TaxTMI Updates e-Newsletter
Apr 30,2021

Bail under Section 439 Cr.P.C. - offence under Section 132 of the CGST Act, 2017 - allegation of fraudulent claim of Input Tax Credit - triability by Magistrate

Bail under Section 439 Cr.P.C. - allegation of fraudulent claim of Input Tax Credit - Prayer for grant of bail to the petitioner was rejected. - HELD THAT: - The petitioner sought bail under Section 439 Cr.P.C., asserting he had been an employee who resigned in February 2020, had furnished details to show actual movement of goods, and noting that a co-accused had been granted bail. The prosecution countered that the petitioner was a partner in the concerned firm at the relevant time, that input tax credit totalling approximately Rs. 47 crore was claimed without transportation of goods, and that fake bills and invoices were used to pass on input tax credit to firms existing only on paper. The Court considered these contentions and, in view of the prosecution's allegations regarding large-scale fraudulent claim of Input Tax Credit and associated role attributed to the petitioner, declined to exercise discretionary bail jurisdiction in the petitioner's favour. [Paras 2, 6, 7]

Bail application rejected and Criminal Misc. Bail Application dismissed.

Final Conclusion: The High Court, after considering the petitioner's submissions and the prosecution's allegations of large-scale fraudulent Input Tax Credit claims, declined to grant bail and rejected the bail application.

Allowability of depreciation where capital expenditure was earlier treated as application of income - set off of excess application of income of an earlier assessment year against deficiency of a subsequent year - binding effect of High Court decisions on income tax appellate authorities - remand for fresh consideration where lower authorities failed to apply binding precedent

Allowability of depreciation where capital expenditure was earlier treated as application of income - application of precedents of the Supreme Court and High Court - Depreciation claimed on assets whose cost had earlier been treated as application of income was allowable to the assessee. - HELD THAT: - Following and applying the decisions of the Supreme Court and this Court relied upon by the parties, the Court held that the question on allowability of depreciation is covered by those authorities in favour of the assessee. The Court accepted that the precedents require that depreciation may be allowed even where, in an earlier year, the capital expenditure was treated as application of income, and therefore the Tribunal's disallowance was not sustainable. The Court expressly followed the reasoning in the cited Bench decisions and concluded the first substantial question of law for the assessee. [Paras 6]

Question one answered for the assessee; the Tribunal's disallowance of depreciation set aside in that respect.

Set off of excess application of income of an earlier assessment year against deficiency of a subsequent year - application of Matriseva Trust ratio to set off claims - The question whether excess application of income in Assessment Year 2008-2009 could be set off against income of Assessment Year 2009-2010 was not finally adjudicated by the Tribunal and is remitted for fresh consideration by the Assessing Officer in the light of the binding Division Bench decision in Matriseva Trust. - HELD THAT: - The Court found that the Tribunal and the Commissioner (Appeals) failed to consider or apply the binding ratio of this Court in Matriseva Trust which dealt with set off of earlier excess application against subsequent year's deficiency. Because the Tribunal did not apply that precedent and the Commissioner (Appeals) recorded unwarranted observations, the Court set aside the orders and remitted the matter to the Assessing Officer to decide afresh after giving the assessee an opportunity of hearing while taking into account the Matriseva Trust ratio. [Paras 15]

Matter remitted to the Assessing Officer for fresh consideration of set off claim for Assessment Year 2008-2009/2009-2010 in accordance with Matriseva Trust.

Binding effect of High Court decisions on income tax appellate authorities - remand for fresh consideration where lower authorities failed to apply binding precedent - The Commissioner (Appeals) and the Tribunal erred in failing to follow the binding Division Bench decision and in making unwarranted remarks about High Court judgments; those portions of their orders are set aside. - HELD THAT: - The Court observed that the Commissioner (Appeals) is bound to follow applicable High Court decisions and that the impugned remarks criticizing High Court judgments were inappropriate and beyond jurisdiction. Given that both the Commissioner (Appeals) and the Tribunal did not apply the Matriseva Trust ratio to the facts, the Court set aside their orders to the extent they ignored binding precedent and remitted the matter to the Assessing Officer for fresh adjudication under the correct legal position. [Paras 14, 15]

Orders of the Commissioner (Appeals) and the Tribunal set aside to the extent they failed to apply binding High Court precedent; remitted for fresh decision.

Final Conclusion: The appeal is allowed in part: the question on depreciation is decided in favour of the assessee; the Tribunal and Commissioner (Appeals) orders are set aside for having ignored the binding Division Bench decision in Matriseva Trust and the matter is remitted to the Assessing Officer for fresh consideration in accordance with that precedent after giving the assessee an opportunity of hearing. No costs.

Reopening of assessment - disposal of objection by the Assessing Officer by a speaking order - vitiation of reassessment for failure to dispose objections - validity of approval for initiation of reassessment under Section 151 - authority required for approval where reopening is beyond four years

Disposal of objection by the Assessing Officer by a speaking order - vitiation of reassessment for failure to dispose objections - Whether issuance of the show cause notice without disposing of the assessee's written objections vitiates the reassessment proceedings - HELD THAT: - The Court held that the Assessing Officer's failure to dispose of the Petitioner's detailed written objections prior to issuing the show cause notice was a breach of the mandatory requirement laid down by the Supreme Court in GKN Driveshafts. The show cause notice of 2nd July, 2014 contains no reference to the Petitioner's representation dated 8th October, 2013, and the Department's counter affidavit is silent on any prior disposal. The requirement that objections to reopening be disposed of by a speaking order is mandatory where the assessment is being reopened, particularly when reopening is sought after the statutory period; non-compliance with this requirement vitiates the reassessment proceedings. [Paras 12]

The reassessment proceedings are vitiated on account of non-disposal of the Petitioner's objections before issuance of the show cause notice.

Validity of approval for initiation of reassessment under Section 151 - authority required for approval where reopening is beyond four years - Whether the approval for initiation of reassessment was validly granted by the competent authority - HELD THAT: - The Court found that the purported approval dated 10th/20th May, 2013 from the Joint Commissioner stating 'Approval is hereby accorded u/s. 151(2) ... for initiation of proceeding u/s. 147' shows no indication of application of mind and, factually, was granted by an authority not competent to grant approval when reopening is beyond four years. The approval under Section 151 must be granted by the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner where the statutory period exceeds four years; approval by the Joint Commissioner in these circumstances is invalid. For these reasons the approval relied upon to initiate reassessment was ineffective. [Paras 13]

The approval for initiation of reassessment was invalid, and the proceedings based on it cannot be sustained.

Final Conclusion: The writ petition is allowed; the notice dated 21st May, 2013 and all consequential reassessment proceedings are set aside. No order as to costs.

Limitation under Section 201(3) - Application of tribunal findings - Assessment under Section 201(1) - Reasonable time - Personal hearing - No coercive action

Limitation under Section 201(3) - Payments to non-residents - Whether orders under Section 201(1) in respect of remittances to non-residents are time-barred in view of Section 201(3) - HELD THAT: - The Court noted that notice under Section 201(1) dated 08.03.2021 relates to alleged non-deduction for financial year 2014-15 and that Section 201(3) prescribes a seven-year bar from the end of the financial year in which payment is made. Petitioners challenged applicability of Section 201(3) on the ground that that sub-section refers to payments to persons resident in India and therefore may not govern payments to non-residents. The Court found prima facie merit in the contention that the statutory provision, as invoked by the Respondents, requires closer examination in the factual context of remittances to non-residents and the relevance of earlier proceedings and tribunal findings in related matters. Given these open questions the Court did not adjudicate the issue on merits but directed that the controversy be considered on the returnable date.

Prima facie substance found in petitioners' limitation/contention; matter directed to be heard afresh and not finally decided in this order.

No coercive action - Personal hearing - Application of tribunal findings - Interim relief against coercive measures and procedural fairness pending final hearing - HELD THAT: - Petitioners asserted that the impugned order was passed without granting a personal hearing and despite earlier communications and tribunal findings in related proceedings favourable to them. On that basis and in view of the prima facie limitation concern, the Court issued rule and stayed coercive action. The Court also recorded that petitioners had requested a personal hearing and that connected appeals/tribunal proceedings were pending, warranting restraint until fuller consideration.

Rule made returnable; no coercive action to be taken pursuant to the impugned order/notices until the next hearing (2nd week of July, 2021).

Final Conclusion: Rule issued returnable; the court found prima facie merit in the petitioners' challenge to the invocation of Section 201(3) in respect of remittances to non-residents and stayed any coercive action under the impugned notices/orders pending further hearing.

Re-opening of assessment - failure to disclose fully and truly all material facts - proviso to Section 147 of the Income Tax Act, 1961 - scope of judicial review under Article 226 - computation of book profit for Minimum Alternate Tax

Re-opening of assessment - failure to disclose fully and truly all material facts - proviso to Section 147 of the Income Tax Act, 1961 - Validity of notice issued under Section 148 / invocation of proviso to Section 147 in light of alleged disclosure in returns and annexed financial statements - HELD THAT: - The Court examined whether the material placed on record at the time of original assessment (including audited financial statements and the auditor's report) constituted true and full disclosure so as to preclude invocation of the proviso to Section 147. The Court held that mere production of account books, financial statements or an auditor's remark does not automatically amount to full and true disclosure for purposes of foreclosing reopening; an assessing officer may, by due diligence, discover relevant particulars. The Court observed that the auditor's observation in the shareholder report that interest write-back understated secured loans and losses did not suffice to conclude absolute full disclosure to oust reopening. However, the Court did not decide the correctness of the reopening on merits; it treated the speaking order as a prima facie view of the Department and left the substantive adjudication to the assessing authority to examine with submissions from the petitioner. [Paras 12, 19, 25, 26, 27]

Writ relief to quash the reopening was refused; the Court did not adjudicate the merits of reopening and left the matter to the assessing authority for reconsideration on merits.

Scope of judicial review under Article 226 - computation of book profit for Minimum Alternate Tax - Whether correctness of computation of book profit and related MAT issues could be entertained under Article 226 at interlocutory stage - HELD THAT: - The Court held that challenges to the correctness of computation of income/book profit and the MAT implications are not appropriate for determination under Article 226 in the present proceedings. Such technical and factual issues relating to computation and assessment are better left to the assessing officer and the statutory appellate hierarchy. Consequently, the Court declined to re-open or test the computation under writ jurisdiction and directed that these matters be gone into by the income tax authorities. [Paras 15, 16, 24]

Court declined to adjudicate the computation issues under Article 226 and left them to the assessing officer/authorities under the Income Tax Act.

Re-opening of assessment - administrative remand for fresh consideration - Procedure to be followed after refusal of writ relief - whether matter should be remanded for fresh consideration - HELD THAT: - Instead of quashing the departmental proceedings, the Court granted liberty to the petitioner to file additional submissions/representations and directed the respondent to consider them and pass appropriate orders on merits in accordance with law. The petitioner was given thirty days to furnish additional reply/representations and the respondent was directed to complete the exercise, including hearing if desired (including by video-conference), within ninety days from receipt of the order. [Paras 26, 27, 28, 29]

Writ petition dismissed with liberty to the petitioner to make submissions; respondent to decide the matter on merits within the stipulated time-frame.

Final Conclusion: Writ petition challenging the re-opening for Assessment Year 2003-2004 dismissed. The High Court declined to entertain computation issues under Article 226, held that auditor's report and accounts did not ipso facto prevent reopening, and remitted the matter to the assessing authority for fresh consideration after receipt of any additional submissions within prescribed time-limits.

