TaxTMI Updates e-Newsletter
May 02,2023

Revocation of cancellation of registration - Cancellation of registration for non-filing of returns - Special procedure under notification issued under Section 148 of the Central Goods and Services Tax Act, 2017 - Effect of appeal dismissed as time-barred on eligibility for revocation

Cancellation of registration for non-filing of returns - Effect of appeal dismissed as time-barred on eligibility for revocation - Notification No. 03/2023-CENTRAL TAX dated 31.03.2023 applies to a registered person whose registration was cancelled on or before 31.12.2022 for non-filing of returns and who failed to apply for revocation within the time specified, including where an appeal was rejected as time-barred. - HELD THAT: - The court noted the terms of the Notification issued under Section 148 of the Central Goods and Services Tax Act, 2017 which prescribes a special procedure for revocation of cancellation where registration was cancelled on or before 31.12.2022 and the registered person failed to apply for revocation within the period specified in section 30. The Notification expressly includes, by its Explanation, persons whose appeals against cancellation or against rejection of revocation applications were rejected on the ground of failure to adhere to the time limit. Applying this language to the facts, the court held that the Notification indisputably covers the petitioner whose registration was cancelled and whose appeal was dismissed as barred by limitation. The court therefore directed that the Notification is available to the petitioner as a procedural route for seeking revocation. [Paras 4, 5]

Notification No. 03/2023-CENTRAL TAX dated 31.03.2023 applies to the petitioner and covers appeals dismissed as time-barred.

Revocation of cancellation of registration - Special procedure under notification issued under Section 148 of the Central Goods and Services Tax Act, 2017 - The competent authority is directed to consider any revocation application filed by the petitioner under the Notification and to decide it without recording delay. - HELD THAT: - In view of the Notification's applicability, the court declined to adjudicate the merits of the cancellation itself and instead provided the petitioner the remedy of applying afresh for revocation in accordance with the special procedure. The court instructed that if the petitioner approaches the competent authority pursuant to the Notification, the authority shall take an appropriate decision without treating the application as delayed, thereby enabling consideration under the statutory scheme prescribed by the Notification. [Paras 5, 6]

Petitioner may apply for revocation under the Notification and the competent authority must decide the application without treating it as delayed.

Final Conclusion: The petition is disposed of by holding that Notification No. 03/2023-CENTRAL TAX dated 31.03.2023 applies to the petitioner; the petitioner may seek revocation of cancellation in accordance with the Notification and the competent authority is directed to decide the revocation application promptly; no expression of opinion is made on the merits of the cancellation.

Cancellation of GST registration for non-filing of returns - Revocation of cancellation under post facto notification dated 31.03.2023 - Restoration of GST registration subject to fulfillment of conditions - Entitlement to claim Input Tax Credit for period between cancellation and restoration

Cancellation of GST registration for non-filing of returns - Revocation of cancellation under post facto notification dated 31.03.2023 - Restoration of GST registration subject to fulfillment of conditions - Petitioner permitted to apply for revocation of GST registration cancellation under the notification dated 31.03.2023 and the competent authority directed to consider the application. - HELD THAT: - The writ petition challenged cancellation of the petitioner's GST registration on the ground of non-filing of returns. During pendency, the competent authority issued a notification dated 31.03.2023 providing for revocation of cancellation on fulfillment of specified conditions. The High Court held that the petitioner's case falls within the scope of that notification and therefore granted liberty to the petitioner to file an application for restoration. The Court directed the competent authority to consider and decide the application expeditiously in light of the notification, thereby leaving substantive determination of fulfillment of conditions to the authority exercising its statutory power under the notification.

Liberty granted to apply for revocation; competent authority to consider and decide the application expeditiously in accordance with the notification dated 31.03.2023.

Entitlement to claim Input Tax Credit for period between cancellation and restoration - Petitioner entitled to lodge claim for Input Tax Credit in respect of the period from cancellation of registration until restoration when the competent authority considers revocation. - HELD THAT: - While directing consideration of the revocation application, the Court expressly provided that the petitioner shall be entitled to lodge its claim for availment of Input Tax Credit for the interregnum period (from cancellation until restoration). The Court thereby preserved the petitioner's right to seek ITC, leaving the assessment and admissibility of such claim to the competent authority in the course of deciding revocation under the notification.

Petitioner may claim Input Tax Credit for the period from cancellation to restoration; admissibility to be considered by the competent authority when deciding the revocation application.

Final Conclusion: Writ petition disposed of with liberty to the petitioner to file an application for restoration of GST registration under the notification dated 31.03.2023; competent authority directed to consider the application expeditiously and the petitioner is entitled to lodge claim for Input Tax Credit for the period from cancellation until restoration.

Quashing of criminal proceedings - cognizance - vicarious liability - criminal intention - principal officer - assessee - summons

Quashing of criminal proceedings - vicarious liability - principal officer - assessee - criminal intention - summons - Whether the order taking cognizance and issuance of summons against the petitioner, an advisor/retainer to HEC Ltd., could be sustained for alleged delay in remittance of TDS and offences under the Income Tax Act and IPC. - HELD THAT: - The Court found as an admitted fact that the petitioner was not an employee of HEC Ltd. but a retainer engaged as an independent consultant for improving finance and costing systems. He did not exercise control over the company's affairs, was not part of its management, and did not fall within the definitions of "Assessee", "Principal Officer" or "Employee". The complaint failed to specify any overt act by the petitioner or allege responsibility for daily affairs, deduction or deposit of TDS that could attract penal consequences. The absence of material imputing criminal intention or vicarious liability to the petitioner, combined with the similarity of facts to an earlier matter in which process against him was quashed, led the Court to conclude there was no basis to sustain cognizance or summon the petitioner. [Paras 10, 11, 12]

Order taking cognizance dated 05.10.2001 and summons issued in Complaint Case No. 41 of 2001 are quashed and set aside; the criminal miscellaneous petition is allowed.

Final Conclusion: Proceedings against the petitioner were quashed on the ground that he, being a retainer/advisor and not an employee or part of management, was not shown to be an "assessee" or "principal officer" nor alleged to have committed any overt act or harboured criminal intention to attract penal liability; therefore there was no material to sustain cognizance or summons.

Revisional jurisdiction under section 263 - prejudicial to the interests of the revenue - selection for complete scrutiny under CASS - verification of source of capital - estimation of income when books are rejected - acceptance of returned income after consideration of material

Revisional jurisdiction under section 263 - estimation of income when books are rejected - acceptance of returned income after consideration of material - PCIT's exercise of revisional power under section 263 to set aside the assessment on the ground of 'low income' from liquor business. - HELD THAT: - The Tribunal examined the material placed before the Assessing Officer (profit & loss account, cash flow, bank statements, note on low income, audited books and related documents) which the AO had called for and on the basis of which the AO accepted the returned income. The authorities cited by the PCIT for applying a 3-5% presumptive profit relate to situations where books are rejected; here the books were audited, not rejected, and a possible view taken by the AO after considering the documents cannot be treated as an erroneous order prejudicial to revenue. The Supreme Court's principle that an order is prejudicial only where the view taken is unsustainable in law was applied to hold that merely because the PCIT thought the AO should have gone deeper or adopted a notional profit rate does not justify revision under section 263. [Paras 20, 21, 22, 23]

PCIT was not justified in invoking section 263 to set aside the assessment on the ground of low income from liquor trade; that part of the revision order is quashed.

Verification of source of capital - prejudicial to the interests of the revenue - selection for complete scrutiny under CASS - PCIT's exercise of revisional power under section 263 to set aside the assessment for failure by the AO to verify the introduction and withdrawal of substantial capital. - HELD THAT: - The Tribunal found that although the case was selected for complete scrutiny and notices under section 142(1) and 143(2) were issued, the AO did not ask any query regarding the introduction of capital and withdrawals. There was nothing on record showing the assessee had explained the source of the substantial capital transactions. In these circumstances the AO's order was held to be erroneous and prejudicial to the interests of the revenue because the AO failed to verify a vital aspect relating to source of funds, and the PCIT was therefore justified in directing reassessment. [Paras 24]

PCIT was justified in invoking section 263 in respect of non-verification of introduction and withdrawal of capital; that part of the revision order is upheld and AO directed to redo assessment on this issue.

Final Conclusion: The Tribunal quashed the exercise of revision under section 263 insofar as it related to 'low income' from liquor trade but upheld the revision insofar as the AO failed to verify the substantial introduction and withdrawal of capital; the assessee's appeal is dismissed.

Levy of fee under section 234E - processing of TDS return under section 200A - prospective effect of amendment dated 01.06.2015 - conflict of High Court decisions and following the view favourable to the assessee

Levy of fee under section 234E - processing of TDS return under section 200A - prospective effect of amendment dated 01.06.2015 - Whether fees under section 234E could be demanded by issuing an intimation under section 200A for TDS statements pertaining to period prior to 01.06.2015. - HELD THAT: - The Tribunal examined that prior to insertion of clause (c) in section 200A on 01.06.2015 there was no express statutory provision in section 200A empowering the authority, while processing TDS returns under that provision, to compute or raise demand of fees under section 234E. The Tribunal noted the Karnataka High Court decision in Fatehraj Singhvi and the Kerala High Court decision in M/s Sarala Memorial Hospital holding that the amendment of section 200A is prospective from 01.06.2015 and that demands for fees under section 234E raised by intimation under section 200A for periods before that amendment cannot be sustained. Having regard to the conflicting view in Rajesh Kourani (Gujarat High Court) and applying the principle that, where High Courts differ, the decision favourable to the assessee should be followed, the Tribunal adopted the view in favour of the assessee. For TDS statements relating to periods prior to 01.06.2015 the fees levied under section 234E pursuant to intimation under section 200A were held unsustainable and were ordered to be deleted. The Tribunal applied this reasoning to the lead appeal for assessment year 2013-14 and observed that the finding equally applies to the companion appeal. [Paras 3, 4, 6]

Fees levied under section 234E by intimation under section 200A for periods prior to 01.06.2015 are not sustainable and are deleted; the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals: demands of late filing fees under section 234E (and consequential interest) raised by intimation under section 200A for TDS statements pertaining to the period prior to 01.06.2015 were set aside, and the deletion applies to both appeals including assessment year 2013-14.

Treatment of unsecured loan as unexplained cash credit under Section 68 - addition of alleged commission as unexplained expenditure under Section 69C - shift of burden after assessee discharges primary onus to prove identity, creditworthiness and genuineness - acceptance of repayment in subsequent year precluding addition - reliance on investigation report without disclosure to assessee

Treatment of unsecured loan as unexplained cash credit under Section 68 - shift of burden after assessee discharges primary onus to prove identity, creditworthiness and genuineness - reliance on investigation report without disclosure to assessee - acceptance of repayment in subsequent year precluding addition - Whether the addition of Rs. 9.50 lacs as unexplained cash credit could be sustained where the assessee furnished identity, PAN, bank statements, confirmations and where the loan was repaid and that repayment was accepted in a subsequent year. - HELD THAT: - The Tribunal examined the material placed on record and the proceedings of the lower authorities. During assessment the assessee produced the name, address and PAN of the lender, copy of the lender's ITRs, bank statements evidencing receipt and subsequent repayment, account confirmations and copies of assessment orders. The Assessing Officer relied on an investigation report which was not furnished to the assessee and did not undertake independent verification such as seeking confirmation from the Assessing Officer of the lender. The Tribunal applied the settled principle that once the assessee discharges the primary onus by proving identity, creditworthiness and genuineness of the transaction, the burden shifts to the revenue to undertake further verification; absent such verification the addition cannot be sustained. The Tribunal also noted that the impugned loan was repaid through banking channel on 29/03/2013 and that no adverse view was taken by the department in the subsequent year; reliance was placed on the jurisdictional authorities holding that acceptance of repayment in a later year precludes sustaining an addition in the earlier year. On the facts the Assessing Officer's reliance on non-disclosed investigation material and lack of independent enquiry rendered the addition unsustainable. [Paras 10]

Addition of Rs. 9.50 lacs under Section 68 deleted.

Addition of alleged commission as unexplained expenditure under Section 69C - dependency of connected additions on principal addition - Whether the addition of Rs. 19,000 as alleged commission could be sustained once the principal addition in respect of the unsecured loan was deleted. - HELD THAT: - The Tribunal found that the alleged commission addition under Section 69C was linked to and contingent upon the disallowance of the unsecured loan. Having concluded that the addition under Section 68 was unsustainable on the record and reasons given, the connected addition for alleged commission had no independent foundation. There was no material to show that commission was paid as a separate unexplained expenditure independent of the disallowed transaction. [Paras 11]

Addition of Rs. 19,000 under Section 69C deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition of Rs. 9.50 lacs on account of unexplained cash credit and consequentially deleted the addition of Rs. 19,000 as alleged commission.

Nexus between expenditure and purpose of business - expenditure wholly and exclusively for the purposes of business - onus of proof on the assessee to substantiate claimed deduction - assessing officer's power to make reasonable estimate and disallow unexplained claims - appellate admission of additional evidence and Rule 46A - remand for fresh consideration and verification by Assessing Officer

Expenditure wholly and exclusively for the purposes of business - onus of proof on the assessee to substantiate claimed deduction - assessing officer's power to make reasonable estimate and disallow unexplained claims - Validity of the AO's disallowance of increase in salary and wages for AY 2010-11. - HELD THAT: - The Tribunal held that the burden to prove a deduction under section 37(1) lies on the assessee and must be discharged before the assessing authority. Where the assessee furnished no explanation or supporting material for a steep, unexplained rise in salary and wages, the AO was entitled to form a reason to doubt genuineness and to make a reasonable estimate, disallowing the excess. The Tribunal rejected the CIT(A)'s approach of substituting commercial judgment for the AO in the absence of substantiation, emphasising that the AO's estimate based on available materials (including previous year's returns and comparatives) was within his powers. Reference to the assessee's unsupported appellate explanations and the mandatory constraints on admission of additional evidence under Rule 46A further weighed against the assessee. Consequently the AO's disallowance was held sustainable and the CIT(A) order deleting the disallowance was set aside. [Paras 5]

CIT(A)'s deletion of the disallowance for AY 2010-11 set aside; AO's disallowance restored.

