TaxTMI Updates e-Newsletter
May 13,2022

Availability of statutory appeal - jurisdictional bar to writ remedy where alternate statutory remedy exists - direction to appellate authority to dispose of appeal on merits and in accordance with law within a stipulated time

Availability of statutory appeal - jurisdictional bar to writ remedy where alternate statutory remedy exists - Petitioner directed to pursue the statutory appeal against Order No.19/2021-2022 dated 17.03.2022 and writ petition disposed without adjudicating merits. - HELD THAT: - The High Court recorded that an appeal remedy against the impugned order under the TNGST Act, 2017 is available and that the petitioner has not availed that remedy. Consequently, the Court declined to examine the merits of the detention and penalty but instead directed the petitioner to file the statutory appeal. The Court exercised its supervisory jurisdiction to mandate that, upon filing, the appellate authority shall consider and dispose of the appeal on merits and in accordance with law after giving an opportunity of hearing, within one month from the date of filing of the appeal. [Paras 6, 7]

Writ petition disposed directing the petitioner to file the statutory appeal and directing the appellate authority to decide it on merits and in accordance with law within one month after hearing.

Final Conclusion: The High Court dismissed the writ challenge to the impugned order on the ground of existence of an effective statutory appeal, directing the petitioner to file that appeal and directing the appellate authority to decide it on merits and in accordance with law within one month; the Court did not decide the substantive merits of the detention or penalty.

GST liability on royalty - royalty as tax or consideration - stay of demand and proceedings - jurisdictional challenge to ex parte order - entertainment of writ pending constitution of Tribunal

Stay of demand and proceedings - Grant of interim stay of demand of GST, payment of royalty and related proceedings - HELD THAT: - The High Court entertained the writ petition because the Tribunal had not been constituted and, on consideration of the petitions and interim authorities cited, granted an interim protective order. The court recorded that pending further orders it would stay the demand of GST and the obligation to pay royalty arising from the orders dated 02.07.2021 and 23.06.2021 and proceedings pursuant to the notice dated 15.03.2021. The stay was ordered as an interim measure while the substantive questions are considered and while the parties exchange pleadings as directed. [Paras 8]

Demand of GST and payment of royalty pursuant to the impugned orders and related proceedings are stayed until further order of the Court.

GST liability on royalty - royalty as tax or consideration - Whether payment of royalty for mining activity attracts GST - HELD THAT: - The court noted competing contentions and precedent relied upon by the petitioner, including an interim observational order of a Division Bench and the principle in India Cement Ltd. (that royalty may be in the nature of tax rather than consideration), and observed that the question of liability to pay GST on royalty requires consideration. The matter was not finally adjudicated on the merits; instead the court preserved the parties' positions by granting interim relief and directed the respondents to file a counter-affidavit for adjudication on merits at the subsequent hearing. [Paras 2, 3, 5]

Liability of GST on royalty is not finally decided and is reserved for adjudication after exchange of affidavits and further hearing.

Jurisdictional challenge to ex parte order - entertainment of writ pending constitution of Tribunal - Alleged jurisdictional error in the ex parte order dated 23.06.2021 passed for the same tax period - HELD THAT: - The court observed that challenge has been raised to an ex parte order dated 23.06.2021 and that the same tax period is involved in both proceedings; it recognised that the question of jurisdictional error in the second proceeding requires consideration. The petition was entertained in view of the Tribunal not being constituted, but the court did not finally determine the jurisdictional challenge; it directed filing of counter-affidavit and rejoinder and listed the matter for further hearing. [Paras 2, 5, 6]

Jurisdictional challenge to the ex parte order is left open for fresh consideration and adjudication after the parties have filed affidavits.

Final Conclusion: The High Court entertained the writ petition in view of non-constitution of the Tribunal, granted an interim stay on the demand of GST and payment of royalty and related proceedings for Financial Year 2017-18, and directed affidavits and further hearing; substantive questions of GST liability on royalty and any jurisdictional error in the ex parte order are reserved for adjudication.