Processing under Section 143(1)(a) - Incorrect claim apparent from the return - Belated return and disallowance of deductions under Part C of Chapter VIA - Scope of the Explanation to Section 143(1)(a) - Intimation and opportunity to respond before adjustment

Processing under Section 143(1)(a) - Incorrect claim apparent from the return - Belated return and disallowance of deductions under Part C of Chapter VIA - Scope of the Explanation to Section 143(1)(a) - Intimation and opportunity to respond before adjustment - Whether the CPC was justified in making adjustments under Section 143(1)(a) by disallowing deduction claimed under Part C of Chapter VIA in belated returns and issuing intimations without further inquiry. - HELD THAT: - The Court held that the scope of adjustments under Section 143(1)(a) includes making corrections for errors and incorrect claims apparent from the return and the record; the Explanation to Section 143(1)(a) cannot be read down so as to curtail the main provision. The statutory disqualification in respect of deductions under Part C of Chapter VIA (as effected by Section 80AC(ii) post-amendment effective 01.04.2018) renders claims under that Part inadmissible where the return is belated. The date of filing is apparent on the face of the return and therefore the CPC can, as a mechanical exercise in processing, determine that the return is belated and accordingly disallow the deduction under Section 143(1)(a)(ii). The provisos requiring intimation and consideration of any response were observed to have been complied with; the petitioners did not respond to defect notices and remained uncooperative. The petitioners' belated approach to the Court and failure to engage with the processing/defect procedure were relevant factors militating against interference under Article 226. [Paras 7, 8, 9]

The intimations issued under Section 143(1)(a) by the CPC disallowing the Chapter VIA deduction in respect of belated returns were upheld; the writ petitions are dismissed.

Final Conclusion: Writ petitions filed by the cooperative societies challenging intimations under Section 143(1)(a) for assessment year 2018-19 are dismissed; connected miscellaneous petitions and Revenue miscellaneous petitions seeking vacatur of stay are closed; no costs.

Adjustment of income tax refunds against outstanding tax demand - Stay of recovery with reservation to adjust refunds - Centralised Processing of Return of Income Scheme - set off of refunds - Binding nature of CBDT instructions and office memoranda - Limitation on adjustment of refunds consistent with CBDT guidelines

Adjustment of income tax refunds against outstanding tax demand - Limitation on adjustment of refunds consistent with CBDT guidelines - Binding nature of CBDT instructions and office memoranda - Adjustment of refunds pertaining to various assessment years against the disputed demand for AY 2013-14 beyond limits indicated by CBDT instructions is not permissible. - HELD THAT: - The Court held that the power to set off refunds under the Centralised Processing Scheme must be read in the context of statutory provisions and the CBDT instructions and office memoranda that regulate exercise of adjustment/ recovery. Clause 10 of the Scheme enables set off by using outstanding demand details uploaded by the Assessing Officer, but that clause is not intended to override or render ineffective existing instructions regulating stays and the extent of permissible adjustment. Consequently, where refunds have been adjusted in excess of what CBDT guidelines permit when a demand is subject to appeal, such excess adjustment is arbitrary and not sustainable. The Court therefore concluded that refunds adjusted over and above the amounts permissible under the relevant instructions must be treated as improperly retained by revenue. [Paras 16, 17, 18, 19, 20]

Refunds adjusted beyond the extent permitted by CBDT instructions in respect of the demand for AY 2013-14 are to be regarded as excessive and cannot be retained.

Stay of recovery with reservation to adjust refunds - Centralised Processing of Return of Income Scheme - set off of refunds - Remedies for excess adjustment of refunds - Relief to be granted for excess adjustments and restraint on further adjustments pending appeal. - HELD THAT: - Having found that the assessing officer should refrain from recovering amounts in excess of those permitted by the CBDT instructions while the demand for AY 2013-14 is pending in appeal, the Court directed that any amount already recovered in excess of the permitted limit must be returned to the petitioner with interest according to law. Further, the Court ordered that refunds in excess of the amount permitted by instructions/guidelines shall not be adjusted against the disputed demand for AY 2013-14 until the appeal is finally disposed of. [Paras 19, 20, 21]

Excess amounts recovered by adjustment of refunds are to be refunded with interest and no further adjustment of refunds beyond the permitted limit shall be made until disposal of the appeal.

Final Conclusion: Writ petition allowed: assessing officer restrained from adjusting refunds in excess of amounts permitted by CBDT instructions in respect of the disputed demand for AY 2013-14; excess amounts already adjusted are to be returned to the petitioner with interest and refunds over the permitted limit shall not be adjusted till the appeal is disposed of.

Income from house property - stock-in-trade - occupation for the purposes of business - annual letting value / annual value - exclusion under section 22 - prospective amendment to annual value for stock-in-trade - write off and cessation of liability - section 41(1) - disallowance under section 14A where no exempt income is earned

Income from house property - stock-in-trade - occupation for the purposes of business - annual letting value / annual value - exclusion under section 22 - prospective amendment to annual value for stock-in-trade - Whether annual letting value of unsold flats/bungalows held as stock in trade is chargeable to tax under the head Income from house property for A.Y. 2013 14. - HELD THAT: - The Tribunal examined the four cumulative conditions for exclusion from chargeability under section 22 - ownership and occupation by the assessee, carrying on of business by the assessee, occupation being for the purpose of business, and profits of such business being chargeable to tax. The Tribunal held that the unsold flats were in the physical possession and control of the assessee (occupation), the assessee was engaged in property development (business), the holding/occupation of flats pending sale or for readying them for sale had the requisite nexus with the business (occupation for the purpose of business), and profits of that business were chargeable to tax. Consequently, the flats fell within the exclusion and their annual letting value could not be charged as Income from house property for the year under consideration. The Tribunal noted and distinguished adverse authority but also observed that a legislative amendment (to treat annual value of stock in trade as nil for a limited period) was made prospectively with effect from A.Y. 2018 19 and therefore was not applicable to A.Y. 2013 14; the amendment did not assist the Revenue for the year in dispute. On these bases the addition made by the AO and sustained by the CIT(A) was deleted. [Paras 8, 10, 11, 12, 13]

Addition of Rs. 1,47,65,688/- by way of deemed rental income on unsold flats/bungalows for A.Y. 2013 14 deleted.

Write off and cessation of liability - section 41(1) - Taxability under section 41(1) in respect of amount written off by a creditor-company and whether corresponding income accrued to the assessee. - HELD THAT: - The AO treated the amount written off by the creditor-company as cessation of liability giving rise to income under section 41(1). The assessee's case was that it had recorded only the net amount (after deduction) in its books and therefore no corresponding income arose on write off. The assessee was, however, unable to place documentary evidence (such as the creditor's gross invoice and the assessee's corresponding net recording) before the Tribunal. In the interest of justice and because the assessee sought an opportunity to produce supporting evidence, the Tribunal set aside the order on this issue and remanded the matter to the AO for fresh adjudication after affording the assessee a hearing and opportunity to place requisite records. If the assessee proves it recorded only the net liability originally, no addition would be warranted; otherwise the AO shall decide as per law. [Paras 14, 15, 16]

Matter remitted to the file of the AO for fresh decision after hearing the assessee on the question of taxability under section 41(1).

Disallowance under section 14A where no exempt income is earned - Whether disallowance under section 14A is warranted where the assessee's investment yielded no exempt income in the year. - HELD THAT: - The AO made a notional disallowance under section 14A despite the assessee's contention that the partnership (Marigold Properties) returned a loss and no exempt income was received in the year. Reliance was placed on High Court authority establishing that section 14A disallowance cannot exceed the exempt income earned in the year and that, in the absence of exempt income, no disallowance is called for. The Tribunal followed the jurisdictional and other persuasive decisions holding that where an assessee earns no exempt income in the year, disallowance under section 14A cannot be made. The first appellate authority's contrary reasoning (that potential future positive income could justify disallowance) was rejected. [Paras 17, 18, 19]

Disallowance of Rs. 15,21,690/- under section 14A deleted.

Final Conclusion: The appeal is partly allowed: the addition by way of deemed rental income on unsold flats for A.Y. 2013 14 is deleted and the section 14A disallowance is deleted; the question of taxability under section 41(1) in respect of the amount written off is remitted to the Assessing Officer for fresh consideration after affording the assessee an opportunity of hearing.

Admission of additional evidence - remand for de novo consideration - deduction under section 80GG - unexplained cash credits - proof of repayment of advance - circumstantial evidence

Admission of additional evidence - remand for de novo consideration - deduction under section 80GG - Additional evidence filed by the assessee in support of deduction claimed under section 80GG was admitted and the matter remanded to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal recorded that the assessee filed additional evidence in support of the claim for deduction under section 80GG for the assessment year before it and that the Revenue did not object to admission. In view of the admitted evidence, the Tribunal remanded the issue to the file of the Assessing Officer for de novo consideration in accordance with law, thereby directing fresh adjudication rather than deciding the deduction on the record before the Tribunal. [Paras 2]

Additional evidence admitted; deduction claim under section 80GG remanded to the Assessing Officer for de novo reconsideration.

Unexplained cash credits - proof of repayment of advance - circumstantial evidence - Whether the cash receipts alleged to be return of advances from Smt. G. Surekha were explained or liable to be treated as unexplained cash credits, and whether other cash withdrawals could be treated as sources for bank deposits. - HELD THAT: - On the facts, the Tribunal accepted that (a) the assessee had given advances in an earlier assessment year and that the earlier assessment (reopened under section 148) had accepted the sources for those advances; (b) summons produced an explanation from the husband of the alleged payee, establishing her identity; and (c) bank records showed cheques were issued in the name of a third person (Mr. Mohd Abdul Samad) consistent with the explanation. Given these factors and the absence of proof of purchase of the property in the year of advance, the Tribunal found the circumstantial and documentary material sufficient to deem the receipts of Rs. 14.00 lakhs as explained and not exigible as unexplained cash credits. However, with respect to the balance comprising cash withdrawals which the assessee could not show were applied to the bank deposits, the Tribunal found no reason to interfere with the Assessing Officer's and CIT(A)'s treatment and accordingly confirmed the addition insofar as it related to such withdrawals. [Paras 9, 10]

Receipts to the extent of Rs. 14.00 lakhs treated as explained (advance returned); additions relating to other cash withdrawals confirmed; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: additional evidence relating to the section 80GG claim is admitted and the matter remanded to the Assessing Officer for de novo consideration; the Tribunal set aside the addition insofar as it related to Rs. 14.00 lakhs, treating those receipts as explained, but confirmed the addition in respect of other unexplained cash withdrawals.

Reopening of assessment under section 147 - Reason to believe - Unexplained money under section 69A - Burden on assessee to satisfactorily explain bank deposits - Addition based on statement on oath - Deletion of addition in absence of independent verification from employer

Reopening of assessment under section 147 - Reason to believe - Validity of reassessment proceedings initiated under section 147 for the assessment years 2009-10, 2010-11 and 2011-12 - HELD THAT: - The Tribunal, after considering the reasons recorded by the Assessing Officer and the detailed findings of the Commissioner (Appeals), held that the Assessing Officer had prima facie material-specific information relating to bank account numbers and credits, investigation by the Investigation Wing/Financial Intelligence Unit and non filing or non disclosure by the assessee-to form a reasonable belief that income had escaped assessment. The courts' role at the reopening stage is limited to seeing whether there was prima facie material to constitute a 'reason to believe'; sufficiency of that material is not to be tested at this stage. The assessee did not produce contrary evidence to negate the AO's recorded reasons. On these grounds the challenge to reopening was rejected for the years under consideration.

Challenge to reopening under section 147 dismissed; reassessment proceedings sustained.

Unexplained money under section 69A - Burden on assessee to satisfactorily explain bank deposits - Validity of additions made under section 69A in respect of unexplained cash/cheque credits in bank accounts for the assessment years 2009-10, 2010-11 and 2011-12 - HELD THAT: - The Tribunal upheld the findings of the AO and CIT(A) that substantial cash credits appearing in the assessee's bank accounts were not reflected in the books of account or return and that the explanations offered by the assessee (sales of computer parts, re deposits after withdrawals, etc.) were bald assertions unsupported by documentary evidence, details of customers or corroborative records. The authorities below acted upon concrete information (including account specific deposits) and the AO applied his mind to form a belief. Given the absence of satisfactory explanation or supporting evidence, the amount in question fell within the mischief of section 69A and the additions were sustained.

Additions under section 69A in respect of unexplained bank deposits upheld.

Addition based on statement on oath - Deletion of addition in absence of independent verification from employer - Whether addition on account of alleged undisclosed salary income could be sustained where the only basis was the assessee's statement on oath and no verification was made with the employer - HELD THAT: - The Tribunal observed that the AO had recorded the assessee's admission on oath that he received salary from an employer, but the AO did not make any independent inquiry with the employer to verify actual receipt of salary. The Tribunal held that a mere offer or admission in the assessee's statement, without corroborative or conclusive evidence, ought not to be treated as conclusive proof of taxable salary. In the absence of independent verification from the employer or other conclusive evidence, the AO was not justified in making the addition on account of salary. Accordingly, the Tribunal directed deletion of the salary addition in the appeals where this issue arose.