Nexus between expenditure and purpose of business - remand for fresh consideration and verification by Assessing Officer - capitalisation versus revenue treatment of development costs - Treatment and allowance of salary, wages and outsourced contract labour for AY 2011-12 and whether the AO's disallowance was sustainable or required fresh enquiry. - HELD THAT: - For AY 2011-12 the Tribunal found the factual matrix different and the AO's computation inconsistent. While accepting that outsourced contract labour for development of moulds and prototypes required scrutiny (including whether elements ought to be capitalised or treated as revenue), the Tribunal concluded that the matter required factual verification. It noted errors in the AO's percentage calculations and that certain components (outsourced development costs) had been correctly segregated by the assessee. In the interest of justice the Tribunal directed that the AO reconsider the claim afresh under section 37(1), permitting the assessee to produce substantiating material and the AO to verify and adduce contrary evidence; the AO to decide with a speaking order and to treat related issues (including depreciation or capitalisation) according to law. The Tribunal emphasised the assessee's duty to cooperate and that adverse inferences may be drawn for non-furnishing of relevant details. [Paras 7]

Assessment for AY 2011-12 restored to the file of the AO for fresh determination and verification.

Final Conclusion: Revenue appeal allowed for AY 2010-11 (CIT(A)'s deletion of disallowance set aside and AO's disallowance restored). Revenue appeal in respect of AY 2011-12 allowed for statistical purposes by remanding the matter to the Assessing Officer for fresh adjudication and verification on the issues raised, including possible capitalisation and admissibility under section 37(1).

Deduction under Section 80P(2)(d) - income from investment with a co-operative society - allowability of interest from co-operative banks - registration as a co-operative society

Deduction under Section 80P(2)(d) - income from investment with a co-operative society - allowability of interest from co-operative banks - registration as a co-operative society - Whether interest received by the assessee from Panchmahal District Co-operative Bank Limited and Dahod Urban Co-operative Bank Limited is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. - HELD THAT: - The Tribunal held that both Panchmahal District Co-operative Bank Limited and Dahod Urban Co-operative Bank Limited are registered under the Societies Act and constitute co-operative societies for the purposes of Section 80P(2)(d). Relying on the decision of the Hon'ble Gujarat High Court in Surat Vankar Sahakari Sangh Limited, the Tribunal noted that Section 80P(2)(d) does not distinguish between sources of investment and grants deduction for income derived by a co-operative society from any investment with a co-operative society. Since the banks in question are registered co-operative societies, interest received from them falls within the scope of income deductible under Section 80P(2)(d). The Assessing Officer and the CIT(A) were therefore incorrect in disallowing the deduction claimed by the assessee. [Paras 7]

Deduction claimed under Section 80P(2)(d) in respect of interest from the two co-operative banks is allowable; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2018-19, holding that interest received from Panchmahal District Co-operative Bank Limited and Dahod Urban Co-operative Bank Limited is deductible under Section 80P(2)(d) as both banks are registered co-operative societies.

Revisionary jurisdiction under section 263 - section 194C(6) - PAN exemption for transport operators - requirement of declaration under section 194C(7) - disallowance under section 40(a)(ia) for non-deduction of TDS - application of mind by the Assessing Officer

Revisionary jurisdiction under section 263 - application of mind by the Assessing Officer - Validity of the PCIT's exercise of revisionary jurisdiction under section 263 in setting aside the assessment framed u/s 143(3). - HELD THAT: - The Tribunal examined whether the assessment order involved a lack of enquiry or absence of application of mind such as would render the order erroneous and prejudicial to Revenue. The AO had issued specific queries on TDS, elicited replies, and recorded that PANs/declarations were obtained; the AO thereafter took a plausible view in admitting the expenditure. Applying the principle that mere disagreement with the AO's view does not justify interference under section 263 where inquiries were made (as illustrated by Sunbeam Auto Ltd.), the Tribunal held that the PCIT was not justified in invoking section 263. The order under review was therefore quashed and the assessment order restored. [Paras 11, 12, 13]

Order passed by the PCIT under section 263 set aside; assessment order dated 25.08.2017 restored.

Section 194C(6) - PAN exemption for transport operators - requirement of declaration under section 194C(7) - disallowance under section 40(a)(ia) for non-deduction of TDS - Whether the assessee's failure to furnish the prescribed declaration rendered it liable to disallowance under section 40(a)(ia) despite having obtained PANs of transport contractors. - HELD THAT: - The Tribunal considered the statutory position and relevant CBDT explanations. Section 194C(6) required only the furnishing of PAN by the transport contractor for the payer to refrain from deducting TDS; the post-1.6.2015 amendment and consequent additional obligations (intimation/limits and declaration under later provision) are not applicable for the year under consideration. The assessee had obtained PANs from the payees and had responded to specific AO queries to that effect during assessment proceedings. Mere non-furnishing of prescribed post-amendment intimation to Revenue does not vitiate the primary statutory requirement of obtaining PAN; therefore disallowance under section 40(a)(ia) could not be sustained on that ground. [Paras 8, 10, 12]

Assessee's compliance by obtaining PANs held sufficient for the relevant period; disallowance under section 40(a)(ia) not warranted.

Final Conclusion: The appeal is allowed: the Tribunal set aside the PCIT's order passed under section 263, held that the AO had applied his mind and taken a plausible view, and found that for AY 2015-16 the assessee's production of PANs satisfied the requirements of section 194C(6), thereby negating the basis for disallowance under section 40(a)(ia).

Transfer pricing adjustment - arm's length price - intra-group services need, rendition and benefit tests - Transactional Net Margin Method - remand to Transfer Pricing Officer for verification - recomputation of total income - allowability under section 43B - interest under sections 234B, 234C and 234D - penalty proceedings premature

Transfer pricing adjustment - arm's length price - intra-group services need, rendition and benefit tests - Transactional Net Margin Method - remand to Transfer Pricing Officer for verification - Transfer pricing adjustment in respect of payment of regional service fees remanded to the TPO for fresh consideration and verification of evidence and determination of arm's length price. - HELD THAT: - The Tribunal found that a similar issue in the assessee's own earlier year had been remitted to the TPO with directions that the assessee demonstrate the tests applicable to intra group services (need, rendition and benefit) and that the TPO verify the documentary evidence before determining ALP. Given the similarity of submissions and factual matrix, the Tribunal considered it appropriate to follow the coordinate bench direction and set aside the impugned determination that treated the transaction at nil ALP. The remand requires the TPO to verify the evidence and documentation produced by the assessee and to determine the arm's length price afresh, applying the appropriate transfer pricing methodology and tests. [Paras 7, 8]

Issue remanded to the file of the TPO for verification of evidence and fresh determination of ALP; grounds 1 and 2 allowed for statistical purposes.

Recomputation of total income - allowability under section 43B - restoration to Assessing Officer - Computation of total income (including treatment of additional customs duty claimed as allowable under section 43B) restored to the Assessing Officer for verification and recomputation. - HELD THAT: - The Tribunal noted a discrepancy between the income taken as the starting point in the final assessment order and the returned income/draft assessment, attributable to additional customs duty paid and claimed as allowable under section 43B. As the assessee has filed rectification applications and factual verification is required, the matter was restored to the AO to compute total income in accordance with law after necessary verification. [Paras 9]

Issue restored to the AO for recomputation of total income after verification; grounds 3 and 4 allowed for statistical purposes.

Interest under sections 234B, 234C and 234D - Claim regarding levy of interest under sections 234B, 234C and 234D treated as consequential and allowed for statistical purposes. - HELD THAT: - The Tribunal held that the challenge to interest levied under the specified provisions is consequential upon the primary issues remitted/ restored and therefore did not decide the merits independently; it recorded the ground as allowed for statistical purposes. [Paras 10]

Ground allowed for statistical purposes.

Penalty proceedings premature - Initiation of penalty proceedings under section 270A dismissed as premature. - HELD THAT: - The Tribunal found initiation of penalty proceedings to be premature at this stage of adjudication and therefore dismissed the challenge accordingly. [Paras 11]

Penalty ground dismissed.

Final Conclusion: The appeal is partly allowed for statistical purposes: the transfer pricing issue concerning regional service fees is remitted to the TPO for fresh verification and ALP determination; the computation of total income (including claimed additional customs duty under section 43B) is restored to the AO for recomputation; the consequential interest challenge is recorded as allowed for statistical purposes; and initiation of penalty proceedings is dismissed as premature.

Time limit for passing transfer pricing order under section 92CA(3) computed by reference to section 92CA(3A) and the expiry of limitation under section 153 - Mandatory character of timeline for transfer pricing determination despite use of the word 'may' in section 92CA(3A) - Effect of an invalid or time barred TPO order on the status of an 'eligible assessee' under section 144C(15)(b)(i) - Jurisdictional consequences on assessment proceedings and final order where the draft assessment and/or TPO order is void for being time barred - Quashing of transfer pricing order and consequent final assessment order as barred by limitation

Time limit for passing transfer pricing order under section 92CA(3) computed by reference to section 92CA(3A) and the expiry of limitation under section 153 - Mandatory character of timeline for transfer pricing determination despite use of the word 'may' in section 92CA(3A) - The transfer pricing order dated 01/11/2019 passed by the TPO under Section 92CA(3) was barred by limitation and is set aside. - HELD THAT: - Applying the approach adopted by the Hon'ble Madras High Court decisions relied upon, the outer date for completion of assessment (including the 12 month extension on a valid reference) fell on 31.12.2019 for AY 2016 17. Section 92CA(3A) requires the TPO's order to be passed before the 60th day prior to expiry of that limitation; excluding 31.12.2019 for computation, the 60th day falls on 01.11.2019 and the TPO therefore had to pass the order on or before 31.10.2019. The TPO's order was passed on 01.11.2019, i.e., after the computed cutoff; in light of the cited authorities the time schedule is mandatory and the belated order is time barred and cannot be relied upon. [Paras 7]

TPO order dated 01/11/2019 set aside as barred by limitation.

Effect of an invalid or time barred TPO order on the status of an 'eligible assessee' under section 144C(15)(b)(i) - Jurisdictional consequences on assessment proceedings and final order where the draft assessment and/or TPO order is void for being time barred - Quashing of transfer pricing order and consequent final assessment order as barred by limitation - The Final Assessment Order dated 31/03/2021 is barred by limitation and is quashed because the assessee was not an 'eligible assessee' in the absence of a valid TPO order, and the Assessing Officer lacked jurisdiction to complete assessment under Section 144C. - HELD THAT: - Once the TPO's determination is held time barred and invalid, there is no legally valid variation arising from a TPO order and consequently no 'eligible assessee' as defined in section 144C(15)(b)(i). Proceedings under section 144C, including passing of the draft and final assessment orders, depend on that substratum; without it the Assessing Officer had no jurisdiction to proceed under section 144C and the extended limitation cannot be invoked. Therefore the time for completing assessment expired on 31.12.2019 and the final assessment order dated 31.03.2021 is barred by limitation and liable to be quashed, following the Tribunal precedents relied upon. [Paras 11, 12]

Final assessment order dated 31/03/2021 quashed as barred by limitation and for want of jurisdiction.

Final Conclusion: Appeal allowed; for Assessment Year 2016 17 the transfer pricing order dated 01/11/2019 and the final assessment order dated 31/03/2021 are quashed as time barred and invalid, and remaining grounds are rendered infructuous.

Penalty under section 271(1)(c) of the Income Tax Act - Addition made on estimate - Onus to prove genuineness of purchases - Bogus purchases / accommodation entries

Penalty under section 271(1)(c) of the Income Tax Act - Addition made on estimate - Whether the penalty under section 271(1)(c) could be sustained where the assessing officer made an addition by way of estimate in respect of alleged bogus purchases - HELD THAT: - The assessing officer reopened assessment and made an addition of Rs.1,48,214 by estimating 12.5% of impugned purchases allegedly from a hawala party. The Revenue accepted that the addition was made on an estimation basis. The Tribunal noted that various judicial decisions have established the settled principle that penalty under section 271(1)(c) cannot be sustained where the disallowance or addition is made on the basis of an estimate. Although the Revenue relied on authorities supporting imposition of penalty for furnishing inaccurate particulars, those were not found determinative in the present facts because the addition itself was founded on estimation and the assessee had produced purchase ledgers, bills, delivery challans and bank payment details and the dealer's reply could not be procured. Applying the settled principle that estimation-based additions do not warrant levy of penalty under section 271(1)(c), the Tribunal found no justification for the penalty and set it aside. [Paras 9, 11]

Penalty levied under section 271(1)(c) quashed.

Final Conclusion: The appeals are allowed and the penalty imposed under section 271(1)(c) for A.Y. 2010-11 and A.Y. 2011-12 is quashed, the Tribunal holding that a penalty cannot be sustained where the impugned addition was made on an estimated basis.

