TaxTMI Updates e-Newsletter
Apr 23,2022

Summary order. Petition seeking quashing of order dated 22.10.2021 of provisional attachment under provisional attachment to protect revenue (Section 83, CGST Act, 2017) listed for further consideration; respondent directed to file counter-affidavit within one week and matter posted to 27.04.2022.

Principles of natural justice - show cause notice under Section 74 of the JGST Act - summary of show cause notice not substituting a formal show cause notice - opportunity of personal hearing under Section 75(4) and 75(5) of the JGST Act - antedated adjudication order vitiates proceedings - quashing of adjudication order for procedural infirmity

Show cause notice under Section 74 of the JGST Act - summary of show cause notice not substituting a formal show cause notice - principles of natural justice - Adjudication proceedings initiated and adjudication order passed without issuance of a proper show cause notice under Section 74 are void for violation of principles of natural justice. - HELD THAT: - The Court held that proceedings under Section 74, which allege fraud or willful misstatement/suppression, require a show cause notice specifying the charges so that the person proceeded against can make an effective defence. A mere issuance of Form GST DRC 01 as a 'summary of show cause notice' without specifying the foundational allegations and without meeting the statutory ingredients of a notice under Section 74 cannot substitute a proper show cause notice. Reliance on the Coordinate Bench decision in M/s NKAS Services Pvt. Ltd. established that vague or conclusory notices deny a reasonable opportunity to the noticee and vitiate the proceedings. Applying that principle, the Court found the statutory requirements unmet and the adjudication order to be non est in law. [Paras 16, 17, 18]

The summary of show cause notices dated 14.03.2020 and the adjudication order are quashed insofar as they were preceded by no proper show cause notice; the impugned orders are set aside.

Opportunity of personal hearing under Section 75(4) and 75(5) of the JGST Act - principles of natural justice - quashing of adjudication order for procedural infirmity - Passing of adjudication order without affording opportunity of personal hearing and in disregard of Sections 75(4) and 75(5) constitutes violation of natural justice and warrants setting aside the order. - HELD THAT: - Sections 75(4) and 75(5) require that an opportunity of hearing be granted where an adverse decision is contemplated, and adjournments be allowed if sufficient cause is shown. The record showed that Form GST DRC 01 did not fix any hearing date and no personal hearing was recorded; the adjudication order was passed on the first recorded date after issuance of the summary notice. The Court found this to be a stark disregard of the statutory scheme and principles of natural justice, independently justifying quashing of the adjudication order. [Paras 21, 23]

The adjudication orders are quashed for failure to afford the statutory opportunity of hearing and for breach of natural justice.

Antedated adjudication order vitiates proceedings - quashing of adjudication order for procedural infirmity - Discrepancies in dates of adjudication order and absence of corresponding entries in the order sheet (suggesting an antedated or unrecorded order) amount to serious lacunae in the proceedings and militates against the validity of the orders. - HELD THAT: - The Court observed that the adjudication order produced in the counter affidavit bore a date which was not reflected in the order sheet and that the summary of order elsewhere referenced a different date. The State could not satisfactorily explain the discrepancy. While the Court did not base its sole conclusion on malice, it held that such defects in recording and dating the proceedings contributed to the procedural infirmity and reinforced the need to quash the impugned orders. [Paras 24, 25, 26]

The inconsistencies and failure to record the adjudication proceedings contribute to invalidating the orders; the impugned orders are quashed.

Quashing of adjudication order for procedural infirmity - administrative direction to tax authorities - Court directs administrative remedial action to prevent recurrence of procedural lapses by State Tax authorities. - HELD THAT: - Having found systemic lapses in adherence to prescribed procedure in the present and similar matters, the Court directed the Commissioner of State Tax to issue appropriate guidelines/circular/notification detailing the procedure to be followed in issuance of show cause notices, adjudication and recovery proceedings so that due process is observed in future adjudications. The Court noted this step was warranted in the public interest given the impact on revenue administration and taxpayers' rights. [Paras 26, 27]

Commissioner of State Tax directed to issue guidelines/circulars clarifying the procedure for issuance of show cause notices, adjudication and recovery; respondents permitted to initiate fresh proceedings in accordance with law.

Final Conclusion: The writ petitions are allowed. The summary of show cause notices dated 14.03.2020, the adjudication order dated 13.08.2020 (and related summaries dated 11.09.2020) issued against the petitioner for Financial Years 2017 18 and 2018 19 are quashed and set aside for failure to issue a proper show cause notice, denial of statutory opportunity of hearing and procedural lacunae; respondents are at liberty to initiate fresh proceedings in accordance with law and the Commissioner of State Tax is directed to issue procedural guidelines.

Transitional input tax credit - TRAN-1 - belated filing of TRAN-1 - sub rule (1A) to Rule 117 - verification of unutilised credit on cut off date - credit to electronic cash ledger - cash refund of unutilised input tax credit

Transitional input tax credit - belated filing of TRAN-1 - sub rule (1A) to Rule 117 - Entitlement of the petitioner to transitional input tax credit despite not having filed Form TRAN-1 within the original time line. - HELD THAT: - The Court recognised that the petitioner did not file TRAN-1 by the cut off date because the factory was closed following a major accident. While the respondents contend that the benefit under sub rule (1A) to Rule 117 is available only to those who had filed TRAN 1 by 27.12.2017, the Court observed that transitional input tax credit, being the equivalent of cash for discharging tax liability, cannot be denied merely on account of technical difficulties or closure. The Court did not order an unconditional belated filing of TRAN 1 but directed administrative verification of whether unutilised input tax credit existed on the cut off date (date of accident) and indicated that, if such credit existed, it ought to be made available to the petitioner by appropriate means. [Paras 8]

Respondents directed to verify existence of unutilised input tax credit on 01.12.2016 and, if found, to allow the petitioner the corresponding transitional credit.

Verification of unutilised credit on cut off date - credit to electronic cash ledger - cash refund of unutilised input tax credit - Course of action to be followed if unutilised input tax credit is found to have existed on the relevant cut off date. - HELD THAT: - The Court specified the practical method for effecting relief: respondents are to examine the petitioner's returns, particularly October and November 2016, to ascertain the quantum of unutilised input tax credit in respect of input service tax and capital goods as on 01.12.2016. If such unutilised credit is established, the respondents must either make a suitable credit entry in the petitioner's electronic cash ledger or grant a cash refund, and allow that credit in the petitioner's regular returns. This direction remits the factual verification and consequential grant of relief to the respondents for action in accordance with the Court's observations. [Paras 8, 9]

Respondents directed to verify monthly returns for October and November 2016 and to allow any unutilised credit existing on 01.12.2016 by crediting the electronic cash ledger or by cash refund; writ petition disposed accordingly.

Final Conclusion: Writ petition disposed by directing respondents to verify whether unutilised input tax credit existed on 01.12.2016 from the petitioner's returns and, if so, to allow such credit by suitable entry in the electronic cash ledger or by cash refund; no order as to costs.

Summons for personal appearance under Section 70 of the Central Goods and Services Tax Act, 2017 - Appearance by authorised representative under Section 116 of the Central Goods and Services Tax Act, 2017 - Personal appearance for examination on oath or affirmation - Administrative FAQs and executive instructions cannot override statutory mandate - Procedure for recording statement and safeguards per Paramvir Singh Saini - Authority's discretion to consider change of date or relief for personal disability

Appearance by authorised representative under Section 116 of the Central Goods and Services Tax Act, 2017 - Personal appearance for examination on oath or affirmation - Whether a person served with a summons under Section 70, requiring personal appearance, is entitled to appear through an authorised representative under Section 116 of the CGST Act, 2017. - HELD THAT: - The Court held that Section 116 itself excludes representation by an authorised representative where a person is required under the Act to appear personally for examination on oath or affirmation. Since summons in the present case under Section 70 require the petitioner to appear personally for recording of statement, the proviso in Section 116 is applicable and the statutory right to be represented does not extend to cases where personal appearance for examination on oath or affirmation is mandated. In the absence of any specific illegality or malice alleged against the issuing authority, no relief to permit representation in place of personal appearance can be granted.

Petitioner's request to appear through an authorised representative in lieu of personal appearance pursuant to summons under Section 70 is rejected.

Administrative FAQs and executive instructions cannot override statutory mandate - Summons for personal appearance under Section 70 of the Central Goods and Services Tax Act, 2017 - Whether clarifications in FAQs or administrative instructions can permit representation by authorised representative despite the statutory exclusion in Section 116. - HELD THAT: - The Court observed that administrative FAQs annexed to the petition do not, and cannot, expand the statutory entitlement to representation where the statute itself requires personal appearance. Granting such an administrative dispensation in cases expressly excluded by statute would be contrary to law. Consequently, reliance on FAQs to permit representation in cases mandating personal appearance is misplaced.

FAQs or administrative instructions do not entitle the petitioner to be represented where the statute requires personal appearance.

Authority's discretion to consider change of date or relief for personal disability - Whether the Court should direct the authority to allow representation or grant other reliefs (such as change of date) instead of personal appearance. - HELD THAT: - The Court held that limited, case-specific requests-for example, for rescheduling appearance or granting relief on grounds of personal disability-are matters for the authority's discretion and may be applied for before the authority. Absent a statutory entitlement to representation, the High Court will not issue a writ directing the authority to permit representation; however it remains open to the petitioner to seek appropriate administrative relief from the authority.

Relief in the nature of permitting representation or altering the date for personal appearance is for the authority to consider; no writ will be issued to that effect.

Procedure for recording statement and safeguards per Paramvir Singh Saini - Summons for personal appearance under Section 70 of the Central Goods and Services Tax Act, 2017 - Whether procedural safeguards laid down by the Supreme Court in Paramvir Singh Saini are to be followed while recording statements pursuant to summons under Section 70. - HELD THAT: - The Court noted and directed that the respondents must adhere to the procedures and safeguards indicated by the Supreme Court in Paramvir Singh Saini, including measures intended to ensure proper oversight and recording (such as installation and use of CCTV and recording equipment in interrogation/statement-recording areas as specified in that decision). The observation was recorded as a mandatory procedural expectation to be followed when recording the petitioner's statement pursuant to the summons.

Respondents are to follow the procedures and safeguards laid down in Paramvir Singh Saini while recording the petitioner's statement pursuant to summons under Section 70.

Final Conclusion: Writ petition dismissed. The Court refused to permit representation in lieu of personal appearance where a summons under Section 70 requires personal examination; administrative FAQs cannot override the statutory exclusion in Section 116; limited administrative reliefs are to be sought from the authority; and the respondents must follow procedural safeguards laid down in Paramvir Singh Saini when recording statements.

Utilisation of PLA balance - carry forward of cenvat credit - transitional provisions under Section 140 of the Central Goods and Services Tax Act, 2017 - refund remedy - transfer to Electronic Credit Ledger

Utilisation of PLA balance - carry forward of cenvat credit - transitional provisions under Section 140 of the Central Goods and Services Tax Act, 2017 - Whether the writ petition seeking a declaration that the petitioner may utilise the balance in its Personal Ledger Account for discharge of liabilities under the CGST Act, 2017 was maintainable and could be finally adjudicated by this Court. - HELD THAT: - The Court recorded the parties' rival contentions: respondents contend that Section 140 permits carry forward of cenvat credit to the Electronic Credit Ledger but does not permit carry forward or utilisation of amounts deposited in the Personal Ledger Account (PLA), and further noted that the petitioner could pursue a refund remedy. The petitioner sought leave to pursue an appropriate application for refund before the competent authority. The Court did not consider or pronounce on the merits of the legal contention regarding entitlement to utilise PLA balance or the correct interpretation of the transitional provisions. Instead, having noted the petitioner's willingness to approach the competent authority, the writ petition was disposed of without adjudication on merits and with an express direction that any refund application filed by the petitioner be considered in accordance with law.

Writ petition disposed of without deciding the substantive question; petitioner permitted to pursue a refund application which respondents must consider in accordance with law.

Final Conclusion: The petition was disposed of by the Court without adjudicating the substantive dispute over utilisation of PLA balance or carry forward under Section 140; the petitioner is permitted to file an appropriate refund application, which shall be considered by the competent authority in accordance with law.

Summary order. The Court recorded procedural irregularities (absence of a proper show cause notice under Section 74(1) of the JGST Act and inconsistencies in dates between the adjudication order and its summary), reserved final order, directed listing under the heading for orders on 31.03.2022, entrusted case records to the Court Master for perusal and disposal, and dispensed with the personal presence of the officers.

Prohibited by law - Explanation 1 to Section 37(1) of the Income Tax Act, 1961 - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - Regulation 6.4.1 and 6.4.2 - retrospective effect of CBDT Circular No. 5/2012 from 14.12.2009 - reopening of assessment under Section 147 - omission to disclose fully and truly all material facts - mere change of opinion

Explanation 1 to Section 37(1) of the Income Tax Act, 1961 - prohibited by law - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - Regulation 6.4.1 and 6.4.2 - retrospective effect of CBDT Circular No. 5/2012 from 14.12.2009 - Deductibility of payments described as 'referral to doctors' by a hospital under Section 37(1) in view of Explanation 1, the amended Indian Medical Council Regulations and CBDT Circular No.5/2012 - HELD THAT: - The Court applied the reasoning of the Supreme Court in M/s Apex Laboratories Pvt. Ltd., holding that where acceptance of freebies or commissions by medical practitioners is prohibited and punishable under the Indian Medical Council Regulations, the corresponding expenditure incurred by suppliers or allied health providers cannot be treated as allowable business expenditure under Section 37(1). The CBDT Circular No.5/2012 was treated as clarificatory and effective from the date of implementation of the regulation (14.12.2009). The Court emphasised the public-interest object of the Regulations to prevent corruption and avoid passing hidden costs to patients, and held that allowing deduction for such payments would defeat that object and permit profiting from conduct that is prohibited by law. The petitioner's contention that hospitals are not themselves medical practitioners and therefore their payments cannot be prohibited was rejected on the ground that participation in and enabling of a prohibited act falls within the ambit of Explanation 1. Consequently the expenditure characterized as referral fees/commissions to doctors is disallowable under Explanation 1 to Section 37(1).

Payments described as 'referral to doctors' are disallowable under Explanation 1 to Section 37(1) in light of the Indian Medical Council Regulations and CBDT Circular No.5/2012 (effective from 14.12.2009); questions (i), (ii) and (iii) answered in favour of the revenue.

Reopening of assessment under Section 147 - omission to disclose fully and truly all material facts - mere change of opinion - Validity of reopening assessments for AY 2011-12 and 2012-13 under Section 147/148 after the four-year period where the Assessing Officer relied on the same material considered in the original assessment and did not record any omission or failure by the assessee to disclose material facts - HELD THAT: - It was admitted and appears from the recorded reasons that the notices under Section 148 were issued after the four-year period. The Assessing Officer's recorded reasons show that the expenditure in question was considered and allowed in the original assessment and that no new material was alleged to have emerged post-assessment; moreover, the recorded reasons did not state any omission or failure by the assessee to disclose fully and truly all material facts. On that basis the Court held that the statutory condition precedent for reopening after four years was not satisfied and that reopening on the self-same material amounted to a mere change of opinion, which is impermissible. Consequently the impugned notices and all proceedings consequent thereto were quashed as beyond jurisdiction.

