TaxTMI Updates e-Newsletter
May 04,2022

Cancellation of bail for non-compliance of bail condition - use of electronic credit ledger / Input Tax Credit to discharge tax liabilities - permissibility of utilising electronic credit ledger to satisfy judicially imposed deposit - rule-based restriction on debit of electronic credit ledger where credit is suspected to be fraudulent

Use of electronic credit ledger / Input Tax Credit to discharge tax liabilities - permissibility of utilising electronic credit ledger to satisfy judicially imposed deposit - Depositing part of the amount directed by the trial court by reversing/ debiting the electronic Input Tax Credit ledger was permissible under the GST regime. - HELD THAT: - The Court examined the statutory scheme permitting utilisation of amounts in the electronic credit ledger for discharge of liabilities and the corresponding Rules. Section 49 (4) allows the amount available in the electronic credit ledger to be used for making payments towards output tax in accordance with prescribed conditions; Section 49(5) prescribes the order of utilisation between integrated, central and State/Union territory tax; Rule 86(2) debits the electronic credit ledger to the extent of discharge of any liability; and Rule 86A contemplates administrative restriction where credit is suspected to be fraudulently availed. In the present case the petitioner had substantial ITC balance and the investigation so far established fraud only in a limited portion of ITC; the prosecution did not dispute the general statutory permissibility of payment from the electronic ledger. Having regard to these provisions and the factual position that the deposit directed by the trial court was satisfied partly by credit reversal and partly by cash ledger, the Court held that reversal of ITC for the purpose of complying with the deposit condition could not be treated as inherently illegal or impermissible. [Paras 10, 11, 12, 13, 14]

Reversal/debit of ITC from the electronic credit ledger to satisfy the deposit condition imposed for bail was permissible and not unlawful in the circumstances.

Cancellation of bail for non-compliance of bail condition - permissibility of utilising electronic credit ledger to satisfy judicially imposed deposit - Cancellation of the bail order for having deposited the directed amount partly by way of ITC reversal was not justified and was set aside. - HELD THAT: - The learned CMM cancelled bail on the basis that the petitioner had deposited part of the directed amount by reversing ITC without prior permission of the court. The High Court noted that non-compliance with bail conditions is a ground for cancellation, but where the condition required deposit of a sum and the petitioner fulfilled that obligation (by cash ledger and reversal of electronic credit), cancellation was not warranted. The Court observed that, if the trial court intended deposit only in cash, it could have permitted time or directed compliance in a specified manner; instead, the petitioner satisfied the deposit condition in a manner permissible under the GST provisions. Given that the investigation had not established that the entirety of the petitioner's ITC balance was fraudulent, treating the debit from the electronic credit ledger as a breach justifying cancellation was unsustainable. Consequently, the CMM's order cancelling bail was set aside. [Paras 5, 6, 14, 15, 16]

Impugned order cancelling bail is set aside and the earlier order granting regular bail is restored.

Final Conclusion: The High Court held that utilisation of the electronic credit ledger to discharge the deposit condition attached to bail was permissible in the circumstances and that cancellation of bail for having partly deposited the amount by reversing ITC was unjustified; the cancellation order dated 9th July, 2021 was set aside and the bail granted on 23rd December, 2019 restored.

Cancellation of registration - appeal under Section 107 of U.P. Goods & Service Act, 2017 - limitation for filing appeal - service by e-mail - liberty to invoke appellate remedy - expedited consideration by appellate authority

Appeal under Section 107 of U.P. Goods & Service Act, 2017 - cancellation of registration - limitation for filing appeal - Petitioner permitted to invoke the statutory appellate remedy against the order cancelling his registration. - HELD THAT: - The order of cancellation dated 30.10.2018 is appealable under Section 107 of the U.P. Goods & Service Act, 2017, and an appeal must be filed within three months from the date on which the decision or order is communicated to the person. The petitioner stated that communication occurred only in the current month. The Court, without adjudicating the merits of the cancellation, allowed the petitioner the statutory remedy of appeal and disposed of the writ petition accordingly.

Writ petition disposed of with liberty to the petitioner to prefer an appeal under Section 107 of the U.P. Goods & Service Act, 2017.

Appellate authority's duty to decide appeal - expedited consideration - Direction to the appellate authority to consider and decide any appeal filed by the petitioner within a specified time. - HELD THAT: - The Court directed that if the petitioner files an appeal, the appellate authority shall proceed to consider and decide the same with expedition. A specific time-frame of two months from the date of filing the appeal was fixed for disposal. The Court expressly refrained from making any observation on the merits of the underlying cancellation, limiting its order to conferring the appellate remedy and directing prompt adjudication by the appellate authority.

If an appeal is filed, the appellate authority shall decide it within two months from the date of filing.

Final Conclusion: The writ petition is disposed of by granting the petitioner liberty to file an appeal under Section 107 of the U.P. Goods & Service Act, 2017 against the cancellation order; the appellate authority is directed to decide any such appeal expeditiously, within two months, the Court making no observation on the merits.

Examination of representation - opportunity of hearing - stay on precipitate action pending representation - furnishing copy of decision - period for expeditious disposal of representation - interim protection after adverse decision - deposit of tax and interest pursuant to departmental circular - accessibility of orders and placement of endorsements

Examination of representation - deposit of tax and interest pursuant to departmental circular - The petitioner's statutory/contention will be treated as a representation and examined by the concerned officer. - HELD THAT: - The Court directed that the contentions advanced by the petitioner in the writ petition shall be examined by the concerned officer by treating the writ petition as a representation. The Court noted the petitioner's assertion that the tax and interest were deposited in accordance with the revenue circular dated 29.12.2017 and that the discrepancy between GSTR-1 and GSTR-3B arose from an invoice omission for March 2019 which was corrected in April 2019; however, the Court did not adjudicate the merits and left factual and legal determination to the concerned officer after examination of the documents placed on record. The officer is to consider the petitioner's submissions and the supporting material and pass a reasoned decision. [Paras 8]

The concerned officer will treat the petition as a representation and examine the petitioner's contentions, including the deposit made pursuant to the departmental circular.

Opportunity of hearing - The petitioner shall be granted an opportunity of hearing before the concerned officer. - HELD THAT: - The Court directed that the concerned officer shall afford an opportunity of hearing to the authorised representative of the petitioner, specifying that the officer will communicate date, time and venue. If physical hearing is not possible, the officer must provide a video-conferencing link. This ensures procedural fairness by giving the petitioner a chance to be heard before any final administrative action is taken. [Paras 8]

An opportunity of hearing will be granted to the petitioner (physically or via video-conference) prior to disposal of the representation.

Stay on precipitate action pending representation - interim protection after adverse decision - No precipitate or coercive action shall be taken against the petitioner pending disposal of the representation, and if the decision is adverse, no precipitate action shall be taken for two weeks from receipt of the decision. - HELD THAT: - The Court granted interim protection by restraining the revenue from taking precipitate action in pursuance of the impugned order while the representation is under consideration. Further, the Court ordered that in the event the officer's decision is adverse to the petitioner, there shall be a further two-week moratorium from the date the petitioner receives the copy of the decision before any precipitate action is initiated. These directions are protective and procedural, designed to preserve the petitioner's rights while permitting administrative decision-making. [Paras 8]

Pending disposal of the representation no precipitate action shall be taken, and if the decision is adverse no precipitate action shall be taken for two weeks after receipt of the decision.

Furnishing copy of decision - period for expeditious disposal of representation - The concerned officer shall furnish a copy of the decision to the petitioner and shall endeavour to dispose of the representation expeditiously, in any event within six weeks from receipt of the order. - HELD THAT: - The Court mandated that the officer must provide the petitioner with a copy of the decision on the representation. The Court further directed that the officer shall endeavour to decide the representation expeditiously and specified an outer time limit of six weeks from the date of receipt of the order. These directions impose timelines and an obligation of communication to ensure timely administrative resolution. [Paras 8]

The officer will furnish a copy of the decision and dispose of the representation expeditiously, not later than six weeks from receipt of this order.

Accessibility of orders and placement of endorsements - The Court requested the Department to avoid placing endorsements across the text of orders and advised placement of marks where they do not obstruct readability or accessibility. - HELD THAT: - The Court observed that endorsements spread across the pages of orders impede readability and may prevent visually impaired persons from accessing the contents. The Court recommended that endorsements or marks be affixed in unused areas of the order (for example, corners or foot) so as not to obstruct the text. The Court directed that this concern be brought to the attention of the CEO of the Goods and Service Tax Network. [Paras 10, 11]

The Department is requested to modify the placement of endorsements to avoid obstructing the textual content of orders and to place this direction before the CEO of the Goods and Service Tax Network.

Final Conclusion: The writ petition was disposed of by directing the concerned officer to treat the petition as a representation and to examine it after granting hearing; interim protection was granted against precipitate action pending disposal (and for two weeks after any adverse decision); the officer must furnish a copy of the decision and endeavour to decide within six weeks; and the Department was advised to ensure endorsements on orders do not impede readability or accessibility.

Release of seized electronic gadgets - retention of seized goods pending forensic data retrieval - time limited custody for data extraction by Forensic Science Laboratory - return of seized cash - proportionality of retention under sub section 7 of Section 67 of the G.S.T. Act

Release of seized electronic gadgets - retention of seized goods pending forensic data retrieval - time limited custody for data extraction by Forensic Science Laboratory - Eighteen of the twenty one electronic items seized during the search shall be released forthwith while three specified devices may be retained for a limited period to enable data retrieval. - HELD THAT: - The Court recorded the departmental statement that of the 21 seized electronic items 18 are to be released and three - an iPhone 12 Pro Max (256 GB), a Lenovo laptop and a DVR - are sought to be retained for further time on account of substantial data yet to be retrieved. Prima facie the Court found release of 18 items appropriate and observed that retention of the remaining three may be permitted for a limited period of three months to enable data extraction. The Court directed the learned AGP to ascertain instructions from the authority and make a statement before the Court, noting that a Forensic Science Laboratory ordinarily should not require excessive time for retrieval. The Court expressly refrained from entering into a substantive interpretation of sub section 7 of Section 67 of the Act, but emphasised that prolonged retention would be inappropriate and that an authoritative statement from the department would assist in final disposal.

Order for immediate release of 18 seized electronic items; the three specified devices may be retained for three months for data retrieval subject to the authority's statement.

Return of seized cash - proportionality of retention under sub section 7 of Section 67 of the G.S.T. Act - Cash seized during the search shall be returned to the writ applicants. - HELD THAT: - On being informed that cash was seized from the premises during the search, the Court directed that the seized cash should be returned to the writ applicants. The Court noted its prima facie view that retention of seized items should be proportionate and that statutory provisions such as sub section 7 of Section 67 cannot justify undue or prolonged withholding of property; however, the Court did not undertake a detailed interpretation of that provision and left matters of extent and duration of retention to the authority's statement and the Court's subsequent consideration.

Seized cash to be returned to the writ applicants; retention of other items must be proportionate and time limited.

Final Conclusion: The petitioners are entitled to immediate release of 18 of the 21 seized electronic items and return of the seized cash; three specified electronic devices may be retained for a limited period of three months for forensic data retrieval, subject to the authority making an appropriate statement to the Court.

Natural justice - personal hearing - opportunity of personal hearing - quashing of assessment proceedings - remand for fresh adjudication - stay of recovery - DRC-07 proceedings

Natural justice - personal hearing - remand for fresh adjudication - stay of recovery - DRC-07 proceedings - DRC-07 proceedings dated 10.02.2022 set aside and remitted for fresh consideration after affording opportunity of personal hearing. - HELD THAT: - The Court found that the impugned DRC-07 order dated 10.02.2022 had been passed without affording an opportunity of personal hearing to the petitioner and that the proceedings recorded aspects concerning recovery of ocean freight despite an earlier stay by this Court. In view of these procedural deficiencies and the potential conflict with the earlier judicial stay, the Court did not undertake adjudication on the merits of the tax demand but instead set aside the DRC-07 proceedings and remanded the matter to the first respondent. On remand the first respondent is directed to deal with the matter and pass appropriate orders after giving the petitioner an opportunity of personal hearing and otherwise in accordance with law. [Paras 10, 11]

DRC-07 dated 10.02.2022 is set aside and the matter is remanded to the first respondent to pass fresh orders after providing a personal hearing in accordance with law.

Final Conclusion: Writ petition disposed of by setting aside the impugned DRC-07 order dated 10.02.2022 and remitting the matter for fresh consideration; petitioner to be given personal hearing and orders to be passed in accordance with law; no order as to costs.

Cancellation of GST registration - Vague show cause notice - Non-speaking order - Violation of principles of natural justice - Quashing of statutory order - Remand for de novo proceedings - Revival of registration

Vague show cause notice - Non-speaking order - Violation of principles of natural justice - Quashing of statutory order - The show cause notice and the consequential order of cancellation were quashed on grounds of vagueness, non-speaking character and breach of natural justice. - HELD THAT: - The Court found that the show cause notice lacked material particulars and the cancellation order was cryptic and non-speaking, failing to refer to the contents of the show cause or the representation filed by the writ applicant. Given that cancellation of registration attracts penal and pecuniary consequences, the authority was obliged to furnish clear reasons and to consider the objections; absence of such disclosure and reasoning amounted to a breach of the principles of natural justice. Accordingly, the Court set aside the show cause notice dated 01.11.2021 and the order dated 18.01.2022 (as well as analogous notices and orders in the allied matters) as illegal. [Paras 7]

Quashment and setting aside of the impugned show cause notices and cancellation orders for being vague, non-speaking and violative of natural justice.

Remand for de novo proceedings - Revival of registration - Matters remitted to the respondent authority for fresh adjudication and the registrations revived pending de novo proceedings. - HELD THAT: - Having quashed the impugned show cause notices and cancellation orders, the Court directed that the matters be remitted to the respondent for fresh consideration in accordance with law. The Court observed that the registrations, being annulled by the quashed orders, stand revived. The respondent authority was also expected to comply with the directions issued in the earlier decision cited by the Court in Special Civil Application No.18860 of 2021 and allied matters when conducting the de novo proceedings. [Paras 7, 8]

Remand for fresh proceedings in accordance with law and revival of the respective GST registrations.

Final Conclusion: The writ petitions are allowed: the impugned show cause notices and cancellation orders are quashed for being vague and non-speaking and for violating principles of natural justice; the matters are remitted to the respondent for de novo proceedings in accordance with law and the registrations stand revived.