Joinder of necessary and proper parties - amendment of memo of parties - service of notice by all permissible modes including e-mail - listing for further adjudication - allowing miscellaneous application subject to just exceptions

Joinder of necessary and proper parties - DMRC to be arrayed as respondent in the writ petition. - HELD THAT: - The Court observed that, although DMRC may not be a strictly necessary party, the impugned order contains observations that make DMRC a proper party to the lis. In the interests of adjudicating the controversy between the petitioner and the revenue with all relevant stakeholders before the Court, DMRC was directed to be added as respondent no.3 and the petitioner was granted time to amend the memo of parties accordingly. [Paras 4]

DMRC is arrayed as respondent no.3 and the petitioner shall file an amended memo of parties within one week.

Service of notice by all permissible modes including e-mail - Notice to be issued to respondents including newly-arrayed DMRC. - HELD THAT: - Having directed that DMRC be added as a party, the Court ordered that issue of notice be effected to respondent nos.1 and 2 and to respondent no.3 (DMRC) by all permissible modes of service, explicitly including e-mail, to ensure procedural expediency and effective participation in the proceedings. [Paras 5]

Issue notice to respondent nos.1 and 2 and respondent no.3/DMRC via all permissible modes including e-mail.

Allowing miscellaneous application subject to just exceptions - listing for further adjudication - Miscellaneous application allowed and matter listed for further hearing. - HELD THAT: - The Court allowed the miscellaneous application in the terms indicated, subject to just exceptions, and fixed a date for the next listing so that the substantive contest (including the petitioner's grievance regarding non-refund of amounts deposited by DMRC) may be considered after proper joinder and service on all parties. [Paras 1, 6]

CM APPL. 19489/2022 allowed subject to just exceptions; matter listed on 03.08.2022.

Final Conclusion: The Court granted the miscellaneous application, directed that DMRC be added as respondent no.3 with an amended memo of parties to be filed within one week, ordered service of notice on all respondents including DMRC by all permissible modes (including e-mail), and listed the matter for further hearing on 03.08.2022.

Classification of goods - taxability of solar power based devices - composite supply - mixed supply - principal supply - Section 2(30) of the CGST Act - Section 2(74) of the CGST Act - valuation rule for supplies comprising goods and services (70:30 explanation) - application of highest rate for mixed supply - classification under Chapter headings 84, 85 and 73/76

Classification of goods - classification under Chapter headings 84, 85 and 73/76 - Classification and applicable GST rate on the Controller supplied by the appellant - HELD THAT: - The appellant contended that the controller supplied is a specialist SPV controller incorporating MPPT/VFD features and therefore part of a solar power based device eligible under the solar entries. The Authority examined the technical claims but observed that a controller is an electrical device capable of multiple uses and not necessarily confined to solar pumping systems. The Authority therefore held that the controller, in standalone condition, is properly classifiable under Chapter Heading 8504 (electrical transformers, static converters and inductors). The taxable rate is that applicable to items classifiable under the said heading, and the controller cannot be treated as a solar power based device or part thereof merely because it can be used in solar pumping systems. [Paras 6]

Controller classifiable under Chapter Heading 8504 and taxable at the rate applicable to that heading.

Classification of goods - classification under Chapter headings 84, 85 and 73/76 - taxability of solar power based devices - Classification and applicable GST rate on the Structure (mounting structure) supplied by the appellant - HELD THAT: - The appellant argued that the metal structures are specifically designed for solar water pumping systems and thus are parts of the machine falling under Chapter 84 and eligible as parts of a solar power based device. The Authority examined the relevant tariff headings, Section Notes and prior authorities but noted that structures of iron or steel are generally classifiable under Chapter Heading 7308 (or 7610 for aluminium). The Authority observed that mere specification for intended use does not take a structure out of the general heading for structures. The Tax Research Unit clarification confirming that solar panel mounting structures fall under 7308/7610 and attract 18% GST was relied upon. Accordingly the structures cannot be classified as solar power based devices or treated under the solar entries. [Paras 6]

Structures are classifiable under Chapter Heading 7308 (iron/steel) or 7610 (aluminium) and attract the rate applicable to those headings.

