TaxTMI Updates e-Newsletter
Apr 22,2022

Interest on delayed refund - principal part of Section 56 of the CGST Act - proviso to Section 56 - refund consequent to adjudicatory or appellate order - application of CGST refund provisions mutatis mutandis to IGST claims - maintainability of writ for recovery of delayed refund/interest

Application of CGST refund provisions mutatis mutandis to IGST claims - interest on delayed refund - Registered exporters claiming IGST refunds are governed by the refund and interest provisions of the CGST Act and are entitled to statutory interest where applicable. - HELD THAT: - The Court held that Section 16 of the IGST Act makes an exporter entitled to claim refund of integrated tax and Section 20 brings the refund provisions of the CGST Act to bear mutatis mutandis. Consequently, applications for refund under the IGST framework are to be determined in accordance with Section 54 of the CGST Act and interest on delayed refunds is governed by Section 56 of the CGST Act. The principal part of Section 56 prescribes payment of interest at a rate not exceeding six per cent where a refund ordered under Section 54(5) is not made within sixty days; the proviso prescribes a higher rate (not exceeding nine per cent) only where the refund arises from an order of an adjudicating authority, appellate authority, Appellate Tribunal or court. The present claims did not arise from any such adjudicatory or appellate order and therefore fall squarely under the principal part of Section 56. The High Court's award of interest at nine per cent in these facts was thus inconsistent with the statutory scheme and the correct rate is six per cent per annum. [Paras 11, 12, 13, 19, 20]

The writ petitioners are entitled to interest at the statutory rate of 6% per annum on the delayed refund amounts; the award of 9% by the High Court was erroneous where the proviso to Section 56 does not apply.

Maintainability of writ for recovery of delayed refund/interest - Writ petitions seeking interest on delayed refunds are maintainable in appropriate cases where a statutory right or public law function is involved. - HELD THAT: - The Court reviewed earlier precedents and accepted the doctrine that, although a writ for mere recovery of money is generally a matter for civil proceedings, Article 226 jurisdiction may be invoked where enforcement of a statutory right or public law duty is involved. The decision in Suganmal was explained in subsequent authorities and the Court noted that Godavari Sugar Mills and other decisions recognise that writ relief for refund and attendant interest may be granted when the claim involves enforcement of statutory rights or where facts permit exercise of public law remedy. On that basis the Court proceeded to decide the merits of the present petitions and award statutory interest at the correct rate. [Paras 14, 15, 16]

The writ petitions were maintainable and the Court was entitled to adjudicate the claim for interest on delayed refunds under the statutory scheme.

Final Conclusion: Appeals allowed in part: the High Court's awards of interest at 9% are set aside and the writ petitioners are entitled to interest at 6% per annum under Section 56 (principal part) of the CGST Act; amounts at 6% have already been paid and no further relief is necessary.

Quashing of GST registration cancellation - revival of registration subject to filing returns and payment of tax, interest and penalty - restriction on utilisation of Input Tax Credit pending departmental scrutiny - requirement to file returns and pay GST in cash for periods subsequent to cancellation - directions to GST Network to enable filing and payment - application of precedent to grant relief subject to conditions

Application of precedent - quashing of GST registration cancellation - The cancellation of the petitioner's GST registration was quashed by applying the directions issued in Tvl.Suguna Cutpiece Center to the present petitioner. - HELD THAT: - The Court found that the present petition falls within the category dealt with by the earlier decision in Tvl.Suguna Cutpiece Center and, for that reason, the same relief and conditional directions (recorded in paragraph 229 of that judgment) are applicable to the petitioner. The writ petition was therefore disposed of by extending the benefit of the cited directions to the petitioner, resulting in quashing of the cancellation subject to compliance with those conditions. [Paras 5, 6]

Writ petition allowed by extending the directions in the cited precedent and quashing the cancellation of registration on compliance with the specified conditions.

Filing returns and payment of tax, interest and penalty - non-utilisation of Input Tax Credit pending scrutiny - revival of registration upon payment and uploading of returns - requirement to pay GST in cash for subsequent periods - directions to GST Network to enable filing and payment - The cancellation is to be set aside subject to the conditional directions: filing of returns and payment of outstanding tax, interest, fine/fee; restrictions on utilisation of Input Tax Credit until departmental scrutiny and approval; payment in cash for periods after cancellation; and GSTN portal modifications to permit compliance. - HELD THAT: - The Court adopted the conditions articulated in the earlier order and applied them to the petitioner. These include: filing returns for periods prior to cancellation and paying the tax defaulted along with interest and prescribed fine/fee within the specified time; prohibition on adjusting unpaid liabilities from any unutilised Input Tax Credit; allowing utilisation of Input Tax Credit only after scrutiny and approval by competent departmental officers; requirement that returns and payment for periods subsequent to cancellation declare correct values and payments be made in cash; permissibility of departmental restrictions to prevent undue passing of Input Tax Credit or bill trading; revival of registration forthwith on payment and uploading of returns; and a direction to the respondents to coordinate with GST Network to enable filing and payment via the portal within the stipulated timeframe. [Paras 4]

Cancellation quashed and registration to be revived only upon fulfilment of the stated conditional directions; respondents to take steps with GST Network to enable compliance; no order as to costs.

Final Conclusion: The writ petition is allowed by applying the directions given in the cited precedent: the cancellation of GST registration is quashed subject to the petitioner filing returns and paying tax, interest, penalty/fee (with specified restrictions on Input Tax Credit and other conditions), and the registration shall be revived on compliance; respondents to coordinate with GST Network to enable compliance; no costs.

Acceptance of bank guarantee under Section 129(1)(c) of the CGST Act, 2017 - Provisional release of detained goods on furnishing security - Confirmation of penalty under Section 129(1)(a) of the CGST Act, 2017 - Mention and enforcement of representation for release of goods

Acceptance of bank guarantee under Section 129(1)(c) of the CGST Act, 2017 - Provisional release of detained goods on furnishing security - Direction to accept a bank guarantee equivalent to the disputed penalty and provisionally release the detained goods and conveyance. - HELD THAT: - The petitioner sought a writ directing the respondents to accept a bank guarantee equivalent to the disputed penalty and to provisionally release the goods and the vehicle in which they were detained. The petitioner had earlier challenged the detention and the penalty confirmed under the relevant provisions; a representation requesting release on furnishing a bank guarantee was pending. The Additional Government Pleader expressly stated that upon annexing the bank guarantee with the representation, the respondents would release the detained goods within one week of receipt. Relying on that assurance, the Court permitted the petitioner to furnish and annex the bank guarantee and the application within one week from receipt of the order, and directed the respondents to release the detained goods within one week after receipt of the bank guarantee and application. The order implements the mechanism under the statute for provisional release on security and provides a clear timetable for action by both parties. [Paras 5, 6]

Petitioner permitted to furnish and annex a bank guarantee within one week; respondents directed to release the detained goods within one week of receipt of the bank guarantee and application.

Final Conclusion: Writ petition disposed by directing the petitioner to furnish a bank guarantee within one week and directing respondents to release the detained goods within one week of receipt; no costs.

Constitutional validity of transitional credit rules - Permissibility of revision of TRAN-1/TRAN-2 for transitional credit - Application of section 140 and Rule 117(1) to claims for transitional credit - Directory vs mandatory nature of Rule 117(1)

Constitutional validity of transitional credit rules - Application of section 140 and Rule 117(1) to claims for transitional credit - Challenge to the vires of section 140 and Rule 117 (and Rule 120A) of the Central Goods and Services Tax Rules, 2017 was negatived. - HELD THAT: - The Court noted that the constitutional challenge to section 140 and Rule 117 had been negatived by this Court in Nelco Limited (referenced in the judgment) and declined to sustain the petitioners' contention that those provisions are ultra vires. The Court also observed the petitioners' reliance on a separate decision (Heritage Lifestyles) but expressly declined to accept the submission that that decision established the directory (as opposed to mandatory) character of the time-limits in Rule 117(1). Accordingly, the challenge to validity of the statutory and rule provisions was not upheld. [Paras 10, 11]

Constitutional challenge to section 140 and Rule 117/120A rejected; provisions to be treated according to existing binding precedents.

Permissibility of revision of TRAN-1/TRAN-2 for transitional credit - Application of section 140 and Rule 117(1) to claims for transitional credit - Petitioner permitted to correct and re-submit Form TRAN-1 and to file Form TRAN-2; matter remitted to the jurisdictional assessing authority for fresh consideration under section 140 and Rule 117(1). - HELD THAT: - Although the constitutional challenge was negatived, the Court exercised its discretion in the interest of justice by permitting the petitioner in the lead matter to correct TRAN-1 and to file TRAN-2. The Court directed that the jurisdictional assessing authority consider whether the corrected or newly filed TRAN-1/TRAN-2 can be entertained in accordance with section 140 and Rule 117(1), and to consider all issues raised by the petitioner on merits, including the effect of the cited precedents. The authority was given a strict timeline to decide (four weeks for decision; communication within one week; reliefs to be granted within four weeks if allowed), and the petitioner was afforded liberty to pursue appropriate proceedings if the decision is adverse. [Paras 12, 13]

Leave granted to correct TRAN-1 and file TRAN-2; matter remitted to the assessing authority to decide admissibility and merits under section 140 and Rule 117(1) within the timelines directed.

Final Conclusion: Writ petitions disposed: constitutional challenge to section 140 and Rules 117/120A rejected; petitioner permitted to correct TRAN-1 and file TRAN-2 and the assessing authority directed to consider admissibility and merits under section 140 and Rule 117(1) within the timelines prescribed by the Court.

Summary order. Writ appeals admitted; that portion of the High Court order quashing the Tamil Nadu Authority for Advance Ruling proceedings and setting aside the departmental circular is stayed until further orders; appeals listed for further hearing on 9-12-2021.

Disallowance of interest under Section 36(1)(iii) - use of borrowed funds for non-business purposes - principle of consistency and certainty in tax litigation - precedential value of earlier assessment-year findings - departure from prior findings resulting in contradictory finding

Disallowance of interest under Section 36(1)(iii) - use of borrowed funds for non-business purposes - Validity of deletion by the ITAT of the addition made by the AO under Section 36(1)(iii) for interest expenditure in AY 2013-14 and 2014-15. - HELD THAT: - The Court examined the Revenue's contention that interest expenditure should be proportionately disallowed because borrowed funds were used for non-business purposes and that reinvestment in FDRs reflected imprudent use of loans. The Tribunal's deletion of the addition was held to be consistent with earlier Tribunal findings in the assessee's own case for earlier assessment years, where factual constraints (contractual restrictions, liquidation damages/pre-payment charges) made diversion or pre payment imprudent. The Court observed that those earlier decisions addressed the same factual matrix and that no appeal under Section 260A was preferred against those orders. Applying the principle that a contrary conclusion in subsequent years, despite the same fundamental facts, would create a contradictory finding, the Court found no substantial question of law warranting interference with the ITAT's deletion of the addition.

ITAT's deletion of the addition under Section 36(1)(iii) affirmed; no interference.

Principle of consistency and certainty in tax litigation - precedential value of earlier assessment-year findings - departure from prior findings resulting in contradictory finding - Whether the Tribunal's reliance on earlier co ordinate bench decisions in the assessee's own case justified the same treatment in the present assessment years and whether a question of law arises. - HELD THAT: - The Court considered authorities emphasizing the need for consistency and certainty in tax matters and noted that although res judicata and estoppel do not rigidly apply to taxation, a departure from earlier findings where the same fundamental aspect recurs would lead to contradictory conclusions and unsettle settled expectations. Citing the direction that similar matters should receive similar treatment unless factual differences require otherwise, the Court concluded that the Tribunal rightly treated the present years in conformity with earlier decisions and that no question of law arose for consideration.

Reliance on earlier Tribunal decisions in the assessee's own case upheld; no question of law made out.

Final Conclusion: Appeals dismissed; the ITAT's orders deleting the additions are sustained and no substantial question of law arises, in view of consistent treatment of identical factual matrix in earlier assessment years.

Reopening of assessment - change of opinion - accumulation under Section 11(2) - deemed application under Explanation (2) to Section 11(1) - tangible fresh material obtained in subsequent assessments

Reopening of assessment - change of opinion - accumulation under Section 11(2) - deemed application under Explanation (2) to Section 11(1) - tangible fresh material obtained in subsequent assessments - Validity of notice of reopening and order rejecting objections where reopening was founded on alleged non-disclosure regarding accumulation of income of Rs. 70,00,000/- - HELD THAT: - The Court found that the question whether the sum of Rs. 70,00,000/- represented accumulation under Section 11(2) or deemed application under Explanation (2) to Section 11(1) had been actively considered during the original assessment proceedings. The assessee was repeatedly called under Section 142(1), furnished Form 10, the trustees' resolution and replies to a show cause notice, and the Explanation that the misstatement was inadvertent was accepted; the assessment under Section 143(3) was finalised taking the accumulation into account. The respondents conceded that the reasons for reopening contained an erroneous statement that it was "not ascertainable" whether the amount was accumulation or deemed application. There was no fresh or tangible material arising from assessments of subsequent years that was not available at the time of the original assessment; therefore the reopening amounted to a prohibited change of opinion rather than being founded on new material or information that could justify reopening. Applying the principle that reopening cannot be based on material already considered in the original assessment, the Court concluded that the notice and the order rejecting objections were unsustainable. [Paras 4, 5, 6, 7, 8]

Reopening was based on change of opinion and absence of fresh material; notice dated 30 March 2021 and order dated 28 December 2021 quashed.

Final Conclusion: Writ petition allowed; notice of reopening dated 30 March 2021 and the order rejecting objections dated 28 December 2021 set aside as founded on change of opinion without fresh material.

Waiver of interest under Section 220(2A) - liability to pay interest under Section 220(2) - reopening of assessment under Section 148 - revised return and assessment consequences

Waiver of interest under Section 220(2A) - liability to pay interest under Section 220(2) - Whether the petitioner was entitled to waiver of the further interest demanded under Section 220(2) by invoking the discretion under Section 220(2A). - HELD THAT: - The Court recorded that the petitioner filed an incorrect return for Assessment Year 2007-2008, the assessment was reopened under Section 148 and finalized by the Assessment Order dated 30.01.2015 which gave rise to a demand notice under Section 156. The Demand Notice expressly warned that failure to pay within the specified period would attract simple interest at 1.5% p.m. under Section 220(2). The petitioner did not pay the amount within time and thereafter sought waiver under Section 220(2A), which was considered and rejected by the competent authority on 28.12.2016. Following that rejection the petitioner paid the assessed tax and interest quantified in the assessment order, but a further consequential interest under Section 220(2) was demanded. The Court held that because the petitioner failed to make timely payment and the statutory waiver power under Section 220(2A) had already been exercised and rejected, there was no merit in the petition. The Court therefore declined to exercise writ jurisdiction to grant a waiver of interest which the statutory authority had refused, noting the absence of any accepted ground such as genuine hardship or circumstances beyond the assessee's control that would attract Section 220(2A). [Paras 19, 21, 22, 23, 24]

Petition dismissed; petitioner not entitled to waiver of the further interest demanded under Section 220(2) as the waiver under Section 220(2A) had been rightly rejected and the petitioner failed to pay within the prescribed time.

Final Conclusion: Writ petition dismissed: the assessment for Assessment Year 2007-2008 was reopened and finalized, the petitioner failed to pay within time, the statutory discretion to waive interest under Section 220(2A) had been exercised and rejected, and therefore the claim for waiver of further interest was refused.

Set off of brought forward capital losses against capital gains - treatment of losses and gains on sale of shares subject to STT - disallowance under section 14A and Rule 8D - assessment under section 153A following search - additions based on incriminating material - tax effect threshold for filing departmental appeal - classification of carried forward loss as short-term and applicability of Section 74(1)(a)

Set off of brought forward capital losses against capital gains - assessment under section 153A following search - additions based on incriminating material - disallowance under section 14A and Rule 8D - treatment of losses and gains on sale of shares subject to STT - Validity of repeated disallowances in assessment under section 153A where identical disallowances were made earlier under section 143(3) and no incriminating material was found during the search - HELD THAT: - The Tribunal noted that the disallowance of set off of a brought forward loss (claimed against a long-term capital gain from sale of immovable property) had already been made in the original assessment under section 143(3) and subsequently travelled to the co-ordinate Bench where relief was granted. Additions in proceedings under section 153A are permissible only if supported by incriminating material found consequent to the search. There was no incriminating material relating to either the set off or the section 14A disallowance; consequently the Assessing Officer could not validly repeat those disallowances in the 153A assessment. Although the CIT(A) relied on a co-ordinate-bench line of decisions adversely affected by a High Court decision, the Tribunal found the procedural defect (repetition without incriminating material) decisive and dismissed the Revenue's grounds in the appeal. [Paras 9, 11, 12]

Appeal dismissed; repeated disallowances in the 153A order could not be sustained in absence of incriminating material and are therefore rejected.

Set off of brought forward capital losses against capital gains - treatment of losses and gains on sale of shares subject to STT - tax effect threshold for filing departmental appeal - Maintainability of Revenue's appeal for AY 2016-17 in view of the combined tax effect being below the prescribed threshold - HELD THAT: - On the merits the Tribunal observed that the co-ordinate Bench's decision (APOLLO Tyres Ltd) would be against the Revenue on the question of allowing set off of a brought forward loss arising from sale of shares on which STT was paid. However, the Tribunal did not decide the substantive question because the combined tax effect of the two contested grounds (the set off disallowance and the section 14A disallowance) was less than Rs. 50 lakhs. The Tribunal held that the Assessing Officer should not have filed the appeal given the low tax effect and therefore dismissed the appeal without entering into merits. [Paras 21]

Appeal dismissed on ground of insufficient tax effect; merits not adjudicated.

Classification of carried forward loss as short-term and applicability of Section 74(1)(a) - set off of brought forward capital losses against capital gains - Whether the Assessing Officer's challenge to set off of brought forward loss is sustainable where the carried forward loss is short-term and set off is claimed against capital gain - HELD THAT: - The Tribunal examined the assessment record and found that the carried forward loss was correctly recorded as a short-term capital loss from Assessment Year 2010-11 and not a long-term capital loss as alleged in the Revenue's grounds. Section 74(1)(a) permits set off of brought forward short-term capital losses against capital gains from any other capital asset. As the assessee claimed set off of a brought forward short-term capital loss against long-term capital gain in the subject year, the Assessing Officer's ground (which mischaracterised the loss as long-term) was unsustainable. On that basis the appeal was dismissed. [Paras 28]

Appeal dismissed; set off of the brought forward short-term capital loss was allowable under Section 74(1)(a).