Capital versus revenue character of foreign-exchange gain on restatement of external commercial borrowing - netting of interest earned on fixed deposits against interest payable on borrowed funds where both are inextricably linked - capitalization of employee remuneration where employees have direct or indirect nexus with construction of plant - non-applicability of Section 43A and 43AA where ECB is utilised for acquisition of capital assets in India - entertainment by appellate authority of a new legal ground without a revised return where facts are on record

Capital versus revenue character of foreign-exchange gain on restatement of external commercial borrowing - non-applicability of Section 43A and 43AA where ECB is utilised for acquisition of capital assets in India - Deletion by CIT(A) of addition representing foreign-exchange gain on restatement of ECB loan treated by AO as taxable revenue receipt - HELD THAT: - The Tribunal upheld CIT(A)'s finding that the notional foreign-exchange gain arising on year-end restatement of the ECB was capital in nature because the ECB was raised and utilised for acquisition of capital assets for setting up a new manufacturing plant in India. The CIT(A) recorded that RBI approvals, loan agreement and returns established utilisation for capital purpose and noted inconsistency in AO's treatment (acceptance of like loss in AY 2014-15). The Tribunal also accepted the view that provisions of Section 43A and 43AA were not attracted since those provisions apply where capital assets are acquired from outside India and corresponding liability is incurred for acquiring such assets from outside India, which was not the case here. Revenue failed to point to any contrary binding authority or infirmity in CIT(A)'s reasoning; hence no interference was warranted. [Paras 12, 16]

Addition deleted; ground of Revenue dismissed.

Netting of interest earned on fixed deposits against interest payable on borrowed funds where both are inextricably linked - Deletion by CIT(A) of addition representing interest earned on FDRs which AO treated as income from other sources - HELD THAT: - CIT(A) found that interest earned on FDRs (from amounts of ECB kept as deposits) and interest payable on the ECB were inextricably linked; therefore the interest income capitalised by the assessee to capital work in progress was to be netted off against interest expense. The Tribunal concurred, noting reliance by CIT(A) on precedents (including a Delhi High Court decision cited before the Tribunal) and that Revenue did not demonstrate any flaw in that conclusion. Accordingly, CIT(A)'s deletion was sustained. [Paras 11, 13, 16]

Addition deleted; ground of Revenue dismissed.

Capitalization of employee remuneration where employees have direct or indirect nexus with construction of plant - Deletion by CIT(A) of addition treating certain employee salaries as capital expenditure - HELD THAT: - AO disallowed aggregate salaries on view that four employees were supervising and coordinating construction and thus salaries should be capitalised. CIT(A) accepted assessee's case that the construction was on turnkey contract with Shimizu Corporation India Pvt. Ltd. and that the employees in question were engaged in regular trading/manufacturing activities without direct or indirect nexus to construction. The Tribunal observed that Revenue did not place material to impugn CIT(A)'s findings and, on that basis, sustained the deletion. [Paras 18, 21, 22]

Addition deleted; ground of Revenue dismissed.

Entertainment by appellate authority of a new legal ground without a revised return where facts are on record - Whether CIT(A) erred in not admitting assessee's additional ground that interest on FDRs ought to be capitalised (raised first time before CIT(A)) - HELD THAT: - The assessee sought to challenge the taxability of interest on FDRs as a capital receipt for the first time before CIT(A) without filing a revised return. The Tribunal applied the principle that an appellate authority (CIT(A) or Tribunal) may entertain a new legal ground for the first time if the facts necessary to examine the ground are already on record, following the reasoning in relevant High Court and Supreme Court precedents. Finding that the facts necessary to adjudicate the claim were on record and that Revenue did not show otherwise, the Tribunal held that CIT(A) ought to have adjudicated the ground. Accordingly, the Tribunal remitted the issue to CIT(A) for fresh adjudication with liberty to call for information and after giving both parties opportunity of hearing. [Paras 30]

Issue restored to CIT(A) for fresh adjudication; cross-objection allowed for statistical purposes.

Final Conclusion: Both Revenue appeals for AY 2012-13 and 2013-14 are dismissed; additions relating to foreign-exchange restatement gain, interest on FDRs and employee salaries sustained as deleted by CIT(A). Assessee's cross-objections seeking to treat certain interest as capital receipts are restored to CIT(A) for fresh adjudication (allowed for statistical purposes).

Deduction of tax at source u/s.194-I - deduction of tax at source u/s.194C - definition of "rent" for the purposes of Section 194-I - characterisation of CAM charges as contractual payment for "work" - assessee-in-default under section 201(1) and interest under section 201(1A)

Deduction of tax at source u/s.194-I - deduction of tax at source u/s.194C - characterisation of CAM charges as contractual payment for "work" - assessee-in-default under section 201(1) - Whether CAM charges paid by the assessee were exigible to TDS @10% under Section 194-I or to TDS @2% under Section 194C and whether the assessee could be treated as an assessee-in-default for short deduction. - HELD THAT: - The Tribunal examined the nature of CAM charges paid by the assessee and the contractual arrangements showing that rent and CAM charges were paid to different entities and that CAM charges related to maintenance services for common areas rather than payment for the use of premises. Relying on the statutory scope of "rent" in Section 194-I, which covers payments for use of land, building, machinery, plant, equipment, furniture or fittings, the Tribunal held that CAM charges are not payments for use of premises or equipment but are payments for services/works. Applying that statutory distinction and following the decisions in Kapoor Watch Company Pvt. Ltd. and Connaught Plaza Restaurants P. Ltd., the Tribunal concluded that CAM charges are contractual payments for carrying out work and thus fall within Section 194C attracting TDS @2%. Consequently, the finding that the assessee was an assessee-in-default for deducting TDS at 2% instead of 10% was set aside and the addition/demand arising from alleged short deduction was directed to be deleted. The Tribunal therefore allowed the appeal and set aside the orders of the AO and CIT(A). [Paras 6, 7, 8]

CAM charges were liable to TDS @2% under Section 194C (not @10% under Section 194-I); the assessee is not an assessee-in-default on that ground and the addition/demand is to be deleted.

Final Conclusion: Appeal allowed; assessment and first appellate order set aside insofar as the demand for differential TDS and interest on CAM charges is concerned, and the Assessing Officer directed to delete the addition.

Onus of proof under section 68 of the Act - genuineness of creditor and transaction - creditworthiness of lender - unexplained cash credit - non-appearance of lender not determinative - reliance on bank transaction trail and documentary evidence - acceptance of return under section 143(1) - suspicion cannot substitute proof

Onus of proof under section 68 of the Act - genuineness of creditor and transaction - creditworthiness of lender - non-appearance of lender not determinative - reliance on bank transaction trail and documentary evidence - suspicion cannot substitute proof - acceptance of return under section 143(1) - Validity of addition under section 68 on account of alleged unexplained unsecured loan of the lender and the consequence of non production of lender's director - HELD THAT: - The Tribunal examined whether the assessee discharged the onus to prove the identity, creditworthiness and genuineness of the loan from M/s. Arti Securities & Services Pvt. Ltd. It found that the assessee had placed on record registration as an NBFC, audited accounts and return of the lender, bank statements evidencing fund transfers, ledger confirmations, interest particulars, Form 16A and an intimation under section 143(1) accepting the lender's return for AY 2015-16. The authorities had also had access to, and examined, the banking trail establishing disbursement and repayment. The Tribunal held that mere non appearance of the lender's director before the AO could not, by itself, render the contemporaneous documentary and banking evidence infirm. Where transactions pass through banking channels, and the lender's own return and earlier appellate orders in its favour exist (together with a coordinate bench decision upholding similar transactions), suspicion generated from third party inputs does not supplant the proof produced. The Tribunal emphasised that the Act does not prescribe a fixed mode of discharging the burden under section 68; authorities must assess the totality and credibility of evidence rather than reject it solely for absence of a particular piece of evidence. Consequently, on the facts - including repayment of the loan and acceptance of the lender's return - the Tribunal concluded that the assessee had discharged the onus and that the addition based on suspicion was unsustainable. [Paras 9, 10, 11, 12, 14]

Addition of Rs.1,75,00,000 treated as unexplained cash credit and confirmed by lower authorities is deleted; grounds in favour of the assessee.

Final Conclusion: Appeal allowed: the Tribunal deleted the addition made under section 68 for AY 2015-16, concluding that the assessee had satisfactorily proved the identity, creditworthiness and genuineness of the lender and the loan by documentary and banking evidence and that suspicion arising from non appearance of the lender's director was an insufficient basis for sustaining the addition.

Remand for fresh adjudication - opportunity to produce material and be heard - estimation of income by assessment officer - addition under unexplained cash credits and share valuation - custodial absence of company officers as ground for restoration

Custodial absence of company officers as ground for restoration - opportunity to produce material and be heard - remand for fresh adjudication - Impugned assessment orders for the stated assessment years set aside and matters restored to the Assessing Officer for fresh adjudication after giving the assessee opportunity to be heard and to produce relevant material. - HELD THAT: - The Tribunal found on the material on record, including a certificate and correspondence, that the persons responsible for the affairs of the assessee-company were in custody between 12/02/2016 and 23/10/2018, which impeded the assessee's ability to produce full records during assessment and first appellate proceedings (paras. 5-8). The coordinate Benches had taken identical views in earlier group cases and had restored files for fresh adjudication after affording opportunity to the assessee to place material on record. In the light of these peculiar facts and in the interests of justice, the Tribunal held that the appropriate course was to set aside the impugned orders and remit the matters to the Assessing Officer to adjudicate afresh, allowing the assessee to produce all relevant material and be heard; the directions extend to verification of the additions earlier made (estimation of business income, additions treating share consideration as less than fair market value, unexplained cash credits and interest income) (paras. 7-9). [Paras 5, 7, 8, 9]

Impugned orders set aside and matters restored to the file of the Assessing Officer for fresh adjudication after affording the assessee opportunity to be heard and to produce relevant material.

Final Conclusion: The appeals for assessment years 2009-10 to 2015-16 are disposed of by setting aside the impugned assessment orders and restoring the matters to the Assessing Officer for fresh adjudication with directions to give the assessee an opportunity to produce relevant material and to be heard; the appeals are treated as allowed for statistical purposes.

Computation of capital gains - Full value of consideration - Genuineness of revised consideration - Settlement deed and supplementary share purchase agreement - Post facto event - Evidence of receipt of consideration - Encashment of undated cheque

Computation of capital gains - Full value of consideration - Genuineness of revised consideration - Settlement deed and supplementary share purchase agreement - Post facto event - Evidence of receipt of consideration - Recomputation of capital gains by adopting the revised sale consideration of Rs.25 lakh for transfer of shares of Shivalik Land Development Ltd. - HELD THAT: - The Tribunal examined the contractual documents: the original Share Purchase Agreement, the Mortgage Deed, the subsequent Settlement Deed and the Supplementary Share Purchase Agreement, together with attendant litigation and proceedings (including complaint under section 138 NI Act). The Assessing Officer rejected the assessee's claim on the ground that a post facto event cannot reduce the full value of consideration and that the assessee failed to explain why the undated cheque was not presented or honoured. The Tribunal found these objections unfounded on the material: the Settlement Deed expressly recorded the parties' mutual agreement to revise the sale consideration from the originally agreed sum to Rs.25 lakh and to execute a Supplementary Share Purchase Agreement; the title to the underlying land was discovered to be defectively encumbered and subject to injunctions and litigation, which had led the purchaser to initiate proceedings and to settle; the undated cheque was returned for insufficient funds and criminal proceedings were instituted; and crucially, the Revenue produced no evidence that the full original consideration was ever received or that the shares were properly valued at the originally agreed sum despite the documented settlement. On these peculiar facts the Tribunal held the parties' contemporaneous written settlement and supplementary agreement to be genuine and operative for tax computation, and directed recomputation of capital gains on the basis of the revised consideration of Rs.25 lakh. [Paras 17, 18, 19]

The recomputation of capital gains by adopting the revised consideration of Rs.25 lakh is upheld and the Revenue's grounds are dismissed.

Final Conclusion: The appeal by the Revenue is dismissed; the Tribunal upholds the Commissioner (Appeals) order directing recomputation of capital gains on the transfer of shares by taking the sale consideration at Rs.25 lakh, on the basis of the Settlement Deed and supplementary agreement and the material on record.

Pre-import condition - Advance Authorisation (AA) scheme - IGST and GST compensation cess exemption subject to conditions - exports in anticipation of authorization - DGFT power to impose pre-import condition under FTP - Handbook of Procedures subordinate to and governed by FTP - reasonableness and arbitrariness under Article 14 - retrospective effect of delegated legislation - refund or input tax credit

Pre-import condition - Advance Authorisation (AA) scheme - DGFT power to impose pre-import condition under FTP - IGST and GST compensation cess exemption subject to conditions - Handbook of Procedures subordinate to and governed by FTP - Validity of the 'pre-import condition' introduced by Notification No.79/2017 (Customs) and Notification No.33/2015-2020 (FTP) as a condition for exemption of IGST and GST compensation cess on imports under Advance Authorisation. - HELD THAT: - The Court held that the amendments of 13.10.2017 making IGST and compensation cess exemption subject to (i) physical export and (ii) a 'pre-import condition' were within the competence of the executive and not arbitrary. Paragraph 4.13(i) of the FTP expressly preserved DGFT's power to impose pre-import conditions and Appendix-4J previously listed items subject to such conditions; thus the power to extend the condition to other inputs lay with DGFT. The Handbook of Procedures is procedural and subordinate to the FTP; paragraph 4.27(d) of the HBP (disallowing duty-free authorisations for inputs subject to pre-import condition) and the Trade Notice communicated the change to trade. The introduction of GST created new levies (IGST and compensation cess) with a distinct mechanism of input tax credit and refunds; treating these levies differently from pre-existing customs levies (BCD, CVD, SAD) was a permissible policy choice and not violative of Article 14. Hardship or commercial inconvenience resulting from the new regime does not render a plainly enacted condition arbitrary. Experimental or phased implementation in a complex economic reform is entitled to judicial deference; the change in the mechanism of levy, collection and refund justified the differentiated treatment and the imposition of the pre-import requirement for exemption from IGST and cess.