Classification of composite products by essential character - exclusion of food supplements from Chapter 30 by Note 1(a) - application of General Rules for the Interpretation of the Harmonized System (Rules 1-3) - classification of protein concentrates under heading 2106 - use of drug licence as a guide but not determinative for tariff classification

Classification of composite products by essential character - application of General Rules for the Interpretation of the Harmonized System (Rules 1-3) - classification of protein concentrates under heading 2106 - Dry Powders containing Protein Powder with Vitamins & Minerals is to be classified under HSN 2106 (Chapter 21) as a food supplement/protein concentrate and not under Chapter 30. - HELD THAT: - The Authority applied the General Rules for the Interpretation of the Harmonized System. Rule 1 requires classification according to the terms of the headings and relevant chapter notes; Rule 2 and Rule 3 address mixtures and composite goods and direct classification according to the component giving the product its essential character. Note 1(a) to Chapter 30 expressly excludes foods and food supplements from Chapter 30, directing such products to Section IV (Chapters 16-24). Chapter note 5(a) to Chapter 21 identifies protein concentrates and textured protein substances as classifiable under heading 2106. The product's presentation, label (chocolate flavour, preparation like a beverage), and food-oriented characteristics demonstrate that its essential character is that of a food supplement/protein preparation rather than a medicament. Applying the Rules and chapter notes, Chapter 21 (heading 2106) is the appropriate classification for 'Protowits'.

Product classified under HSN 2106 (Chapter 21) as a food supplement/protein concentrate; not classifiable under Chapter 30.

Exclusion of food supplements from Chapter 30 by Note 1(a) - use of drug licence as a guide but not determinative for tariff classification - Grant of a drug licence or a certificate purporting to approve the product under an entry in the FDC list does not by itself determine classification under Chapter 30. - HELD THAT: - The authority noted that issuance of a drug licence may be a guide but cannot override the language of the tariff and chapter notes. Reliance on precedents (as cited) establishes that classification must be judged by tariff terms and chapter notes, not solely by regulatory licences. Even if an approval/certificate exists, classification must be determined by whether the product falls within the exclusions and terms of Chapter 30 and relevant Section IV chapters; Note 1(a) excludes dietetic/fortified foods and food supplements from Chapter 30, pointing them to Section IV.

Drug licence/approval is not determinative; classification must follow GST Tariff/HSN and chapter notes.

Validity of product approval certificate - use of product-specific ingredients to test conformity with listed FDC entry - The product approval certificate dated 05.04.2021 was rejected as being inconsistent with the ingredients/specifications of Entry Serial No. 138 of the FDC list; the AAR's rejection of that certificate is upheld. - HELD THAT: - On comparison, the ingredients and quantities in the applicant's product did not conform with those specified in Entry No. 138 of the FDC list (e.g., discrepancy in protein hydrolysate quantity and additional ingredients not listed under Entry No. 138). The certificate therefore contained an error on its face and could not be accepted as establishing that the product falls within that FDC entry. The AAR was justified in rejecting the certificate for lack of consonance with the schedule.

Certificate dated 05.04.2021 rejected for non-conformity with Entry No. 138; AAR's rejection upheld.

Final Conclusion: The Appeal is dismissed; the Ruling of the Authority for Advance Ruling (Uttarakhand) is upheld and the product 'Dry Powders containing Protein Powder with Vitamins & Minerals' (Protowits) is to be classified as a food supplement/protein concentrate under HSN 2106 (Chapter 21), rather than under Chapter 30; the applicant's certificate of approval was rightly rejected and a drug licence does not by itself determine tariff classification.

Recovery proceedings - Stay of demand - AO required the petitioner to deposit 20% of the disputed amount - projection of Tax on Returned Income - Certain matters concerning the assessee are pending consideration before the Commissioner of Income Tax (Appeals) - HELD THAT:- Since the matters had arisen out of the proceedings initiated by way of a writ petition before the High Court [2020 (4) TMI 335 - DELHI HIGH COURT] questioning the demand, both sides are agreeable that the matters pending before the Commissioner of Income Tax (Appeals) be taken to logical conclusion.

We, therefore, leave the assessee as well as the revenue to agitate all the issues before the Commissioner of Income Tax (Appeals) in the pending appeals.

Let those issues be considered by the Commissioner of Income Tax (Appeals) without being influenced by any of the observations made by the High Court in the order presently impugned.

Considering the nature of circumstances, we may direct the Commissioner of Income Tax (Appeals) to dispose of the matters as expeditiously as possible and preferably within three months.

Re-assessment under Section 148 of the Income Tax Act - scrutiny assessment under Section 143(3) - suppression of material facts - limitation for re-assessment beyond four years - judicial review of re-assessment notice - exercise of special leave jurisdiction under Article 136

Validity of the reassessment proceedings and notice under Section 148 where the Assessing Officer had conducted scrutiny assessment under Section 143(3), the assessee furnished details of unsecured loan during assessment, and re-assessment was initiated beyond four years- HELD THAT: - The Court recorded that during the scrutiny assessment under Section 143(3) the Assessing Officer had specifically asked for and received details of the unsecured loan from the assessee and thereafter passed the assessment order under Section 143(3). On the material placed before it, the Court found that there was no suppression by the assessee of true and correct facts which could warrant reopening. Further, the reassessment proceedings had been initiated beyond the period of four years. In these circumstances the High Court's conclusion [2021 (2) TMI 1291 - GUJARAT HIGH COURT] to quash the reassessment proceedings and the notice issued under Section 148 was held to be justified. The Supreme Court, applying judicial review principles to the issuance of a reassessment notice, found no occasion to interfere with the High Court's exercise of that review on the record before it.

Reassessment proceedings and the notice under Section 148 quashed; High Court decision upheld.

Final Conclusion: The Special Leave Petition is dismissed. The High Court was justified in quashing the reassessment proceedings and the notice under Section 148, and no interference under Article 136 is warranted.

Capital v. revenue nature of subsidy - remand for fresh adjudication - unreasoned assessment order - exercise of powers under Section 263 of the Income-tax Act - prejudicial to the interests of Revenue

Exercise of powers under Section 263 of the Income-tax Act - unreasoned assessment order - prejudicial to the interests of Revenue - Validity of the Commissioner (CIT) invoking powers under Section 263 to interfere with the assessment order - HELD THAT: - The High Court found that the Assessing Officer accepted the assessee's claim that the amounts received were capital in nature without any discussion, resulting in an unreasoned assessment order. When a assessing order is unreasoned and appears prejudicial to the interests of the Revenue, the Commissioner is justified in invoking jurisdiction under Section 263 to call for a fresh and reasoned assessment. The Supreme Court declined to interfere with the High Court's conclusion that the Commissioner did not err or act without jurisdiction in exercising powers under Section 263 in the facts of this case.

The invocation of powers under Section 263 was valid and the High Court correctly upheld the Commissioner's action.

Capital v. revenue nature of subsidy - remand for fresh adjudication - Whether the amount received by way of subsidy is capital or revenue in nature? - HELD THAT: - The High Court remanded the matter to the Assessing Officer for independent analysis and a fresh order determining whether the subsidy is capital or revenue in nature. The Supreme Court concurred with the remand, noting that the Assessing Officer must examine and decide the classification on merits and without being influenced by the observations made by the Commissioner in the exercise of powers under Section 263. The Court directed that the Assessing Officer's fresh order shall be based on independent reasoning and shall treat the CIT's observations as relevant only to the exercise of Section 263 powers.

Matter remanded to the Assessing Officer for fresh, independent adjudication on whether the subsidy is capital or revenue in nature.

Final Conclusion: The Special Leave Petition is dismissed; the High Court's order remanding the issue of classification of the subsidy to the Assessing Officer is affirmed; the Assessing Officer is directed to pass a fresh independent order on merits, uninfluenced by the CIT's observations, which are limited to the exercise of powers under Section 263.

Extension of time to respond to notice - Consideration of reply filed pursuant to notice under Section 148A(b) - Validity of notice issued under Section 148 of the Income Tax Act and consequent issuance of reassessment notice - Remand for fresh consideration of objections/reply

Extension of time to respond to notice - Consideration of reply filed pursuant to notice under Section 148A(b) - Validity of notice issued under Section 148 of the Income Tax Act and consequent issuance of reassessment notice - Whether the impugned reassessment notice dated 30th March, 2022 could be sustained where the assessee had sought an extension of time and filed a reply on 29th March, 2022 which the Revenue recorded as not having been filed. - HELD THAT: - The Court interpreted the assessee's request for "15 days time to respond" made by letter dated 17th March, 2022 as an extension of fifteen days from 17th March, 2022. On that interpretation the detailed response filed on 29th March, 2022 fell within the extended period. The Assessing Officer's recording that no reply had been filed and the consequential issuance of the notice dated 30th March, 2022 were therefore set aside. The matter was remitted to the Assessing Officer to consider and decide the objections/reply dated 29th March, 2022 in accordance with law within eight weeks. The Court expressly confined itself to interpreting the extension request and directing fresh consideration and did not express any view on the merits of the underlying tax dispute. [Paras 5, 6]

Impugned order and consequential notice dated 30th March, 2022 set aside; matter remitted to the Assessing Officer to consider the reply dated 29th March, 2022 and decide objections in accordance with law within eight weeks.

Final Conclusion: Writ petition allowed to the extent that the reassessment notice dated 30th March, 2022 is set aside and the matter is remitted for consideration of the reply filed on 29th March, 2022; no observation on merits and rights of parties left open.

Wilful attempt to evade tax - Offence under Section 276C(2) of the Income Tax Act - Self-assessment payment under Section 140A - Presumption of culpable mental state under Section 278E - Quashing of criminal complaint under Section 482 Cr.P.C. - Malafide prosecution and non-application of mind

Wilful attempt to evade tax - Offence under Section 276C(2) of the Income Tax Act - Self-assessment payment under Section 140A - Whether the ingredients of an offence under Section 276C(2) are made out where the assessee filed returns disclosing income but delayed payment and subsequently paid the tax with interest before initiation of prosecution. - HELD THAT: - The Court held that Section 276C(2) requires a wilful attempt to evade tax, which ordinarily involves concealment of income, furnishing inaccurate particulars, or creation of circumstances enabling evasion. In the present case there was no concealment or inaccurate particulars: the return was filed on time disclosing the income and tax liability, and the tax with interest was paid before any prosecutorial process was set in motion. Mere delay in payment (a default) which was later regularised does not satisfy the mens rea or positive act necessary for Section 276C(2). The deeming consequences of default cannot be invoked to convert such a factual situation into a wilful attempt to evade tax when the record shows payment prior to sanction and prosecution. [Paras 13, 14]

The complaint under Section 276C(2) could not be sustained on the facts; the essential ingredient of a wilful attempt to evade tax was absent.

Presumption of culpable mental state under Section 278E - Offence under Section 276C(2) of the Income Tax Act - Whether the statutory presumption under Section 278E operates to sustain prosecution where the basic ingredients of the offence are not established on the record. - HELD THAT: - The Court explained that Section 278E is a rule of evidence creating a rebuttable presumption of culpable mental state in prosecutions where such mens rea is an ingredient. However, the presumption can only operate where the foundational facts disclosing the offence are present. If the material facts do not disclose an offence (for example, where tax has been paid before initiation of prosecution and there is no concealment), the evidentiary presumption cannot be employed to manufacture the basic ingredients of the offence. Thus the reverse onus under Section 278E does not rescue a prosecution which lacks the essential factual foundation. [Paras 15, 16, 17]

Section 278E's presumption of culpable mental state could not be invoked to sustain prosecution in the absence of facts constituting the offence.

Malafide prosecution and non-application of mind - Quashing of criminal complaint under Section 482 Cr.P.C. - Whether the complaint should be quashed on the ground that sanction to prosecute and the complaint suppressed the material fact of prior payment, amounting to malafide prosecution and non-application of mind. - HELD THAT: - The Court found that the Principal Commissioner, while granting sanction, failed to consider the material record that tax with interest had been paid on 15/02/2018 and proceeded on an incorrect statement that the self-assessment amount was unpaid. The complaint filed thereafter likewise alleged non-payment despite payment on record. Such suppression of material facts and failure to apply mind amounted to malafide prosecution. When malafide is manifest and the prosecution lacks a factual basis, the petitioners should not be subjected to a needless trial; therefore exercise of the Court's inherent jurisdiction under Section 482 Cr.P.C. to quash the complaint was appropriate. [Paras 18, 19, 20, 21]

The complaint was quashed as malafide and founded on non-application of mind to material facts; prosecution would not be permitted to proceed.

Final Conclusion: The petitions to quash the complaint were allowed: on the facts there was no wilful attempt to evade tax for Assessment Year 2017-2018, the evidentiary presumption under Section 278E could not cure the absence of foundational elements of the offence, and the sanction and complaint were vitiated by suppression of payment and non-application of mind, warranting quashing under the Court's inherent jurisdiction.

Reopening of assessment - prima facie material for reopening - reasons recorded for reopening - natural justice and opportunity to inspect reasons and file objections - disallowance of interest on interest-free/colourable loans

Reopening of assessment - prima facie material for reopening - reasons recorded for reopening - Validity of the notice under Section 148 and the decision to reopen assessment for AY 2010-11 - HELD THAT: - The Court examined whether the revenue had prima facie material to reopen the assessment and whether reasons for reopening were furnished and actionable. The reasons recorded by the Assessing Officer set out that substantial sums were transferred to the assessee's son without charging interest while the assessee's overdraft account from which funds flowed attracted interest; the balance sheet showed large loans to the son and the profit & loss account showed significant interest expenditure claimed without corresponding interest income. The Assessing Officer obtained sanction, issued the notice under Section 148, supplied the recorded reasons to the assessee, and disposed of the objections after giving an opportunity to inspect the record. Applying the settled principle that at the initiation stage the officer need only have prima facie material to justify reopening (as explained in Raymond Woolen Mills Ltd.), the Court confined itself to whether such prima facie material existed and did not assess correctness of that material on merits. [Paras 19, 20, 21, 22, 23]

There was sufficient prima facie material and proper reasons were recorded and supplied; the reopening under Section 148 was valid and no interference was warranted.