The reopening notices under Section 148/Section 147 issued after the four-year period are invalid; questions (iv) and (v) answered in favour of the assessee and the impugned notices and subsequent proceedings are quashed.

Final Conclusion: The Court held that (a) payments made as 'referral to doctors' are not deductible under Section 37(1) by reason of Explanation 1, the Indian Medical Council Regulations and CBDT Circular No.5/2012 (effective from 14.12.2009), and (b) the reassessment notices for AY 2011-12 and 2012-13 issued after the four-year period were unlawful because no omission to disclose material facts or new material was shown; accordingly the notices under Section 148 and all consequent proceedings are quashed.

Reopening of assessment - assumption of jurisdiction under the First Proviso to Section 147 - change of opinion - objections to reopening of assessment - prematurity of writ challenge under Article 226 - fresh tangible material - liberty to file reply/representation in reassessment proceedings

Prematurity of writ challenge under Article 226 - objections to reopening of assessment - liberty to file reply/representation in reassessment proceedings - Whether the High Court should interfere with the order rejecting the assessee's objections to reopening of the completed assessment prior to conclusion of reassessment proceedings. - HELD THAT: - The High Court held that the impugned order and reasons recorded for reopening merely justified why proceedings under Section 147/148 were initiated and did not reach a definite conclusion on recomputing the assessee's income. The learned Judge granted the assessee liberty to file a reply/representation and directed completion of reassessment within a fixed time. Given that the reassessment proceedings had not culminated in a final speaking order on merits or jurisdiction, the Court concluded that interference by writ at that interlocutory stage was not warranted. The Court observed that disputed questions of fact and the ultimate question whether the completed assessment deserves confirmation are matters to be determined in the reassessment proceedings, and therefore refused to disturb the order rejecting objections to reopening. [Paras 10, 11]

Writ interference declined; appellant granted liberty to participate in reassessment by filing reply/representation and challenge to reopening not entertained at interlocutory stage.

Assumption of jurisdiction under the First Proviso to Section 147 - reopening of assessment - fresh tangible material - change of opinion - Whether the question of alleged lack of jurisdiction in reopening (for want of fresh material / being a mere change of opinion) was finally adjudicated by the High Court. - HELD THAT: - The Court did not decide the substantive jurisdictional controversy on the merits. While counsel for the assessee argued that the reasons recorded did not disclose fresh material and thus reopening was a change of opinion, the High Court observed that the assessing officer had recorded reasons asserting the existence of fresh tangible material and that the objections had been considered and rejected. The Court expressly left open the contention on jurisdiction, noting it is open to the appellant to press all contentions, including jurisdictional objections, during the reassessment proceedings and in any final order arising therefrom. Consequently, the jurisdictional issue was not finally adjudicated and must be considered in the reassessment process or in a final order. [Paras 10]

Jurisdictional objection not finally decided; appellant may raise and seek adjudication of the jurisdictional issue in the reassessment proceedings or against any final reassessment order.

Final Conclusion: The writ appeal is dismissed. The High Court declined to interfere at the interlocutory stage with the order rejecting objections to reopening the 2014-15 assessment, granted the assessee liberty to file reply/representation in the reassessment proceedings, and left substantive jurisdictional questions to be decided during the course of reassessment or in any final order.

Section 54 exemption - qualifying investment in new residential property - pre-possession construction or improvement expenditure - time limit for investment under Section 54 - genuineness of expenditure as a determinative factor

Section 54 exemption - pre-possession construction or improvement expenditure - time limit for investment under Section 54 - genuineness of expenditure as a determinative factor - Expenditure incurred for making the newly acquired residential property habitable prior to possession but within the statutory time limit qualifies as qualifying investment for exemption under Section 54. - HELD THAT: - The Tribunal found that the assessee incurred bonafide expenditure for making the new house habitable prior to taking possession but within the period prescribed by Section 54. The authorities below had not doubted the genuineness of the payments (including amounts characterised as repair/work and stamp/registration payments). Relying on precedents of the Tribunal - Sri Vidyasagar Dontineni vs. DCIT, Circle 3(1) (Hyderabad Bench) which held that the date of commencement of construction is not material and that completion within the specified period and the period of investment are relevant, and the Coordinate Bench decision in Shriniwas R. Desai vs. ACIT(OSD) which held there is no bar on a buyer incurring construction or supplementary expenditure on a ready-made unit - the Tribunal concluded that additional bona fide expenditure incurred to render the flat habitable falls within the scope of qualifying investment under Section 54. Having regard to the undisputed nature of the payments and the consistent view in the cited Tribunal decisions, the addition made by the lower authorities was held to be without merit and deleted.

Assessee entitled to exemption under Section 54 for the expenditure of Rs. 14,00,000/- claimed; addition deleted and appeal allowed.

Final Conclusion: The appeal is allowed: the Tribunal held that bona fide expenditure incurred to make the newly acquired residential property habitable before possession but within the statutory period qualifies as qualifying investment under Section 54, and directed deletion of the addition made by the lower authorities.

Disallowance of labour charges as percentage of unvouched expenses - ad hoc disallowance of expenses for lack of vouchers - invocation of section 145(3) for determination of income where books/expenditures are not properly vouched

Disallowance of labour charges as percentage of unvouched expenses - Whether the disallowance of labour charges at 7.38% was justified. - HELD THAT: - The Tribunal noted that labour charges (both 'Others' and 'Job work') were not supported by proper vouchers and that for an earlier year the disallowance at 7.38% had been sustained and not agitated by the assessee. Considering these facts and the absence of verifiable supporting documents, the Tribunal held that a percentage disallowance of 7.38% is a just and fair adjustment and upheld the CIT(A)'s reduction to that rate from the AO's higher ad hoc percentage. [Paras 4]

Disallowance of labour charges at 7.38% upheld.

Ad hoc disallowance of expenses for lack of vouchers - Whether the ad hoc disallowance of various expenses (telephone, travelling, factory expenses, machine maintenance, petrol, vehicle repair, etc.) at 10% was sustainable. - HELD THAT: - The Tribunal observed that the AO recorded that these expense heads were either not supported by proper vouchers or contained a personal element. Having regard to the assessments in earlier years where a similar 10% disallowance had been sustained, the Tribunal found no reason to interfere with the CIT(A)'s confirmation of the ad hoc disallowance and approved the view taken by the authorities below. [Paras 6]

Ad hoc disallowance of various expenses at 10% sustained.

Invocation of section 145(3) for determination of income where books/expenditures are not properly vouched - Whether the Assessing Officer was justified in invoking section 145(3) of the Act. - HELD THAT: - Given that significant expenses were supported by self-prepared vouchers and not properly vouched, the Tribunal accepted the AO's exercise of power under section 145(3) to determine the taxable income. The Tribunal found the invocation of the provision to be justified in the factual matrix of unverified and self-made vouchers. [Paras 7]

Invocation of section 145(3) upheld.

Final Conclusion: All grounds of appeal are dismissed and the order of the CIT(A) is upheld; the Tribunal affirms the percentage disallowances and the invocation of section 145(3), resulting in dismissal of the appeal.

Taxability of profits on sale/redemption of investments of a general insurance company under the First Schedule and section 44 - effect of deletion and subsequent reinsertion of clause (b) of Rule 5 of the First Schedule - non-applicability of section 14A to computation of income of insurance companies under section 44 and First Schedule - treatment of contributions collected under Public Liability Fund Act and applicability of section 43B - allowability of risk inspection charges and limits on ad hoc disallowances - consequences of administrative circulars and consistent practice of the Revenue

Taxability of profits on sale/redemption of investments of a general insurance company under the First Schedule and section 44 - effect of deletion and subsequent reinsertion of clause (b) of Rule 5 of the First Schedule - consequences of administrative circulars and consistent practice of the Revenue - Whether profits on sale/redemption of investments and loss on amortization of securities are excluded from the computation of income of the assessee (general insurance company) under section 44 read with the First Schedule for A.Y. 2007-08. - HELD THAT: - The Tribunal followed its earlier detailed decisions in the assessee's own case (lead year A.Y. 2003-04 and subsequent years) and the Calcutta High Court decision in National Insurance Co. Ltd., holding that deletion of clause (b) of Rule 5 of the First Schedule (w.e.f. 01-04-1989) and the explanatory CBDT Circular indicate the legislative intent not to tax such gains. Section 44, being a non-obstante special provision prescribing computation for insurance business by reference to the First Schedule, displaces other provisions insofar as computation is concerned. Absent any enabling provision in the First Schedule after deletion of Rule 5(b), the Department could not add back profit on sale/redemption of investments, and corresponding amortization losses debited as per the First Schedule are to be allowed in computing insurance business income. The Tribunal therefore allowed the assessee's claim following consistent judicial and tribunal precedents.

Profits on sale/redemption of investments and corresponding amortization loss are not taxable/are allowable respectively for computation of the assessee's insurance business income under section 44 and the First Schedule for A.Y. 2007-08; Revenue's appeal dismissed on this point and assessee's ground allowed.

Treatment of contributions collected under Public Liability Fund Act and applicability of section 43B - diversion of income/assesse acting as conduit for Government fund - Whether contribution collected towards Environmental Relief Fund (ERF) under Public Liability Fund Act constituted income of the assessee and was disallowable under section 43B for A.Y. 2007-08. - HELD THAT: - The Tribunal accepted the assessee's position that amounts collected towards ERF were identified in policy schedules, were collected as a statutory charge from insureds and that the insurer acted as a conduit/custodian. In absence of a mechanism/rules for remittance until December 2008 and because the amounts were shown as current liabilities (not routed through profit and loss account), the receipts did not constitute the assessee's income and could not be disallowed under section 43B. The Tribunal relied on precedents concerning collection as agent/conduit and the principle of diversion by overriding title.

Disallowance under section 43B in respect of the ERF contribution is deleted; assessee's ground allowed.

Allowability of risk inspection charges and limits on ad hoc disallowances - genuineness of payments to specified parties and consequential disallowance - Extent to which payments for risk inspection charges are deductible and whether adhoc disallowance by the Assessing Officer was sustainable for A.Y. 2007-08. - HELD THAT: - On the facts the Tribunal confirmed the disallowance in respect of amounts linked to specified parties for which direct adverse evidence existed and which the assessee conceded (the specified-party disallowance confirmed). However, the Tribunal held that the Assessing Officer's large adhoc disallowance was unsustainable: having regard to the Tribunal's orders in other assessment years and to the principle that ad hoc disallowance without adverse evidence is impermissible, the adhoc element imposed by the AO was deleted. The result reflects a twofold conclusion: specified-party disallowances supported by evidence may be sustained, but wholesale adhoc disallowances are not permissible in the absence of cogent adverse material.

Disallowance relating to specified parties is confirmed (as conceded by the assessee); the adhoc disallowance by the AO is deleted and reduced to nothing - assessee's appeal partly allowed and Revenue's ground dismissed.

Non-applicability of section 14A to computation of income of insurance companies under section 44 and First Schedule - scope of section 44's non-obstante clause vis-a -vis section 14A - Whether disallowance under section 14A is maintainable in computing the income of the assessee (general insurance company) for A.Y. 2007-08. - HELD THAT: - Relying on Tribunal precedent in the assessee's own case and the Delhi High Court's reasoning in Principal CIT v. Oriental Insurance Co. Ltd., the Tribunal held that section 44 begins with a non-obstante clause and prescribes a special scheme of computation under the First Schedule, excluding the operation of provisions relating to computation (including the exception for deductions contained in sections 28 to 43B). Section 14A, which operates for the purposes of computing total income, is thereby excluded insofar as computation of an insurance business under section 44 and the First Schedule is concerned. Consequently, the Assessing Officer could not travel beyond section 44/First Schedule to invoke section 14A.

Disallowances under section 14A in the assessment are deleted; Revenue's appeals on this point are dismissed and the assessee's cross-objection in respect of non-applicability of section 14A is therefore rendered infructuous.

Retrospective effect of Finance Act, 2022 and treatment of education cess - Whether education cess is deductible for computing income for relevant assessment years and whether the assessee's additional ground on education cess should be allowed. - HELD THAT: - The Tribunal noted that Finance Act, 2022 treats education/cess as part of tax and by amendment (Explanation to section 40) has clarified that 'tax' includes surcharge or cess, with retrospective effect from 1 April 2005. Consequently, the previous practice of allowing deduction for education cess no longer holds and education cess is to be treated as part of income-tax for the purpose of computation.

Assessee's additional ground seeking deduction for education cess is dismissed; education cess is not an allowable deduction.

Final Conclusion: For A.Y. 2007-08 the Tribunal allowed the assessee's challenge to taxation of profits on sale/redemption of investments (and allowed corresponding amortization loss) following its precedents and supporting High Court authority; deleted the ERF-related disallowance under section 43B; confirmed specified-party disallowances in relation to risk inspection charges but struck down the AO's adhoc disallowance; held section 14A inapplicable to computation of an insurance company's income under section 44 and the First Schedule; and dismissed the assessee's claim for deduction of education cess in view of the Finance Act, 2022 amendments.

Deemed dividend under section 2(22)(e) of the Income tax Act - advances in the nature of commercial transactions / business expediency - running account and journal entries not constituting shareholder benefit - precedential value of coordinate bench decisions and reliance on CBDT Circular No.19/2017

Deemed dividend under section 2(22)(e) of the Income tax Act - advances in the nature of commercial transactions / business expediency - running account and journal entries not constituting shareholder benefit - precedential value of coordinate bench decisions and reliance on CBDT Circular No.19/2017 - Whether the addition on account of deemed dividend under section 2(22)(e) is sustainable where the impugned loans/advances were given as commercial/business advances (including by way of journal entries and running accounts) for purchase of land for business purposes. - HELD THAT: - The Tribunal examined the factual and legal characterisation of the advances and applied the coordinate bench finding in the assessee's own earlier matters that the advances were made out of commercial consideration and business expediency for acquiring land to set up wind farms, and therefore were not loans made to confer a benefit on shareholders attracting section 2(22)(e). The coordinate bench had given detailed reasons (including that land was purchased in the names of related entities to meet land ceiling constraints and adjustments were subsequently effected), relied upon judicial precedents and took note of CBDT Circular No.19/2017 which clarifies that trade advances in the nature of commercial transactions do not fall within the scope of 'advances' under section 2(22)(e). The Tribunal found no distinguishing feature in the year under appeal and observed that the Revenue did not advance any contrary reason to displace the coordinate bench conclusion. On that basis the Tribunal held the addition unsustainable and directed deletion. [Paras 10, 11, 12, 13]

The addition of deemed dividend under section 2(22)(e) in the hands of the assessee for AY 2012 13 is deleted; the orders of the lower authorities are reversed and the appeal is allowed.