Addition on account of salary deleted for the assessment years in which it was raised.

Final Conclusion: The Tribunal sustained the reassessment proceedings under section 147 and upheld the additions under section 69A for unexplained bank deposits due to lack of satisfactory explanation or supporting evidence, but directed deletion of additions made for alleged salary income where the Assessing Officer had relied solely on the assessee's statement without independent verification from the employer; the appeals are accordingly partly allowed.

Section 50C valuation deeming fiction - third proviso to Section 50C(1) - tolerance band for variation between stamp duty value and sale consideration - retrospective/curative effect of remedial amendment - reference to Departmental Valuation Officer under Section 50C(2)

Section 50C valuation deeming fiction - third proviso to Section 50C(1) - tolerance band for variation between stamp duty value and sale consideration - retrospective/curative effect of remedial amendment - Whether the addition by adopting DVO valuation under Section 50C should be sustained where the DVO value exceeded the declared sale consideration by 1.02% and the amended proviso provides a tolerance band. - HELD THAT: - The Tribunal noted that the DVO-determined fair market value was Rs. 8,89,63,168 against declared sale consideration of Rs. 8,78,00,000, a difference of Rs. 11,63,168 (1.02%). Relying on the coordinate-bench reasoning in Maria Fernandes Cheryl, the Tribunal accepted that the third proviso to Section 50C(1) and the later enhancement of the tolerance band are curative/remedial and apply from the date Section 50C was introduced. The proviso embodies a permissible tolerance for bonafide small variations between stamp duty valuation and the stated consideration so that the anti-avoidance deeming fiction is not invoked for such minimal differences. Applying that principle, a variation of 1.02% falls within the permissible band and does not warrant substituting the declared sale consideration; consequently, the addition based on the DVO valuation was not sustainable. [Paras 8, 9]

Addition deleted and the appeal allowed; Assessing Officer directed to give effect accordingly.

Final Conclusion: Following the Tribunal's acceptance of the remedial, retrospective operation of the tolerance under the third proviso to Section 50C(1) and applying the same to the facts (variation 1.02%), the addition based on DVO valuation was deleted and the appeal was allowed.

Capital gains on transfer of agricultural land - Definition of "municipality" and inclusion of Nagar Panchayat - Applicability of amended Section 2(14) explanation (iii)(b) - Non-application of statutory amendment to earlier assessment years - Condonation of delay

Condonation of delay - The application for condonation of delay of 36 days in filing the appeal. - HELD THAT: - The Tribunal examined the assessee's condonation petition and affidavit dated 27-12-2019 and noted absence of any departmental rebuttal. Having considered the explanation for delay and the lack of opposition from Revenue, the Tribunal exercised its discretion to condone the delay and admitted the appeal for adjudication on merits. [Paras 2]

The 36 days' delay in filing the appeal is condoned and the appeal is admitted.

Capital gains on transfer of agricultural land - Definition of "municipality" and inclusion of Nagar Panchayat - Applicability of amended Section 2(14) explanation (iii)(b) - Non-application of statutory amendment to earlier assessment years - Whether the land sold by the assessee for AY.2011-12 was liable to long-term capital gains under the unamended provisions of Section 2(14), having regard to its location within Rajam Nagar Panchayat limits and the subsequent amendment to Section 2(14) explanation (iii)(b). - HELD THAT: - The Tribunal reviewed the factual findings recorded by the Assessing Officer and affirmed the legal position cited by the lower authorities that a Nagar Panchayat falls within the definition of "municipality" for the purposes of Section 2(14)(iii)(a), relying on constitutional provisions and earlier jurisdictional authority. However, the Tribunal further observed that the amendment to Section 2(14) explanation (iii)(b) effected by the Finance Act, 2013 became effective from 01-04-2014 and thus does not govern AY.2011-12. The Revenue did not contend that any Central Government notification under the amended provision applied to the assessee's land. Consequentially, because the amended explanation could not be applied to the assessment year in question and there was no notification bringing the area within clause (b), the Tribunal directed deletion of the long-term capital gain addition notwithstanding the lower authorities' findings on municipal limits. [Paras 5, 6]

The addition of long-term capital gains for AY.2011-12 is deleted and the Assessing Officer is directed to remove the impugned capital gain.

Final Conclusion: Delay in filing the appeal is condoned; on merits the Tribunal directed deletion of the long-term capital gain addition for AY.2011-12 because the statutory amendment relied upon by Revenue was effective only from 01-04-2014 and no applicable Central Government notification covered the land for the assessment year under consideration.

Fringe Benefit Tax - fringe benefits in respect of electricity supplied to employees' residential quarters - explanation to sub-clause (E) of sub-section 2 of section 115WB - statutory obligation - mitigation of occupational hazards - National Coal Wages Agreement (NCWA) not statutory

Fringe Benefit Tax - fringe benefits in respect of electricity supplied to employees' residential quarters - Whether the expenditure on electricity supplied to employees' residential quarters is chargeable as a taxable fringe benefit in the hands of the employer. - HELD THAT: - The Assessing Officer treated the value of electricity supplied to residential quarters as a fringe benefit and brought a quantified portion to tax after the assessee failed to produce meter-wise consumption. The CIT(A) affirmed the AO's conclusion that electricity supplied to employees' residential quarters cannot be regarded as falling outside fringe benefit tax. The Tribunal, on reviewing the NCWA and the material on record, found no infirmity in the revenue authorities' conclusion and upheld the addition. The determinative factual premise was the absence of evidence to show that the supply of electricity was anything other than a facility provided to employees and the inability to quantify and segregate consumption to displace the AO's treatment. [Paras 5, 8, 9]

Addition in respect of electricity supplied to residential quarters upheld as taxable fringe benefit; appeals dismissed on this ground.

Explanation to sub-clause (E) of sub-section 2 of section 115WB - statutory obligation - mitigation of occupational hazards - National Coal Wages Agreement (NCWA) not statutory - Whether the supply of electricity falls outside taxable fringe benefits by virtue of being a statutory obligation or a measure to mitigate occupational hazards under the explanation to sub-clause (E) of sub section 2 of section 115WB. - HELD THAT: - The assessee contended the supply was mandated by the NCWA and aimed at mitigating occupational hazards, bringing it within the exclusion in the explanation to sub-clause (E). The Tribunal examined the NCWA clause providing a concession of 30 KWH per quarter and noted the agreement was entered between trade unions and governmental/industry representatives. However, the Tribunal observed that the NCWA has not been recognised by the CBDT and is not a statutory enactment capable of overriding the Income tax Act. Further, the electricity was supplied to residential quarters rather than directly to mine operations, and the revenue authorities correctly held that the supply was not demonstrably for mitigation of occupational hazards. In these circumstances the exclusion under the explanation was not attracted. [Paras 8]

NCWA held not statutory and the exclusion for statutory obligation or mitigation of occupational hazards under the explanation to sub-clause (E) not attracted; thus the exclusion was rejected.

Final Conclusion: The Tribunal upheld the revenue authorities' finding that electricity supplied to employees' residential quarters is taxable as a fringe benefit; the NCWA was held not to be statutory and the claimed exclusions for statutory obligation or mitigation of occupational hazards under the explanation to sub clause (E) of sub section 2 of section 115WB were rejected, and all appeals were dismissed.

Effect of omission of a statutory provision - specified domestic transaction - reference to Transfer Pricing Officer (TPO) under section 92CA - clause (i) of section 92BA - operation of section 6 and 6A of the General Clauses Act - examination of payments under section 40A(2)

Clause (i) of section 92BA - reference to Transfer Pricing Officer (TPO) under section 92CA - effect of omission of a statutory provision - operation of section 6 and 6A of the General Clauses Act - Validity of transfer pricing reference and consequential addition made under section 92CA in respect of transactions falling within the omitted clause (i) of section 92BA. - HELD THAT: - The Tribunal followed the binding decision of the Hon'ble High Court of Karnataka upholding the coordinate-bench view that clause (i) of section 92BA was omitted from the statute and therefore must be treated as never having existed. In the absence of any saving provision preserving proceedings initiated under that clause, proceedings and references made to the TPO under section 92CA pursuant to clause (i) cannot be sustained. The Tribunal, applying those precedents and the principle that omission (without a saving clause) removes the statutory basis for proceedings initiated under the omitted provision, held that the reference to the TPO and the consequential transfer pricing adjustment are invalid. [Paras 6]

The addition made under section 92CA in respect of specified domestic transactions covered by the omitted clause (i) of section 92BA is not valid and is directed to be deleted.

Examination of payments under section 40A(2) - specified domestic transaction - Whether the claim of expenditure (formerly examined as SDT under clause (i) of section 92BA) should be re-examined and, if so, the forum and legal provision for that examination. - HELD THAT: - Although the reference under section 92BA(i) was held invalid, the Tribunal observed that the Assessing Officer must still adjudicate the claim of expenditure in accordance with law. Following the approach in the coordinate decisions upheld by the High Court, the matter is restored to the file of the AO with a direction to examine the expenditure under the provisions of section 40A(2). This remand is for fresh adjudication under the ordinarily applicable provision (section 40A(2)), not for continuation of the TPO proceedings under the omitted clause. [Paras 7]

The issue is remitted to the Assessing Officer to examine the claimed expenditure in terms of section 40A(2) of the Act.

Final Conclusion: Following the binding decision of the High Court of Karnataka and coordinate-bench precedent, the Tribunal set aside the transfer pricing addition made pursuant to the omitted clause (i) of section 92BA and directed deletion of the addition; the matter is remitted to the Assessing Officer for fresh examination of the claimed expenditure under section 40A(2).

Treatment of interest subsidy as capital receipt - admissibility of additional grounds in a cross objection / appeal - computation of book profit for Minimum Alternate Tax under section 115JB - remand to Assessing Officer for verification of factual aspects - binding effect of coordinate bench decision on identical facts

Treatment of interest subsidy as capital receipt - computation of book profit for Minimum Alternate Tax under section 115JB - binding effect of coordinate bench decision on identical facts - remand to Assessing Officer for verification of factual aspects - Whether the interest subsidy received under TUFS is to be treated as a non taxable capital receipt and, if so, whether the matter should be remitted to the AO for verification and exclusion from taxation. - HELD THAT: - The Tribunal noted that in the year under appeal MAT was levied on book profit under section 115JB and, accordingly, the appellant's plea for reduction of subsidy from book profit had been allowed, rendering the specific grounds academic at the time of the original adjudication. The Tribunal examined its Coordinate Bench's decision in the assessee's own case for A.Y. 2012-13, which held that interest reimbursement under TUFS is capital in nature because the subsidy was intended to promote industrial investment and upgrade technology, and therefore is not chargeable as revenue in that assessment year. The Coordinate Bench also directed restoration to the file of the AO for verification of quantum and documentary support before excluding the subsidy from taxation. Applying that decision on identical facts, the Tribunal held that the interest subsidy should be treated as a capital receipt of non taxable nature and, following the Coordinate Bench's approach, restored the issue to the AO for verification and to exclude the subsidy from taxation if factual verification is satisfactory. [Paras 4, 5, 6]

Grounds relating to treatment of interest subsidy are allowed for statistical purposes and the issue is restored to the AO for verification and exclusion of the subsidy from taxation as directed.

Admissibility of additional grounds in a cross objection / appeal - binding effect of coordinate bench decision on identical facts - Whether the additional grounds (grounds 1 to 1.3) raising the claim that the interest subsidy should be treated as capital receipt could be admitted. - HELD THAT: - Relying on the Coordinate Bench's reasoning in the assessee's own A.Y. 2012-13 decision, the Tribunal accepted that a cross objection/appeal permits raising additional legal grounds and that there is no bar to entertaining such grounds for the first time before the Tribunal. The coordinate decision admitted the additional ground and proceeded to consider its merits; the present Tribunal followed that approach and, having found the Coordinate Bench's decision favourable on identical facts, allowed the appellant's additional grounds (for statistical purpose) and remitted the factual verification to the AO. [Paras 5, 6]

Additional grounds 1 to 1.3 are allowed (for statistical purpose) and admitted; the matter is directed to be verified by the AO in accordance with the Tribunal's directions.