The pre-import condition, as introduced by the notifications dated 13.10.2017, is valid and not arbitrary; the Gujarat High Court's declaration to the contrary is set aside.

Exports in anticipation of authorization - pre-import condition - Handbook of Procedures subordinate to and governed by FTP - Whether paragraph 4.27 of the Handbook of Procedures (permitting exports in anticipation of authorization) overrides or renders inoperative the pre-import requirement imposed by the FTP and the amending notifications. - HELD THAT: - The Court held there is no conflict that invalidates the pre-import requirement. Paragraph 4.27 of the HBP permits exports in anticipation of authorisation as an exception but paragraph 4.27(d) excludes inputs subject to pre-import conditions from that exception. The FTP (paragraph 4.03 and paragraph 4.13) has primacy; HBP cannot override FTP. Thus exports-in-anticipation provisions do not negate the power to impose or the effect of the pre-import condition where the policy and notifications so provide.

Paragraph 4.27 of the HBP does not nullify the pre-import condition imposed under the FTP and the notifications; the High Court erred in giving primacy to the HBP over the FTP.

Retrospective effect of delegated legislation - Whether the subsequent deletion of the pre-import condition by Notification dated 10.01.2019 renders the condition unlawful for the period it was in force (i.e., whether the later notification operates retrospectively). - HELD THAT: - The Court reaffirmed that the power under Section 5 of the FTDRA and delegated rule-making does not permit retrospective framing of regulations unless expressly provided. Interpreting the 10.01.2019 notification as effective from 13.10.2017 would amount to impermissible retrospectivity. The fact that the condition was later omitted does not invalidate the lawfulness of its operation while in force.

The deletion of the pre-import condition on 10.01.2019 cannot be given retrospective effect; the High Court's reliance on the subsequent omission to invalidate the earlier notification is unsustainable.

Reasonableness and arbitrariness under Article 14 - IGST and GST compensation cess exemption subject to conditions - Whether the imposition of the pre-import condition specifically for exemption from IGST and compensation cess (while other customs levies remained exempt without that condition) offended Article 14 as unreasonable classification or discriminatory. - HELD THAT: - The Court held that differential treatment of the new GST-era levies from older customs levies has a rational basis: IGST and compensation cess form part of a unified GST regime dependent on input tax credit and refund mechanisms, unlike legacy customs levies. Classification in fiscal matters admits latitude for experimentation and phased application; absent palpable arbitrariness or mala fide discrimination, the Court will defer to policy judgments. The requirement to pay and then claim refund or claim input credit was a legitimate administrative choice and did not amount to unconstitutional classification.

The differentiation between IGST/cess and other customs levies for purposes of imposing the pre-import condition does not violate Article 14.

Refund or input tax credit - Relief available to exporters who paid IGST/compensation cess during the period the pre-import condition operated and enjoyed interim orders. - HELD THAT: - Although the notifications and conditions are upheld, the Court recognised that many exporters had interim orders and that IGST/cess had been paid or blocked as working capital. In equity and consistent with statutory refund/input-credit regimes, the Court directed administrative facilitation of claims: affected exporters may apply for refund or input tax credit to the jurisdictional commissioner with documentary evidence within six weeks; claims shall be examined on merits and the Revenue should issue a circular prescribing a convenient procedure.

Revenue must permit affected exporters to apply for refund or input tax credit within six weeks; claims to be examined on merits and appropriate administrative directions issued.

Final Conclusion: The appeals are allowed; the Gujarat High Court's judgment setting aside the pre-import condition and related amendments of 13.10.2017 is set aside. The pre-import requirement and the conditions for IGST/compensation cess exemption introduced on 13.10.2017 are upheld as lawful and not arbitrary; affected exporters may apply for refund or input tax credit within the period directed and their claims shall be examined on merits.

Pre-deposit under Section 129E - waiver of pre-deposit in rare and deserving cases - Article 226 writ jurisdiction to dispense with statutory pre-deposit - valuation of seized goods and provisional valuation - right of appeal rendered illusory by unduly onerous conditions

Pre-deposit under Section 129E - waiver of pre-deposit in rare and deserving cases - Article 226 writ jurisdiction to dispense with statutory pre-deposit - right of appeal rendered illusory by unduly onerous conditions - Whether the High Court should, in the facts of this case, exercise its writ jurisdiction under Article 226 to dispense with the mandatory pre-deposit prescribed by Section 129E so that the Petitioners' appeals are entertained without payment of the pre-deposit. - HELD THAT: - The Court analysed the legislative scheme introduced by amendment to Section 129E and noted the settled position that, as a general rule, appeals filed on or after 06.08.2014 are subject to the amended provision requiring a pre-deposit. Notwithstanding this, Coordinate Benches of this Court and other High Courts have recognised that the High Court's writ jurisdiction under Article 226 survives and, in rare and deserving cases, the Court may relax or dispense with the pre-deposit requirement. The Court examined the Petitioners' socioeconomic status (daily wage earners with negligible means, as confirmed by the District Magistrate's report) and the practical effect of the pre-deposit in the present case. Applying the principle that a condition which is unduly onerous may render the right of appeal illusory, and having regard to precedents where relief was granted in exceptional circumstances, the Court found that this case warrants exercise of writ jurisdiction to dispense with the pre-deposit so that the Petitioners can contest the adjudication on merits. The Court therefore directed that the Appeals, if filed within six weeks, be heard on merits without insistence on pre-deposit and shall not be rejected as barred by limitation. [Paras 19, 20, 21]

The High Court exercised its Article 226 jurisdiction and directed that the Petitioners' appeals be decided on merits without insisting on the mandatory pre-deposit under Section 129E; appeals filed within six weeks shall not be dismissed on limitation grounds.

Valuation of seized goods and provisional valuation - provisional valuation and burden of proof on authorities - right of appeal rendered illusory by unduly onerous conditions - Whether the valuation adopted by the Customs Authorities to impose the penalty was supported by a valid basis and whether the penalty imposed can be sustained. - HELD THAT: - The Court examined the documentary record relied upon by the Respondents and found that the valuation adopted throughout (rates taken in the Panchnama and seizure memos as 'provisional international market value') was not supported by any material or final expert report establishing grade-specific valuation. The Wildlife Inspector's preliminary examination identified different grades of Agarwood, but neither the SCN nor the OIO engaged in any grade-wise valuation or produced documentary evidence to justify the uniform high valuation applied to the entire seizure. Given the wide variation in market value according to grade and variety (as reflected in the Assam Agarwood Policy and other material), and the reliance by the adjudicating authority on a provisional figure without explanation or supporting documentation, the Court concluded that the penalty imposed was founded on an unsustainable provisional valuation and lacked legal basis. In view of this prima facie defect and the Petitioners' financial inability to make the pre-deposit, the Court found it appropriate to allow the Petitioners an opportunity to challenge the valuation on merits before the appellate authority without pre-deposit. [Paras 14, 15, 16, 18]

The Court held that the valuation and consequent penalty were based on an unsupported provisional valuation and could not be sustained without proper grade-wise valuation or supporting material; the Petitioners must be permitted to contest valuation on merits before the appellate authority.

Final Conclusion: Writ petition allowed. The High Court dispensed with the requirement of pre-deposit under Section 129E in respect of the Petitioners and directed that their appeals, if filed within six weeks, be decided on merits without insistence on pre-deposit and without dismissal on limitation; the Court found the impugned valuation and the penalty to be based on an unsupported provisional valuation and directed that the Petitioners be afforded the opportunity to contest the same.

Appealable order under Section 129A of the Customs Act, 1962 - statutory remedy before CESTAT - condonation of delay by CESTAT - writ remedy under Article 226 of the Constitution

Appealable order under Section 129A of the Customs Act, 1962 - statutory remedy before CESTAT - writ remedy under Article 226 of the Constitution - Whether the petitioner should be permitted to pursue a writ under Article 226 instead of availing the statutory remedy before CESTAT against the order in original. - HELD THAT: - The High Court held that the impugned order in original is an appealable order under Section 129A of the Customs Act, 1962 and that the appropriate course is for the petitioner to invoke the statutory appellate remedy before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The court noted the existence of the special statutory remedy and, in view of that availability, declined to adjudicate the matter on merits in the writ petition. All substantive contentions raised before the High Court were kept open for consideration by the appellate forum. [Paras 6, 7]

Writ petition dismissed insofar as it seeks to bypass the statutory appellate remedy; petitioner directed to file appeal under Section 129A, contentions left open.

Condonation of delay by CESTAT - statutory remedy before CESTAT - Whether the appeal under Section 129A, which is ordinarily required to be filed within three months, can be entertained after expiry of the limitation period. - HELD THAT: - The Court observed that while an appeal under Section 129A must be filed within three months from communication of the order, CESTAT has jurisdiction to admit an appeal after the prescribed period if it is satisfied that sufficient cause for delay has been shown. In that factual and legal posture, the High Court left the question of limitation and any related factual contentions to be addressed by CESTAT in the appeal, indicating that the existence of the appellate remedy and CESTAT's power to condone delay militates against exercising writ jurisdiction at this stage. [Paras 6]

Statutory limitation does not preclude the petitioner from approaching CESTAT because CESTAT may condone delay on sufficient cause; matters of limitation are to be considered by CESTAT.

Final Conclusion: The writ petition is dismissed, with the petitioner directed to avail the statutory appellate remedy under Section 129A of the Customs Act, 1962 before CESTAT (which may condone delay on sufficient cause); all substantive contentions are kept open and there shall be no order as to costs.

Confiscation of goods - imposition of penalty under Section 112 of the Customs Act - penalty under Section 114A of the Customs Act linked to duty evasion - mens rea not required for confiscation or penalty under Sections 111/112 - re-exportation and redemption fine - compliance with PFA standards - proportionality of penalty and fine

Compliance with PFA standards - confiscation of goods - mens rea not required for confiscation or penalty under Sections 111/112 - Whether consignments found non-conforming to PFA standards rendered liable to confiscation and whether penalty under Section 112 is sustainable in the absence of mens rea. - HELD THAT: - The Tribunal found that certain consignments were tested by the Central Food Laboratory and found not conforming to PFA standards. The importer produced certificates of analysis from load-port authorities and there was no case that the importer was aware of non-conformity; thus, mens rea or knowledge on the part of the importer was not established. The Tribunal applied the legal position that neither Section 111 nor Section 112 requires mens rea as a pre-condition for imposing confiscation or penalty; liability arises if acts of commission or omission render goods liable for confiscation. While the action of the department in proposing confiscation and imposing penalties is legally tenable, the quantum of fine and penalty must be commensurate with the offence and the factual circumstances showing absence of deliberate violation. [Paras 8, 9]

Confiscation and imposition of penalty under Section 112 are legally sustainable on the facts (goods rendered liable for confiscation), but the quantum of redemption fine and penalty must be moderated in view of absence of mens rea and the overall circumstances.

Penalty under Section 114A of the Customs Act linked to duty evasion - Whether penalty under Section 114A can be imposed where there is no demand for duty or proof of duty evasion. - HELD THAT: - The Tribunal held that penalty under Section 114A is intrinsically linked to the quantum of duty evaded and cannot be imposed in isolation of any demand for duty. In the present case no demand of duty was raised; consequently, imposition of penalty under Section 114A was unsustainable. [Paras 10]

Penalty under Section 114A cannot be sustained where there is no demand for duty or proof of duty evasion; the appeal in that respect is allowed.

Re-exportation and redemption fine - proportionality of penalty and fine - What is the appropriate quantum of redemption fine and penalty in respect of the consignments allowed for re-exportation? - HELD THAT: - Having found that the importer acted without mens rea and considering the prolonged litigation and factual matrix, the Tribunal exercised its discretion to moderate the financial sanctions to ensure proportionality. The Tribunal concluded that the ends of justice would be met by reducing the redemption fine and the penalty imposed under Section 112 to amounts commensurate with the offence and surrounding circumstances. [Paras 9, 11]

In appeal C/192/2008 the redemption fine is restricted and the penalty under Section 112 reduced; in appeal C/736/2007 the challenge to Section 114A penalty is allowed.

Final Conclusion: The Tribunal upheld the legality of confiscation and penalties where goods failed PFA standards but held that mens rea is not a pre-condition under Sections 111/112; it reduced the redemption fine and Section 112 penalty in appeal C/192/2008 to a moderated sum and allowed appeal C/736/2007 by holding that a Section 114A penalty cannot be sustained in the absence of any demand for duty.

Admissibility of electronic evidence - reliability of WhatsApp extracts and mobile phone data - requirement of panchnama and identification (IMEI) for seizure of mobile devices - proof and admissibility of documents from freight forwarders - reliability of hostile or retracted witness statements - obligations under Section 138B and opportunity for cross-examination - valuation of imported goods and rule of contemporaneous imports (NIDB data) - competence of expert/chartered engineer valuation for new machinery - propriety of revaluation without rejecting transaction value - speculativeness of show cause notice and requirement to quantify differential duty - confiscation under Section 111(m) and penalty under Section 112(a)

Admissibility of electronic evidence - reliability of WhatsApp extracts and mobile phone data - requirement of panchnama and identification (IMEI) for seizure of mobile devices - Reliability and admissibility of WhatsApp data recovered from the Samsung mobile phone submitted during investigation - HELD THAT: - The Tribunal found that the appellant's statement of submission of the Samsung phone did not record the IMEI and no proper panchnama was drawn at the time of receipt. Recovery and extraction of data were effected without appropriate certification under the statutory scheme and behind the back of the appellant. For these reasons the Tribunal held the WhatsApp data and extracted electronic material to be unreliable and not admissible as dependable evidence in the adjudication of confiscation and penalty. [Paras 24]

WhatsApp data and electronic evidence recovered from the Samsung phone are not reliable and cannot be relied upon.

