complainant's case, the preponderance of probability favoured drawing the statutory presumption in respect of the cheque and the Trial Court rightly rejected the defence theory. The Court found no applicability of the authority relied upon by the petitioner because the required rebuttal material was not placed before the courts below. [Paras 9, 10, 11, 13]

Petitioner's defence did not rebut the presumption; Trial Court rightly accepted the complainant's evidence.

Re-appreciation of evidence by appellate court - scope of appellate interference with concurrent findings - The Appellate Court did not commit an error in confirming the conviction and sentence on re-appreciation of evidence. - HELD THAT: - On re-appreciation the Appellate Court noted admission of issuance and signature on the cheques by the petitioner and observed that the defence explanations were not substantiated by documentary proof. The appellate court considered the trial evidence, including the petitioner's admissions about the complainant's capacity to advance the loan and deficiencies in the defence documents (overwritings and lack of detail in Ex. D3), and concluded that the defence failed to rebut the complainant's case. There being no perversity or demonstrable error in the concurrent findings of fact, interference in revisional jurisdiction was unwarranted. [Paras 13]

Appellate Court correctly confirmed conviction and sentence; no error justifying interference.

Maintainability of complaint against partners of a firm in individual capacity - requirement to arraign a firm when pleading in-charge or agency is necessary - The complaint was maintainable though the firm as an entity was not separately arraigned; arraignment of partners in their individual capacity was sufficient on the pleaded facts. - HELD THAT: - The complaint specifically averred that the petitioner alone approached the complainant for financial assistance and sought a loan for the business; the pleading named the partners in their individual capacities. No clear or earlier plea was taken that the firm alone should have been made a party or that the accused acted only as agents in-charge of firm affairs. The defence on this ground was raised for the first time in revision and the Trial Court was not given an opportunity to examine the complainant on that point. The Court observed that the requirement to make a firm a party arises only when the complaint pleads that the accused acted in their capacity as persons in-charge of the firm's affairs, which is absent here; hence non-arraignment of the firm as a distinct entity did not vitiate maintainability. [Paras 11, 12]

Complaint maintainable against partners in their individual capacities; failure to arraign the firm did not invalidate proceedings.

Scope of revisional jurisdiction - scope of interference for perverse concurrent findings - This Court should not exercise revisional jurisdiction as there is no perversity or illegality in the concurrent findings of the Trial and Appellate Courts. - HELD THAT: - The High Court noted that both courts had considered oral and documentary evidence and given reasons for rejecting the defence. Revisional interference is warranted only if the findings are contrary to the evidence or perverse. As both courts had applied their minds to the material on record and reached conclusions supported by admissions and documentary defects in the defence evidence, the High Court found no merit to disturb those conclusions. The Court emphasised the limited scope of revision and declined to re-appreciate facts on merits absent demonstrable perversity. [Paras 12, 13]

Revisional jurisdiction not attracted; no interference with concurrent findings.

Final Conclusion: The revision petition is dismissed; concurrent findings of the Trial and Appellate Courts that the petitioner failed to rebut the presumption arising from the cheques, that the complaint was maintainable against the partners in their individual capacity, and that no error arises to invite revisional interference are upheld.

Condonation of delay under the proviso to Section 142(b) of the Negotiable Instruments Act - remand to trial court for disposal of condonation application - raising limitation/ delay for the first time in appellate proceedings - appellate court's power vis-a -vis trial court's discretion to condone delay

Raising limitation/ delay for the first time in appellate proceedings - condonation of delay under the proviso to Section 142(b) of the Negotiable Instruments Act - remand to trial court for disposal of condonation application - Validity of the Appellate Court's order setting aside the trial court's conviction and remanding the matter for consideration of delay and for filing/deciding an application for condonation of delay. - HELD THAT: - Adverting to the record, there was an admitted delay of seven days in filing the complaint and no application for condonation was filed before the Trial Court. The contention of the petitioners that the Appellate Court had no power to remit for filing or adjudication of a condonation application is unsustainable where the objection to limitation was raised for the first time on appeal. The proviso to Section 142(b) of the N.I. Act contemplates the Trial Court's discretion to condone delay and, where that discretion has not been exercised because the issue was first taken in the appellate forum, the Appellate Court was justified in remitting the matter so that the Trial Court may exercise its jurisdiction on the question of condoning delay. If the defence of delay had been taken before the Trial Court and no application for condonation filed, the petitioners' argument might have prevailed; however, no such defence was raised at trial. In these peculiar facts and circumstances, the Appellate Court did not usurp the Trial Court's jurisdiction but sought to afford the complainant an opportunity to file and have decided an application under the proviso to Section 142(b). Consequently the Appellate Court's order setting aside the conviction and remanding the matter for fresh consideration on the question of delay is upheld. [Paras 23, 24]

The Appellate Court did not commit any error in setting aside the conviction and remanding the matter to the Trial Court to permit filing and decision of an application for condonation of delay; the revision petition is dismissed and the Trial Court is directed to dispose of the matter within one year.