Final Conclusion: All three appeals filed by the Assessing Officer (for AY 2012-13, 2016-17 and 2017-18) are dismissed: the 2012-13 disallowances were improperly repeated in 153A proceedings without incriminating material; the 2016-17 appeal was dismissed for being filed despite combined tax effect below the threshold; and the 2017-18 ground failed because the carried forward loss was correctly short-term and hence allowable to be set off under Section 74(1)(a).

Deeming fiction of section 50 limited to computation of capital gains - nature of asset not altered by deeming provision - set-off of brought forward long-term capital loss against long-term capital gain under section 74 - disallowance under section 14A read with Rule 8D - no disallowance where interest-free own funds exceed investment in tax-free securities - disallowance cannot exceed exempt income

Deeming fiction of section 50 limited to computation of capital gains - nature of asset not altered by deeming provision - set-off of brought forward long-term capital loss against long-term capital gain under section 74 - Whether long-term capital loss brought forward can be set off against capital gain on sale of depreciable assets when section 50 applies as a deeming provision. - HELD THAT: - The Tribunal accepted the view of the jurisdictional High Court and the Supreme Court that section 50 operates as a deeming fiction confined to the mode of computation of capital gains and does not convert the intrinsic nature of an asset from long-term to short-term. Where assets (other than those actually acquired within the short-term period) were held for more than the prescribed period, the gain on sale remains in substance long-term; the computation under section 50 does not deprive such gains of benefits available to long-term capital gains. The CIT(A) correctly treated the balance of the capital gain (after excluding the true short-term component arising from an asset purchased in the short period) as long-term for the purpose of set-off against carried forward long-term capital loss, subject to verification. Following ACE Builders (Bombay High Court) and affirmed by the Supreme Court in V.S. Dempo, the deeming in section 50 is restricted to computation and cannot be extended to deny substantive reliefs available to long-term gains. [Paras 6, 7, 10, 11, 13]

Set-off of brought forward long-term capital loss against long-term capital gain was upheld; section 50's deeming fiction does not change the asset's nature and does not preclude the set-off, subject to verification.

Disallowance under section 14A read with Rule 8D - no disallowance where interest-free own funds exceed investment in tax-free securities - disallowance cannot exceed exempt income - Whether disallowance under section 14A read with Rule 8D should be made where the assessee's interest-free own funds exceed investments in tax-free securities and whether any disallowance can exceed the exempt income. - HELD THAT: - The Tribunal followed authoritative precedents of the jurisdictional High Court and the Supreme Court holding that where an assessee's own funds and other non-interest bearing funds exceed the investment in tax-free securities, the investment is to be presumed made out of such funds and no disallowance under section 14A is called for. Further, judicial authority supports the proposition that any disallowance, if at all warranted, cannot exceed the exempt income itself. Applying these principles to the facts, the CIT(A) was justified in deleting the higher disallowance made by the Assessing Officer and restricting the disallowance to the extent consistent with the exempt income and the position of interest-free funds. [Paras 14, 16, 19, 20, 21]

Disallowance under section 14A r/w Rule 8D was deleted; where interest-free own funds exceed investment in tax-free securities no disallowance is warranted and any disallowance cannot exceed the exempt income.

Final Conclusion: Revenue's appeal dismissed: the Tribunal upheld the CIT(A)'s allowance of set-off of brought forward long-term capital loss against the relevant long-term component of capital gain despite section 50's deeming provision, and affirmed deletion of the section 14A/Rule 8D disallowance on the facts and settled precedent.

Disallowance under Section 14A - application of Rule 8D formula - requirement of recording satisfaction by the Assessing Officer before invoking Rule 8D - treatment of investments made out of interest free own funds / appropriation doctrine where interest free funds exceed investment

Disallowance under Section 14A - application of Rule 8D formula - requirement of recording satisfaction by the Assessing Officer before invoking Rule 8D - treatment of investments made out of interest free own funds / appropriation doctrine where interest free funds exceed investment - Whether the Assessing Officer could invoke Rule 8D and make disallowance under Section 14A when the assessee demonstrated that investments yielding exempt income were made out of substantial interest free own funds and the Assessing Officer did not record satisfaction after examining the accounts and nature of expenditures - HELD THAT: - The Tribunal observed that the Assessing Officer proceeded mechanically to apply Rule 8D without recording the mandatory satisfaction required by Section 14A read with Rule 8D, namely that after examining the assessee's accounts he was not satisfied with the correctness of the assessee's claim or that no expenditure was incurred. The Tribunal relied on the principles laid down in Maxopp Investment Ltd. Vs. CIT and Godrej & Boyce Mfg. Co. Ltd. Vs. CIT that invocation of Rule 8D presupposes a prior satisfaction by the Assessing Officer after examining the accounts; only thereafter can the formula under Rule 8D be applied. The Tribunal further applied the principle from South Indian Bank Vs. CIT , holding that where interest free funds available to the assessee exceed the investments made in tax exempt securities, it must be presumed that such investments were made out of interest free funds and proportionate disallowance of interest is not warranted. On the facts, the assessee had shown large interest free internal funds far exceeding the investments giving rise to exempt dividend income, and the Assessing Officer did not rebut this by recording any satisfaction based on examination of the books or by pointing to specific expenditures attributable to earning the exempt income. Consequently the Tribunal concluded that no disallowance under Section 14A could be sustained and deleted the disallowance computed under Rule 8D(2)(iii). [Paras 9, 10, 11, 12]

Disallowance under Section 14A computed by applying Rule 8D was deleted as the AO failed to record requisite satisfaction after examining the accounts and the assessee had shown interest free own funds exceeding the investments.

Final Conclusion: The disallowance under Section 14A made by the Assessing Officer (including the amount computed under Rule 8D(2)(iii)) is deleted; the assessee's appeal is allowed and the Revenue's appeal is dismissed.

Allowability of expenditure as business deduction - deductibility of expenses where entire asset complex is leased out - liability for repairs under lease and effect on lessor's deduction - distinction between routine/current repairs and capital expenditure in lease context - assessment of genuineness and necessity of salaries and running expenses for an assessee who is a lessor

Assessment of genuineness and necessity of salaries and running expenses for an assessee who is a lessor - allowability of expenditure as business deduction - Upholding disallowance of management salaries of Rs. 72,000/- claimed by the assessee. - HELD THAT: - The Tribunal found that the earlier ITAT order did not remit the issue of management salaries to the Assessing Officer for estimation or allowance; the head 'management salaries' was not included among items to be treated as necessary to keep the company alive. Having regard to the ITAT's earlier directions and the absence of a specific remand or evidence justifying the management salaries as necessary business expenditure of the lessor, the Tribunal saw no infirmity in the CIT(A)'s decision to uphold the AO's disallowance. [Paras 9]

Assessee's ground against disallowance of management salaries dismissed; CIT(A)'s order upheld.

Deductibility of expenses where entire asset complex is leased out - assessment of genuineness and necessity of salaries and running expenses for an assessee who is a lessor - Upholding disallowance of staff salaries (only Rs. 7,800 allowed out of claimed Rs. 83,558/-). - HELD THAT: - The Tribunal accepted the factual position that the entire poultry complex was leased out and that the assessee failed to justify why salaries for six employees were incurred by the lessor when the lessee was liable to attend to maintenance under the lease. The Tribunal noted the disproportionality between claimed expenditure and the nature of the assessee's residual interest (limited agricultural activity and shared facilities), and found no justification for allowing the staff salary claim beyond the nominal amount already admitted by the AO and upheld by the CIT(A). [Paras 14]

Assessee's ground on staff salaries dismissed; CIT(A)'s disallowance upheld.

Deductibility of vehicle running and repair expenses where asset is leased - assessment of genuineness and necessity of salaries and running expenses for an assessee who is a lessor - Upholding denial of vehicle repairs and maintenance claims except for petrol cost of Rs.10,033/- allowed by CIT(A). - HELD THAT: - The assessee conceded that the larger items of vehicle repairs and maintenance related to a tractor and not to lease income. The AO disallowed these under the applicable provision as not connected with the assessee's lease income; the CIT(A) allowed only a modest petrol expense where use by staff was plausible. The Tribunal found no error in treating the major repair and maintenance amounts as unrelated to deductible lease-related expenditure and upheld the limited allowance for petrol. [Paras 19]

Assessee's challenge to the disallowance of vehicle repairs/maintenance dismissed; CIT(A)'s limited allowance for petrol upheld.

Liability for repairs under lease and effect on lessor's deduction - distinction between routine/current repairs and capital expenditure in lease context - deductibility of expenditure as business deduction - Upholding disallowance of poultry equipment repairs and maintenance of Rs.2,03,112/- on the ground that such expenses are to be borne by the lessee under the lease agreement. - HELD THAT: - The lease expressly allocated responsibility for repairs and maintenance to the lessee during the lease period, leaving only major capital expenditure to the lessor. The CIT(A) found supporting bills to be petty in nature and noted absence of evidence for the claimed large item (claimed Rs.1,20,000/-) to show enhancement of asset capacity that might qualify as lessor-borne capital expenditure. The Tribunal agreed that, on the record, these routine repair items fell within the lessee's obligations and were not allowable deductions to the lessor. [Paras 25]

Assessee's ground on poultry equipment repairs dismissed; CIT(A)'s disallowance upheld.

Final Conclusion: All grounds raised by the assessee were dismissed and the CIT(A)'s orders upholding various disallowances (management salaries, staff salaries, most vehicle expenses except limited petrol allowance, and poultry equipment repairs) were affirmed; the appeal is dismissed.

Rule of consistency - Res judicata - Business income vs. capital gains on shares and mutual funds - Section 14A disallowance - Apportionment under Rule 8D of the Income-tax Rules - CBDT Circular No. 6/2016 on taxability of surplus on sale of shares and securities - CBDT Circular No. 18/2015 and its application to cooperative societies and banks - Maxopp Investment Ltd. principle regarding shares held as stock-in-trade

Rule of consistency - Business income vs. capital gains on shares and mutual funds - CBDT Circular No. 6/2016 on taxability of surplus on sale of shares and securities - Whether the income from sale of mutual funds and shares should be treated as business income (trading) rather than capital gains, by applying the rule of consistency and the CBDT guidance. - HELD THAT: - The Tribunal examined the factual treatment of the assessee over several assessment years and the appellate findings in earlier years. The appellate authority had observed that the assessee consistently treated receipts from sale of shares and mutual funds as business income from AY 2005-06 onwards, and that the departmental practice had accepted that treatment in multiple years except in isolated assessment years where AO sought to treat them as capital gains. The CIT(A) relied upon turnover-to-closing-stock ratios, the use of borrowed funds to purchase securities, and the earlier appellate crystallisation of the assessee's status to conclude that the activity was trading rather than investment. The Tribunal held that, although res judicata strictly does not apply in income-tax proceedings, the rule of consistency precludes the Revenue from taking a contrary view in the absence of material change; this position is supported by CBDT Circular No. 6/2016 which directs acceptance of an assessee's consistent stand regarding treatment of listed shares and securities. Applying these principles to the facts and earlier unchallenged appellate decisions, the Tribunal sustained the CIT(A)'s conclusion to treat the gains as business income. [Paras 5, 6, 7, 8]

Sustained the CIT(A)'s finding that income from sale of shares and mutual funds is business income; the revenue's ground on this point is dismissed.

Section 14A disallowance - Apportionment under Rule 8D of the Income-tax Rules - CBDT Circular No. 18/2015 and its application to cooperative societies and banks - Maxopp Investment Ltd. principle regarding shares held as stock-in-trade - Whether disallowance under Section 14A read with Rule 8D is attracted to the assessee (a cooperative society engaged in financial activity and eligible under section 80P) in respect of exempt dividend income earned on shares/mutual funds treated as stock-in-trade. - HELD THAT: - The Tribunal reviewed competing authorities, including Maxopp and the Supreme Court's treatment of appeals in respect of banking/cooperative entities (including State Bank of Patiala and South Indian Bank Ltd.), and the Board's Circular No.18/2015. While Maxopp dealt with holdings retained to retain control (and accepted application of Section 14A in that context), the Supreme Court in related appeals recognised that where shares and securities are held as stock-in-trade in the course of banking/cooperative business, income therefrom is attributable to business and Section 14A would not apply. The assessee in the present case is a cooperative society engaged in providing financial assistance to members and eligible for Section 80P; therefore the Tribunal found the reasoning in the banking/cooperative line of authorities applicable. Consequently, the Tribunal concluded that Section 14A/Rule 8D could not be applied to the assessee and directed deletion of the disallowance. (The CIT(A) had directed recomputation limiting allocation of interest/expenses; the Tribunal, however, held that no Section 14A disallowance should survive given the assessee's cooperative/banking-character under the applicable authorities and CBDT guidance.) [Paras 9, 15]

Held that Section 14A and Rule 8D are not attracted to the assessee (a cooperative society covered by the Board circular); directed deletion of the disallowance.

Final Conclusion: Applying the rule of consistency and the relevant CBDT circulars and Supreme Court authorities, the Tribunal sustained the CIT(A)'s classification of gains on sale of shares and mutual funds as business income and held that disallowance under Section 14A/Rule 8D is not attracted to the assessee cooperative society; accordingly all revenue appeals are dismissed and all assessee appeals are allowed.

Addition treated as unexplained expenditure under Section 69C - Validity of reference to Valuation Officer under Section 142A for ascertaining value for Section 69C - Re-characterisation of addition under Section 69B by appellate authority without notice - Limits of powers of Commissioner (Appeals) to change statutory provision in assessment

Addition treated as unexplained expenditure under Section 69C - Validity of reference to Valuation Officer under Section 142A for ascertaining value for Section 69C - Whether reference to the Valuation Officer (DVO) under Section 142A for the purpose of making an addition under Section 69C was valid and whether the addition made on the basis of the DVO report could be sustained. - HELD THAT: - The Tribunal held that Section 142A permits reference to the Valuation Officer only for ascertaining values in respect of investments or articles referred to in Sections 69, 69A and 69B and that Section 69C is conspicuously excluded. The assessing officer had referred the matter to the DVO and proceeded to make an addition as unexplained expenditure under Section 69C. Following the reasoning adopted in the identical earlier decision in M/s Toffee Agricultural Farms Pvt. Ltd., and the principle that the legislature's omission of Section 69C from Section 142A cannot be remedied by interpretation, the reference to the DVO for purposes of Section 69C was held invalid. Consequently, the addition founded on the DVO report and characterized as being under Section 69C could not be sustained and was liable to be deleted. [Paras 3]

Reference to DVO under Section 142A for the purpose of Section 69C was invalid; the addition made under Section 69C on the basis of the DVO report is deleted.

Re-characterisation of addition under Section 69B by appellate authority without notice - Limits of powers of Commissioner (Appeals) to change statutory provision in assessment - Whether the Commissioner of Income-tax (Appeals) could treat an addition made by the Assessing Officer under Section 69C as having been made under Section 69B without giving the assessee specific notice and opportunity to be heard. - HELD THAT: - The Tribunal accepted the assessee's contention that the Commissioner (Appeals) has no power to substitute the statutory provision under which an item was assessed without affording the assessee specific notice. While the CIT(A) may make further inquiry or direct the Assessing Officer to inquire, the appellate powers do not permit treating an addition made under one provision as having been made under another provision in the absence of notice and opportunity. The Tribunal relied on the reasoning in the contemporaneous decision in M/s Toffee Agricultural Farms Pvt. Ltd. and the principle in the jurisdictional precedent that the appellate authority cannot, by interpretation, effect an amendment or fill an omission in statutory scheme. As the Revenue did not show that notice was given before the substitution, the re-characterisation was held impermissible. [Paras 3, 4]

CIT(A)'s re-characterisation of the Assessing Officer's addition from Section 69C to Section 69B without giving specific notice to the assessee is contrary to law; such action cannot be sustained.

Final Conclusion: Following the reasoning in the identical earlier decision, the Tribunal set aside the orders below and deleted the impugned addition; the assessee's appeal is allowed.

Sale of software not constituting royalty - taxability of cloud computing / hosting services as non-royalty consideration - royalty under Article 12 of the India-US DTAA - use or right to use of copyright / software for royalty characterisation - interpretation of Explanation 2 to section 9(1)(vi) of the Income-tax Act in software cases - precedential effect of DIT v. Infrasoft Ltd. and Engineering Analysis Centre of Excellence (supreme court affirmation)

Sale of software not constituting royalty - royalty under Article 12 of the India-US DTAA - use or right to use of copyright / software for royalty characterisation - precedential effect of DIT v. Infrasoft Ltd. and Engineering Analysis Centre of Excellence (supreme court affirmation) - Receipts from licensing/sale of Microsoft retail software products are not taxable as royalty in India for AY 2012-13. - HELD THAT: - The Tribunal noted that the revenue had consistently treated sales of Microsoft retail software to Indian distributors as royalty but that coordinate and higher court decisions (including the Hon'ble Delhi High Court in DIT v. Infrasoft Ltd. and the Supreme Court's affirmation in Engineering Analysis Centre of Excellence) hold that sale of software products does not give rise to royalty. There are no distinguishing facts in the present assessment year to depart from those precedents; similar grounds were allowed for related assessments and for MRSC by the Bench. In view of the binding judicial pronouncements and the absence of material distinctions, the assessment treating the receipts as royalty was reversed and the assessment order set aside. [Paras 7]

The addition treating software-sale/licensing receipts as royalty is disallowed and the assessment order set aside.