Proof and admissibility of documents from freight forwarders - Reliability of printouts and documentation produced by the freight forwarder (Unicorn Logistics / Best Shipping) relied upon by Revenue to establish higher transaction value - HELD THAT: - The Tribunal held that printouts and email documents supplied by the freight forwarder were not authenticated by Chinese Customs or any competent authority. In absence of authentication and given the provenance, the Tribunal treated such documentary material as not reliable for establishing the true transaction value. [Paras 24]

Documents and email/printouts furnished by the freight forwarder are unreliable for valuation purposes.

Reliability of hostile or retracted witness statements - obligations under Section 138B and opportunity for cross-examination - Reliability and admissibility of the statement of the alleged Hawala operator (Mr. Tarun Baid) and other third party statements relied upon by Revenue - HELD THAT: - The Tribunal noted that Mr. Tarun Baid promptly retracted his statement and was not made a co-noticee nor examined in the adjudication proceedings; Revenue also failed to offer witnesses for cross examination. In consequence, the Tribunal held the statement of the alleged Hawala operator and other third party statements (not subjected to cross examination) to be unreliable and inadmissible for sustaining confiscation and penalty. [Paras 24]

Statements of the alleged Hawala operator and other untested third party witnesses are not reliable evidence.

Valuation of imported goods and rule of contemporaneous imports (NIDB data) - competence of expert/chartered engineer valuation for new machinery - propriety of revaluation without rejecting transaction value - Validity of the valuation adopted by Revenue and methodology for valuation of new imported machinery - HELD THAT: - The Tribunal held that for new machinery valuation should follow the Valuation Rules, giving primacy to contemporaneous imports (NIDB data). A chartered engineer's valuation based on visual inspection and internet data, particularly one competent under the Rules for second hand machinery only, could not supplant the requirement to consider NIDB/seriatim valuation steps. Further, the show cause notice did not formally propose rejection of the transaction value nor quantify any differential duty, rendering the revaluation exercise speculative and procedurally defective. [Paras 24]

Valuation by the Chartered Engineer and adoption of the higher unit price without following valuation Rules and rejecting transaction value is improper; show cause notice is speculative and procedurally defective.

Confiscation under Section 111(m) and penalty under Section 112(a) - Whether confiscation of the imported paper cup machines and penalty could be sustained on the material on record - HELD THAT: - Applying the foregoing findings - that electronic evidence was unreliable, freight forwarder documents unauthenticated, key witness statements untested and retracted, and valuation procedure defective - the Tribunal concluded that the foundational factual basis for confiscation and penalty was not established. The Tribunal also observed there was no proven mismatch between the bill of entry and import documents and that the exporter had admitted an error in dispatch of a different model, undermining any finding of deliberate mis declaration. [Paras 24]

Confiscation and penalty cannot be sustained and the adjudicating order is liable to be set aside.

Final Conclusion: The appeal is allowed. The Tribunal set aside the order-in-original confirming confiscation of the 16 paper cup machines and the penalty under Section 112(a), finding the electronic evidence, freight forwarder documents and untested witness statements unreliable, and the valuation exercise procedurally defective; consequential benefits to the appellant to follow in accordance with law.

De Minimis exemption - calculation of relevant assets and turnover of the portion acquired - retrospective effect of clarificatory notification - imposition of penalty under section 43A for failure to notify under section 6(2) - applicability of Tribunal precedent in Eli Lilly

De Minimis exemption - calculation of relevant assets and turnover of the portion acquired - retrospective effect of clarificatory notification - imposition of penalty under section 43A for failure to notify under section 6(2) - applicability of Tribunal precedent in Eli Lilly - Whether penalty under Section 43A could be imposed on the appellant for not notifying the trademark acquisitions when the transactions fell within the De Minimis exemption after applying the clarificatory notification and Tribunal precedent - HELD THAT: - The Tribunal held that the clarificatory notification dated 27.3.2017 makes clear that where only a portion, division or business is being acquired, the relevant assets and turnover attributable to that portion are to be taken into account for threshold calculations. The Press Release accompanying the notification explains the Government's intent to limit filings for combinations falling within threshold limits. Applying the reasoning in Eli Lilly, what is being acquired is the relevant yardstick and the assets/turnover left with the seller post-acquisition are irrelevant for the purchaser's filing obligation. The Tribunal treated the 27.3.2017 notification as clarificatory and therefore having retrospective effect, following precedents on purposive and clarificatory interpretations. On the material before it, the turnover attributable to the transferred trademarks was Rs.68.37 crores, which is below the applicable De Minimis threshold; accordingly the transactions were exempt from notification and the basis for imposing penalty under Section 43A did not subsist. The Tribunal expressly left other questions on the nature of the combination open and confined its decision to the penalty issue. [Paras 24, 25, 27, 28, 29]

Penalty under Section 43A set aside because the acquisitions of the trademarks fell within the De Minimis exemption when assets and turnover attributable to the portion acquired were correctly taken into account; appeal allowed to that limited extent.

Final Conclusion: The Tribunal set aside the CCI's order imposing penalty under Section 43A, concluding that the trademark acquisitions were exempt from notification under the De Minimis exemption once the assets and turnover attributable to the portion acquired were considered; other issues were left open.

Refund of court-fee - settlement of claims - Section 16 of the Court-Fees Act, 1870 - interim moratorium upon commencement of insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 - participation in collective insolvency resolution process - purposive interpretation of settlement provisions

Refund of court-fee - Section 16 of the Court-Fees Act, 1870 - settlement of claims - interim moratorium upon commencement of insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 - participation in collective insolvency resolution process - purposive interpretation of settlement provisions - Whether the plaintiff is entitled to refund of the court-fee under Section 16 of the Court-Fees Act, 1870 where the summary suit could not proceed because insolvency proceedings under Section 95 IBC were instituted and the plaintiff's remedy is to file a claim and participate in the collective insolvency process. - HELD THAT: - The Court held that commencement of personal insolvency proceedings under Section 95 IBC triggers the interim moratorium and confines the plaintiff to the statutory remedy of filing a claim and participating in the collective resolution process. Because that course amounts to a settlement of claims by way of collective insolvency proceedings, it falls within the ambit of settlements contemplated by Section 16 of the Court-Fees Act when construed purposively. The Court relied on the reasoning in High Court of Madras v. M.C. Subramaniam as approving a broad, purposive construction of settlement provisions (including analogous provisions) to encompass out-of-court or privately arrived settlements and to extend refund benefits where the dispute is settled without further court adjudication. Applying that principle, the High Court found the facts here to justify extending the benefit of Section 16 and ordering refund of the court-fee deposited. [Paras 4, 5]

Application allowed; registry directed to refund the court-fee deposited.

Final Conclusion: The High Court allowed the application for refund of court-fee, holding that where insolvency proceedings under Section 95 IBC bar continuation of a suit and require the claimant to participate in the collective insolvency process, such collective settlement falls within the scope of Section 16 of the Court-Fees Act and warrants refund of the court-fee.

Demand guarantee - continuing guarantee - co-extensive liability of surety under Section 128 of the Indian Contract Act - date of default for corporate guarantor under Section 3(12) of the IBC - limitation for Section 7 proceedings under Article 137 of the Limitation Act - effect of written acknowledgment under Section 18 of the Limitation Act - prohibition period under Section 10A of the IBC - liability of guarantor governed by terms of the guarantee deed

Co-extensive liability of surety under Section 128 of the Indian Contract Act - date of default for corporate guarantor under Section 3(12) of the IBC - liability of guarantor governed by terms of the guarantee deed - Whether the default of the corporate guarantor is necessarily the same date as the default of the principal borrower for the purposes of Section 7 proceedings. - HELD THAT: - The liability of a guarantor is co-extensive with that of the principal debtor by law, but the point at which the guarantor's liability crystallises depends on the terms of the guarantee deed. A guarantor's liability may arise at the same time as, or at a different time from, the principal debtor depending on contractual stipulations; therefore the date of default for a corporate guarantor must be ascertained from the guarantee instrument read with statutory definitions of "debt" and "default" under the Code. The Court observed that while the IBC scheme treats both principal borrower and guarantor as liable when default occurs, the precise date of default for the guarantor cannot be assumed to be the same as that of the borrower where the guarantee provides otherwise. [Paras 24]

The guarantor's date of default depends on the terms of the guarantee deed and need not be the same as the principal borrower's date of default.

Demand guarantee - liability of guarantor governed by terms of the guarantee deed - Whether the Deed of Guarantee dated 17.05.2019 is a demand guarantee. - HELD THAT: - The material clauses of the Deed of Guarantee (notably clauses 1, 13 and 20) expressly require payment "forthwith on demand" and contemplate service of a notice requiring payment. Construed in light of authorities which hold that a guarantor's liability is governed by the guarantee's terms, these provisions establish that the Deed is a demand guarantee and the guarantor's liability arises on the bank making the stipulated demand. [Paras 26, 32]

The Deed of Guarantee dated 17.05.2019 is a demand guarantee and the guarantor's liability arises on issuance of the contractual demand.

Demand guarantee - prohibition period under Section 10A of the IBC - Whether the notice dated 01.10.2020 from the Bank constituted the contractual demand and thus fixed the date of default of the guarantor. - HELD THAT: - The recall/invocation notice of 01.10.2020 explicitly invoked the corporate guarantees and called upon the guarantors to make payment within seven days. Given the Deed's express clause making amounts payable on service of such a notice, the invocation letter must be treated as the demand required by the guarantee. Consequently the guarantor's default would occur only upon failure to pay in the stipulated seven day period (i.e. after the demand), not on the earlier date of the borrower's NPA. [Paras 27, 31, 32]

The notice dated 01.10.2020 is the contractual demand and the guarantor's default arose only after non payment in response to that notice.

Prohibition period under Section 10A of the IBC - date of default for corporate guarantor under Section 3(12) of the IBC - Whether the Section 7 application filed by the Bank was barred by Section 10A of the IBC. - HELD THAT: - Because the Deed is a demand guarantee and the Bank's invocation dated 01.10.2020 operated as the contractual demand, the guarantor's date of default for purposes of Section 7 falls after 01.10.2020 (non payment within seven days). That date lies within the statutory prohibition period under Section 10A. The Adjudicating Authority did not advert to the guarantee's demand clauses and therefore erred in treating an earlier date as the guarantor's date of default. On that basis the Bank's Section 7 application was time barred under Section 10A. [Paras 32, 33, 34]

The Section 7 application was barred by Section 10A because the guarantor's default arose after the demand dated 01.10.2020 and within the prohibited period.

Final Conclusion: The appeal is allowed; the NCLT order admitting the Section 7 petition is set aside because the Deed of Guarantee is a demand guarantee, the invocation dated 01.10.2020 constituted the contractual demand and the guarantor's default arose thereafter (within the Section 10A prohibited period), rendering the Section 7 application barred.

Inherent powers under Rule 11 of the NCLAT Rules - Scope of correction versus modification of a judgment - Limitation on revisiting findings of fact under Rule 11 - Interpretation of directions in an appellate order - Liability of Resolution Applicant to bear additional payments under an approved Resolution Plan

Inherent powers under Rule 11 of the NCLAT Rules - Scope of correction versus modification of a judgment - Limitation on revisiting findings of fact under Rule 11 - Application under Rule 11 seeking modification/clarification of this Tribunal's earlier order is not maintainable insofar as it seeks to modify the directions issued by the Tribunal. - HELD THAT: - Rule 11 declares the Tribunal's inherent power to make orders necessary to meet the ends of justice or prevent abuse of process, and to avoid ambiguity or confusion. However, the Rule cannot be invoked to revisit or re-examine findings of fact or to modify directions consciously issued by the Tribunal. Correction under Rule 11 is limited to mistakes apparent on the face of the record or conclusions incompatible with recorded findings; it does not permit substantive modification of an order where there is no ambiguity. The present application seeks modification of Para 30(II) of the earlier judgment to alter its effect, which would amount to revisiting and modifying the Tribunal's directions rather than correcting an apparent error. Applying these principles, the Tribunal held that it had no jurisdiction under Rule 11 to grant the substantive modification sought and therefore rejected the application. [Paras 10, 11, 12, 13]

Application under Rule 11 dismissed to the extent it seeks modification of the Tribunal's directions; Rule 11 cannot be used to modify a clear and deliberate direction of the Tribunal.

Interpretation of directions in an appellate order - Liability of Resolution Applicant to bear additional payments under an approved Resolution Plan - Prayer to direct that the admitted claim be proportionately distributed among Assenting Financial Creditors (thereby altering who bears the additional liability) is contrary to the Tribunal's express directions and cannot be granted. - HELD THAT: - The earlier order (Para 30) expressly held that the reduction of the Financial Creditor's claim was set aside and that the creditor shall be entitled to distribution as per its admitted claim, while also directing that any additional amount payable as a consequence shall be borne by the Resolution Applicant from amounts reserved under the Resolution Plan. The present application sought to modify this scheme so that the additional liability would be proportionately shared as per fixed payout to Assenting Financial Creditors. Granting that relief would directly conflict with the Tribunal's deliberate direction that the Resolution Applicant bears the additional burden and would therefore amount to modifying the judgment rather than clarifying an ambiguity. The Tribunal refused to accede to that request. [Paras 11, 12, 13]

Prayer to reallocate the additional liability away from the Resolution Applicant and proportionately among Assenting Financial Creditors is refused; the Tribunal's direction that the Resolution Applicant bears the additional amount remains operative.

Final Conclusion: The application under Rule 11 is rejected; Rule 11 cannot be employed to modify the Tribunal's clear and deliberate directions, and the earlier order's allocation that the Resolution Applicant shall bear any additional amount remains unchanged.