Final Conclusion: Miscellaneous application allowed; the Tribunal followed its Coordinate Bench's decision in the assessee's A.Y. 2012-13, held that the TUFS interest subsidy is to be treated as a non taxable capital receipt, admitted the additional grounds, and restored the issue to the Assessing Officer for factual verification and exclusion of the subsidy from taxation if satisfied.

Application of section 14A read with Rule 8D in the absence of exempt income - invocation of section 14A where no exempt income is earned - allowance of depreciation where plant and machinery is installed, commissioned and ready for use - put-to-use test versus ready-for-use test for depreciation - condonation of delay in filing cross objection

Application of section 14A read with Rule 8D in the absence of exempt income - invocation of section 14A where no exempt income is earned - Whether disallowance under section 14A (computed as per Rule 8D) is sustainable where the assessee has not earned any exempt income in the relevant assessment year. - HELD THAT: - The Tribunal recorded that the learned CIT(A) found that the assessee did not earn any exempt income for the relevant assessment year. The Tribunal canvassed the Madras High Court decision in M/s. Redington India Ltd. and the subsequent dismissal of SLP by the Hon'ble Supreme Court in CIT v. Chettinad Logistics Pvt. Ltd., which uphold the principle that section 14A cannot be invoked in a vacuum where no exempt income is earned. Having regard to those authoritative decisions and the categorical finding on facts that no exempt income was earned in the year under consideration, the Tribunal held that the CIT(A)'s deletion of the section 14A disallowance was in accordance with law and required no interference. [Paras 10]

Disallowance under section 14A (computed under Rule 8D) cannot be sustained in the absence of any exempt income for assessment year 2013-14; the CIT(A)'s order deleting the disallowance is upheld.

Allowance of depreciation where plant and machinery is installed, commissioned and ready for use - put-to-use test versus ready-for-use test for depreciation - Whether depreciation claimed on plant and machinery can be disallowed where the Assessing Officer concluded the assets were not put to use during the relevant previous year despite evidence of installation, commissioning and production. - HELD THAT: - The Tribunal examined the material placed on record, including the tabular chart of purchases, commissioning reports and production details showing finished goods from the newly installed machinery. It noted that the CIT(A) had recorded that the assets were installed and commissioned on or before 30.03.2013, while the Assessing Officer's contrary conclusion was founded on assumptions about producible volumes rather than concrete evidence. Applying the settled law reflected in Whittle Anderson Ltd. and the Madras High Court's decision in CIT v. Chennai Petroleum Corp., the Tribunal reiterated the principle that where machinery is installed and ready for use (and business is a going concern), depreciation may be allowed even if actual use was limited or affected for reasons beyond the assessee's control. Given the commissioning evidence and production records, and that the Assessing Officer's disbelief was speculative, the Tribunal found no error in the CIT(A)'s deletion of the depreciation disallowance. [Paras 15, 16]

Depreciation claimed on plant and machinery is allowable where assets were installed, commissioned and ready for use (and production records exist); the CIT(A)'s deletion of the disallowance is upheld.

Final Conclusion: Revenue's appeal is dismissed; the CIT(A)'s deletions of the section 14A disallowance and the depreciation disallowance are sustained. The assessee's cross objection is dismissed as infructuous/not maintainable.

Waiver of eligibility requirements under Section 244(1) of the Companies Act, 2013 - right to apply under Section 241 for oppression and mismanagement - issued share capital (including preference share capital) for computation of one tenth threshold - discretionary exercise of proviso to Section 244(1) - maintainability of company petition where shareholding is encumbered/attached - requirement of demonstrating exceptional circumstances to grant waiver

Issued share capital (including preference share capital) for computation of one tenth threshold - right to apply under Section 241 for oppression and mismanagement - Whether the petitioners satisfy the statutory threshold under Section 244(1) by holding not less than one tenth of the issued share capital of the company. - HELD THAT: - The Tribunal examined the statutory language of Section 244(1) and authoritative precedents holding that 'issued share capital' includes both equity and preference share capital. The admitted numbers on record showed that, when preference shares are included, the petitioners collectively held only 5.61% of the issued share capital as on the date of filing. The Tribunal accepted the respondents' submission that accounting classification of redeemable preference shares as liabilities under accounting standards does not alter their character as issued share capital for the purposes of Section 244. Consequently, the petitioners did not meet the one tenth threshold required to maintain a petition under Section 241 without a waiver.

Petitioners do not satisfy the one tenth issued share capital requirement under Section 244(1) and therefore cannot, on that basis, maintain the petition.

Waiver of eligibility requirements under Section 244(1) of the Companies Act, 2013 - discretionary exercise of proviso to Section 244(1) - requirement of demonstrating exceptional circumstances to grant waiver - Whether the Tribunal should exercise its discretion under the proviso to Section 244(1) to waive the eligibility requirements and allow the petition to proceed. - HELD THAT: - The Tribunal applied the test articulated in the NCLAT precedent (para 151 of Cyrus Investments) as a guide: whether applicants are members, whether the proposed petition alleges oppression and mismanagement, whether similar allegations have been earlier adjudicated, and whether exceptional circumstances exist to justify waiver. The Tribunal observed relevant facts: the petitioners are members but do not meet the numeric threshold; many of the transactions relied upon dated back several years and involved periods when petitioner No. 3 was Chairman/Managing Director; some allegations overlap with criminal investigations in which petitioner No. 3 was also implicated; the company is listed with thousands of shareholders and no other qualifying group had joined; and there was no material to show petitioner No. 3 lacked responsibility or knowledge of the contested transactions. Given these factors, and bearing in mind that waiver is an exception, the Tribunal concluded that the petitioners failed to establish the kind of exceptional circumstances that would justify waiving the statutory requirements. The Tribunal also noted that any views expressed on merits were provisional and limited to adjudicating the waiver application, not final determination of the main dispute. [Paras 7, 8]

Discretionary waiver under the proviso to Section 244(1) is refused as the petitioners have not made out exceptional circumstances to justify relaxation of the statutory eligibility requirements.

Maintainability of company petition where shareholding is encumbered/attached - Whether shares encumbered or attached (in DRT proceedings) could be counted for determining eligibility under Section 244(1). - HELD THAT: - Respondents relied on orders of attachment by the Debts Recovery Tribunal to contend that a large block of petitioner No. 3's shares were encumbered and could not be counted for eligibility. The Tribunal accepted that encumbered/attached shares cannot be taken into account for computing the one tenth threshold and observed that the existence of attachments further reduced the petitioners' effective shareholding below the statutory threshold. This factor reinforced the conclusion that the petitioners did not qualify for maintaining the petition absent a waiver. [Paras 18]

Encumbered or attached shares are not to be counted for computing eligibility; the presence of attachments undermined the petitioners' claim to the one tenth threshold.

Discretionary exercise of proviso to Section 244(1) - Whether the Tribunal's limited consideration of the merits in the course of deciding the waiver application amounted to a final adjudication on the main petition. - HELD THAT: - The Tribunal clarified that, in assessing whether exceptional circumstances for waiver exist, it was inevitable to refer to and provisionally examine some merits related facts. However, it emphasised that such provisional observations were made strictly for the purpose of deciding the waiver application and do not constitute a final decision on the substantive claims under Section 241. The petitioners remain free to present a fresh petition after meeting the statutory criteria or other shareholders may sue independently. [Paras 7]

Preliminary consideration of merits was confined to the waiver exercise and does not preclude future adjudication of the substantive petition if statutory eligibility is met.

Final Conclusion: The application for waiver (IA No. 499 of 2019) under the proviso to Section 244(1) is dismissed. The Tribunal found that the petitioners did not meet the one tenth of issued share capital threshold (preference share capital included), the presence of attached/encumbered shares further reduced their effective holding, and no exceptional circumstances were established to justify exercising the discretionary waiver; the observations on merits were provisional and limited to the waiver determination.

Operational Creditor - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - pre-existing dispute - reply to notice under Section 138 of the Negotiable Instruments Act, 1881 - admission of debt - commencement of CIRP - interim resolution professional - moratorium

Operational Creditor - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - admission of debt - pre-existing dispute - reply to notice under Section 138 of the Negotiable Instruments Act, 1881 - Maintainability of the Section 9 application and existence of debt and default despite the Corporate Debtor's plea of a pre-existing dispute. - HELD THAT: - The Tribunal found that material on record establishes a debt and default by the Corporate Debtor and that the Operational Creditor complied with the requirements of Section 9(3)(b). The Adjudicating Authority accepted the Applicant's factual position that the Corporate Debtor made a part payment and, in the view of the Bench, that payment amounted to an acknowledgement of liability. Relying on the ratio in Sudhi Sachdeva v. APPL Industries Ltd. [referred judgment], the Tribunal held that pendency of proceedings under Section 138 of the Negotiable Instruments Act does not prima facie create a pre-existing dispute preventing admission; rather, such proceedings may amount to admission of debt. Having regard to the admitted receipt of goods to a specified value and the established default, the Tribunal declined to treat the Corporate Debtor's reply to the Section 138 notice as a bar to maintainability and admitted the Section 9 application. [Paras 14, 15, 16]

The Section 9 application is maintainable; the plea of a pre-existing dispute based on the Section 138 reply is rejected and the existence of debt and default is established for the purposes of admission.

Commencement of CIRP - interim resolution professional - moratorium - Reliefs and consequential orders upon admission of the Section 9 application. - HELD THAT: - On admission of the application the Tribunal ordered commencement of the Corporate Insolvency Resolution Process and appointed the Interim Resolution Professional proposed by the Applicant. A moratorium was imposed in terms of the Code, including the suspension of suits, transfers and enforcement actions against the Corporate Debtor and preservation of supply of essential goods or services as specified. The Applicant was directed to deposit funds to enable the IRP to meet immediate expenses; directions were also given for communication of the order to the parties, IBBI and ROC and for the IRP to file requisite reports within the time stipulated under the Code. [Paras 16, 17, 18, 19, 21]

The CIRP is ordered to commence; the proposed IRP is appointed; moratorium is imposed; the Applicant to furnish funds for immediate IRP expenses and the Registry/IRP/IBBI/ROC to be notified as directed.

Final Conclusion: The Tribunal admitted the Section 9 application, held that debt and default were established and that the Corporate Debtor's contention of a pre-existing dispute (based on its Section 138 reply) did not preclude admission; the Corporate Insolvency Resolution Process was ordered to commence, the proposed Interim Resolution Professional was appointed, a moratorium was imposed and the Applicant was directed to provide funds to meet immediate IRP expenses.

Definition of Financial Service Provider - definition of Corporate Debtor/Corporate Person - financial debt and default under Section 7 - financial services versus direct dealing in financial products - derivative transactions as financial debt - moratorium under Section 14 - appointment of Interim Resolution Professional

Definition of Financial Service Provider - definition of Corporate Debtor/Corporate Person - financial services versus direct dealing in financial products - derivative transactions as financial debt - Whether a company engaged in stock broking and executing trades/derivative transactions on behalf of clients qualifies as a Financial Service Provider and is therefore excluded from the definition of Corporate Debtor under the Code. - HELD THAT: - The Adjudicating Authority examined the distinction between rendering/advising or soliciting financial services and directly dealing in financial products on behalf of clients. It observed that Section 3(16)(e) of the Code covers rendering advice or soliciting transactions, whereas a stock broker directly executes buy/sell and derivative transactions for clients. The Authority noted that derivative transactions are specifically included within the definition of financial debt under Section 5(8)(g), a provision which contemplates entities registered with SEBI entering into such transactions. The court concluded that treating stock brokers who directly transact in financial products as FSPs excluded from the CIRP would conflict with the statutory scheme, including the specific inclusion of derivative transactions within financial debt. The Gazette notification identifying certain large NBFCs as FSPs further supported that ordinary stock-broking activities are not intended to attract the FSP exemption. On the material before it, including trade instructions, invoices and communications showing the respondent executed derivative transactions for the applicant, the Authority held that the respondent is not an excluded FSP but falls within the definition of Corporate Person and hence can be a Corporate Debtor under the Code. [Paras 28, 29, 31, 32, 33]

A stock-broking company directly dealing in clients' trades and derivatives is not a Financial Service Provider excluded from the definition of Corporate Debtor; the respondent is a Corporate Debtor.