Composite supply - mixed supply - principal supply - application of highest rate for mixed supply - Section 2(30) of the CGST Act - Section 2(74) of the CGST Act - Nature and tax consequence of supply when different solar components are sold in various combinations (whether composite or mixed supply) and the applicable tax rate - HELD THAT: - The Authority considered definitions of composite supply (Section 2(30)) and mixed supply (Section 2(74)) and the facts that each component (panel, pump, controller, structure) can be sold separately and is not inherently bundled in the ordinary course of business. The Authority found absence of the requisite element of a principal supply and natural bundling for a composite supply. Therefore, supplies of different possible combinations of these independent goods constitute a mixed supply. In terms of Section 8(b) of the CGST Act, a mixed supply is to be treated as supply of that component attracting the highest rate of tax. The Authority accordingly upheld the AAR finding that such combinations attract the highest rate applicable among the items in the mix. [Paras 6]

Where the appellant sells components in various combinations (and no principal supply or natural bundling exists) the supply is a mixed supply and will be taxed at the highest rate applicable to any individual item in that combination.

Taxability of solar power based devices - composite supply - valuation rule for supplies comprising goods and services (70:30 explanation) - Classification and taxation of supply of a Solar Water Pumping System supplied as a whole along with installation and commissioning (whether composite supply and valuation applicable) - HELD THAT: - The Authority examined the notifications and their explanations linking the goods entry for solar power based devices with the services entry for installation/setting up (Sl. No. 234 of Notification No.1/2017 and Sl. No. 38 of Notification No.11/2017). Finding that the appellant supplies the solar water pumping system and also provides installation and commissioning services specified in the notifications, the Authority held that the condition precedent in the explanations is satisfied. The supply therefore falls to be considered under those entries with the deeming explanation which apportions value of goods as seventy percent and value of service as thirty percent of the gross consideration. Applying the rates prescribed (5% on the goods portion and 18% on the services portion) yields an effective rate of 8.9% for the period up to 30.09.2021. The Authority noted that amendments notified on 30.09.2021 change the goods portion rate and therefore the effective rate post-amendment will be correspondingly higher. [Paras 6]

Supply of the Solar Water Pumping System with installation/commissioning is governed by the linked entries and explanation; value to be apportioned 70% (goods) and 30% (services) with applicable rates yielding an effective rate of 8.9% up to 30.09.2021, and a higher effective rate after the amendments notified on 30.09.2021.

Final Conclusion: The appeal is disposed of by upholding the AAR on all contested points: (i) controllers are classifiable under Chapter Heading 8504 and taxed at the rate applicable to that heading; (ii) mounting structures are classifiable under Chapter Heading 7308/7610 and taxed accordingly; (iii) sales of components in various combinations (absent natural bundling/principal supply) are mixed supplies and taxed at the highest applicable rate among components; and (iv) supply of a Solar Water Pumping System with installation/commissioning qualifies under the linked goods and services entries with value apportioned 70:30 (goods:services), producing an effective rate of 8.9% up to 30.09.2021, with the effective rate increased thereafter by subsequent notifications.

Impleadment of Union of India as respondent - conflicting reassessment orders by National Faceless Assessment Centre - direction to file personal affidavit explaining anomalies and remedial steps - communication of court order by Income Tax Department to respondents

Impleadment of Union of India as respondent - Union of India through Secretary, Finance, New Delhi was permitted to be impleaded as respondent no.4. - HELD THAT: - On oral request of learned counsel for the petitioner the Court allowed impleadment of the Union as respondent no.4 and accepted notice on behalf of the Central Government. The Court also took on record the rejoinder affidavit filed on behalf of the petitioner. The allowance of impleadment was ordered to enable the Union to be placed before the Court for explaining the alleged anomalies arising from conflicting reassessment orders.

Union of India impleaded as respondent no.4 and notice accepted on its behalf.

Conflicting reassessment orders by National Faceless Assessment Centre - direction to file personal affidavit explaining anomalies and remedial steps - The Court directed the newly impleaded respondent (Union) to explain the state of affairs arising from conflicting reassessment orders and to state steps taken to remove anomalies. - HELD THAT: - Having noted that two co-owners of the same land received conflicting reassessment orders from the National Faceless Assessment Centre - one accepting agricultural status and the other disallowing it and treating proceeds as long term capital gain - the Court required respondent no.4 to look into the matter. The Union was directed to file a personal affidavit explaining the position and detailing measures being taken by the Government to address such conflicting decisions. This direction was given to enable the Court to assess the state action taken to reconcile or rectify inconsistent assessments on identical facts.