Admissibility of Section 9 application under IBC - operational debt - pre-existing dispute - Mobilox test for notice of dispute - summary jurisdiction of the Adjudicating Authority under IBC - forgery allegations and limits of adjudicatory enquiry

Operational debt - pre-existing dispute - Mobilox test for notice of dispute - Whether the operational debt claimed in the Section 9 petition was undisputed and payable so as to warrant initiation of CIRP. - HELD THAT: - The Tribunal applied the Mobilox standard to examine whether a plausible dispute existed which would require further investigation, and whether any defence was merely a patently feeble assertion. The Adjudicating Authority's findings that the Corporate Debtor had, by communications and credit notes, raised consistent complaints about quality of goods, requested removal/replacement of rejected materials, and had withheld amounts on that account, show a bona fide dispute. The reply to the statutory demand captured the essence of these disputes and satisfied the requirement to bring the existence of a dispute to the Operational Creditor's notice. The record also included credit notes and communications (including alleged account confirmation and emails) which, taken together with the letters about defective supplies and subsequent delisting, provided sufficient foundation of a genuine dispute over the claimed operational debt. The Tribunal accepted the Adjudicating Authority's conclusion that this was not a case of an undisputed debt warranting CIRP admission. [Paras 11, 14, 23, 24, 25]

The Section 9 application was rightly rejected because the claimed operational debt was subject to a pre-existing, plausible dispute and therefore not an undisputed debt admissible for CIRP.

Forgery allegations and limits of adjudicatory enquiry - summary jurisdiction of the Adjudicating Authority under IBC - Whether allegations of forged documents/postage receipts could be gone into by the Adjudicating Authority in summary proceedings under IBC. - HELD THAT: - The Tribunal agreed with the Adjudicating Authority and its precedents that the question of whether documents (including postage receipts or stamps) are forged requires detailed investigation and is beyond the scope of the Adjudicating Authority's summary adjudicatory power under the IBC. The Adjudicating Authority was correct in refraining from undertaking a roving inquiry or trial into forgery allegations; such matters necessitate deeper investigation which the IBC's summary jurisdiction does not contemplate. Consequently, the presence of disputed allegations of fabrication did not mandate admission of the Section 9 petition where otherwise a plausible dispute existed on the merits. [Paras 19, 20, 24]

Allegations of forgery of documents/postage receipts are not to be adjudicated in the Adjudicating Authority's summary proceeding under the IBC, and refusal to probe such allegations did not vitiate the rejection of the Section 9 application.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority correctly rejected the Section 9 application because the claim was subject to a bona fide pre-existing dispute and allegations of document forgery could not be resolved in the summary proceedings under the IBC. The appellant remains free to pursue other remedies in law.

Commencement of limitation from pronouncement of order - condonation of delay in filing appeal - effect of correction of name of corporate debtor on commencement of limitation - duty to exercise due diligence to obtain certified copy and exclusion under the Limitation Act

Commencement of limitation from pronouncement of order - effect of correction of name of corporate debtor on commencement of limitation - condonation of delay in filing appeal - Whether delay in filing the Company Appeal (AT)(Ins.) could be condoned having regard to (a) the rule that limitation commences from date of pronouncement of the order, and (b) the fact that the order as pronounced was against a different corporate debtor and was corrected subsequently. - HELD THAT: - The Tribunal applied the settled principle that limitation for filing an appeal under the IBC runs from the date the order is pronounced, as explained in V. Nagarajan v. SKS Ispat and Power Ltd. That principle does not, however, lead to the same legal consequence where the order as pronounced is against a different corporate debtor. In the present case the order pronounced on 13.01.2023 named "Mansfield Cables Company & Infrastructure Pvt. Ltd." and therefore limitation, though it began on 13.01.2023, ran only in respect of that named company. The Adjudicating Authority subsequently corrected the order on 17.01.2023 to substitute the name "Mansfield Power & Infrastructure Pvt. Ltd.", the company of which the appellant is a suspended director. The correction order of 17.01.2023 could not be treated as having given notice to the present corporate debtor on that date because the corrected name was not on the record when the order was pronounced. Given that the impugned order, as originally pronounced, was not against the present corporate debtor, limitation could not be said to have run against the appellant from 13.01.2023. The appellant stated that he received information of the corrected order by communication dated 18.01.2023, which he received on 06/07.02.2023, and the appeal was e-filed with a short delay thereafter. The Resolution Professional did not deny sending communication; the circumstances of an inadvertent wrong memo of parties corrected by the Adjudicating Authority, and the appellant's prompt action upon receiving information, constitute sufficient cause for condonation of the short delay in this peculiar factual matrix. Applying these findings, the Tribunal allowed the applications for condonation of delay and directed listing of the appeal for admission. [Paras 6, 7, 10, 11, 12]

Delay in filing the appeals is condoned; the appeals to be listed for admission on 28.04.2023.

Final Conclusion: The applications for condonation of delay are allowed on the ground that the order as pronounced on 13.01.2023 was against a different company and limitation did not run against the present corporate debtor until the name was corrected; the appeals are directed to be listed for admission.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - expiry of challan - acceptance of payment and subsequent reversal - technical impediment/technical error - impossibility beyond control - equitable relief in writ jurisdiction - remedial measures distinct from extension of scheme

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - expiry of challan - acceptance of payment and subsequent reversal - technical impediment/technical error - impossibility beyond control - equitable relief in writ jurisdiction - remedial measures distinct from extension of scheme - Petitioner shall not be denied benefit of the SVLDR Scheme due to reversal of an initially accepted payment caused by expiry of the challan where the inability to complete payment was not the petitioner's fault. - HELD THAT: - The Court found that the petitioner had applied under the SVLDR Scheme for the period April 2016 to June 2017, Form SVLDRS-3 was issued and the petitioner made an RTGS payment which was initially accepted but later reversed because the challan had expired. Relying on the principle that a person cannot be punished for failing to do what was impossible for them to do and the decisions in Shekhar Resorts Ltd. and Innovative Antares Pvt. Ltd., the Court held that where a genuine technical impediment (such as expiry of challan causing reversal) prevents payment within the stipulated period, equity and the objectives of the Scheme permit remedial measures. The Court distinguished such remedial relief from an impermissible extension of the Scheme, noting that the relief granted is to avoid making the petitioner suffer for a failure beyond his control and that administrative/manual processing can be adopted to give effect to the Scheme. Applying these principles to the material facts, the Court concluded that the petitioner was entitled to be permitted to make the required payment pursuant to the issued SVLDRS-3 and to receive the consequent discharge certificate. [Paras 10, 15, 16]

Petitioner permitted to pay the settlement amount under Form SVLDRS-3 despite earlier reversal due to expired challan, and respondent authorities directed to accept payment and issue discharge certificate.

Final Conclusion: Writ petition allowed: respondent authorities directed to permit petitioner to pay the amount under Form SVLDRS-3 (relating to April 2016 to June 2017), accept the payment notwithstanding earlier reversal caused by expiry of challan, and issue the necessary discharge certificate; parties to bear their own costs.

Works contract - deemed sale under Article 366(29A)(b) of the Constitution - valuation of service portion under Service Tax (Determination of Value) Rules, 2006 - abatement of material value where VAT has been paid - dominant intention test rendered inapplicable by the Forty sixth Amendment

Works contract - deemed sale under Article 366(29A)(b) of the Constitution - abatement of material value where VAT has been paid - valuation of service portion under Service Tax (Determination of Value) Rules, 2006 - Whether the respondent's blasting activity is a works contract service and whether the value of explosives consumed is to be excluded from the service tax assessable value because VAT was paid on those explosives. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) conclusion that the blasting activity fell within the concept of a works contract. Applying the legal framework developed after the Forty sixth Amendment and the decisions of the Apex Court (notably Larsen & Toubro and related authorities), the transfer of goods incorporated or consumed in execution of works is a deemed sale under Article 366(29A)(b), and the dominant intention test is no longer decisive. The assessee purchased explosives, issued them for use at the customer's site, charged separately for materials and service and paid VAT on the explosives; these facts supported classification as a works contract with a separable goods element. Under the Service Tax (Determination of Value) Rules, 2006 and the principle of abatement where VAT on materials has been paid, the value of material already assessed under VAT is to be excluded in computing the service portion assessable to service tax. The Tribunal found no flaw in the reasoning of Commissioner (Appeals) that the material value (on which VAT was paid) is not to be included in the service tax valuation and that, given the VAT payment and applicable notifications/exemptions, the demand was correctly set aside.

The Order of the Commissioner (Appeals) classifying the blasting activity as works contract, excluding the value of explosives on which VAT was paid from service tax valuation, is upheld; the Department's appeal is dismissed.

Final Conclusion: The tribunal upholds the Commissioner (Appeals) order that the assessee's blasting activity is properly classifiable as a works contract; the material value of explosives (on which VAT was paid) is to be excluded from the service tax valuation, and the departmental appeal is dismissed.

Liquidated damages/penalties not consideration for declared service - taxable value exclusion of penalty recoveries - nexus requirement for "agreeing to the obligation" declared service - application of Tribunal precedents and CBIC Circular dated 28.02.2023

Liquidated damages/penalties not consideration for declared service - taxable value exclusion of penalty recoveries - nexus requirement for "agreeing to the obligation" declared service - Whether liquidated damages/penalties recovered by the appellant from suppliers/contractors for delayed supply or delayed completion of work form part of the taxable value as 'consideration' for the declared service under clause (e) and are liable to service tax. - HELD THAT: - The Tribunal examined the accounting entries and the Department's contention that recoveries recorded as "Recovery from suppliers/contractors towards penalty damages" amounted to "consideration" for a declared service. It was held that liquidated damages/penalties arising from delayed performance are not a service provided by the appellant, nor do they constitute "consideration" for any declared service. The Tribunal relied on its earlier decisions and related precedents, and on CBIC Circular No. 214-1-2023-ST dated 28.02.2023 which explains that the phrase "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" has three limbs and requires independent contractual arrangements and a necessary and sufficient nexus between the supply and the consideration. The Tribunal found no such regular contractual nexus here: recoveries were occasional consequences of non-performance and not a regular payment for abstaining or agreeing to tolerate or perform an act. Consequently, such recoveries cannot be equated with consideration and cannot be included in the taxable value for service tax. [Paras 3, 4, 5, 6]

The amounts recovered as liquidated damages/penalties do not form part of the taxable value as consideration for a declared service; the impugned order confirming service tax demand is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed: recoveries of liquidated damages/penalties from contractors/suppliers for delay are not consideration for the declared service and are not liable to service tax; the impugned adjudication is set aside.

Exemption under Notification No. 45/2010-ST - transmission and distribution of electricity - works contract service - refund of excess service tax - incidence of tax not passed on - remand for arithmetical verification

Exemption under Notification No. 45/2010-ST - transmission and distribution of electricity - refund of excess service tax - incidence of tax not passed on - Appellant entitled to exemption under Notification No. 45/2010-ST for services relating to installation and commissioning of substations made for transmission and distribution of electricity and consequent refund of service tax paid, subject to conditions. - HELD THAT: - On examination of the agreement between MSEB and CIDCO and the work order issued to the appellant, the Tribunal found that the appellant's activities related to installation and commissioning of substations undertaken for and on behalf of the electricity supply arrangement and therefore fell within taxable services relating to transmission and distribution of electricity which were exempted by Notification No. 45/2010-ST dated 20.07.2010. The Tribunal noted the consistent practice and the statutory basis for the exemption and observed that prior Tribunal decisions on analogous facts supported granting the benefit. Consequently, the Tribunal held that the impugned order confirming service tax demand was without merit and allowed the appeal to the extent of setting aside the demand and directing refund, subject to the statutory condition that the incidence of service tax was not passed on to any other person and had been borne by the appellant. [Paras 5, 6]

Appeal allowed insofar as the demand of service tax is set aside and refund directed, subject to satisfaction of the condition that the tax incidence was not passed on.

Remand for arithmetical verification - refund of excess service tax - Claim for refund of alleged excess payment of Rs. 17,02,362/- remanded for fresh adjudication limited to arithmetical accuracy. - HELD THAT: - The Tribunal did not decide on the appellants' contention of excess payment arising from a calculation error. Instead, it remitted that specific claim to the original authority for de novo consideration limited to verifying the arithmetical correctness of the refund claim and directed that opportunity of personal hearing be given to the appellant before deciding the limited issue afresh. [Paras 7]

Specific refund claim remanded to the original authority for fresh adjudication on arithmetical accuracy with an opportunity of personal hearing.

Final Conclusion: The Tribunal allowed the appeal in part by holding that services performed for installation and commissioning of substations fall within the exemption under Notification No. 45/2010-ST and directing refund subject to the condition that the tax incidence was not passed on; the separate claim of an alleged excess payment was remanded to the original authority for verification and de novo adjudication.

Breach of principles of natural justice - service of decisions, orders, summons, etc. under Section 37C of the Central Excise Act, 1944 - opportunity of hearing - procedure for intimation of hearing under Section 33A - remand for fresh hearing

Breach of principles of natural justice - service of decisions, orders, summons, etc. under Section 37C of the Central Excise Act, 1944 - opportunity of hearing - Impugned Order in Original dated 24 December 2020 set aside on ground of breach of natural justice for non service of notices of virtual hearing; proceedings remanded for fresh hearing. - HELD THAT: - The Court found that notices of virtual hearing dated 19 November 2020, 3 December 2020 and 14 December 2020 were returned with the remark "left" and, having regard to the lockdown period, physical service was difficult. Section 37C provides the statutory modes of service and requires resort to alternative modes where personal service is not effected; once it was apparent that service had not been effected (notices returned "left"), an adverse order could not be founded on those notices without affording the petitioner an opportunity to be heard. Section 33A, being a provision as to adjudicatory procedure and adjournments, does not supplant the service requirements in Section 37C. Taking the totality of circumstances and the petitioner's request for an opportunity to be heard (and the deposit made in court as a demonstration of bonafide), the Court held that the impugned order must be quashed and the matter restored to the Commissioner for fresh hearing on merits; the Court's order is confined to the breach of natural justice and does not decide the merits of the liability or penalty. [Paras 7, 8, 9, 10]

Impugned order quashed and set aside; proceedings restored to the file of the Commissioner for fresh hearing; amount deposited in Court transferred to the adjudicating authority; petitioner to appear before the Commissioner on 3 May 2023 for further hearing; order confined to breach of natural justice and not on merits.