Final Conclusion: Following the coordinate bench conclusion in the assessee's earlier years and the clarification in CBDT Circular No.19/2017, the Tribunal held that the impugned advances were commercial/business advances and not distributable profits; the deemed dividend addition under section 2(22)(e) for AY 2012 13 is deleted and the appeal is allowed.

Rental income - Annual Letting Value - admissibility of documentary evidence - surrender letter - onus of proof for surrender of leased area - consistency of treatment across assessment years / res judicata principles - notional income not received cannot be taxed

Rental income - Annual Letting Value - admissibility of documentary evidence - surrender letter - onus of proof for surrender of leased area - consistency of treatment across assessment years / res judicata principles - notional income not received cannot be taxed - Whether the addition made by treating Annual Letting Value on the full leased area instead of on the reduced area (allegedly surrendered) was justified. - HELD THAT: - The Tribunal examined the lease, the tenant's letter dated 4.9.2009 confirming surrender of 2,946.34 sq. ft., the rent ledger showing payments from 01.07.2009 for the reduced area, and the assessee's consistent declaration of rent on the reduced area in earlier assessments. The Assessing Officer and the CIT(A) rejected the surrender letter as inadmissible on the ground that it could not substitute a formal signed lease; the Tribunal held that a copy of a relevant document, including a surrender letter written by the tenant to the landlord, constitutes material evidence and cannot be discarded merely because it is not an executed formal agreement, citing Vikrant Dutt Chaudhary on admissibility of copies. The Tribunal further relied on the predecessor Assessing Officer's acceptance of the same rent in the assessment for the preceding year and applied the principle of consistency as explained in Radhasoami Satsang and related authority, observing that where a factual position has been accepted in an earlier year and not challenged, it is impermissible to change that position in a subsequent year without contrary material. No evidence was produced by the Revenue to contradict the assessee's categorical denial of receipt of higher rent or to rebut the tenant's letter and rent ledger entries. On these findings, the Tribunal concluded that notional rent which was neither received nor accrued to the assessee could not be taxed and that the assessee discharged the onus to establish actual rent received. [Paras 7, 8]

The addition based on presumed higher Annual Letting Value was deleted and the appeal was allowed.

Final Conclusion: The Tribunal held that the surrender of part of the leased area was established by the tenant's letter and rent ledger, the assessee consistently declared rent on the reduced area in the preceding year, and no contrary material was produced by the Revenue; accordingly the addition made by treating notional higher rent as taxable was deleted and the assessee's appeal was allowed.

Condonation of delay - substantial justice versus technical bar - Section 43B - disallowance of unpaid taxes - service tax collected but not remitted - Section 36(1)(va) - disallowance for late payment of employee contributions - remand for factual verification of receipt and retention of tax collected

Condonation of delay - substantial justice versus technical bar - Whether the delay of 951 days in filing the appeal (678 pre COVID days) should be condoned. - HELD THAT: - The Tribunal examined the explanation that the assessee, being poorly educated, entrusted appeal work to intermediaries who failed to prosecute the matter before the CIT(A) and that the assessee became aware of the ex parte CIT(A) order only later when consulting a new adviser. Applying the principle that where substantial justice and technical consideration conflict, substantial justice should ordinarily prevail, and noting absence of a departmental counter affidavit challenging bonafides, the Tribunal found the explanation sufficient to prefer substantial justice over a technical bar. The Tribunal therefore exercised discretion to condone the delay and admit the appeal for adjudication on merits. [Paras 5]

Delay condoned and appeal admitted for adjudication.

Section 36(1)(va) - disallowance for late payment of employee contributions - Assessee's challenge to the disallowance of employees' contribution to EPF/ESI by invoking Section 36(1)(va). - HELD THAT: - The Tribunal recorded that the CIT(A) had already deleted the addition relating to employees' contribution to EPF/ESI. As the appellate authority below had set aside that addition, there was no live controversy for the Tribunal to decide. [Paras 6]

Ground is infructuous and dismissed.

Section 43B - disallowance of unpaid taxes - service tax collected but not remitted - remand for factual verification of receipt and retention of tax collected - Whether the amount representing service tax collected but not remitted should be disallowed under Section 43B or requires factual verification as to receipt by the assessee. - HELD THAT: - The Tribunal reviewed conflicting precedents and the submissions that Section 43B applies only when the liability is claimed as a deduction in the P&L. The AO had found that the assessee actually collected service tax and did not remit it; the assessee disputed that factual finding. Noting authorities holding that unpaid service tax collected and retained may attract Section 43B if it formed part of receipts, but also recognizing precedents directing factual examination of whether the amount was actually collected and retained, the Tribunal concluded that the factual question had not been sufficiently verified in the impugned proceedings. Therefore the matter was remitted to the AO to examine and ascertain whether the assessee actually received and retained the service tax such that Section 43B could be invoked; if so, disallowance may follow, otherwise not. [Paras 8]

Issue remitted to the AO for factual verification whether the assessee actually received and retained the service tax; appeal otherwise dismissed on this ground unless AO finds in favour of disallowance.

Final Conclusion: The Tribunal condoned the delay and admitted the appeal. The challenge to disallowance under Section 36(1)(va) is infructuous. The service tax addition under Section 43B was not finally adjudicated but remitted to the Assessing Officer for factual verification as to whether the assessee actually collected and retained the service tax; appeal treated as partly allowed for statistical purposes.

Permanent Establishment - Project office as fixed place of business - Preparatory and auxiliary activities - Installation Permanent Establishment - Dependent agent Permanent Establishment - Attribution of profits to PE - Taxability of interest income as income of PE - Interpretation of Double Taxation Avoidance Agreement

Permanent Establishment - Project office as fixed place of business - Preparatory and auxiliary activities - Installation Permanent Establishment - Dependent agent Permanent Establishment - Interpretation of Double Taxation Avoidance Agreement - Attribution of profits to PE - Assessee did not have a Permanent Establishment in India for AY 2015-16. - HELD THAT: - The Tribunal upheld the conclusion of the First Appellate Authority and found no merit in the Revenue's contention that the assessee's project office, its activities, or arrangements with agents gave rise to a PE in India. The Tribunal relied on earlier decisions of the Hon'ble Delhi High Court in the assessee's own cases for prior assessment years, which held that the assessee did not have a PE in India under the DTAA and, consequently, profits attributable to a PE need not be determined. The Assessing Officer had followed the approach of earlier assessments that were subsequently set aside by the High Court; the Tribunal held that those High Court findings and their application by coordinate benches and the CIT(A) were determinative of the present appeal and there was no substance in the Revenue's grounds challenging the non-existence of a PE.

Appeal dismissed on the question of existence of PE; assessee held to have no PE in India for AY 2015-16.

Taxability of interest income as income of PE - Attribution of profits to PE - Interpretation of Double Taxation Avoidance Agreement - Interest income was not taxable as income of a Permanent Establishment for AY 2015-16. - HELD THAT: - The Tribunal endorsed the view accepted by the First Appellate Authority that interest income did not form part of the income of a PE. That conclusion followed from the primary finding that the assessee had no PE in India; therefore, the question of attributing interest income to a PE did not arise. The Tribunal noted that the Assessing Officer's contrary treatment was premised on earlier assessment conclusions which had been set aside by the Hon'ble Delhi High Court in the assessee's own cases, and accordingly found no infirmity in the CIT(A)'s decision to exclude the interest from PE taxation.

Appeal dismissed on the question of taxation of interest as PE income; interest income not taxable as income of a PE for AY 2015-16.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal affirms that the assessee had no Permanent Establishment in India for AY 2015-16 and that interest income is not taxable as income of a PE, relying on prior decisions of the Hon'ble Delhi High Court and coordinate authorities.

Revisionary jurisdiction under Section 263 - Reopening assessment under Section 147 - Application of mind and verification by Assessing Officer - Prejudicial to revenue - Explanation 2 to Section 263

Revisionary jurisdiction under Section 263 - Application of mind and verification by Assessing Officer - Prejudicial to revenue - Explanation 2 to Section 263 - Whether the Principal Commissioner of Income-tax was justified in invoking revisional powers under Section 263 to set aside the assessment framed under Section 147 r.w.s. 143(3) as erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal found on the record that the Assessing Officer reopened the assessment under Section 147 on information regarding alleged cash transactions and contract receipts. During assessment the assessee produced confirmations and bank statements disputing the figures shown in Form 26AS, and the Assessing Officer examined those documents, verified bank statements and confirmations and accepted the assessee's returned income computed under Section 44AE. The Tribunal held that the Assessing Officer did apply his mind and carried out verifications; his acceptance of the assessee's explanation was the result of such verification. Even if the verifications were not exhaustive, that inadequacy did not render the assessment order so vitiated as to attract revisional jurisdiction under Section 263 by treating the order as erroneous and prejudicial to revenue within the meaning of Explanation 2. Accordingly, the Pr. CIT's exercise of power under Section 263 to set aside the assessment was unjustified and liable to be quashed. [Paras 7, 8, 9]

Order under Section 263 dated 09.03.2021 set aside; assessment order dated 05.12.2018 passed under Section 147 r.w.s. 143(3) restored.

Final Conclusion: The Tribunal allowed the appeal, set aside the Principal CIT's revisional order under Section 263 and restored the assessment order passed under Section 147 r.w.s. 143(3) for AY 2015-16, holding that the Assessing Officer had applied his mind and conducted necessary verifications so as not to warrant interference under Section 263.

Arm's Length Price - Management Service Fees - Transactional Net Margin Method (TNMM) - Tested party/least complex entity - Benchmarking and comparable selection - Evidence of services/rendering of services - Transfer Pricing adjustment - Tribunal precedent

Evidence of services/rendering of services - Management Service Fees - Whether the assessee actually received management services from the associated enterprise. - HELD THAT: - The Tribunal examined the chart of services and the sample e-mails filed by the assessee and noted that the Department did not point to any discrepancy in that material. The Tribunal found that the documentary evidence on record (charts and e-mails) established that services were provided by the AE to the assessee for the year under consideration. Having reviewed the material, the Bench concluded that the factual finding of non-provision of services recorded by the TPO/DRP was not sustainable in view of the contemporaneous documentary evidence placed before them. [Paras 7]

Services were provided by the associated enterprise to the assessee.

Arm's Length Price - Transactional Net Margin Method (TNMM) - Tested party/least complex entity - Benchmarking and comparable selection - Tribunal precedent - Transfer Pricing adjustment - Whether the payment of management service fees was at arm's length and whether the upward adjustment to nil by the TPO/DRP was warranted. - HELD THAT: - After determining that services were in fact rendered, the Tribunal addressed ALP. The assessee had benchmarked the MSF transaction using TNMM and relied on co-ordinate Bench decisions in the assessee's own case for preceding years where the same transaction was held at ALP. The TPO and DRP had sustained an adjustment to treat the MSF as nil primarily on the ground of alleged lack of reliable data and that Walter AG could not be treated as the tested party. The Tribunal observed that the TPO himself recorded there were no changes in facts and circumstances from the preceding year, and that the factual assertions and benchmarking relied upon by the assessee in respect of the immediately preceding year were not controverted by the Department. Respectfully following the Tribunal's precedent in the assessee's own case for the prior year and having found no distinguishing features in the facts for the year under consideration, the Tribunal held the international transaction of payment of management service fees to be at arm's length and found the upward adjustment unjustified. [Paras 7, 8]

The payment of management service fees was at arm's length; the Transfer Pricing adjustment treating the fees as nil is not sustainable.

Final Conclusion: The appeal is allowed: the Tribunal held that the assessee received management services from the AE and, following the Tribunal's precedents for preceding years and the facts of the case, that the management service fees were at arm's length; the upward transfer pricing adjustment is therefore deleted.

Tax deduction at source on commission for solicitation or procurement of insurance business - Reinsurance commission not constituting commission for section 194D purposes - Interim stay on recovery pending appeal - Expeditious hearing of appeal

Reinsurance commission not constituting commission for section 194D purposes - Tax deduction at source on commission for solicitation or procurement of insurance business - Prima facie view on applicability of tax deduction at source to reinsurance commission - HELD THAT: - The Tribunal recorded that the demand arose from disallowance under the Act consequent to alleged failure to deduct tax under the provision dealing with commission paid in relation to solicitation or procurement of insurance business. The assessee, a non-resident reinsurer approved by the regulator, contended that payments received from insurance companies are reinsurance commissions that are shared expenses and compensation towards procurement costs borne by cedants, and that the provision invoked applies only to commission for solicitation or procurement of insurance business which the assessee did not solicit. After considering authorities placed before it, the Tribunal was of the prima facie view that the dispute appears covered in favour of the assessee by a number of judicial precedents and that the question of applicability of the TDS provision to reinsurance commission requires adjudication at the hearing of the appeal; accordingly the Tribunal found there was sufficient prima facie ground to grant interim relief and to list the appeal for expeditious hearing (paras. 2-6). [Paras 2, 3, 4, 6]

Prima facie view recorded in favour of the assessee that the TDS provision on commission may not apply to reinsurance commission; matter to be adjudicated at the appeal hearing.

Interim stay on recovery pending appeal - Expeditious hearing of appeal - Interim relief and terms for stay of recovery of demand and listing of appeal - HELD THAT: - The Tribunal, with consent of parties, directed that the appeal be listed for hearing on the specified date and dispensed with separate notice. As to the outstanding demand, the Assessing Officer was permitted to pursue the assessee for part payment, but was restrained from taking any coercive recovery action until the date fixed for hearing. The Tribunal warned that any unnecessary adjournment sought by the assessee would result in vacation of the interim protection and loss of the benefit of early hearing (paras. 6-7). [Paras 6, 7]

Stay of coercive recovery granted until the date of the appeal hearing; appeal fixed for hearing and interim protection subject to conditions including consequences for unnecessary adjournment.

Final Conclusion: Application for stay allowed: appeal of the assessee fixed for expeditious hearing on 28.04.2022; no coercive recovery to be taken until that date though Assessing Officer may seek part payment; interim protection to stand subject to conditions and may be vacated for unwarranted adjournment.