Taxability of cloud computing / hosting services as non-royalty consideration - use or right to use of copyright / software for royalty characterisation - royalty under Article 12 of the India-US DTAA - Subscription receipts for cloud computing services are not taxable as royalty in India for AY 2012-13. - HELD THAT: - The Tribunal examined the functional nature of the cloud services and found that subscribers do not obtain copies of, or physical access to, the software or equipment, nor any right of reproduction or control over the provider's infrastructure. The services are provided online from data centres outside India and merely facilitate processing and storage of user data; customers do not get access to the provider's processes or equipment. Reliance was placed on prior Tribunal decisions holding web hosting/cloud services to be hosting or access charges and not consideration for use or right to use scientific equipment or software under the royalty definitions. On these facts, the AO erred in treating subscription fees as royalty; the receipts are consideration for online access to services and not royalty. [Paras 8]

The addition treating cloud-subscription receipts as royalty is disallowed.

Final Conclusion: The Tribunal allowed the appeal in part, holding that (a) receipts from sale/licensing of Microsoft retail software products and (b) receipts from cloud computing subscriptions are not taxable as royalty in India for assessment year 2012-13; the impugned assessment orders are set aside.

Unexplained expenditure - addition to total income - disallowance for unexplained cash deposits - unexplained unsecured loans - unexplained debits in bank statement - unexplained advances - burden of proof on the assessee to substantiate claims with documentary evidence - hearing and adjudication in absence of the assessee - ex parte confirmation of assessments

Unexplained expenditure - addition to total income - burden of proof on the assessee to substantiate claims with documentary evidence - hearing and adjudication in absence of the assessee - Validity of addition of Rs. 43,50,000 to income on account of unexplained expenditure. - HELD THAT: - The Assessing Officer treated certain payments as unexplained and made an addition because the assessee did not provide documentary particulars such as bank book narrations, nature of transactions, names and addresses of parties, ledger accounts, mode and source of payments. The CIT(A) confirmed that addition in an ex parte order on the basis that the assessee failed to substantiate the claimed expenditure. The Tribunal, noting that the assessee did not appear before it and filed no documentary evidence despite repeated notices and a long lapse of time since filing the appeal, found no reason to interfere with the concurrent findings and upheld the addition. [Paras 4]

Addition of Rs. 43,50,000 on account of unexplained expenditure upheld.

Disallowance for unexplained expenditure - burden of proof on the assessee to substantiate claims with documentary evidence - hearing and adjudication in absence of the assessee - Validity of disallowance of Rs. 1,60,434 being 25% of total expenditure towards unexplained expenditure. - HELD THAT: - The Assessing Officer disallowed 25% of the expenditure for lack of satisfactory explanation and documentary support. The CIT(A) sustained the disallowance ex parte because the assessee failed to produce evidence. Given the assessee's non-appearance and failure to file any documents before the Tribunal despite service of notice and the passage of time, the Tribunal declined to disturb the concurrent disallowance. [Paras 4]

Disallowance of Rs. 1,60,434 upheld.

Disallowance for unexplained cash deposits - addition to total income - burden of proof on the assessee to substantiate claims with documentary evidence - Validity of addition of Rs. 8,00,000 on account of unexplained cash deposits in bank. - HELD THAT: - The AO treated cash deposits as unexplained in absence of documentary justification and added the amount to income. The CIT(A) confirmed the addition in an ex parte order for lack of substantiation by the assessee. The Tribunal observed that no evidence was placed before it and the assessee did not appear, and therefore upheld the addition. [Paras 4]

Addition of Rs. 8,00,000 for unexplained cash deposits upheld.

Unexplained unsecured loans - addition to total income - burden of proof on the assessee to substantiate claims with documentary evidence - Validity of addition of Rs. 41,00,000 on account of unexplained unsecured loans. - HELD THAT: - The AO made an addition treating certain unsecured loans as unexplained due to absence of details and documentary proof. The CIT(A) sustained that view in an ex parte order since the assessee did not substantiate the loans. The Tribunal, recording that the assessee neither appeared nor filed evidence at the hearing, found no grounds to interfere and upheld the addition. [Paras 4]

Addition of Rs. 41,00,000 for unexplained unsecured loans upheld.

Unexplained debits in bank statement - addition to total income - burden of proof on the assessee to substantiate claims with documentary evidence - Validity of addition of Rs. 36,25,588 on account of unexplained debits in bank statement. - HELD THAT: - The AO added unexplained bank debits to income for want of documentary clarity on the transactions. The CIT(A) upheld that treatment ex parte as the assessee failed to provide bank narrations or supporting documents. The Tribunal, noting the absence of any documentary filing or appearance by the assessee, affirmed the concurrent finding. [Paras 4]

Addition of Rs. 36,25,588 for unexplained bank debits upheld.

Unexplained advances - addition to total income - burden of proof on the assessee to substantiate claims with documentary evidence - Validity of addition of Rs. 29,53,553 on account of unexplained advances. - HELD THAT: - The Assessing Officer made an addition for advances treated as unexplained owing to lack of details and documentary proof. The CIT(A) confirmed the addition in an ex parte order because the assessee did not substantiate the advances. The Tribunal observed that the assessee did not appear or file any documents even after repeated notices and therefore upheld the addition. [Paras 4]

Addition of Rs. 29,53,553 for unexplained advances upheld.

Final Conclusion: The Tribunal dismissed the appeal and upheld the additions and disallowance confirmed by the CIT(A), on the basis that the assessee failed to appear and did not produce any documentary evidence to substantiate the claimed expenditures, deposits, loans, debits and advances.

Registration under Section 12AA - charitable purpose - education in the meaning of Section 2(15) - applicability of the first proviso to Section 2(15) in defining charitable purpose - surplus retained not disentitling entity to charitable status - relevance of registration under Section 25 of the Companies Act to Section 12AA consideration - approval under Section 80G(5)(vi) conditioned on production of 12AA registration

Registration under Section 12AA - education in the meaning of Section 2(15) - charitable purpose - Grant of registration under Section 12AA to an entity whose predominant activity is imparting financial education/awareness - HELD THAT: - The Tribunal followed the order of the Hon'ble Jurisdictional High Court in T.C.A. No. 900 of 2018 dated 04.09.2020 and held that the assessee's activities of imparting financial education/awareness fall within the concept of education and charitable purpose for the purposes of registration under Section 12AA. The Tribunal rejected a restrictive reading of Loka Shikshana Trust that would confine 'education' only to traditional scholastic institutions, noting authorities that accept systematic dissemination of specialised knowledge and modern methods of instruction as educational activity. The registration of the company under Section 25 of the Companies Act was held to be a relevant factor to be considered by the CIT in determining non profit character, though not by itself determinative. Applying these principles, the Tribunal directed the Commissioner to grant registration under Section 12AA.

Application for registration under Section 12AA allowed; CIT directed to grant registration.

Surplus retained not disentitling entity to charitable status - charitable purpose - Effect of generation of surplus on entitlement to registration/exemption - HELD THAT: - The Tribunal applied the established principle that incidental surplus arising from educational activity does not convert an institution into one carried on 'for profit' and does not disentitle it to registration. Emphasis was placed on the predominant object test: whether the institution's primary purpose is education rather than profit. The fact that surplus was retained and not distributed, together with the Memorandum of Association and the Section 25 licence provisions forbidding distribution of income, supported the conclusion that the assessee's surplus did not negate its charitable character.

Surplus retained by the company does not disqualify it from registration under Section 12AA.

Applicability of the first proviso to Section 2(15) in defining charitable purpose - education in the meaning of Section 2(15) - Whether the proviso to Section 2(15) excluding activities rendered 'for benefit of a particular trade or business' applied to the assessee - HELD THAT: - The Tribunal examined the Tribunal and CIT findings that sponsorship receipts and fee structures rendered the activity commercial and within the proviso's exclusion. Relying on the High Court's reasoning, the Tribunal held that the proviso could not be read to exclude systematic dissemination of specialised knowledge such as financial literacy simply because fees or sponsorships were involved, particularly where activities demonstrate selflessness, objects are non profit and income/surplus is not distributable. Therefore the proviso did not operate to deny charitable character in the facts of this case.

Proviso to Section 2(15) did not preclude the assessee's activities from qualifying as educational/charitable in the present case.

Relevance of registration under Section 25 of the Companies Act to Section 12AA consideration - Weight to be accorded to existing registration under Section 25 of the Companies Act when considering Section 12AA application - HELD THAT: - The Tribunal observed that while Section 25 registration is not an automatic passport to registration under Section 12AA, it is a material and relevant factor because the Section 25 licence issued after scrutiny recognises the entity's non profit objects. The CIT ought to consider that status and not ignore it when adjudicating an application for tax registration under Section 12AA.

Registration under Section 25 is a relevant factor to be considered by the CIT in granting registration under Section 12AA, though not conclusive.

Approval under Section 80G(5)(vi) conditioned on production of 12AA registration - Grant of approval under Section 80G(5)(vi) where 12AA registration was not produced with the application - HELD THAT: - The Tribunal noted that the application for approval under Section 80G(5)(vi) lacked the mandatory attachment of the Section 12AA registration certificate and that the CIT rightly rejected the 80G application for that reason. However, having directed grant of registration under Section 12AA, the Tribunal directed the CIT to grant approval under Section 80G(5)(vi) upon filing of the 12AA certificate as and when issued.

80G(5)(vi) approval to be granted after the assessee files the certificate of registration under Section 12AA.

Final Conclusion: The Tribunal, following the Jurisdictional High Court's decision in T.C.A. No. 900 of 2018, allowed the appeals, set aside the CIT's rejections, directed grant of registration under Section 12AA for the assessee (carrying on financial literacy activities), held that retained surplus did not defeat charitable character, recognised the relevance of Section 25 registration, and directed the CIT to grant approval under Section 80G(5)(vi) upon production of the 12AA certificate.

Presumptive taxation under Section 44AD - agency business exclusion under Section 44AD(6)(iii) - commission income exclusion - estimation of reasonable profit - recomputation by assessing officer

Agency business exclusion under Section 44AD(6)(iii) - presumptive taxation under Section 44AD - estimation of reasonable profit - Applicability of Section 44AD to a commission agent dealing in agricultural produce and the basis for estimating business profit - HELD THAT: - The Tribunal held that the provisions of Section 44AD cannot be applied to persons carrying on agency business or earning commission/brokerage because Section 44AD(6)(iii) excludes such persons from the scope of the section. The assessee, a commission agent in agricultural produce, therefore could not be assessed on the presumptive profit rate specified under Section 44AD. In exercise of the power to estimate, and having regard to the assessee's contention (accepted for present purposes) that net profit for such commission agents is normally about 2%, the Tribunal adopted a higher but reasonable estimate of profit at 4% of the total credits determined by the AO (after deducting sweep transfers) and directed recomputation of income on that basis. The Tribunal recorded that the AO shall recompute the income accordingly. [Paras 3, 4]

Section 44AD does not apply to the assessee as a commission agent; profit estimated at 4% of the total credits of Rs. 1,58,01,195/-, and the AO directed to recompute income accordingly.

Final Conclusion: The appeal is allowed for statistical purposes: Section 44AD was held inapplicable to the commission-agent assessee and the Tribunal estimated profit at 4% of the credits determined by the AO for recomputation of income.

Deduction of interest under section 36(1)(iii) of the Act - interest on funds borrowed for business purposes - percentage of completion method - completed contract / project completion method - capitalisation of project-related expenses - matching principle

Deduction of interest under section 36(1)(iii) of the Act - percentage of completion method - interest on funds borrowed for business purposes - capitalisation of project-related expenses - Claim for deduction of interest of Rs. 4,35,36,783 under section 36(1)(iii) was allowable and was to be permitted by the Assessing Officer. - HELD THAT: - The Tribunal found that the assessee followed the percentage of completion method to recognise revenue and that the borrowed funds were utilised for business purposes, deployed into projects which constituted stock-in-trade and not capital assets. The decision in Wall Street Construction Ltd. (Special Bench), which applied the completed contract/project completion method and directed capitalisation of interest to work-in-progress, was held to be inapplicable to the present facts where revenue is recognised proportionately under POCM. The Tribunal relied on binding precedent of the jurisdictional High Court in Lokhandwala Construction Industries Ltd. and on co-ordinate-bench Tribunal decisions which allowed interest deduction under section 36(1)(iii) where interest is incurred on capital borrowed for business and consistently charged in the accounts. In the absence of any finding of diversion or misuse of borrowed funds and given consistent accounting treatment, the matching principle invoked by the Revenue did not preclude immediate deduction under section 36(1)(iii). Applying these principles, the Tribunal directed the Assessing Officer to allow the interest deduction claimed. [Paras 9, 11]

Appeal allowed and Assessing Officer directed to allow deduction under section 36(1)(iii) in respect of the interest expenditure.

Final Conclusion: Following co-ordinate-bench precedents and the jurisdictional High Court authority, the Tribunal allowed the assessee's claim for deduction of interest under section 36(1)(iii) for AY 2014 - 15 and directed the Assessing Officer to give effect to the deduction.

Registration under section 12A of the Income tax Act, 1961 - charitable purpose of an educational institution - genuineness of activities - substantial government funding as criterion for exemption - obligations to file returns and audit consequent to statutory amendments

Registration under section 12A of the Income tax Act, 1961 - charitable purpose of an educational institution - genuineness of activities - substantial government funding as criterion for exemption - obligations to file returns and audit consequent to statutory amendments - Whether denial of registration under section 12A was justified where the CIT(Exemptions) did not examine the assessee's objects and the genuineness of its activities but relied on non filing of returns, absence of audits, provisional profit figures and payments abroad. - HELD THAT: - The Tribunal found that the assessee is a State funded university carved out from an earlier university and historically engaged solely in imparting education, a charitable activity. Amendments and rules relevant to filing returns and to the test of being 'substantially funded by the Government' were noted, including amendments effective from 2014-2015 and rule 2BBB; until AY 2014 the assessee was not required to file returns and the assessee's claimed unfamiliarity with subsequent filing obligations was held to be bona fide. The Tribunal observed that the statutory requirement for grant of registration under section 12A focuses on the objects of the institution and the genuineness of activities, and that the CIT(Exemptions) failed to consider the assessee's objectives and did not dispute the activities actually carried on. In these circumstances the Tribunal concluded that the CIT(Exemptions) erred in refusing registration by principally relying on non compliance (returns/audit), provisional profits and overseas payments without addressing whether the university's objects and activities are charitable and whether it is substantially government funded. Accordingly, the matter was remitted to the file of the CIT(Exemptions) with a direction to grant registration under section 12A. [Paras 6, 7]

Appeal allowed; matter remitted with direction to the CIT(Exemptions) to grant registration under section 12A.

Final Conclusion: The Tribunal allowed the appeal and remanded the matter to the CIT(Exemptions) with a direction to grant registration under section 12A, holding that the CIT(Exemptions) had failed to consider the university's objects and genuineness of activities and had improperly relied on non filing, provisional profits and overseas payments without adjudicating the core charitable purpose and funding issues.

Proper and necessary party - detention certificate - Customs Cargo Service Provider - statutory regulation overriding contractual term - waiver of demurrage and container detention charges - regulation 6(1) of the 2009 Regulations - regulation 10(1)(l) and (m) of the 2018 Regulations - contempt for obstructing implementation of court order

Proper and necessary party - detention certificate - Impleadment of the Container Freight Station (CFS) and the Shipping Line as respondents in the contempt petition - HELD THAT: - The Court found that the detention certificate dated 18.02.2022 was communicated to both the Shipping Line and the CFS and that the Shipping Line had actual notice of the Court's directions and communicated objections thereafter. Having been put on notice and having responded, the Shipping Line could not contend thereafter that it was a mere stranger to the proceedings. The CFS, though initially unresponsive, later complied or agreed to comply. In these circumstances the Court held both the Shipping Line and the CFS are proper and necessary parties to the contempt proceedings and allowed the impleadment application so that binding directions could be given to them. [Paras 29, 30, 31]

I.A. No. G.A/01/2022 allowed; CFS and Shipping Line impleaded as party respondents to the contempt petition.

Customs Cargo Service Provider - regulation 6(1) of the 2009 Regulations - regulation 10(1)(l) and (m) of the 2018 Regulations - statutory regulation overriding contractual term - waiver of demurrage and container detention charges - Whether the Shipping Line is bound by the 2009 and 2018 Regulations and whether the detention certificate can negate or override its contractual lien/right to claim detention charges - HELD THAT: - The Court construed the expansive definition of "Customs Cargo Service Provider" in the 2009 Regulations to include the Shipping Line (responsible for receipt, storage, delivery, dispatch or handling of imported goods and including custodians). Regulation 6(1) of the 2009 Regulations prohibits charging rent or demurrage on goods seized or detained by the proper officer. Regulation 10 of the 2018 Regulations prescribes responsibilities of the authorised carrier and contains clauses (l) and (m) relevant to waiver and compliance. The proviso to Regulation 10(1)(l), which permits an authorised carrier to "may" demand detention charges after 60 days, cannot be read as a standalone right to unilaterally enforce contractual claims; the proviso is permissive and its exercise is subject to consideration by Customs and must be read harmoniously with the 2009 Regulations. The Shipping Line, having obtained licence/registration under the statutory scheme, submitted to the regulatory conditions; consequently its contractual rights (including lien or claim for detention charges) are subject to and yield to the statutory regulations to the extent of any repugnancy. Prior Supreme Court authority on contracts and custody was held distinguishable insofar as it predates the 2009 and 2018 Regulations. [Paras 33, 34, 35, 36, 46]

The Shipping Line falls within the definition of a "Customs Cargo Service Provider"; the 2009 and 2018 Regulations apply to it; the detention certificate is binding on the Shipping Line and the contractual right to claim detention/demurrage is subordinate to and cannot be enforced contrary to the statutory regulations.

Contempt for obstructing implementation of court order - detention certificate - waiver of demurrage and container detention charges - Relief to be granted and whether contempt proceedings should be initiated against the Shipping Line and CFS - HELD THAT: - Although the Court concluded that the Shipping Line had obstructed implementation of the Court's directions by refusing to comply with the detention certificate after being put on notice and therefore could be amenable to contempt proceedings, the Court exercised caution given the submissions and the remedial character of contempt jurisdiction. The Court declined to initiate contempt proceedings at present but issued a positive and enforceable direction: the Shipping Line and the CFS must comply with the detention certificate and waive detention/demurrage charges for the period of official detention from the date of detention until release. The newly added respondents were given a short timeframe to implement the direction and warned that failure to comply would invite initiation of contempt proceedings and other penal/regulatory consequences under the 2018 Regulations (including show-cause notice already issued). [Paras 45, 46, 48, 49, 50]

No contempt initiated immediately; Shipping Line and CFS directed to waive detention/demurrage charges in accordance with the detention certificate and to implement directions within three days, failing which contempt action may be taken.

