TaxTMI Updates e-Newsletter
Apr 28,2022

Pre-deposit requirement under Section 107(6) of the CGST Act - restoration of dismissed appeal on compliance with pre-deposit - exercise of writ jurisdiction under Article 226 for interim relief - no adjudication on merits

Pre-deposit requirement under Section 107(6) of the CGST Act - restoration of dismissed appeal on compliance with pre-deposit - Direction permitting deposit of the mandatory pre-deposit and restoration of the appeal on compliance - HELD THAT: - The Court declined to decide the challenge to the assessment on merits and dealt only with the interlocutory consequence of non-compliance with the statutory pre-deposit. The petitioner offered to deposit 10% of the confirmed liability in terms of Section 107(6) of the CGST Act within two weeks. In exercise of its writ jurisdiction the Court directed that upon deposit of the specified amount with the Office of the Commissioner (Appeals) within the stipulated period, the appeal which had been dismissed for non-compliance shall be restored to its original file and the Commissioner (Appeals) shall proceed to hear the appeal on its own merits. The Court expressly clarified that it expressed no opinion on the merits of the underlying assessment. [Paras 8, 9, 11, 12]

Petitioner to deposit the pre-deposit amount within two weeks; on such deposit the appeal shall be restored and the Commissioner (Appeals) shall hear it on merits; no adjudication on merits by this Court.

Final Conclusion: Writ petition disposed by directing deposit of the prescribed pre-deposit within two weeks; upon compliance the dismissed appeal shall be restored and the appellate authority shall hear the appeal on its merits; the High Court refrained from expressing any view on the merits.

Vague show-cause notice - requirement of material particulars in show-cause - quashing of administrative order - restoration of GST registration - contempt for willful disobedience of court order

Vague show-cause notice - requirement of material particulars in show-cause - Validity of the show-cause notice and requirement to contain necessary particulars enabling effective response. - HELD THAT: - The Court found the impugned show-cause notice to be bereft of material particulars or information, rendering it difficult for the writ-applicant to make an effective response. The earlier order of this Court (24.03.2022) had quashed the prior show-cause notice for being vague and directed that any fresh notice must be in physical form and contain necessary information and details. The present proceedings record that respondent no.2 proceeded to cancel registration without issuing a fresh notice containing requisite particulars, which the Court regarded as impermissible procedure. [Paras 4, 5, 6, 7]

The show-cause notice lacked necessary particulars and could not support the consequential action; any fresh show-cause must contain adequate material particulars as directed earlier.

Quashing of administrative order - restoration of GST registration - Validity of the order dated 29.03.2022 cancelling GST registration and the subsequent order dated 05.04.2022; restoration of registration. - HELD THAT: - The Court examined the order dated 29.03.2022 cancelling the writ-applicant's GST registration and the later order dated 05.04.2022 and found both to be vague and lacking in reasoned material particulars. The cancellation order was passed despite the earlier direction that a fresh, detailed show-cause be issued; the subsequent revocation-order was equally without substance. For these reasons the Court quashed and set aside the cancellation order and the so-called revocation-order and directed immediate restoration of the writ-applicant's GST registration. [Paras 7, 9, 10, 13, 14]

Order dated 29.03.2022 cancelling registration and order dated 05.04.2022 are quashed and set aside; GST registration restored forthwith.

Contempt for willful disobedience of court order - Whether respondent no.2 should be proceeded against for contempt for alleged willful disobedience of the Court's earlier order. - HELD THAT: - Counsel for the writ-applicant urged initiation of contempt proceedings against respondent no.2 for acting in disregard of the Court's direction to issue a fresh, detailed show-cause. The Court acknowledged the gravity of the conduct and observed that the respondent's actions were high-handed and unacceptable. Nevertheless, the Court declined to issue a notice for contempt at this stage, opting instead to warn respondent no.2 that any future similarly vague orders or show-cause notices signed by him will attract the Court's stern action and may lead to the last day in office. [Paras 11, 12]

No contempt notice issued; respondent no.2 is warned that repetition of such vague orders or non-compliance will invite severe consequences.

Final Conclusion: The Court quashed the cancellation order dated 29.03.2022 and the subsequent order dated 05.04.2022 for being vague and lacking necessary particulars, restored the writ-applicant's GST registration forthwith, reiterated that any fresh show-cause must contain adequate material particulars, and declined to issue contempt notice while warning the impugned officer against repetition.

Interest on delayed payment of tax - interest charged on net cash tax liability (proviso to Section 50) - reversal of Input Tax Credit and interest liability - interest liability for belated remittance of tax - procedure for recovery of dues under existing laws (Rule 142A)

Interest charged on net cash tax liability (proviso to Section 50) - reversal of Input Tax Credit and interest liability - Applicability of the proviso to Section 50(1) (charging interest only on net cash tax liability) to the petitioner's case and correctness of earlier disposal relating to reversal of ITC. - HELD THAT: - The Court examined the proviso to Section 50(1), observing that it applies to cases where returns are filed after the due date under Section 39 and prescribes that interest is to be levied only on that portion of tax paid by debiting the electronic cash ledger. The earlier common order disposing a batch of writ petitions (including the petitioner's matter) addressed recovery of interest on reversal of ITC; however, that disposal was rendered by oversight in the petitioner's case because the petitioner's interest liability did not arise from reversal of ITC. The proviso inserted by the Finance Act (No.2), 2019 and notifications concerning its effective date are therefore not applicable to the petitioner, whose liability stems from belated payment of tax rather than reversal of input tax credit. [Paras 11, 12, 13, 14, 15]

Proviso to Section 50(1) (charging interest only on net cash tax liability) does not apply to the petitioner; the earlier batch disposal concerning reversal of ITC was by oversight and is not operative in the petitioner's case.

Interest on delayed payment of tax - interest liability for belated remittance of tax - procedure for recovery of dues under existing laws (Rule 142A) - Whether the petitioner can stall recovery of interest demanded for belated payment of tax for the period in question. - HELD THAT: - The Court found that the petitioner paid tax belatedly for the relevant period and that nothing prevented discharge of tax from the electronic cash ledger. The substantive provisions and Rule 37(3) (reversal and interest) and the recovery procedure under Rule 142A do not absolve the petitioner of interest liability where tax is paid after the due date. The Court held that interest follows belated payment declared in returns and is payable even where returns are delayed or proceedings under Sections 73/74 are involved. Having regard to these legal positions and the factual matrix that the petitioner's liability arose from belated tax payment, the writ petition lacks merit. [Paras 10, 16, 17, 18]

Petitioner is liable to pay interest on belated payment of tax for the period pleaded; the petition to stall recovery is dismissed.

Final Conclusion: Writ petition dismissed: the proviso to Section 50(1) (net cash liability) is not applicable to the petitioner whose liability arises from belated payment of tax for July 2017 to October 2020, and the petitioner must pay the interest demanded; earlier batch disposal relating to reversal of ITC was an oversight and does not avail the petitioner.

Penalty for unauthorised transport of goods under the GST regime (s.129(3) of the Act, 2017) - lawful inspection and seizure of consignments - appellate review of penalties under the GST framework (s.107 of the Act, 2017) - factual determination v. question of law - compliance with principles of natural justice in enforcement proceedings

Penalty for unauthorised transport of goods under the GST regime (s.129(3) of the Act, 2017) - lawful inspection and seizure of consignments - Validity of the penalty imposed under section 129(3) of the GST Act, 2017 consequent to inspection which found goods in the vehicle not matching the invoices and e way bill. - HELD THAT: - The court examined the record and the operative findings of the appellate authority which record that the vehicle carried goods in excess of the bilti and e way bill and that the goods loaded were not as per accompanying invoices and e way bill. On that factual foundation the authorities were held to be competent under the statute to inspect the consignment and to find transportation in violation of the statutory provisions and rules. The petitioner's contention that inspection was not carried out in accordance with law because the driver did not have all documents was not demonstrated to the satisfaction of the court; no legal right of the petitioner was shown to have been infringed. The matter was therefore treated as a factual determination by the enforcement authorities which supported imposition of the penalty.

Penalty under section 129(3) sustained; inspection and consequent penalty held valid on the factual findings recorded by the authorities.

Appellate review of penalties under the GST framework (s.107 of the Act, 2017) - factual determination v. question of law - compliance with principles of natural justice in enforcement proceedings - Whether the writ petition raised any substantial question of law or disclosed violation of principles of natural justice warranting interference with the orders of the original and appellate authorities. - HELD THAT: - The court found that the challenge was essentially directed to the factual conclusions reached by the statutory authorities and that the petitioner failed to demonstrate any contravention of statutory provisions or of principles of natural justice in the conduct of inspection and adjudication. Because the dispute was factual in nature and no legal right was shown to be violated, interference by writ court was not warranted. The petitioner's request for quashing and for remand for a fresh inspection was rejected as the court did not find any procedural irregularity or legal infirmity necessitating remand.

Writ petition dismissed for want of merit; no interference with the appellate order and no remand ordered.

Final Conclusion: The writ petition challenging the penalty order and the appellate dismissal is dismissed on the ground that the matter involves factual findings of mismatch between consignment and documents which do not disclose any legal infirmity or breach of natural justice; no order as to costs.

Vacation of interim stay - stay of operation of Authority for Advance Ruling order - deposit of disputed tax under protest - subject to final outcome of main matter - awaiting decision of higher court governing pending writ

Vacation of interim stay - deposit of disputed tax under protest - subject to final outcome of main matter - Ad-interim relief staying operation of the Authority for Advance Ruling order was to be vacated to permit the applicant to recover and deposit the disputed tax. - HELD THAT: - The Court noted that the substantive question in the writ petition is sub judice before the Supreme Court, whose eventual decision will govern the present dispute. The applicant sought permission to commence recovery from its customers and to deposit the amounts with the Authority pending final adjudication. Having considered the position that the higher court's decision may take time and that the applicant wishes to proceed in accordance with law, the Court allowed the civil application and vacated the ad-interim stay previously granted. The Court made clear that any amount recovered and deposited pursuant to this order shall remain subject to the final outcome of the main matter. [Paras 5, 6, 7]

The ad-interim stay is vacated; the applicant may proceed to recover and deposit the disputed amount in accordance with law, with such deposits being subject to the final outcome of the main matter.

Awaiting decision of higher court governing pending writ - Direction regarding further conduct of Special Civil Application No.19071 of 2019 while the related issue remains pending before the Supreme Court. - HELD THAT: - Because the determinative question is pending before the Supreme Court, the Court directed that Special Civil Application No.19071 of 2019 be notified once the writ applicant files an appropriate note. The order records that the matter will be taken up after such notification in view of the awaiting higher court verdict.

The matter shall be notified once an appropriate note is filed by the writ applicant; further proceedings await the Supreme Court's determination of the related issue.

Final Conclusion: The civil application is allowed: the interim stay of the Authority for Advance Ruling's order is vacated permitting recovery and deposit of disputed tax subject to the final outcome of the main matter; the related Special Civil Application will be notified upon filing of an appropriate note.

Review jurisdiction - Order 47 Rule 1 CPC - Binding precedent under Article 141 - Palpable error - Propriety of review by reconstituted bench

Review jurisdiction - Order 47 Rule 1 CPC - Palpable error - Binding precedent under Article 141 - Entertainability of the review application against the Division Bench order dated 05.08.2021 - HELD THAT: - The Court examined whether the present review application could be allowed to recall or review the Division Bench's order which had affirmed the Single Judge's decision. It held that the mere contention that binding precedents or authorities (including those having the force of Article 141) were not considered, or that a different conclusion might have followed had certain decisions been applied, does not by itself constitute a ground for review. The Court applied the principle that a review is not a forum for re-arguing or seeking a different decision on questions already adjudicated, and that absence of consideration of certain authorities, standing alone, does not establish the kind of apparent or patent error warranting interference under review jurisdiction. The Court also noted the additional factor of propriety arising from reconstitution of the Bench, which weighs against entertaining the review application in the circumstances. [Paras 3, 4]

Review application dismissed; no interference with the Division Bench order.

Final Conclusion: The review petition challenging the Division Bench order is dismissed: disagreement with the outcome or asserted non-consideration of authorities does not justify review, and propriety considerations arising from bench reconstitution reinforce refusal to reopen the decision.

Grant of bail in offences under the CGST regime involving alleged fraudulent input tax credit - prima facie satisfaction in support of the charge - reformative theory of punishment - Article 21 - liberty and bail - verification of sureties and conditional release - court's power to cancel bail on breach of conditions - judicial reliance on Dataram Singh principles for bail

Grant of bail in offences under the CGST regime involving alleged fraudulent input tax credit - prima facie satisfaction in support of the charge - reformative theory of punishment - Article 21 - liberty and bail - judicial reliance on Dataram Singh principles for bail - Whether the applicant Sanchit Gupta, accused in a case registered under Section 132(1)(b) of the CGST Act for alleged fraudulent inward ITC, was entitled to be released on bail during trial. - HELD THAT: - The Court considered the nature of accusation, severity of punishment, the supporting evidence and the extent of prima facie satisfaction in support of the charge, while applying the guiding principles laid down in Dataram Singh. Having regard to the reformative theory of punishment and the constitutional guarantee under Article 21, and without expressing any opinion on merits, the Court found this case fit for grant of bail. The Court noted that the applicant was an employee and that the principal alleged beneficiary had not been made an accused; these factual aspects, together with the other considerations, informed the exercise of judicial discretion in favour of bail. The Court emphasised that its observations are confined to disposal of the bail application and do not bear on the ultimate merits of the prosecution.