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Mere incorrect or disallowed claim not attracting penalty - Distinction between quantum additions and penalty proceedings - Onus to prove genuineness of expenses - Requirement of independent investigation before levying penalty - Relevance of deduction of tax at source and production of supporting particulars to assess bona fides

Penalty under section 271(1)(c) for furnishing inaccurate particulars - Mere incorrect or disallowed claim not attracting penalty - Requirement of independent investigation before levying penalty - Relevance of deduction of tax at source and production of supporting particulars to assess bona fides - Whether the penalty imposed under section 271(1)(c) for AY 2004-05 on account of disallowance of commission expenses was justified - HELD THAT: - The Tribunal held that the assessee had produced ledger accounts, bank statements, names and PANs of payees, TDS details and TDS certificates during assessment and penalty proceedings. The Assessing Officer disallowed the commission merely on the basis that commission payments had increased by 87% over the preceding year and did not carry out any independent investigation to disprove the evidentiary material placed on record. While the quantum addition was ultimately upheld by the authorities on the question of whether services were rendered, penalty proceedings under section 271(1)(c) are separate and require evidence of concealment or furnishing of inaccurate particulars. Applying the principle in Reliance Petroproducts that an incorrect or disallowed claim alone does not attract penalty, and noting absence of any material showing concealment or false particulars or any independent enquiry by the AO, the Tribunal concluded that imposition of penalty was not justified. [Paras 12, 14]

Penalty imposed under section 271(1)(c) for AY 2004-05 deleted and the appeal allowed.

Final Conclusion: The Tribunal set aside the penalty order under section 271(1)(c) for AY 2004-05, holding that merely disallowing commission expenses (even if upheld on quantum) without independent inquiry or evidence of concealment does not justify penalty; appeal allowed.

Registration under Section 12AA - Genuineness of charitable activities - Certification of trust deed by trustee - Principles of natural justice - Time limit for decision under Section 12AA(2)

Genuineness of charitable activities - Certification of trust deed by trustee - Principles of natural justice - Validity of the refusal of registration on the ground that the assessee failed to establish the genuineness of activities and did not produce a trust deed duly certified by the trustee. - HELD THAT: - The Tribunal affirmed the adjudicating authority's finding that the assessee failed to furnish requisite evidence to satisfy that any activities carried out were in furtherance of the trust's objects. The CIT(E) issued notices and afforded opportunities, but the assessee did not produce a duly certified trust deed and, on examination of audited accounts for the preceding years, there was no indication of charitable/religious activities or corpus creation to undertake such activities. In these circumstances, and given that the assessee did not appear before the Tribunal despite service of notice, the Tribunal found no merit in the contention that the order was unjust or violative of natural justice and upheld the rejection of registration. [Paras 5, 6]

Rejection of the application for registration was valid; grounds of appeal on these facts dismissed.

Registration under Section 12AA - Time limit for decision under Section 12AA(2) - Whether the impugned order was time-barred under the deeming provision of Section 12AA(2). - HELD THAT: - The Tribunal noted the date on which the application was recorded by the office of the CIT(E) as 18.12.2017 and observed that the impugned order was passed on 28.06.2018. Applying the six month limitation computed from the end of the month in which the application was received, the Tribunal concluded that the order was passed within the statutory time limit and therefore not beyond jurisdiction on this ground. [Paras 5, 6]

The challenge that the order was time barred under Section 12AA(2) is rejected.

Final Conclusion: The appeal is dismissed: the rejection of registration is upheld on merits for failure to establish genuineness of activities and absence of a duly certified trust deed, and the order was not time barred under Section 12AA(2).

Deduction under section 80P for cooperative societies: principle of mutuality - Distinction between ordinary and nominal members and effect on mutuality - Characterisation of society's activity as cooperative activity or finance/banking business - Binding effect of Supreme Court precedent on classification of cooperative societies

Deduction under section 80P for cooperative societies: principle of mutuality - Distinction between ordinary and nominal members and effect on mutuality - Characterisation of society's activity as cooperative activity or finance/banking business - Claim for deduction under section 80P was disallowed because the cooperative society lacked the requisite mutuality due to two distinct categories of members (ordinary and nominal), leading to characterisation of its activity as finance/business rather than cooperative activity. - HELD THAT: - The Tribunal considered the assessment records, the by laws of the society and the findings of the Assessing Officer and the Commissioner (Appeals). The Assessing Officer found that the society operated with two distinct categories of members - ordinary (resident) members and nominal members - and that nominal members did not enjoy equal rights (no voting rights and no entitlement to share annual dividend), which in form and substance negated the principle of mutuality. The CIT(A) upheld the disallowance of the deduction under section 80P on the same facts, recording that the issue was squarely covered by the decision of the Hon'ble Supreme Court in Citizen Cooperative Society Ltd v. ACIT, which treated similar arrangements as finance/business activity rather than cooperative activity. Having heard the Revenue and noting that no one appeared for the assessee, the Tribunal found no infirmity in the appreciation of facts and the application of the Supreme Court precedent and therefore upheld the disallowance of the claimed deduction. [Paras 5, 6]

Appeal dismissed; CIT(A)'s order upholding disallowance of deduction under section 80P on account of absence of mutuality is affirmed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the disallowance of the deduction claimed under section 80P for A.Y. 2016-17 on the ground that the society's two tier membership structure extinguished mutuality and, following the Supreme Court precedent, characterised the activity as finance/business rather than a cooperative activity.

Violation of principles of natural justice - cross-examination and waiver - admission of guilt - fabrication of documents - evasion of customs duty - breach of conditions of CHA licence - simultaneous proceedings under Regulation 20(2) and Regulation 22 of the Customs House Agents Licensing Regulations, 2004 - suspension and revocation of CHA licence - statutory appeal to CESTAT

Violation of principles of natural justice - cross-examination and waiver - Whether there was a breach of principles of natural justice by refusing the petitioner's request to cross-examine DRI officers - HELD THAT: - The Court found that although the petitioner complained of denial of cross-examination, the Managing Director expressly informed the Inquiry Officer during personal hearing that he was not interested in cross-examining the said officers. The court relied on the record of the personal hearing to conclude that no deprivation of the opportunity to cross-examine occurred because the right was waived by the petitioner's representative. The petitioner's contention of gross violation of natural justice therefore failed on the basis of the waiver recorded in the enquiry proceedings. [Paras 3]

No breach of natural justice was made out as the petitioner waived the request to cross-examine.

Fabrication of documents - evasion of customs duty - admission of guilt - breach of conditions of CHA licence - Whether the impugned order suspending/revoking the CHA licence was unsustainable on merits in view of alleged procedural or factual infirmities - HELD THAT: - The Court examined the material on record and noted inculpatory statements from an importer and findings that the petitioner engaged in large scale fabrication of documents including bill of entries, resulting in evasion of customs duty. The Managing Director had, by letter dated 07.07.2011, accepted the mistake and sought revocation of the suspension and restoration of the licence. In light of the admission and the documentary findings of evasion, the Court held there was no merit in the challenge to the impugned order and that the order stood sustained on its merits. [Paras 4, 5, 6]

The challenge to the impugned order was dismissed on merits due to fabrication, evasion of duty, and the admission by the Managing Director.

Statutory appeal to CESTAT - Relief to be afforded despite dismissal of the writ petition - HELD THAT: - Although the writ petition was dismissed, the Court granted the petitioner liberty to pursue the alternate statutory remedy by filing an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The Court directed that if such appeal is filed within 30 days from receipt of the order, the CESTAT shall number and list the appeal for final hearing and dispose it on merits expeditiously. [Paras 6]

Liberty granted to file statutory appeal before the CESTAT within 30 days; CESTAT to number, list and decide the appeal on merits expeditiously.

Final Conclusion: Writ petition challenging the impugned order and corrigendum dismissed on merits: no breach of natural justice (request to cross-examine was waived) and findings of fabrication and evasion supported the impugned action; petitioner granted liberty to file a statutory appeal before the CESTAT within 30 days for expeditious final disposal.

Transaction value - royalty - condition of sale - remand for fresh consideration - books of account and financial statements as evidence

Transaction value - royalty - condition of sale - books of account and financial statements as evidence - Whether the alleged royalty amount shown in the appellant's financial statements can be included in the transaction value as a condition of sale or must be excluded unless actual payment to the foreign supplier is established. - HELD THAT: - The Tribunal examined the materials placed before it and noted absence of any agreement between the appellant and the foreign supplier obliging payment of royalty, and the appellant's contention that the charge was only a provision reflected in the 2012-13 financial statements and subsequently reversed. The appellant produced financial statements and a Chartered Accountant's certificate and contended that no payment was effected and relevant ledger entries were reversed in 2014-15. Given these factual disputes as to whether the royalty was actually paid, and the necessity of examining ledger entries and documentary evidence to determine whether the payment was a condition of sale, the Tribunal found that the adjudicating authority must undertake fresh scrutiny of the books of account and other documents to ascertain whether any royalty was paid to the foreign supplier. The Tribunal did not decide the substantive question on merits but directed a remand for the adjudicating authority to determine factually whether the amount was paid; if no payment is shown, it cannot be included in the transaction value. [Paras 11, 12]

Impugned order set aside to the extent indicated and the matter remanded to the adjudicating authority to decide, after examining the ledger entries, financial statements and other documents, whether the royalty was actually paid; if not paid, it shall not be included in the transaction value.

Final Conclusion: The Tribunal set aside the impugned order insofar as it includes the alleged royalty in the transaction value and remanded the matter to the adjudicating authority for fresh consideration limited to the question whether the royalty was actually paid; appeal disposed accordingly.

Regulation 10(n) of Customs Broker Licensing Regulation, 2018 - verification of client identity and functioning at declared address - forfeiture of security and revocation of licence - imposition of penalty on customs broker - evidentiary basis for administrative action - reliance on communication from a risk analysis unit (DGARM)

Regulation 10(n) of Customs Broker Licensing Regulation, 2018 - evidentiary basis for administrative action - forfeiture of security and revocation of licence - imposition of penalty on customs broker - Whether the Revenue established violation of Regulation 10(n) of CBLR, 2018 by the appellant so as to justify revocation of the customs broker licence, forfeiture of security and imposition of penalty. - HELD THAT: - The show cause notice and the inquiry rested solely on a communication allegedly received from DGARM stating that certain exporters whose shipping bills were handled by the appellant were 'non existent'. No copy of the DGARM communication, no details of the enquiries by DGARM, and no supporting documents were furnished with the SCN or produced in the proceedings. The inquiry officer's conclusion and the Commissioner's holding that Regulation 10(n) was violated were drawn by treating the DGARM communication as conclusive proof both of non existence of the exporters and of failure by the broker to verify. The record does not disclose how DGARM reached its conclusion, whether any physical verification was carried out, or what enquiries produced that result. The appellant, on the other hand, produced documents said to have been obtained in terms of the CBEC circular and placed them before the Commissioner during adjudication. In the absence of any relied upon material or evidence showing that the appellant failed to carry out the verification required by Regulation 10(n), the finding of contravention is unsupported. Depriving the appellant of its licence and livelihood on the basis of an unproduced communication and inferences drawn therefrom is unsustainable. [Paras 9, 10, 11, 12, 13]

The Revenue failed to prove violation of Regulation 10(n); the revocation, forfeiture and penalty cannot be sustained.

Final Conclusion: The appeal is allowed; the impugned order revoking the customs broker licence and imposing penalty is set aside and the respondent is directed to restore the appellant's Customs Broker licence within ten days of receipt of this order.

Removal of Names of Companies from the Register of Companies - restoration of name of company to the register of companies - reasonable cause to believe that a company is not carrying on business or operation - sufficient provision for realisation of amounts and discharge of liabilities - just and equitable - bonafide inadvertent lapse in filing statutory returns - obligation to file statutory annual returns until wound up or struck off - conditions for restoration including filing of outstanding documents, payment of late fees and costs

Restoration of name of company to the register of companies - just and equitable - Restoration of the appellant company's name to the register of companies was just and proper. - HELD THAT: - The Tribunal accepted that the company prepared audited financial statements and admitted a bonafide inadvertent failure to file statutory returns for the listed financial years. In light of the settled principle that the right to seek restoration remains for twenty years and having regard to the totality of facts - including continued existence of assets and willingness to comply - the Tribunal concluded it was just and proper to set aside the NCLT order and restore the company's name, subject to statutory compliances and conditions imposed by the Tribunal. [Paras 21, 22]

Impugned order set aside and the company's name to be restored subject to filing of outstanding documents and payment of prescribed fees and costs.

Bonafide inadvertent lapse in filing statutory returns - obligation to file statutory annual returns until wound up or struck off - The appellant's admitted bonafide lapse in non-filing and production of audited financial statements supported restoration, while recognising the continuing statutory obligation to file returns. - HELD THAT: - The Tribunal noted that the company had prepared and audited financial statements for several years though they were not filed due to financial crisis and lack of coordination. The Tribunal treated the lapse as bona fide and emphasised the settled legal position that companies remain under an obligation to file statutory annual returns until wound up or struck off; however, such a lapse, when bona fide and accompanied by readiness to file overdue documents with applicable late fees, does not preclude restoration under Section 252(3). [Paras 2, 17, 21]

Bona fide non-filing did not bar restoration where audited accounts exist and the company undertakes to file overdue documents with applicable fees.

Sufficient provision for realisation of amounts and discharge of liabilities - conditions for restoration including filing of outstanding documents, payment of late fees and costs - Restoration was made conditional on compliance with statutory requirements, filing of outstanding returns, payment of late fees and imposition of costs. - HELD THAT: - Having regard to Section 248(1)(6) and the Tribunal's power under Section 252(3) to give such directions as just, the Tribunal directed restoration only after the appellant files all outstanding statutory documents and pays applicable late fees. To vindicate compliance and deter non-compliance, the Tribunal imposed a costs condition to be paid to the Prime Minister's Relief Fund and specified that restoration would follow once conditions are fulfilled. [Paras 9, 20, 22]

Name of the company to be restored only after filing of all outstanding documents, payment of applicable late fees/charges and payment of costs as directed.

Final Conclusion: The appeal is allowed; the NCLT order dismissing the petition is set aside and the appellant company's name is directed to be restored to the register of companies subject to filing all outstanding statutory documents, payment of applicable late fees/charges and the costs directed by the Tribunal.

Condonation of delay - restoration of proceedings dismissed for default - law of limitation and inordinate delay - requirement of sufficient cause - applicability of Limitation Act to company petitions - continuing cause of action - presence at hearing and effect on ex-parte claim

Condonation of delay - restoration of proceedings dismissed for default - requirement of sufficient cause - law of limitation and inordinate delay - presence at hearing and effect on ex-parte claim - Whether the delay of 1332 days in filing the application for restoration of the Company Petition dismissed in default should be condoned and the petition restored. - HELD THAT: - The Tribunal found that the Company Petition (originally C.P. No.186 of 2013, renumbered T.P. No.13/397/398/GB/2016) was dismissed on 13.07.2017 in the presence of the learned Advocate for the petitioner and respondents; the record (attendance sheet) therefore did not support the applicant's submission that the order was ex parte. The Tribunal applied the established principle that while courts may adopt a liberal approach in cases of short delay, an inordinate delay calls for strict scrutiny. The applicant filed the condonation application after 1332 days and, contrary to her averments of inability to pursue the matter due to family and health emergencies, records produced by respondents showed the applicant prosecuted other proceedings before various fora during the relevant period. On the whole facts the Tribunal concluded that the applicant failed to furnish convincing and sufficient cause for the inordinate delay, and therefore exercise of discretion in favour of restoration was not warranted. [Paras 12, 13, 14, 15, 16]

Application for condonation of delay for restoration is rejected for want of sufficient cause; delay of 1332 days not condoned.