Final Conclusion: The Court allowed impleadment of the CFS and Shipping Line; held the Shipping Line is a "Customs Cargo Service Provider" bound by the 2009 and 2018 Regulations, that the detention certificate issued by Customs is binding and prevails over conflicting contractual claims to detention/demurrage, and directed the Shipping Line and CFS to waive detention and demurrage charges for the period of official detention, warning of contempt and regulatory consequences if they fail to comply.

Prematurity of writ against departmental show cause notice - scope of judicial review under Article 226 in revenue matters - requirement of adjudication on merits before quashing revenue proceedings - principles of natural justice and personal hearing in departmental adjudication - availability of statutory appellate remedy under the Customs Act

Prematurity of writ against departmental show cause notice - scope of judicial review under Article 226 in revenue matters - Writ petition challenging the impugned show cause notice is premature and not maintainable at this stage. - HELD THAT: - The Court held that allegations in the show cause notice-that refunds were sanctioned on the basis of false or fabricated documents and certificates-constitute factual contentions which require investigation and adjudication by the statutory authority. A writ under Article 226 cannot be used to probe disputed factual matters central to revenue recovery; the correctness of the departmental allegations must be examined in the statutory proceedings. Consequently, the petition seeking quashing of the show cause notice as being without jurisdiction was rejected as premature. [Paras 15, 16]

The writ petition is premature and not maintainable; the challenge to the show cause notice is refused.

Principles of natural justice and personal hearing in departmental adjudication - availability of statutory appellate remedy under the Customs Act - Departmental proceedings under the show cause notice must be completed after affording principles of natural justice and the petitioner has recourse to statutory appellate remedies. - HELD THAT: - The Court directed the first respondent to conclude the proceedings initiated by the show cause notice after providing the petitioners an opportunity of personal hearing and following the principles of natural justice, preferably within six months from receipt of the order. The Court emphasised that if the petitioners receive an adverse order, they may pursue the hierarchical appellate remedies provided under the Customs Act, rather than seek pre-emptive relief by writ. [Paras 17]

Proceedings to be completed after hearing the petitioners; appellate remedies under the Customs Act remain available.

Final Conclusion: Writ petition dismissed as premature; departmental adjudication to proceed after affording personal hearing within six months, and petitioners may pursue statutory appellate remedies if aggrieved.

Custodian's lien - demurrage charges - waiver of demurrage - power of Customs authority to direct custodian - detention certificate - demurrage under AAI Regulations, 2003 - exception for unconscionable delay by custodian

Custodian's lien - demurrage charges - power of Customs authority to direct custodian - Customs authorities cannot direct the custodian to waive demurrage charges recoverable by the custodian. - HELD THAT: - The Court held that the custodian has a lien over imported goods entitling it to retain the goods until its dues, including demurrage, are paid. Absent a statutory or contractual stipulation permitting waiver on the basis of a Customs detention certificate, Customs authorities have no jurisdiction to instruct the custodian to waive demurrage; any such waiver is for the custodian under the instrument governing its functions. The Court relied on precedent and principles that the liability to pay demurrage initially rests on the importer even if seizure or detention by Customs is later found unjustified, subject only to the narrow exception where the custodian itself is guilty of unconscionable delay in holding the goods. [Paras 9]

Customs authorities cannot direct waiver of demurrage; waiver is within the custodian's domain.

Demurrage under AAI Regulations, 2003 - detention certificate - exception for unconscionable delay by custodian - On the facts, the petitioner was not entitled to waiver of demurrage and the writ petition seeking such relief was dismissed. - HELD THAT: - Applying the legal principle that demurrage waiver lies with the custodian and noting that AAI Regulations, 2003 provide for lien and non-waiver where penalties are imposed by Customs, the Court found no basis to direct waiver here. The goods were seized and penalty/fine imposed; no detention certificate or statutory provision entitled the importer to automatic waiver, and the petitioner had not paid the imposed penalty. No factual finding of unconscionable delay by the custodian was made that would invoke the narrow exception allowing relief against demurrage. [Paras 11, 12]

Petitioner not entitled to waiver of demurrage; writ petition dismissed.

Final Conclusion: The writ petition was dismissed: the Court ruled that demurrage waiver cannot be directed by Customs and, on the facts and applicable AAI regime, the petitioner was not entitled to waiver of demurrage charges.

Refund of SAD - description of goods - nexus between import documents and sale invoices - statutory auditor/Chartered Accountant certificate as evidence of correlation - application of CBEC Circular No. 15/2010-Cus - judicial precedent accepting CA certificate to establish correlation

Description of goods - nexus between import documents and sale invoices - refund of SAD - Abbreviated or short descriptions in sales invoices do not, by themselves, disentitle the claimant to refund of SAD where correlation between imported goods and local sales is otherwise established. - HELD THAT: - The authorities below rejected the refund solely because sales invoices used abbreviated or short descriptions (for example, "Electrolytic Tinplate Defective Waste" shown as "Tinplate", "Tin Mill Black Plate Secondary" shown as "T.M.B.P"). The Tribunal observed that use of short descriptions at sales counters is a common practice and that mere mismatch of descriptive wording is not determinative when other prescribed evidentiary safeguards are complied with. The adjudicatory focus must be on whether the requisite correlation between imported goods and local sales has been established, not on literal identity of phrasing in clerical invoice descriptions. [Paras 4]

Mismatch in description, if limited to abbreviated or short phrases in sales invoices, does not alone justify denial of SAD refund where correlation can be established by other accepted evidence.

Statutory auditor/Chartered Accountant certificate as evidence of correlation - refund of SAD - A certificate from the statutory auditor/Chartered Accountant correlating payment of Sales Tax/VAT with sale invoices is acceptable evidence to establish the nexus required for grant of SAD refund. - HELD THAT: - The Tribunal relied on the clarification in Board Circular No. 06/2008-Cus (para 5.1) which contemplates that a certificate from the statutory auditor/Chartered Accountant certifying correlation between payment of ST/VAT and sale invoices is required/acceptable. In the present case, the appellant produced such CA certificates for all refund claims along with original sale invoices. On that basis the Tribunal held that the statutory auditor's certificate supplies the necessary correlation for purposes of the notification and rules governing refund claims. [Paras 4, 5]

The CA/statutory auditor certificate produced by the appellant suffices to establish correlation between imported goods and local sales for allowing the SAD refund.

Application of CBEC Circular No. 15/2010-Cus - judicial precedent accepting CA certificate to establish correlation - CBEC Circular No. 15/2010-Cus (concerning filing of fraudulent documents) was erroneously applied by the lower authorities; reliance on the Madras High Court precedent accepting CA certificate is persuasive and was followed. - HELD THAT: - The adjudicating authorities invoked Circular No. 15/2010-Cus to infer manipulation and fraud from abbreviated descriptions. The Tribunal held that that Circular, which addresses fraudulent practices like submission of forged/duplicate invoices for stock not sold, was not applicable where CA certificates and original invoices were produced establishing correlation. The Tribunal also noted and followed the decision of the Hon'ble Madras High Court in Johnson Lifts Pvt. Ltd. which held that the department is bound to accept the descriptions as correlating when supported by the statutory auditor's certificate. Applying that precedent, the Tribunal set aside the denial based on Circular No. 15/2010-Cus. [Paras 5, 6]

Denial of refund on the basis of CBEC Circular No. 15/2010-Cus was misplaced; the CA certificate and the cited judicial precedent support acceptance of the claimed correlation and grant of refund.

Final Conclusion: Appeal allowed; order denying refund of SAD set aside and appellant entitled to refund with applicable interest, respondent directed to pay within three months.

Confiscation under section 111(m) of Customs Act, 1962 - penalty under section 112 of Customs Act, 1962 - penalty under section 114AA of Customs Act, 1962 - voluntary deposit and appropriation towards duty - re-determination of assessable value under rule 3 of Customs Valuation (Determination of Price/Value of Imported Goods) Rules - reliance on confessional statements and requirement of cross-examination for relevancy - proportionality in confiscation and finality of clearance under section 47

Voluntary deposit and appropriation towards duty - Tribunal remand directions - Validity of acceptance and appropriation of the voluntary deposit made during investigation and its treatment in the adjudication - HELD THAT: - The adjudicating authority's express 'acceptance' of the voluntary deposit and its attribution beyond the proposal in the show cause notice travels beyond the scope of the proceedings and must be set aside. The Tribunal's remand had confined appropriation of deposits to situations where the amount deposited could be proved to pertain to imports within the period of limitation; the adjudicating authority's treatment did not follow the proposal in the SCN and therefore exceeds the adjudicatory mandate. Consequently the Tribunal lacks jurisdiction to appropriate or retain the deposit for purposes not proposed in the show cause notice. [Paras 4, 5, 6]

The acceptance and appropriation of the voluntary deposit as performed in the impugned order is set aside; the Tribunal lacks jurisdiction to appropriate the deposit beyond the SCN proposal.

Confiscation under section 111(m) of Customs Act, 1962 - penalty under section 112 of Customs Act, 1962 - proportionality in confiscation and finality of clearance under section 47 - Sustainability of confiscation and penal consequences in respect of the nine consignments imported by M/s Crown Lifters (2005-07 imports) - HELD THAT: - Clearance for home consumption attains finality subject to limited grounds for reopening; there was no allegation that the goods were prohibited. The adjudicating authority did not ascertain the actual purchase price of each of the nine used cranes (sourced at auctions) and recourse to valuation simply to found confiscation converts assessment machinery into a cause of action for penal consequences. In absence of proper ascertainment of transaction value and given disproportionate detriment, confiscation and consequent penalties in respect of the nine consignments cannot be sustained. [Paras 6, 7, 13]

Confiscation of the nine used cranes imported by M/s Crown Lifters and consequential penalties are set aside.

Re-determination of assessable value under rule 3 of Customs Valuation (Determination of Price/Value of Imported Goods) Rules - reliance on confessional statements and requirement of cross-examination for relevancy - penalty under section 114AA of Customs Act, 1962 - Validity of redetermination of assessable value, recovery of differential duty, confiscation and penalties in respect of five consignments imported by M/s Crown Lifters Pvt Ltd (2008-10 imports) - HELD THAT: - The re-assessment relied essentially on the confessional statement of the individual-appellant and on the statement of the alleged illicit fund-mover; the actual transaction price of each crane was not ascertained. The Tribunal's remand required that statements relied upon be made relevant through opportunity for cross-examination; the adjudicating authority denied cross-examination of the crucial declarant without recording specific reasons, in breach of the remand direction and principles of natural justice. Reliance solely on uncorroborated confessions is fragile; in absence of corroboration and having denied the mandated cross-examination, re-determination under rule 3 of the Valuation Rules and consequent recovery, confiscation and penalties are not in accordance with law. [Paras 8, 11, 12, 13]

Redetermination of value, recovery of differential duty, confiscation of used cranes imported by M/s Crown Lifters Pvt Ltd and consequential penalties are set aside.

Final Conclusion: The Tribunal's order sets aside the impugned adjudication: the acceptance/appropriation of a voluntary deposit beyond the SCN proposal is quashed; confiscation and penalties in respect of nine consignments imported by M/s Crown Lifters (11.02.2005-12.02.2007) are set aside; and the redetermination of value, recovery of differential duty, confiscation and penalties relating to five consignments imported by M/s Crown Lifters Pvt Ltd (23.01.2008-23.02.2010) are set aside for reliance on uncorroborated confessions and denial of cross-examination as directed on remand.

Waiver of demurrage and detention charges for goods detained by Customs - detention certificate issued by Customs - responsibility of authorised carrier under Sea Cargo Manifest and Transhipment Regulations, 2018 - obligations of Customs Cargo Service Provider under Handling of Cargo in Customs Areas Regulations, 2009 - power to suspend operations or revoke registration of authorised carriers for non compliance - contempt for failure of department officials to ensure compliance with court directions

Waiver of demurrage and detention charges for goods detained by Customs - detention certificate issued by Customs - Detention certificate issued by Customs entitles the importer to waiver of demurrage/detention charges for the period the goods were detained and prevents the CFS/shipping line from demanding such charges. - HELD THAT: - The Court found that statutory regulations enacted after earlier decisions (notably the Sea Cargo Manifest and Transhipment Regulations, 2018 and the Handling of Cargo in Customs Areas Regulations, 2009) expressly provide that authorised carriers and Customs Cargo Service Providers shall not demand container detention charges or demurrage on goods detained by Customs for the purpose of verification or investigation where entries are found correct, and shall not charge rent or demurrage on goods seized, detained or confiscated by Customs. Given those regulatory provisions, the contention that the dispute is purely contractual and outside the department's concern was rejected. The detention certificate issued in compliance with the Court's order had been served on relevant CFS/shipping line, and their insistence on payment notwithstanding that certificate was inconsistent with the statutory obligations imposed on carriers and CFSs.

The Court rejected the revenue's submission that the matter was purely contractual and held that the statutory regulations require waiver of such charges when goods are detained by Customs and a detention certificate is issued.

Responsibility of authorised carrier under Sea Cargo Manifest and Transhipment Regulations, 2018 - obligations of Customs Cargo Service Provider under Handling of Cargo in Customs Areas Regulations, 2009 - Statutory regulatory framework places on authorised carriers and Customs Cargo Service Providers a duty not to levy detention/demurrage charges when goods are detained by Customs and to comply with detention certificates issued by Customs. - HELD THAT: - The Court noted Regulation 10(1)(l) of the 2018 Regulations and Regulation 6(1)(l) of the 2009 Regulations (as continued in the 2019 regulatory scheme) which prohibit charging detention/demurrage where goods are detained by Customs for verification or investigation and require carriers/CSPs to follow statutory obligations. Those regulations bind licensed carriers and service providers and, accordingly, the CFS/Shipping Line could not lawfully insist on charges where detention certificates had been issued by Customs directing waiver. The Court emphasised that the newer regulatory regime distinguishes the instant case from prior decisions rendered under different statutory schemes.

The Court held that the regulatory provisions impose clear obligations on carriers and CFSs to waive such charges and to comply with detention certificates issued by Customs.

Power to suspend operations or revoke registration of authorised carriers for non compliance - contempt for failure of department officials to ensure compliance with court directions - Customs authorities have regulatory powers to enforce compliance by carriers/CFSs (including suspension or revocation of registration) and the department cannot remain a passive observer; failure by departmental officials to act so as to render court directions unworkable may attract adverse inference or contempt. - HELD THAT: - The Court observed that the regulatory schemes provide for action against authorised carriers, including suspension of operations or revocation of registration for non compliance with statutory duties. While it is not for the Court to specify the exact administrative steps, the department was directed to take appropriate action to ensure that its detention certificate is effective and complied with by the CFS/Shipping Line. The Court warned that continued inaction, whereby departmental officials permit non compliance that frustrates the Court's order, could lead to adverse inference and possible contempt proceedings against those officials. The Court also granted the petitioner liberty to pursue appropriate steps against the non party CFS/Shipping Line.

The Court required the department to take steps under the regulatory scheme to secure compliance and warned that failure to do so may result in adverse inference and contempt consequences.

Final Conclusion: The Court directed that the detention certificate issued by Customs must be effective to procure waiver of demurrage/detention charges; rejected the revenue's contention that the matter is purely contractual; recorded that statutory regulations impose duties on carriers and CFSs and empower the department to enforce compliance (including suspension or revocation of registration); granted liberty to the petitioner to take steps against non parties and warned the department that failure to act may attract adverse inference or contempt. The matter was listed for further hearing.

Scheme of Amalgamation - Convening of meetings of equity shareholders - Dispensation of meetings of secured creditors on consent - Dispensation of meetings of unsecured creditors on consent - Statutory notice to regulators under section 230(5) - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Conduct of meetings by video conferencing and e voting under MCA circulars - Appointment of Chairperson and Scrutinizer for shareholders meeting

Convening of meetings of equity shareholders - Scheme of Amalgamation - Direction to convene meeting of equity shareholders of the Transferor Company - HELD THAT: - The Tribunal directed that a meeting of the equity shareholders of the Transferor Company be held on 4th May, 2022 at 11:00 AM at the corporate office or through video conferencing, with the quorum for the meeting fixed at 10. The Applicant had filed the Scheme of Amalgamation and supporting documents, including the certified list of equity shareholders, and the Tribunal, after perusal, issued directions for notice, publication, provision of the Scheme and explanatory statement, proxy rules and reporting of voting results. Meetings may be conducted physically or via audio visual means with e voting in accordance with applicable MCA circulars and the Companies Act and Rules. [Paras 15, 16, 18, 19, 20]

Meeting of equity shareholders to be convened on the specified date and conducted in accordance with the Tribunal's directions and applicable law.

Dispensation of meetings of secured creditors on consent - Scheme of Amalgamation - Dispensation of convening and holding the meeting of secured creditors of the Transferor Company - HELD THAT: - The Applicant represented and placed on record affidavits evidencing consent of 40 secured creditors representing 98.07% of the value. On that basis the Tribunal dispensed with the necessity of convening and holding a meeting of secured creditors. The direction is confined to the factual representation of consent and the supporting affidavits filed with the application. [Paras 9]

Meeting of secured creditors dispensed with in view of the recorded consents.

Dispensation of meetings of unsecured creditors on consent - Scheme of Amalgamation - Dispensation of convening and holding the meeting of unsecured creditors of the Transferor Company - HELD THAT: - The Applicant placed on record affidavits from seven unsecured creditors representing 99.44% of the value of unsecured claims. The Tribunal accepted this showing of consent and dispensed with the requirement to convene and hold a meeting of unsecured creditors. This dispensation is based on the particular consents evidenced in the record. [Paras 9]

Meeting of unsecured creditors dispensed with in view of the recorded consents.