Financial debt and default under Section 7 - derivative transactions as financial debt - Whether the applicant established existence of a financial debt, default by the corporate debtor and compliance with Section 7 such as completeness of the application. - HELD THAT: - The Authority reviewed the applicant's evidence of monies paid and security margins furnished, bank statements, ledgers, invoices and certificates from its chartered accountant, and noted discrepancies in the respondent's ledgers and the lack of any suit or recovery proceedings by the respondent for its asserted counterclaim. The material showed repeated modifications in the respondent's accounts and certain allegedly fake invoices affecting balances, which the Authority found supported the applicant's contention of indebtedness and default. The Authority also noted that the debt claimed exceeded the statutory threshold under Section 4 as on the filing date. On this basis the Authority found the documents and submissions of the financial creditor established a financial debt and default, and that the application was complete under Section 7. [Paras 38, 40, 41, 42, 43]

The applicant has proved financial debt and default and fulfilled the requirements of Section 7; the petition is admissible.

Moratorium under Section 14 - appointment of Interim Resolution Professional - Reliefs to be granted following admission: imposition of moratorium and appointment of Interim Resolution Professional. - HELD THAT: - Having admitted the Section 7 petition, the Authority declared the moratorium under Section 14 prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of property in possession of the corporate debtor, and directed continuity of supply of goods and essential services subject to notified exceptions. The Authority appointed the named Insolvency Professional as Interim Resolution Professional under the Code and directed communication of the order to the parties and the IRP. [Paras 43, 44, 45, 46, 47]

The petition is admitted; moratorium is declared and the named Interim Resolution Professional is appointed.

Final Conclusion: The Adjudicating Authority admitted the Section 7 petition: it held that a stock-broking company executing trades and derivatives for clients is not an excluded Financial Service Provider but is a Corporate Debtor; it found that the financial creditor proved financial debt and default and that the petition was complete, directed declaration of moratorium and appointed the Interim Resolution Professional.

Dissolution of corporate debtor - liquidation completed - compliance with Liquidation Process Regulations - final report and certificate of compliance - Section 54(2) of the Insolvency and Bankruptcy Code, 2016

Dissolution of corporate debtor - liquidation completed - Section 54(2) of the Insolvency and Bankruptcy Code, 2016 - Whether the Corporate Debtor should be dissolved under Section 54(2) of the IBC upon completion of liquidation. - HELD THAT: - The Tribunal examined the liquidator's filings including the Final Report, the Certificate of Compliance in Form H, audit report dated 31.03.2020 stating no tangible or intangible assets, the public announcement and stakeholders' consultation, progress reports, and the statement that there were no pending litigations. Finding that assets had been fully and completely liquidated and that statutory compliances under the Liquidation Process Regulations had been observed to the satisfaction of creditors, the Tribunal applied the mandate of Section 54(2) of the IBC which directs dissolution of the corporate debtor on an application by the liquidator once liquidation is complete. On these findings the Tribunal concluded that nothing remained to keep the company alive and ordered dissolution. [Paras 10, 11]

The Corporate Debtor stands dissolved from the date of the order and the application for dissolution is allowed.

Compliance with Liquidation Process Regulations - final report and certificate of compliance - Whether the liquidator had complied with the statutory requirements under the Liquidation Process Regulations prior to seeking dissolution. - HELD THAT: - The Tribunal noted the liquidator's conduct of public announcement in Form B, formulation of the Stakeholder Consultation Committee, submission of Preliminary and Final Reports, quarterly progress reports, and production of the Certificate of Compliance in Form H along with accounts. These steps were treated as fulfillment of the procedural and documentary requirements prescribed by the Liquidation Process Regulations, thereby validating the liquidator's application for dissolution. [Paras 6, 7, 8, 9, 10]

Statutory compliances under the Liquidation Process Regulations were found to be met and the liquidator's application for dissolution was allowed.

Communication to Registrar of Companies - Direction as to consequential formalities following dissolution. - HELD THAT: - Having ordered dissolution under Section 54(2), the Tribunal directed that a copy of the dissolution order be communicated to the Registrar of Companies, Gujarat, Ahmedabad for information and necessary action within seven days, thereby ensuring completion of statutory post-dissolution formalities. [Paras 11]

Order to communicate dissolution to the Registrar of Companies within seven days was issued.

Final Conclusion: The Tribunal allowed the liquidator's application, held that liquidation was complete and statutory compliances satisfied, ordered dissolution of M/s. Orbis Infinium Private Limited under Section 54(2) of the IBC, directed communication of the order to the Registrar of Companies, and disposed of the related IA.

Maintainability of an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - authorization of corporate representative to institute insolvency proceedings - limitation for initiation of corporate insolvency proceedings - pre-existing dispute defence to an operational creditor's claim - declaration of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and functions of IRP

Authorization of corporate representative to institute insolvency proceedings - The person who filed the application was duly authorised by the operational creditor to sign and file the present application. - HELD THAT: - The corporate debtor contended that the application was not maintainable because Mr. Manish Narayan Saboo was not authorised to file it. The operational creditor produced a board resolution dated 03.11.2018 in rejoinder authorising him to sign papers, affidavits and relevant documents for proceedings relating to the present application. The Tribunal accepted the board resolution and held that the contention of lack of authorisation was not valid. [Paras 10]

Board resolution dated 03.11.2018 establishes authority to file; objection rejected and authorisation accepted.

Limitation for initiation of corporate insolvency proceedings - The application was filed within the prescribed period and is not barred by limitation. - HELD THAT: - The invoices were raised between 27.02.2016 and 20.07.2016 and the application was filed on 14.02.2019. The Tribunal examined the timeline and found the application to be within limitation (noting the period of 2 years, 11 months and 18 days as relevant to the controversy) and therefore held the plea of limitation to be without merit. [Paras 11]

Limitation plea rejected; application held within time.

Pre-existing dispute defence to an operational creditor's claim - The plea of a pre-existing dispute raised by the corporate debtor regarding defective goods and set-off was not found to be a genuine pre-existing dispute to defeat the application. - HELD THAT: - The corporate debtor alleged that goods supplied were defective and relied on debit notes and adjustments involving a third party (M/s. General Polytex). The Tribunal observed absence of cogent documentary evidence showing that the alleged dispute was communicated to the operational creditor before service of the demand notice. The debit notes said to have been handed over were not proved to have been delivered and one such communication relied upon by the corporate debtor dated 24.09.2019 post-dated the demand notice. The Tribunal found the claimed adjustments and debit notes to be an afterthought and held that the pre-existing dispute defence failed. The Tribunal also noted that the interest component need not be adjudicated at this stage and that the claimed amount met the threshold under the Code. [Paras 11]

Pre-existing dispute defence rejected for lack of supporting evidence; claim by operational creditor stands.

Declaration of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and functions of IRP - The application is admitted; moratorium is declared and an Interim Resolution Professional is appointed to conduct the CIRP with directions as set out. - HELD THAT: - Having held the application to be maintainable, within limitation and not defeated by any pre-existing dispute, the Tribunal admitted the Section 9 application and declared the moratorium prohibiting institution or continuation of suits, transfer or disposition of assets, enforcement of security interests and recovery of property as specified. The Tribunal observed that naming a Resolution Professional by the operational creditor is not mandatory and, accordingly, appointed an IRP from the IBBI panel and directed the IRP to perform functions under the Code, make the public announcement, call for claims and preserve the corporate debtor as a going concern. The Tribunal also directed the operational creditor to pay an advance to the IRP and ordered communication of the order to concerned parties. [Paras 12, 13]

Application admitted; moratorium declared; IRP appointed and given directions to carry out CIRP duties.

Final Conclusion: The Section 9 application filed by the operational creditor is admitted: the challenge to the applicant's authority and the limitation and pre-existing dispute defences were rejected; moratorium has been declared and an Interim Resolution Professional appointed with directions to conduct the Corporate Insolvency Resolution Process.

Operational debt - default - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - admission of petition - moratorium - Interim Resolution Professional - public announcement and call for claims - limitation - existence of dispute - Mobilox principle on Section 9 scrutiny

Operational debt - default - Mobilox principle on Section 9 scrutiny - The applicant proved existence of operational debt and occurrence of default such that the Section 9 application could be admitted. - HELD THAT: - The Tribunal examined the invoices, ledger, payment details and related documents filed by the operational creditor and found that services were supplied, invoices were raised and partial payments were made with an outstanding balance. The last payment received was on 25.04.2018 and the date of default was recorded accordingly. Applying the principles laid down in Mobilox (as quoted), the Authority confined itself to whether an operational debt exists, whether the documentary evidence shows the debt is due and payable, and whether any pre-existing dispute or proceedings existed prior to the demand notice. On the material before it the Tribunal was satisfied that the debt and default were established and that no dispute had been raised by the corporate debtor. [Paras 11, 14, 15, 16, 17]

Operational debt and default established; requirement for admission under Section 9 satisfied.

Limitation - existence of dispute - The petition was within limitation and there was no pre-existing dispute or pending suit/arbitration before receipt of the demand notice. - HELD THAT: - The Tribunal noted the timeline of services, invoices and payments and expressly recorded that the petition is within limitation. It further observed that the corporate debtor had not replied to the demand notice and had not raised any dispute; the MoU executed in September 2017 acknowledged liability but subsequent defaults occurred. In view of the absence of any recorded dispute or pending proceedings antecedent to the demand notice, the bar under the Mobilox tests was not attracted. [Paras 6, 7, 13, 17]

Petition within limitation and no pre-existing dispute; admissible.

Admission of petition - moratorium - Interim Resolution Professional - public announcement and call for claims - On admission, CIRP was ordered: moratorium declared, public announcement directed and an Interim Resolution Professional appointed with directions regarding advance funds and duties. - HELD THAT: - Having found that the Section 9 requirements were met, the Tribunal exercised its discretion to admit the petition and initiate the corporate insolvency resolution process. It declared the moratorium operative from the date of receipt of the authenticated order, directed public announcement and call for claims to be made immediately after appointment of the IRP, and appointed a named IRP to manage and preserve the corporate debtor as a going concern. The operational creditor was directed to provide an advance to the IRP and the IRP was empowered to seek further interim funds as per the rules. Ancillary directions included communication of the order to statutory authorities and suspension of striking-off proceedings that would interfere with the CIRP. [Paras 21, 22, 23, 24, 25]

Petition admitted; moratorium declared; IRP appointed; public announcement and related directions issued.

Final Conclusion: The Tribunal admitted the Section 9 petition on the basis that the operational creditor established an operational debt and default, the petition was within limitation and no pre-existing dispute existed; consequently CIRP was initiated, moratorium declared, a named IRP appointed and directions issued for public announcement, claim submission and interim funding.

Withdrawal under Section 12A - Regulation 30A - withdrawal procedure and Form FA requirement - Public announcement and constitution of Committee of Creditors under Section 15 and Section 21 - Approval of Committee of Creditors by prescribed voting share (ninety percent / sixty-six percent) - Appointment and replacement of Interim Resolution Professional - Inherent powers under Rule 11 of the NCLT Rules - Disciplinary action / complaint under Section 217

Withdrawal under Section 12A - Regulation 30A - withdrawal procedure and Form FA requirement - Public announcement and constitution of Committee of Creditors under Section 15 and Section 21 - Application for withdrawal of the petition under Section 12A read with Regulation 30A filed by persons other than the original applicants and not through the IRP is maintainable or not. - HELD THAT: - Section 12A permits withdrawal of an admitted application only "on an application made by the applicant" and, therefore, requires the original applicant (on whose petition CIRP was initiated) to move for withdrawal and obtain requisite approval of the CoC. Regulation 30A prescribes that the application under Section 12A is to be made in Form FA and, where applicable, filed through the interim resolution professional within the timelines prescribed and accompanied by bank guarantee for estimated expenses. Neither Section 12A nor Regulation 30A contemplates filing of the withdrawal application by an agent or authorised representative in place of the applicant, nor dispenses with filing through the IRP where so stipulated. The applicants here did not file the Form FA themselves, sought to rely on a Special Power of Attorney and authorised agents, and also did not approach the IRP as required; moreover the IRP had not performed duties but the applicants had not taken steps earlier to seek his replacement. Given the in rem nature of CIRP and the presence of numerous home buyers/allottees whose rights could be prejudiced by termination without their participation and the requisite voting approval, allowing the present withdrawal would jeopardise other stakeholders and would circumvent the statutory safeguards. On these grounds the applications for withdrawal were dismissed as not maintainable. [Paras 28, 31, 32, 33, 34]

Applications IA/3896/2020 and IA/3898/2020 for withdrawal under Section 12A read with Regulation 30A dismissed as not maintainable.