Bail granted to the applicant on furnishing a personal bond and two sureties in like amount, subject to attendance, non-tampering and non-indulgence in illegal activities, and other stated conditions.

Verification of sureties and conditional release - court's power to cancel bail on breach of conditions - Conditions and procedural safeguards to be complied with before and after release on bail. - HELD THAT: - The Court directed that sureties be verified by the concerned court before issuance of the release order and required the applicant to attend and cooperate in the trial, not tamper with witnesses, and refrain from illegal activities. The court below was vested with liberty to cancel bail and remand the applicant to custody in case of breach of any condition. The Court also directed filing and verification procedures for a computer generated copy of the order downloaded from the High Court website, to be self attested by counsel and authenticated in writing by the concerned Court/Authority/Official.

Release conditioned on verified sureties, specified conduct during bail, and procedural verification of the order; breach to be ground for cancellation of bail.

Final Conclusion: The bail application of the applicant Sanchit Gupta is allowed; he is directed to be released on furnishing the required bond and two verified sureties and subject to the listed conditions, with the concerned court empowered to cancel bail on breach and with prescribed procedural verification of the release order.

Requirement of GST registration - Exemption under Notification entries SI.No.69 and SI.No.70 - Exemption under Entry 9C (supply of service by a Government Entity to government persons against grants) - Advance ruling binding effect - Appellate Authority power to confirm or modify advance ruling

Requirement of GST registration - Exemption under Notification entries SI.No.69 and SI.No.70 - Appellate Authority power to confirm or modify advance ruling - Whether the appellant is required to be registered under the GST Act in view of the AAR's ruling that the exemption entries relied upon by the appellant (SI.No.69 and SI.No.70 of Notification No.12/2017-C.T.(Rate)) do not apply to it. - HELD THAT: - The Appellate Authority examined the appeal against the AAR's finding that the specific exemption entries relied upon by the appellant (SI.No.69 and SI.No.70) were not attracted. The appellant did not contest the AAR's conclusions on the applicability of those two entries before this forum and accepted that the AAR had examined those entries and ruled accordingly. Under Section 100(1) the Appellate Authority may confirm or modify the ruling appealed against; however, this appeal did not raise new facts before the AAR on SI.No.69 and SI.No.70. The Appellate Authority found no reason to interfere with the AAR's factual and legal conclusions on those entries and, therefore, confirmed the Original Ruling that the appellant is required to be registered under the GST Act insofar as the AAR's examination of SI.No.69 and SI.No.70 is concerned. [Paras 7, 8]

Original Ruling confirmed; appeal dismissed and the appellant remains required to be registered under the GST Act on the basis of the AAR's findings regarding SI.No.69 and SI.No.70.

Exemption under Entry 9C (supply of service by a Government Entity to government persons against grants) - Advance Authority remit for fresh factual verification - Whether the appellant's claim under Entry 9C of Notification No.12/2017 (exemption for supply of service by a Government Entity to government persons against grants) could be adjudicated by this Appellate Authority in the present appeal. - HELD THAT: - Entry 9C exempts supply of service by a Government Entity to government persons against consideration received in the form of grants. The Appellate Authority observed that applicability of Entry 9C depends on fresh factual questions - whether the appellant qualifies as a 'Government entity', whether services are rendered only to the government or persons specified by government, and whether consideration is limited to grants - which were not the subject-matter examined by the AAR below. Since Entry 9C and the supporting factual matrix were not pleaded to and adjudicated by the Original Authority, this Appellate Authority declined to decide that new ground in the appeal. The forum noted that it may either confirm or modify the AAR's ruling but cannot entertain a new factual ground that was not dealt with below in this appellate proceeding. [Paras 7]

Applicability of Entry 9C not decided on merits in this appeal; appellant may approach the Original Authority separately with that ground for fresh consideration and verification.

Final Conclusion: The Appellate Authority confirmed the AAR's ruling that the appellant is required to be registered under the GST Act insofar as the AAR's examination of SI.No.69 and SI.No.70 is concerned, dismissed the appeal, and declined to decide the separate contention based on Entry 9C which raises fresh facts left open for consideration by the Original Authority.

Reopening of assessment - change of opinion - proviso to Section 147 of the Income Tax Act - failure to truly and fully disclose material facts - deduction under Section 80-IC - assessing officer's consideration during original assessment proceedings

Reopening of assessment - change of opinion - Reopening of assessment on the ground that deduction should have been restricted to 30% (instead of 100%) is invalid as a mere change of opinion. - HELD THAT: - The Court found that the reasons recorded by the Assessing Officer amount to a change of opinion because they merely disagree with allowing 100% deduction instead of 30%. A purported reassessment based on such disagreement is impermissible. The assessment record shows that the dispute over the quantum of deduction was raised and considered during original proceedings, and the attempt to reopen on that basis cannot stand as a valid foundation for forming belief that income escaped assessment. [Paras 8]

Reopening quashed insofar as it rests on a change of opinion about the percentage of deduction allowable.

Deduction under Section 80-IC - assessing officer's consideration during original assessment proceedings - The question whether the assessee had disclosed material facts relating to the claim of deduction under Section 80-IC was finally decided against the Revenue; the Court held there was no failure to truly and fully disclose material facts. - HELD THAT: - The assessee had explained and documented the 80-IC deductions in the return and in replies to notices issued under Section 142(1) during assessment proceedings, including explanation for revision to 100% and furnishing supporting evidence. The assessment order dealt with unit-wise details and thus indicates that the Assessing Officer had the matter under active consideration. Where a query is raised and replied to in assessment proceedings, it must be treated as having been considered; absence of explicit mention in the assessment order does not mean nondisclosure. On this basis the proviso to Section 147 (which requires failure to disclose truly and fully) was not attracted. [Paras 9, 10]

There was no failure to truly and fully disclose material facts on the issue of Section 80-IC deductions; therefore the proviso to Section 147 does not validate reopening.

Reopening of assessment - proviso to Section 147 of the Income Tax Act - failure to truly and fully disclose material facts - Reliance on a Supreme Court judgment which was subsequently overruled could not form a valid basis for forming belief of escapement of income for purposes of reopening. - HELD THAT: - The Court accepted petitioner's contention that the decision relied upon by the Assessing Officer had been overruled prior to the sanction to reopen. Reliance on an authority no longer good law cannot constitute a sustainable foundation for forming the requisite belief under Section 147. The Revenue's plea that an officer cannot be expected to know all judgments was not accepted as justifying reliance on an overruled precedent to reopen assessment. [Paras 9]

Reopening cannot be sustained by reliance on a judgment that had been overruled and thus did not furnish a valid basis for forming belief of escapement.

Final Conclusion: The petition is allowed: the notice dated 31.03.2021 and the consequential order are quashed and set aside insofar as they reopen Assessment Year 2014-2015; the reassessment based on change of opinion, reliance on an overruled precedent, or on an alleged failure to disclose material facts is impermissible.

Reopening of assessment - proviso to Section 147 of the Income Tax Act, 1961 - failure to truly and fully disclose material facts - assessment completed under Section 143(3) - accommodation entries / bogus capital gains - acceptance of replies to s.142(1) queries - Gemini Leather Stores principle

Reopening of assessment - proviso to Section 147 of the Income Tax Act, 1961 - failure to truly and fully disclose material facts - assessment completed under Section 143(3) - acceptance of replies to s.142(1) queries - Gemini Leather Stores principle - Validity of notice under section 148 read with proviso to section 147 for reopening assessment for Assessment Year 2013-2014 - HELD THAT: - Reopening beyond four years from the end of the relevant assessment year is barred by the proviso to Section 147 unless the Assessing Officer shows escapement of income resulting from the assessee's failure to truly and fully disclose material facts. The reasons recorded did not specify any material fact which the petitioner was bound to disclose but failed to do so. During the original assessment the AO had issued specific s.142(1) notices seeking demat statements and scrip-wise details and the petitioner furnished those particulars, including trades in the implicated scrip, which were treated as bonafide and assessed. The affidavit in reply admits that the AO accepted the particulars and had no means to know they were not bonafide. Once an assessee has answered queries during assessment and the AO had the material before him, mere subsequent information that the transactions may have been accommodation entries cannot, by itself, justify reopening where there was no omission by the assessee to disclose material facts. Applying the principle in Gemini Leather Stores, an error on the part of the AO or lack of means on his part to detect non-genuineness does not convert into failure by the assessee to disclose material facts permitting reopening under the proviso to Section 147. [Paras 6, 7, 8, 9]

Notice under section 148 to reopen assessment for AY 2013-2014 quashed as the proviso to section 147 is not attracted since there was no failure by the petitioner to truly and fully disclose material facts and the AO had the material before him when completing the assessment.

Final Conclusion: Writ petition allowed; notice dated 31.3.2021 issued under section 148 and consequential proceedings quashed and set aside; petition disposed of with no order as to costs.

Capitalisation of interest - interest on temporary investment of borrowed funds - interest earned on fixed deposits during construction period - receipts inextricably linked with setting up of a capital asset - reduction of cost of capital asset by capital receipts - compliance with Reserve Bank of India guidelines for external commercial borrowings

Capitalisation of interest - interest on temporary investment of borrowed funds - interest earned on fixed deposits during construction period - receipts inextricably linked with setting up of a capital asset - Whether interest earned on fixed deposits into which foreign ECB funds were temporarily parked during the period of construction could be capitalised (i.e., treated as reducing the cost of the capital asset) rather than taxed as income. - HELD THAT: - The Court accepted the principle that where receipts are inextricably linked with the process of setting up a capital asset, such receipts are capital in nature and serve to reduce the cost of the asset rather than constituting taxable income. The Court observed that the assessee had obtained an ECB disbursed in a single tranche, utilised part for renovation/ refurbishment and temporarily parked the balance in FDRs in compliance with RBI instructions. Reliance was placed on the Apex Court's exposition that receipts linked to setting up plant and machinery reduce asset cost, as explained in the subsequent Bokaro Steel decision, and on this Court's precedents which applied the same principle where funds were inextricably linked with capital expenditure. Having regard to those authorities and the admitted facts that the ECB proceeds were for acquisition/ renovation and were temporarily invested pending utilisation, the Court found no substantial question of law to be decided against the approach of capitalising the net interest amount. [Paras 4, 5, 6, 7]

The interest earned on FDRs into which ECB funds were temporarily parked during construction was held to be capital in nature and capable of being capitalised (reducing the cost of the capital asset); the appeal was dismissed as covered by earlier decisions.

Final Conclusion: The Court dismissed the appeal, holding that the treatment of interest earned on temporary investment of ECB proceeds as capital (reducing the cost of the asset) is consistent with precedents and that no substantial question of law arises for adjudication.

Reopening of assessment - reassessment under section 147 of the Income Tax Act - notice under section 148 of the Income Tax Act - reason to believe - failure to disclose fully and truly all material facts - change of opinion - tangible material - proviso to section 147

Reopening of assessment - reason to believe - failure to disclose fully and truly all material facts - change of opinion - tangible material - Validity of the notice dated 30.03.2021 under section 148 seeking reassessment for A.Y. 2014-15. - HELD THAT: - The Court found that the Assessing Officer had considered and examined the claim of deduction under section 80 IA during original assessment and had access to the material facts when the assessment under section 143(3) was completed. The reasons recorded for reopening did not identify any particular material fact which was not truly and fully disclosed by the assessee; instead the record indicated that the reopening was founded on the Assessing Officer's later view about computation and allowance of deduction. The proviso to section 147 requires that, after four years from the end of the relevant assessment year, reassessment can be initiated only where income has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. A reassessment based merely on a subsequent change of opinion by the Revenue, without disclosure of any new tangible material showing nondisclosure by the assessee, is impermissible. Applying these principles, the Court concluded that the notice and consequent order were an attempt to review the earlier concluded assessment rather than action based on any undisclosed material, and therefore were invalid. [Paras 20, 21, 22, 23]

Notice dated 30.03.2021 under section 148 and order dated 13.12.2021 rejecting objections are quashed and set aside.

Final Conclusion: The petition succeeds: reassessment proceedings initiated by notice dated 30.03.2021 and the order dated 13.12.2021 are quashed because reopening was based on a change of opinion and not on any failure by the assessee to disclose fully and truly all material facts.

Bad debts - business loss - commercial expediency / business purpose - factual findings of the Tribunal - perversity - finality of fact-finding

Bad debts - business loss - commercial expediency / business purpose - factual findings of the Tribunal - perversity - Whether the disallowance of the claim of business loss / bad debts was sustainable where the authorities found no material to show that the amount advanced was for the assessee's business purpose. - HELD THAT: - The authorities below examined the complaint, the accounts and the surrounding material and found that the original complaint indicated the payment was for purchase of land by a partner for personal purposes, not for expansion of the firm's lodging business. No agreement, correspondence or other records were produced to demonstrate a business link or commercial expediency for the payment. The Tribunal consequently concluded that the amount was not advanced in respect of the business carried on by the assessee and rightly disallowed the claim as neither a bad debt nor a business loss. The High Court observed that those findings are based on material evidence and factual appraisal and are not shown to be perverse. Reliance placed on decisions cited by the assessee was held to be factually distinguishable. The court reiterated the principle that appellate interference is unwarranted unless a finding of fact is vitiated by perversity, which was not established here. [Paras 11, 14]

The disallowance of the claim of business loss / bad debts was affirmed and the Tribunal's factual conclusion was held not to be perverse.