Final Conclusion: The Miscellaneous Application for condonation of delay and restoration of the Company Petition dismissed in default is dismissed; the application is rejected and the restoration petition will not be restored.

Dispensation of shareholders' meetings by consent - Convening of unsecured creditors' meeting - Waiver of meeting where all shareholders have given affidavit consent - Verification of nil creditors by auditor's certificate - Non-requirement of meetings for nil secured or unsecured creditors - Appointment of meeting Chairman and Scrutinizer and fixation of remuneration - Quorum for creditors' meeting as per Section 103 of the Companies Act, 2013 - Publication and service of notice and scheme to creditors and authorities - Presumption of no objection if statutory authorities do not respond within 30 days - Submission of Chairman's report in Form CAA-4 within four weeks - Filing of affidavit of compliance and liberty to file joint application under Rule 15

Dispensation of shareholders' meetings by consent - Waiver of meeting where all shareholders have given affidavit consent - Requirement of convening and holding separate meetings of shareholders of the Transferee and Transferor Companies dispensed with. - HELD THAT: - All equity shareholders of the Transferee Company and the Transferor Companies furnished affidavits consenting to the proposed Scheme of Amalgamation and waived convening of meetings. The Tribunal examined the affidavits and annexed auditors' lists and, in view of unanimous consent recorded by sworn affidavits, dispensed with the statutory requirement to convene separate shareholders' meetings. [Paras 3, 7]

Dispensation granted; separate shareholders' meetings need not be convened.

Verification of nil creditors by auditor's certificate - Non-requirement of meetings for nil secured or unsecured creditors - Requirement of convening meetings of unsecured creditors of Applicant Companies No.2 to 4 and of secured creditors of all Applicant Companies does not arise. - HELD THAT: - Auditor certificates filed with the application verified that Applicant Companies No.2 to 4 have nil unsecured creditors and that all Applicant Companies have nil secured creditors. On this basis the Tribunal concluded that there is no need to convene separate meetings of those classes of creditors. [Paras 4, 7]

No meetings required for unsecured creditors of Applicants 2-4 and for secured creditors of Applicants 1-4.

Convening of unsecured creditors' meeting - Quorum for creditors' meeting as per Section 103 of the Companies Act, 2013 - A separate meeting of the unsecured creditors of Applicant No.1 shall be convened on the specified date, time and place, with quorum governed by Section 103 of the Companies Act, 2013. - HELD THAT: - Having determined that Applicant No.1 has unsecured creditors and that meetings for other classes are unnecessary, the Tribunal directed that the unsecured creditors of Applicant No.1 be convened to consider the Scheme of Amalgamation. The Tribunal fixed the date, time and venue for the meeting and specified that the statutory quorum provisions in Section 103 will apply to that meeting. [Paras 7]

Meeting of unsecured creditors of Applicant No.1 to be held on 4/05/2022 at the stated venue; quorum as per Section 103.

Appointment of meeting Chairman and Scrutinizer and fixation of remuneration - Mr. Pawan Kumar Agrawal appointed Chairman and Miss Neha Somani appointed Scrutinizer for the unsecured creditors' meeting of Applicant No.1, with specified consolidated remuneration. - HELD THAT: - The Tribunal appointed the identified persons to preside over and scrutinize the unsecured creditors' meeting of Applicant No.1 and fixed their consolidated remuneration as recorded in the order. The appointments were directed to facilitate proper conduct and reporting of the meeting. [Paras 7]

Chairman and Scrutinizer appointed and remunerations fixed.

Submission of Chairman's report in Form CAA-4 within four weeks - Chairman to submit his report in Form No. CAA-4, verified by affidavit, within four weeks from conclusion of the meeting. - HELD THAT: - The Tribunal prescribed the procedural requirement that the Chairman's report of the creditors' meeting be submitted in the statutory Form CAA-4 and verified by affidavit, within a stipulated four-week period, to enable further steps in the CAA process in accordance with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. [Paras 7]

Chairman's report in Form CAA-4 to be filed within four weeks, verified by affidavit.

Publication and service of notice and scheme to creditors and authorities - Filing of affidavit of compliance and liberty to file joint application under Rule 15 - Directions issued for publication of notice in specified newspapers, service of meeting notices and scheme to unsecured creditors and specified authorities, filing of affidavit of compliance, and liberty to file subsequent joint application under Rule 15. - HELD THAT: - The Tribunal directed that at least thirty clear days prior to the meeting an advertisement and individual notices (by registered post/speed post/email/hand/courier) including the Scheme, the statement required under Section 230 and prescribed proxy form be issued to unsecured creditors. It also directed service of CAA.3 and copy of the Scheme on the Regional Director, Registrar of Companies, Official Liquidator and Income Tax Authority as specified, together with the requirement to include PAN of the company where indicated. An affidavit of compliance with original proofs of service was ordered to be filed jointly by the applicants. Liberty was granted to file a joint application pursuant to Rule 15 after the Chairman's report is filed. [Paras 7]

Notice/publication and service directions given; affidavit of compliance to be filed; liberty to file joint application under Rule 15 granted.

Presumption of no objection if statutory authorities do not respond within 30 days - If no response is received from the specified authorities within 30 days of receipt of notice, it shall be presumed they have no objection to the proposed Scheme. - HELD THAT: - The Tribunal directed that service be effected on the Central Government (Regional Director), Registrar of Companies, Official Liquidator and Income Tax Authority and provided that absence of any response within thirty days will be treated as absence of objection, in accordance with the Companies (Compromises, Arrangements & Amalgamations) Rules, 2016. [Paras 7]

Statutory authorities' silence for 30 days to be presumed as no objection.

Final Conclusion: C.A. (CAA) No.4/KB/2022 disposed of in terms of the Tribunal's directions: shareholders' meetings dispensed with, meetings for nil creditor classes dispensed with, unsecured creditors' meeting of Applicant No.1 directed to be held with appointed Chairman and Scrutinizer, statutory notice, publication and service requirements ordered, Chairman's report to be filed in Form CAA-4 within four weeks, compliance affidavit to be filed and procedural consequences regarding authorities' non-response recorded.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code - Committee of Creditors' decision by requisite voting share - Appointment of Liquidator and requirement of valid Authorization for Assignment - Vesting of management powers in the Liquidator and cessation of directors' powers - Restriction on institution of suits and legal proceedings during liquidation - Public notice and filing of liquidation order with Registrar of Companies

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code - Committee of Creditors' decision by requisite voting share - Order for liquidation of the Corporate Debtor in terms of Section 33(2) of the Code following CoC decision. - HELD THAT: - The Resolution Professional filed an application under Section 33(2) after the Committee of Creditors, in whose composition the sole financial creditor held 100% voting share, resolved to liquidate the Corporate Debtor on account of absence of business activity, nil realizable assets and non-availability of books and records. The Tribunal examined the minutes of the CoC meeting and the factual matrix showing cessation of commercial operations since 2011, absence of assets and no meaningful prospect of a resolution plan. Section 33(2) permits the Adjudicating Authority to order liquidation when the RP intimates a CoC decision to liquidate approved by not less than sixty-six percent of voting share; here the CoC decision was unanimous (100%). Continuing CIRP would only increase costs without benefit. In view of these findings, the application for liquidation is to be allowed and the Corporate Debtor ordered into liquidation under Section 33(2) read with Section 33(1). [Paras 12, 13, 14]

Application under Section 33(2) is allowed and the Corporate Debtor is ordered to be liquidated.

Appointment of Liquidator and requirement of valid Authorization for Assignment - Appointment of the Resolution Professional as Liquidator subject to possession of a valid Authorization for Assignment (AFA). - HELD THAT: - The CoC had proposed the Resolution Professional to act as Liquidator and the RP gave consent in Form 2 to act as liquidator if liquidation is ordered. The Tribunal appointed the proposed person as Liquidator under Section 34(1) but made the appointment subject to the condition that he possess a valid Authorization for Assignment issued by the Insolvency Professional Agency of which he is a member, in terms of Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2019. The condition ensures compliance with regulatory requirements before the Liquidator assumes the functions conferred by the Code. [Paras 9, 14]

Mr. Purshotam Gaggar is appointed as Liquidator provided he holds a valid Authorization for Assignment from the relevant Insolvency Professional Agency.

Vesting of management powers in the Liquidator and cessation of directors' powers - Restriction on institution of suits and legal proceedings during liquidation - Public notice and filing of liquidation order with Registrar of Companies - Consequential directions relating to initiation of liquidation process, public notice, cessation of management powers, cooperation by personnel, restriction on suits, deemed discharge of employees, and filing with ROC. - HELD THAT: - The Tribunal directed that the Liquidator shall initiate the liquidation process under the Code and applicable IBBI regulations and issue a public notice in the same newspapers earlier used during CIRP stating that the Corporate Debtor is in liquidation. All powers of the Board of Directors and key managerial personnel cease and vest in the Liquidator. Corporate personnel are directed to extend cooperation to the Liquidator. Subject to Section 52 of the Code, no suit or proceeding shall be instituted by or against the Corporate Debtor save that the Liquidator may institute proceedings on behalf of the Corporate Debtor with prior approval of the Adjudicating Authority as provided by Section 33(5) and its proviso. The order is to be deemed a notice of discharge to officers, employees and workmen in terms of Section 33(7), unless the business is continued during liquidation. The Liquidator is directed to file a copy of the order with the Registrar of Companies within whose jurisdiction the Corporate Debtor is registered, and the Registry shall forward a copy to the ROC. [Paras 14]

The Liquidator shall commence the liquidation process and undertake the specified procedural steps; management powers shall vest in the Liquidator, suits are generally barred subject to statutory exceptions, employees shall be deemed discharged, and the order shall be filed with the Registrar of Companies.

Final Conclusion: The Tribunal allowed the RP's application under Section 33(2), directed liquidation of Berial Engineers Pvt. Ltd., appointed the proposed Liquidator subject to possession of a valid Authorization for Assignment, and issued standard directions to initiate and conduct the liquidation process including public notice, vesting of managerial powers in the Liquidator, restriction on suits subject to statutory exceptions, deemed discharge of employees and filing of the order with the Registrar of Companies.

Corporate Insolvency Resolution Process - Admission of Section 10 application by Corporate Debtor - Default and existence of debt - Effect of pendency of SARFAESI and DRT proceedings on initiation under the Code - Overriding effect of the Insolvency and Bankruptcy Code - Moratorium - Appointment of Interim Resolution Professional

Admission of Section 10 application by Corporate Debtor - Default and existence of debt - Application under Section 10 of the IBC filed by the corporate debtor found to be complete and is admitted initiating CIRP against the corporate debtor. - HELD THAT: - The Adjudicating Authority found that the Corporate Applicant had availed credit facilities from the Financial Creditor, furnished requisite information and documents (including books of account, resolution approving filing and particulars of the proposed resolution professional), and demonstrated existence of debt above the statutory threshold. The Tribunal recorded that the debt was due, payable and in default, with default occurring on 31.03.2021 in respect of the major financial creditor (PNB). The application filed on 07.09.2021 was held to be within limitation and complete for initiation of CIRP; accordingly the petition was admitted. [Paras 12, 14]

The Section 10 application is admitted and CIRP is initiated against the corporate debtor.

Effect of pendency of SARFAESI and DRT proceedings on initiation under the Code - Overriding effect of the Insolvency and Bankruptcy Code - Pendency of proceedings under SARFAESI Act or before the DRT does not bar initiation of CIRP under Section 10 where the application is complete. - HELD THAT: - Relying on higher judicial pronouncements and on the overriding provision of the Code, the Tribunal rejected the financial creditor's contention that ongoing SARFAESI/DRT proceedings precluded admission. The Tribunal observed that Section 238 of the Code gives it overriding effect over inconsistent provisions of other laws, and therefore pendency of recovery proceedings under other statutes is not a valid ground to refuse admission if the Section 10 application is otherwise complete. [Paras 9, 10, 13]

Objections based on pendency of SARFAESI/DRT proceedings are not legally tenable and do not preclude admission of the Section 10 application.

Moratorium - Moratorium is declared from the date of the order, prohibiting institution or continuation of suits, transfer/alienation of assets, enforcement of security and related actions. - HELD THAT: - On admission of the Section 10 petition, the Tribunal invoked Sections 13 and 14 of the Code to declare the moratorium effective from the date of the order until completion of CIRP. The order specified the prohibitions (suits/proceedings, transfer/encumbrance of assets, enforcement of security, recovery of leased property) and preserved supply of essential goods/services, subject to statutory exceptions. [Paras 15]

Moratorium is imposed with effect from the date of the order until completion of the CIRP.

Appointment of Interim Resolution Professional - The proposed interim resolution professional is appointed to perform functions of IRP and to make public announcement of moratorium. - HELD THAT: - The Tribunal appointed the insolvency professional proposed by the corporate debtor, directed him to make the public announcement of moratorium upon receipt of an authenticated copy of the order and to submit assignment declaration within two days. The IRP was also directed to adhere to statutory timelines and perform duties under the Code, and the personnel connected with the corporate debtor were reminded of their obligation to assist the IRP. [Paras 11, 16, 17]

Mr. Akhil Ahuja is appointed as the Interim Resolution Professional and directed to act in accordance with the Code and the Tribunal's directions.

Limitation/applicability of limitation for Section 10 filing - The Section 10 application was filed within limitation having regard to the date of default recorded as 31.03.2021. - HELD THAT: - The Tribunal noted the date of default with the major financial creditor as 31.03.2021 and observed that the corporate debtor filed the Section 10 application on 07.09.2021; on that basis the application was held to be within the limitation period for initiation of CIRP. [Paras 14]

The Section 10 application is within the limitation period and maintainable.

Final Conclusion: The Tribunal admitted the corporate debtor's Section 10 application as complete, recorded existence of default (dated 31.03.2021), held that pendency of SARFAESI/DRT proceedings does not bar admission by virtue of the Code's overriding effect, declared moratorium with effect from the date of the order, appointed the nominated Interim Resolution Professional and directed compliance with statutory duties and timelines; the date of admission is recorded as 01.04.2022.