Natural justice and opportunity to inspect reasons and file objections - disallowance of interest on interest-free/colourable loans - Whether principles of natural justice were violated and whether the merits of disallowance of interest were determined by the Court - HELD THAT: - The Court considered the assessee's contention that he was not given adequate opportunity and that objections were not considered. The record shows the assessee was supplied the reasons, was given an opportunity to inspect the file, filed objections which were disposed of by a detailed order, and was asked to supply enclosures thereafter. The Court therefore found no breach of natural justice in the reopening process. As to the substantive question of disallowance of interest on amounts advanced to the assessee's son (including contentions based on availability of capital or third party funds), the Court expressly declined to rule on merits, observing that these are factual questions to be adjudicated by the Assessing Officer at the assessment stage. [Paras 20, 21, 23]

No violation of natural justice; merits of disallowance of interest not decided and to be determined by the Assessing Officer.

Final Conclusion: Writ petition dismissed: the reopening of assessment for AY 2010-11 was supported by prima facie material and proper procedure was followed; questions on the substantive disallowance of interest remain open for adjudication by the Assessing Officer.

Retrospective application of administrative circular - power of CBDT under section 268A to fix monetary limits for filing appeals - exception for organised tax evasion requiring special order - non-application of Circular No. 23/2019 and Office Memorandum to pending appeals - withdrawal/not pressing of pending appeals below prescribed monetary limits

Non-application of Circular No. 23/2019 and Office Memorandum to pending appeals - retrospective application of administrative circular - Circular No. 23/2019 dated 6th September 2019 and the Office Memorandum dated 16th September 2019 apply prospectively and do not cover appeals that were pending on the date of the Circular. - HELD THAT: - The Court examined Circular No. 23/2019 and the Office Memorandum dated 16th September 2019 and held that the exception they carve out-permitting appeals on merits in cases of organised tax evasion involving bogus LTCG/STCL-was directed to operate from the date of issuance. The text of Circular No. 23/2019 and the clarificatory Office Memorandum do not indicate that they are to be applied to appeals pending on the date of the Circular; unlike Circular No. 3/2018 which expressly stated retrospective application to pending SLPs/appeals/cross objections/references, Circular No. 23/2019 contains no such provision. Consequently, pending appeals alleging organised tax evasion as on the date of Circular No. 23/2019 are not covered by that Circular or the Office Memorandum. The Court relied on the plain language and legislative intent underlying the CBDT powers under section 268A to reach this conclusion (paras 33-36, 37-39). [Paras 34, 35, 36, 37]

Circular No. 23/2019 and the Office Memorandum dated 16th September 2019 do not apply retrospectively to appeals pending on the date of the Circular.

Power of CBDT under section 268A to fix monetary limits for filing appeals - exception for organised tax evasion requiring special order - withdrawal/not pressing of pending appeals below prescribed monetary limits - Pending appeals with tax effect below the monetary limits prescribed by earlier CBDT circulars cannot be pursued unless the CBDT issues a special order permitting appeal on merits under the organised tax evasion exception. - HELD THAT: - The Court construed the regime of CBDT circulars issued under section 268A as aimed at limiting unnecessary litigation by fixing monetary thresholds for departmental appeals. Circular No. 3/2018 (as amended by Circular No. 17/2019) prescribed monetary limits and expressly permitted withdrawal or non pressing of pending appeals below those limits. Circular No. 23/2019 creates an exception permitting appeals on merits in organised tax evasion cases only where the Board, by a special order, directs filing of such appeals. As Circular No. 23/2019 and the Office Memorandum do not operate retrospectively, and no special order of the Board had been shown in respect of these pending matters, the Department cannot pursue these pending appeals where the tax effect is below the prescribed monetary limit. The Court therefore dismissed the departmental appeals while preserving the Department's right to approach the Court afresh where a special order is issued after the Circular (paras 31-36, 40-43). [Paras 32, 33, 40, 42, 43]

Because no special order by the CBDT was shown and Circular No. 23/2019 is not retrospective, the revenue cannot pursue pending appeals below the prescribed monetary limits unless the Board issues a qualifying special order.

Final Conclusion: The departmental appeals are dismissed for want of maintainability because the tax effect is below the monetary limits prescribed by CBDT circulars and Circular No. 23/2019 (with its Office Memorandum) does not operate retrospectively; the revenue remains free to approach the Court anew where the Board issues a special order after the date of the Circular.

Reopening of assessment - re-assessment notice validity post 01.04.2021 - procedure under Section 148A - time limits for issuance of notice under substituted Section 149 - delegated legislation ultravires - CBDT notifications dated 31.03.2021 and 27.04.2021

Re-assessment notice validity post 01.04.2021 - procedure under Section 148A - time limits for issuance of notice under substituted Section 149 - Validity of a notice of reassessment issued on 14.06.2021 for Assessment Year 2014-15 without following the procedure introduced by the Finance Act, 2021. - HELD THAT: - The Court held that the new statutory scheme for reopening assessments introduced by the Finance Act, 2021 - including the enquiry and pre-notice procedure now embodied in Section 148A and the revised time-limits under substituted Section 149 - applies to any notice issued after 01.04.2021. Notices issued after that date without complying with the newly prescribed procedure are invalid. The scheme of substitution shows no intent that the pre-amendment regime should continue to govern issuance of notices after 01.04.2021, and the first proviso to the substituted Section 149 demonstrates that notices which were time-barred before 01.04.2021 could not be revived by the enlarged time-limits. Applying these principles, the impugned notice dated 14.06.2021, having been issued without following the Section 148A process, is invalid and liable to be quashed.

The reassessment notice dated 14.06.2021 for AY 2014-15 issued without following Section 148A is quashed.

Delegated legislation ultravires - CBDT notifications dated 31.03.2021 and 27.04.2021 - Validity of the CBDT notifications of 31.03.2021 and 27.04.2021 which sought to clarify or preserve the pre-amendment application of Section 148 for periods after 01.04.2021. - HELD THAT: - The Court concluded that the CBDT, acting under the limited power conferred by the Relaxation Act, 2020 to extend time-limits, exceeded its delegated authority by issuing explanations purporting to preserve or defer the substitution effected by the Finance Act, 2021. Such subordinate legislation cannot alter or override the parent Act or travel beyond the scope of the delegated power; an explanation that changes the statutory scheme is ultra vires. Consequently, the clarificatory explanations in the said notifications are unconstitutional and invalid and cannot validate notices issued after 01.04.2021 in disregard of the new statutory procedure.

The CBDT notifications dated 31.03.2021 and 27.04.2021 insofar as they purport to preserve or restore the pre-amendment reassessment regime are invalid and of no legal effect.

Final Conclusion: The impugned notice of reassessment dated 14.06.2021 for Assessment Year 2014-15 is quashed. The Court affirms that the reassessment regime substituted by the Finance Act, 2021 governs notices issued after 01.04.2021 and that the CBDT notifications attempting to preserve the pre-amendment regime are ultra vires and invalid.

Transfer of cases under Section 127 - Centralization for coordinated investigation - Reasoned order and opportunity to be heard - Jurisdiction of Assessing Officer under Section 124 - Judicial review of administrative transfer-limits

Transfer of cases under Section 127 - Centralization for coordinated investigation - Reasoned order and opportunity to be heard - Judicial review of administrative transfer-limits - Validity of the transfer order dated 30.09.2020 passed under Section 127 for centralization of the assessee's case with DCIT, Central Circle-8(1), Mumbai - HELD THAT: - The Court considered whether the transfer under Section 127 was vitiated by absence of reasons, absence of opportunity of hearing, or lack of any material connecting the assessee with the searched persons. Section 127 is an exception to normal jurisdiction under Section 124 and permits transfer of a 'case' for effective and coordinated investigation, subject to recording reasons and giving the assessee a reasonable opportunity to be heard wherever possible. The Court examined the record showing (a) proposals for centralization from multiple offices, (b) show-cause notices and correspondence offering opportunities to the assessee to object, and (c) the detailed order dated 30.09.2020 disposing of objections which recorded the authority's view about the assessee's alleged role as an angadia and the need for centralization to facilitate coordinated inquiry. Applying settled principles that facilitation or coordination of investigation is a substantial ground for transfer and that judicial review of such administrative discretion is limited to examining the decision-making process (not substituting the Court's view for the authority's), the Court found that the procedural requirements under Section 127 were complied with and that there was material on record to prima facie indicate nexus between the assessee and the searched entities. The Court further noted that transfer orders are administrative in nature, the assessee has no right to choose Assessing Officer, and interference is warranted only where the order is arbitrary, perverse, mala fide, or made without jurisdiction. On the facts and material before it, no such vitiating defect was demonstrated. [Paras 16, 22, 25, 26]

The transfer order dated 30.09.2020 under Section 127 was upheld; the writ petition is dismissed.

Final Conclusion: The High Court dismissed the writ petition and upheld the transfer of the assessee's case to DCIT, Central Circle-8(1), Mumbai under Section 127, finding that the procedural requirements were met and that sufficient material justified centralization for coordinated investigation.

Assessment order passed in the name of a dissolved/struck off company - jurisdictional defect - void ab initio - stay of assessment order - right of appeal under the Faceless Appeal Scheme - opportunity of hearing

Assessment order passed in the name of a dissolved/struck off company - jurisdictional defect - void ab initio - stay of assessment order - opportunity of hearing - Challenge to the assessment order dated 19th December, 2019 under Sections 144/147 on the ground that it was issued in the name of a dissolved/struck off company and the interim relief to be granted. - HELD THAT: - The petitioner contended that the impugned assessment suffers from a fundamental jurisdictional defect and is void ab initio because it was issued in the name of an entity struck off from the register of companies, relying upon earlier judicial authorities. The High Court issued notice on the writ petition and permitted the Revenue and Union of India to file counter-affidavits within four weeks, with leave for the petitioner to file rejoinder-affidavits before the next date. Pending further orders, the Court recorded a stay of the impugned assessment order dated 19th December, 2019. Separately, the Court allowed the interim exemption application (C.M. No.3322/2022). The order therefore (a) preserves the petitioner's statutory position by staying the assessment during adjudication of the writ, (b) directs adversarial pleadings by fixed timelines, and (c) grants the interim relief applied for.

Notice issued; counter-affidavits and rejoinder permitted within fixed time; interim stay of the impugned assessment order granted; interim exemption application allowed.

Final Conclusion: Writ petition admitted for consideration; notice issued; interim relief granted by staying the assessment order dated 19th December, 2019; parties directed to file affidavits within stipulated time and matter listed for further hearing.

Correction of record - application to the Tribunal for rectification - tribunal to decide on merits - preservation of alternative legal remedies

Correction of record - application to the Tribunal for rectification - tribunal to decide on merits - Appellant directed to approach the Tribunal by filing an appropriate application to correct the Tribunal's observation that certain grounds were not pressed, and the Tribunal to decide that application on merits within the rules of law. - HELD THAT: - The High Court noted that the Tribunal's impugned order recorded an observation in paragraph 5 that the remaining grounds were not pressed by the assessee, whereas the appellant contends that grounds Nos. 3 to 5 were pressed and written submissions on those grounds were placed before the Tribunal. The Court held that the appropriate remedy at this stage is for the appellant to move the Tribunal with an application seeking correction of the specific observation in the opening line of paragraph 5 of the impugned order. The Court directed that if such an application is filed within three weeks, the Tribunal shall deal with it on its merits. The Court did not adjudicate the substantive correctness of the grounds themselves, nor substitute its view for that of the Tribunal; instead it provided a procedural direction enabling the Tribunal to reconsider its recital and decide the application on merits.

Appellant permitted to file an application before the Tribunal within three weeks to seek correction of the stated observation; the Tribunal to adjudicate that application on merits; further legal remedies remain available to the appellant if aggrieved.

Final Conclusion: The appeal is disposed of by directing the appellant to approach the Tribunal with an application to correct the observation in paragraph 5 of the impugned order within three weeks, the Tribunal to decide the application on merits, and the appellant remains free to pursue other legal remedies if dissatisfied.

Provision for inventory obsolescence - deferred grant and prohibition against double taxation - taxation in the correct assessment year - admission of additional evidence at appellate stage without remand - adhoc disallowance of expenses

Provision for inventory obsolescence - Accounting Standards and valuation of closing stock - Deletion of addition made by AO in respect of provision for inventory obsolescence. - HELD THAT: - The Tribunal affirmed the deletion by the CIT(A) of the addition made by the AO to disallow the provision for inventory obsolescence. The AO treated the provision as an inadmissible, uncertain expense under section 37(1), but the Tribunal found that this approach conflicted with binding precedents which recognise provision for diminution in stock value made in accordance with accounting principles (cost or net realizable value, whichever is lower) and accepted consistent accounting treatment. The Tribunal relied on the decisions of the Delhi High Court and Karnataka High Court holding that such provisions, made in compliance with accounting standards and regularly followed, cannot be disallowed merely because they are anticipatory, and that substance of accounting treatment governs tax treatment. In view of those precedents and the fact that books were audited and not rejected, there was no reason to interfere with the appellate finding deleting the addition. [Paras 9, 11, 12]

Addition on account of provision for inventory obsolescence deleted; Revenue's ground dismissed.

Admission of additional evidence at appellate stage without remand - Validity of CIT(A)'s admission of additional evidence without remanding to AO for verification. - HELD THAT: - The Revenue alleged that the CIT(A) admitted additional evidence without affording the AO an opportunity to examine it. The assessee denied filing any additional evidence before the CIT(A). The Revenue failed to identify specific additional documents that were not confronted to the AO. Absent a specific showing as to what additional evidence was taken and not placed before the AO, the Tribunal found no merit in the challenge to the appellate admission and upheld the CIT(A)'s action. [Paras 16]

Ground contesting admission of additional evidence dismissed.

Adhoc disallowance of expenses - business expediency and evidentiary burden - Sustainability of AO's adhoc disallowance of 5% of certain repair/maintenance expenses. - HELD THAT: - The AO made a 5% adhoc disallowance without pointing to specific instances of personal or non-business expenditure, while conceding that 95% of similar expenses were allowable on business expediency. The Tribunal held that the AO's selective acceptance of 95% and arbitrary disallowance of 5% without specific justification was not in consonance with settled principles. The CIT(A)'s deletion of the adhoc disallowance was therefore confirmed. [Paras 21]

Adhoc 5% disallowance deleted; Revenue's ground dismissed.