Statutory notice to regulators under section 230(5) - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions to send prescribed notices and copies of the Scheme to statutory and sectoral regulators - HELD THAT: - The Tribunal directed that the companies shall individually send notices and copies of the Scheme to the concerned Regional Director, MCA, Income Tax Authorities, Registrar of Companies Chennai, Reserve Bank of India, SEBI, Official Liquidator and other sectoral regulators who may have significant bearing on the operation of the Applicant Company or the Scheme, in accordance with the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Applicant was also directed to furnish copies of the Scheme free of charge on requisition and to file affidavits evidencing service and publication prior to the meetings. [Paras 17, 18, 19, 20]

Notices and copies of the Scheme to be sent to statutory and sectoral authorities and compliance affidavits to be filed in accordance with the Tribunal's directions.

Appointment of Chairperson and Scrutinizer for shareholders meeting - Conduct of meetings by video conferencing and e voting under MCA circulars - Appointment of the Chairperson, alternate Chairperson and Scrutinizer and fixation of their fees - HELD THAT: - The Tribunal appointed Mrs. Bharathi J as Chairperson and the Managing Director as alternate Chairperson for the meetings, fixing the Chairperson's fee and incidental expenses. Mr. Vinith S, Advocate, was appointed as Scrutinizer with a fixed fee and incidental expenses. The Chairperson(s) were directed to file reports of the meetings within a week, ensure maintenance of proxy registers, and report voting results within three days of conclusion. These appointments and directions are ancillary to the convening and conduct of the shareholders' meeting under the Scheme. [Paras 10, 11, 12, 16]

Chairperson, alternate Chairperson and Scrutinizer appointed with fees; obligations to report and ensure proper conduct and record keeping imposed.

Final Conclusion: The Company Application under Sections 230-232 was allowed: the Tribunal directed convening of the equity shareholders' meeting on the specified date with detailed procedural directions, dispensed with meetings of secured and unsecured creditors on the basis of recorded consents, appointed meeting officials and directed service of statutory notices and compliance with the Companies Act, Rules and applicable MCA circulars.

Reduction of share capital - Special resolution - Power in Articles to reduce capital - Certificate of no creditors - Statutory auditor's conformity with accounting standards - Regional Director report and non-objection - Form of minutes for registration under Section 66(5) - Publication and filing requirements - Compliance with SEBI, FEMA and Income Tax laws - No immunity from enforcement for statutory violations

Reduction of share capital - Special resolution - Power in Articles to reduce capital - Confirmation of the proposed reduction of the petitioner's issued, subscribed and paid-up equity share capital as approved by the members by a special resolution. - HELD THAT: - The Tribunal examined the petitioner company's articles (Article 41) which confer the power to reduce capital and noted that a special resolution was passed at an Extra Ordinary General Meeting. The petitioner demonstrated that the reduction is sought because of excess cash not required for business and proposed the cancellation of up to 80% of issued, subscribed and paid-up equity capital proportionately. Having considered the petition, the annexures and the corporate approvals, the Tribunal found it just and proper to confirm the reduction of share capital to the quantum and share structure as set out in the petition and the approved minutes.

Reduction of the petitioner's share capital confirmed as set out in the petition and approved minutes.

Certificate of no creditors - Statutory auditor's conformity with accounting standards - Regional Director report and non-objection - Satisfaction with supporting certifications and the Regional Director's report for the purpose of confirming the reduction. - HELD THAT: - The Tribunal took into account the chartered accountant's certificate stating nil secured and unsecured creditors as on the specified date, and the statutory auditor's certificate that the proposed accounting treatment conforms with applicable accounting standards. The Regional Director's report, filed after required service and publication, recorded that there were no objections and that the company was regular in statutory filings with no pending complaints, prosecutions or inspections. On the basis of these documents and the filed memo of clarification regarding reserves and cash balances, the Tribunal was satisfied to proceed with confirmation.

The supporting certificates and the Regional Director's non-objection were accepted as sufficient for confirmation.

Form of minutes for registration under Section 66(5) - Publication and filing requirements - Approval of the proposed form of minutes for registration under Section 66(5) and direction to publish and file the order. - HELD THAT: - The Tribunal approved the proposed form of minutes to be registered under Section 66(5) as annexed to the petition, and directed the petitioner to publish the order of confirmation in specified newspapers and to file a certified copy of the Tribunal's order with the Registrar of Companies within 30 days, thereby ensuring the required public notice and statutory filing consequent to the reduction.

Approved minutes for registration under Section 66(5); directed publication and filing with RoC within 30 days.

Compliance with SEBI, FEMA and Income Tax laws - No immunity from enforcement for statutory violations - Clarification that the confirmation does not exempt the company from other statutory obligations, taxes or enforcement action. - HELD THAT: - While sanctioning the reduction, the Tribunal expressly clarified that the order does not grant exemption from payment of stamp duty, taxes or any other charges that may be payable under law, nor from obtaining any permissions or complying with specific statutory requirements. The Tribunal further recorded that if any deficiency or violation of enactments or rules is found, the sanction will not preclude lawful action against the persons concerned, directors or officials of the company. The petitioner was also directed to ensure compliance in relation to SEBI, FEMA and Income Tax laws as applicable.

Confirmation subject to all applicable statutory liabilities and compliance; does not preclude subsequent enforcement action for violations.

Final Conclusion: Petition allowed: the Tribunal confirmed the reduction of the company's issued, subscribed and paid-up equity share capital as proposed and approved the form of minutes for registration under Section 66(5), while directing publication, filing with the RoC and compliance with applicable statutory laws; the order does not exempt the company or its officers from taxes, duties or enforcement for any legal violations.

Insider trading - unpublished price sensitive information (UPSI) - connected person - immediate relative (rebuttable presumption) - onus of proof for possession of UPSI - circumstantial evidence - communication of UPSI - first appellate court's duty to independently examine evidence

Connected person - immediate relative (rebuttable presumption) - estrangement / family settlement - Whether the appellants in C.A. No.7590 of 2021 were "connected persons" or "immediate relatives" of the appellant Balram Garg and whether the claim of estrangement was rightly rejected. - HELD THAT: - The WTM found that Noticees no.1-3 were not connected persons qua Balram Garg and that there was no contractual, fiduciary or employment relationship or other foundational facts to treat them as connected persons. The SAT nevertheless upheld the WTM without independent evaluation. This Court held that the WTM and SAT failed to appreciate and assess material family arrangements (dated 01.07.2011 and 10.04.2015), resignations and the documentary evidence showing disassociation and separate residential occupancy, which supported the appellants' claim of breakdown of ties. Where foundational facts for the deeming fiction of "immediate relative" or for inferring access to UPSI are absent, the presumption cannot be raised. The Court therefore accepted that the appellants in C.A. No.7590 of 2021 were not shown to be "immediate relatives" or "connected persons" of Balram Garg and that the SAT erred in rejecting the estrangement claim without proper appreciation of evidence. [Paras 30, 31, 32, 44, 48]

The finding that the appellants in C.A. No.7590 of 2021 were "connected persons" or "immediate relatives" qua Balram Garg is unsustainable; the SAT and WTM failed to appreciate foundational facts demonstrating estrangement, and the appellants cannot be treated as connected persons on the record before the authorities.

Insider trading - communication of UPSI - circumstantial evidence - onus of proof for possession of UPSI - Whether the appellants in C.A. No.7590 of 2021 could be held to be "insiders" under Regulation 2(1)(g)(ii) and be convicted of communicating or trading on UPSI solely on the basis of trading patterns and timing (circumstantial evidence). - HELD THAT: - Two corporate events were identified as UPSI (UPSI1 and UPSI2). SEBI and the SAT relied principally on timing and pattern of trades by the appellants as circumstantial evidence of possession/access to UPSI and of communication by Balram Garg. The Court analysed trading in three phases and found the transactional data inconsistent with an inference that the appellants possessed UPSI: substantial pre-UPSI sales, limited sales during alleged UPSI period, continued holding of significant shareholding, and a persistent falling market price that undermined the claimed motivation to time sales around the UPSI. The Court reiterated that Regulation 3 does not create a deeming fiction of communication of UPSI and that communication must be proved by cogent material (letters, emails, call records, witnesses etc.). Further, the legislative note to Regulation 2(1)(g) places the initial onus on the party levelled with the charge (SEBI) to show possession or access to UPSI; only thereafter can the person who traded attempt to rebut. The SAT's conclusion based solely on circumstantial trading patterns, without foundational facts or direct material showing communication or frequent duty-related contact, was held to be legally unsustainable. [Paras 39, 40, 41, 43, 48]

The appellants could not be held to be "insiders" or found guilty of communication/trading on UPSI purely on the basis of circumstantial evidence of trading pattern and timing; SEBI failed to discharge the initial onus of proving possession or communication of UPSI by cogent material.

First appellate court's duty to independently examine evidence - non-application of mind - Whether the SAT, as the first appellate court, properly discharged its duty to independently assess evidence and provide reasons in upholding the WTM's order. - HELD THAT: - The Court emphasised that the first appellate forum must address both law and facts and give adequate reasons. The SAT merely repeated WTM's findings and relied on preponderance of probability without addressing deficiencies in foundational facts or the absence of direct evidence of communication. This constituted non-application of mind and failure to exercise appellate jurisdiction effectively. The Court found the SAT's approach impermissible and remediable. [Paras 24, 25, 48]

The SAT failed to independently assess the evidence and furnish adequate reasoning; its affirmation of the WTM's order suffered from non-application of mind and cannot be sustained.

Final Conclusion: The appeals are allowed. The impugned orders of the WTM and the SAT are set aside on the grounds that SEBI did not prove possession or communication of UPSI by cogent material and that the SAT failed to independently evaluate foundational facts (including family arrangements and estrangement). Deposits made by the appellants shall be refunded. No order as to costs.

Operational debt as defined under Section 5(21) of the Code - confirmation of debt / confirmation of balance - default - running account - admission of an application under the Insolvency and Bankruptcy Code, 2016 - operational creditor

Confirmation of debt / confirmation of balance - default - admission of an application under the Insolvency and Bankruptcy Code, 2016 - Validity of admission of the Section 9 application on the ground that debt and default were proved by the confirmation of balance and supporting documents. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that debt and default were established. The ledger and invoices reproduced on the record evidence recurring transactions of sale and purchase of gold between the parties. The Adjudicating Authority relied on a confirmation of balance dated 12.02.2019 acknowledging an outstanding sum, and the Tribunal noted that the parties maintained a current/running account rather than invoice wise settlements. Given the running account, the Tribunal held it was material when the parties treated the account as in default and that the confirmation of balance sufficed to establish debt and default for admission. The Tribunal also observed that the contention that amounts were already paid invoice wise was unsupported on the Statement of Account and that the plea that the amount was an advance was not pleaded before the Adjudicating Authority in response to the demand notice. [Paras 5, 7]

The admission of the application under the Code was proper; debt and default having been established, the Adjudicating Authority's order admitting the Section 9 application is upheld.

Operational debt as defined under Section 5(21) of the Code - running account - operational creditor - Whether the claimed amount was an 'advance' and therefore not an operational debt recoverable under the Code. - HELD THAT: - The Tribunal rejected the appellant's contention that the sums constituted advances and not operational debt. It relied on the Statement of Account showing periodic payments and subsequent invoices, indicating a running account and continuous transactions of purchase and sale rather than discrete advances tied to specific invoices. The Tribunal further noted that the advance contention was not raised in the Reply to the demand notice before the Adjudicating Authority, weakening that plea. Applying the definition of 'operational debt' and factual record, the Tribunal found the amounts fell within the ambit of operational debt. [Paras 6, 7]

The claim is not an unpleaded 'advance' outside the definition of operational debt; the characterization as operational debt is affirmed.

Final Conclusion: The appeal is dismissed; there is no infirmity in the Adjudicating Authority's order admitting the Section 9 application and the finding of debt and default based on the running account and confirmation of balance is affirmed.

Liquidation as last resort - implementation of approved resolution plan - duty of Monitoring Agency to initiate implementation - obstruction to implementation by a creditor/member of Monitoring Agency - assessment of enterprise value versus liquidation value in insolvency proceedings - effect of parked/escrowed resolution funds on implementation

Liquidation as last resort - assessment of enterprise value versus liquidation value in insolvency proceedings - Validity of the Adjudicating Authority's refusal to order liquidation and its decision to permit implementation of the approved resolution plan instead of liquidation. - HELD THAT: - The Appellate Tribunal upheld the Adjudicating Authority's approach that liquidation must be a last resort and cannot be ordered merely because the liquidation value may be higher than the enterprise value offered under the resolution plan. The Tribunal relied on the Code's object of revival and continuance of the corporate debtor and relevant Supreme Court precedents stressing that liquidation equates to corporate death and should be avoided where revival is feasible. The Adjudicating Authority had found that a successful resolution applicant was ready and willing to implement the approved plan, that material steps (including payments for CIRP costs and workmen dues) had been taken, and that the full resolution amount had been parked in a separate account and could be transferred to the corporate debtor. Those factual findings and the legal principle favouring resolution over liquidation led the Tribunal to conclude there was no error in refusing liquidation. The Tribunal also noted that the NCLAT's direction was to have the Monitoring Agency commence implementation and, if the SRA failed, to move for liquidation; it did not mandate immediate liquidation. The Appellant, who acquired its interest after the NCLAT order, sought liquidation primarily to maximise its recovery, but the Tribunal held that self-interest of a creditor and the existence of a higher liquidation value were not sufficient grounds to override the statutory objective of revival and continuance. [Paras 9, 21, 23, 24]

The Adjudicating Authority did not err in rejecting the liquidation prayer and in directing implementation of the approved resolution plan rather than ordering liquidation.

Implementation of approved resolution plan - duty of Monitoring Agency to initiate implementation - obstruction to implementation by a creditor/member of Monitoring Agency - effect of parked/escrowed resolution funds on implementation - Whether the Successful Resolution Applicant had failed to implement the approved resolution plan after appellate orders, and whether the Appellant's conduct prevented implementation. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's factual conclusion that after the NCLAT order the Monitoring Agency and SRA took steps towards implementation: the SRA offered to deposit the resolution amount in escrow, paid CIRP costs and workmen dues, and had parked the full resolution amount in a separate account which the Adjudicating Authority directed be transferred to the corporate debtor. The minutes of the Monitoring Agency meeting on 07.07.2021 showed that deadlock arose because the Appellant insisted on compensation/interest as a pre-condition and refused to participate in implementation unless compensated, while the SRA declined to accept any additional payment beyond the approved plan. The Tribunal found that the SRA's initial condition (awaiting resolution of the Vanguard appeal) and subsequent conduct were not sufficient to conclude wilful failure to implement the plan, particularly given the SRA's payments and escrow arrangements; conversely, the Appellant's insistence on a pre-condition had contributed to the impasse. Having regard to these findings, the Adjudicating Authority's direction giving the SRA a final opportunity to transfer funds and implement the plan was appropriate. [Paras 11, 12, 13, 17, 22]

The SRA had not been shown to have irrevocably failed to implement the plan; the Appellant's pre-condition contributed to the deadlock and the Adjudicating Authority rightly directed transfer of the parked funds and implementation.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority did not err in refusing liquidation and in directing the transfer of the parked resolution funds to the corporate debtor to enable implementation of the approved resolution plan; the factual finding that the SRA had taken steps towards implementation and that the Appellant had impeded implementation is affirmed.

Limitation - Section 7 of the Insolvency & Bankruptcy Code, 2016 - Effect of acknowledgement on limitation period - Section 18 of the Limitation Act, 1963 - Acknowledgement in balance sheet - Dishonour of cheques and subsequent communications as acknowledgement - Remand to Adjudicating Authority for further proceedings

Section 7 of the Insolvency & Bankruptcy Code, 2016 - Limitation - Section 18 of the Limitation Act, 1963 - Acknowledgement in balance sheet - Effect of acknowledgement on limitation period - Dishonour of cheques and subsequent communications as acknowledgement - Whether the Adjudicating Authority was justified in dismissing the Section 7 application as barred by limitation. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in Asset Reconstruction Company (India) Ltd v. Bishal Jaiswal and Dena Bank v. C. Shivakumar Reddy and held that entries in the corporate debtor's balance sheets and contemporaneous written communications can constitute an acknowledgement of liability under Section 18 of the Limitation Act and thereby extend the period of limitation. The Tribunal noted specific materials on record - the letter dated 18.11.2015 acknowledging the debt, the corporate debtor's written reply to the legal notice of 18.03.2017 admitting the debt and referring to a repayment roadmap discussed on 23.09.2016, and the dishonour of cheques in January-February 2017 - and treated these as establishing the jural relationship and acknowledgements that operate to restart the limitation period. The Adjudicating Authority had referred to balance sheets but failed to apply the cited Supreme Court precedents; that omission was held to be an error. Applying the settled principle that a debt shown in a company's balance sheet or otherwise acknowledged in writing restarts the limitation period under Section 18, the Tribunal concluded that the Section 7 application filed on 10.06.2020 fell within three years of the last admissible acknowledgement and therefore was not time barred. [Paras 8, 11, 14, 15, 16]

The Adjudicating Authority erred in dismissing the Section 7 application as barred by limitation; the acknowledgements in the balance sheets and communications extended the limitation period and the Section 7 application is within time.

Remand to Adjudicating Authority for further proceedings - Whether the matter should be remitted to the Adjudicating Authority for further adjudication. - HELD THAT: - Having concluded that the Section 7 application is not barred by limitation, the Tribunal set aside the impugned order and remitted the matter to the Adjudicating Authority to proceed in accordance with law. The remand is for the Adjudicating Authority to consider the application on merits (and any consequential steps) after taking into account the Tribunal's determination on limitation and the acknowledgements on record. [Paras 17]

Appeal allowed; impugned order set aside and matter remitted to the Adjudicating Authority for onward proceedings in accordance with law.

Final Conclusion: Appeal allowed. The Tribunal held that the corporate debtor's balance sheet entries and contemporaneous written communications constituted acknowledgements under Section 18 of the Limitation Act, thereby extending the limitation period; the Section 7 application filed on 10.06.2020 is not time barred. Impugned order dated 10.11.2020 is set aside and the matter is remitted to the Adjudicating Authority to proceed in accordance with law.