Insolvency resolution process against personal guarantor - Interim moratorium upon filing of application - Requirement of proper authorisation and complete Form C for petitions under the personal-guarantor rules - Dismissal for non-compliance without calling Resolution Professional's report

Requirement of proper authorisation and complete Form C for petitions under the personal-guarantor rules - Interim moratorium upon filing of application - Dismissal for non-compliance without calling Resolution Professional's report - Whether the petition for initiating insolvency resolution process against the personal guarantor could be admitted despite defects in authorisation and incomplete Form C, and the consequences thereof. - HELD THAT: - The Tribunal found that the application was defectively authorised: the Power of Attorney was executed in favour of one person while the Letter of Authority authorising the advocate was signed by another, and the affidavit in support was signed by a different individual. Further, Part-III Point-16 and Form C were not properly filled to disclose the authorised signatory and requisite particulars. Given these material defects, the Tribunal declined to proceed to obtain the Resolution Professional's report and observed that allowing an incomplete application to stand filed would wrongly trigger the interim moratorium from the date of filing. For these reasons the petition could not be admitted in its present form; the interim moratorium that would have arisen on admission was therefore not permitted to operate. The Tribunal dismissed the application but granted liberty to file a fresh petition in accordance with law. [Paras 10, 11, 12, 13, 14]

The petition is dismissed for lack of proper authorisation and non-compliance in Form C; the Tribunal did not call for the Resolution Professional's report; the interim moratorium shall cease and liberty is granted to file a fresh application.

Final Conclusion: The application for initiation of insolvency resolution process against the personal guarantor is dismissed on account of defective authorisation and incomplete statutory particulars; the interim moratorium does not continue and the Financial Creditor may file a fresh compliant petition.

Replacement of Interim Resolution Professional by Resolution Professional - Committee of Creditors' voting requirement of not less than 75% for replacement - Appointment of Resolution Professional subject to IBBI confirmation - Duties and functions of Resolution Professional under the Insolvency and Bankruptcy Code - Payment of IRP fees and CIRP costs in accordance with the Code and S3 Electricals judgment

Replacement of Interim Resolution Professional by Resolution Professional - Committee of Creditors' voting requirement of not less than 75% for replacement - Appointment of Resolution Professional subject to IBBI confirmation - Duties and functions of Resolution Professional under the Insolvency and Bankruptcy Code - Appointment of Shri Purshotam Gaggar as Resolution Professional in place of the Interim Resolution Professional pursuant to the Committee of Creditors' resolution - HELD THAT: - The Tribunal examined the CoC resolution dated 09.02.2022 which recorded that the CoC, supported by 100% of the voting share (the sole financial creditor being Punjab National Bank), resolved to appoint Shri Purshotam Gaggar as Resolution Professional in place of the then Interim Resolution Professional. The statutory requirement under Section 22 for a CoC decision to replace an IRP by a majority of not less than 75% of voting share was satisfied. On perusal of the records and after hearing parties, the Tribunal approved the COC's choice and appointed Shri Purshotam Gaggar, bearing the stated IBBI registration, as Resolution Professional with immediate effect. The Tribunal directed the outgoing IRP to hand over all papers and documents within two days and recorded that the new RP shall discharge the functions envisaged in the Code (including those in Sections 15, 17, 18, 19, 20 and 21).

Shri Purshotam Gaggar is appointed as Resolution Professional in place of the Interim Resolution Professional with immediate effect and shall perform all statutory functions of the RP; outgoing IRP to hand over records within two days.

Payment of IRP fees and CIRP costs in accordance with the Code and S3 Electricals judgment - Liability of the Committee of Creditors to clear dues of the outgoing IRP and meet CIRP costs - HELD THAT: - The Tribunal directed that the CoC shall clear the dues of the outgoing Interim Resolution Professional and discharge CIRP costs in accordance with the provisions of the Code and the guidance laid down by the Hon'ble Supreme Court in S3 Electricals and Electronics Private Limited v. Brian Lau & Anr. This obliges the CoC to ensure payment consistent with statutory priority and the judicial precedent referred to by the Tribunal.

The CoC is directed to clear the outgoing IRP's dues and meet CIRP costs as per the Code and the S3 Electricals judgment.

Final Conclusion: Application admitted and disposed of: the Tribunal approved the CoC's resolution and appointed Shri Purshotam Gaggar as Resolution Professional with immediate effect, directed the outgoing IRP to hand over records within two days, and directed the CoC to clear dues and CIRP costs in accordance with the Code and the S3 Electricals judgment.

Minimum amount of default for the purposes of section 4 proviso of the Insolvency and Bankruptcy Code, 2016 - applicability of Gazette Notification S.O. 1205(E) dated 24.3.2020 to applications under Section 9 filed on or after 24.3.2020 - inadmissibility of clubbing debts pertaining to different corporate debtors for initiation of CIRP - date of filing of application under Section 9 as determinative for applicability of the threshold

Applicability of Gazette Notification S.O. 1205(E) dated 24.3.2020 to applications under Section 9 filed on or after 24.3.2020 - minimum amount of default for the purposes of section 4 proviso of the Insolvency and Bankruptcy Code, 2016 - date of filing of application under Section 9 as determinative for applicability of the threshold - Maintainability of the Section 9 application in view of the Government notification fixing Rs. 1 crore as minimum amount of default for applications filed on or after 24.3.2020. - HELD THAT: - The Tribunal applied the Gazette Notification S.O. 1205(E) dated 24.03.2020 which specifies one crore rupees as the minimum amount of default for purposes of the proviso to section 4. The demand notice in the present case was issued on 06.03.2020 but the Section 9 application was filed on 18.02.2022, i.e., after the notification. Following the reasoning in the cited NCLAT decisions, the relevant date for determining applicability of the threshold is the date of filing the Section 9 application and not the date of default. Since the debt claimed in the application (excluding the impermissibly clubbed amount) is below the Rs. 1 crore threshold, the petition is not maintainable under Section 9 as amended by the notification and must be dismissed. [Paras 6, 7, 10, 11, 12]

Section 9 application is not maintainable as the application filed on 18.02.2022 discloses a default less than the Rs. 1 crore threshold fixed by Notification S.O.1205(E), and therefore the petition is dismissed.

Inadmissibility of clubbing debts pertaining to different corporate debtors for initiation of CIRP - Whether the applicant could club a debt allegedly due from a different corporate entity with the debt claimed against the present corporate debtor for the purpose of initiating CIRP. - HELD THAT: - The Tribunal found that the applicant had earlier filed and thereafter withdrawn a separate case in respect of an amount allegedly receivable from KKR Agro Mills Pvt. Ltd. The applicant attempted to include that earlier claim when prosecuting the present petition against M/s K K R Products and Marketing Pvt. Ltd. The Tribunal held that debts due from a different corporate debtor cannot be clubbed with the debt against the present corporate debtor to meet the threshold for initiation of CIRP, and that the applicant was not entitled to aggregate the separate claim with the present claim. [Paras 4, 5, 11]

The claim previously pursued against a different corporate debtor cannot be clubbed with the present claim; the amounts are not aggregateable for initiating CIRP against the present corporate debtor.

Final Conclusion: The petition under Section 9 is dismissed without costs: the application filed on 18.02.2022 discloses a debt below the statutory threshold prescribed by Notification S.O.1205(E) and the applicant cannot aggregate a separate claim against a different corporate debtor to cure the deficiency.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - definition of "financial creditor" and "financial debt" under Section 5(7) and (8) of the Insolvency and Bankruptcy Code, 2016 - minimum threshold for filing under Section 7 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and his duties under Sections 15, 17 to 21 of the Insolvency and Bankruptcy Code, 2016 - public announcement of CIRP under Section 13 and related regulations - requirement of written consent in Form 2 and eligibility of insolvency professional

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - definition of "financial creditor" and "financial debt" under Section 5(7) and (8) - minimum threshold for filing under Section 7 - The Section 7 application filed by the Financial Creditor for initiation of CIRP against the Corporate Debtor was maintainable and is admitted. - HELD THAT: - The Tribunal, relying on the statutory definitions in Section 5(7) and (8) and on Section 7, found that the Financial Creditor established the existence of financial debt and default by the Corporate Debtor. The account was classified as NPA and notices under SARFAESI were issued without repayment. The claim amount as pleaded satisfied the prescribed minimum threshold for filing the insolvency application. The requirements for initiating CIRP under Rule 4(1) of the Insolvency and Bankruptcy Code Rules, 2016 were held to be met and, accordingly, the application was admitted. [Paras 6, 8]

Application under Section 7 admitted and CIRP initiated against the Corporate Debtor.

Appointment of Interim Resolution Professional and his duties under Sections 15, 17 to 21 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement of CIRP under Section 13 and related regulations - requirement of written consent in Form 2 and eligibility of insolvency professional - Appointment of the Interim Resolution Professional, imposition of moratorium and ancillary directions for conducting CIRP were ordered. - HELD THAT: - The Tribunal recorded that the proposed Insolvency Professional had furnished written consent in Form 2 and there were no disciplinary proceedings pending against him. On that basis the Tribunal appointed the named person as Interim Resolution Professional and directed that he perform functions under the Code (including Sections 15 and 17-21). A moratorium under Section 14 was declared with the standard prohibitions on institution or continuation of suits, disposition of assets, and enforcement of security, subject to statutory exceptions. The Registry was directed to ensure public announcement of CIRP as mandated and the Financial Creditor was directed to deposit the specified initiation amount with the IRP, subject to ratification by the CoC. [Paras 7, 8]

IRP appointed; moratorium imposed; public announcement directed; deposit to IRP ordered.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the Financial Creditor, initiated CIRP against the Corporate Debtor, appointed an Interim Resolution Professional who furnished consent and was found eligible, imposed the statutory moratorium, directed the public announcement of CIRP and ordered the Financial Creditor to deposit the specified amount with the IRP.

Existence of pre-existing dispute under Section 8(2) of the IBC, 2016 - effect of undated demand notice under Section 8 and Rule 5 of the I&B (Application to Adjudicating Authority) Rules, 2016 - failure to reply to demand notice within ten days does not preclude raising a dispute - reconciliation statement and running account as evidence of dispute - shareholder/capital infusion obligations as basis for dispute

Effect of undated demand notice under Section 8 and Rule 5 of the I&B (Application to Adjudicating Authority) Rules, 2016 - failure to reply to demand notice within ten days does not preclude raising a dispute - Validity of the Form III demand notice and whether absence of a dated reply within ten days precludes the Corporate Debtor from raising a pre existing dispute. - HELD THAT: - The Tribunal noted the Corporate Debtor's contention that the Form III demand notice was undated but accepted the Operational Creditor's evidence of service (postal tracking report) showing delivery. More importantly, the Tribunal followed authoritative precedent that non receipt of a reply within ten days to a Section 8 demand notice does not bar the Corporate Debtor from bringing materials before the Adjudicating Authority to establish a pre existing dispute. Consequently, even though the demand notice was undated, the Corporate Debtor could legitimately raise and rely upon evidence of pre existing disputes in response to the Section 9 application. The Tribunal therefore treated the procedural infirmity of the undated notice as not being determinative where documentary evidence established delivery and where the Corporate Debtor produced material showing disputes predating the demand notice. [Paras 22, 24]

The absence of a dated reply within ten days and the undated demand notice did not preclude the Corporate Debtor from raising a pre existing dispute; delivery evidence sufficed for the Tribunal to consider the defence.

Existence of pre-existing dispute under Section 8(2) of the IBC, 2016 - reconciliation statement and running account as evidence of dispute - shareholder/capital infusion obligations as basis for dispute - Whether a bona fide pre existing dispute existed between the parties prior to issuance of the demand notice, thereby warranting rejection of the Section 9 application. - HELD THAT: - On the material placed before it - including the reconciliation statement dated 19.03.2019 showing disputed invoices (remarks such as 'Approval not obtained' and 'invoice received after the cut off period'), email communications and MOUs evidencing alleged capital infusion obligations by the Operational Creditor, and correspondence reflecting disputes over quality, freight and account differences - the Tribunal concluded that disputes antecedent to the demand notice existed. The Tribunal applied the principle in Mobilox (that the Adjudicating Authority need only be satisfied that a dispute truly exists and need not adjudicate its merits) and held that the Corporate Debtor's contentions were not spurious, hypothetical or illusory. Given that the disputes related to both contractual performance (quality and alleged returns) and claimed financial commitments by the Operational Creditor, the Tribunal found the Section 9 petition barred by the existence of a pre existing dispute. [Paras 27, 31, 32, 33, 34]

A genuine pre existing dispute existed prior to the demand notice; the Section 9 application was liable to be dismissed on that ground.

Final Conclusion: The Tribunal dismissed the Section 9 application filed by the Operational Creditor (IBA/820/2020) holding that the Corporate Debtor had a bona fide pre existing dispute, and that procedural aspects of the demand notice (including it being undated and absence of a ten day reply) did not preclude consideration of that dispute; application dismissed, no costs.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice and service under Form 3 - pre-existing dispute - genuine dispute - existence of operational debt due and payable - proof under Section 9(2)(e)

Demand notice and service under Form 3 - The statutory demand notice in Form 3 was served and received by the Corporate Debtor but the invoices annexed to the notice did not reconcile with the amount claimed in the application. - HELD THAT: - The Form 3 notice dated 07.01.2019 was sent (posted on 10.01.2019) and received by the Corporate Debtor (acknowledged as received on 12.01.2019), and a reply dated 24.01.2019 evidences receipt. However, the invoices specifically attached to the section-8 notice total Rs. 1,02,761 whereas Part IV of the Form 5 application claimed a larger sum of Rs. 3,99,034.52. The Tribunal records that while service and receipt of the demand notice are not in doubt, the documentary reconciliation between the invoices attached to the notice and the amount claimed in the petition is inconsistent, undermining the evidentiary foundation of the claim. [Paras 7]

Notice was duly served and received but the invoices appended to the notice do not support the higher claimed amount.

Pre-existing dispute - genuine dispute - The reply by the Corporate Debtor did not demonstrate a pre-existing genuine dispute prior to receipt of the demand notice. - HELD THAT: - Applying the test for a 'genuine dispute' (as explained in Mobilox Innovations), the Tribunal found no correspondence or material showing a bona fide dispute existing before service of the demand notice. The Corporate Debtor raised discrepancies only in reply to the Form 3 notice (letter dated 24.01.2019), which was after the prescribed period and therefore does not qualify as a pre-existing dispute. The pleading and documentary record do not disclose reconciliatory communications or a prior contestation of the claim that would amount to a genuine pre-existing dispute. [Paras 7]

No pre-existing genuine dispute is established on the record.

Existence of operational debt due and payable - proof under Section 9(2)(e) - The Operational Creditor failed to establish that the operational debt claimed was due and payable, and failed to produce the requisite proof under Section 9(2)(e). - HELD THAT: - The ledger produced by the Operational Creditor shows 'on account' receipts and entries indicating that at least one of the invoices included in the section-8 notice had been paid, undermining the claim that those invoices remained unpaid. There was no clear one-to-one reconciliation between invoices and payments, no systematic pre-suit reconciliation, and interest was claimed without any contractual basis. The Tribunal observed that inclusion of paid invoices, unsupported interest claims, and absence of substantive documentation demonstrates failure to discharge the evidentiary obligation under Section 9(2)(e) to establish an undisputed operational debt recoverable through CIRP initiation. [Paras 7, 8, 9, 10]

Petition rejected for failure to produce required proof that an operational debt was due and payable under Section 9(2)(e).