Final Conclusion: The Tribunal's and lower authorities' factual finding that the amount advanced lacked any demonstrable business purpose was upheld; the disallowance of the claim of business loss / bad debts for Assessment Year 2006-07 is sustained and the Tax Case Appeal is dismissed.

Reopening of assessment - fresh material suggesting escapement of income - change of opinion - notice under section 148 of the Income-tax Act - repeat notice - remand for fresh consideration - opportunity of personal hearing

Reopening of assessment - notice under section 148 of the Income-tax Act - fresh material suggesting escapement of income - change of opinion - remand for fresh consideration - opportunity of personal hearing - Validity of the notice dated 16.08.2002 under section 148 for assessment year 1998-99 and the appropriate course of action. - HELD THAT: - The assessing officer recorded reasons on 16.08.2002 alleging that the land sold was not agricultural, invoking capital gains character and provisions indicated in the reasons (including reference to non-registration and alleged applicability of provisions treating the transaction as transfer). The learned Single Judge had set aside the reassessment notices for both years on the ground of absence of fresh material and change of opinion; a Coordinate Bench earlier affirmed that conclusion for 1997-98 but directed ascertainment of factual differences for 1998-99. Having examined the recorded reasons and the parties' submissions, this Court found bona fide in the Revenue's contention that there existed material warranting fresh consideration for 1998-99. Rather than finally deciding the validity of the notice on merits, the Court set aside the Single Judge's blanket quashing insofar as it applied to 1998-99 and remanded the matter to the assessing officer to decide on the merits in accordance with law, after providing the assessee an opportunity to file objections and to be heard. The Court prescribed timelines: the assessee may file objections within two weeks of receiving this order, and the assessing officer shall, after affording personal hearing, pass appropriate orders within four weeks. [Paras 12, 14, 15]

Order quashing the reassessment notice for 1998-99 set aside and the matter remanded to the assessing officer for fresh, merits-based consideration after giving the assessee an opportunity of hearing; timelines directed for objections and disposal.

Final Conclusion: Writ appeal allowed in part: the Single Judge's order quashing the section 148 notice for assessment year 1998-99 is set aside and the matter is remanded to the assessing officer to examine the recorded reasons, permit the assessee to file objections and afford personal hearing, and thereafter pass appropriate orders within the prescribed timelines; no costs.

Principles of natural justice - opportunity of personal hearing through video conferencing - faceless assessment procedure - remand for fresh speaking order - alternate remedy under Section 246A

Principles of natural justice - opportunity of personal hearing through video conferencing - faceless assessment procedure - Impugned assessment order passed without permitting the assessee to participate in personal hearing through video conferencing violated principles of natural justice. - HELD THAT: - The petitioner specifically requested permission to participate in the personal hearing by Video Conferencing and the request was not considered before passing the impugned assessment order. Although the National Faceless Assessment Centre operates through a portal and the system contains a facility for Video Conferencing, it is incumbent on the authority to ensure the system functions so as to enable an assessee who desires to participate to do so; it is not sufficient to merely state that the assessee did not press a link in the notice. In these circumstances the order was passed without affording the petitioner the requested opportunity to be heard, thereby infringing the principles of natural justice. The court therefore set aside the assessment order and remitted the matter for a fresh adjudication on merits after affording the petitioner the opportunity of a personal hearing by Video Conferencing and directed appropriate administrative steps to enable such hearing. [Paras 7, 8]

Impugned assessment order quashed and matter remitted for fresh speaking order on merits after permitting personal hearing through Video Conferencing; respondent to issue instructions to enable Video Conferencing and pass a speaking order within sixty days.

Alternate remedy under Section 246A - maintainability of writ despite alternate remedy - Existence of an alternate remedy under Section 246A did not preclude entertainment of the writ petition in the circumstances. - HELD THAT: - The respondent relied on the availability of an alternate remedy under Section 246A. The court, having found a breach of the assessee's right to be heard caused by non-provision of a requested Video Conferencing hearing, proceeded to decide the petition on that basis and granted relief by quashing the assessment and remitting the matter for reconsideration. The availability of the alternate statutory remedy was not treated as a bar to granting writ relief in these facts. [Paras 5, 8]

Writ petition entertained and allowed despite the existence of an alternate remedy under Section 246A; relief granted on merits relating to denial of hearing.

Final Conclusion: Writ petition allowed: impugned assessment order for Assessment Year 2018-19 set aside for failure to afford requested personal hearing through Video Conferencing; matter remitted to the National Faceless Assessment Centre to pass a fresh speaking order on merits after enabling and affording Video Conferencing participation within sixty days.

Deemed concealment under Explanation 1(A) to section 271(1)(c) - onus of proof in respect of unexplained credits under section 68 - power to condone delay under section 249(3) - no bar on initiation/confirmation of penalty pending disposal of quantum appeal; remedial revision under section 275(1A)

Power to condone delay under section 249(3) - Whether the appeal to the CIT(A) was rightly dismissed as not admitted for delay in filing and whether the Tribunal should interfere with that finding. - HELD THAT: - The Tribunal noted that the assessee filed the appeal to the CIT(A) after the 30-day period prescribed by section 249(2)(b) and did not file any application seeking condonation of delay. The CIT(A)'s conclusion that the appeal was presented late and that no sufficient cause was shown remained uncontroverted on the record before the Tribunal. The Tribunal treated the omission as negligence and inaction by the assessee and, applying the settled discretionary standard for exercise of power under section 249(3), declined to interfere with the CIT(A)'s exercise of discretion to refuse admission of the appeal. [Paras 11, 12]

The CIT(A)'s dismissal of the appeal as not admitted for delay is sustained and not interfered with.

Deemed concealment under Explanation 1(A) to section 271(1)(c) - onus of proof in respect of unexplained credits under section 68 - Whether the penalty under section 271(1)(c) was rightly confirmed on the basis of deemed concealment arising from failure to explain credits shown as sundry creditors. - HELD THAT: - On the merits the Tribunal recorded that the assessee did not attend inquiries and did not furnish explanations after the AO communicated results of enquiries under section 133(6). The Tribunal reiterated the legal position that the assessee bears the onus to prove the identity, creditworthiness and genuineness of entries charged under section 68, and that failure to offer an explanation engages Explanation 1(A) to section 271(1)(c) rendering additions as deemed concealment. The findings of the AO and the CIT(A) on these factual and legal points remained uncontroverted by the assessee, who did not appear before the authorities or the Tribunal. Accordingly the Tribunal declined to interfere with confirmation of the penalty. [Paras 9, 10, 14]

The confirmation of penalty on the ground of deemed concealment for unexplained credits is sustained.

No bar on initiation/confirmation of penalty pending disposal of quantum appeal; remedial revision under section 275(1A) - Whether passing or confirming the penalty while the quantum appeal is pending was impermissible. - HELD THAT: - The Tribunal observed that there is no statutory bar against passing a penalty order pending disposal of the quantum appeal. It noted that section 275(1A) provides the mechanism to revise the penalty in conformity with appellate orders in the quantum appeal, and therefore disposal of the penalty appeal pending quantum adjudication is not impermissible as a matter of law. [Paras 9]

Passing or confirming the penalty pending the quantum appeal is not prohibited; revision in conformity with quantum appellate orders is available under law.

Final Conclusion: The Tribunal dismissed the assessee's appeal, upholding the CIT(A)'s non-admission for delay and sustaining confirmation of the penalty as deemed concealment for unexplained credits; it further held that penalty proceedings pending disposal of the quantum appeal are not barred as section 275(1A) permits revision.

Deemed dividend under section 2(22)(e) - meaning of "accumulated profits" under Explanation 2 to section 2(22) - disallowance of depreciation for personal use under section 38(2)

Deemed dividend under section 2(22)(e) - meaning of "accumulated profits" under Explanation 2 to section 2(22) - Addition on account of deemed dividend of Rs. 3,62,366 under section 2(22)(e) was validly made and upheld. - HELD THAT: - The Tribunal found that the statutory conditions for attracting section 2(22)(e) were satisfied: both companies were closely held (not substantially interested by the public), the assessee was a shareholder holding more than 10% (95% and 50%), and loans/advances were credited to the assessee by those companies. Explanation 2 to section 2(22) treats "accumulated profits" as including all profits of the company up to the date of the payment; it does not limit "accumulated profits" to profits of the immediately preceding year. The Tribunal relied on the view that accumulated profits are to be determined as on the date of the loan/advance and noted the Jurisdictional High Court authority to similar effect. In consequence, the amount attributable to accumulated profits was properly treated as deemed dividend and the addition affirmed. [Paras 9, 10, 11]

Addition under section 2(22)(e) upheld and ground dismissed.

Disallowance of depreciation for personal use under section 38(2) - Disallowance of 20% of depreciation on motor car for personal use under section 38(2) was correctly sustained. - HELD THAT: - The Assessing Officer disallowed 20% of the depreciation claimed on the ground that no log book was maintained to segregate business and personal use of the vehicle, applying section 38(2). The Commissioner (Appeals) affirmed that disallowance, and the Tribunal agreed that in absence of records demonstrating exclusive business use, the proportionate disallowance was justified. The Tribunal found no infirmity in upholding the 20% add-back. [Paras 13, 15]

Disallowance of 20% depreciation upheld and ground dismissed.

Final Conclusion: The appeal is dismissed in entirety; the additions under section 2(22)(e) as deemed dividend and the 20% disallowance of motor car depreciation under section 38(2) are affirmed.

Transfer of jurisdiction under section 127 - jurisdictional acquiescence and waiver - unexplained expenditure and undisclosed investment under section 69 - presumption arising under section 132(4A) - use of seized loose papers as corroborative material in search assessments

Transfer of jurisdiction under section 127 - jurisdictional acquiescence and waiver - Validity of assessment proceedings before the Assessing Officer at Nashik in view of the transfer order under section 127. - HELD THAT: - The Tribunal held that objections to the transfer order under section 127 cannot be agitated in assessment proceedings because proceedings under section 127 are independent and any remedy against the transfer lies elsewhere. Further, where the assessee had knowledge of the transfer during assessment proceedings and did not timely challenge or participated so as to acquiesce, he cannot later challenge the jurisdiction of the transferee Assessing Officer. Reliance was placed on settled precedents to the effect that acquiescence ousts subsequent jurisdictional objections. [Paras 6, 7, 8]

Objection to jurisdiction arising from the section 127 transfer dismissed; assessment before the Nashik Assessing Officer upheld.

Unexplained expenditure and undisclosed investment under section 69 - use of seized loose papers as corroborative material in search assessments - Sustainability of addition of Rs. 1,38,38,000 as unexplained expenditure under section 69 based on loose papers seized during search. - HELD THAT: - The Tribunal examined the seized loose papers (extracted in the assessment order) which recorded a payment/receipt dated 31.01.2011 indicating total payment of Rs. 1,38,38,000 and notings reflecting interest/loan transactions. The assessee failed to satisfactorily explain the contents when confronted; consequently the material warranted drawing inference of unexplained income and justified addition under section 69. The Tribunal confirmed the Assessing Officer's finding that the assessee did not rebut the seized material. [Paras 11]

Addition of Rs. 1,38,38,000 confirmed; ground challenging this addition dismissed.

Unexplained expenditure and undisclosed investment under section 69 - presumption arising under section 132(4A) - use of seized loose papers as corroborative material in search assessments - Sustainability of addition of Rs. 6,20,00,000 as undisclosed investment under section 69 based on seized notings showing cash payments for share transactions. - HELD THAT: - The Tribunal considered the seized page (Annexure A/5) reflecting receipts and payments relating to purchase and sale of shares in which the assessee's name appeared and which recorded a cash payment of Rs. 6,20,00,000. The assessee's responses were found vague when confronted; the presumption under section 132(4A) accordingly remained unrebutted. On that basis the Tribunal held the Assessing Officer and CIT(A) were justified in treating the amount as undisclosed investment and making the addition under section 69. [Paras 11]

Addition of Rs. 6,20,00,000 confirmed; ground challenging this addition dismissed.

Treatment of cash seized during search - Claim for credit of seized cash of Rs. 32,00,000 in computing interest and tax liability. - HELD THAT: - The Tribunal observed that the claim for credit of the seized cash did not arise from the assessment order and therefore could not be entertained in the present appeal. Consequently the ground seeking such credit was not sustained. [Paras 11]

Ground seeking credit for seized cash dismissed as not arising from the assessment order.

Non-pressing of grounds at hearing - Ground of appeal alleging lack of opportunity in passing assessment under section 143(3) r.w.s. 153A was not pressed. - HELD THAT: - The Tribunal recorded that ground no.4 was not pressed at the hearing and therefore was dismissed as not pressed. [Paras 12]

Ground not pressed dismissed.

Final Conclusion: The appeal is dismissed in entirety: the transfer to Nashik was not a ground to invalidate the assessment; additions of Rs. 1,38,38,000 and Rs. 6,20,00,000 as unexplained expenditure/undisclosed investments under section 69 based on seized documents and unrebutted presumption were confirmed; the claim for credit of seized cash did not arise from the assessment and was dismissed; an unpressed ground was declined.