Rejection of claim by Liquidator - Verification and admission of claims in liquidation - Proof of diversion of funds / identification of payee - Burden of documentary evidence for establishing claim against corporate debtor

Rejection of claim by Liquidator - Verification and admission of claims in liquidation - Burden of documentary evidence for establishing claim against corporate debtor - Validity of the Liquidator's rejection of the applicant's claim and whether the applicant established that payments made to a partnership concern were in fact received by the corporate debtor. - HELD THAT: - The Liquidator rejected the claim on the stated grounds that the claimed amount did not appear in the books of the corporate debtor and that the payments were made to a distinct partnership firm, M/s. Nathella Sampathu Chetty & Co. The applicant alleged that funds deposited into the partnership firm's account were diverted to the corporate debtor and relied on payment receipts and a reference to receipts and an FIR. The Adjudicating Authority examined the documentary material and found no sufficient evidence demonstrating diversion of funds into the corporate debtor's books. The Authority noted a temporal inconsistency relied on by the applicant: the corporate debtor's alleged receipt (referenced to an FIR) related to financial year 2012-2013, whereas the applicant's payment receipt bore the date 28.04.2014. On the material before it, the Tribunal accepted the Liquidator's verification that the cheque was deposited into the partnership firm's account and that the partnership firm was not amalgamated with the corporate debtor. In the absence of evidence to show that the corporate debtor received the sums, the Liquidator's rejection was upheld. [Paras 12, 13, 14]

Application dismissed for want of sufficient documentary evidence to show that payments made to the partnership firm were received or diverted to the corporate debtor; the Liquidator's rejection of the claim is affirmed.

Final Conclusion: The application seeking to set aside the Liquidator's order rejecting the claim is dismissed for lack of adequate evidence establishing that payments to the partnership firm were received by or diverted to the corporate debtor; the Liquidator's rejection is maintained.

Rejection of claim by liquidator - powers of liquidator to reject claims under the Insolvency and Bankruptcy Code and Liquidation Process Regulations - proof of payment and verification from books and records for admission of claim - separate legal entity of a partnership firm vis-a -vis the corporate debtor - absence of nexus or diversion of funds to corporate debtor

Rejection of claim by liquidator - proof of payment and verification from books and records for admission of claim - powers of liquidator to reject claims under the Insolvency and Bankruptcy Code and Liquidation Process Regulations - Whether the Liquidator was justified in rejecting the applicant's claim for amounts paid under the gold scheme on the ground that the claimed amount did not appear in the books of the corporate debtor and the payments pertained to a different entity. - HELD THAT: - The Tribunal examined the claim documents, the order form and the passbook produced by the applicant alongside the Liquidator's verification of the corporate debtor's ledger. The passbook indicates payments and payment instructions in favour of the partnership firm, M/s. Nathella Sampathu Chetty & Co., and the corporate debtor's books do not show receipt of the claimed amounts. The Liquidator communicated the rejection with reasons in writing, relying on verification of records and regulation-backed procedures. The applicant did not produce sufficient documentary evidence to establish that payments were received by or diverted to the corporate debtor. In these circumstances the Tribunal found no basis to overturn the Liquidator's rejection under the statutory scheme empowering the Liquidator to reject claims where they do not appear in the corporate debtor's records or where supporting evidence is lacking. [Paras 17, 18, 19]

The rejection of the claim by the Liquidator was upheld and the application was dismissed for want of sufficient evidence establishing liability of the corporate debtor.

Final Conclusion: The application challenging the Liquidator's rejection of the claim is dismissed; the Tribunal finds the claim pertains to a separate partnership firm and that the applicant failed to prove payment to or diversion of funds into the corporate debtor, accordingly upholding the Liquidator's rejection.

Proof of security interest under Regulation 21 - Requirement of registration of charge with ROC or CERSAI to establish secured status - Secured creditor's right to realise security under Section 52 - Liquidator's verification and claim admission powers under Regulation 30 - Distinction between mere third party security/authorization and financial debt under Anuj Jain

Proof of security interest under Regulation 21 - Requirement of registration of charge with ROC or CERSAI to establish secured status - Liquidator's verification and claim admission powers under Regulation 30 - Secured creditor's right to realise security under Section 52 - The liquidator was justified in classifying the applicant as an unsecured creditor in respect of the vehicle loans and in refusing permission to realise security where registration evidence was not furnished with the claim. - HELD THAT: - Section 52(3) read with Regulation 21 requires proof of existence of a security interest by records in an information utility, ROC certificate of registration of charge, or proof of registration with CERSAI. The applicant notified its intention to realise security in Form D on 26.05.2021 but did not supply the mandated proof of registration. The registrations relied upon by the applicant were dated after submission of the claim (18.06.2021 and 07.07.2021) and therefore were not available to the liquidator when verifying claims within the period prescribed by Regulation 30. The liquidator, having no proof of charge before him, was obliged to verify and admit or reject claims on the basis of documents submitted; classification as unsecured and denial of realisation of security in respect of the vehicle loans was therefore consistent with the statutory scheme and the liquidator's verification powers. [Paras 23, 24, 25, 26, 27]

Claim in respect of vehicle loans treated as unsecured and the liquidator was justified in refusing permission to realise the security.

Distinction between mere third party security/authorization and financial debt under Anuj Jain - Secured creditor's right to realise security under Section 52 - The amounts advanced to group companies against FDRs (based on authorisations) do not constitute financial debt of the corporate debtor and the applicant is not a financial creditor in respect of those advances. - HELD THAT: - The documents placed on record show only authorisations by the corporate debtor permitting fixed deposits to be used as security for loans to group companies; no guarantee deed or other instrument creating an obligation of the corporate debtor to repay the loans was executed. Under the principle in Anuj Jain, to qualify as a creditor there must be a debt or payment obligation of the corporate debtor. Mere security interest without an underlying payment obligation of the corporate debtor does not convert the claimant into a financial creditor of the corporate debtor. Consequently, the liquidator was entitled to reject the claim insofar as it sought recognition as a financial creditor for advances made to third parties. [Paras 28]

Claim based on advances to group companies against corporate debtor's FDRs rejected as not constituting financial debt of the corporate debtor.

Final Conclusion: Both interlocutory applications are dismissed; the liquidator acted within the statutory scheme in classifying the vehicle loan claim as unsecured for want of prescribed proof of registration and in rejecting the claim arising from advances to group companies where no payment obligation of the corporate debtor was established.

Moratorium under IBC - possession during corporate insolvency resolution process (CIRP) - rights of lessor under a lease during CIRP - CIRP costs and contribution obligation of the committee of creditors (CoC) - duty to cooperate with the resolution professional and compliance with orders under Section 19 - contempt proceeding for non-cooperation with the RP

Possession during corporate insolvency resolution process (CIRP) - rights of lessor under a lease during CIRP - moratorium under IBC - Entitlement to physical possession of premises leased to a sister concern and effect of moratorium on surrender of possession and payment of rent. - HELD THAT: - The Tribunal recorded that the lease deed is in favour of the applicant and R2 (a sister concern of the corporate debtor), but the corporate debtor (through the IRP/RP) has been in physical possession of the premises allegedly because certain goods of the corporate debtor are lying there. The RP/Circular Debtor relied on the moratorium to resist vacating possession and to deny liability under the lease, while also disavowing recognition of the lease and non-payment of rent. The Tribunal noted the incongruity of the RP claiming possession without legal authority to recognize or discharge the lease obligations, and observed that the applicant has not pursued available remedies (such as rent recovery or proceedings under rent control). The Tribunal did not direct immediate vacation of the premises by the RP, but advised the applicant to exercise rights under the lease and pursue appropriate remedies for recovery and possession.

No immediate order for handing over possession was made; the applicant was directed to pursue its rights under the lease and available statutory remedies, while the Tribunal recorded that the RP/R1's claim to retain possession under moratorium lacked clear legal authority.

CIRP costs and contribution obligation of the committee of creditors (CoC) - Liability of the CoC to meet CIRP expenses and the immediate direction for payment of the RP's claimed CIRP costs. - HELD THAT: - The Tribunal noted that the RP has made claims to the CoC for CIRP costs and that the CoC members, including a majority member who participated in attempts to revive or sell the corporate debtor, have refused or failed to contribute to CIRP expenses. Having regard to the RP's statement of work and the CoC's participation in the process, the Tribunal directed the CoC to satisfy the RP's claimed CIRP expenses. The RP was also directed to file a detailed affidavit of the work done in respect of the corporate debtor to substantiate the claim.

The CoC was directed to pay the RP's claimed CIRP amount within ten working days and the RP was directed to file a detailed affidavit of all work done.

Duty to cooperate with the resolution professional and compliance with orders under Section 19 - contempt proceeding for non-cooperation with the RP - Non-cooperation of suspended board/other parties with the RP and the remedial step to be taken by the RP. - HELD THAT: - The Tribunal observed that despite an earlier order under Section 19, the suspended board of directors and relevant parties had not cooperated with the RP and had not handed over books or accounts. The Tribunal noted that no application had been moved earlier to enforce compliance with the Section 19 order. In view of continued non-cooperation, the Tribunal directed the RP to file an application for contempt against the non-cooperating respondents and indicated that the expenses arising therefrom could be included as part of CIRP costs.

RP directed to file an application for contempt against respondents who failed to cooperate and to include such expenses as part of CIRP cost.

Final Conclusion: The Tribunal declined to order immediate delivery of possession to the applicant but advised the applicant to pursue its contractual and statutory remedies; directed the CoC to pay the RP's claimed CIRP costs within ten working days and ordered the RP to file a detailed affidavit of work; and directed the RP to initiate contempt proceedings against parties who have not complied with orders to cooperate with the RP, with such expenses allowable as CIRP costs. All matters listed for further hearing on the date fixed.

Maintainability of writ petition - territorial jurisdiction - cause of action - statutory alternative remedy by appeal under Section 19 of the Foreign Exchange Management Act, 1999 - principle of natural justice - pre-deposit requirement and power to dispense with deposit on showing undue hardship

Maintainability of writ petition - territorial jurisdiction - cause of action - Writ petition at the Jaipur Bench is not maintainable for want of territorial cause of action in Rajasthan. - HELD THAT: - The Court held that neither the filing of the initial complaint through Jaipur nor the direction to deposit the penalty in the Jaipur office constitute a part of the cause of action sufficient to confer territorial jurisdiction on the Rajasthan High Court. The adjudication culminating in the impugned order was carried out by the Additional Director after earlier proceedings and an order from the Punjab and Haryana High Court; residence of the petitioners or their place of business in Rajasthan does not convert those facts into a cause of action within the State of Rajasthan. Consequently the petition was not maintainable at the Jaipur Bench.

Writ petition dismissed for lack of territorial cause of action.

Statutory alternative remedy by appeal under Section 19 of the Foreign Exchange Management Act, 1999 - pre-deposit requirement and power to dispense with deposit on showing undue hardship - Availability of remedy by appeal under Section 19 of FEMA, 1999 bars entertaining the writ petition. - HELD THAT: - The Court observed that the impugned order itself indicates the availability of an appeal to the Appellate Tribunal and that the legislature has provided a comprehensive appellate mechanism. The Court held that where a statutory appellate remedy exists, the High Court should ordinarily refrain from exercising writ jurisdiction. Concerns about limitation and the requirement of pre-deposit were rejected as a ground to retain the writ: the Appellate Tribunal has power to condone delay if sufficient cause is shown and, under the proviso permitting dispensation, to relax the pre-deposit requirement on proof that deposit would cause undue hardship and subject to such conditions as the Tribunal may impose. The Court thus directed that petitioners may challenge all grievances, including alleged procedural lapses, before the Appellate Tribunal.

Writ petition dismissed in view of the availability of the statutory appeal and statutory mechanisms to address limitation and pre-deposit difficulties.

Principle of natural justice - statutory alternative remedy by appeal under Section 19 of the Foreign Exchange Management Act, 1999 - Alleged violation of principles of natural justice and non compliance with the Rules, 2000 is not a ground to retain the writ where an alternative statutory appeal is available. - HELD THAT: - The Court held that allegations of breach of natural justice or non observance of the procedural requirements in the Rules governing adjudication are matters that can be agitated before the Appellate Tribunal under the statutory appeal. The existence of the appellate forum empowered to examine such contentions, including delay and procedural compliance, renders the writ forum inappropriate. The Court rejected the submission that procedural infirmities alone justify bypassing the statutory remedy.

Complaint of violation of natural justice dismissed as a basis for entertaining the writ; such complaints must be raised before the appellate forum.

Final Conclusion: The writ petition is dismissed on grounds of lack of territorial cause of action and existence of a statutory alternative remedy by way of appeal under Section 19 of FEMA, 1999; dismissal is without prejudice to the petitioners raising all their contentions, including alleged procedural infirmities and applications for condonation or dispensation of pre-deposit, before the Appellate Tribunal.

Voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Ineligibility arising from an enquiry or investigation relating to the time period of the declaration - Conjunctive requirement of pending enquiry and unquantified duty for disqualification - Disjunctive bar for voluntary disclosure after being subjected to enquiry/investigation/audit or having disclosed duty in return - Relevance of the time period mentioned in the declaration to eligibility and to the discharge certificate - Conclusive effect of discharge certificate for the matter and time period covered - Principles of natural justice - right to notice and hearing before rejection of declaration

Voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Ineligibility arising from an enquiry or investigation relating to the time period of the declaration - Conjunctive requirement of pending enquiry and unquantified duty for disqualification - Disjunctive bar for voluntary disclosure after being subjected to enquiry/investigation/audit or having disclosed duty in return - Relevance of the time period mentioned in the declaration to eligibility and to the discharge certificate - Whether the petitioner was ineligible for relief under the Scheme by reason of departmental action taken before filing the declaration. - HELD THAT: - The Court construed the eligibility provisions of the Scheme and held that the disqualification in Section 125(1)(e) must be read conjunctively - the declarant must, at the time of making the declaration, be subjected to an enquiry/investigation/audit and the amount of duty relatable to that enquiry/investigation/audit must not have been quantified on or before 30.06.2019. Section 125(1)(f) contemplates two distinct situations joined disjunctively - being subjected to enquiry/investigation/audit at the time of making a voluntary disclosure, or having filed a return wherein an amount of duty was indicated as payable but not paid. Crucially, the enquiry or investigation which triggers ineligibility must relate to the time period stated in the declaration because the discharge certificate is conclusive only as to the matter and time period covered. Applying these principles, the Court found that the departmental action preceding the declaration (letter dated 23.07.2019 and summons dated 11.09.2019) related to verification for the financial year 2014-2015 and not to the period 01.04.2016 to 31.03.2017 covered by the petitioner's voluntary disclosure. Therefore, as on 30.06.2019 the petitioner was not facing any enquiry/investigation/audit in respect of the declared period and the designated committee's invocation of Sections 125(1)(e)/(f) to reject the voluntary disclosure was unsustainable. [Paras 41, 42, 43, 44, 45]

Declaration filed under the category of 'voluntary disclosure' could not be rejected on the ground of pending enquiry/investigation which did not relate to the time period stated in the declaration; the rejection was set aside.

Principles of natural justice - right to notice and hearing before rejection of declaration - Procedural fairness in administration of the Scheme - Whether the designated committee was obliged to afford an opportunity of hearing before rejecting the petitioner's declaration. - HELD THAT: - The Court observed that the Scheme requires procedural safeguards where the designated committee proposes any upward adjustment of the amount payable and, by parity of reasoning, it would be arbitrary and contrary to the object of the Scheme to summarily reject a declaration without hearing the declarant. Rejection without affording any opportunity to explain carries adverse civil consequences and thus violates principles of natural justice. The Court relied on a cited Division Bench decision to the effect that non-compliance with natural justice when rejecting a declaration impeaches the decision-making process. [Paras 46, 47]

Summary rejection of a declaration without affording an opportunity of hearing is contrary to natural justice; the petitioner must be given an opportunity to be heard.

Remand for fresh consideration with a speaking order - Requirement to communicate decision to the declarant - Remedial consequence and directions on how the matter should proceed following quashing of the intimation. - HELD THAT: - In view of the legal conclusions on eligibility and natural justice, the Court quashed the impugned intimation and remanded the matter to the designated committee to consider the petitioner's declaration afresh in terms of the Scheme. The designated committee was directed to afford the petitioner an opportunity of hearing, pass a speaking order in accordance with law, and communicate the decision to the petitioner. The exercise was to be completed within eight weeks from receipt of the order. [Paras 48]

Intimation dated 27.09.2019 set aside; matter remanded for fresh consideration after affording hearing and issuance of a speaking order within eight weeks.

Final Conclusion: Writ petition allowed; impugned intimation rejecting the voluntary disclosure quashed and the matter remitted to the designated committee to reconsider the declaration as a voluntary disclosure, after affording the petitioner a hearing and issuing a reasoned order within eight weeks; no order as to costs.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound one-time settlement scheme - bonafide attempt to pay - technical glitch and payment re-credit - acceptance of declaration and payment despite delay - designated committee manual processing - Board instruction No.01/2021-CX - functus officio of designated authority

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound one-time settlement scheme - bonafide attempt to pay - technical glitch and payment re-credit - acceptance of declaration and payment despite delay - Board instruction No.01/2021-CX - Whether the petitioner's declaration under the Sabka Vishwas Scheme should be accepted despite electronic payment having been re credited due to a technical glitch on the last date for payment. - HELD THAT: - The Court found the facts undisputed that the petitioner had filed a declaration under the Scheme and that an electronic debit of the settlement amount was effected on the last date but was subsequently re credited due to technical glitches. Recognising the Scheme's object as a time bound measure to enable chronic defaulters to obtain one time settlement, the Court held that a genuine bonafide attempt to pay which failed solely because of technical problems should not defeat the Scheme's purpose. The Court took into account the Board's subsequent instruction permitting manual processing by designated committees where a High Court order has been accepted by the Commissionerate and the case has appropriate representation (Instruction No.01/2021 CX dated 17.03.2021), and observed that procedural time limits ought not to be applied so rigidly as to frustrate the Scheme when the petitioner had manifested consistent efforts to pay. Applying these principles, the Court concluded that there was no justification for refusing to accept the petitioner's declaration or belated payment where non acceptance resulted from technical failure beyond the petitioner's control. [Paras 15, 16]

The petitioner's plea was allowed and the respondents were directed to accept the payment and give closure under the Scheme, the order being implemented within 30 days.

Final Conclusion: Writ petition allowed. Respondents directed to accept the petitioner's payment/declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and bring the matter to closure in the spirit of the Scheme within 30 days; no costs.