Appointment and replacement of Interim Resolution Professional - Approval of Committee of Creditors by prescribed voting share (sixty-six percent) - Inherent powers under Rule 11 of the NCLT Rules - Whether the Tribunal may order replacement of an IRP who has been appointed but has not taken charge, including on an application by persons who were not original parties to the petition. - HELD THAT: - Statutory provisions provide for replacement of the interim resolution professional by the Committee of Creditors under Section 22 (by requisite majority) and for replacement of the resolution professional under Section 27. Those provisions presuppose constitution of the CoC and the voting thresholds they prescribe. In the present case the IRP appointed on admission never took charge, made no public announcement and the CoC was not constituted; therefore the statutory route under Sections 22/27 could not be operated in the usual manner. Although neither Section 22 nor Section 27 permits replacement on an application by a non party, the Tribunal considered the exceptional factual matrix - prolonged inaction by the IRP, failure to comply with earlier directions, the pendency of a direction from the appellate authority (NCLAT) to urgently appoint another IRP, and prejudice to other creditors/home buyers - and found the IRP's conduct to be a dereliction of duty. In light of these circumstances and exercising the Tribunal's inherent powers under Rule 11 of the NCLT Rules to prevent abuse of process and to secure the effective continuation of CIRP, the Tribunal appointed a new IRP from the IBBI panel to take immediate charge and proceed with the CIRP. [Paras 42, 45, 46, 47, 48]

IA/3371/2020 and IA/3912/2020 disposed of by exercising inherent powers under Rule 11: Mr. Shiv Nandan Sharma appointed as Interim Resolution Professional with immediate effect.

Disciplinary action / complaint under Section 217 - Whether disciplinary action should be initiated against the IRP who failed to take charge and disobeyed Tribunal directions. - HELD THAT: - The IRP did not take charge, failed to make public announcement, did not constitute the CoC, and disobeyed the Tribunal's direction to file an affidavit explaining his conduct. Such non initiation of CIRP and failure to comply with directions constitute serious dereliction of duty and justify disciplinary action. The Tribunal directed that a copy of the order be sent to the IBBI treating the order as a complaint under Section 217 of the IBC to initiate disciplinary proceedings against the IRP in accordance with law. [Paras 41, 42, 50]

Registrar directed to send a copy of the order to IBBI to initiate disciplinary action treating the order as a complaint under Section 217.

Final Conclusion: Applications for withdrawal under Section 12A / Regulation 30A filed through agents and not through the IRP were held not maintainable and dismissed; the Tribunal, invoking its inherent power under Rule 11, appointed a new IRP to take immediate charge and directed the IBBI to initiate disciplinary proceedings against the erstwhile IRP by treating the order as a complaint under Section 217.

Applicability of amended Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 to ongoing liquidations - realization of security interest under Section 52(1)(b) of the Insolvency and Bankruptcy Code, 2016 - requirement of exclusive charge or sole first charge to enforce security under Section 52(1)(b) - liquidator's duty to hand over physical possession of secured assets to a secured creditor who elects to stand outside liquidation - treatment of secured assets as part of the liquidation estate where conditions of Regulation 21A are not complied with - procedure for realization under Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016

Applicability of amended Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 to ongoing liquidations - Amendments to Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 are not applicable retrospectively to a liquidation which commenced before the amendments came into force. - HELD THAT: - The Tribunal applied the established presumption that statutory and subordinate legislative amendments are prospective unless expressly made retrospective. It noted the liquidation of the corporate debtor commenced on 25.04.2018 and that Regulation 21A was inserted by amendment effective 06.01.2020. The Insolvency Board of India's Circular No. IBBI/LIQ/024/2019 dated 26.08.2019 was held to clarify that amendments do not apply to liquidation processes which commenced before the amended regulations came into force. Accordingly, the regulations in force at the time the liquidation commenced govern the matter and the subsequent amendment to Regulation 21A (2) and (3) could not be given retrospective effect to deprive the secured creditor of its rights arising in 2018. [Paras 16]

Amended Regulation 21A (effective 06.01.2020) does not apply to the liquidation that commenced on 25.04.2018; the amendment cannot be given retrospective effect.

Realization of security interest under Section 52(1)(b) of the Insolvency and Bankruptcy Code, 2016 - requirement of exclusive charge or sole first charge to enforce security under Section 52(1)(b) - liquidator's duty to hand over physical possession of secured assets to a secured creditor who elects to stand outside liquidation - procedure for realization under Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016 - A secured creditor who elects to enforce its security outside the liquidation under Section 52(1)(b) is entitled to physical possession of those assets over which it holds an exclusive charge or a sole first charge; assets subject only to second or pari passu charges remain part of the liquidation estate. - HELD THAT: - The Tribunal examined Section 52 of the Code and Regulation 37 of the Liquidation Regulations. It held that Section 52(1) provides two routes for realization and that enforcement under Section 52(1)(b) permits a secured creditor to realize security outside liquidation only if it holds an exclusive charge or sole first charge. The Tribunal found that the applicant had communicated its intention to enforce security under SARFAESI and thus, in principle, a liquidator cannot retain possession of assets over which a secured creditor validly stands outside liquidation. However, the applicant failed to place on record documentary proof delineating which portions of Unit VII were subject to exclusive or sole first charge, and registration particulars were also not produced. Given the absence of necessary documents, the Tribunal could not identify the assets over which the applicant's exclusive or sole first charge subsisted. The Tribunal therefore directed the liquidator to identify the properties over which the applicant holds exclusive or sole first charge and to hand over physical possession of those identified assets to the applicant; assets forming part of second charge or pari passu charge must remain with the liquidator. The Tribunal also clarified that after realization the applicant may appropriate its dues and any surplus will be deposited into the liquidation estate and dealt with under Section 53, and liquidation costs due from the applicant may be deducted and transferred to the liquidator as per Section 59(8). [Paras 21, 24, 25]

The secured creditor may enforce securities under Section 52(1)(b) only over assets where it has exclusive or sole first charge; the liquidator must hand over physical possession of such identified assets, while assets subject to second or pari passu charge remain in the liquidation estate. The liquidator is directed to identify those assets and effect delivery of possession.

Final Conclusion: The application is disposed of with directions: (i) the 2020 amendment to Regulation 21A does not apply to this liquidation which commenced in 2018; and (ii) the liquidator must identify the properties over which the applicant holds an exclusive or sole first charge and hand over physical possession of those assets to the applicant, while assets subject to second or pari passu charges remain part of the liquidation estate; realisation proceeds are to be appropriated and distributed in accordance with the Code.

Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016 - service of demand notice under Section 8 of the Insolvency & Bankruptcy Code, 2016 - existence of default in payment of operational debt - threshold requirement for admission of Section 9 application (operational debt exceeding statutory minimum) - appointment of Interim Resolution Professional from list approved by IBBI - declaration and effect of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - duties and powers of the Interim Resolution Professional during CIRP

Existence of default in payment of operational debt - service of demand notice under Section 8 of the Insolvency & Bankruptcy Code, 2016 - threshold requirement for admission of Section 9 application (operational debt exceeding statutory minimum) - Application under Section 9 of IBC, 2016 was admitted on ground that an operational debt was due and payable, Section 8 notice was served and no pre-existing dispute barred admission, and the outstanding amount met the minimum threshold. - HELD THAT: - The Tribunal accepted the applicant's status as an operational creditor supported by employment records and Form-16, found that the demand notice under Section 8 was duly served and remained unanswered, and recorded that no dispute existed prior to service of the notice. The Tribunal held that the debt was not barred by limitation, a default had occurred, and the outstanding amount exceeded the statutory threshold for admitting a petition under Section 9. On these bases the petition fulfilled the requirements for admission under Section 9 and warranted initiation of CIRP. [Paras 5]

The Section 9 application was allowed and the corporate debtor was admitted into CIRP.

Appointment of Interim Resolution Professional from list approved by IBBI - It was held that proposing the name of an IRP is not mandatory in a Section 9 application and the Adjudicating Authority may appoint an IRP from the IBBI-approved list. - HELD THAT: - The Tribunal observed that although the Operational Creditor had not initially proposed the name of an IRP, proposing a specific IRP is not a mandatory requirement for admission of a Section 9 petition. The Authority therefore exercised its power to appoint an IRP from the roster approved by the Insolvency and Bankruptcy Board of India. The Tribunal subsequently appointed a named IRP in the operative order. [Paras 6]

An IRP shall be appointed by the Adjudicating Authority from the IBBI-approved list (the order appoints the named IRP).

Declaration and effect of moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 - duties and powers of the Interim Resolution Professional during CIRP - Upon admission, moratorium was declared and the IRP was directed to perform statutory functions, make public announcements, call for claims and preserve the corporate debtor as a going concern; the Operational Creditor was directed to pay an advance to the IRP. - HELD THAT: - The Tribunal, in the operative portion of its order, declared the moratorium restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security interest and recovery by lessors, with effect from the date of the order until completion of CIRP or its lawful termination. The IRP was directed to carry out duties under the Code including public announcement and calling for claims, to protect and preserve the corporate debtor's assets and manage operations as a going concern, and to seek cooperation from management and personnel. The Operational Creditor was directed to pay an advance to the IRP to facilitate the conduct of CIRP.

Moratorium was declared; IRP's appointment and statutory obligations were directed; the Operational Creditor was ordered to provide an advance to the IRP and the Registry was directed to communicate and upload the order.

Final Conclusion: The Tribunal allowed the Section 9 petition, admitted the corporate debtor into CIRP, declared the moratorium, appointed an IRP (from the IBBI list and specifically named in the order), directed the IRP to perform statutory functions including public announcement and claims verification, and directed the Operational Creditor to pay an advance to the IRP; the petition CP (IB) No. 91/9/NCLT/AHM/2020 is disposed of.

Refund of illegally collected tax - mistake of law - limitation under Section 11B of the Central Excise Act - refund procedure under Central Excise Act as applied by Section 83 of the Finance Act, 1994 - right to refund under Article 265 of the Constitution - requirement to establish non-passing on of tax burden

Refund of illegally collected tax - limitation under Section 11B of the Central Excise Act - refund procedure under Central Excise Act as applied by Section 83 of the Finance Act, 1994 - Whether the petitioner is entitled to refund of service tax paid for storage services where the claim was filed after the period of limitation prescribed under Section 11B. - HELD THAT: - The Court held that although the collection of service tax by the service provider was contrary to law (and thus fell under the category of an illegal levy), any refund claim is governed by the statutory scheme for refund under the Central Excise Act as made applicable to service tax by Section 83 of the Finance Act, 1994. The Supreme Court's decisions in Mafatlal and subsequent authorities establish that refunds for illegal levies must be pursued in accordance with the time-limits and procedures provided under the Act and Rules. The petitioner's refund claim, filed after becoming aware of the legal position, was time-barred because it was not filed within the limitation period prescribed by Section 11B. Reliance on another assessee's case to extend limitation or to obtain a refund notwithstanding the statutory period is not permissible. Consequently, despite acknowledging that tax was collected contrary to law and Article 265, the Court found that refund could not be granted where the statutory limitation had expired. [Paras 21, 22, 25, 26]

Refund claim dismissed as time-barred; refund governed by Section 11B and could not be allowed after the prescribed period.