Deferred grant and prohibition against double taxation - taxation in the correct assessment year - Assessee's challenge to addition of deferred grant to income in Assessment Year 2012-13 and whether the amount had already been offered to tax in Assessment Year 2016-17. - HELD THAT: - The assessee contended that the grant was received for specified capital purposes, unutilized amounts were held in trust and were booked as liability, and in any event the unutilized balance was written back and offered to tax in Assessment Year 2016-17. The Revenue did not dispute that the amount was offered to tax in Assessment Year 2016-17. Applying the settled principle that income cannot be taxed twice and that an amount not partaking the character of income in a year should not be taxed, the Tribunal set aside the appellate order sustaining the addition for Assessment Year 2012-13 and directed the AO to verify and, if appropriate, tax the amount in the correct assessment year. The cross-objection was allowed for statistical purposes, with instruction to the AO to examine correct year of taxation. [Paras 29]

Impugned addition set aside and matter remitted to AO to verify and tax, if applicable, in the correct assessment year; cross-objection allowed for statistical purposes.

Final Conclusion: Revenue's appeal dismissed in its entirety; assessee's cross-objection allowed for statistical purposes and matter remitted to the Assessing Officer to verify and, as appropriate, effect taxation of the deferred grant in the correct assessment year.

Validity of reassessment framed under section 143(3) read with section 148 in absence of a return - Mandatory nature of notice under section 143(2) - Distinction between notice under section 142(1) and notice under section 143(2) - Quashing of assessment for lack of statutory notice

Validity of reassessment framed under section 143(3) read with section 148 in absence of a return - Quashing of assessment for lack of statutory notice - Assessment framed under section 143(3) read with section 148 in the absence of any return of income was invalid and liable to be quashed. - HELD THAT: - The Tribunal found as a fact that the assessee had not filed any return under section 139 nor in response to the section 148 notice. The issuance of an assessment under section 143(3) presupposes the existence of a valid return and the service of a notice under section 143(2). Absent a return and without a valid section 143(2) notice, framing an assessment under section 143(3) is impermissible. The Tribunal relied on the principle that service of a notice under section 143(2) is mandatory and not a mere procedural formality, following the rule laid down by the Supreme Court that where the statutory notice is not served in accordance with the Act the assessment is invalid. Applying this legal principle to the facts, the Tribunal held that the assessment order dated 21.11.2016 was bereft of jurisdictional validity and must be quashed. [Paras 7, 8, 9]

Assessment framed under section 143(3)/148 without any return or valid notice under section 143(2) is quashed.

Distinction between notice under section 142(1) and notice under section 143(2) - Mandatory nature of notice under section 143(2) - A notice issued under section 142(1) cannot be treated as a substitute for the statutory notice required under section 143(2). - HELD THAT: - The CIT(Appeals) had held that notices issued under section 142(1) could be viewed as notice under section 143(2). The Tribunal disagreed, observing that this approach misconstrued the statutory scheme and overlooked the specific contention that no return had been filed. The mandatory character of a section 143(2) notice cannot be satisfied by issuing notices under section 142(1); the latter do not supplant the statutory requirement for a section 143(2) notice necessary to validly frame an assessment under section 143(3). Consequently, the CIT(Appeals)'s reliance on section 142(1) notices to validate the assessment was held to be legally unfounded. [Paras 6, 7, 8]

Notices under section 142(1) cannot be construed as notices under section 143(2); the CIT(A)'s view to the contrary is rejected.

Final Conclusion: The assessee's appeal is allowed; the assessment order dated 21.11.2016 framed under section 143(3)/148 for Assessment Year 2011-12 is quashed for want of a valid notice under section 143(2) and because no return of income was filed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Bonafide or inadvertent error as defence to penalty - Requirement that penalty notice specify the limb/charge alleged - Rejection of claim in assessment year does not ipso facto attract penalty where claim is bona fide and later accepted

Bonafide or inadvertent error as defence to penalty - Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Penalty levied for wrong claim of deduction under section 24(a) was not sustainable as the claim arose from a bona fide and inadvertent error and the assessee had disclosed the relevant income. - HELD THAT: - The Tribunal examined whether the assessee's claim of deduction under section 24(a) constituted concealment or furnishing of inaccurate particulars. Applying the test that a bonafide or inadvertent mistake must be established from records and noting that rent was offered to tax under income from house property, the Tribunal held that the claim was made bona fide. In light of the reasoning in Price Waterhouse (as relied upon by parties) and the facts showing disclosure of the relevant income, the levy of penalty on this issue could not be sustained and had to be deleted. [Paras 7]

Penalty in respect of the deduction claimed under section 24(a) deleted.

Rejection of claim in assessment year does not ipso facto attract penalty where claim is bona fide and later accepted - Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Penalty confirmed for disallowance of depreciation was unsustainable where the claim was made bona fide and an identical claim was allowed by the appellate authority in the succeeding year. - HELD THAT: - The Tribunal observed that merely because the Assessing Officer rejected the depreciation claim does not automatically render the assessee liable to penalty. The assessee had disclosed and furnished particulars and there was no material to show conscious defiance of law. The fact that the Commissioner (Appeals) allowed the same claim in the succeeding year under identical facts, and Revenue did not point to any change in facts for the year under appeal, indicated absence of deliberate concealment. Relying on the principle in Reliance Petroproducts (as relied upon), the Tribunal directed deletion of the penalty on this ground. [Paras 8, 9]

Penalty in respect of the depreciation claim deleted.

Requirement that penalty notice specify the limb/charge alleged - Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Penalty proceedings were vitiated because the notice initiating penalty failed to specify the particular limb/charge under which the assessee was accused, rendering initiation of proceedings legally defective. - HELD THAT: - The Tribunal reviewed the show-cause notice and found it merely recited that the assessee 'have concealed the particulars of your Income or furnished inaccurate particulars' without specifying which limb was being invoked. Citing the Delhi High Court's approach in PCIT vs Sahara India Life Insurance Company Limited (as relied upon by the assessee), the Tribunal held that where the specific limb is not struck off or identified in the notice under section 274 read with section 271(1)(c), the levy of penalty suffers from infirmity. Given the patent defect in the notice, the initiation of penalty proceedings failed the test of law. [Paras 12, 13, 14]

Penalty proceedings quashed for want of a legally valid notice specifying the charge; additional ground allowed.

Final Conclusion: The appeal is allowed: penalties imposed under section 271(1)(c) are deleted on the merits in respect of the section 24(a) deduction and the depreciation claim, and the penalty proceedings are held legally defective for failure to specify the charge in the notice.

Disallowance under section 14A - Rule 8D computation of expenditure relating to exempt income - Non-addition of notional disallowance under section 14A to book profit under section 115JB - Depreciation classification of renewable energy devices - Ejusdem generis and noscitur a sociis in construction of tax rules - Ascertained liability for leave encashment and accrual accounting - Admissibility of additional evidence under Rule 29 ITAT Rules

Disallowance under section 14A - Rule 8D computation of expenditure relating to exempt income - Admissibility of additional evidence under Rule 29 ITAT Rules - Non-addition of notional disallowance under section 14A to book profit under section 115JB - Extent and correctness of disallowance under section 14A read with rule 8D and its treatment for computation of book profit under section 115JB. - HELD THAT: - The Tribunal admitted additional evidence under Rule 29 as necessary for substantial justice and to ascertain the nature of interest/finance charges (admission sustained). On facts the alleged interest expenditure related to discounting of trade bills and guarantee commission and no outside interest-bearing borrowings were shown to be applied for earning exempt dividend income; the assessing officer failed to verify these facts. Consequently the component of disallowance under rule 8D(2)(ii) based on presumed interest was deleted. As to indirect/administrative expenditure under rule 8D(2)(iii), the assessing officer computed disallowance on gross investments without bifurcation; after the assessee produced reconciliation the revenue conceded and the disallowance was restricted to the portion relating to dividend-earning investment (quantified by the Tribunal). Separately, the Tribunal held that the notional disallowance under section 14A (being notional) cannot be added back to book profit under clause (f) of section 115JB, having regard to the scheme of section 115JB(1) and (5) and relevant precedents; accordingly such addition to MAT book profit was held impermissible. The Tribunal therefore partly allowed the appeal on section 14A issues by deleting the interest-related disallowance, restricting the administrative disallowance as per the assessee's reconciled computation, and disallowing addition of section 14A amounts to book profit under section 115JB. [Paras 11]

Interest-based disallowance under rule 8D(2)(ii) deleted; disallowance under rule 8D(2)(iii) restricted to amount computed on dividend-earning investments; amounts disallowed under section 14A cannot be added to book profit under section 115JB.

Depreciation classification of renewable energy devices - Ejusdem generis and noscitur a sociis in construction of tax rules - Whether a diesel generator qualifies as a 'renewable energy device' for entitlement to higher rate of depreciation under Appendix I entry III(8)(xiii)(m). - HELD THAT: - The Tribunal construed the entry III(8)(xiii)(m) by applying principles of noscitur a sociis and ejusdem generis, observing that the entry contemplates devices generating non-conventional/renewable energy (e.g., wind or solar) and thus the phrase 'electric generators and pumps running on wind energy' must be read as generators running on wind energy. A diesel generator runs on conventional fuel and does not fall within the class of renewable energy devices enumerated in the Appendix. Reliance placed by the assessee on decisions concerning different factual matrices was found distinguishable. Consequently the assessing officer's reclassification of the diesel generator to the general plant & machinery block (lower rate) was upheld. [Paras 12]

Claim for 80% depreciation on diesel generator as a renewable energy device rejected; appeal on this ground dismissed.

Ascertained liability for leave encashment and accrual accounting - Whether the provision for leave encashment constitutes an ascertained liability deductible for computing book profit under section 115JB. - HELD THAT: - Applying mercantile/accrual accounting principles and precedents, the Tribunal held that a provision quantified on actuarial basis for leave encashment represents a liability that is incurred and capable of being estimated with reasonable certainty even though payment may fall in future. The liability is therefore not contingent but an ascertained liability. Reliance on authority recognising such accruals supported the view that the provision made for leave encashment is allowable and should not be added back in computing book profit under section 115JB. [Paras 13]

Provision for leave encashment held to be an ascertained liability and deduction allowed; addition to book profit under section 115JB disallowed.

Final Conclusion: The appeal is partly allowed: the section 14A interest disallowance deleted and administrative disallowance limited to the amount attributable to dividend-earning investments (and amounts under section 14A cannot be added to book profit under section 115JB); the claim for 80% depreciation on the diesel generator as a renewable energy device is rejected; and the provision for leave encashment is held to be an ascertained liability and is allowed for computation of book profit.

Non-supply of relied upon documents (RUDs) - supply of illegible relied upon documents - subjective satisfaction of the detaining authority - non-application of mind - preventive detention under COFEPOSA - severability of grounds under Section 5A of COFEPOSA - right to make effective representation under Article 22(5) of the Constitution

Non-supply of relied upon documents (RUDs) - supply of illegible relied upon documents - subjective satisfaction of the detaining authority - right to make effective representation under Article 22(5) of the Constitution - non-application of mind - The effect of non-supply and supply of illegible RUDs on the validity of the detention orders and on the detaining authority's subjective satisfaction. - HELD THAT: - The Court found on the material placed before it, including the original RUDs, that several relied upon documents supplied to the detenus and those on the detaining authority's file were admittedly illegible. The law requires that legible copies of relevant documents considered in forming subjective satisfaction must be furnished so that the detenu can make an effective representation under Article 22(5). Illegible documents are equivalent to non-placement of RUDs and their reliance vitiates the detaining authority's subjective satisfaction where those documents were considered in reaching the decision. The Court noted that substantial reliance was placed in the grounds upon statements and other documents whose admissibility or weight was affected by retractions and belated rebuttals which the sponsoring authority should have placed before the detaining authority. Given the admitted illegibility and the detaining authority's apparent inability to have perused voluminous documents within the short time available, the detention orders suffered from non-application of mind and were rendered invalid. [Paras 36, 37, 38, 39, 40]

The non-supply and supply of illegible RUDs vitiated the detaining authority's subjective satisfaction; the detention orders are invalid for non-application of mind.

Severability of grounds under Section 5A of COFEPOSA - preventive detention under COFEPOSA - non-application of mind - subjective satisfaction of the detaining authority - Whether Section 5A's severability principle can salvage the detention orders that are invalid due to non-application of mind. - HELD THAT: - The Court considered the respondents' oral plea that under Section 5A severable grounds could preserve the detention order. It held that Section 5A cannot save an order where the fundamental condition precedent - the detaining authority's independent subjective satisfaction arrived at after perusal of relevant material - is vitiated by non-application of mind. The grounds in the present case were not properly severable because illegible RUDs were admitted to have been relied upon by the detaining authority; consequently the orders could not be sustained on the basis that some other independent ground remained valid. The Court relied on authority and prior decisions distinguishing cases where severability applies from those where the subjective satisfaction itself is flawed. [Paras 47, 48, 49, 50, 51]

Section 5A does not save the detention orders where the detaining authority's subjective satisfaction is vitiated by non-application of mind; the severability argument fails in these facts.

Final Conclusion: Writ petitions allowed. The detention orders dated 26.11.2021 (PD-PD-12001/17/2021-COFEPOSA and PD-12001/18/2021-COFEPOSA) are quashed as invalid for reliance on illegible/non-supplied RUDs and for non-application of mind; the detenus are directed to be released forthwith unless their custody is required in connection with any other case.

Provisional release - conditional deposit of enhanced duty - stay of confiscation - continuation of adjudication proceedings - quantification of duty

Provisional release - conditional deposit of enhanced duty - stay of confiscation - Whether the petitioners are entitled to provisional release of imported Multi Function Devices notwithstanding the pendency of challenges to notifications and the Revenue's contention that the goods are prohibited. - HELD THAT: - The Court accepted petitioners' reliance on earlier orders of this Court and the Supreme Court, including the Supreme Court's order dated 11.08.2021 which stayed confiscation and directed provisional release on identical terms. Noting that the controversy regarding the notifications dated 01.04.2020 and 18.03.2021 is sub judice, the Court held that petitioners may seek provisional release independently of the substantive adjudication. The Court directed that provisional release be conditioned upon payment/deposit of the enhanced duty as quantified by Customs, observing that the established practice and intervening higher court orders justify provisional release despite pendency of litigation on prohibitory notifications. [Paras 15, 16, 17]

Provisional release ordered on condition that the petitioners pay/deposit the enhanced duty amount; reliance placed on earlier orders including the Supreme Court's order staying confiscation.