Disallowance under Section 36(1)(iii) - presumption regarding utilization of non-interest-bearing funds for advances - use of market/assumed interest rate to compute notional interest disallowance - disallowance under Section 14A read with Rule 8D - requirement of recording satisfaction under Section 14A(2)

Disallowance under Section 36(1)(iii) - presumption regarding utilization of non-interest-bearing funds for advances - use of market/assumed interest rate to compute notional interest disallowance - Validity of disallowance of interest expense of Rs. 23,997,017 under Section 36(1)(iii) in respect of advances made to related and unrelated parties - HELD THAT: - The Tribunal found that as on 31.3.2014 the assessee had non-interest-bearing funds (share capital and reserves and surplus) substantially in excess of the opening advances of the four parties; consequently the presumption favoured the assessee that non-interest-bearing funds were used for making the advances. The Tribunal also noted that during the year the assessee made a fresh loan but recovered amounts from the first three parties which together exceeded the fresh loan amount, and that the accounting diminution in value of investments did not involve cash outflow. Absent proof that interest-bearing funds were used for the advances, the Assessing Officer and CIT(A) could not sustain an ad hoc disallowance computed by applying a presumed market rate of 12% to the advances. On these findings the Tribunal held that the addition under Section 36(1)(iii) was not justified and deleted the disallowance. [Paras 11, 12]

Addition of Rs. 23,997,017 under Section 36(1)(iii) deleted.

Disallowance under Section 14A read with Rule 8D - requirement of recording satisfaction under Section 14A(2) - Sustainability of disallowance of Rs. 192,395 under Section 14A read with Rule 8D where assessee denied earning exempt income and incurring expenditure for it - HELD THAT: - The Tribunal emphasised that invocation of Section 14A read with Rule 8D requires the Assessing Officer to record a satisfaction under Section 14A(2) that the assessee's explanation is incorrect, based on the accounts. Here the assessee denied earning exempt income and asserted no expenditure was incurred; the Assessing Officer proceeded to compute and confirm a disallowance without recording any satisfaction supported by the assessee's accounts. Mere complexity of investment decisions or the existence of investments in the balance sheet does not discharge the obligation to record such satisfaction. In absence of the requisite satisfaction, the disallowance could not be sustained. [Paras 16]

Disallowance of Rs. 192,395 under Section 14A read with Rule 8D deleted for lack of recorded satisfaction under Section 14A(2).

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition of Rs. 23,997,017 under Section 36(1)(iii) and also deleted the disallowance of Rs. 192,395 under Section 14A read with Rule 8D for absence of requisite satisfaction by the Assessing Officer.

Bad debt deduction under section 36(1)(vii) - Conditions of section 36(2)(i) - Year of write-off as year of allowance - Post amendment evidentiary requirement - proof of write off and prior inclusion in income - CBDT Circular No. 12/2016

Bad debt deduction under section 36(1)(vii) - Conditions of section 36(2)(i) - Year of write-off as year of allowance - Post amendment evidentiary requirement - proof of write off and prior inclusion in income - Allowability of the claimed bad debt of Rs. 1,50,00,000/- under section 36(1)(vii) read with section 36(2)(i) for A.Y. 2014-15. - HELD THAT: - The Tribunal found that the assessee had written off the impugned amount in the profit and loss account and produced the broker ledger and confirmation to demonstrate the outstanding receivable as on 31.03.2014, thereby satisfying the requirement that the debt was written off in the books. It further accepted the assessee's explanation that the receivable had been included in computing income in an earlier year (the sales figure reflected in profit and loss account), fulfilling the requirement of section 36(2)(i). The Tribunal applied the post 1989 amended legal position - that after substitution w.e.f. 01.04.1989 the act of writing off in the books suffices and it is not necessary to prove that the debt had in fact become irrecoverable - and relied on the reasoning in T.R.F. Ltd. and CBDT Circular No. 12/2016 to conclude that a bona fide write off cannot be rejected merely because recovery might still be possible. On these grounds the Tribunal upheld the CIT(A)'s deletion of the addition and dismissed the Revenue's appeal. [Paras 8, 9, 10, 11]

Claim of bad debt of Rs. 1,50,00,000/- is allowable under section 36(1)(vii) read with section 36(2)(i) for A.Y. 2014-15; Revenue's appeal dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the addition, holding that the assessee met the post amendment requirements for claiming bad debt - the debt was written off in the books and had been taken into account in computing income in an earlier year - and therefore the deduction under section 36(1)(vii) read with section 36(2)(i) is allowable for A.Y. 2014-15.

Revisionary jurisdiction under section 263 - computation of book profit under section 115JB - disallowance for failure to deduct or deposit tax at source under section 40(a)(ia) - treatment of unascertained provisions and Corporate Debt Restructuring recompense as deductible expenditure - short deduction of tax at source and the ratio in S.K. Tekriwal - principal-to-principal sale versus commission attracting deduction under section 194H

Computation of book profit under section 115JB - Whether the assessment was erroneous and prejudicial for failure to verify and add back provision for doubtful debts (including DEPB-related provision) in computation of book profit under section 115JB. - HELD THAT: - The Principal CIT invoked revisionary jurisdiction on the ground that the Assessing Officer did not examine or require add-back of provision for doubtful debts (including DEPB-related provision) in the computation of book profit under section 115JB. The assessee's representative conceded that the AO failed to examine this point. The Tribunal records that the omission amounted to lack of application of mind by the AO and that the Principal CIT was therefore justified in treating the assessment order as erroneous and prejudicial to the Revenue and in directing fresh verification and reassessment on this point.

Principal CIT was justified in invoking section 263 on this ground; the assessment is to be re-examined by the AO.

Treatment of unascertained provisions and Corporate Debt Restructuring recompense as deductible expenditure - Whether the assessment was erroneous and prejudicial for failure to examine and disallow unascertained provision for doubtful debts/advances and the claimed deduction for CDR recompense. - HELD THAT: - The Principal CIT held that the AO did not examine the substantial deduction claimed for provision towards CDR recompense and other unascertained provisions, and therefore the assessment was erroneous and prejudicial. The assessee did not press a contrary contention before the Tribunal, the assessee's representative admitting non-examination by the AO. The Tribunal concluded that non-application of mind by the AO justified exercise of revisionary power under section 263 and that the AO should verify and decide the admissibility of such provisions afresh.

Principal CIT was justified in invoking section 263 on this ground; the AO must re-examine the claim on merits.

Disallowance for failure to deduct or deposit tax at source under section 40(a)(ia) - short deduction of tax at source and the ratio in S.K. Tekriwal - Whether the assessment was erroneous and prejudicial for not disallowing expenses under section 40(a)(ia) in respect of non-deduction or short deduction of TDS disclosed in the audit report (including the balance sum not evidenced by challans). - HELD THAT: - The audit report disclosed non/short deduction of TDS. The assessee produced TDS challans showing belated deposit for part of the amount and the AO, in proceedings following revision, accepted deduction in respect of amounts where tax was deposited before the return due date, rendering that aspect infructuous. For the remaining disputed sum the assessee claimed it to be short deduction rather than non-deduction and relied on the ratio in S.K. Tekriwal that short deduction on account of mistaken lower rate does not attract disallowance; however, that ratio does not protect cases where tax was not deducted from a subset of payees while deducted from others. The assessee failed to produce particulars of payees and rates of deduction; the AO did not inquire into this deficiency. The Tribunal found non-application of mind by the AO in this regard and upheld the Principal CIT's exercise of revisional jurisdiction so that the AO may examine and determine whether disallowance under section 40(a)(ia) is warranted.

Principal CIT was justified in invoking section 263 on this ground; the matter is to be examined afresh by the AO.

Principal-to-principal sale versus commission attracting deduction under section 194H - disallowance for failure to deduct tax at source under section 40(a)(ia) - Whether discounts given to stockists/distributors (difference between MRP and price to stockists) constitute commission/brokerage attracting TDS under section 194H and thereby merit disallowance under section 40(a)(ia), such that the assessment order was erroneous and prejudicial for not addressing it. - HELD THAT: - The Principal CIT treated the price difference as equivalent to commission and held that TDS ought to have been deducted. The Tribunal analysed the commercial structure: manufacturer sells to stockists at a price below MRP, who then add margins and sell to retailers; MRP is the retail price to ultimate consumers. The Tribunal held that this structure reflects principal-to-principal sales among manufacturer, stockists and retailers rather than a principal-agent relationship giving rise to commission. As no commission or brokerage was involved, the charge under section 194H did not arise and there was no basis for disallowance under section 40(a)(ia). The AO's silence on the point therefore did not render the assessment order erroneous in this respect.

Principal CIT was not justified in invoking revisionary jurisdiction on this ground; the impugned order is overturned insofar as it alleged non-deduction of TDS on discounts to stockists.

Final Conclusion: The Tribunal upholds invocation of revisionary jurisdiction under section 263 on three distinct grounds where the Assessing Officer failed to examine material claims (provision for doubtful debts/DEPB in computation of book profit under section 115JB; unascertained provisions/CDR recompense; and unexplained non/short deduction of TDS), but reverses the revisional order insofar as it treated ordinary trade discounts to stockists as commission attracting TDS under section 194H. The appeal is partly allowed.

Set off of short-term capital loss - treatment of transactions subject to Securities Transaction Tax - interpretation of section 70(2) - interaction with concessional tax rate under section 111A

Set off of short-term capital loss - treatment of transactions subject to Securities Transaction Tax - interpretation of section 70(2) - interaction with concessional tax rate under section 111A - Short-term capital loss on transactions where STT was paid can be set off against short-term capital gain on transactions where STT was not paid. - HELD THAT: - The Tribunal held that section 70(2) entitles an assessee to set off a short-term capital loss against income computed in respect of any other capital asset following computations under sections 48 to 55, and the provision contains no qualification distinguishing transactions on the basis of whether STT was paid. The Assessing Officer's reliance on the term "similar computation" does not import a prohibition against inter-setting of short-term losses and gains merely because different rates of tax (by reason of section 111A) apply to particular transactions. The Tribunal followed prior coordinate-bench decisions which allowed such set off and found no cogent reason to depart from those precedents, thereby upholding the CIT(A)'s allowance of the set off. [Paras 12, 13, 16]

The claim of set off of the short-term capital loss (STT paid) against short-term capital gain (STT not paid) was held to be valid and the Revenue's appeal on this ground was dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order allowing the assessee to set off the short-term capital loss (on which STT was paid) against short-term capital gain (on which STT was not paid) for AY 2014-15.

Application of Section 43B to employees' contribution - deduction for employees' contribution under the Act - interaction of Section 43B with Section 36(1)(va) read with Section 2(24)(x) - due date for furnishing return of income under Section 139(1) as determinative date for deduction - prospective operation of amendment introduced by Finance Act, 2021

Application of Section 43B to employees' contribution - due date for furnishing return of income under Section 139(1) as determinative date for deduction - deduction for employees' contribution under the Act - interaction of Section 43B with Section 36(1)(va) read with Section 2(24)(x) - Employees' contribution paid by the employer before the due date for furnishing return of income under Section 139(1) is allowable as a deduction even if remitted after the statutory due date under PF/ESI statutes. - HELD THAT: - Adopting the reasoning in the lead order (M/s Benco Thermal Technologies Pvt. Ltd.), the Tribunal held that Section 43B, which permits deduction if payment is made on or before the due date for filing return under Section 139(1), applies to employees' contribution as well. The Tribunal relied on a preponderance of High Court decisions and the dismissal of the revenue's Special Leave Petition to conclude that Section 43B's non-obstante provision overrides the requirement in Section 36(1)(va) read with Section 2(24)(x) that contributions be credited by the statutory date under PF/ESI acts. Consequences for delayed payment under the PF/ESI statutes (interest/penalty) are matters dealt with under those statutes and do not affect the assessee's entitlement to deduction where payment to the funds was made before the due date for filing the return under Section 139(1). Accordingly, on the merits the assessee's claim for deduction was allowed. [Paras 5]

Deduction of employees' contribution is allowed where payment was made before the due date for furnishing return under Section 139(1); appeals allowed on merits and revenue directed to grant deduction and recompute income.

Prospective operation of amendment introduced by Finance Act, 2021 - interpretation of taxing statute amendments - The amendment effected by Finance Act, 2021 to Section 36(1)(va) and Section 43B (inserting explanations excluding Section 43B's application to employees' contributions) operates prospectively and applies to Assessment Year 2021-22 and subsequent assessment years only. - HELD THAT: - Relying on the lead order which followed a coordinate bench decision, the Tribunal accepted that the Finance Act, 2021 amendments are prospective. The Tribunal referred to judicial guidance that taxing amendments that impose liability must be unambiguous to apply retrospectively and, applying that principle, concluded the inserted explanations take effect from 01/04/2021 (Assessment Year 2021-22) and do not alter the law for earlier assessment years. [Paras 5]

Amendments by Finance Act, 2021 are prospective and do not affect assessment years prior to AY 2021-22.

Verification/rectification of factual compliance with statutory due dates - Liberty granted to revenue to seek rectification if it is found that the employees' contributions were in fact deposited beyond the due date for furnishing the return under Section 139(1). - HELD THAT: - While allowing the appeals on the merits, the Tribunal noted that its decision is based on the factual premise that contributions were paid before the due date for filing the return. The revenue was given liberty to apply for rectification in accordance with law if evidence establishes that payments were made after that due date, thereby permitting limited factual verification and correction where appropriate. [Paras 5]

Revenue may apply for rectification if monies were deposited beyond the due date for filing return; otherwise the allowed deduction stands.

Final Conclusion: The Tribunal, following its lead order, allowed the consolidated appeals: employees' contribution paid before the due date for furnishing the return under Section 139(1) is deductible notwithstanding belated statutory remittance under PF/ESI laws for assessment years prior to AY 2021-22; the Finance Act, 2021 amendments operate prospectively from AY 2021-22; revenue granted liberty to seek rectification if factual verification shows payments were actually made after the return-filing due date.