Final Conclusion: The application under Section 9 of the IBC was rejected and the petition C.P.(IB) No. 1777/KB/2019 dismissed for failure to produce requisite proof under Section 9(2)(e); the demand notice was served but discrepancies in invoices and lack of documentary reconciliation precluded admission of the petition.

Operational Debt - Pre-existing dispute - Section 8(2)-requirement to bring dispute to notice within ten days - Section 9(1)-right to file application after ten days - Section 9(5)(ii)-rejection where notice of dispute received or record of dispute in information utility - Adjudicating Authority's duty to consider materials placed before it

Operational Debt - Adjudicating Authority's duty to consider materials placed before it - Whether the Adjudicating Authority was justified in rejecting the Section 9 application solely on the ground that default of instalment of a settlement agreement does not fall within the definition of "operational debt". - HELD THAT: - The Tribunal found that the Adjudicating Authority's sole reason for rejection - that default of instalment of a settlement agreement cannot constitute an "operational debt" - was erroneous on the facts of the case. The agreements relied upon by the operational creditor (including the agreement dated 28th November, 2014) created rights and obligations entitling the creditor to payment and were not merely a settlement of an existing liability by instalments. Therefore the Adjudicating Authority erred in treating the claim as one of default of instalment of a settlement agreement and dismissing the Section 9 application on that ground. The Tribunal set aside the impugned order insofar as it rested on that legal view and remitted the matter for fresh consideration on merits by the Adjudicating Authority. [Paras 5, 9, 10]

Impugned rejection on the ground that default of instalment of a settlement agreement is not an operational debt was set aside and the matter remitted for fresh consideration.

Pre-existing dispute - Section 8(2)-requirement to bring dispute to notice within ten days - Section 9(5)(ii)-rejection where notice of dispute received or record of dispute in information utility - Whether failure of the corporate debtor to reply to the Section 8 demand notice within ten days precludes it from raising a pre-existing dispute before the Adjudicating Authority. - HELD THAT: - The Tribunal interpreted the scheme of Section 8 and Section 9 to hold that mere failure to reply to the demand notice within the ten-day period under Section 8(2) does not extinguish the corporate debtor's right to place materials before the Adjudicating Authority to show a pre-existing dispute. Section 9(5)(ii) permits rejection of the Section 9 application if a notice of dispute has been received or there is a record of dispute in the information utility, which indicates that the presence of materials evidencing a pre-existing dispute can lead to rejection even if no timely notice under Section 8(2) was given. Consequently the Adjudicating Authority should have considered the replies and documentary material filed by the corporate debtor and not rejected the application solely on the ground of delay in replying to the Section 8 notice. [Paras 11, 12, 13]

Failure to reply within ten days to the Section 8 notice does not per se preclude the corporate debtor from raising pre-existing disputes before the Adjudicating Authority; the matter is to be considered afresh with the materials on record.

Final Conclusion: The appeal is allowed to the extent that the impugned order is set aside and the Section 9 application is revived; the matter is remitted to the Adjudicating Authority to consider the application afresh on merits after hearing the parties, without any expression of view on the substantive merits.

Offence of money laundering - proceeds of crime - projection of property as untainted - knowledge requirement for money laundering liability - predicate criminal activity - abuse of process of law - provisional attachment and confirmation

Offence of money laundering - proceeds of crime - projection of property as untainted - knowledge requirement for money laundering liability - abuse of process of law - Sustainability of criminal prosecution under Section 3 read with Section 4 of PMLA against the purchasers A8 to A15. - HELD THAT: - The Court identified the essential ingredients for prosecution under Section 3 read with Section 4 of PMLA: (i) commission of a criminal activity (predicate offence), (ii) generation of money as proceeds of crime, and (iii) projection of those proceeds as untainted property. Reliance on the principles in Nikesh Tarachand Shah was applied to emphasise that a person is guilty only if knowingly or actually involved in a process or activity connected with proceeds of crime and projects the property as untainted. The material on record showed that the scheduled offence related to obtaining a loan of Rs. 15 crores by fraudulent documents, and only a part of that sum was later invested in land. The transactions by A8 (who purchased from A4/A6/A7 through a power agent and sold to A9-A15) and by A9-A15 were completed before registration of the FIR for the scheduled offence. There is no material to show that A8-A15 participated in the predicate offence, had knowledge that the properties were purchased with proceeds of crime, or projected the properties as untainted knowing their criminal origin. Given those facts, continuing criminal prosecution against A8-A15 under Section 3 r/w 4 of PMLA is without basis in law and amounts to an abuse of the process of court. The Court therefore quashed the prosecution but observed that the Enforcement Directorate remains at liberty to examine A8-A15 as prosecution witnesses if so advised. [Paras 9, 10, 11, 12, 13]

Criminal prosecution in C.C. No.62 of 2016 against A8 to A15 under Section 3 r/w 4 of PMLA is quashed as an abuse of process; ED may examine them as prosecution witnesses if desired.

Final Conclusion: The petitions are allowed: the prosecution of the purchasers A8-A15 in C.C. No.62 of 2016 under Section 3 r/w 4 of the PMLA is quashed as an abuse of process; connected petitions are closed and the Enforcement Directorate may, if appropriate, take the persons as witnesses.

Offence of money laundering involving projection of proceeds of crime as untainted property - Ingredients of the offence of money laundering - Proceeds of crime - Quashing of complaint for absence of prima facie case - Permissibility of examining the accused as a witness - Restoration of property under the Prevention of Money Laundering (Restoration of Property) Rules, 2016 - Direction for expeditious trial

Ingredients of the offence of money laundering - Proceeds of crime - Offence of money laundering involving projection of proceeds of crime as untainted property - Quashing of complaint for absence of prima facie case - Whether the complaint in C.C.No.14 of 2017 discloses the ingredients of the offence under the Prevention of Money Laundering Act so as to sustain prosecution against the petitioner, Naidu Amrutesh Reddy. - HELD THAT: - The complaint shows that the petitioner paid the stated sale consideration to a person who was not the true owner and executed a registered sale deed. The complaint does not, however, allege that the petitioner generated proceeds of crime from a predicate offence, nor that he dealt with or projected any such proceeds as untainted property. The Court applied the principle in Nikesh Tarachand Shah that, to attract money laundering liability, a person must be knowingly or actually involved in processes connected with proceeds of crime and must project or claim such property as untainted. On the material before it, the necessary ingredients - criminally generated proceeds and their projection as untainted by the petitioner - are absent. Consequently there is no prima facie case to prosecute the petitioner under the money laundering provisions. [Paras 11, 12]

The complaint does not disclose the ingredients required to prosecute the petitioner for money laundering and therefore prosecution against him is quashed.

Permissibility of examining the accused as a witness - Restoration of property under the Prevention of Money Laundering (Restoration of Property) Rules, 2016 - Direction for expeditious trial - Incidental orders concerning the petitioner's role in the ongoing proceedings, remedies available to the original owners, and judicial directions for the trial of the remaining accused. - HELD THAT: - Having quashed the prosecution against the petitioner, the Court left open the Enforcement Directorate's option to examine him as a witness in the prosecution of other accused. The Court also recognised the entitlement of the original owners (and their power agent) to move the Special Court under the Restoration Rules for restoration of the attached property. Finally, the trial court was directed to conclude the trial against the other accused within a specified, limited period to ensure expedition of proceedings. [Paras 14]

The petitioner may be examined as a witness by the Enforcement Directorate; the original owners may apply for restoration under the Restoration Rules; and the Special Court is directed to complete the trial against the other accused expeditiously.

Final Conclusion: The petition is allowed: prosecution in C.C.No.14/2017 is quashed as against Naidu Amrutesh Reddy for lack of ingredients of money laundering offence; he may be examined as a witness in the prosecution of other accused; the original owners may seek restoration under the Prevention of Money Laundering (Restoration of Property) Rules, 2016; and the Special Court is directed to conclude the trial against remaining accused within the stipulated timeframe.

Refund of service tax on services used in export - entitlement under Notification No. 41/2012-ST - place of removal in export on CIF/CF basis is port of export - interest under Section 11BB of the Central Excise Act - non-speaking impugned order

Refund of service tax on services used in export - entitlement under Notification No. 41/2012-ST - place of removal in export on CIF/CF basis is port of export - non-speaking impugned order - interest under Section 11BB of the Central Excise Act - Appellant entitled to refund of service tax paid on services utilized in the course of export up to the port of export and direction to grant refund with interest. - HELD THAT: - The Tribunal found that the appellant, a manufacturer-exporter, utilized services such as transportation to the gateway port, packing and forwarding, CHA services, banking/financial services and terminal handling charges until the port of export. Having regard to the scheme of not exporting taxes and the Government of India's clarification that in exports on CIF/CF basis the place of removal is the port of export, the Tribunal held that service tax paid on those services is refundable to the exporter under the refund scheme. The Tribunal observed that the lower authority treated the place of removal as the factory gate and that the impugned order was cryptic and non-speaking. For these reasons the Tribunal allowed the appeal, set aside the impugned order and directed the Adjudicating Authority to grant the refund along with interest under Section 11BB within a specified period. [Paras 3, 4, 5]

Appeal allowed; refund of service tax claimed granted in respect of services used till port of export and adjudicating authority directed to grant refund with interest under Section 11BB within 45 days.

Final Conclusion: The appeal is allowed, the impugned order is set aside and the Adjudicating Authority is directed to sanction the refund claimed for services used in export up to the port of export with interest under Section 11BB of the Central Excise Act within 45 days; consequential benefits follow.

Pure agent - taxability of cash discount - service tax on commission - small service provider exemption under Notification No. 33/2012 - negative list of services under section 66D

Taxability of cash discount - negative list of services under section 66D - Whether the amount received/retained as cash discount is part of consideration for taxable service and liable to service tax. - HELD THAT: - The adjudicating authority proceeded on the premise that the discount constituted consideration for a taxable service and therefore applied the negative list test under section 66D. The Tribunal observed that the amount in question is a cash discount given at 2.5% of the sale value as per the agreement and is not consideration for providing any taxable service. The Commissioner (Appeals) had himself recorded that the discount was not related to the service, and earlier decisions of the Tribunal treating cash discounts/incentives as not liable to business auxiliary service were held to be applicable. Applying that reasoning to the present facts, the confirmation of service tax on the discount was incorrect. [Paras 7, 8]

Demand of service tax on the amount of discount is set aside.

Pure agent - service tax on commission - small service provider exemption under Notification No. 33/2012 - Whether service tax is payable on the commission received, having regard to the exemption available to small service providers under Notification No. 33/2012. - HELD THAT: - The appellant conceded that the commission formed part of the consideration for the taxable service rendered as a pure agent. Notification No. 33/2012 grants exemption where the value of taxable service in the preceding year did not exceed Rs. 10 lakh. From the material before the Tribunal, the value of taxable service in 2013-14 (the preceding year for 2014-15) was less than Rs. 10 lakh, entitling the appellant to exemption for 2014-15. However, there was no information or documents on the value of taxable service in the preceding year to 2013-14 (i.e., 2012-13); in the absence of that data the appellant could not be extended the benefit of the notification for 2013-14. Accordingly the demand for 2014-15 stands dropped under the notification, while the demand for 2013-14 is sustained. [Paras 9, 10]

Demand of service tax on commission is confirmed for 2013-14 and held exempt for 2014-15 under Notification No. 33/2012 to the extent shown.

Final Conclusion: Appeal partly allowed: demand in respect of cash discount set aside; demand in respect of commission upheld for 2013-14 but exempted for 2014-15 under Notification No. 33/2012.

Exemption under the SEZ Act for services used in authorised operations - authorised operations - overriding effect of the SEZ Act over other tax laws - prescribed by the SEZ Rules - refund of service tax - input service distributor (ISD) distribution and entitlement to refund - Unit Approval Committee (UAC) approval of list of services - place of consumption / outward transportation (GTA) and CENVAT rules

Exemption under the SEZ Act for services used in authorised operations - overriding effect of the SEZ Act over other tax laws - prescribed by the SEZ Rules - Whether services used for authorised operations of an SEZ unit are exempt from service tax by virtue of the SEZ Act regardless of exemption notifications issued under the Finance Act, 1994. - HELD THAT: - The Tribunal held that Section 26(1)(e) of the SEZ Act and Rule 31 of the SEZ Rules render services provided for authorised operations of SEZ developers and units exempt from service tax. Section 26 entitles developers/units to such exemptions subject only to the manner and terms 'prescribed' under the SEZ Act, and 'prescribed' must mean rules framed under the SEZ Act. Section 51 gives the SEZ Act an overriding effect over inconsistent provisions of other laws. Consequently, exemption notifications issued under the Finance Act (section 93) and conditions therein are redundant insofar as services for authorised SEZ operations are concerned; the charge under the Finance Act is effectively displaced for such supplies. The Tribunal therefore directed refund of service tax paid on input services used for authorised operations. The Tribunal applied these principles to the appeals before it and set aside the impugned rejections. [Paras 21, 38, 40, 48, 50]

Services used for authorised operations of the SEZ unit are exempt under the SEZ Act and service tax paid on such input services is refundable; exemption notifications under the Finance Act are not a prerequisite.

Unit Approval Committee (UAC) approval of list of services - prescribed by the SEZ Rules - Whether lack of prior or only subsequent approval by the Unit Approval Committee of services in the exemption-notification list justifies denial of refund. - HELD THAT: - The Tribunal explained that the requirement to obtain UAC approval arises from the exemption notifications under the Finance Act, which the Tribunal found unnecessary where the SEZ Act and SEZ Rules already provide exemption for services used in authorised operations. As the exemption flows from the SEZ Act (subject to SEZ Rules) and there was no finding of non-compliance with those Rules, absence of prior UAC approval or subsequent approval could not be a valid ground to deny refund. The Tribunal rejected the departmental reliance on notification-based approval requirements in these appeals. [Paras 42, 43, 48, 50]

Non-obtaining or belated obtaining of UAC approval under exemption notifications is not a valid ground to deny refund where SEZ Act/Rules entitlement to exemption applies.

Input service distributor (ISD) distribution and entitlement to refund - refund of service tax - Whether a SEZ unit is entitled to refund of service tax attributable to services distributed to it by the head office through ISD invoices. - HELD THAT: - The Tribunal observed that the ISD mechanism distributes input services consumed partly by field units; when a portion of an ISD invoice is attributable to authorised operations of an SEZ unit, that portion is exempt under the SEZ Act and refundable to the SEZ unit. The head office cannot claim that refund because it is not an SEZ unit and has no authorised operations; it only distributes a portion of the input service via ISD. Thus, service tax paid in respect of services distributed to the SEZ unit through ISD invoices must be refunded to the SEZ unit to the extent attributable to authorised operations. [Paras 11, 44, 48, 50]

SEZ unit is entitled to refund of the portion of service tax distributed to it by the head office via ISD invoices when that portion relates to authorised operations.