Final Conclusion: The impugned Order in Original dated 24 December 2020 was quashed for breach of the principles of natural justice due to non service of virtual hearing notices; the matter is remanded to the Commissioner for a fresh hearing (on merits) and the amount deposited in Court is transferred to the adjudicating authority; directions given for the petitioner to appear on 3 May 2023.

Doctrine of Merger - remand directions - re-adjudication beyond remand - admission of additional evidence on remand - setting aside impugned order

Doctrine of Merger - remand directions - re-adjudication beyond remand - Whether the Commissioner re adjudicated matters beyond the limited scope of the Tribunal's remand direction and thereby contravened the Doctrine of Merger. - HELD THAT: - The Tribunal's earlier order admitted additional evidence and remanded the matter with a specific and limited direction that the original authority examine the dated certificate issued by the Senior Manager (Accounts) of Tata Steel Ltd. and allow credit as may be applicable as per law within eight weeks. The Adjudicating authority, however, proceeded to re examine statutory provisions and re decide the dispute afresh instead of restricting the exercise to verification of the certificate and related documents as directed by the Tribunal. By doing so the Commissioner revisited and re decided issues already concluded in the Tribunal's earlier round of litigation. The Tribunal held that such re adjudication went beyond the remit of the remand and is impermissible under the Doctrine of Merger, which prevents the lower authority from reopening matters already settled by the appellate forum when the remand is limited to a specific verification or ministerial exercise. [Paras 7, 8, 9]

The Commissioner impermissibly re adjudicated beyond the specific remand directions; the action is contrary to the Doctrine of Merger and cannot be sustained.

Admission of additional evidence on remand - setting aside impugned order - Whether the denovo order passed by the Adjudicating authority can be sustained or must be set aside in view of the Tribunal's remand and its specific directions. - HELD THAT: - The Tribunal recorded that additional evidence was admitted and that the original authority was to examine the certificate submitted by the appellants to its satisfaction and allow credit as per law. The adjudicating authority's de novo order disallowed the credit and imposed recovery, interest and penalty after re visiting the merits instead of confining itself to the limited examination mandated by the Tribunal. Given that the adjudication exceeded the scope of the remand and reinstated matters already settled by the Tribunal, the impugned denovo order is legally infirm. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief. [Paras 7, 9]

The denovo order is set aside; the appeal is allowed and consequential relief is granted.

Final Conclusion: The Tribunal found that the Commissioner exceeded the limited remand by re adjudicating settled issues, held that such conduct was barred by the Doctrine of Merger, set aside the impugned denovo order and allowed the appeal with consequential relief.

Availability of exemption subject to prescribed conditions and intimation requirement - veracity and admissibility of invoices as proof for exemption - omission in statutory return (ER-1) and presumption of clandestine clearance - leniency under administrative circulars not amounting to amnesty for statutory non-compliance - extended period of limitation and suppression/misrepresentation

Availability of exemption subject to prescribed conditions and intimation requirement - veracity and admissibility of invoices as proof for exemption - Benefit of Notification No.31/2011-CE in respect of 1456 pieces of branded garments was not admissible to the appellant. - HELD THAT: - The Tribunal found that the statutory condition of furnishing intimation to the jurisdictional authority within 48 hours, as required by the notification for returned goods, was not complied with. The documents relied on by the appellant were internally inconsistent (one set of invoices bearing a rubber stamp and another set lacking it) and the reconciliation statement was disordered and unsatisfactory. Reliance on private records or internal formats cannot substitute for the prescribed intimation and formal compliance; failure to observe the notification's conditions disentitles the appellant to the exemption. The decisions of the Supreme Court and High Court cited in the order support the proposition that conditions of an exemption notification are mandatory and non-compliance results in denial of benefit. [Paras 5]

Exemption under Notification No.31/2011-CE for 1456 pieces is denied and duty treatment as out of duty-paid stock is not allowable.

Omission in statutory return (ER-1) and presumption of clandestine clearance - leniency under administrative circulars not amounting to amnesty for statutory non-compliance - The claim that 4963 pieces were held in stock and not clandestinely cleared is not established and the appellant is not entitled to leniency. - HELD THAT: - The appellant failed to demonstrate bona fide non-reporting in the ER-1 return after transitioning to online filing; the private inventory statements furnished did not conclusively establish continuous holding of the disputed quantity. The administrative circular invoked by the appellant provides facilitation and guidance but does not grant amnesty for breaches of statutory return requirements. Given the absence of conclusive contemporaneous ER-1 filings for the relevant months and unreliable private records, the presumption of clandestine clearance stands and leniency is not warranted. [Paras 6, 7]

The appellant's plea that the 4963 pieces were in stock and that the omission was bona fide is rejected; no leniency is granted.

Extended period of limitation and suppression/misrepresentation - The plea of limitation based on the demands being worked out from records supplied during audit is rejected; extended limitation is invocable. - HELD THAT: - The Tribunal held that the present case involves either failure to comply with a statutory intimation, questionable documentary veracity, or misrepresentation in monthly ER-1 returns - matters that attract the suppression/misrepresentation doctrine. Reliance on decisions concerning CENVAT credit admissibility in different factual matrices was held inapposite. Detections arising from audit records do not preclude invocation of the extended period where there is misrepresentation or non-compliance with statutory prescriptions; therefore the limitation plea fails. [Paras 8]

The contention that the demand is time-barred is rejected; extended period is rightly invoked.

Final Conclusion: The appeal is devoid of merit and is dismissed.

Validity of section 16-B of the HPGST Act as creating a first charge on property - scope of non-obstante clause in the SARFAESI Act - effect of an infructuous writ petition on constitutional adjudication - priority of State's statutory charge vis-a -vis secured creditors - recovery as arrears of land revenue under the HPLR Act and determination of liability - apex Court's inherent power to rectify a gross error / review jurisdiction

Effect of an infructuous writ petition on constitutional adjudication - apex Court's inherent power to rectify a gross error / review jurisdiction - Whether the High Court's declaration on the validity of section 16-B could be examined where the writ petition had been rendered infructuous by facts not placed before the High Court. - HELD THAT: - The Court held that the High Court had decided an infructuous writ petition because material developments (withdrawal/compromise by the bank leading to release of the mortgaged property) had occurred prior to pronouncement and were not brought to the High Court's notice. An apex court may exercise its inherent power to rectify a gross error; reopening a matter that has attained finality is exceptional but justified where a provision of law was declared invalid in circumstances where the writ was moot. The Court therefore answered this issue affirmatively and noted that the proper course was to treat the underlying writ as infructuous rather than decide on constitutional validity. [Paras 31, 32, 33]

The impugned High Court adjudication on section 16-B could be examined because the writ petition was infructuous and a gross error required correction.

Validity of section 16-B of the HPGST Act as creating a first charge on property - priority of State's statutory charge vis-a -vis secured creditors - scope of non-obstante clause in the SARFAESI Act - Whether section 16-B of the HPGST Act should have been struck down as ultra vires the Constitution or the Banking Companies Act. - HELD THAT: - On the merits the Court held that the question was no longer res integra and that earlier High Court conclusions outlawing section 16-B were unsustainable. Applying subsequent Supreme Court jurisprudence (notably Central Bank of India v. State of Kerala), the Court observed that non-obstante clauses in enactments like the SARFAESI or DRT Acts do not automatically override state statutory first-charge provisions unless there is a clear inconsistency or a specific parliamentary provision granting priority to secured creditors. Parliament subsequently amended the DRT and SARFAESI Acts to introduce limited priority, but as at the time of the High Court's decisions no such overriding provision existed. Consequently section 16-B is a valid enactment and not ultra vires the Constitution or the Banking Companies Act; observations contrary to this in the impugned judgments are of no effect. [Paras 36, 37, 38, 39, 40]

Section 16-B of the HPGST Act is valid and not ultra vires; the High Court erred in declaring it otherwise.

Recovery as arrears of land revenue under the HPLR Act and determination of liability - validity of section 16-B of the HPGST Act as creating a first charge on property - Whether, on the facts of C.A. Nos. 8980-8981/2012, the State's claim of a first charge was substantiated and whether refusal to mutate the property was justified. - HELD THAT: - The Court examined the statutory scheme: assessment under section 14 of the HPGST Act must precede crystallisation of any first charge under section 16-B and recovery as arrears of land revenue follows prescribed HPLR Act procedures. On the material before the High Court in CWP 306/2007, no notice of demand or adjudication determining tax liability had been shown to have been issued to the dealers; consequently liability had not been determined and could not have created a crystallised charge. In the absence of requisite steps under the HPGST Act and HPLR Act, insertion of adverse 'red' entries and refusal to effect mutation were unlawful. The High Court was therefore right, on the facts, to set aside the refusal to mutate. [Paras 46, 47, 48, 49, 50]

State's claim of a first charge was not substantiated on the record; refusal to mutate the property without prior determination of liability was incorrect.

Apex Court's inherent power to rectify a gross error / review jurisdiction - remedies for review and inherent powers of apex court - Whether the High Court erred in dismissing the State's application under section 151 CPC (styled as an application for rectification/recall). - HELD THAT: - The Court held that the application under section 151 CPC was not maintainable to seek recall of a judgment decided on merits where specific remedies (including review) exist. The High Court correctly treated the application as a disguised review and refused to entertain it because no error apparent on the face of the record was shown and documents relied upon were available earlier. The High Court therefore did not err in rejecting the recall/rectification application. [Paras 50]

High Court was justified in dismissing the application under section 151 CPC; recall was not the proper remedy.

Validity of section 16-B of the HPGST Act as creating a first charge on property - effect of an infructuous writ petition on constitutional adjudication - What reliefs are available to the appellants (the State and its officers) following the errors identified. - HELD THAT: - The Court held that appellants are not entitled to substantive reliefs overturning the High Courts' factual findings where those findings stand (subject to finality against certain parties), but declared that section 16-B is not ultra vires any law. Because section 16-B had been wrongly declared invalid by the High Court in earlier decisions, this declaration will have prospective effect and will not revive closed or old cases already concluded to the State's advantage. Parties were left to bear their own costs. [Paras 51]

Appellants are not entitled to further relief except the declaration that section 16-B is not ultra vires; that declaration operates prospectively and does not revive closed matters.

Final Conclusion: The appeals are disposed of: the Court corrects the error of the High Court in adjudicating an infructuous writ petition and holds that section 16-B of the HPGST Act is valid; on the facts of the mutation dispute the State had not determined tax liability and accordingly could not claim a crystallised first charge, so refusal to mutate was unjustified; the High Court correctly rejected the recall/application under section 151 CPC; relief to the State is limited to the declaration that section 16-B is not ultra vires, with prospective effect; parties to bear their own costs.

Extinguishment of statutory dues by approved insolvency resolution plan - binding effect of an NCLT approved resolution plan on statutory creditors and authorities - primacy of the Insolvency and Bankruptcy Code over inconsistent laws - duties of a quasi judicial tax authority to consider replies and apply mind - judicial review and quashing of orders passed without application of mind

Extinguishment of statutory dues by approved insolvency resolution plan - binding effect of an NCLT approved resolution plan on statutory creditors and authorities - primacy of the Insolvency and Bankruptcy Code over inconsistent laws - Claims and demands raised by the State GST Department for periods prior to the effective date of an NCLT approved resolution plan are extinguished by the approved resolution plan and cannot be the subject of fresh recovery proceedings. - HELD THAT: - The petitioner established that a resolution plan under the Insolvency and Bankruptcy Code was approved by the NCLT with an effective date preceding the impugned demands, and relied on the principle that an approved resolution plan is binding on the corporate debtor, its creditors and statutory authorities. The Court accepted the settled proposition that Sections 31 and 238 of the IBC render an approved resolution plan binding and that the Code prevails over inconsistent laws. The Court relied on the ratio of the decision in Committee of Creditors of Essar Steel India Ltd. Through Authorised Signatory Vs. Satish Kumar Gupta & Ors. and the Division Bench decision in Ultra Tech Nathdwara Cement Ltd. to hold that demands in respect of periods prior to the effective date of the approved plan stand extinguished. Applying those principles to the admitted facts - namely, that the impugned demands related to Financial Years 2017 18 and 2018 19 which are prior to the effective date of the approved plan - the Court concluded that the Department had no jurisdiction to proceed with recovery for those periods.

Demands raised by the Department for Financial Years 2017 18 and 2018 19 are extinguished by the NCLT approved resolution plan and cannot be sustained.

Duties of a quasi judicial tax authority to consider replies and apply mind - judicial review and quashing of orders passed without application of mind - The Deputy Commissioner acted without application of mind by ignoring the petitioner's reply and relevant binding precedents and, therefore, the demand orders are legally unsustainable and liable to be quashed. - HELD THAT: - The Court examined the impugned orders and found that the petitioner's reply - which specifically recorded the NCLT approval of the resolution plan and cited binding precedent - had been incorporated into the file by cut copy paste but was not considered; the Deputy Commissioner proceeded to record demands in a laconic and perfunctory manner. Given the quasi judicial nature of the officer's function, the Court held that reasoned consideration of the reply and authority was required. The respondent conceded that the impugned demands did not stand to scrutiny but sought remand for fresh consideration; the Court rejected remand because the orders suffer from non application of mind and are contrary to settled legal position. Accordingly, the impugned notices and demand orders were declared invalid and quashed.