Interpretation of insurance contracts - contra proferentem - business common sense - use of external statutory guidelines in contract interpretation - application of DGFT Handbook of Procedures (Handbook of Procedures (Vol I), Chapter 9, Provision 9.12) - Foreign Trade (Development and Regulation) Act, 1992 - Section 5 (Foreign Trade Policy)

Interpretation of insurance contracts - use of external statutory guidelines in contract interpretation - application of DGFT Handbook of Procedures (Handbook of Procedures (Vol I), Chapter 9, Provision 9.12) - Whether reliance by NCDRC on the DGFT Guidelines to interpret the date of 'despatch / shipment' in the respondent's Single Buyer Exposure Policy and to deny the appellant's claim was legally sustainable. - HELD THAT: - The Court held that the Policy must be construed in light of its purpose and the relevant contractual documents; mere mechanical reliance on a third party guideline could not defeat coverage where the Policy and surrounding documents showed a different commercial reality. Applying the contextual approach of commercial contract interpretation and business common sense, the Court found that the date of loading which commenced before the policy effective date was immaterial to the risk insured, namely the buyer's later default. Further, on textual analysis of DGFT Provision 9.12 itself, the Bill of Lading date (and not an 'Onboard' Bill of Lading provision applicable only where an L/C so provided) governed the date of despatch in sea exports; that provision therefore did not justify denial of the claim on the facts. Consequently, the NCDRC's reliance on the DGFT Guidelines to disallow the claim was not good in law. [Paras 18, 19, 20, 21, 22]

NCDRC's reliance on DGFT Guidelines to deny the claim was unsustainable; the claim could not be disallowed on that basis and the impugned order was set aside.

Contra proferentem - interpretation of insurance contracts - Whether the rule of contra proferentem applied to the ambiguous term 'despatch / despatched' in the Policy and required construction in favour of the insured. - HELD THAT: - The Court reiterated that ambiguous terms in insurance contracts are construed against the drafter after a harmonious reading of the policy; the rule operates where words remain truly ambiguous. Having considered the Policy and related documents (Mate's Receipt, Bill of Lading, dates of sailing and delivery) and the purpose of the insurance (cover against buyer's default), the Court concluded that the term should be construed so as to give effect to the insurance's commercial purpose and the insured's reasonable understanding. Given the ambiguity as to the precise operative date and the contractual allocation of risk, the contra proferentem principle favoured the appellant. The Court also noted the insurer's market position and the standard form nature of the contract as reinforcing the application of this rule. [Paras 16, 17, 21, 22]

The ambiguous term was to be construed in favour of the insured under the contra proferentem rule; the appellant was entitled to coverage.

Final Conclusion: The impugned NCDRC order is set aside; the appellant's complaint is allowed. ECGC is directed to pay the claim amount of Rs. 2.45 crores with interest at 9% p.a.; the appeal is allowed and pending applications are disposed of.

Invalidity of show cause notice for lack of particulars - onus on revenue to prove availment of MODVAT credit - incurability of defects in adjudicatory notice where essentials are missing - requirement of particulars in adjudication of demand and penalty - penalty under section 112 of the Customs Act, 1962

Invalidity of show cause notice for lack of particulars - onus on revenue to prove availment of MODVAT credit - requirement of particulars in adjudication of demand and penalty - Whether the CESTAT was justified in setting aside the demand and penalty on the ground that the show cause notice and annexure lacked necessary particulars and could not be remedied. - HELD THAT: - The Court held that the show cause notice was unsustainable because it did not provide the particulars necessary for the respondent to meet the allegations. The annexure referred to in the notice was blank and did not specify bill of entry numbers, dates, quantities, values or other essential details. Where the allegation is that the license-holder availed MODVAT credit on inputs procured locally, the burden lies on the revenue to establish that such credit was in fact availed; mere naked assertions without particulars do not suffice. Given the absence of particulars, it was not possible for the respondent to meaningfully answer the notice and the defect was not one that could be remedied by directing the respondent to file a reply. Applying the correct legal test and having regard to precedents cited by the Court, the Tribunal did not commit any perversity in setting aside the demand and penalty.

Tribunal's order setting aside the demand and penalty was upheld; the show cause notice was held to be invalid for want of particulars and the appeal is dismissed.

Final Conclusion: The High Court declined to interfere with the CESTAT order which set aside the demand and penalty because the show cause notice and its annexure lacked essential particulars and the revenue failed to discharge the onus of proving availment of MODVAT credit; the appeal is dismissed.

Principles of natural justice - preponderance of probability - confidentiality of investigative sources - production of investigating officers / Mahazar witnesses where statements are relied upon - remand for fresh consideration

Principles of natural justice - remand for fresh consideration - Validity of the order rejecting the petitioner's request for cross-examination and the consequent procedural remedy. - HELD THAT: - The order refusing opportunity for cross-examination was examined in light of the requirement to afford a fair opportunity to the petitioner to meet the case set out in the show cause notices. The Court found that the impugned order rejecting the request for cross-examination was passed and, within a short period thereafter, consequential orders were issued without giving adequate breathing time to the petitioner to respond. In view of these deficiencies in procedure and the need for the authority to reassess the materials on record applying the correct standard, the impugned orders were quashed and the matters were remitted to the respondent for fresh consideration. The respondent was directed to pass a fresh order within three months from receipt of a copy of the order, permitting the petitioner to produce any documents or collateral evidence and to be considered afresh. [Paras 13, 16]

Order rejecting request for cross-examination quashed; cases remitted for fresh decision within three months permitting petitioner to produce evidence.

Confidentiality of investigative sources - production of investigating officers / Mahazar witnesses where statements are relied upon - preponderance of probability - Extent to which the Department must disclose investigative sources or produce witnesses, and the standard of proof to be applied on fresh consideration. - HELD THAT: - The Court reiterated that information gathered during investigation may be treated as confidential and the Department is not obliged to disclose its sources. However, where the Department proposes to rely on the statement of an officer or a Mahazar witness as a basis for adverse orders, it must produce such witnesses for cross-examination if their testimony is relied upon. On remand the respondent is to decide the matter on the basis of preponderance of probability, considering the materials placed before it; the respondent is not required to call Mahazar witnesses or counterpart officials unless it intends to place reliance on their statements. If the petitioner fails to discharge the burden of proof, the respondent may pass appropriate orders on available materials, giving weight to any admissions made by the petitioner in statements. [Paras 15, 16]

Department not required to disclose investigative sources; if statements of officers or Mahazar witnesses are to be relied upon, those witnesses must be produced for cross-examination; on remand respondent to apply preponderance of probability in arriving at its decision.

Final Conclusion: Impugned orders rejecting the request for cross-examination are quashed; the matters are remitted to the respondent for fresh adjudication within three months, permitting the petitioner to produce evidence and directing the respondent to decide on the basis of preponderance of probability while observing that investigative sources need not be disclosed but statements relied upon require production of the relevant witnesses for cross-examination.

Eligible passenger - bonafide personal baggage - prohibited goods - absolute confiscation - option to redeem under section 125 - false or non-declaration of baggage contents - penalty under section 112

Eligible passenger - bonafide personal baggage - prohibited goods - absolute confiscation - option to redeem under section 125 - false or non-declaration of baggage contents - Whether the gold jewellery, foreign currency and television were rightly treated as liable to absolute confiscation or whether the appellant, being an eligible passenger, was entitled to an option to redeem the goods. - HELD THAT: - The Tribunal upheld the adjudicating authority's finding that the goods were liable for confiscation because the appellant had proceeded through the green channel and the department's case that there was non-declaration and an attempt to evade duty was supported by the interception and statements (para 20). However, the Tribunal found that the appellant otherwise met the criteria of an eligible passenger and there was no evidence of concealment of the jewellery; the seized currency was sufficient to pay the duty and invoices were produced (para 21). Applying the distinction between goods which are truly prohibited and goods which are importable by an eligible passenger but become liable to confiscation because of the manner of importation, the Tribunal held that the adjudicating authority ought to have given the appellant the statutory option to redeem the goods under section 125 of the Customs Act instead of ordering absolute confiscation (paras 21, 24-25). Consequently, absolute confiscation was set aside and the appellant was permitted to redeem the seized items on payment of a redemption fine fixed by the Tribunal (para 27). [Paras 20, 21, 24, 25, 27]

Absolute confiscation set aside; appellant, an eligible passenger, granted option to redeem the gold jewellery, foreign currency and television by payment of a redemption fine as fixed by the Tribunal.

Penalty under section 112 - false or non-declaration of baggage contents - Whether the penalties imposed on the appellants were appropriate and what reduction, if any, should be made. - HELD THAT: - The Tribunal observed that there was no evidence of concealment though the appellant had proceeded through the green channel and did not pay duty at that time (para 26). Applying the facts to the statutory scheme and having regard to proportionality, the Tribunal held that the penalty originally imposed on Shri Rajan Ran was excessive and reduced it from the amount imposed by the adjudicating authority to Rs. 10,00,000 (para 26). The penalty on Shri Vasu Arumugam was reduced correspondingly to Rs. 5,00,000 (para 26). The Tribunal also fixed the redemption fine payable for release of the goods (para 27). [Paras 21, 26, 27]

Penalty on Shri Rajan Ran reduced to Rs. 10,00,000; penalty on Shri Vasu Arumugam reduced to Rs. 5,00,000; redemption fine fixed by the Tribunal for release of goods.

Final Conclusion: The Tribunal partly allowed the appeals: absolute confiscation was set aside and the appellants were permitted to redeem the seized gold jewellery, foreign currency and television on payment of the redemption fine fixed by the Tribunal; penalties were substantially reduced in the terms recorded by the Tribunal.

Confiscation under Section 111 - redemption fine - penalty under Section 112 - expert opinion under Section 46 of the Indian Evidence Act, 1872 - notification relaxations for import of used medical equipment during COVID-19 - classification as E Waste / hazardous - re assessment and amendment of Bill of Entry

Confiscation under Section 111 - classification as E Waste / hazardous - expert opinion under Section 46 of the Indian Evidence Act, 1872 - notification relaxations for import of used medical equipment during COVID-19 - Items listed at Table 6 and Table 10 of the Order in Original were not liable for confiscation. - HELD THAT: - The panel Chartered Engineer, an expert on the Revenue's panel, reported that the inspected equipment were not E Waste and not hazardous; such expert opinion is relevant and requires consideration under Section 46 of the Indian Evidence Act, 1872, and is binding in the absence of direct contrary documentary evidence (para 8.1). The Adjudicating Authority relied on a pre pandemic Technical Review Committee decision without taking into account subsequent Government notifications relaxing import conditions for used medical equipment during the COVID 19 pandemic (paras 8.2, 10.2). No material was placed on record to show improper importation or that the appellant derived monetary benefit; consequently the statutory conditions for confiscation under sub section (d) of Section 111 were not satisfied (paras 11.1-11.3). For these reasons the findings of prohibited/hazardous importation and the orders of confiscation in respect of items at Table 6 and Table 10 are unsustainable and are set aside. [Paras 8, 10, 11, 12]

Confiscation of items at Table 6 and Table 10 set aside; items held not liable for confiscation.

Re assessment and amendment of Bill of Entry - redemption fine - confiscation under Section 111 - Redemption fine imposed in respect of items at Table 7 and Table 11 was set aside. - HELD THAT: - The Adjudicating Authority itself ordered amendment of the Bill of Entry and re assessment in respect of items at Tables 7 and 11, which regularised the Bill of Entry and the import (para 12). Once re assessment regularised the entry, the foundation for confiscation under Section 111 and for invoking Section 125 (redemption fine consequent to confiscation) ceases to exist; accordingly the redemption fine on those items is meaningless and has been set aside (para 12). [Paras 12]

Redemption fine on items at Tables 7 and 11 set aside.

Penalty under Section 112 - confiscation under Section 111 - notification relaxations for import of used medical equipment during COVID-19 - Penalty imposed under Sections 112(a)(i) and 112(a)(ii) was not sustainable and was set aside. - HELD THAT: - Penalty under Section 112 is predicated on there being an improper importation; having found no improper importation (on account of the expert report, absence of contrary material and the effect of Government notifications relaxing import conditions), there was no scope to levy the penalty (paras 11.2-11.3, 13). Accordingly the monetary penalty imposed on the appellant is quashed (para 13). [Paras 11, 13]

Penalty under Sections 112(a)(i) and 112(a)(ii) set aside.

Mis declaration - confiscation under Section 111 - expert opinion under Section 46 of the Indian Evidence Act, 1872 - Allegation of mis declaration by the appellant was set aside. - HELD THAT: - The adjudicatory findings of mis declaration were not sustained in view of the expert Chartered Engineer's report concluding the goods were not E Waste or hazardous and the absence of documentary evidence contradicting that expert opinion (para 8.1). Coupled with the Government's relaxations for import of medical equipment during the pandemic, the charge of mis declaration and consequent measures could not be maintained (paras 8.2, 11.2). [Paras 8, 11, 14]

Allegation of mis declaration set aside.

Final Conclusion: The appeal is allowed to the extent indicated: findings of mis declaration and improper importation are set aside; confiscation of items at Table 6 and Table 10 is quashed; redemption fines in respect of Tables 7 and 11 are set aside; and the penalty under Section 112 is vacated. All other unpressed grounds were not considered.