Quantification of duty - continuation of adjudication proceedings - Procedure and timeline for quantification, payment and release, and whether the order bars further adjudication by Customs. - HELD THAT: - The Court directed Customs to quantify the enhanced duty forthwith within one week of receipt of a copy of the order; upon receipt of such quantification the petitioners shall pay immediately and Customs shall release the goods within three weeks of receipt of payment. The Court made clear that this direction for provisional release does not impede the Customs Department from proceeding with adjudication or other statutory actions in accordance with law, and preserved the Department's right to continue proceedings which may lead to confiscation or other consequences depending on final adjudication. [Paras 17]

Customs to quantify duty within one week, petitioners to pay on receipt of quantification, goods to be released within three weeks of payment; Customs may continue adjudication proceedings undisturbed by this provisional release.

Final Conclusion: Writ petitions allowed in part: petitioners granted provisional release of the imported Multi Function Devices on deposit/payment of enhanced duty as quantified by Customs within the timelines directed; the order expressly preserves the Revenue's right to proceed with adjudication and other lawful remedies.

Sanction of Scheme of Amalgamation under Section 230(6) read with Section 232(3) of the Companies Act, 2013 - Transfer and vesting of assets, rights and liabilities on amalgamation - Appointed date and retrospective effectiveness of amalgamation - Dispensation of meetings of shareholders and creditors - Obligations to file schedule of assets and liabilities and post-sanction filings with Registrar of Companies - Treatment of undertakings made to the Tribunal as binding - Dissolution of transferor company without winding up - Payment of applicable stamp duty on transfer of immovable property - Adjustment of fees on clubbing of authorised share capital upon amalgamation

Sanction of Scheme of Amalgamation under Section 230(6) read with Section 232(3) of the Companies Act, 2013 - Appointed date and retrospective effectiveness of amalgamation - Transfer and vesting of assets, rights and liabilities on amalgamation - Sanction of the Scheme of Amalgamation between Eurasia Publishing House Private Limited and Chhaya Prakashani Limited and its operative legal effects - HELD THAT: - The Tribunal considered the petition filed under the Companies Act for sanctioning the Scheme and the attendant materials including board approvals, auditor's certificate as to accounting treatment, dispensation of meetings where applicable, statutory notices and representations filed by authorities. Having heard parties and considered the records, the Tribunal sanctioned the Scheme, fixed the appointed date as 1st April 2020 and directed that, from the appointed date, all properties, rights and interests of the transferor shall vest in the transferee without further act or deed, and all debts, liabilities and duties of the transferor shall become the liabilities and duties of the transferee. The order further provides that pending or existing proceedings by or against the transferor shall continue by or against the transferee and be prosecuted or defended by it in accordance with law.

Scheme sanctioned; appointed date fixed as 1st April 2020; assets, rights and liabilities to stand transferred and vested in the transferee and pending proceedings to be continued by or against the transferee.

Dispensation of meetings of shareholders and creditors - Whether meetings of shareholders and creditors were required for considering the Scheme - HELD THAT: - The Tribunal noted the prior directions in the connected Company Application dispensing with meetings of equity shareholders and unsecured creditors where consent by affidavit was obtained and recorded the status of secured creditors. The Tribunal proceeded on that basis and sanctioned the Scheme without convening such meetings.

Meetings dispensed as per earlier order; Scheme sanctioned without holding meetings.

Obligations to file schedule of assets and liabilities and post-sanction filings with Registrar of Companies - Treatment of undertakings made to the Tribunal as binding - Payment of applicable stamp duty on transfer of immovable property - Adjustment of fees on clubbing of authorised share capital upon amalgamation - Dissolution of transferor company without winding up - Directives and undertakings to be complied with as conditions of sanction - HELD THAT: - The Tribunal recorded and treated as binding the undertakings given by the petitioners in their rejoinder concerning compliance with statutory post-sanction formalities. It directed the transferee to issue and allot shares as per the Scheme (and, if necessary, to increase authorised share capital), to file the schedule of assets and liabilities within three weeks, to deliver certified copies of the order to the Registrar of Companies within thirty days of obtaining the certified copy, and recognised the undertaking to pay applicable stamp duty on transfer of immovable properties. The Tribunal also accepted the undertaking to comply with the requirement to adjust fees on clubbing of authorised share capital and to file the relevant statement at the time of filing INC-28. Consequent to the sanction, the transferor shall stand dissolved without winding up from the effective date.

Undertakings accepted and treated as binding; directions issued for allotment of shares, filing of schedule, ROC filings, payment of stamp duty, fee adjustment compliance and dissolution of the transferor without winding up.

Final Conclusion: The Tribunal allowed the petition and sanctioned the Scheme of Amalgamation between Eurasia Publishing House Private Limited and Chhaya Prakashani Limited with effect from 1st April 2020, directing transfer and vesting of assets and liabilities, continuation of proceedings by/against the transferee, compliance with specified post-sanction filings and undertakings (including payment of stamp duty and fee adjustment on authorised capital), and dissolution of the transferor company without winding up.

Necessary party - proper party - impleadment in a company petition under Section 241/242 of the Companies Act, 2013 - locus standi of shareholders - exercise of judicial discretion to add parties - principles under Order 1 Rule 10 CPC

Necessary party - proper party - impleadment in a company petition under Section 241/242 of the Companies Act, 2013 - locus standi of shareholders - exercise of judicial discretion to add parties - Whether two shareholders who are not parties to the pending company petition can be impleaded as additional respondents at a belated stage. - HELD THAT: - The Tribunal examined the averments and documents filed in the application for impleadment and applied the legal tests of a 'necessary party' and a 'proper party'. The Tribunal held that impleadment should be permitted only where the prospective party's presence is just and necessary to enable complete and efficacious adjudication of the controversies; mere shareholding, without demonstration of how the applicant's rights would be affected by the outcome or how their presence is essential to decide the matters in issue, is insufficient. The Tribunal emphasised that discretion to add parties must be exercised according to reason and fair play and not arbitrarily, relying on analogous principles under Order 1 Rule 10 CPC, and cautioned against allowing impleadment where it would permit ventilating unrelated grievances or cause prejudice by introducing matters having no nexus to the subject-matter of the petition. Applying these principles to the materials before it, the Tribunal found that the applicants failed to show they are in management against whom acts of oppression and mismanagement are complained of, or that their joinder was necessary for a complete decision. The Tribunal also noted that the applicants were not eligible to file an independent company petition under Section 244 and that belated impleadment at the stage when pleadings are complete and the matter is listed for final hearing was not justified on the facts presented. [Paras 14, 15, 16, 18, 19]

Application for impleadment dismissed as applicants are neither necessary nor proper parties and mere shareholding does not justify their addition as respondents.

Final Conclusion: The application for impleading the two shareholders as additional respondents in Company Petition No. TCP/34/KOB/2019 is dismissed for want of merit; the applicants failed to establish that their joinder was necessary or proper or that mere shareholding entitled them to be added at a belated stage.

Scheme of Amalgamation - Sanction by Tribunal - Transfer and vesting of undertaking - Appointed Date - Section 232 of the Companies Act, 2013 - Continuance of contracts and legal proceedings - Employees' continuity of service and transfer of retirement benefits - Accounting treatment of amalgamation (Pooling of interests) - Automatic increase of authorised share capital on amalgamation - Liabilities and existing charges to remain unaffected - Filing and stamp duty compliance following sanction

Scheme of Amalgamation - Sanction by Tribunal - Section 232 of the Companies Act, 2013 - Sanction of the Scheme of Amalgamation between the Transferor Company and the Transferee Company. - HELD THAT: - The Tribunal examined the material placed on record, including board resolutions, the Scheme, the Registrar of Companies' report and the absence of objections from statutory authorities. Having found the Scheme to be fair, reasonable, not in violation of law and not contrary to public policy, and satisfied that statutory compliances under Sections 230 and 232 of the Companies Act, 2013 were followed, the Tribunal sanctioned the Scheme and made it absolute. The sanction operates to bind members, secured and unsecured creditors and employees of the petitioner companies.

The Scheme of Amalgamation is sanctioned and shall be binding on the Members, Secured Creditors, Unsecured Creditors and employees of the Petitioner Companies.

Appointed Date - Transfer and vesting of undertaking - Section 232 of the Companies Act, 2013 - Effectiveness of transfer and vesting of the Transferor Company's undertaking from the Appointed Date fixed as 1st April 2019. - HELD THAT: - The Scheme provides that upon coming into force it shall be deemed effective from the Appointed Date and, by virtue of the Tribunal's sanction under Section 232, all assets, liabilities, rights and obligations of the Transferor Company shall stand transferred to and vested in the Transferee Company with effect from the Appointed Date. The Tribunal fixed the Appointed Date as opening hours of 1st April 2019 and sanctioned the transfer and vesting accordingly, subject to the terms of the Scheme (including that disputed or unacknowledged claims are not deemed accepted).

The transfer and vesting of the Undertaking of the Transferor Company to the Transferee Company shall take effect from the Appointed Date of 1st April 2019 as provided in the Scheme.

Continuance of contracts and legal proceedings - Transfer and vesting of undertaking - Continuation and enforceability of contracts, suits and other proceedings after amalgamation. - HELD THAT: - The Scheme stipulates and the Tribunal sanctioned that all contracts, proceedings, suits, appeals and other legal or quasi judicial proceedings by or against the Transferor Company pending on or after the Effective Date shall continue, be prosecuted and enforced by or against the Transferee Company as if it were the Transferor Company. Inter se transactions between the two companies shall be closed in the books by appropriate contra entries. The Tribunal directed compliance with these provisions in giving effect to the Scheme.

All contracts, proceedings and legal actions by or against the Transferor Company shall continue and be enforceable by or against the Transferee Company as provided in the Scheme.

Employees' continuity of service and transfer of retirement benefits - Treatment of employees and transfer of their service continuity and retirement fund balances on amalgamation. - HELD THAT: - The Scheme provides that employees of the Transferor Company on its payroll shall be offered transfer of their services to the Transferee Company with continuity of service and on terms not less favourable than before transfer. Accumulated balances in provident fund, gratuity, superannuation or other retirement funds shall be transferred to corresponding funds of the Transferee Company subject to approvals, and the Transferee Company shall be substituted for the Transferor Company for administration of such funds. The Tribunal sanctioned these provisions and directed their implementation.

Employees' services shall be transferred with continuity and retirement fund balances shall be transferred to the corresponding funds of the Transferee Company as provided in the Scheme.

Accounting treatment of amalgamation (Pooling of interests) - Accounting policy to be followed upon amalgamation. - HELD THAT: - The Scheme prescribes that accounting of the amalgamation shall follow generally accepted accounting principles prevailing in India and be undertaken by the Pooling of Interests Method as per Accounting Standard 14. Immovable and other assets and liabilities of the Transferor Company are to be recorded in the books of the Transferee Company at book values as at the Appointed Date, with differences in accounting policies to be adjusted against revenue reserves. The Tribunal sanctioned this accounting regime and authorised the Transferee Company, in consultation with auditors, to resolve clarifications or adjustments in the best interests of the company.

The accounting of the amalgamation shall be carried out by the Pooling of Interests Method with assets and liabilities reflected at book values as provided in the Scheme.

Automatic increase of authorised share capital on amalgamation - Filing and stamp duty compliance following sanction - Effect of amalgamation on authorised share capital and consequent filing and stamp duty obligations. - HELD THAT: - The Scheme provides that on coming into force the Authorised Share Capital of the Transferor Company shall stand merged with and added to that of the Transferee Company ipso facto and without further act, registration fee or stamp duty; the Tribunal sanctioned this and directed the petitioner companies to file the certified order and Scheme with the Registrar of Companies in E Form INC 28 and to lodge certified copies with the Superintendent of Stamps for adjudication of stamp duty within prescribed timeframes. The Tribunal also directed filing of amended MoA/AoA and compliance with Section 232(3)(i).

The Authorised Share Capital of the Transferee Company shall stand increased automatically as provided in the Scheme and the Petitioner Companies must comply with filing and stamp duty formalities directed by the Tribunal.

Liabilities and existing charges to remain unaffected - Effect of amalgamation on existing charges and liabilities. - HELD THAT: - The Scheme and the Tribunal's sanction confirm that the transfer and vesting of the Undertaking is subject to any existing charges, encumbrances, hypothecations or mortgages on the assets; the Scheme does not envisage modification or dilution of subsisting charges. Further, the Scheme clarifies that the sanction does not constitute acceptance of disputed or unacknowledged claims by the Transferee Company.

All existing charges and liabilities shall continue to subsist and the Scheme does not alter their nature or operation; disputed claims are not deemed accepted by sanction.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Hesel Engineering Private Limited (Transferor) and Henry and Farad Private Limited (Transferee), fixed the Appointed Date as 1st April 2019, directed transfer and vesting of the Transferor's undertaking (assets, liabilities, contracts and proceedings) to the Transferee subject to existing charges, upheld employee continuity and specified accounting, capital alteration, filing and stamp duty compliance as set out in the Scheme; the petitions were disposed of accordingly.

Statutory charge of municipal tax - enforceability of charge against transferee for value without notice - constructive notice - protection of a bona fide purchaser for value without notice - liquidator's sale by public auction - moratorium on alienation under the Insolvency and Bankruptcy Code - consolidation of claims before the liquidator - overriding effect of the Insolvency and Bankruptcy Code

Enforceability of charge against transferee for value without notice - statutory charge of municipal tax - protection of a bona fide purchaser for value without notice - constructive notice - Whether Surat Municipal Corporation can claim a first charge or precedence over the subject property to recover pre-sale property tax arrears from the auction-purchaser. - HELD THAT: - The Court applied the well-settled principle that a statutory provision creating a charge on property must, by clear and express words, enable enforcement of that charge against a transferee for value without notice in order to override the general prohibition in the proviso to Section 100 of the Transfer of Property Act. Reliance was placed on AI Champdany Industries Ltd. and Ahmedabad Municipal Corporation where it was held that mere creation of a charge does not dispense with the requirement of notice; whether a transferee had constructive notice is a question of fact. Applying those authorities, and having found that the auction purchaser acquired the property in a liquidation sale without notice of pre-sale municipal dues, the Court held that the municipal corporation cannot assert a first charge against the property in the hands of the purchaser for arrears incurred before the sale. The purchaser may, however, be liable for dues arising after the date of purchase. The determinative reasoning is that absent an express statutory provision permitting enforcement against a transferee for value without notice, the purchaser is entitled to protection as a bona fide transferee. [Paras 10, 27]

The Surat Municipal Corporation cannot claim any first charge or precedence over the subject property by virtue of Section 141 of the BPMC Act as against the auction-purchaser; the auction purchaser is the lawful owner and liable only for property tax from the date of purchase.