Right to refund under Article 265 of the Constitution - requirement to establish non-passing on of tax burden - mistake of law - Whether the petitioner may obtain relief by invoking the constitutional right to refund or the doctrine of mistake of law notwithstanding the statutory limitation, and whether any further consideration is permissible if a related writ by the service provider is found to be timely. - HELD THAT: - The Court reiterated that Article 265 recognises a right to refund where tax is collected without authority of law, but this constitutional right does not render refund automatic or independent of statutory limitations and equitable considerations. The Supreme Court's jurisprudence requires proof that the claimant has not passed on the burden of the tax. The Court also observed that if the petitioner seeks to rely on proceedings filed by the service provider (IMC Ltd.), the petitioner may implead itself in any such writ and, should the Court independently find that IMC Ltd.'s refund was filed in time, the petitioner's entitlement may be considered separately. This direction is procedural and does not effect a substantive departure from the requirement to comply with Section 11B and the Mafatlal line of authorities. [Paras 16, 17, 27]

Constitutional right to refund and mistake-of-law doctrine do not override statutory limitation; petitioner given liberty to implead in IMC Ltd.'s proceedings for independent consideration if IMC's claim is found timely.

Final Conclusion: Writ petition dismissed: refund claim on service tax paid for the period September 1999 to March 2000 is time-barred under Section 11B as applied to service tax; constitutional or mistake-of-law contentions do not bypass the statutory refund procedure and limitation, though the petitioner may implead in IMC Ltd.'s proceedings for independent consideration if those proceedings establish a timely claim.

Treatment of partner and partnership firm as one and the same person - distinction between service provider and service recipient - remuneration paid to a partner as a special share of profits (not consideration for services) - Business Auxiliary Services requires two distinct persons as provider and client - absence of definition of "person" in Finance Act, 1994 prior to 01/07/2012 - inapplicability of Customs self-assessment/appeal jurisprudence to Service Tax regime - refund of service tax claim maintainable despite non-challenge of self-assessment where no appellate order exists - unjust enrichment requirement for refund and evidentiary declaration by claimant

Treatment of partner and partnership firm as one and the same person - distinction between service provider and service recipient - absence of definition of "person" in Finance Act, 1994 prior to 01/07/2012 - Business Auxiliary Services requires two distinct persons as provider and client - remuneration paid to a partner as a special share of profits (not consideration for services) - Partner providing activities to the partnership firm is not a service provider to a distinct service recipient for the purposes of Service Tax for the period prior to 01/07/2012; remuneration to partner under partnership deed is a special share of profits and not consideration for taxable service. - HELD THAT: - The Tribunal examined the partnership deed, the duties undertaken by the appellant as partner and the statutory and judicial exposition of partnership law. Under section 4 of the Partnership Act partners and the firm are the same persons collectively and, prior to 01/07/2012, the Finance Act did not define "person" to include a firm; the General Clauses Act definition cannot be imported so as to alter partnership law. Reliance on Supreme Court decisions (Dulichand Lakshminarayan and R.M. Chidambaram Pillai) establishes that a firm is not a separate legal person and that payments to a partner under the partnership arrangement represent a mode of sharing profits (special share) rather than a contract of service. The Business Auxiliary Services description requires a service provided by one person to another distinct client; where the provider is a partner and the recipient is the partnership, there are not two distinct persons and service tax cannot be levied. The Tribunal also relied on authorities holding that contribution of skill and labour can constitute capital/consideration for a share of profits. Applying these principles to the facts, the activities performed by the appellant pursuant to the partnership deed were duties as a partner and the remuneration received is part of profit-sharing and not consideration for taxable services. [Paras 4]

Activities performed by the appellant as partner for the partnership firm do not constitute a taxable service and the remuneration received is a special share of profits, not consideration for service tax.

Refund of service tax claim maintainable despite non-challenge of self-assessment under Service Tax law - inapplicability of Customs self-assessment/appeal jurisprudence to Service Tax regime - unjust enrichment requirement for refund and evidentiary declaration by claimant - Refund of service tax paid by the appellant is maintainable even though the self-assessment was not challenged by appeal, and the Revenue's reliance on Customs precedents is inapplicable; claimant satisfied unjust enrichment element by declaration that tax was not passed on. - HELD THAT: - The Tribunal distinguished Customs law where bills of entry and statutory appeal provisions render self-assessment susceptible to separate challenge. In Service Tax, returns (ST-3) do not produce an interlocutory assessment order amenable to appeal under section 85; there is no provision corresponding to section 47(2) of the Customs Act. Therefore, precedents that deny refund where an assessed bill was not appealed (including ITC Ltd. and related Customs decisions) do not control service tax refund claims. The Tribunal further examined the unjust enrichment point: the refund application contained express declarations that the appellant had not passed on the service tax to the partnership; the adjudicating authorities ignored those declarations. On the record the Tribunal found the unjust enrichment objection unsustained and held the appellant entitled to refund with consequential relief. [Paras 4, 5, 6, 7]

Refund claim is maintainable in Service Tax despite non-challenge of self-assessment and, having found the appellant's declaration that the tax was not passed on, unjust enrichment does not bar refund; the appeals are allowed and impugned orders set aside.

Final Conclusion: The appeals are allowed: activities carried out by the appellant as a partner for the partnership firm prior to 01/07/2012 do not attract Service Tax because partner and firm are not distinct persons for the purposes of the Finance Act then in force; the service tax paid is refundable and the Revenue's reliance on Customs self-assessment/appeal authorities is inapposite; unjust enrichment was not established, and the impugned orders are set aside with consequential relief.

Finality of Settlement Commission orders under Section 32M - Judicial review under Article 226 - Findings of fact by the Settlement Commission not open to challenge - Power of the Settlement Commission to fix tax liability and grant immunities under Section 32K - Doctrine of preponderance of probability - Application of departmental manuals in determining condonable wastage (Tobacco Manual)

Findings of fact by the Settlement Commission not open to challenge - Finality of Settlement Commission orders under Section 32M - Judicial review under Article 226 - Whether the High Court should interfere with the Settlement Commission's factual determination fixing driage at 10% and the consequential additional duty liability - HELD THAT: - The Court held that the question of quantum of loss due to drying of tobacco leaves (driage) was a factual determination made by the Settlement Commission after considering submissions of the parties, departmental reports and the Tobacco Manual. Proceedings before the Settlement Commission are not governed by strict rules of evidence and its findings rest on the doctrine of preponderance of probability. Section 32M renders orders of settlement conclusive as to matters stated therein, limiting judicial review. Binding authorities were applied to observe that writ jurisdiction under Article 226 is confined to the decision making process and cannot lightly reappraise findings of fact recorded by the Settlement Commission. The Court further noted that settlement proceedings are a composite package and an applicant who opts for settlement cannot selectively accept favourable parts and reject others. Though the departmental representative had suggested a range of 15%-19%, the Commission adjusted that position and fixed 10%-a conclusion the Court found within the Commission's jurisdiction and not perverse. Consequently, interference with the Settlement Commission's factual conclusion was inappropriate. [Paras 32, 33, 34, 35]

Writ petition dismissed; no interference with the Settlement Commission's fixation of driage at 10% and its settlement order.

Final Conclusion: The High Court declined to disturb the Settlement Commission's factual determination and final order under the settlement scheme; the writ petition is dismissed and the settlement order upheld.

Principles of natural justice (audi alteram partem) - service of show cause notice and notices of personal hearing - personal penalty under Rule 15(1) of the Cenvat Credit Rules - entertainment of writ despite availability of alternative statutory remedy where gross violation of natural justice is shown - pre-deposit requirement under Section 35(F)/35(B) and availability of alternative remedy

Service of show cause notice and notices of personal hearing - principles of natural justice (audi alteram partem) - personal penalty under Rule 15(1) of the Cenvat Credit Rules - Validity of the ex-parte order imposing personal penalty on the petitioner in view of non-service of the show cause notice and denial of personal hearing. - HELD THAT: - The Court found on the material before it that the petitioner had left employment in 2016 and that attempts to serve the show cause notice had failed; notices sent by speed post returned with remark 'Left' and notices/personal hearing notices were only affixed at the company premises. The respondent's reliance on service by affixation at the company premises and on service to the company generally did not establish that the petitioner personally received the show cause notice or was accorded an opportunity of personal hearing. A personal penalty cannot be imposed on a person without due service of the show cause notice and an opportunity to be heard. The court observed that affixing notices at the company premises, when the petitioner had ceased to be in service and the department had (through other public records) means to locate his address, was insufficient to satisfy the requirement of service and natural justice. In consequence, the ex-parte order imposing personal penalty on the petitioner was held to be vitiated by a flagrant violation of audi alteram partem and was quashed insofar as it concerned the petitioner. [Paras 12, 13, 14, 15]

The order in original dated 11.02.2019 insofar as it imposes personal penalty on the petitioner is quashed and set aside for failure of service and denial of opportunity of hearing.

Entertainment of writ despite availability of alternative statutory remedy where gross violation of natural justice is shown - pre-deposit requirement under Section 35(F)/35(B) and availability of alternative remedy - Whether the writ petition should be entertained notwithstanding the availability of an alternative statutory remedy before the CESTAT which requires pre-deposit. - HELD THAT: - The Court acknowledged the statutory appellate route and the pre-deposit requirement under Sections 35(B)/35(F) of the Central Excise Act, 1944 but observed that when there is a clear and gross violation of principles of natural justice (such as non-service of show cause notice and denial of hearing), exercise of extraordinary jurisdiction under Article 226 is permissible. The Court therefore entertained the writ petition limited to the question of non-observance of natural justice and, having found such violation, provided relief without entering into merits, while leaving the parties free to pursue the statutory remedy thereafter. [Paras 10, 11]

Writ petition entertained limitedly for the purpose of addressing the breach of natural justice; alternative statutory remedy remains available for adjudication on merits.

Remand for fresh decision after service and hearing - service by official email and address for future correspondence - Procedure to be followed by the adjudicating authority in reassessing liability after quashing the ex-parte order. - HELD THAT: - The Court directed that the existing show cause notice on record shall be the operative notice and that it must be served on the petitioner at his official e-mail ID (to be furnished within one week) and that the address in the cause title shall be used for future physical correspondence. The matter was remitted to the adjudicating authority to decide afresh after giving the petitioner fullest opportunity of hearing; none of the Court's observations shall influence the merits and parties remain free to agitate their contentions before the authority. [Paras 16, 17, 18]

Proceedings remitted to the authority for fresh adjudication after serving the show cause notice on the petitioner by email/registered address and after affording full opportunity of hearing; prior order quashed only insofar as it affected the petitioner.

Final Conclusion: The ex-parte order imposing personal penalty on the petitioner was quashed for failure of service of the show cause notice and denial of personal hearing; the show cause notice on record shall be served on the petitioner by email and the address in the cause title for physical correspondence, and the matter is remitted to the adjudicating authority to decide afresh after granting full opportunity of hearing; the Court did not decide the merits and the statutory appellate remedy remains available.

Claim for refund under Section 11B - limitation period under Section 11B(1) - payment of duty under protest - buyer's right to claim refund under Section 11B(2)(e) - doctrine of unjust enrichment - distinction between provisional assessment under Rule 9B and payment under protest

Claim for refund under Section 11B - limitation period under Section 11B(1) - buyer's right to claim refund under Section 11B(2)(e) - Whether the purchaser (buyer) of goods can claim refund of duty paid under protest by the manufacturer without complying with the limitation and other requirements of Section 11B. - HELD THAT: - The Court applied the authority of the Hon'ble Supreme Court in Allied Photographics and held that Section 11B treats the rights of the manufacturer and the buyer as separate and distinct. A buyer seeking refund must comply with the procedural and limitation requirements of Section 11B(1)-(3) and Section 11B(2)(e) (establishing that the duty was not passed on). Where the buyer files an independent refund application after the prescribed period, the bar of limitation under Section 11B applies even though the manufacturer had paid duty under protest. The Tribunal and the Supreme Court decisions rejecting the buyer's contention bind the Court and lead to dismissal of the buyer's out-of-time claim. [Paras 22, 23, 24]

The purchaser's refund claim was time-barred and the buyer could not prevail without complying with Section 11B; the appeal is dismissed on this ground.

Payment of duty under protest - doctrine of unjust enrichment - distinction between provisional assessment under Rule 9B and payment under protest - Whether payment of duty under protest by the manufacturer exempts the buyer from Section 11B's limitation and unjust enrichment bar when the buyer files for refund. - HELD THAT: - The Court followed Allied Photographics in holding that payment under protest by a manufacturer is distinguishable from refunds arising from provisional assessment under Rule 9B. Paragraphs of Allied Photographics establish that duty paid under protest falls within the ambit of Section 11B and the doctrine of unjust enrichment can apply; para 104 of Mafatlal (dealing with provisional assessment and Rule 9B) does not extend to payments made under protest. Consequently, a purchaser cannot step into the manufacturer's shoes merely because the manufacturer paid under protest; the buyer must satisfy Section 11B requirements and limitation provisions. [Paras 17, 18, 21]

Payment under protest by the manufacturer does not automatically relieve the buyer from complying with Section 11B; the buyer's claim is subject to the unjust enrichment bar and limitation.