Admissibility of electronic evidence under Section 65B of the Evidence Act and Section 138C of the Customs Act - transaction value and rejection under Rule 12 of the Customs Valuation Rules, 2007 - sequential valuation under Rules 3 to 9 of the Customs Valuation Rules - extrapolation of undervaluation across multiple imports - evidentiary value of manufacturer's invoice vis-a -vis transaction value under amended Section 14

Admissibility of electronic evidence under Section 65B of the Evidence Act and Section 138C of the Customs Act - Admissibility of the EXCEL file extracted from the pen-drive seized at the residence of the authorised signatory. - HELD THAT: - The Tribunal examined whether the CFSL-extracted computer output (EXCEL file) satisfied the procedural prerequisites for admissibility under Section 65B of the Evidence Act, Section 3 of the Information Technology Act and Section 138C of the Customs Act. The record does not contain the requisite certificates or any material showing compliance with the statutory conditions for computer generated evidence; the Department could not produce evidence of having followed those procedures. The Court considered the decision relied upon by the Revenue (Arjun Panditrao Khotkar) and found it inapposite because that case involved production of primary electronic evidence by the person in control of the device, whereas here the person in exclusive knowledge (the owner/occupier) did not testify to the contents and the respondent disputed the file's provenance. In the absence of the prescribed certification or admissible primary evidence, the EXCEL file on the pen drive was held inadmissible. [Paras 31, 33, 34, 35]

The EXCEL file/pen drive evidence is inadmissible and cannot be relied upon.

Extrapolation of undervaluation across multiple imports - transaction value and rejection under Rule 12 of the Customs Valuation Rules, 2007 - Permissibility of rejecting transaction value for imports not independently evidenced by extrapolating undervaluation found in other imports. - HELD THAT: - The Tribunal restated that valuation is transaction specific under amended Section 14 and the Valuation Rules, and rejection of a declared transaction value under Rule 12 requires a proper, case specific reasonable doubt based on evidence relating to that import. While Rule 12 allows rejection where reasonable doubt exists, there is no legal basis to reject transaction values for separate imports merely by extrapolating from instances where evidence exists. The Tribunal held that demands and penalties calculated for consignments by projection/extrapolation (WORKSHEET IIIA and WORKSHEET IV) lack legal foundation because each assessment must be determined on the evidence for that import; extrapolation cannot substitute for case specific proof. [Paras 14, 17, 24, 25]

Rejection of transaction value and recovery of duty/penalty by extrapolation is impermissible; demands based on WORKSHEET IIIA and WORKSHEET IV fail.

Evidentiary value of manufacturer's invoice vis-a -vis transaction value under amended Section 14 - Whether availability of manufacturer's invoices mandates valuation at the manufacturer's price (reliance on Sai Impex) under the amended statutory scheme. - HELD THAT: - The Tribunal distinguished the Sai Impex line of authority relied upon by the Revenue as arising under the pre amendment regime where value was not based on transaction value. Under the amended Section 14 valuation is transaction based; manufacturer's invoice cannot automatically displace the declared transaction value without satisfying the Rule 12 rejection process. Thus the earlier proposition that manufacturer's invoice is the best evidence of price is not applicable where the law now requires transaction specific valuation and the Rule 12 procedure is not properly made out. [Paras 36]

Sai Impex is not applicable and manufacturer's invoice does not automatically supplant the transaction value under the amended Section 14.

Transaction value and rejection under Rule 12 of the Customs Valuation Rules, 2007 - sequential valuation under Rules 3 to 9 of the Customs Valuation Rules - Sufficiency of the Revenue's case to reject the declared transaction value for consignments specifically listed in WORKSHEET II and to redetermine value. - HELD THAT: - WORKSHEET II relied upon the (now inadmissible) EXCEL file and manufacturer's invoices recovered from the respondent's office. The Tribunal recognised that the circumstance of repeated back to back transactions showing the trader selling at a recurrent loss could raise reasonable doubt. However, it found the investigative process deficient: investigating officers did not adequately question the importer or other parties about the commercial anomaly, did not identify or examine persons named in the EXCEL entries as conduits for alleged cash payments, and did not produce corroborative evidence of cash remittances. Given the pen drive's inadmissibility and the absence of sufficient independent proof (identification/questioning of the named persons, verification of alleged cash transactions, or satisfactory explanation of the pricing anomaly), the mere existence of discrepant invoices without proper inquiry was insufficient to justify rejection of the declared transaction value for those consignments. [Paras 29, 30, 31, 38, 39]

The evidence is insufficient to sustain rejection and re determination of the transaction value for consignments in WORKSHEET II; the Commissioner's decision to drop proceedings in respect of those consignments is upheld.

Final Conclusion: The Tribunal sustained the Commissioner's order dropping the SCN. The CFSL extracted EXCEL/pen drive evidence was held inadmissible for non compliance with statutory requirements; valuation by extrapolation across imports is impermissible; the manufacturer's invoice does not automatically supplant transaction value under the amended statutory scheme; and, on the available admissible evidence, the Revenue failed to establish case specific grounds to reject the declared transaction value for the consignments in dispute.

Doctrine of unjust enrichment - refund of customs duty on finalization of provisional assessment - provisional assessment concluded before 13.07.2006 and after 13.07.2006 - transitional applicability - limitation and procedural bar on refunds under Section 27 as applied to refunds arising on finalization of provisional assessment - accounting treatment of disputed receivable versus provision and its bearing on passing of duty burden

Doctrine of unjust enrichment - provisional assessment concluded before 13.07.2006 and after 13.07.2006 - transitional applicability - Whether the four refund claims relatable to bills of entry provisionally assessed prior to 13.07.2006 are liable to be denied on the ground of unjust enrichment. - HELD THAT: - The Commissioner (Appeals) had earlier directed that the matters be decided in accordance with the Gujarat High Court decision in Hindalco Industries Ltd. and the Larger Bench decision in Hindustan Zinc Ltd.; remand was for ascertaining actual dates of provisional assessment. The Tribunal found that the four bills were provisionally assessed prior to 13.07.2006 and that, under the decisions relied upon, the doctrine of unjust enrichment does not apply to refunds arising from finalization of provisional assessments antecedent to the amendment of Section 18. The Revenue having accepted and not challenged the Commissioner (Appeals) remand-direction/order earlier, it was not open to Revenue to resile and re-agitate the applicability of the Gujarat High Court decision by relying on conflicting precedents. The Tribunal therefore held that the four refund claims are not liable to be refused on the ground of unjust enrichment and dismissal of the Commissioner (Appeals) order on that point was not warranted.

The appeal of Revenue in respect of the four bills provisionally assessed prior to 13.07.2006 is dismissed; unjust-enrichment test does not apply to those refunds in view of the remand direction and the Gujarat High Court/Larger Bench precedents followed by the Commissioner (Appeals).

Doctrine of unjust enrichment - refund of customs duty on finalization of provisional assessment - accounting treatment of disputed receivable versus provision and its bearing on passing of duty burden - Whether the appellants have rebutted the presumption of unjust enrichment in respect of refund claims for bills of entry involving provisional assessments on or after 13.07.2006. - HELD THAT: - The adjudicating authorities examined the appellants' books, invoices and Chartered Accountant certificates. The appellants had shown the refundable amounts simultaneously as 'receivables' and as 'provision for customs advance' in successive schedules of the balance sheet. The Tribunal agreed with the Commissioner (Appeals) that this paired accounting entry effectively nullified the receivable and resulted in the duty being reflected as an expense in the profit and loss account. The Tribunal accepted the reasoning that where the refundable duty is charged to profit and loss it indicates that the incidence of duty has been passed on (and therefore the presumption of unjust enrichment stands). The CA certificates were found deficient and not reconciled with ledger entries; the appellants' explanation that the provision was a balancing appropriation to present a 'true and fair' profit did not dispel that the net accounting effect was to treat the duty as expenditure. Consequently, the appellants failed to rebut the presumption of unjust enrichment and were not entitled to refunds for those claims.

The appellants failed to rebut unjust-enrichment for the claims involving provisional assessments on or after 13.07.2006; refund claims in respect of those bills are barred by the doctrine of unjust enrichment.

Limitation and procedural bar on refunds under Section 27 as applied to refunds arising on finalization of provisional assessment - provisional assessment/finalization interplay with refund procedure - Whether the Tribunal should entertain the Revenue's fresh contention invoking the decision of a different High Court and the applicability of Section 27 limitations after the Commissioner (Appeals) order was accepted. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had specifically remanded and directed adherence to particular High Court and Larger Bench decisions and that both parties had accepted that order without challenging it. Having accepted the Commissioner's order, the Revenue could not, at a later stage, re-open the settled question by invoking inconsistent authority. The Tribunal therefore rejected the Revenue's attempt to rely on the Bombay High Court decision in Bussa Overseas and Properties Ltd. as a ground to overturn the remand-direction and Commissioner (Appeals) finding.

Revenue's appeal on the ground of non-applicability of the Gujarat High Court decision and reliance on an alternative High Court decision is not maintainable; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed both the Revenue's appeal and the assessee's appeal. The Revenue's challenge to the Commissioner (Appeals) direction and reliance on alternative precedent was rejected; refunds for the four bills provisionally assessed prior to 13.07.2006 stand allowable without application of the doctrine of unjust enrichment, whereas the appellants failed to rebut the presumption of unjust enrichment for the remaining claims (on or after 13.07.2006) because their accounting entries (receivables paired with provisions) demonstrated that the duty incidence was charged to profit and loss.

Arbitral tribunal appointment under Section 11 of the Arbitration and Conciliation Act, 1996 - pendency of Section 7 insolvency petition and pre-admission stage - proceedings in rem upon admission of Section 7 IBC petition - interaction between the Insolvency and Bankruptcy Code and the Arbitration and Conciliation Act - overriding effect of Section 238 of the Insolvency and Bankruptcy Code - Section 8 application under the Arbitration and Conciliation Act before the Adjudicating Authority - moonshine defence to delay insolvency proceedings

Arbitral tribunal appointment under Section 11 of the Arbitration and Conciliation Act, 1996 - pendency of Section 7 insolvency petition and pre-admission stage - proceedings in rem upon admission of Section 7 IBC petition - interaction between the Insolvency and Bankruptcy Code and the Arbitration and Conciliation Act - Whether mere filing of a Section 7 petition under the IBC precludes a Court from exercising jurisdiction under Section 11 ACA to appoint an arbitral tribunal. - HELD THAT: - The Court applied the distinction drawn by the Supreme Court in Indus Biotech between the pre-admission and post-admission stages of a Section 7 IBC petition. Mere filing and pendency of a Section 7 petition do not convert the proceedings into proceedings in rem; only admission under sub section (5) of Section 7 imparts that character and engenders erga omnes effect. Consequently, until the NCLT admits the Section 7 petition, the pendency of that petition does not operate as an embargo on a Court entertaining and deciding an application under Section 11 ACA where an arbitration agreement has been validly invoked. The Court therefore concluded that it was not precluded from exercising jurisdiction under Section 11 in the facts before it, where no admission order had been passed by the NCLT. [Paras 11, 16, 17, 20, 21]

Mere filing of a Section 7 IBC petition at the pre-admission stage does not bar the Court from exercising jurisdiction under Section 11 ACA; only admission of the Section 7 petition converts the proceeding into a proceeding in rem that can preclude arbitration.

Section 8 application under the Arbitration and Conciliation Act before the Adjudicating Authority - moonshine defence to delay insolvency proceedings - overriding effect of Section 238 of the Insolvency and Bankruptcy Code - Whether the applicant was obliged to file a Section 8 ACA application before the NCLT (in the pending Section 7 IBC proceedings) as a precondition to maintain a Section 11 ACA petition in the Court. - HELD THAT: - Relying on the reasoning in Indus Biotech, the Court observed that when a Section 7 petition is pending at the pre-admission stage, the NCLT must first consider the material in the Section 7 petition and record whether there is default. That obligation does not render a Court powerless to entertain a Section 11 petition filed independently. Requiring the applicant to file a Section 8 application before the NCLT as a precondition to approach the Court under Section 11 would lead to an anomalous result by effectively ousting the remedy of arbitration until admission of IBC proceedings. The Court therefore rejected the submission that failure to file Section 8 before the NCLT renders a Section 11 petition not maintainable, while noting that if the NCLT, upon consideration of Section 7, records an irresistible finding of default and admits the petition, the IBC would thereafter override arbitration by virtue of Section 238. [Paras 18, 19, 20, 22]

The applicant was not required, as a precondition, to file a Section 8 ACA application before the NCLT in order to maintain a Section 11 ACA petition while the Section 7 IBC petition remained at the pre-admission stage.

Arbitral tribunal appointment under Section 11 of the Arbitration and Conciliation Act, 1996 - Whether, on the facts and having found an arbitration agreement and its invocation, the Court should appoint an arbitral tribunal. - HELD THAT: - The Court found no dispute as to the existence of the arbitration clause and that the arbitration agreement had been validly invoked. Taking into account the legal position that pre-admission pendency of Section 7 IBC proceedings does not bar appointment under Section 11 ACA, the Court concluded that the application warranted grant and an arbitral tribunal ought to be appointed. However, the Court noted that after judgment was reserved the parties settled the dispute and agreed that arbitration was not warranted, making a formal appointment unnecessary. [Paras 10, 21, 23]

The Section 11 petition would be allowed and an arbitral tribunal appointed, but formal appointment was not made because the parties settled the dispute.

Final Conclusion: The High Court held that mere filing and pendency of a Section 7 IBC petition at the pre-admission stage does not bar a Court from entertaining and deciding a Section 11 ACA application to appoint an arbitral tribunal; a Section 7 petition attains the character of a proceeding in rem only upon admission under sub section (5) of Section 7, after which the IBC (Section 238) will override arbitration. The Court also rejected the contention that filing a Section 8 ACA application before the NCLT was a precondition to maintain a Section 11 petition. The application warranted appointment of an arbitral tribunal, but formal appointment was not made as the parties settled the dispute after judgment was reserved.