Final Conclusion: The revision petition is dismissed. The High Court upheld the Appellate Court's remand for the Trial Court to consider any condonation application under the proviso to Section 142(b) of the N.I. Act, and directed the Trial Court to decide the matter within one year.

Material alteration of a promissory note - Presumption of consideration under Section 118 of the Negotiable Instruments Act - Admission of execution and its evidentiary effect - Effect of material alteration on enforceability of negotiable instruments - Burden of proof where material alteration is alleged

Admission of execution and its evidentiary effect - Presumption of consideration under Section 118 of the Negotiable Instruments Act - Whether the statutory presumption of consideration under Section 118 can be invoked by the plaintiff where execution of the promissory notes is admitted. - HELD THAT: - The trial Court had relied on the admission of signature to invoke the presumption under Section 118 and to presume passing of consideration. The High Court accepted that execution of the promissory notes was admitted by the defendant. However, the Court held that the statutory presumption of consideration is not conclusive and cannot be invoked to override other decisive facts, particularly where the defendant has pleaded and adduced evidence of material alteration. The Court therefore declined to allow the appellant to succeed solely on the basis of the presumption where allegations and evidence of alteration were found to be credible. [Paras 4, 8, 11]

The presumption under Section 118 does not prevail where material alteration is established or credibly alleged; admission of execution alone was insufficient to decree the suit in the face of proved alteration.

Material alteration of a promissory note - Effect of material alteration on enforceability of negotiable instruments - Burden of proof where material alteration is alleged - Whether there was a material alteration in the promissory notes and whether such alteration was fatal to the plaintiff's claim. - HELD THAT: - The defendant specifically pleaded that the figures in the notes had been altered (figure changed from Rs. 60,000 to Rs. 1,20,000) while the amount in words remained unchanged, and led evidence to support the allegation. The Lower Appellate Court accepted the case of the defendant and found that the figures had been altered, which, being a material alteration, rendered the promissory notes unenforceable as presented by the plaintiff. The High Court reviewed the appellate court's findings on pleadings and evidence and found no perversity or illegality in the conclusion that material alteration existed and that the plaintiff could not rely on the altered documents to recover the claimed sum. [Paras 5, 6, 9, 10, 11]

Material alteration was established/found by the appellate court and was fatal to the plaintiff's claim; the appellate finding is upheld as not perverse.

Final Conclusion: The second appeal is dismissed; the judgment and decree of the Principal District Judge, Villupuram in A.S.No.45/2013 dated 30.04.2014 reversing the trial Court's decree are confirmed, the appellate finding that material alteration vitiated the promissory notes being upheld.

Criminal proceeding under Section 138 of the Negotiable Instruments Act - Dishonour of cheque - CTS migration and presentation endorsements - Quashing of criminal proceedings - Abuse of process - Compelling circumstances for exercise of jurisdiction to quash

Quashing of criminal proceedings - Compelling circumstances for exercise of jurisdiction to quash - Whether the petitions seeking quashment of the complaints under Section 138 of the Negotiable Instruments Act should be allowed at the threshold. - HELD THAT: - The High Court refused to interfere with the criminal proceedings which had already commenced. The court noted that the complainant examined PW1 and the Bank Manager and that the petitioner had not availed the opportunity to cross-examine the Bank Manager before moving for quashment. The court held that the invocation of the Reserve Bank of India circular regarding migration to CTS did not, by itself, furnish compelling circumstances to quash the complaints. The completion of the statutory pre-conditions for Section 138 and whether the offence is made out are matters to be determined by the trial court; absent exceptional circumstances based on the RBI circular or other material, the exercise of the quashing jurisdiction was not warranted. Applying these principles, the petitions were dismissed. [Paras 6, 11, 12, 14]

Petitions for quashment dismissed; no interference with trial in absence of compelling circumstances.