Payment of duty under protest - per incuriam - claim for refund under Section 11B - Whether the decision in National Winder (allowing a purchaser to rely on manufacturer's protest for limitation purposes) is binding. - HELD THAT: - The Court held that National Winder was considered and disapproved by the Three-Judge Bench in Allied Photographics which treated National Winder as per incuriam. The Supreme Court later applied Allied Photographics in Western Coalfields and rejected the line of reasoning in National Winder. On that basis the plaintiff's reliance on National Winder is not tenable and cannot support extension of the proviso to Section 11B(1) to the purchaser in this case. [Paras 15, 21, 22]

National Winder is per incuriam for the purposes of this dispute and cannot be invoked to extend the benefit of the manufacturer's protest to the buyer.

Final Conclusion: Applying Allied Photographics and subsequent Supreme Court authority (as followed in Western Coalfields), the buyer's refund application-filed well after the six month limitation and not complying with Section 11B-is time barred; the decision of the Tribunal is affirmed and the appeal is dismissed.

Eligibility of Cenvat credit on input services received outside factory - nexus requirement between service and manufacture - inadmissibility of raising new grounds not pleaded in show cause notice - non-applicability of Rule 8 for credit on input services - cessation of demand and penalty where service-credit held admissible

Eligibility of Cenvat credit on input services received outside factory - nexus requirement between service and manufacture - non-applicability of Rule 8 for credit on input services - Cenvat credit availed on service tax paid for renting of warehouse/godown outside the factory for storage of inputs used in manufacture is admissible. - HELD THAT: - The Tribunal found no dispute that the rented warehouse/godown outside the factory was used for storage of inputs meant for manufacture of final products. The Court applied the settled statutory scheme and authoritative decisions holding that input services are defined broadly to include any services used directly or indirectly in or in relation to manufacture. Location of receipt of an input service is not material where the service has a direct nexus with the manufacturing activity. Rule 8, which contemplates permission for storage of inputs outside the factory, applies to inputs (goods) where Cenvat credit on such inputs has been availed; it does not operate to deny credit in respect of input services simply because the service is received outside factory premises. Reliance on precedents (including the decision of the Bombay High Court in Deepak Fertilizers and the Tribunal/Supreme Court authority on similar facts) supports the conclusion that warehousing/storage services for inputs stored outside the factory but used in manufacture qualify as input services eligible for Cenvat credit.

Credit on warehousing/storage service used for storing inputs outside the factory but used in manufacture is admissible; therefore the portion of demand premised on lack of nexus or location outside the factory is unsustainable.

Inadmissibility of raising new grounds not pleaded in show cause notice - Adjudication and appellate orders cannot sustain findings based on grounds (i.e., absence of Rule 8 permission and denial because warehouse was outside factory) that were not raised in the show cause notice. - HELD THAT: - The Tribunal recorded that the show cause notice alleged only that renting of immovable property service was not included in the definition of input service; the adjudicating authority and Commissioner (Appeals) went beyond the notice to deny credit on the basis that the warehouses were outside factory premises and no permission under Rule 8 had been obtained. The principle that new issues not raised in the show cause notice cannot be imported into adjudication was applied; consequently those additional grounds could not sustain the orders. The Tribunal therefore did not decide the legality of those grounds on merits, but held that they could not be relied upon because they were not pleaded in the notice.

Orders founded on grounds not raised in the show cause notice are unsustainable; those findings were set aside.

Final Conclusion: The appeal is allowed: the Tribunal held that Cenvat credit on warehousing/storage services for inputs stored outside the factory but used in manufacture is admissible; findings and penalties based on grounds not raised in the show cause notice (including reliance on Rule 8 and location outside factory) were set aside. The amount earlier paid by the appellant was maintained as not contested; the remaining demand, interest and penalty were revoked.

Attachment of bank account under the GVAT Act - stay of recovery during pendency of appeal - right to be heard before coercive recovery - relegation to appellate authority for adjudication of stay application - suspension and vacating of attachment for non-compliance with judicial time directions

Attachment of bank account under the GVAT Act - stay of recovery during pendency of appeal - right to be heard before coercive recovery - Validity of the order attaching the petitioner's bank account while a second appeal and an application for stay of recovery were pending, and whether interim relief should be granted or directions issued. - HELD THAT: - The Court declined to enter into the merits of the assessment or the attachment, observing that the petitioner had invoked the statutory appellate remedy by filing Second Appeal No. 280 of 2020 along with an application for stay on 21.10.2020 and that the appellate forum had not adjudicated the stay application before passing the impugned attachment order on 19.01.2021. Noting the anomaly of questioning the petitioner's competency to prosecute the appeal while simultaneously depriving it of its bank account, the Court held that the appropriate course was to direct the appellate authority to decide the stay application (and, if possible, the appeal) on merits after affording the petitioner an opportunity of hearing. The Court therefore refrained from quashing the attachment on merits but issued specific timelines and outcomes in case of non-compliance by the appellate authority: decision on the stay application within two weeks of receipt of this order; if the authority fails to decide within two weeks, the attachment shall be suspended automatically; if the authority does not decide within three months, the attachment shall stand automatically vacated. The Court emphasised that the appellate authority must keep an open mind and decide all aspects in accordance with law, and that nothing said in the order would prejudice either side in further proceedings. [Paras 12, 13, 14, 15, 16]

The petition is disposed by relegating the parties to the second appellate authority which is directed to decide the stay application (and, if possible, the appeal) within two weeks; failure to decide in two weeks will suspend the attachment and failure to decide within three months will result in automatic vacation of the attachment; no interference with merits otherwise.

Relegation to appellate authority for adjudication of stay application - competency and maintainability of appeal - Question of the competency and maintainability of the second appeal as raised before the appellate authority. - HELD THAT: - The Court observed that the appellate forum itself had raised the question of competency and maintainability without adjudicating the framed issues and that the High Court would not enter into the merits of competency while the matter remains before the appellate authority. Consequently, the Court declined to decide the competency/maintainability issue and remitted the matter to the second appellate authority for fresh adjudication, directing that the authority afford the petitioner an opportunity of hearing and decide the stay application and competency questions in accordance with law. [Paras 12, 13]

Competency and maintainability are not decided by this Court and are remitted to the second appellate authority to adjudicate after affording opportunity of hearing within the timelines directed.

Final Conclusion: Writ petition disposed by relegating the parties to the second appellate authority; the authority is directed to decide the petitioner's stay application (and, if possible, the appeal) after hearing within two weeks of receipt of this order, failing which the attachment shall stand suspended at the end of two weeks and shall be automatically vacated if not decided within three months; no costs.

Adjustment of Input Tax Credit against Central Sales Tax liability - Availability of input tax credit under Section 19 of the Tamil Nadu Value Added Tax Act, 2006 - Restriction under Section 19(5)(c) read with Rule 10(9)(a) of the TNVAT Rules - Correlation between Rule 10(9)(a) of TNVAT Rules and Rule 5(3-A) of the Central Sales Tax (Tamil Nadu) Rules, 1957 - Zero rated sales refund and lapse under Section 18(3) of the TNVAT Act, 2006 - One to one correlation between availing ITC and its utilisation - Pre deposit requirement and allowance of unutilised ITC towards pre deposit - Availability of alternative appellate remedy and appellate adjudication on merits

Adjustment of Input Tax Credit against Central Sales Tax liability - Availability of input tax credit under Section 19 of the Tamil Nadu Value Added Tax Act, 2006 - Restriction under Section 19(5)(c) read with Rule 10(9)(a) of the TNVAT Rules - Correlation between Rule 10(9)(a) of TNVAT Rules and Rule 5(3-A) of the Central Sales Tax (Tamil Nadu) Rules, 1957 - Entitlement to adjust input tax credit availed under TNVAT Act against tax liability assessed under the Central Sales Tax Act, 1956. - HELD THAT: - The Court held that adjustment against CST liability is permissible only if the ITC is available under Section 19 of the TNVAT Act. Section 19(5)(c) read with Rule 10(9)(a) of the TNVAT Rules places a restriction on ITC for certain inter State transactions unless the statutory condition (such as filing Form C) is satisfied. Rule 5(3 A) of the CST (TN) Rules permits utilisation of ITC for discharging CST liability only where ITC has been validly availed under the TNVAT scheme, demonstrating a one to one correlation between availing ITC under the TNVAT provisions and its subsequent utilisation against CST. The Court referred to the reasoning in the Supreme Court's decision in TVS Motor Co. Ltd. v. State of Tamil Nadu and concluded that the petitioner can adjust ITC against CST liability only if the conditions for availing such ITC under Section 19 (and the linked rules) are met; absence of compliance negates entitlement to adjust. [Paras 42, 43, 44, 45, 52]

Adjustment of ITC against CST liability is allowed only if ITC was validly available under Section 19 of the TNVAT Act read with the relevant rules; entitlement cannot be assumed where statutory conditions for availing ITC are not satisfied.

Zero rated sales refund and lapse under Section 18(3) of the TNVAT Act, 2006 - One to one correlation between availing ITC and its utilisation - Pre deposit requirement and allowance of unutilised ITC towards pre deposit - Validity of adjustment of Rs. 23,31,952 credited in the petitioner's February 2014 return towards past CST arrears and effect of lapse provision in Section 18(3). - HELD THAT: - The Court found that adjustment of the amount claimed from the February 2014 return towards past CST liabilities is not permissible under the statutory scheme because the law contemplates a direct correlation between the manner in which ITC is availed and its utilisation. Section 18(3) provides for lapse of credit where refund or adjustment for zero rated sales is not claimed within the prescribed period, and ITC that has lapsed cannot be applied to past CST liabilities. The Court observed that if there was a legitimate refund entitlement under Section 18, it should be processed in accordance with law; as an exceptional measure in view of transition to GST and subsequent developments, unutilised ITC not transferred under GST may be allowed to be adjusted towards mandatory pre deposit required for appeal, but there is no blanket right to adjust lapsed credits against earlier CST arrears. [Paras 31, 55, 56, 57, 60]

The claimed adjustment of Rs. 23,31,952 in February 2014 is not permissible for discharging past CST liabilities where the ITC claim has lapsed under Section 18(3); any legitimate refund must be dealt with under the TNVAT scheme, and only unutilised ITC (not transitioned to GST) may be allowed for the specific purpose of mandatory pre deposit on appeal.

Availability of alternative appellate remedy and appellate adjudication on merits - Pre deposit requirement and allowance of unutilised ITC towards pre deposit - Whether the writ petition should be entertained in view of alternative remedy and what relief, if any, should be granted. - HELD THAT: - The Court noted that both parties had not placed before it the outcome of the TNVAT assessment for the relevant year, which was material to determining whether ITC had been validly allowed. In these circumstances the Court found no merit in entertaining the writ petition on facts as presented. Nonetheless, the Court permitted the petitioner to file an appeal before the appellate authority within thirty days and directed the appellate authority to decide the matter on merits within three months if such appeal is filed. The Court expressly refused to waive the mandatory pre deposit but allowed that unutilised ITC not transitioned to GST may be permitted to be used for the pre deposit. [Paras 53, 58, 59, 60, 61]

Writ petition dismissed; petitioner granted liberty to appeal within thirty days and the appellate authority directed to decide on merits within three months; no waiver of pre deposit though unutilised TNVAT ITC may be applied towards the pre deposit.

Final Conclusion: The writ petition is dismissed for lack of merit; entitlement to adjust TNVAT Input Tax Credit against CST liability depends on valid availment of ITC under Section 19 read with the applicable rules, and lapsed credits under Section 18(3) cannot be applied to past CST arrears. The petitioner is permitted to file an appeal within thirty days, the appellate authority shall decide on merits within three months, mandatory pre deposit is not waived, but unutilised ITC not transitioned under GST may be allowed for the purpose of the pre deposit.