Liquidator's sale by public auction - consolidation of claims before the liquidator - overriding effect of the Insolvency and Bankruptcy Code - Whether the municipal corporation must pursue recovery of pre-liquidation property tax arrears through the liquidation process. - HELD THAT: - The Court noted provisions of the Code governing moratorium, consolidation of claims and the Code's overriding effect. Having held that the corporation lacks a first charge against the auction-purchaser, the Court directed that the municipal corporation's remedy is to submit its claim as a creditor to the liquidator in accordance with the statutory insolvency and liquidation framework. The Court therefore declined to permit enforcement of the arrears by asserting a precedence over the sold property in the hands of the purchaser and left the statutory claims process under the Companies Act/Code as the appropriate forum. [Paras 26, 28]

The Surat Municipal Corporation may not enforce a charge against the auction-purchaser and must put forward its claim with the Official Liquidator as one of the creditors for recovery of pre-sale property tax dues.

Liquidator's sale by public auction - protection of a bona fide purchaser for value without notice - Whether the auction proceedings and the purchaser's title attained finality and whether the Official Liquidator should complete formalities. - HELD THAT: - The Court found no fault with the liquidator conducting the E-auction or with the successful bidder participating therein. On the facts, the sale proceedings have attained finality and the writ applicant is the lawful owner. The Court directed the Official Liquidator to execute the sale deed in accordance with law so as to complete the transfer formalities, thereby confirming the purchaser's possession and title subject to the municipal corporation's right to press its claim in liquidation proceedings. [Paras 6, 27, 29]

The auction proceedings have attained finality; the writ applicant is the lawful owner and the Official Liquidator shall execute the sale deed in accordance with law.

Final Conclusion: Writ petition disposed: Surat Municipal Corporation cannot claim a first charge on the property sold in liquidation to recover pre-sale property tax arrears from the auction-purchaser; the corporation may recover tax due from the date of purchase and must submit any claim for pre-sale arrears to the Official Liquidator under the insolvency/liquidation process; the Official Liquidator is directed to execute the sale deed in favour of the purchaser.

Insolvency Resolution Process for Personal Guarantors - Admission under section 95 read with section 100 of IBC, 2016 - Moratorium under section 101 of IBC, 2016 - Role and duties of Resolution Professional under sections 97-106 and section 208 of IBC, 2016 - Publication of notice and claims procedure under sections 102-103 of IBC, 2016 - Preparation and approval of repayment plan and meetings of creditors under sections 106-114 of IBC, 2016

Admission under section 95 read with section 100 of IBC, 2016 - Insolvency Resolution Process for Personal Guarantors - The application filed under section 95 of the IBC, 2016 was admitted and the Insolvency Resolution Process was initiated against the personal guarantor. - HELD THAT: - The Resolution Professional submitted a report under section 99 recommending admission. The report recorded that default had occurred by the debtor who is a personal guarantor to the corporate debtor and that the debtor had confirmed non-payment in response to the RP's communications. No request by the RP for issuance of instructions to conduct negotiations for a repayment plan is recorded. On that basis the Adjudicating Authority admitted the application under section 100 and initiated the insolvency resolution process against the respondent personal guarantor. [Paras 4, 9]

Application CP(IB)/184(KB)2021 under section 95 admitted and IR Process initiated against the respondent.

Moratorium under section 101 of IBC, 2016 - A moratorium was declared consequent to initiation of the insolvency resolution process and its scope and duration were specified. - HELD THAT: - The Adjudicating Authority declared that the moratorium begins on the date of admission and shall cease at the end of 180 days or upon approval of the repayment plan under section 114(1). During the moratorium, pending legal actions in respect of any debt of the personal guarantor are stayed, creditors shall not initiate legal proceedings in respect of any debt, the personal guarantor shall not transfer or encumber assets, and exceptions notified by the Central Government (in consultation with financial regulators) are excluded. These terms were set out to give effect to the protective regime provided by the Code upon admission. [Paras 4]

Moratorium declared with the terms and 180-day duration (subject to earlier approval of a repayment plan).

Publication of notice and claims procedure under sections 102-103 of IBC, 2016 - Role and duties of Resolution Professional under sections 97-106 and section 208 of IBC, 2016 - Preparation and approval of repayment plan and meetings of creditors under sections 106-114 of IBC, 2016 - Directions were issued to the Resolution Professional to publish notice, invite and collate claims, prepare the list of creditors, facilitate preparation and submission of the repayment plan, and conduct meetings of creditors in accordance with the Code and Rules. - HELD THAT: - The Resolution Professional appointed under section 97 was directed to cause publication of a public notice within seven days of uploading the order, inviting claims which must be registered within twenty-one days as provided by section 103. Publication is to be in one English and one vernacular newspaper circulating in the State where the personal guarantor resides; copies to be supplied to the Registry for website upload and affixation. The RP is to prepare the list of creditors within thirty days of the notice (section 104), assist the personal guarantor in preparing a repayment plan (section 105) and submit the plan along with his report within twenty-one days from the last date for submission of claims (section 106). If the RP considers that a meeting of creditors is unnecessary, he must record reasons; otherwise he must specify meeting details and ensure notice in the timeframe prescribed by the Code. Meetings are to be conducted in accordance with sections 108-111, and the RP must prepare and submit the report under section 112 and comply with the Code of Conduct under section 208. [Paras 5, 6, 7, 8]

RP directed to publish notice, invite and collate claims, prepare creditors' list, facilitate and submit repayment plan and convene or record reasons for not convening creditors' meeting in accordance with statutory timelines and provisions.

Final Conclusion: The Tribunal admitted the Bank's application under section 95 and initiated the insolvency resolution process against the personal guarantor; a moratorium was imposed for the statutory period and the Resolution Professional was directed to follow the Code and Rules for publication, claims registration, preparation of the creditors' list, formulation and submission of the repayment plan, and conduct of creditor meetings.

Contribution towards CIRP costs - liability of an operational creditor for CIRP expenses - ratification of CIRP expenses by the Committee of Creditors - enforcement of tribunal direction to deposit initial expenses - malicious initiation of insolvency process under Section 65(1) of the Insolvency and Bankruptcy Code, 2016

Contribution towards CIRP costs - liability of an operational creditor for CIRP expenses - ratification of CIRP expenses by the Committee of Creditors - enforcement of tribunal direction to deposit initial expenses - The Resolution Professional is entitled to recover the unpaid share of CIRP costs from the Operational Creditor and the respondent is directed to pay the balance amount to the RP. - HELD THAT: - The Tribunal recorded that the Committee of Creditors had ratified the CIRP expenses and fixed the estimated CIRP cost, thereby allocating a specific contribution payable by the Operational Creditor. The RP complied with the Tribunal's direction to furnish a bifurcation of the estimated CIRP costs and established the total cost and the respondent's share. Although the respondent had paid partial amounts and sought clarifications, it failed to file a substantive counter or comply with repeated directions to deposit the balance. The Tribunal found that ample opportunity was afforded to the respondent to make payment, but directions were flouted. In view of the ratification by the COC, the submission of bifurcation by the RP and the respondent's non-compliance with directed payments, the IA was allowed and the respondent was directed to pay the outstanding share to the RP within two weeks. [Paras 11, 12, 13]

IA allowed; respondent directed to pay the balance sum claimed by the RP (share of CIRP costs) to the Resolution Professional within two weeks.

Final Conclusion: The application filed by the Resolution Professional seeking recovery of the unpaid share of CIRP costs is allowed; the respondent is directed to pay the outstanding amount to the RP within two weeks of receipt of the order.

Admission and verification of claims by Liquidator - liquidator's duty to communicate decision on claims - limitation and time barred claims - rate of interest as per contractual terms and judicial discretion - challenge to conduct of CoC by a shareholder - non cooperation of suspended directors in CIRP and abuse of process - dismissal of repetitious applications and costs

Admission and verification of claims by Liquidator - liquidator's duty to communicate decision on claims - limitation and time barred claims - rate of interest as per contractual terms and judicial discretion - Whether the applicant was entitled to set aside and have re adjudicated the claims admitted by the Liquidator and to direct admission of his own claim - HELD THAT: - The Tribunal examined the applicant's challenge to the Liquidator's admission of the Federal Bank's claim and the homebuyers' claims and his contention that his own Form D claim was not admitted. The record shows that the Corporate Debtor's liquidation was ordered following a CoC resolution and that earlier applications by the applicant raising similar contentions had been dismissed. The Liquidator explained the basis for admission of creditors' claims and reliance on contractual documents and applicable liquidation regulations for interest. The Tribunal found that the applicant, a shareholder and suspended director, had repeatedly litigated identical contentions, had not cooperated in the CIRP, and had earlier failed in parallel proceedings. In these circumstances the Tribunal treated the present challenge as belated and an attempt to delay liquidation and sale processes. The Tribunal further noted that questions about rate of interest and limitation were matters tied to contractual terms, statutory/regulatory framework and, where appropriate, determinations by competent courts; the applicant's assertions did not warrant reopening admissions in liquidation at this stage. Having considered the Liquidator's explanations and the history of prior dismissals, the Tribunal concluded that the present applications lacked merit and were abusive of process. [Paras 20, 21, 22, 23, 24]

Applications seeking to set aside admitted claims and to direct admission of the applicant's claim are dismissed.

Final Conclusion: Both IA(IBC)/161/KOB/2021 and MA(IBC)39/KOB/2021 are dismissed as meritless and repetitious; the Tribunal declines to reopen admitted claims or direct admission of the applicant's claim and records that the applicant's conduct amounted to abuse of process.

Validity of Committee of Creditors constituted with limited creditors - Extension of time for submission of claims under Regulation 12 - Inclusion of post-deadline claims and effect on prior committee decisions - Withdrawal of CIRP requiring 90% consent of Committee of Creditors - Role and powers of the Interim Resolution Professional during CIRP

Validity of Committee of Creditors constituted with limited creditors - Validity of first CoC meeting and its minutes - The Committee of Creditors constituted with the two creditors who had submitted claims and the holding of the first CoC meeting on 19.05.2021 were not set aside on the ground of COVID 19 related difficulties in lodging claims. - HELD THAT: - The Tribunal found that the IRP made the public announcement with a last date for claims as 04.05.2021 and received claims from State Bank of India, Dhanlaxmi Bank and KSEB. Although the appellant contended that the public announcement fell during the COVID 19 second wave and that many creditors could not file claims in time, Regulation 12 permits a creditor who fails to submit claim within the public announcement period to submit claims up to the ninetieth day of the insolvency commencement date and provides for inclusion of admitted financial creditors from the date of admission without affecting prior decisions. The Tribunal noted the IRP had updated the list of creditors and that a Resolution Plan was under consideration by the CoC. In these circumstances, the contentions that the CoC was prematurely constituted and that the first CoC meeting and its minutes of 19.05.2021 should be invalidated were not sustainable and no relief was warranted. [Paras 13, 16, 17]

Claims that the CoC formation and the 19.05.2021 meeting/minutes were void for reasons connected to the pandemic were rejected and those aspects were not set aside.

Extension of time for submission of claims under Regulation 12 - Inclusion of post-deadline claims and effect on prior committee decisions - Regulation 12 allows creditors who miss the public announcement deadline to submit claims up to the ninetieth day of the insolvency commencement date, and such admitted claims are included in the CoC from the date of admission without affecting the validity of prior CoC decisions. - HELD THAT: - The Tribunal quoted Regulation 12 and applied it to the facts: the last date in the public announcement was 04.05.2021 but Regulation 12(2) and (3) permit submission up to the 90th day and inclusion of admitted financial creditors from the date of admission. The Tribunal observed that the IRP had provided opportunities and had later filed an updated list of creditors which was accepted by the Tribunal, thereby complying with the statutory regime. The argument that the IRP ought to have extended the public announcement deadline due to COVID 19 did not supplant the statutory regime permitting later admissions and inclusion. [Paras 13, 16]

No extension of the public announcement deadline was required beyond the statutory mechanism of Regulation 12; post deadline admissions could be made and did not vitiate earlier CoC actions.

Withdrawal of CIRP requiring 90% consent of Committee of Creditors - Effect of settlement of a creditor's claim after constitution of CoC - Withdrawal of the CIRP could not be effected because the applicant did not obtain the requisite 90% consent of the CoC, and settlement of Dhanlaxmi Bank's claim after constitution of the CoC did not automatically permit withdrawal. - HELD THAT: - The Resolution Professional demonstrated that SBI held 86% voting share and did not consent to withdrawal. The Tribunal noted that settlement of the Dhanlaxmi Bank claim occurred after the CoC constitution and that withdrawal of the admitted application requires 90% CoC approval which was not forthcoming. Consequently, the settlement of one creditor's claim post constitution did not nullify the CIRP or permit unilateral withdrawal absent the statutorily mandated CoC majority. [Paras 11, 17]

The request to withdraw the CIRP was not acceded to because the necessary 90% consent of the CoC was not obtained; the post constitution settlement did not invalidate the process.

Final Conclusion: The application filed by the suspended director challenging constitution of the CoC, the first CoC meeting of 19.05.2021 and its minutes was dismissed; the Tribunal upheld the IRP's actions under the statutory regime (including Regulation 12), noted the updated list of creditors and that a Resolution Plan was under consideration, directed cooperation with the RP and disposed of the IA.

Existence of debt and default - financial debt - admission under Section 7 of the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code - public announcement of initiation of Corporate Insolvency Resolution Process - duties of Interim Resolution Professional - limitation period

Existence of debt and default - financial debt - admission under Section 7 of the Insolvency and Bankruptcy Code - limitation period - The petition under Section 7 was admissible because there existed a financial debt and a default, and the petition was within the period of limitation. - HELD THAT: - The Tribunal examined the loan documents, facility letters, hypothecation and guarantee instruments and the cheques returned for insufficient funds, and found that monies were disbursed and successive renewals and amendments of facilities were made. The Corporate Debtor admitted liability during hearing. Applying the statutory tests, the nature of the liability was held to be a financial debt and the circumstance amounted to a default. The Bench also recorded that the petition lay within the prescribed period of limitation. On these bases the two essential prerequisites for admission under Section 7 - existence of debt and default - were satisfied and the petition was fit for admission. [Paras 13, 14, 15]

The Section 7 petition is admitted.