Dishonour of cheque - CTS migration and presentation endorsements - Whether cheques returned with endorsements such as 'present in proper zone' or 'not drawn with' constitute dishonour attracting Section 138 and whether such questions can be finally determined in these petitions. - HELD THAT: - The court declined to accept the submission that endorsements like 'present in proper zone' necessarily negate dishonour for insufficiency of funds. It recorded that the factual and evidentiary determination-whether the cheques were dishonoured for insufficiency of funds or for presentation-zone technicalities-requires trial scrutiny. Likewise, the return endorsement 'not drawn with' was held to be a question fit for trial. The court therefore left these issues to be adjudicated by the trial court upon consideration of evidence and the entire trial process rather than deciding them at the quashment stage. [Paras 8, 11, 13]

Questions whether the specific return endorsements amount to dishonour under Section 138 are to be considered and decided by the trial court; not finally decided in these petitions.

Final Conclusion: All petitions seeking quashment of the complaints under Section 138 of the Negotiable Instruments Act are dismissed; factual and legal questions relating to the nature of cheque returns and dishonour are left for determination by the trial court.

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of arraigning the company as accused for prosecution under Section 141 - necessity of specific averments to attribute control, consent or connivance - application of Aneeta Hada principle on strict construction of vicarious liability

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of arraigning the company as accused for prosecution under Section 141 - application of Aneeta Hada principle on strict construction of vicarious liability - Prosecution of the petitioners under Section 141 of the Negotiable Instruments Act is not sustainable in the absence of the company being arrayed as an accused. - HELD THAT: - The Court applied the ratio in Aneeta Hada that commission of the offence by the company is an express condition precedent to attract vicarious liability of others. The words in the provision require that where the company can be prosecuted, only then the persons in the specified categories can be vicariously liable. On the material before the Court the cheque was issued by the company and the company was not arraigned as an accused; consequently prosecution of the petitioners invoking Section 141 cannot be maintained. The Court held that earlier contrary view in Sheoratan Agarwal was overruled by the Apex Court and thus cannot be followed. The requirement to arraign the company is imperative before proceeding against directors or authorised signatories under Section 141. [Paras 9]

Proceedings against the petitioners under Section 141 are unsustainable without arraying the company as an accused; the complaint is quashed on this ground.

Necessity of specific averments to attribute control, consent or connivance - requirement of pleading sufficient facts to invoke vicarious liability - The complaint lacked specific averments showing that the petitioners took part in the day-to-day affairs of the company or that their consent, connivance or neglect could attract vicarious liability. - HELD THAT: - Apart from the imperative requirement of arraigning the company, the Court examined the notice and complaint and found an absence of specific factual averments against the petitioners demonstrating they were in-charge of and responsible for the conduct of the company's business. The complaint did not sufficiently plead the elements necessary to fasten vicarious liability on the petitioners; therefore, even on the material filed, prosecution could not be sustained. [Paras 9]

Complaint is unsustainable for want of specific averments to invoke vicarious liability and is accordingly quashed insofar as it relates to the petitioners.

Final Conclusion: The proceedings in C.C.No.37 of 2018 against the petitioners are quashed: prosecution under Section 141 of the Negotiable Instruments Act cannot be maintained without arraigning the company as an accused and the complaint also lacks necessary specific averments to fasten vicarious liability on the petitioners.

Maintainability of criminal prosecution against directors without making the corporate entity a party - vicarious liability of officers for corporate offences - doctrine of strict construction in corporate criminal liability - quashing of proceedings for want of necessary party

Maintainability of criminal prosecution against directors without making the corporate entity a party - doctrine of strict construction in corporate criminal liability - vicarious liability of officers for corporate offences - Complaints filed against persons described as Directors, without arraigning the corporate entity, are not maintainable and proceedings based thereon are liable to be quashed. - HELD THAT: - The Court applied the ratio of Aneeta Hada to hold that commission of an offence by the company is an express condition precedent to attract vicarious liability of its officers. Applying the doctrine of strict construction, the Court observed that the words in the statutory provision make clear that when the company can be prosecuted, only then can the persons in other categories incur vicarious liability, subject to the necessary averments and proof. An individual's description as a Director does not suffice for maintainability because the corporate juristic person must be arraigned; otherwise prosecution against only the individual is improper. Following the precedent and decisions of co ordinate benches, the Court concluded that complaints instituted by the Labour Department against individual directors without making the company a party were not maintainable and the consequent proceedings should be quashed, with liberty to the State to take action in accordance with law.

Criminal petitions allowed; impugned orders and all proceedings pursuant thereto quashed, subject to the respondent's liberty to proceed in accordance with law.

Final Conclusion: The petitions were allowed by quashing the magistrate's orders and all proceedings taken thereunder because prosecution of the directors without arraigning the company was held not maintainable under the settled principle that corporate prosecution is a precondition for vicarious liability of officers.