Computation of time under General Clauses Act, 1897 - limitation for refund claims under Notification No. 12/2013-ST dated 01.07.2013 - discretionary extension of time by refund section authority - effect of office closure and holidays on prescribed limitation

Computation of time under General Clauses Act, 1897 - effect of office closure and holidays on prescribed limitation - limitation for refund claims under Notification No. 12/2013-ST dated 01.07.2013 - Whether rejection of the refund claim solely on the ground of limitation was sustainable where the prescribed last day fell on a weekend and the next day was a government holiday and Section 10 of the General Clauses Act applied. - HELD THAT: - The Tribunal examined the prescribed last date for filing the refund claim under Notification No. 12/2013 ST and observed that, as held in the orders below, the application ought to have been filed on or before 29.04.2018. The Tribunal took judicial notice of the English calendar for April 2018 and the fact that 28th and 29th April were weekends while 30th April was a government holiday (Buddha Purnima). Applying the computation rule in Section 10 of the General Clauses Act, 1897, the Tribunal held that where a Central Act or regulation prescribes a period and the Court or office is closed on the last day of that period, the act is to be considered done in due time if done on the next day on which the office is open. Given the office closure on the relevant dates, the refund application could not be treated as barred by limitation. The Tribunal therefore concluded that the Commissioner (Appeals) was not justified in rejecting the refund solely on limitation grounds and that the discretionary power available to the refund granting authority did not justify denial where computation of time by reason of holiday/closure entitled the applicant to an extension.

The Commissioner (Appeals) order rejecting the refund only on limitation grounds is set aside; the appellant's refund claim is to be sanctioned with interest.

Final Conclusion: Appeal allowed. The order of the Commissioner (Appeals) rejecting the refund on the sole ground of limitation is set aside; refund to be sanctioned with applicable interest and paid within three months.

Exemption from service tax for services provided by government or local authority - statutory functions performed by public authority - treatment of entry fee, canter ride, hathi safari and museum charges for a national park - treatment of short term accommodation/forest rest house charges - application of Notification No.25/2012-ST as amended and TRU clarification dated 28.02.2015

Treatment of entry fee, canter ride, hathi safari and museum charges for a national park - statutory functions performed by public authority - application of Notification No.25/2012-ST as amended and TRU clarification dated 28.02.2015 - Whether amounts collected by the appellant as entry fee and charges for canter ride, hathi safari and museum are liable to service tax as tour operator services or are exempt as statutory activities of a government authority. - HELD THAT: - The Tribunal found that the appellant is a Government Authority constituted under the relevant Wildlife law and performs statutory activities under government orders and statutes. The amounts collected from visitors are deposited into the Government Exchequer and the services rendered are in furtherance of statutory duties. Having regard to the statutory character of the functions and in light of the Mega Exemption Notification and the TRU clarification dated 28.02.2015, the Tribunal held that such activities fall within the exemption applicable to services provided by government or local authorities and are not taxable as tour operator services. The Tribunal therefore disagreed with the conclusion in the orders below that restricted exemption to 'entry' alone and treated other amounts as taxable. [Paras 15]

Amounts collected as entry fee and related charges (canter ride, hathi safari, museum) are exempt from service tax as statutory activities of a government authority.

Treatment of short term accommodation/forest rest house charges - exemption from service tax for services provided by government or local authority - application of Notification No.25/2012-ST as amended and TRU clarification dated 28.02.2015 - Whether charges collected for short term accommodation in forest rest houses are taxable as 'short term accommodation service' or are exempt when provided by the government authority in discharge of statutory functions. - HELD THAT: - The Tribunal noted that the forest rest houses are primarily meant for official use and that accommodation provided to visitors is regulated by statutory provisions and government orders, with receipts credited to the Government Exchequer and overall financing met from state budget allocations. On this basis, and applying the exemption framework in the Notification and the TRU clarification, the Tribunal concluded that such accommodation charges constitute services provided by a government authority in discharge of statutory functions and are therefore exempt from service tax. The Tribunal rejected the comparison with state-owned tourism development corporations whose activities are commercial and taxable. [Paras 15]

Charges for short term accommodation in forest rest houses are exempt from service tax as services rendered by a government authority in discharge of statutory functions.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is held entitled to consequential benefits, the amounts challenged being exempt from service tax as services provided by a government authority under the applicable exemption notification and TRU clarification.

Principle of consistency and preclusion of the department - invocation of extended period under Section 11A of the Central Excise Act - wilful suppression - abuse/misuse of statutory power - payment of duty on waste and scrap

Principle of consistency and preclusion of the department - abuse/misuse of statutory power - payment of duty on waste and scrap - Whether the revenue could issue a second show cause notice covering a period overlapping an earlier period for which proceedings had been dropped and the adjudication had attained finality. - HELD THAT: - The Court held that the second show cause notice (dated 30.04.2007) was an exact replica of an earlier show cause notice (dated 31.03.2004) and that the earlier adjudication by the Commissioner (order dated 25.05.2004) had been a speaking order which dropped proceedings and had attained finality. Absent fresh material discovered thereafter, the department could not reopen the identical subject-matter or take a contrary stand; doing so amounted to misuse of statutory authority and was impermissible. The Court observed that mere assertion that the earlier adjudication lacked conclusive evidence did not justify reopening, and that the department was bound by the earlier decision as to the identical transactions (including the assessee's practice of paying duty on waste and scrap). On these grounds the issuance of the second show cause notice was held to be unjustified and the Tribunal's allowance of the appeal was upheld. [Paras 4, 8, 13]

The second show cause notice was barred by the principle of consistency; reopening identical adjudicated transactions without fresh material was unjustified and amounted to misuse of power, and the Tribunal's decision in favour of the assessee was upheld.

Invocation of extended period under Section 11A of the Central Excise Act - wilful suppression - Whether the extended period of limitation under Section 11A could be invoked by the revenue in the absence of fresh material or proof of wilful suppression. - HELD THAT: - Relying on binding precedents, the Court held that where an earlier show cause notice on the same facts has been considered and dropped, the same facts cannot be treated as suppression to invoke the proviso to Section 11A for extended limitation. The Court found no prima facie allegation or material establishing wilful suppression; mere use of the term 'wilfully suppressed' in the later notice was insufficient. Because the facts had been in the department's knowledge and earlier adjudication accepted the assessee's position, invocation of the extended period was not permissible; consequently, claims based on extended limitation, and attendant interest and penalty, could not be sustained in the present proceedings. [Paras 9, 10]

Extended period under Section 11A could not be invoked as there was no fresh material or established wilful suppression; consequently, demands based on extended limitation were not maintainable.

Final Conclusion: The Tribunal's allowance of the assessee's appeal was affirmed: the subsequent proceedings initiated by the revenue were vitiated for lack of fresh material and for improper invocation of the extended limitation; the appeal is dismissed and the Tribunal's order in favour of the assessee is upheld.

Refund of duty - proof of payment of Central Excise duty - evidentiary value of supplier and manufacturer certificates - verification of statutory records and payment ledgers - arbitrariness in rejection of refund

Refund of duty - proof of payment of Central Excise duty - evidentiary value of supplier and manufacturer certificates - verification of statutory records and payment ledgers - Whether the First Appellate Authority was justified in confirming the rejection of the appellant's refund claim where the appellant produced supplier and manufacturer certificates purporting to show duty was paid. - HELD THAT: - The Bench examined the certificates and related invoices placed on record by the appellant from the supplier (a Public Sector Undertaking) and from the manufacturer, which expressly indicated that the High Speed Diesel supplied was duty paid. The Adjudicating Authority and the First Appellate Authority failed to discuss or examine the contents and relevance of those documents despite an earlier direction that statutory records and documents could be called for to ascertain payment. The Revenue did not dispute the contents of the certificates and no effort is shown to verify payment through the statutory records or payment ledgers as suggested by the earlier appellate order. In these circumstances, and given that the supplier and manufacturer certificates attest that Central Excise Duty plus Educational Cess was charged and paid to the Government, the fact of duty payment stands established. The rejection of the refund solely for want of further proof, without addressing or verifying the furnished documents, is arbitrary and unsustainable. [Paras 7, 8, 9, 10, 11]

The impugned order confirming rejection of the refund is unsustainable; the appellant has established payment of duty and is entitled to the refund claim to the extent allowable under law.

Final Conclusion: Impugned Order-in-Appeal set aside; appeal allowed and the appellant granted consequential reliefs as per law.

Cenvat credit - Rule 16(1) of the Central Excise Rules, 2002 - availment of credit on returned goods - procedural irregularity not to defeat substantive right - verification of returned goods by departmental officer

Cenvat credit - Rule 16(1) of the Central Excise Rules, 2002 - availment of credit on returned goods - verification of returned goods by departmental officer - Whether the Cenvat credit availed by the appellant in respect of goods returned by customers could be sustained despite rejection memos being addressed to a different unit, when the goods were received and accounted for at the selling unit and departmental verification was carried out. - HELD THAT: - The adjudicating authorities disallowed the claimed credit solely because certain rejection memos were addressed to another unit, treating the address on the documents as determinative of eligibility under Rule 16(1). The appellant, however, produced an intimation letter dated 03/05/2011 (Exhibit M) showing receipt of the returned goods at the selling unit (Barauni) and a Chartered Accountant's certificate corroborating the sales and returns. The Range Superintendent at Begusarai had physically inspected the goods and recorded observations requiring production of documentary evidence of receipt, which was complied with. There is no contrary evidence on record to negative the appellant's proof of receipt and accounting at the Barauni unit. On these facts, the Tribunal concluded that the substantive right to credit, supported by evidence of receipt and departmental verification, could not be defeated by the procedural irregularity of misaddressed memos. The lower authorities therefore erred in treating the address on the rejection memos as a conclusive bar to credit when the returned goods were shown to have been received and verified at the selling unit. [Paras 8, 9, 10]

The demand and denial of Cenvat credit were set aside and the appeal allowed, the appellant having satisfactorily established receipt and verification of the returned goods at the Barauni unit.

Final Conclusion: The appeal is allowed; the orders of the lower authorities confirming the demand are set aside and the claimed Cenvat credit accepted with consequential relief, the Tribunal finding that substantive entitlement was established by intimation, verification and supporting certification despite procedural irregularity on the rejection memos.

Interest on pre-deposit under Section 35FF - refund of duty paid under protest - pre-deposit under Section 35F - entitlement to interest from date of deposit till refund - rate of interest 12% p.a. - precedent of Sandvik Asia Ltd. regarding interest on deposits

Interest on pre-deposit under Section 35FF - pre-deposit under Section 35F - entitlement to interest from date of deposit till refund - rate of interest 12% p.a. - precedent of Sandvik Asia Ltd. regarding interest on deposits - Whether the appellant is entitled to interest on the amount of pre-deposit under Section 35FF from the date of deposit until the date of refund. - HELD THAT: - The Tribunal held that the lower authority erred in rejecting interest. It applied the consistent line of authority that an assessee successful in appeal is entitled to interest on pre-deposit from the date of deposit until the date of refund. The Tribunal followed a Division Bench decision which, in turn, followed the Supreme Court ruling in Sandvik Asia Ltd., and directed payment of interest at 12% per annum. The appellant had deposited amounts under protest and by way of pre-deposit; having been held entitled to refund of those deposits, the statutory scheme and the cited precedent mandate interest on such deposits for the period between deposit and actual refund. The Tribunal therefore allowed interest and directed disbursement within a specified time. [Paras 10, 11]

Appellant entitled to interest @ 12% p.a. from date of deposit till date of grant of refund; interest to be disbursed within 45 days.

Final Conclusion: Appeal allowed; refund antecedent deposits upheld and interest awarded at 12% p.a. from date of deposit until refund, with directions for payment within 45 days.

Works contract - deemed sale - sale simpliciter - zero rated sale - transfer of property in goods - non-obstante clause - inclusive definition - charging section

Deemed sale - sale simpliciter - zero rated sale - charging section - Whether a transaction which is a works contract and is made exigible to tax by the deeming provision in Section 14(1) can be treated as a 'sale' within the definition of 'sale' under Section 2(39) for the purpose of claiming zero rated status under Section 21A and Schedule AA. - HELD THAT: - The Court examined the scheme of the West Bengal Value Added Tax Act, noting that Section 2(39) defines 'sale' as transfer of property in goods and then specifies five categories in Clauses (a) to (e) as being deemed sales. Section 14(1), commencing with a non-obstante clause, separately deems transfer of property in goods involved in execution of a works contract to be a sale for the purpose of levy under the Act. Section 21A and Schedule AA provide zero rated status 'notwithstanding' certain charging sections (Section 16/16A) but do not expressly incorporate the deeming of works contracts under Section 14. The Court held that the deeming in Section 14 creates a distinct legal fiction to bring works contracts within the charge to tax and that a 'deemed sale' under Section 14(1) cannot be equated with a 'sale simpliciter' under Section 2(39) unless the statute's definition so provides. Because Schedule AA and Section 21A conspicuously omit reference to the Section 14 deemed sale, the statutory grant of zero rated status applies to sales falling within the inclusive categories of Section 2(39) and not to works-contract deeming in Section 14. Accordingly, the petitioner's contention that a works contract deemed to be a sale should be treated as zero rated under Section 21A was rejected. [Paras 7]

A works contract deemed to be a sale under Section 14(1) is not to be treated as a 'sale simpliciter' under Section 2(39) for purposes of Section 21A; zero rated status under Section 21A/Schedule AA applies only to sales falling within the definition in Section 2(39).

Works contract - transfer of property in goods - inclusive definition - non-obstante clause - Whether the petitioner's submission that an installation contract without transfer of property in goods cannot be liable as a works contract under the Act and therefore should attract zero rated treatment. - HELD THAT: - The Court recorded the petitioner's contention that an installation or pure labour contract without transfer of property in goods does not fall within the charge for works contracts and relied upon constitutional and judicial authorities. The Court observed that its determination rests on statutory interpretation of the Act rather than pursuing constitutional argument. Reading Section 2(57) (works contract), Section 14 (deeming transfer of property in goods in execution of a works contract to be sale) and the charging sections together, the Court concluded that liability in respect of works contracts arises from the statute's deeming machinery which is intended to make certain transactions exigible to tax. The petitioner's argument that a works contract which is purely a labour contract should be treated as a 'sale' simpliciter for the purpose of obtaining exemption under Section 21A was rejected as impermissible addition to the statutory text. The Court thus upheld the Tribunal's findings answering point Nos. 1 and 2 against the petitioner. [Paras 7]

The contention that an installation or pure labour contract without transfer of property in goods cannot be taxed as a works contract was not accepted for the purposes of claiming zero rated treatment; the statutory scheme governing works contracts and deeming provisions determines exigibility to tax.

Final Conclusion: The writ petition is dismissed. The High Court affirmed the Tribunal's conclusions on Points Nos. 1 and 2 (answered against the petitioner), holding that works-contract deeming under Section 14 does not bring such transactions within the definition of 'sale' in Section 2(39) for grant of zero rated status under Section 21A and Schedule AA; no interference with the tribunal's orders was warranted.

Pre-deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is mandatory - entertainment of challenge under section 34 of the Arbitration and Conciliation Act, 1996 subject to compliance with statutory pre-deposit - court may permit payment of the statutory pre-deposit in instalments on proof of undue hardship - overruling of earlier contrary Division Bench view to the extent it treated the pre-deposit as directory

Pre-deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is mandatory - entertainment of challenge under section 34 of the Arbitration and Conciliation Act, 1996 subject to compliance with statutory pre-deposit - court may permit payment of the statutory pre-deposit in instalments on proof of undue hardship - overruling of earlier contrary Division Bench view to the extent it treated the pre-deposit as directory - Pre-deposit of 75% of the amount in terms of an arbitral award under section 19 of the MSMED Act, 2006 is a mandatory condition to entertain an application under section 34 of the Arbitration and Conciliation Act, 1996; earlier contrary Division Bench view is overruled. - HELD THAT: - The Court followed and applied its earlier decision in Gujarat State Disaster Management Authority v. Aska Equipments Limited, wherein, after considering prior authorities including Goodyear (India) Ltd. v. Norton Intech Rubbers (P) Ltd., it was held that section 19 of the MSMED Act, 2006 requires deposit of 75% of the amount in terms of the award as a pre-deposit before an application under section 34 of the Arbitration Act, 1996 is entertained. The mandatory nature of the pre-deposit was affirmed, while recognizing that the appellate court retains power to alleviate hardship by permitting the pre-deposit to be made in instalments if satisfied that strict simultaneous payment would cause undue hardship. The Division Bench order below which allowed continuation of proceedings under section 34 without insistence on the statutory pre-deposit relied on an earlier contrary Division Bench decision; that view is held not to be good law and is expressly overruled to the extent it treated the requirement as directory. Consequentially, the High Court's order permitting the section 34 proceedings to continue without the statutory pre-deposit was quashed and set aside, and the judgment debtor was directed to deposit 75% of the awarded amount before its section 34 petition is entertained on merits; until such deposit, the section 34 petition shall not be entertained and execution proceedings may continue. [Paras 4, 5, 6]

The pre-deposit mandated by section 19 of the MSMED Act, 2006 is mandatory (subject to instalment relief for demonstrated hardship); the High Court order allowing a section 34 challenge without such pre-deposit is quashed and the earlier contrary Division Bench view is overruled.

Final Conclusion: The appeal is allowed; the High Court order permitting a section 34 challenge to proceed without the 75% pre-deposit prescribed by section 19 MSMED Act, 2006 is quashed and set aside, respondent No. 1 must deposit 75% of the awarded amount before its section 34 petition is entertained (installment relief may be granted by the court on proof of undue hardship); execution proceedings may continue until the pre-deposit is made.