The demand orders issued by the Deputy Commissioner are quashed for failure to consider the petitioner's reply and for acting without application of mind.

Final Conclusion: The writ petitions are allowed: the show cause notices and demand orders issued in respect of Financial Years 2017 18 and 2018 19 are declared invalid and quashed as the impugned demands are extinguished by the NCLT approved resolution plan and were issued without application of mind.

Criminal breach of trust - cheating - invocation and sale under a Letter of Pledge - pledgee's authority to sell to itself or group companies - abuse of process of law - concurrent findings of fact and interference - civil/contractual dispute vis-a -vis criminal prosecution - effect of arbitration proceedings on parallel criminal complaint

Criminal breach of trust - cheating - invocation and sale under a Letter of Pledge - pledgee's authority to sell to itself or group companies - abuse of process of law - civil/contractual dispute vis-a -vis criminal prosecution - effect of arbitration proceedings on parallel criminal complaint - Whether the criminal complaint discloses the ingredients of the offences alleged and whether continuation of criminal proceedings amounted to an abuse of process, having regard to the contractual terms (ICDA and LoP), the arbitral proceedings and delay in lodging the complaint. - HELD THAT: - The Court examined the ICDA and the Letter of Pledge (LoP) and observed that the contracts expressly authorised the pledgee to invoke the pledge and to sell the pledged shares, including to itself or its group companies, and that the borrower had agreed not to dispute the price at which such sale was effected. The arbitral proceedings had addressed the sale of the pledged shares (including timing, price and identity of purchaser) and rejected allegations of price manipulation. The complainant was aware of the sale in 2001 and participated in arbitration; information from stock exchanges in 2006 and the filing of the criminal complaint only in 2011 demonstrated inordinate delay. On the material on record and taking the complaint at its face value, the Court found that the averments were contrary to the contractual terms and that the dispute was essentially contractual/civil in nature. Having regard to the contracts, the arbitration process and the delay, the complaint did not prima facie disclose the essential ingredients of the alleged offences and continuation of criminal proceedings would amount to an abuse of process of law. The Court therefore interfered with the criminal proceedings and quashed the impugned orders. [Paras 19, 20, 21, 22, 23]

The complaint did not disclose the ingredients of the offences alleged; the criminal proceedings were an abuse of process and were quashed and dismissed.

Final Conclusion: Appeals allowed; the High Court judgment and the trial court order were quashed and set aside and the criminal complaint (CC No. 56/SW/2011) under Sections 403, 406, 420 and 120B IPC was dismissed, without prejudice to the parties' rights in arbitral or other appropriate proceedings.

Arbitration clause - reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - cancellation of agreement - action under Section 31 of the Specific Relief Act is not an action in rem - disputes arising out of or in connection with the agreement

Arbitration clause - cancellation of agreement - action under Section 31 of the Specific Relief Act is not an action in rem - reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - Whether the dispute concerning cancellation of the Development Agreement is referable to arbitration despite the plaintiff's prayer for cancellation under Section 31 of the Specific Relief Act. - HELD THAT: - The Development Agreement contains an arbitration clause covering "all the disputes arising out of or in connection with this agreement" and provides that unresolved disputes shall be referred to arbitration. The question whether the Development Agreement stands cancelled or can be lawfully cancelled arises out of and is in connection with the Development Agreement and therefore falls within the scope of the arbitration clause. The High Court's conclusion rested on the premise that an action under Section 31 of the Specific Relief Act is an action in rem and hence non-arbitrable. This Court, however, in Deccan Paper Mills Company Limited v. Regency Mahavir Properties and Ors. has held that an action under Section 31 for cancellation of an instrument is not an action in rem, and therefore that premise is unsustainable. Applying that principle, the Trial Court rightly exercised its power under Section 8 of the Arbitration Act to direct reference of the dispute to arbitration. Consequently the High Court's interference was erroneous and the Trial Court's order referring the dispute to arbitration is to be restored. [Paras 7, 8, 9]

The dispute over cancellation of the Development Agreement is referable to arbitration; the High Court's order is set aside and the Trial Court's order under Section 8 of the Arbitration Act directing reference to arbitration is restored.

Final Conclusion: Appeal allowed; impugned judgment and order of the High Court set aside and the Trial Court's order directing reference of the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 is restored; parties to act in accordance with Section 8; no order as to costs.

Chargeability of stamp duty on instruments comprising several distinct matters - instruments undervalued - power of registering officer under proviso to Section 27 - reference to Collector and procedure under Section 47A - immovable property - plant and machinery permanently embedded to the earth - operation of transfer - Section 8, Transfer of Property Act - application of Government Order G.O.Ms.No.103/2001 - concession of stamp duty to industrial units

Immovable property - plant and machinery permanently embedded to the earth - operation of transfer - Section 8, Transfer of Property Act - chargeability of stamp duty on instruments comprising several distinct matters - Whether the sale deed operated to convey plant and machinery as part of the immovable property and therefore their value must be included for computation of stamp duty. - HELD THAT: - The Court examined the preamble and recitals of the conveyance together with the background of the auction sale and held that the sale was of the company's assets as a lot (land, building, civil works, plant and machinery and current assets) for a consolidated consideration. Applying Section 8 of the Transfer of Property Act and the definitions of immovable property, the Court concluded that the conveyance passed, inter alia, those plant and machinery which were permanently embedded in or attached to the land scheduled in the deed. Reliance was placed on precedents holding that where the intention and attendant circumstances show machinery to be permanently embedded and part of a going concern, it is immovable and its value must be taken into account for stamp duty under the Stamp Act. The Division Bench's narrow approach - that the purchaser could avoid valuation of plant and machinery by not seeking its registration - was rejected as overlooking the true nature of the transaction and the instrument as executed. [Paras 34, 36, 38]

The sale deed conveyed plant and machinery permanently embedded to the earth and their value must be included for computation of stamp duty.

Instruments undervalued - power of registering officer under proviso to Section 27 - reference to Collector and procedure under Section 47A - Whether the registering authorities are empowered to go behind the ostensible instrument to ascertain true market value and call for enquiries/records. - HELD THAT: - The Court held that the proviso to Section 27 (as inserted by the Andhra Pradesh Amendment) expressly empowers the registering officer to inspect the property, make local enquiries and examine connected records to satisfy compliance with Section 27. Further, Section 47A provides the statutory procedure for dealing with undervalued instruments, including referral to the Collector for determination of market value and provision for deposit and appeals. The earlier restrictive view in Himalaya Space House was qualified by noting the legislative amendments in Andhra Pradesh which confer investigative and determination powers on authorities that were previously absent. Consequently, the registering officer and Collector have statutory authority to examine whether the market value has been truly set forth and to determine duty accordingly. [Paras 39]

Registering authorities have statutory power under the proviso to Section 27 and Section 47A to investigate alleged undervaluation and to refer the matter for determination of market value and duty.

Chargeability of stamp duty on instruments comprising several distinct matters - operation of transfer - Section 8, Transfer of Property Act - Who is liable to pay the stamp duty in respect of the sale deed executed pursuant to the auction and whether the auction purchaser (or its nominee) can be made liable. - HELD THAT: - The Court observed that the sale deed was executed in favour of the first respondent as the nominee of the auction purchaser and recorded that the vendee under the conveyance is the legal entity liable to pay the duty. The absence or non-joinder of the auction purchaser (second respondent) did not preclude passing an order against the first respondent, who, as vendee, is the person liable in law to discharge stamp duty obligations arising from the conveyance. [Paras 41]

The first respondent (the vendee named in the sale deed) is liable to pay the stamp duty; the second respondent (auction purchaser) cannot be made liable under this judgment.

Instruments undervalued - power of registering officer under proviso to Section 27 - reference to Collector and procedure under Section 47A - application of Government Order G.O.Ms.No.103/2001 - concession of stamp duty to industrial units - Matters remitted for determination and the scope of further inquiry. - HELD THAT: - The Court restored the Single Judge's approach but modified the direction regarding the grant of exemption under G.O.Ms.No.103/2001. The matter was remitted to the second appellant (the registering authority/District Registrar) to ascertain which plant and machinery, if any, answer the legal description of immovable property (i.e., permanently embedded) and to determine their value for stamp duty purposes. The second appellant is also to consider, in the exercise of its statutory function, whether the vendee is entitled to the exemption under G.O.Ms.No.103/2001 and grant it if legally merited. The inquiry may require inspection, local enquiries and examination of connected records under the proviso to Section 27 and the procedure under Section 47A; the passage of time and factual changes may be relevant to the determination. [Paras 38, 42, 43]

Remitted to the second appellant to determine (a) which plant and machinery are immovable (permanently embedded) and fix their value for stamp duty; and (b) whether the vendee is legally entitled to the concession under G.O.Ms.No.103/2001.

Final Conclusion: The Division Bench judgment is set aside in part. The appeal against Writ Appeal No.1873 of 2005 is allowed and the appeal against Writ Appeal No.2457 of 2005 is partly allowed; the Single Judge's decision is restored subject to modification that the District Registrar (second appellant) shall determine which plant and machinery are immovable for stamp duty purposes and decide entitlement to G.O.Ms.No.103/2001. The first respondent (vendee) is liable to pay stamp duty; the second respondent is not made liable under this judgment. Parties to bear their own costs.

Wilful disobedience of court's undertaking - Contempt of Court - civil contempt - Enforcement of undertakings and Memorandum of Understanding filed before court - Opportunity to purge contempt - Punishment for contempt - imprisonment and fine - Prohibition on encumbering or disposing of property pending compliance

Wilful disobedience of court's undertaking - Contempt of Court - civil contempt - Enforcement of undertakings and Memorandum of Understanding filed before court - Respondent held guilty of contempt for wilful breach of the MoU and undertakings given to the Trial Court and this Court. - HELD THAT: - The Court found that the Respondent repeatedly acknowledged his liability and gave multiple undertakings - before the Trial Court (order dated 30.10.2019) and before this Court (undertakings recorded on 21.01.2021, 02.06.2022 and 31.08.2022) - to pay the amounts admitted in the MoU. Despite these undertakings and numerous opportunities to purge the contempt, the Respondent failed to make the payments as promised and repeatedly delayed compliance without satisfactory explanation. The Court recorded that the plea that the MoU was signed under coercion was not pressed in the earlier pleadings and was held to be a dishonest, after the fact contention inconsistent with the Respondent's prior acknowledgments and apologies. Relying on established principles that non compliance with undertakings given to the court amounts to contempt, the Court concluded that the Respondent's conduct constituted wilful disobedience and civil contempt of court. [Paras 3, 8, 10]

The Respondent is guilty of contempt of court for wilful breach of the MoU and the undertakings given to the Trial Court and this Court.

Opportunity to purge contempt - Punishment for contempt - imprisonment and fine - Appropriate sentence for the contemnor for the proven civil contempt. - HELD THAT: - Having held the Respondent guilty of contempt and having recorded his contumacious conduct, the Court considered sentencing. The Respondent's explanations (including delay in selling immovable property and reliance on prior decisions to avoid imprisonment) were found not bona fide or sufficient to negate the wilful non payment. The Court noted precedent that wilful non compliance with court undertakings may warrant punishment to maintain rule of law and the majesty of justice. There being no satisfactory steps shown to purge the contempt, the Court imposed a custodial sentence and a nominal fine, with additional default custody in case of non payment of the fine. [Paras 11, 12, 13, 14, 15]

Respondent sentenced to two months simple imprisonment and fined; in default of payment of the fine, a further fifteen days simple imprisonment.

Enforcement of undertakings and Memorandum of Understanding filed before court - Availability and weight of prior acknowledgements and apologies - The Respondent's plea that the MoU was signed under coercion was rejected as not bona fide. - HELD THAT: - The Court observed that in multiple pleadings and undertakings the Respondent had admitted liability and repeatedly promised payment. The belated contention that the MoU was executed under coercion was inconsistent with these admissions and the unconditional apology previously tendered. The Court therefore held the coercion plea to be a dishonest afterthought and rejected it, treating the earlier acknowledgements as determinative of the Respondent's obligation to comply. [Paras 10]

The contention of coercion in execution of the MoU is rejected; the earlier acknowledgements and undertakings are treated as valid admissions of liability.

Prohibition on encumbering or disposing of property pending compliance - Enforcement of interim restraint as ancillary relief to secure satisfaction of undertaking - The interim undertaking restraining encumbrance or disposal of specified properties is made absolute until the admitted amount is cleared. - HELD THAT: - Given the Respondent's admitted arrears and pattern of non compliance, the Court made absolute the earlier recorded undertaking (dated 24.02.2022) restraining the Respondent from encumbering or disposing of any property in which he has an absolute or partial share, including the specified property, and ordered that such properties cannot be sold without the petitioners' written consent and prior permission of the Trial Court. This measure is directed to preserve assets until the Respondent clears the admitted outstanding amount. [Paras 8, 16]

The undertaking against encumbering or disposing of property is made absolute and shall continue until the Respondent clears the admitted amount; sale or encumbrance requires petitioners' consent and Trial Court's prior permission.

Final Conclusion: The contempt petition is allowed in part: the Respondent is held guilty of civil contempt for wilful breach of the MoU and multiple undertakings, is sentenced to two months' simple imprisonment with a fine (and default custody), the restraint on encumbering or disposing of specified properties is made absolute until the admitted arrears are cleared, and the matter and pending applications are disposed of.