Place of consumption / outward transportation (GTA) and CENVAT rules - exemption under the SEZ Act for services used in authorised operations - Whether refund can be denied for transport or warehousing services (including GTA and port warehousing) on the basis of CENVAT Rules or alternative business practices. - HELD THAT: - The Tribunal held that distinctions drawn by CENVAT Rules regarding admissibility of credit for outward transportation do not defeat the SEZ Act entitlement: where the transport or warehousing services are for authorised operations of the SEZ unit, they are exempt under Section 26 of the SEZ Act and taxable charging provisions do not apply. The Tribunal rejected departmental contentions that goods could have been moved differently or that outward transportation precludes benefit; business choices of the SEZ unit do not affect entitlement. In relation to warehousing at port, the Tribunal found that port warehousing charges used for authorised operations are directly relatable and refundable. [Paras 43, 45, 48, 50]

Transport and warehousing services used for authorised SEZ operations are covered by the SEZ Act exemption and refund cannot be denied on CENVAT or alternative-conduct grounds.

Refund of service tax - Whether invoice address formalities or timing of refund claim (quarter filing / short delay) justify rejection. - HELD THAT: - The Tribunal found that absence of the SEZ unit's address on an invoice, when other documents (shipping bill, bill of lading, invoices) establish that the service was rendered for the SEZ unit, cannot defeat the refund. As to filing timing, the Tribunal held that the requirement in exemption notifications to file in the same quarter is inapplicable where entitlement flows from the SEZ Act; the Tribunal accepted that refund claims filed after payment but within the practical timeline (no undue delay in the facts) should not be denied and observed that carrying a claim one quarter forward is procedural and not fatal to substantive right. [Paras 46, 47, 48, 50]

Defects in invoice address and minor procedural delay in filing do not justify denial of refund where the service was for authorised operations and the refund claim is otherwise substantiated.

Final Conclusion: The Tribunal allowed all five appeals, set aside the impugned orders and directed that service tax paid on input services used for authorised operations of the SEZ unit be refunded; conditions and procedures under exemption notifications issued under the Finance Act do not preclude this entitlement where the SEZ Act and SEZ Rules apply, and other departmental grounds for denial were rejected.

Inclusion of deemed exports in FOB value for DTA sale entitlement - Finality of Development Commissioner's permission for DTA clearance - Quantification of demand must accord with scope of show cause notice - Extended period/time bar for demand where no fraud, collusion or suppression found

Finality of Development Commissioner's permission for DTA clearance - Quantification of demand must accord with scope of show cause notice - Quantification of DTA sales in the show cause notice without adjusting the advance DTA sale permitted by the Development Commissioner and whether the adjudicating authority exceeded the scope of the SCN in determining excess DTA sales. - HELD THAT: - The Tribunal found that the Development Commissioner had granted advance and subsequent permissions quantifying the appellant's DTA entitlement for the relevant years, and that the SCN's quantification which ignored those permitted DTA sales was erroneous. The adjudicating authority's computation of excess DTA sales was therefore unsustainable because it failed to give effect to the statutory authority's permission and traversed beyond the entitlement as permitted by the Development Commissioner. Applying the principle that revenue cannot disregard the competent authority's permission when fixing the limit of DTA clearance, the Tribunal held the demand based on the incorrect quantification cannot be sustained. [Paras 6]

Demand based on quantification that ignored the Development Commissioner's permitted DTA sales set aside.

Inclusion of deemed exports in FOB value for DTA sale entitlement - Inclusion of deemed exports in FOB value for DTA sale entitlement - Whether clearances to other EOUs treated as 'deemed exports' must be included in FOB value of exports for determining DTA sale entitlement. - HELD THAT: - After considering the jurisprudence including the Apex Court's decision in Virlon Textiles and subsequent approvals of Tribunal and High Court decisions, the Tribunal concluded that deemed exports must be equated to physical exports for computing FOB value for DTA entitlement. The Tribunal observed that several binding and persuasive decisions recognise that deemed exports confer economic benefits similar to physical exports and that once the Development Commissioner has permitted DTA sale including deemed exports, revenue cannot exclude them while computing entitlement. Applying those precedents to the facts, the asserted demand alleging excess DTA sale without accounting for deemed exports was found to lack basis on merits. [Paras 13]

Deemed exports are to be included in FOB value for DTA entitlement; demand based on exclusion of deemed exports cannot be sustained on merits.

Extended period/time bar for demand - Whether the first show cause notice invoking the extended period is maintainable. - HELD THAT: - The Tribunal held that the records and returns disclosed the relevant clearances and export details and there was no material to indicate fraud, collusion, wilful misstatement or suppression with intent to evade duty. The appellant had also sought administrative redressal and supplied details to the Development Commissioner. In these circumstances, the invocation of the extended period for the first SCN could not be sustained and the demand for that period is time barred. [Paras 14]

First show cause notice invoking the extended period is time barred and cannot be sustained.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned orders and demands: the quantification ignoring the Development Commissioner's permitted DTA sales and the demand excluding deemed exports were held unsustainable on merits, and the first SCN invoking the extended period was held time barred; consequential relief to follow as per law.

Lifting of bank attachment - payment of 50% of tax demand as condition for interim relief - pre-deposit condition for filing statutory appeal - relegation to Appellate Authority for challenge to assessment orders - interim restraint on recovery proceedings

Lifting of bank attachment - payment of 50% of tax demand as condition for interim relief - interim restraint on recovery proceedings - Whether interim relief by lifting attachment of one bank account can be granted on condition of payment of 50% of the tax demand and whether recovery proceedings should be stayed upon such payment. - HELD THAT: - The Court noted that the assessment orders for the listed assessment years were served in February 2020 and the petitioner delayed approaching the Appellate Authority or the Court. Despite the delay, the Court accepted the petitioner's submission that payment of a portion of the tax demand could enable appellate remedy without immediate enforcement. The Court recorded the tax component of the demand separately from penalty and interest and held that pre-deposit for filing appeal would apply only to the tax demand. As a workable interim arrangement the Court directed respondents to lift the attachment on the Axis Bank, Worli Branch account forthwith to permit the petitioner to withdraw funds and deposit 50% of the tax demand (i.e., half of the tax component only) within one week. Upon such deposit, the Revenue was restrained from taking further coercive action pursuant to the impugned assessment orders and demand letter dated 28.03.2022. The Court further directed that the petitioner may approach the Appellate Authority within two weeks to file regular appeals and that the Appellate Authority need not impose any pre-deposit condition until disposal of the appeals. The Court preserved the existing attachments on the other two bank accounts and left it open for the Appellate Authority to consider any application for their release objectively in light of compliance by the petitioner. The Court also recorded that failure to comply with the conditional payment would permit the Revenue to re-attach the said Axis Bank account and proceed with recovery. [Paras 10, 11]

Respondents directed to lift the attachment on the Axis Bank, Worli Branch account forthwith; petitioner to deposit 50% of the tax demand within one week; upon payment, Revenue shall not take further recovery action and petitioner may file appeals within two weeks; Appellate Authority shall not impose pre-deposit condition pending disposal; attachments on other bank accounts to continue and may be considered by the Appellate Authority on compliance.

Pre-deposit condition for filing statutory appeal - relegation to Appellate Authority for challenge to assessment orders - Whether the petitioner should be relegated to the Appellate Authority to challenge the assessment orders and whether the pre-deposit requirement should be waived or modified. - HELD THAT: - The Court observed that the petitioner had not earlier approached the Appellate Authority and that appeal remedy remained available. In view of the conditional payment of 50% of the tax demand directed by the Court, the petitioner was permitted to approach the Appellate Authority within two weeks to file regular appeals. The Court directed that, if such appeals are filed, the Appellate Authority need not impose any pre-deposit condition until the appeals are disposed of, in light of the deposit made pursuant to this order. This arrangement effectively relegates the petitioner to the appellate forum while moderating the pre-deposit requirement as a practical consequence of the interim deposit. [Paras 11]

Petitioner allowed to file appeals before the Appellate Authority within two weeks; Appellate Authority directed not to impose any pre-deposit condition until disposal of the appeals, in view of the interim deposit.

Final Conclusion: Writ petitions disposed by granting conditional interim relief: attachment on the Axis Bank account is to be lifted to permit the petitioner to pay 50% of the tax demand within one week; on such payment, recovery proceedings shall be stayed and the petitioner may file appeals within two weeks, with the Appellate Authority not imposing pre-deposit conditions until disposal; other bank attachments remain in force and non-compliance will permit re-attachment and recovery.

Attachment of personal bank account for recovery of company dues - Vicarious liability under Section-86 of the Value Added Tax Act, 2003 - Power of tax authorities to recover company liabilities from directors' personal assets

Vicarious liability under Section-86 of the Value Added Tax Act, 2003 - Attachment of personal bank account for recovery of company dues - Whether the authority under the Value Added Tax Act, 2003 can attach private movable or immovable property, including the personal bank account, of a director of a company for recovery of dues payable by the company. - HELD THAT: - The Court held that Section-86 of the Act addresses offences by companies and renders persons who were in charge of, and responsible to, the company vicariously liable for the criminal offence; it does not confer power on the revenue to recover civil liabilities of the company from the personal properties or bank accounts of a director. The provision makes an individual criminally liable in certain circumstances but does not alter the regime for recovery of the company's dues against the company's assets. The bank account in question was acknowledged to be the personal account of the director, and the departmental power to attach company dues cannot be extended to such private assets of a director.

Authority under the Act has no power to attach the personal bank account of a director to recover the company's dues; Section-86 creates vicarious criminal liability but does not permit recovery from the director's personal assets.

Attachment of personal bank account for recovery of company dues - Whether the attachment on the specified current account should be lifted in the present writ-application. - HELD THAT: - Applying the legal principle that the Department cannot proceed against the personal bank account of a director for recovery of the company's liabilities, the Court found in favour of the writ-applicant. The attachment insofar as it affected the Current Account bearing No.0372102000022385 maintained with IDBI Bank, Durga Das Nagar, Pali, Rajasthan, was held to be untenable and was ordered to be lifted.

Writ allowed and the attachment on the specified personal current account ordered to be lifted.

Final Conclusion: The writ-application was allowed: the Court held that Section-86 creates vicarious criminal liability but does not authorize recovery of company dues from a director's personal assets, and accordingly directed lifting of the attachment on the petitioner's specified personal bank account.

Reopening of assessment based on information from another department - reliance on Central Excise findings for requantification of VAT and CST - availability of statutory appellate remedy

Reopening of assessment based on information from another department - reliance on Central Excise findings for requantification of VAT and CST - Validity of the impugned reassessment which was reopened and requantified on the basis of information and records furnished by the Central Excise Department - HELD THAT: - The Court recorded that the completed assessment was reopened after information from the Central Excise Department, which had concluded that the petitioner indulged in large scale evasion and had confirmed demand in proceedings under the Central Excise Act. The Court observed that records of the Central Excise Department indicating quantum of manufacture are relevant for arriving at suppressed sales turnover and noted that the Excise proceedings have culminated in confirmation of demand and are currently the subject matter of an appeal before the CESTAT. In view of these facts, the Court found no prima facie ground to interfere with the reassessment at the writ stage and declined to set aside the impugned orders. [Paras 7]

Writ petitions dismissed insofar as challenging the reassessment; no interference with the impugned orders at this stage.

Availability of statutory appellate remedy - Procedure to be followed by the petitioner for challenging the impugned assessment orders and interim treatment of departmental proceedings pending outcome of Excise appeal - HELD THAT: - The Court directed that the petitioner is entitled to pursue the statutory remedy by filing an appeal before the Deputy Appellate Commissioner within 30 days and required the Deputy Appellate Commissioner to keep the appeal pending and await the outcome of the appeal before the CESTAT, Chennai, which would indicate the correct turnover. The Court further directed that if the petitioner succeeds in the Excise appeal, the demand may be reworked and requantified by the Deputy Appellate Commissioner. The petitioner was ordered to furnish details of the CESTAT appeal when filing the statutory appeal and to update the Deputy Appellate Commissioner or the State/Appellate Authority once in six months about developments in the Excise appeal. [Paras 8]

Liberty granted to file statutory appeal within 30 days; appellate authority to keep proceedings pending and await CESTAT decision, with periodic updates and re-quantification to follow if Excise appeal succeeds.

Final Conclusion: Writ petitions dismissed; petitioner granted liberty to file statutory appeal to the Deputy Appellate Commissioner within 30 days, with the appellate authority directed to keep the proceedings pending and await the CESTAT decision in the Excise appeal, and to rework any demand if the petitioner succeeds in the Excise proceedings.

Defence witnesses - capacity to lend - probable defence - Section 138 of the Negotiable Instruments Act - Section 243 of Cr.P.C.

Defence witnesses - Section 243 of Cr.P.C. - Section 138 of the Negotiable Instruments Act - capacity to lend - probable defence - Petitioner entitled to summon and examine witnesses and produce documents on the defence side to rebut the complainant's capacity to lend in proceedings under Section 138 of the Negotiable Instruments Act; trial Court's order dismissing the petition under Section 243 Cr.P.C. set aside. - HELD THAT: - The Court held that in prosecution under Section 138 of the Negotiable Instruments Act the accused is entitled to meet the complainant's case not only by cross-examination but also by examining witnesses and producing documentary materials to demonstrate that the complainant lacked the wherewithal to lend the alleged amount. While the complainant is not required, at the initial stage, to lead evidence of his financial capacity, an accused who specifically pleads that the complainant had no source to lend can rebut the complainant's case by independent material and witnesses. If such material establishes a plausible defence or casts the complainant's case in peril, the trial Court must consider the totality of evidence. Applying these principles to the present record, the petitioner had taken a specific stand regarding the complainant's lack of source and produced a list of witnesses and documents material to that defence; therefore the petition under Section 243 Cr.P.C. seeking issuance of witness summons ought not to have been dismissed. The trial Court's order dated 23.11.2021 dismissing Cr.M.P.No.7611 of 2019 was accordingly set aside and the revision allowed. [Paras 6, 7, 8]

Order in Crl.M.P.No.7611 of 2019 in S.T.C.No.8 of 2018 dated 23.11.2021 is set aside; petitioner permitted to summon and examine the listed defence witnesses and to produce documents to rebut the complainant's capacity to lend.

Final Conclusion: Criminal Revision allowed; the trial Court's dismissal of the petition under Section 243 Cr.P.C. is set aside and the petitioner may examine defence witnesses and produce documents to rebut the complainant's capacity to lend in the Section 138 NI Act proceedings.