Force majeure - Interim measures under Section 17 of the Arbitration Act, 1996 - Arbitral Tribunal's power under Section 17 - Deposit of disputed rents pending arbitration - Interim deposit limited where force majeure is pleaded

Interim measures under Section 17 of the Arbitration Act, 1996 - Deposit of disputed rents pending arbitration - Interim deposit limited where force majeure is pleaded - Whether the Arbitral Tribunal and the High Court could direct deposit of the entire rental amounts for March 2020 to December 2021 as an interim measure despite a bona fide dispute invoking the force majeure clause. - HELD THAT: - The Court held that where the lessee has raised a serious dispute as to liability to pay rent by invoking the force majeure clause, the Arbitral Tribunal ought not to have directed deposit of the entire disputed rental amount for the whole period as an interim measure under Section 17. The Court noted that the Tribunal itself recorded (para 39) that it had not formed any definitive opinion on the import and effect of the force majeure clause and that evidence was yet to be adduced. In those circumstances an order requiring deposit for periods of complete closure due to lockdown was not justified. Applying the record of complete closures (specified in the judgment), the Court modified the interim direction so that the appellant must deposit the rental amounts for the period other than the periods of complete lockdown, while withholding deposit obligations for the periods of complete closure, subject to final adjudication. The modification is confined to the exercise of interim powers under Section 17 and does not decide the merits of the force majeure plea. [Paras 6, 7]

Order directing deposit of the entire rental amount for March 2020 to December 2021 is modified: appellant to deposit rent for periods other than the specified periods of complete lockdown; no deposit to be directed for periods of complete closure, subject to final adjudication.

Force majeure - Arbitral Tribunal's power under Section 17 - Whether the question of applicability of the force majeure clause (clause 29) requires adjudication by the Arbitral Tribunal and the effect of remand on interim directions. - HELD THAT: - The Court held that the applicability of the force majeure clause to the periods of complete closure remains a matter to be finally adjudicated by the Arbitral Tribunal on merits. The Court expressly remitted the issue to the Tribunal to consider force majeure in accordance with law and on its own merits uninfluenced by the present order, and kept open all contentions available to either party. The interim directions in this order are confined to the Section 17 applications and shall have no bearing on the final determination of liability to pay rent for the periods in question. The Court directed expeditious conclusion of arbitration, preferably within nine months, subject to cooperation of the parties. [Paras 7]

Matter remitted to the Arbitral Tribunal to adjudicate the force majeure contention on merits and in accordance with law; interim modification confined to Section 17 proceedings; arbitration to be concluded preferably within nine months.

Final Conclusion: Appeal partly allowed: interim order directing deposit of entire rent for March 2020-December 2021 set aside to the extent that deposits shall not be directed for periods of complete lockdown; deposits for remaining periods to be made as directed, and the Arbitral Tribunal is remitted to decide the force majeure plea on merits within the stated timeframe.

Presumption under Section 139 of the Negotiable Instruments Act - Obligation on accused to rebut statutory presumption - Mere denial of debt is insufficient to rebut presumption - Signed cheque and dishonour by bank as prima facie proof - Revisional jurisdiction to correct perverse concurrent findings - Remand for fresh appreciation and for adducing rebuttal evidence

Presumption under Section 139 of the Negotiable Instruments Act - Signed cheque and dishonour by bank as prima facie proof - Obligation on accused to rebut statutory presumption - Effect of admission of signature on cheque and bank dishonour under Section 139 N.I. Act and the consequent burden on the accused to rebut the statutory presumption. - HELD THAT: - The Court held that once it is established that the cheques relate to the accused's account, are duly signed by him and have been dishonoured for insufficiency of funds, a mandatory statutory presumption arises under Section 139 that the cheque was issued for discharge of a debt or liability. That presumption is a presumption of law which shifts the evidential burden onto the accused to adduce evidence to rebut it. The judgment reiterates settled precedents that mere assertions or plausible explanations are not enough; the accused must bring forward cogent, probative material such that the court can reasonably conclude that the cheque was not issued in discharge of any debt or liability. The Court found that the accused here admitted signatures and did not lead any rebuttal evidence to displace the presumption, so the statutory presumption applied and required appropriate consideration by the trial court. [Paras 18, 19, 22, 23, 24]

Held that the statutory presumption under Section 139 arose on admitted execution and dishonour of the cheques and the accused bore the evidential burden to rebut it.

Mere denial of debt is insufficient to rebut presumption - Signed blank cheque and filling up by payee - Whether the accused's plea that a blank cheque was given for business purposes and later filled in by the complainant, or mere denial of the existence of debt, suffices to rebut the presumption under Section 139. - HELD THAT: - The Court affirmed that denial alone is inadequate to discharge the accused's burden; authoritative decisions were cited to the effect that even a voluntarily signed blank cheque, if handed over and later filled in by the payee, does not per se invalidate the cheque. To rebut the presumption, the accused must lead evidence showing a reasonable possibility of non-existence of debt (for example, evidence of coercion, theft of the cheque, or other cogent circumstances). In the present case the accused claimed issuance of a blank cheque but led no rebuttal evidence; accordingly his plea was insufficient to negate the statutory presumption. [Paras 19, 20, 21, 22, 23]

Held that mere denial or unproved contention of a blank cheque being misused did not rebut the presumption; accused needed to adduce evidence which he did not.

Revisional jurisdiction to correct perverse concurrent findings - Remand for fresh appreciation and for adducing rebuttal evidence - Whether interference in revisional jurisdiction was warranted to set aside the concurrent acquittals and remit the matter for fresh appreciation. - HELD THAT: - The Court observed that both trial and appellate courts recorded findings favourable to the complainant on dishonour and service of demand notice but nonetheless acquitted the accused on the ground that the complainant had not proved the underlying debt to the Court's satisfaction. The High Court concluded that the courts below overlooked the legal import of the admitted cheques and the absence of rebuttal evidence by the accused. Finding that the concurrent findings were legally unsustainable in that respect, the Court entertained revisionary interference. The conviction was not entered at the High Court stage; instead the acquittal was set aside and the matter remitted to the trial court for fresh adjudication, including an opportunity for the accused to adduce evidence to rebut statutory presumptions within a prescribed timeframe. [Paras 24, 25, 26]

Set aside the orders of acquittal and remanded the case to the trial court for fresh appreciation and for the accused to adduce rebuttal evidence within three months.

Final Conclusion: The High Court held that admitted signature on cheques and their dishonour attract the mandatory presumption under Section 139 N.I. Act which the accused must rebut by adducing evidence; mere denial is not sufficient. Finding that the courts below failed to properly apply this legal principle, the Court set aside the concurrent acquittals and remanded the matter to the trial court for fresh consideration and for the accused to adduce evidence to rebut the presumption within three months.

Offence under section 138 of the Negotiable Instruments Act - Presumption under section 139 of the Negotiable Instruments Act - Service of statutory demand notice on corporate officer - Vicarious liability of company officers for corporate cheque dishonour - Sentencing: prohibition on imprisonment of corporate entity and modification of default sentence

Offence under section 138 of the Negotiable Instruments Act - Presumption under section 139 of the Negotiable Instruments Act - Conviction of the company and its officers under section 138 NI Act was maintainable and the presumption under section 139 arose against the accused who failed to rebut it. - HELD THAT: - The complainant proved execution of the agreement, receipt of the advance, issuance and dishonour of the cheque and service of demand notice. The accused-officers admitted receipt of the advance, execution of the agreement and that the agreement was not implemented by the company. The return memo showing dishonour for insufficiency of funds was on record and there was no evidence of refund. In these circumstances the statutory presumption under section 139 of the NI Act arose that the cheque was received for discharge of debt or liability; the accused failed to rebut that presumption by adducing proof. Having considered the evidence and applicable principle that the presumption must be rebutted by proof and not by mere explanation, the court found no infirmity in the conviction under section 138 NI Act and upheld it. [Paras 16, 17, 19, 20]

Conviction under section 138 NI Act upheld as the presumption under section 139 arose and was not rebutted.

Service of statutory demand notice on corporate officer - Vicarious liability of company officers for corporate cheque dishonour - Service of the demand notice on the managing director of the accused company was sufficient and prosecution of the company officers was lawful; an accounts director who is an officer cannot avoid liability by saying notice was not served on her where company liability and their authority to operate accounts is admitted. - HELD THAT: - The complaint impleaded the company and its officers. The accused-officers admitted they were authorised to operate the company's accounts and that the company had received the advance and failed to transfer land or refund the amount. One accused admitted receipt of the demand notice. Given that the liability is corporate and the officers are vicariously liable as representatives, service of the demand notice on the managing director sufficed and the accounts director could not escape liability on the ground of non-service of notice to her personally. [Paras 18, 19]

Prosecution of the officers lawful; service on the managing director adequate and the accounts director liable notwithstanding her contention of non-service.

Sentencing: prohibition on imprisonment of corporate entity and modification of default sentence - The trial court's sentence was modified because a company cannot be sentenced to imprisonment and it was incorrect to impose the company's default sentence on its officers who already had separate default sentences. - HELD THAT: - The trial court fined the company and, in default, ordered imprisonment to be suffered by its representatives; it also awarded separate fines and default sentences to the two officer-accused. The High Court held that a corporate entity cannot be sentenced to imprisonment and it was erroneous to impose the company's default sentence on the individual officers in addition to their separate default sentences. The sentence was therefore modified: the company to pay the fine; the two officer-accused to pay separate fines and, in default, to suffer simple imprisonment for the specified term; the company's unpaid fine, if not deposited, to be realized from the company's estate. [Paras 21, 22, 24]

Sentence modified to remove any imprisonment of the company; fines and default sentences maintained/adjusted as specified against the individual officers and realization directions given for the company's unpaid fine.

Final Conclusion: The conviction under section 138 NI Act against the company and its two officer-accused is affirmed; the presumption under section 139 was rightly applied and not rebutted. The sentence is modified to correct the error of imposing imprisonment on the company: the company shall pay the fine and its unpaid fine may be realized from its estate; the two officers shall each pay the fine and, if defaulting, suffer the stipulated simple imprisonment.

Presumption that a cheque is issued in discharge of liability under negotiable instruments law - Burden on the accused to rebut the statutory presumption - Complainant's obligation to prove existence of a legally enforceable debt beyond reasonable doubt - Rebuttal of presumption by demonstrating infirmities in documentary evidence - Appellate interference with an acquittal only where the view of the trial court is perverse

Presumption that a cheque is issued in discharge of liability under negotiable instruments law - Complainant's obligation to prove existence of a legally enforceable debt beyond reasonable doubt - Rebuttal of presumption by demonstrating infirmities in documentary evidence - Whether the complainant proved a legally enforceable debt and thereby established the accused's liability under the cheque issued in his favour - HELD THAT: - The court acknowledged the statutory presumption favourable to the complainant but emphasised that the complainant must still establish the existence of an enforceable debt beyond reasonable doubt while the accused may rebut the presumption on preponderance of probabilities. The impugned handwritten declaration (Exhibit-8) was examined and found to be a promissory note/declaration rather than a formal agreement; discrepancies were observed in execution, translation, signatures, ink and pen, absence of the accused's signature at the end, overwriting of the date, and the scribe's inability to identify signatories. The complainant's own concession in cross-examination as to uncertainty about having submitted the written document and other inconsistencies undermined the claim of an enforceable loan. In these circumstances the trial court legitimately drew adverse inferences about the genuineness and integrity of the document and concluded that the complainant failed to prove an enforceable debt, enabling the accused to rebut the presumption of liability. [Paras 10, 11, 12, 13, 14]

The complainant failed to prove an enforceable debt; the accused successfully rebutted the initial presumption of liability and the cheque did not establish enforceable liability.

Appellate interference with an acquittal only where the view of the trial court is perverse - Whether the appellate court should disturb the trial court's acquittal of the accused - HELD THAT: - The appellate court reviewed the trial court's findings and the evidence, noting that the trial court's view was a reasonably possible one based on the infirmities and inconsistencies in the prosecution's case. Given the double presumption of innocence arising from the acquittal and the absence of perversity in the trial court's conclusion, there was no valid ground to interfere. The settled principle that an order of acquittal should be disturbed only if perverse was applied. [Paras 15, 16]

The appeal is dismissed and the trial court's acquittal is upheld.

Final Conclusion: The High Court found that the complainant failed to prove an enforceable debt and that the accused had rebutted the statutory presumption; the trial court's acquittal was not perverse and the appeal is dismissed.

Liability under Section 138 of the Negotiable Instruments Act - vicarious liability under Section 141 of the Negotiable Instruments Act - effect of resignation from partnership on criminal liability

Liability under Section 138 of the Negotiable Instruments Act - effect of resignation from partnership on criminal liability - Whether the petitioners, having resigned from the partnership prior to the alleged loan and issuance of cheques, are liable to be proceeded against for the offence under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The petitioners were arraigned as accused in proceedings under Section 138 based on cheques dated 15.07.2017 and 01.08.2017 allegedly issued by the partnership firm to repay a loan taken on 20.01.2015. The petitioners produced partnership records showing resignation effective 01.04.2014 and Form V filed on 12.10.2015 recording deletion of their names from the Register of Firms. The petitioners also served a reply to the statutory notice asserting their resignation prior to the transaction. The court found that, on the materials placed before it, the petitioners were not partners of the firm at the time of the borrowal or at the time of issuance of the cheques and therefore no case was made out to fasten liability on them under Section 138. The judgments concerning vicarious liability under Section 141 (requiring specific averments that a person was in charge of or responsible for the conduct of business) were held inapplicable because the factual position established resignation before the relevant events. Having regard to the records and the absence of evidence that the petitioners retained partnership status or control at the relevant times, the court concluded that continued proceedings against them would be unwarranted and an abuse of process. [Paras 11, 12, 13]

Proceedings in S.T.C.No.46 of 2018 are quashed insofar as the petitioners are concerned.

Final Conclusion: The Criminal Original Petition is allowed and the trial proceedings in S.T.C.No.46 of 2018 are quashed as against the petitioners, who had resigned from the partnership prior to the loan and issuance of the cheques and therefore cannot be held liable under Section 138.

Vicarious liability of company officers - maintainability of criminal proceedings against individuals without arraigning the corporate entity - doctrine of strict construction in corporate criminal liability - requirement that the company must be prosecuted before extending liability to its officers

Maintainability of criminal proceedings against individuals without arraigning the corporate entity - vicarious liability of company officers - The complaints and consequent criminal proceedings against the petitioners in their individual capacities, without making the Company a party, are not maintainable. - HELD THAT: - The Court followed the reasoning in ANEETA HADA which applies the doctrine of strict construction to corporate criminal liability and holds that commission of the offence by the company is an express condition precedent to attract vicarious liability of its officers. The court noted that an individual being described as a director does not substitute for arraigning the juristic person itself and that proceedings initiated only against directors or officers, without naming the company, fail the requirement established by the Apex Court. The High Court observed that its earlier orders applying the same principle render complaints filed by the Labour Department against individuals, where the corporate entity was not made a party, not maintainable, and that identical facts and legal issues in the present petition lead to the same result.

The petition is allowed and the criminal proceedings against the petitioners in Spl.C.C. No. 96/2016 are quashed for want of maintainability for not arraigning the Company.

Final Conclusion: The High Court allowed the petition and quashed the impugned order and all proceedings against the petitioners in Spl.C.C. No. 96/2016, holding that prosecutions against individuals cannot be maintained where the corporate entity has not been made a party, consistent with ANEETA HADA; the State remains at liberty to take action in accordance with law.

Initial presumption under Section 139 of the Negotiable Instruments Act - legally enforceable debt or liability - rebuttal of presumption by contradictory evidence - use of blank cheque as security and filling up by bearer - admissibility of commercial tax record as corroborative evidence - competence of firm representative to give evidence

Initial presumption under Section 139 of the Negotiable Instruments Act - legally enforceable debt or liability - Whether the complainant proved that the cheque was issued for a legally enforceable debt and the accused remained guilty under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The court held that where the drawer does not deny his signature on the cheque, the holder is entitled to the initial presumption under Section 139 that the cheque was issued for a legally enforceable debt. The appellant proved the underlying transaction by producing the invoice (Ex.P2), account statement (Ex.P3) and the impugned cheque; presentation and return for insufficient funds were established. The reverse burden on the accused required him to produce satisfactory rebuttal evidence. The accused's plea that the cheque was blank and issued only as security was considered, but the court observed that once a specific sale is effected and remains unpaid the holder may fill up and present a signed negotiable instrument; under Section 20 the person who signs and delivers a negotiable instrument is liable for the amount filled in by the bearer. Applying these principles to the evidence, the court found the presumption unrebutted and affirmed culpability under Section 138. [Paras 11, 12, 13, 18]

The accused is guilty under Section 138 of the Negotiable Instruments Act as the complainant proved a legally enforceable debt and the initial presumption was not satisfactorily rebutted.

Rebuttal of presumption by contradictory evidence - admissibility of commercial tax record as corroborative evidence - Whether the discrepancy in the commercial tax record (Ex.X1) and the account entries constituted a valid rebuttal of the presumption in favour of the complainant. - HELD THAT: - The appellate court had treated a numerical discrepancy between totals in Ex.X1 and the invoice totals as casting doubt and therefore as rebuttal. The High Court analysed Ex.X1 and observed that the difference arose from the exclusion of the Value Added Tax component by the appellate court. When the VAT element deducted (as shown in Ex.X1) is added back, the totals reconcile with the invoices. The Trial Judge's approach, which treated the tax element as part of the transaction, was correct. Therefore the alleged discrepancy did not amount to a satisfactory rebuttal of the presumption drawn under Section 139. [Paras 8, 14]

The discrepancy in Ex.X1 does not rebut the presumption; the figures reconcile when VAT is accounted for and do not negate the genuineness of the transaction.

Competence of firm representative to give evidence - Whether PW1 was an authorised and competent representative of the appellant-firm to testify and whether want of specific documentary acceptance of authority defeated his evidence. - HELD THAT: - The court noted that PW1 was the Manager of the firm authorised by the directors to represent the firm; subsequent change of personnel does not nullify the firm's right to be represented. Although some directors had not signed the authorisation and there was no documentary acceptance by PW1 on the record, neither the firm nor PW1 disputed the authorization. The court held that the failure to produce a contemporaneous acceptance or signatures of all directors did not render PW1 incompetent; the institutional continuity of the firm and uncontested representation sufficed for admissible testimony. [Paras 15]

PW1 was a competent and authorised representative to tender evidence on behalf of the appellant-firm.

Final Conclusion: Criminal Appeal allowed; the judgment of the appellate court reversing conviction is set aside. The accused is held guilty under Section 138 of the Negotiable Instruments Act and the trial court's sentence and direction to secure custody for the punishment awarded are restored.