Sabka Vishwas (Legacy Dispute Resolution) Scheme - Expiry of amnesty scheme - Internal administrative communication

Sabka Vishwas (Legacy Dispute Resolution) Scheme - Expiry of amnesty scheme - Internal administrative communication - Benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 could not be claimed after expiry of the payment period on the basis of the communication calling for information from declarants who had not paid by 30.06.2020. - HELD THAT: - The Court held that the petitioner had admittedly failed to deposit the amount determined under the Scheme within the extended last date of 30.06.2020. The communication relied upon by the petitioner merely directed the field formations to contact major declarants who were unable to pay by that date and to furnish an estimate of amounts likely to be recoverable by 30th September 2020. It did not extend the life of the Scheme or create any further right in favour of declarants who had not made payment within time. Since the Scheme had already come to an end, directing consideration of the petitioner's representation would serve no purpose. [Paras 5, 7, 8]

No benefit under the Scheme was available to the petitioner after 30.06.2020, and the request for a direction to decide the representation was rightly declined as futile.

Final Conclusion: The writ petition was dismissed. The Court held that, the Scheme having ended and the petitioner having failed to pay the determined amount by 30.06.2020, no further benefit could be granted on the strength of the subsequent internal communication.

Pre-deposit condition for entertainment of appeal - right to file versus right to entertain appeal - condonation of delay limited to prescribed statutory period - substituted Section 35F pre-deposit regime - exclusion of Section 5 of the Limitation Act where statute prescribes outer limit - restraint on exercise of writ jurisdiction under Article 226 where statutory remedy and time-limits apply

Pre-deposit condition for entertainment of appeal - right to file versus right to entertain appeal - substituted Section 35F pre-deposit regime - Whether the appeal was rightly rejected for non-compliance of the pre-deposit condition required for entertainment of appeal. - HELD THAT: - The Court held that Section 83 of the Finance Act applies Section 35F of the Central Excise Act to service tax appeals and that after the substitution of Section 35F (effective 06.08.2014) the statutory pre-deposit regime (deposit of prescribed percentage) is a condition for "entertainment of appeal" and not for mere filing. The Court relied on authorities and prior analysis to conclude that where no evidence was placed on record showing compliance with the pre-deposit condition by the date of entertainment, the Appellate Authority correctly declined to entertain the appeal. The petitioner's reliance on Kissan Gramodyog Sansthan was held inapplicable because, unlike that case, no peculiarity or post-order compliance was shown here. The Court therefore affirmed the Appellate Authority's view and confirmed rejection of the appeal on this ground. [Paras 8, 10]

The Appellate Authority rightly rejected the appeal for non-compliance of the statutory pre-deposit condition; the rejection is affirmed.

Condonation of delay limited to prescribed statutory period - exclusion of Section 5 of the Limitation Act where statute prescribes outer limit - restraint on exercise of writ jurisdiction under Article 226 where statutory remedy and time-limits apply - Whether the appeal was rightly rejected as time-barred and whether the Commissioner (Appeals) had jurisdiction to condone the delay beyond the prescribed period. - HELD THAT: - The Court found that the appeal was filed on 10.01.2022 against an order served on 09.02.2018, resulting in a delay far exceeding the statutory timeline under Section 85(3A) (two months) and its proviso (one month condonable). The Appellate Authority recorded reasons rejecting the explanation for the long delay, and the High Court affirmed that where the statute prescribes an outer condonable limit, Section 5 of the Limitation Act cannot be invoked to extend it. Reliance was placed on Supreme Court and High Court precedents holding that the legislature may impose conditions and outer limits for condonation and that writ jurisdiction should not be used to bypass statutory remedy and limits. On the material before the Court, the petitioner failed to establish sufficient cause; therefore there was no scope for interference under Article 226. [Paras 9]

The appeal was correctly held to be time-barred; the Appellate Authority lacked jurisdiction to condone delay beyond the statutory limit and the order rejecting the appeal on limitation grounds is affirmed.

Final Conclusion: The writ petition is dismissed. The Order dated 27.01.2022 of the Commissioner (Appeals) rejecting the appeal for non-compliance of the pre-deposit condition and for being time-barred is affirmed.

Authority of law for levy and collection of tax (Article 265) - writ jurisdiction for restitution of sums collected without legal authority (Article 226) - binding effect of departmental litigation policy / CBIC instructions - non-issuance of demand where no amount is payable and no appeal is pending (proviso to Rule 6(2) of SVLDRS Rules) - non-refundability under Section 130 of the Finance Act, 2019 (contextual limitation) - payment made under mistake and restitution (Section 72, Indian Contract Act principles)

Binding effect of departmental litigation policy / CBIC instructions - non-issuance of demand where no amount is payable and no appeal is pending (proviso to Rule 6(2) of SVLDRS Rules) - authority of law for levy and collection of tax (Article 265) - The demand issued by the designated committee under SVLDRS Form No.3 and acceptance of the Petitioners' declaration when the departmental appeal, by operation of CBIC instructions, ceased to subsist was without authority of law and entitles the Petitioners to restitution. - HELD THAT: - The Court found that CBIC instructions raising the monetary threshold for filing appeals rendered the Department's pending appeal ineffective in substance so that, on the relevant policy dates, nothing was payable by the Petitioners. Rule 6(2) of the SVLDRS Rules and its proviso preclude issuance of a demand where the amount payable is nil and no appeal is pending; therefore issuance of SVLDRS Form No.3 and the consequent demand, despite the litigation policy, was legally impermissible. The collection was held to lack the requisite authority of law under Article 265 and, being collected without legal authority (and in circumstances of the Petitioners' bona fide reliance), is repayable as a payment made under mistake in equity. [Paras 9, 12, 16, 21]

The demand was illegal and the Petitioners are entitled to restitution of the deposit.

Non-refundability under Section 130 of the Finance Act, 2019 (contextual limitation) - authority of law for levy and collection of tax (Article 265) - payment made under mistake and restitution (Section 72, Indian Contract Act principles) - Section 130's bar on refund does not preclude repayment where the collection itself was without authority of law; therefore Section 130 cannot be read to validate an otherwise unlawful collection. - HELD THAT: - While Section 130 provides that amounts paid under the SVLDRS scheme are not refundable, that provision must be read in context and cannot operate to permit retention of sums collected without legal authority. The Court held that the Petitioners did not obtain benefit under the scheme and that the collection resulted from an unauthorized demand; consequently the constitutional mandate under Article 265 and equitable principles governing payments made under mistake require refund despite the non-refundability clause in Section 130. [Paras 15]

Section 130 does not protect an unlawful collection; refund is permissible.

Final Conclusion: Writ petition allowed; Respondents directed to refund the deposit collected pursuant to SVLDRS Form No.3 within three months, the collection being held to be without authority of law.

Refund of service tax on input services used for authorized operations in SEZ units - Uniform List of Services as indicative - approved list of specified input services / UAC approval not a mandatory condition - overriding effect of the SEZ Act over other laws - denial of refund for want of documents

Refund of service tax on input services used for authorized operations in SEZ units - Uniform List of Services as indicative - denial of refund for want of documents - Denial of refund claim of Service Tax paid on input services used by the appellant in its SEZ authorized operations was not sustainable. - HELD THAT: - The Tribunal found on the material before it that the Revenue did not dispute that the services in question were used by the SEZ unit for its authorized operations. The Uniform List of Services is only indicative, and co-ordinate Benches have consistently held that input services used for authorized operations of SEZ units qualify for refund. The impugned denial rested on non-production of documents and on grounds going beyond the show cause notices; such factual or procedural grounds could not sustain rejection where the core entitlement (use in authorized operations) is established. Applying these principles and the consistent precedents relied upon by the appellant, the Tribunal concluded that the refusal of refund for lack of documents was not sustainable.

Impugned denial of refund set aside and claim allowed.

Approved list of specified input services / UAC approval not a mandatory condition - overriding effect of the SEZ Act over other laws - Requirement of prior approval from the UAC (approved list of specified input services) is not a mandatory prerequisite to deny refund claims of service tax paid on input services used in SEZ authorized operations. - HELD THAT: - The Tribunal accepted the reasoning in M/s. Mast Global Business Services India Pvt. Ltd. that treating UAC approval as a mandatory condition effectively imposes a procedural bar contrary to the intent of the SEZ regime. The SEZ Act has an overriding effect over other laws governing fiscal concessions, and therefore the absence of UAC approval cannot be made a ground to withhold refunds where the input services are shown to have been used for authorized operations. Rejection on this procedural ground was held untenable in law.

Denial of refund on the ground of non production of UAC approval is not tenable; refund claim cannot be rejected for that reason.

Final Conclusion: The impugned order rejecting the refund claims is set aside; the appeals are allowed and the refund claims are to be allowed with consequential benefits as per law.

Maintainability of appeal before the Tribunal - monetary limit for departmental appeals prescribed by CBEC - exemption to monetary limit for adverse judgments - power of Central Board of Excise and Customs under Section 35R(1) of Central Excise Act, 1944 - maintainability under Section 35F(1) of Central Excise Act, 1944 - reverse charge mechanism - GTA service tax liability in light of Notification No. 30/2012-ST

Maintainability of appeal before the Tribunal - monetary limit for departmental appeals prescribed by CBEC - maintainability under Section 35F(1) of Central Excise Act, 1944 - The departmental appeal is not maintainable before the Tribunal as the amount involved is below the monetary threshold fixed by CBEC. - HELD THAT: - The Tribunal examined the departmental instructions issued by the Central Board which fixed the monetary limit for filing departmental appeals before the CESTAT at Rs. 50 lakh and above, clarifying that cases with monetary value below that threshold should not be filed. The facts show that the confirmed demand impugned in the departmental appeal amounted to a sum far below that prescribed monetary limit. The exemption provisions relied upon by the Department were considered and found inapplicable (see analysis of exemption separately). In view of the statutory provision governing maintainability read with the CBEC instructions, the appeal falls outside the Tribunal's maintainable class of cases and must be dismissed on that ground. [Paras 6, 7]

Appeal dismissed as not maintainable before the Tribunal for being below the prescribed monetary limit.

Exemption to monetary limit for adverse judgments - instructions of CBEC regarding filing appeals - The Department is not entitled to rely on the exemption in para 1.3 of the earlier instructions to bypass the monetary limit. - HELD THAT: - Para 1.3 of the instructions (dated 17.08.2011) requires that adverse judgments of specified categories be contested irrespective of amount, including challenges to constitutional validity or where a Notification/Instruction/Order/Circular is held illegal or ultravires. The record does not show any challenge to constitutional validity nor any finding that a Notification/Instruction/Order or Circular was held illegal or ultravires by the authorities below. Consequently, the Department cannot avail itself of the stated exemption and the monetary threshold provisions remain applicable. [Paras 6]

Exemption under para 1.3 is not available to the Department; the monetary limit must be enforced.

Final Conclusion: The departmental appeal, challenging the dropping of a small confirmed demand, is dismissed as not maintainable before the Tribunal because the amount involved is below the monetary threshold prescribed by CBEC and no exemption to that threshold applies.

Claim of refund under Exemption Notification No. 32/99-CE - Interest on delayed refund under Section 11BB of the Central Excise Act - Interaction between Exemption Notification and Sections 11B/11BB - Binding effect of High Court precedents in absence of stay

Claim of refund under Exemption Notification No. 32/99-CE - Interest on delayed refund under Section 11BB of the Central Excise Act - Binding effect of High Court precedents in absence of stay - Whether interest under Section 11BB is payable on refund sanctioned pursuant to Notification No. 32/99-CE in respect of duty paid for the period May, 2000 to March, 2001. - HELD THAT: - The Tribunal examined the departmental contention that Notification No. 32/99-CE is a self-contained code and excludes applicability of Section 11B and consequently Section 11BB. It noted the decisions of the Gauhati High Court holding that Section 11B does not exclude refund claims under the notification and that claimants are entitled to interest under Section 11BB, and that the High Court declined the Department's review. The Tribunal also observed that the Department's SLPs have either been dismissed on limitation or are pending without any stay on the operation of the High Court orders. In light of those binding High Court precedents and the absence of any stay by the Supreme Court, the Tribunal, following judicial discipline, applied the principle that interest under Section 11BB is payable on refunds granted under Notification No. 32/99-CE, and directed payment of interest from three months after filing of the refund application, with the revenue to pay the interest within two months of receipt of the Tribunal's order. [Paras 11, 15]

Interest under Section 11BB is payable on the sanctioned refund for May, 2000 to March,2001 under Notification No. 32/99-CE; interest to run from three months after filing of the refund application and to be paid within two months of receipt of this order.

Final Conclusion: Appeal allowed: the Appellant is entitled to interest under Section 11BB on the refund sanctioned under Notification No. 32/99-CE for the period May, 2000 to March,2001, interest to be computed from three months after filing of the refund application and paid by the Revenue within two months of receipt of this order.

Admissibility of CENVAT credit on invoices issued prior to 01.09.2014 - remand for verification of documents versus final adjudication on merits - reversal of credit does not extinguish substantive right to credit/refund - invocation of extended period of limitation - scope of show cause notice in relation to documentary discrepancies

Admissibility of CENVAT credit on invoices issued prior to 01.09.2014 - precedential value of CESTAT decisions - Credit availed on the basis of invoices issued prior to 01.09.2014 is admissible. - HELD THAT: - The Tribunal examined earlier CESTAT decisions with facts identical to the present case and found them supportive of allowing credit on invoices dated before 01.09.2014. The Commissioner (Appeals) had acknowledged admissibility but remanded the matter for verification; however, no discrepancy in documents was raised in the show cause notice. In these circumstances remand for re-adjudication on merits was unnecessary and the question of admissibility stands decided in favour of the appellant. [Paras 5]

Credit on invoices issued prior to 01.09.2014 is admissible and stands allowed on merits.