Appointment of Interim Resolution Professional - duties of Interim Resolution Professional - Appointment of the proposed Insolvency Professional as Interim Resolution Professional and the duties to be performed by the IRP. - HELD THAT: - The Financial Creditor furnished Form 2 containing the written consent of the proposed professional and there was no material on record showing any pending disciplinary action against him. On this basis the proposed professional, Mr. Sanjeev Kumar Jalan, was appointed as the Interim Resolution Professional. The IRP was directed to perform the functions assigned under the Code, including carrying out the public announcement, managing affairs during the moratorium and reporting progress and compliance to the Tribunal within 30 days (with liberty to report earlier). [Paras 16, 17, 20]

Mr. Sanjeev Kumar Jalan is appointed as Interim Resolution Professional and shall perform the duties of IRP and report to the Bench as directed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - public announcement of initiation of Corporate Insolvency Resolution Process - Operation of moratorium and requirement of public announcement on admission of the Section 7 petition. - HELD THAT: - On admission of the petition, the statutory moratorium under Section 14 was declared operative from the date of the order, prohibiting suits, transfer or encumbrance of assets of the Corporate Debtor, subject to the statutory exception that supply of essential goods or services shall not be terminated. The Bench further directed that the IRP shall immediately make the public announcement about initiation of the Corporate Insolvency Resolution Process as mandated by the Code. [Paras 18, 19]

Moratorium is operative from the date of the order and the IRP shall make the public announcement of CIRP initiation forthwith.

Final Conclusion: The Company Petition filed by the Financial Creditor is admitted under Section 7 of the Code; an Interim Resolution Professional is appointed; moratorium is declared effective from the date of the order; the IRP is directed to make the public announcement and to perform statutory duties and report compliance to the Tribunal.

Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - extension/availability of scheme benefits after prescribed deadline - treatment of writ petition as representation - jurisdiction of Commissionerate for consideration of representations - adjudication on merits after hearing

Treatment of writ petition as representation - jurisdiction of Commissionerate for consideration of representations - adjudication on merits after hearing - The writ petition will be treated as a representation and placed before the Delhi East Commissionerate which issued the show cause notice for consideration and decision on merits after hearing. - HELD THAT: - The Court directed that, given the petitioner's grievance about a technical glitch and the steps required under the Scheme, the writ petition itself be placed before the Delhi East Commissionerate (the Commissionerate that issued the show cause notice) for consideration. The Commissionerate is to consider the submissions made before the Court, accord a hearing to the authorised representative of the petitioner and decide the matter on merits. The Court gave specific directions as to the forum for consideration and the procedure to be followed, thereby converting the writ petition into a representation for administrative adjudication by the appropriate officer. [Paras 8, 9]

The petition is to be placed before the Delhi East Commissionerate, which shall hear the petitioner and decide the matter on merits.

Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - extension/availability of scheme benefits after prescribed deadline - The question of whether the petitioner may be permitted to avail benefits under the Scheme notwithstanding the deadline (and despite the alleged mis addressing of the representation) was not decided on merits and has been remanded for fresh consideration by the Delhi East Commissionerate. - HELD THAT: - The Court noted the petitioner's claim that a technical glitch prevented timely completion of formalities under the Scheme and the respondent's contention that the deadline had been missed and the representation was filed before an incorrect Commissionerate. Rather than resolving these competing contentions, the Court directed the Delhi East Commissionerate to examine the petitioner's submissions, including any contention based on exceptions or circulars relied upon by the petitioner, and to pass an order on the merits. The remand requires the Commissionerate to consider whether, in the circumstances of the case, the petitioner can be entertained for relief under the Scheme and what interest or other conditions may apply. [Paras 4, 6, 7, 9]

The question of entitlement to benefits under the Scheme despite the deadline is remanded to the Delhi East Commissionerate for fresh consideration and decision on merits after hearing the petitioner within eight weeks.

Final Conclusion: The writ petition is disposed of by treating it as a representation and directing the Delhi East Commissionerate (which issued the show cause notice) to hear the petitioner and decide, on merits, whether the petitioner may be permitted to avail benefits under the Sabka Vishwas Scheme despite the deadline; the Commissionerate is to pass a reasoned order within eight weeks of receipt of this order.

Business Auxiliary Service - Storage and Warehousing Services - exigibility of service tax on amounts collected as commission or storage charges - substance over form - statutory functions under the State Excise Act and Rules

Business Auxiliary Service - Storage and Warehousing Services - exigibility of service tax on amounts collected as commission or storage charges - substance over form - Whether the amounts collected by the appellant-corporation as commission, storage or warehousing charges are exigible to service tax as business auxiliary services or storage and warehousing services. - HELD THAT: - The Tribunal held that the transfers from distilleries to the appellant-corporation in terms of the rate contracts are completed sales and, having purchased the liquor, the corporation becomes the owner and stores goods owned by it. The storage activity is thus incidental to its function as purchaser/distributor and is not a separate provision of taxable storage services in respect of third party goods. Applying the principle that substance prevails over form, the Tribunal found that characterising receipts as 'storage charges' does not convert the appellant into a service provider liable to service tax where the charges relate to goods owned by the appellant. The Tribunal also noted that the appellant discharges statutory functions under the State Excise Act and Rules in exercising the exclusive distribution mandate, and accordingly has not rendered the taxable services sought to be levied. Reliance was placed on earlier decisions which reached the same conclusion, and on the reasoning reproduced from prior orders (including the findings recorded at 6.5 and 18) to support that the receipts are not exigible to service tax. [Paras 6, 18]

Amounts received as commission or warehousing/storage charges are not exigible to service tax; the impugned demands on these grounds are set aside.

Final Conclusion: The appeals filed by M/s. Karnataka State Beverages Corporation Ltd. for the periods shown are allowed and the department's appeal is dismissed as not maintainable; the demands confirmed as service tax on the challenged receipts are set aside.

Interest on delayed refund under Section 11BB - refund claim under Notification No. 32/99-CE - applicability of Section 11B to refund claims made under an exemption notification - binding effect of High Court precedent in departmental appeals

Interest on delayed refund under Section 11BB - refund claim under Notification No. 32/99-CE - applicability of Section 11B to refund claims made under an exemption notification - Whether the appellant is entitled to interest under Section 11BB on the refund sanctioned under Notification No. 32/99-CE dated 08.07.1999. - HELD THAT: - The Tribunal found that the principal refund was sanctioned to the appellant and that the only dispute was regarding entitlement to interest for delayed payment. The Tribunal followed the decisions of the Hon'ble Gauhati High Court in M/s Amalgamated Plantations (P.) Ltd. and M/s Dharampal Satyapal Ltd., which held that Section 11B does not exclude refund claims made under Notification No. 32/99-CE and that interest under Section 11BB is therefore payable. The Tribunal noted that the Department's SLP against the Amalgamated Plantations judgment was dismissed on the ground of limitation and that the SLP against Dharampal Satyapal is pending without any stay of the High Court order. In view of those High Court rulings and the absence of any superseding order staying their operation, the Tribunal, following judicial discipline, held that Section 11BB applies and interest is payable from three months after filing of the refund application. [Paras 11, 15]

Appellant entitled to interest under Section 11BB on the refund sanctioned under Notification No. 32/99-CE, payable from three months after filing of the refund application.

Final Conclusion: Appeal allowed; interest under Section 11BB granted from three months after filing of the refund claim and Revenue directed to pay the interest within two months from receipt of this order.

CENVAT credit - Input Service Distributor - distribution of input service credit on pro rata basis proportionate to turnover - entitlement to CENVAT credit by contract manufacturers - attribution of input services to the final product - Rule 7(d) of the CENVAT Credit Rules

Distribution of input service credit on pro rata basis proportionate to turnover - entitlement to CENVAT credit by contract manufacturers - attribution of input services to the final product - Rule 7(d) of the CENVAT Credit Rules - Whether the principal (M/s. PBPL) was justified in distributing input service CENVAT credit pro rata between its own units and contract manufacturing units including the appellant, and whether the appellant was entitled to avail such credit. - HELD THAT: - The Tribunal recorded that the appellant is a contract manufacturer producing biscuits solely for M/s. PBPL under the prescribed authorisation and that inputs and excise invoices were issued by M/s. PBPL and delivered to the appellant. The appellant had availed CENVAT credit based on those invoices and utilised it for payment of duty on goods cleared for PBPL. The determinative legal question was the applicability of Rule 7(d) of the CENVAT Credit Rules regarding distribution of input service credit. The Tribunal relied on the Larger Bench decision in M/s. Krishna Food Products, which had considered and distinguished contrary authorities such as Sunbell Alloys and held that distribution on a pro rata basis proportionate to turnover between principal's manufacturing units and contract manufacturers is permissible where input services are attributable to the final product. The Bench noted no distinguishing facts in the present case and observed that the decision has been followed in similar matters. Applying that precedent and the factual finding that input services were attributable to the final product cleared on payment of duty, the Tribunal held that PBPL was justified in distributing credits pro rata and that the appellant was entitled to avail the CENVAT credit so distributed. [Paras 8, 9]

M/s. PBPL was justified in distributing input service CENVAT credit on a pro rata basis under Rule 7(d), and the appellant is entitled to avail the CENVAT credit; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned orders, and held that credits distributed by the principal to contract manufacturing units on a pro rata basis proportionate to turnover under Rule 7(d) are permissible and the appellant is entitled to avail such CENVAT credit.

Condonation of delay - Suppression of earlier proceedings - False averments and verification of pleadings - Abuse of process - Imposition of costs as punitive and deterrent measure - Requirement to disclose pending or earlier appeals

Condonation of delay - Suppression of earlier proceedings - Requirement to disclose pending or earlier appeals - Delay condonation application dismissed on account of deliberate suppression of earlier appeal and false averments regarding receipt of the order. - HELD THAT: - The Tribunal found that the appellant had earlier filed Excise Appeal No. 50087 of 2018 against the same order dated 30.06.2017 which was dismissed on 11.01.2018 for non-payment of pre-deposit, and that in the earlier appeal Form EA-III the appellant recorded receipt of the impugned order on 08.07.2017. In the present proceedings the appellant filed a delay condonation application asserting that a certified copy was provided only on 21.02.2019 and, in Form EA-III filed with the present appeal, likewise stated receipt on 21.02.2019; the appellant also furnished an undertaking that no earlier appeal had been filed. The Tribunal held these representations to be false and that material facts had been concealed, amounting to abuse of the process. In view of the deliberate suppression and false averments, the Tribunal rejected the explanation for delay and dismissed the application for condonation of delay. [Paras 15, 16, 18, 20, 21]

Delay condonation application dismissed for suppression of material facts and false averments; appeal consequently dismissed for being time-barred.

Abuse of process - False averments and verification of pleadings - Imposition of costs as punitive and deterrent measure - Heavy costs of Rs. 10 Lakhs imposed on the appellant to be deposited in the PM CARES Fund for the deliberate suppression and misuse of tribunal process. - HELD THAT: - The Tribunal regarded the appellant's conduct-filing a second appeal against the same impugned order without disclosure of the earlier dismissed appeal and giving a false undertaking-as a serious abuse of the appellate process warranting punitive action. Exercising its power to impose costs as a deterrent and to penalise misconduct, the Tribunal fixed costs at Rs. 10 Lakhs, directed deposit within six weeks in the PM CARES Fund, and recorded that non-deposit may be recovered in the manner of recovery of the penalty imposed by the impugned order. The Tribunal also directed a compliance listing to verify deposit. [Paras 18, 19, 20, 22, 23]

Costs of Rs. 10 Lakhs imposed to be deposited in the PM CARES Fund within six weeks; failure to deposit may lead to recovery in the manner specified.

Final Conclusion: The Tribunal dismissed the condonation of delay application and, as a consequence, the appeal, finding deliberate suppression of an earlier appeal and false statements by the appellant; heavy costs of Rs. 10 Lakhs were imposed to be deposited in the PM CARES Fund, with a compliance listing ordered.

Sale in the course of import - first point of sale - single levy under the MVAT liquor notification - double taxation - revenue neutrality - application of precedent prevailing on date of transaction - excess of jurisdiction as exception to alternate remedy - ultra vires levy - requirement of C Form for concessional CST - constitutional restrictions on state taxation (Articles 265, 286, 300A)

Sale in the course of import - first point of sale - single levy under the MVAT liquor notification - ultra vires levy - Levy of fresh tax on petitioner for bond to bond sales governed by MVAT scheme and notification was ultra vires - HELD THAT: - The Court held that the transactions from the petitioner's bonded warehouse to ASK Agencies' bonded warehouse in Maharashtra during financial year 2015-2016 fell within the principle of 'sale in the course of import' as declared by the Supreme Court in Hotel Ashoka and, under the MVAT scheme and Notification No. VAT/1511/C.R.-57/Taxation-1, liquor purchased from registered dealers after 1.5.2011 was to suffer tax only at the 'first point of sale'. ASK Agencies had paid VAT as the first point of sale and the tax so collected was accepted by the tax authorities. Consequently a fresh levy by the assessing officer on the petitioner was beyond the scope of the charging provisions of the MVAT Act and therefore ultra vires and liable to be quashed. [Paras 50, 51, 54, 65, 76]

Impugned levy under MVAT in respect of the bond to bond sales quashed as beyond the charging provisions and ultra vires.

Application of precedent prevailing on date of transaction - sale in the course of import - double taxation - Whether the earlier Supreme Court decision in Hotel Ashoka governs the transactions rather than the later decision in Nirmal Kumar Parsan - HELD THAT: - The Court applied the principle that tax proceedings are governed by the law and precedents prevailing on the date of the transaction or assessment proceeding. As the bond to bond sales occurred in 2015 16 when Hotel Ashoka's ratio was binding, the assessing officer could not invoke the later decision in Nirmal Kumar Parsan to alter the legal position retrospectively. Reliance on subsequent divergent decisions could not upset rights crystallised under the earlier binding precedent. [Paras 61, 66, 68, 69]

Hotel Ashoka governs the transactions; the later decision was not available to the assessing officer to displace that position.

Double taxation - revenue neutrality - first point of sale - Whether levy on the petitioner would result in impermissible double taxation or be revenue neutral - HELD THAT: - The Court found that ASK Agencies had already discharged VAT as the first point of sale and the tax department had accepted those returns. Imposing tax on the petitioner for the same transaction would either constitute double taxation or, if recovered from petitioner and refunded to ASK Agencies, would be revenue neutral. Both outcomes are impermissible under settled law; therefore the levy could not stand. The Court further observed that, if the revenue nevertheless sought recovery from petitioner, a corresponding refund to ASK Agencies would be required, demonstrating revenue neutrality and making the fresh demand unsustainable. [Paras 70, 71, 72]

Demand on petitioner quashed as it would cause double taxation or at least a revenue neutral adjustment which the authorities could not effect as a fresh levy.

Excess of jurisdiction as exception to alternate remedy - maintainability of writ - Maintainability of the writ petition despite existence of statutory appellate remedy - HELD THAT: - Although statutory appellate remedies existed, the Court held that the writ petition was maintainable under Article 226 because the impugned assessment was challenged on the ground of excess of jurisdiction and vires; such exceptional circumstances fall within recognised exceptions to the rule barring writs where alternate remedies exist. The Court found substance in the petitioner's contention that the assessing officer had acted without authority by levying tax inconsistent with the statutory and constitutional scheme and thus entertained the writ. [Paras 79, 80]

Writ petition entertained and maintainable due to excess of jurisdiction; alternate remedy does not bar relief in the circumstances.

Requirement of C Form for concessional CST - ultra vires levy - constitutional restrictions on state taxation (Articles 265, 286, 300A) - Validity of Central Sales Tax levy and related constitutional challenge - HELD THAT: - The assessing officer had levied Central Sales Tax treating transactions as inter state; the Court observed that this treatment was inconsistent with admitted facts that the bond to bond movement was within Maharashtra and that ASK Agencies had paid VAT as first point of sale. The petitioner's contention that levy of CST (and retrospective high rate tax for non production of C Forms) was ex facie illegal and contrary to the constitutional taxation scheme was accepted in part: C Forms were later furnished and petitioner was permitted to rely on them before the assessing authority, but the Court held that to the extent the assessment sought to impose CST contrary to Section 5(2)/MVAT scheme and Articles 265/286/300A, the levy was ultra vires and liable to be quashed. [Paras 49, 73, 75, 81]

Levy of CST/high rate tax on the facts was unsustainable; petitioner may file C Forms with assessing authority, but the impugned CST levy is quashed as beyond jurisdiction and constitutionally impermissible.

Final Conclusion: Writ petition allowed. The assessment demand insofar as it levies fresh tax on the petitioner for bond to bond sales of financial year 2015 2016 is quashed as ultra vires MVAT and constitutionally impermissible; Hotel Ashoka governs the transactions and the later contrary decision cannot be applied; the levy would result in double taxation or be revenue neutral and thus unsustainable; the writ is maintainable as the assessment is in excess of jurisdiction. No order as to costs.

Quashing of assessment order - Opportunity to produce verification letters - Enquiry into genuineness of verification letters - Writ relief in the interest of justice - COVID-19 as a factor for leniency in procedural compliance

Opportunity to produce verification letters - Quashing of assessment order - Enquiry into genuineness of verification letters - Writ relief in the interest of justice - Ext.P4 assessment order dated 25.10.2021 is liable to be set aside and the petitioner is to be given a limited opportunity to produce the original verification letters directed in Ext.P2, with the assessing authority to proceed thereafter. - HELD THAT: - The appellate order Ext.P2 had directed the petitioner to produce original verification letters from the State and for the assessing authority to enquire into their genuineness and pass fresh orders. Ext.P4 gave the petitioner two days to produce those originals and, on non-production, revived the original assessment. The petitioner contended that an authorised representative had sought 20 days' time to produce the originals and that the originals are now available. The Court found that, in the interests of justice and having regard to difficulties posed by the COVID-19 pandemic, a lenient view should be adopted to allow the petitioner a further opportunity to produce the originals so that the assessing authority may carry out the enquiry directed in Ext.P2. Accordingly, Ext.P4 was set aside and liberty granted to produce the original verification letters before the assessing authority on the specified date; failure to do so would entitle the authority to proceed in accordance with law. [Paras 2, 3, 5, 6, 7]

Ext.P4 dated 25.10.2021 is set aside; petitioner permitted to produce the original verification letters on 28.02.2022 at 11 a.m. before the first respondent, after which the assessing authority shall proceed to enquire into their genuineness and pass orders; if the petitioner fails to produce the letters, the authority may proceed in accordance with law.

Final Conclusion: Writ petition allowed: impugned order Ext.P4 set aside and petitioner granted a one-time opportunity to produce the original verification letters directed in Ext.P2 for fresh consideration by the assessing authority; failure to produce will permit the authority to proceed as law permits.

Power of appellate court to direct deposit of a minimum of 20% of fine or compensation as interim measure under Section 148 of the Negotiable Instruments Act - Retrospective application of amendment to Section 148 in appeals arising from complaints filed before the amendment - Judicial discretion to suspend sentence subject to statutory conditions - Interim compensation scheme under Section 143-A of the Negotiable Instruments Act

Power of appellate court to direct deposit of a minimum of 20% of fine or compensation as interim measure under Section 148 of the Negotiable Instruments Act - Judicial discretion in suspension of sentence subject to conditions - Validity of the Appellate Court's order directing deposit of 20% of the compensation as a pre-condition for suspension of sentence during the pendency of the appeal. - HELD THAT: - The High Court upheld the Appellate Court's power to condition suspension of sentence on deposit of a minimum of 20% of the fine/compensation awarded by the trial court under Section 148 of the Negotiable Instruments Act. The Court applied the reasoning in M/s Ginni Garments and another Versus M/s Sethi Garments and another , which recognised that Section 148, as amended, regulates interim recovery of fine/compensation during the pendency of appeals and operates as a procedural mechanism complementing existing Cr.P.C. recovery provisions; and that orders under Section 148 imposing deposit requirements by appellate courts are permissible. The Court also relied on the Supreme Court's reasoning in Surinder Singh Deswal @ Col. S.S. Deswal and others Versus Virender Gandhi , which held that the amended Section 148 applies to appeals pending after the amendment came into force and that the word "may" in the provision is to be purposively construed so that directing deposit (not directing) a minimum of 20% ordinarily operates as the rule, with exceptions requiring special reasons. The impugned order, which made suspension of sentence contingent upon furnishing bail/surety and depositing 20% of the compensation within the prescribed time, was therefore held to be within judicial discretion and consonant with Section 148 read with the Cr.P.C. provisions relating to recovery and suspension of sentence.

The pre-condition directing deposit of 20% of the compensation as ordered by the Appellate Court is legal and is not liable to be quashed; the petition is dismissed.

Final Conclusion: The High Court dismissed the petition and upheld the Appellate Court's order conditioning suspension of sentence on deposit of 20% of the compensation, holding such a condition to be lawful under the amended Section 148 of the Negotiable Instruments Act and consistent with judicial discretion in suspending sentences.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Setting aside conviction and sentence consequent to compounding - Exercise of compounding power at trial, appellate and revisional stages - Overriding effect of non obstante clause in Section 147 over Code of Criminal Procedure - Continuation of ancillary proceedings as abuse of process where main NI Act dispute is compounded

Compounding of offence under Section 147 of the Negotiable Instruments Act - Exercise of compounding power at trial, appellate and revisional stages - Setting aside conviction and sentence consequent to compounding - Overriding effect of non obstante clause in Section 147 over Code of Criminal Procedure - Whether the offence under Section 138 of the Negotiable Instruments Act could be compounded under Section 147 at the appellate/revisional stage and the legal consequence of such compounding on conviction and sentence. - HELD THAT: - The Court applied settled precedents holding that Section 147 of the Negotiable Instruments Act empowers parties to compound offences punishable under the Act and that this power can be exercised at any stage of the proceedings including trial, appeal and revision. The non obstante clause in Section 147 gives the special statute an overriding effect over the Code of Criminal Procedure insofar as compounding is concerned. Consistent decisions require that when a case under Section 138 is permitted to be compounded under Section 147, the conviction and sentence recorded in the criminal proceedings are to be set aside. The Court observed that compounding is in keeping with the compensatory character of the offence and that courts should be liberal in exercise of Section 147, drawing analogies with the object of Section 320 Cr.P.C. and recognizing the scope for relief under constitutional powers where appropriate. Applying these principles to the facts, and having recorded that the parties had amicably settled the dispute, the Court held the offence to be compoundable and that the conviction and sentence must be set aside.

The offence under the Negotiable Instruments Act is compounded under Section 147; the conviction and sentence recorded in the criminal complaint are set aside.

Continuation of ancillary proceedings as abuse of process where main NI Act dispute is compounded - Proclaimed offender declaration and ancillary FIRs - Relief by quashing proclaimed person order and direction for bail subject to conditions - Whether the order declaring the petitioner a proclaimed person and related ancillary proceedings arising from the main NI Act complaint should be set aside/quashed in view of the compounding/settlement, and what interim relief should follow. - HELD THAT: - The Court relied on coordinate benches and appellate authority reasoning that where the principal dispute under Section 138 of the Negotiable Instruments Act has been amicably settled and compounded, continuation of ancillary criminal proceedings (including proceedings under provisions such as Section 174 A IPC when registered in consequence of the NI proceedings) would amount to an abuse of the process of law. On the facts, having recorded a genuine compromise and receipt of payment by the complainant, the Court held that the judgment declaring the petitioner a proclaimed person and the convictions and sentence recorded earlier must be set aside. In the exercise of its supervisory jurisdiction, the Court ordered release on bail subject to involvement, if any, in other cases, and conditioned the release upon payment of a nominal cost to the District Legal Services Authority within a stated period.

The order declaring the petitioner a proclaimed person and consequential proceedings are set aside; the petitioner is to be released on bail subject to involvement in other cases and upon payment of the directed cost.

Final Conclusion: The petition is allowed: the offence under the Negotiable Instruments Act is ordered compounded under Section 147, the convictions and sentence recorded in the criminal complaint and the order declaring the petitioner a proclaimed person are set aside, and the petitioner is directed to be released on bail subject to involvement in other cases and deposit of the prescribed cost with the District Legal Services Authority, Gurugram.

Offence under Section 138 of the Negotiable Instruments Act - Cheque issued as security versus cheque issued for discharge of legally recoverable debt - Presumption in favour of holder of a dishonoured cheque - Onus on drawer to establish repayment or discharge of debt

Offence under Section 138 of the Negotiable Instruments Act - Cheque issued as security versus cheque issued for discharge of legally recoverable debt - Onus on drawer to establish repayment or discharge of debt - Whether the cheque issued by the accused was for discharge of a legally recoverable debt and attracted criminal liability under Section 138 of the N.I. Act. - HELD THAT: - The complainant's case was that the accused borrowed a loan and issued a post-dated cheque and a loan agreement (Ex. P9). Although the complainant admitted in cross-examination that the cheque was given as security, the appellate court accepted that admission as exculpatory while the trial court treated it as a stay admission. Applying the principle in Sripati Singh (para 17-20), a cheque given as security is not per se immune from presentation; presentation and dishonour may attract Section 138 unless the drawer proves prior discharge of the debt or an altered understanding. The accused alleged the cheque was merely security and that the complainant lacked capacity to lend, but produced no documentary proof of repayment or of any substituted arrangement. The complainant's evidence that he operates multiple vehicles and the absence of defence evidence to rebut the complainant's capacity further supported that the debt remained recoverable. Having found no proof of discharge or altered understanding and no adequate defence evidence, the court concluded the cheque was presented in respect of a legally recoverable debt and its dishonour attracted liability under Section 138. [Paras 8, 9, 10]

The cheque was issued for discharge of the loan and, being dishonoured, constituted an offence under Section 138 of the N.I. Act.

Presumption in favour of holder of a dishonoured cheque - Onus on drawer to establish repayment or discharge of debt - Whether the judgment of the first appellate court acquitting the accused required interference. - HELD THAT: - The first appellate court accepted the view that the cheque was given only as security and relied on the admission; this court examined the record and applicable law endorsed in Sripati Singh that presentation of a cheque taken as security is permissible unless the drawer shows prior discharge or an altered arrangement. Given absence of documentary proof from the accused to show repayment or discharge and the complainant's evidence supporting the recoverable nature of the debt, the appellate court's conclusion was unsustainable. The trial court's finding of guilt, supported by the material on record and the complainant's capacity evidence, warranted restoration. [Paras 10]

The first appellate court's acquittal is set aside and the trial court's conviction is restored.

Final Conclusion: The appeal is allowed: the judgment of acquittal by the first appellate court is set aside and the trial court's conviction in CC. No. 3753/2013 dated 05.01.2014 is confirmed for offence under Section 138 of the N.I. Act.

Section 311 CrPC - power to summon, recall and re-examine witnesses - Discretionary power to be exercised for the ends of justice - Right of accused to cross-examine witnesses - Recall of witness where earlier opportunity was granted but not availed - Imposition of costs as condition for recall/re-examination

Section 311 CrPC - power to summon, recall and re-examine witnesses - Right of accused to cross-examine witnesses - Discretionary power to be exercised for the ends of justice - Recall of witness where earlier opportunity was granted but not availed - Imposition of costs as condition for recall/re-examination - Whether the trial court erred in rejecting the accused's successive application under Section 311 CrPC to recall PW-2 for cross-examination when the accused had not in fact ever cross-examined that witness despite an earlier opportunity having been granted - HELD THAT: - The High Court examined the scope and limits of Section 311 CrPC, emphasising that while the provision confers wide discretionary power, that power must be exercised judicially and only for the ends of justice. The court noted that, on the record, PW-2's examination-in-chief occurred after substitution of parties and that the accused had never cross-examined PW-2 at any stage. The trial court had earlier allowed recall with a direction to complete cross-examination by a specified date, which was not utilised; subsequently the trial court treated cross-examination as nil and rejected a second application. Applying the principle that Section 311 must be used to prevent failure of justice and to enable the accused to defend himself, the High Court concluded that, because no cross-examination had been conducted at all and the accused faced potential prejudice, a further limited opportunity should be given. The court relied on the enunciated principles in the decisions cited by it to stress that the discretionary power must be exercised with caution but may be invoked to secure a just decision. The High Court therefore quashed the rejection order and directed a single, time-bound opportunity for cross-examination on condition of payment of costs, while precluding further successive applications for re-examination of the same witness. [Paras 9, 11]

The High Court allowed the petition, quashed the trial court's order dated 08.03.2022, directed that PW-2 be produced for cross-examination on a specified date subject to payment of costs, and prohibited further applications under Section 311 CrPC for additional recall of PW-2.

Final Conclusion: Criminal petition allowed; trial court order rejecting the successive Section 311 application quashed and a single, conditional, time-bound opportunity granted to the accused to cross-examine PW-2, with costs and a bar on further Section 311 applications regarding that witness.