Remand for verification of documents versus final adjudication on merits - scope of show cause notice in relation to documentary discrepancies - Whether the Commissioner (Appeals) was justified in remanding the matter for verification and what the lower authority should do on remand. - HELD THAT: - The Tribunal held that where the appellate authority has decided admissibility on merits and the show cause notice did not raise documentary discrepancies, remand for verification was unnecessary as a means of re-examining merits. Nonetheless, recognizing the procedural posture, the Tribunal directed limited remand: the lower authority is to verify the documents and allow the credit without going into merits again. The Tribunal imposed a timeline of four weeks for such verification to be completed 'as far as it may be practicable.' [Paras 6, 7]

Matter remanded to the lower authority only for verification of documents and to allow the credit within four weeks, without re-opening merits.

Reversal of credit does not extinguish substantive right to credit/refund - invocation of extended period of limitation - Effect of reversal of credit by the assessee and applicability of the extended period of limitation. - HELD THAT: - The Tribunal found that the appellants had reversed certain credits (including reversing the full amount after audit pointed out an initial partial inadmissible claim) and that such reversal does not extinguish their substantive right where the credit is otherwise held admissible. Further, the show cause notice covered July 2014 to February 2017 and the issue was in departmental knowledge through audit; therefore, invocation of the extended period of limitation was not justified and had not been properly contended at the Original Authority level. [Paras 2, 5]

Reversal by the assessee does not bar allowance of credit; extended period of limitation is not invocable in the circumstances.

Final Conclusion: The appeal is allowed in part: the Tribunal finds the disputed credits (including those based on invoices prior to 01.09.2014) admissible, rules that reversal does not defeat the right to credit and that extended limitation is not invocable, and directs a limited remand to the lower authority to verify documents and allow the credit within four weeks without re-opening the merits.

Input Tax Credit - Proviso to Section 19(2)(v) of the TNVAT Act - Applicability of Section 19(2)(v) to manufacturers - Declaratory/curative amendment and retrospective effect - Doctrine of unjust enrichment (refund claims) - Interpretation of taxing statutes - literal, harmonious and purposive rules - Judicial review in fiscal statutes

Proviso to Section 19(2)(v) of the TNVAT Act - Applicability of Section 19(2)(v) to manufacturers - Interpretation of taxing statutes - literal, harmonious and purposive rules - Whether the proviso inserted to Section 19(2)(v) by Act 28 of 2013 applies to manufacturers when inputs purchased within the State are used in manufacture and the manufactured goods are subsequently sold in the course of inter state trade covered by Section 8(1) of the CST Act. - HELD THAT: - The Court analysed the language, structure and scheme of Section 19(2) of the TNVAT Act, treating the sub clauses (i)-(vi) as independent, alternative heads of entitlement to ITC. Reading the main clause with each sub clause showed that the trigger for clause (v) is the ultimate "sale" in the course of inter state trade; the ordinary meaning of "sale" includes sale of goods in the same or a different form (i.e., manufactured goods). Punctuation (semi colons and the disjunctive "or") and the statutory context support independent operation of clause (v). Precedents requiring literal construction of taxing provisions were applied; had the legislature intended to exclude manufactured goods from clause (v) it would have used explicit limiting language as it did elsewhere (for example in section 19(4) and 19(5)(c)). The Court therefore held that clause (v) and its proviso (as inserted in 2013) are applicable to manufacturers at the point the manufactured goods are sold inter state under Section 8(1) of the CST Act, and not limited to pure traders. [Paras 75, 76, 97, 100, 107]

Section 19(2)(v) (and therefore the proviso as inserted in 2013) covers sales of manufactured goods sold in the course of inter state trade; the proviso is not limited to traders and is applicable to manufacturers when the inter state sale occurs.

Declaratory/curative amendment and retrospective effect - Proviso to Section 19(2)(v) of the TNVAT Act - Doctrine of unjust enrichment (refund claims) - Whether the omission of the proviso to Section 19(2)(v) and substitution of clause (v) by Act 5 of 2015 is curative/declaratory and has retrospective effect (relates back to the date of insertion of the proviso), and the consequences for refund claims including the application of unjust enrichment and limitation. - HELD THAT: - Having held that the proviso as worded applied to manufacturers, the Court examined the legislative history and purpose of the 2013 amendment and the 2015 amending Act. The 2015 enactment omitted the proviso and substituted clause (v) while also omitting section 19(5)(c). Considering the object, the effect of the 2013 proviso (including counter mischief to manufacturers) and the terms and context of the 2015 changes, the Court concluded that the 2015 amendment was curative/declaratory in nature and intended to remove the mischief caused by the 2013 change; accordingly it relates back and must be read as clarificatory of the law from the date of the insertion of the proviso. The Court further clarified consequences for refund claims: refunds, if any, arising from the position declared by the 2015 amendment are subject to the doctrine of unjust enrichment - i.e., tax/credit already passed on to others (directly or indirectly) cannot be refunded to the claimant - and claims will have to be examined in that light and within applicable limitation rules (the Court noted the position that claims to recover taxes retained without authority attract the limitation applicable to actions for money had and received). [Paras 139, 140, 141, 143, 145]

Act 5 of 2015 is curative/declaratory and relates back to the date the proviso was inserted; any consequential refund claims are governed by the principles of unjust enrichment and relevant limitation rules and must be examined accordingly.

Final Conclusion: The appeals are partly allowed. The proviso inserted to Section 19(2)(v) in 2013 applies to manufacturers when manufactured goods are sold in the course of inter state trade; however, the 2015 amendment (omission and substitution) is declaratory/curative and relates back to the date of insertion, restoring the position intended by the legislature. Any entitlement to refund arising from these conclusions is subject to the doctrine of unjust enrichment and the applicable limitation principles; other reliefs are to be dealt with in accordance with this ratio.

Transit sale - inter-state sale - exemption under Section 6 (2) of the CST Act - treatment as local sale - movement of goods occasioned by contract

Transit sale - inter-state sale - exemption under Section 6 (2) of the CST Act - treatment as local sale - movement of goods occasioned by contract - Whether the supplies made through the Calcutta supplier to Atomic Energy Project, Kalpakkam constituted a transit (inter-state) sale attracting exemption under Section 6(2) of the CST Act or were local sales not eligible for such exemption. - HELD THAT: - The Court examined whether the contract and sequence of events occasioned movement of goods outside the State and thereby made the transaction an inter-state (transit) sale. Relying on the Division Bench decision in Vinay Cotton Waste Company v. State of Tamil Nadu, the Court accepted that an inter-state sale may arise even where seller and buyer are in the same State if the sale contract contemplates delivery outside the State and thereby occasions movement of goods. Applying that principle, the Court held that the petitioner, having received the purchase order from Atomic Energy Project and forwarded it to the Calcutta supplier who dispatched the goods directly to Kalpakkam on behalf of the petitioner, had occasioned movement of goods outside the State and the delivery was effected in Kalpakkam. The Form E1 showing Kalpakkam as destination did not convert the transaction into a local sale where the movement was occasioned by the contract and delivery was taken at the out-of-State destination. On these findings the Court concluded that the transaction was a transit sale within the meaning of the CST provisions and that the Tribunal's contrary conclusion treating it as a local sale was unsustainable. [Paras 8, 9]

The supply was a transit (inter-state) sale entitling the petitioner to the exemption under Section 6(2) of the CST Act; the Tribunal's order treating it as a local sale was set aside and the writ petition allowed.

Final Conclusion: Writ petition allowed; order of the Sales Tax Appellate Tribunal dated 05.09.2007 in S.T.A. No.540 of 2003 set aside and the transaction held to be a transit (inter-state) sale attracting exemption under Section 6(2) of the CST Act.

Pre-deposit for admission of appeal under Section 73(4) of the VAT Act - discretion of appellate authority to admit appeal - prima facie case at the pre-deposit stage - summary dismissal for non-compliance of pre-deposit - stay pending appeal and deposit as percentage of disputed demand

Pre-deposit for admission of appeal under Section 73(4) of the VAT Act - prima facie case at the pre-deposit stage - summary dismissal for non-compliance of pre-deposit - The Tribunal and first appellate authority erred in directing pre-deposit and summarily dismissing the appeal without considering the appellant's prima facie case. - HELD THAT: - The statutory scheme in Section 73(4) vests discretion in the appellate authority to entertain an appeal without full pre-deposit, to accept a smaller payment, or to permit security. At the stage of deciding admission based on pre-deposit, the appellate authority (and on review the Tribunal) is required to examine whether a strong prima facie case has been made out. Where such a prima facie case exists, the authority should exercise its discretion to admit the appeal without insisting on the full tax/penalty pre-deposit. In the present matter the Tribunal confined itself to the fact of prolonged proceedings and the first appeal having been summarily dismissed, and directed a substantial pre-deposit without addressing the appellant's prima facie contentions (including reliance on the master dealer agreement and the limits of reliance on loose slips). That approach failed to apply the statutory discretion judiciously and was therefore erroneous. [Paras 11, 12, 13]

Order of the Tribunal dated 22.11.2021 is quashed and set aside insofar as it directed a pre-deposit and summarily dismissed the appeal without considering the appellant's prima facie case; the second appeal is restored to the Tribunal for fresh consideration on merits.

Discretion of appellate authority to admit appeal - stay pending appeal and deposit as percentage of disputed demand - The Tribunal is directed to reconsider stay and pre-deposit issues on merits, taking into account relevant guidelines permitting a percentage deposit for stay. - HELD THAT: - Having quashed the impugned order, the Court directed that the Tribunal should hear the appeal on merits regarding grant of stay pending appeal and consider the guidelines reflected in the CBDT circulars (as modified) which contemplate deposit of a percentage (notably 15% as a general condition) of the disputed demand for grant of stay. Those instructions operate as a guiding mechanism to enable uniform exercise of discretion to decrease or increase the percentage of disputed demand to be deposited. The Tribunal is required to apply its discretion afresh and expeditiously, considering the appellant's prima facie case and the guidance on percentage deposit where appropriate. [Paras 13, 14]

Tribunal directed to expeditiously hear the restored second appeal on merits and reconsider pre-deposit/stay, applying the CBDT guidance on percentage deposit; respondents restrained from taking coercive action pending the Tribunal's decision.

Final Conclusion: Writ petition allowed; impugned Tribunal order dated 22.11.2021 quashed and set aside; Second Appeal No.784 of 2019 restored to the Tribunal which is directed to hear the appeal on merits within two months and reconsider pre-deposit and stay issues in accordance with the Court's directions and applicable guidelines; respondents restrained from coercive action pending disposal.

Quashing of criminal complaint as abuse of process - Abuse of process of court - Application under Section 223 CrPC for joint trial - Maintainability of complaint under Sections 200 and 202 CrPC - Proceedings under Section 138 Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act

Quashing of criminal complaint as abuse of process - Maintainability of complaint under Sections 200 and 202 CrPC - Abuse of process of court - Complaint filed under Sections 200 and 202 CrPC (UNCR 201/2018) and subsequent proceedings were liable to be quashed as an abuse of process. - HELD THAT: - The Court found that the respondent's complaint alleging theft and misuse of a cheque was filed after long inaction and is factually the same cheque which is the subject-matter of the petitioner's complaint under Section 138 of the Negotiable Instruments Act. The chronology shows earlier unsuccessful attempts by the respondent under Section 91 CrPC and related revisional remedies, and a substantial delay in pursuing the complaint leading to statements being recorded only in 2021 although the complaint dated from 2016. Having regard to the identity of subject-matter, the respondent's filing of the criminal complaint is treated as a clear attempt to evade liability under the NI Act and to obstruct the ongoing Section 138 trial. The Magistrate's taking of cognizance for offences under the IPC in those circumstances was held to be perverse and unsustainable. Consequently the complaint and proceedings originating from UNCR 201/2018 were quashed as an abuse of process of court. [Paras 11, 12]

Complaint under Sections 200 and 202 CrPC in UNCR 201/2018 and subsequent proceedings are quashed.

Application under Section 223 CrPC for joint trial - Proceedings under Section 138 Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Order of JMFC dated 18-02-2021 rejecting the respondent's application under Section 223 CrPC was affirmed and the JMFC was directed to proceed with the Section 138 NI Act prosecution. - HELD THAT: - The Court observed that the JMFC had earlier rejected the respondent's application under Section 223 CrPC to try the two matters together and there was no perversity in that rejection. Given that the respondent's complaint was quashed as an abuse of process, the JMFC's order rejecting joint trial stands affirmed. The Magistrate is directed to continue the Section 138 trial and decide it in accordance with law, applying the statutory presumptions relevant to cheque dishonour matters where appropriate. [Paras 11, 12]

Order dated 18-02-2021 of the JMFC rejecting the Section 223 application is affirmed; the JMFC is directed to proceed with the Section 138 NI Act complaint.

Final Conclusion: The petition succeeds in part: the complaint under Sections 200 and 202 CrPC (UNCR 201/2018) and related proceedings are quashed as an abuse of process; the JMFC's rejection of the joint-trial application is affirmed and the Section 138 NI Act prosecution shall proceed; earlier interim orders of this Court stand vacated.