Respondent no.4 directed to file a personal affidavit explaining the conflicting reassessment orders and remedial steps.

Communication of court order by Income Tax Department to respondents - The Income Tax Department was directed to communicate this order in writing to all respondents and the matter was listed for further hearing before an appropriate Bench. - HELD THAT: - In light of the need for coordinated response and further adjudication, the Court ordered that the order be communicated in writing by learned counsel for the Income Tax Department to all respondents within three days. The writ petition was directed to be placed for further hearing on the specified date along with connected writ tax matters, facilitating consolidated consideration of the issues arising from the conflicting reassessments.

Income Tax Department to communicate the order in writing to all respondents within three days and matter listed for further hearing.

Final Conclusion: Impleadment of the Union was permitted; respondent no.4 (Union) directed to file a personal affidavit explaining the conflicting reassessment orders issued by the National Faceless Assessment Centre and steps taken to remove anomalies; the Income Tax Department directed to communicate the order to all respondents and the matter listed for further hearing.

Amendment of pleadings - impleadment of party - re-assessment under Section 148 of the Income Tax Act, 1961 - stay of operation of reassessment order - absence of material to form reasons to believe for reopening - arbitrariness and harassment in tax proceedings

Amendment of pleadings - impleadment of party - Application for amendment of the writ petition was allowed and the National Faceless Assessment Centre, Delhi was permitted to be impleaded as respondent No.4. - HELD THAT: - With the consent of counsel, the Court permitted the petitioner to amend the writ petition and directed that the necessary amendment be incorporated within three days. On an oral, unopposed request by the petitioner, the National Faceless Assessment Centre, Delhi was allowed to be impleaded as respondent No.4 and corrections in the array of parties were directed to be carried out. The order on the amendment and impleadment was recorded by the Court as part of the interlocutory directions prior to the substantive hearing.

Amendment allowed; National Faceless Assessment Centre, Delhi impleaded as respondent No.4; corrections in array of parties directed.

Re-assessment under Section 148 of the Income Tax Act, 1961 - absence of material to form reasons to believe for reopening - stay of operation of reassessment order - arbitrariness and harassment in tax proceedings - Prima facie conclusion that the reassessment proceedings were initiated without material against the petitioner and the effect and operation of the impugned reassessment order dated 29.3.2022 was stayed. - HELD THAT: - The Court examined the record and noted that the information on which proceedings under Section 148 were initiated related to another entity (M/S S.R. Cold Storage) and not the petitioner. The objection filed by the petitioner that the alleged cash deposit did not pertain to it was found supported by annexures and the respondents' own verification report. The impugned reassessment order was held, on a prima facie basis, to rest on anonymous information and to lack any material showing that the petitioner had deposited the cash said to have escaped assessment. The Court observed that the initiation of proceedings in those circumstances indicated an arbitrary approach and potential harassment of the assessee. In view of these prima facie findings, the Court granted an interim stay of the effect and operation of the reassessment order, while granting the respondents time to file a counter-affidavit and the petitioner time to file a rejoinder, and listed the matter for further hearing. [Paras 7, 8, 12]

On prima facie evaluation, reassessment proceedings lacked material against the petitioner; effect and operation of the reassessment order dated 29.3.2022 stayed; respondents granted time to file counter and matter listed for further hearing.

Final Conclusion: Amendment to the petition was permitted and the National Faceless Assessment Centre, Delhi was impleaded as respondent No.4. On a prima facie review the reassessment proceedings were found to lack material against the petitioner and, accordingly, the operation of the reassessment order dated 29.3.2022 was stayed; parties were granted time for affidavits and the matter posted for further hearing.

Deduction under Sec. 80P(2)(d) for interest earned from deposits with co-operative banks - definition of "co-operative society" under Sec. 2(19) - effect of insertion of sub-section (4) to Sec. 80P on co-operative banks - precedential weight of coordinate-bench Tribunal decisions and favour-the-assessee rule where High Court decisions conflict

Deduction under Sec. 80P(2)(d) for interest earned from deposits with co-operative banks - effect of insertion of sub-section (4) to Sec. 80P on co-operative banks - definition of "co-operative society" under Sec. 2(19) - precedential weight of coordinate-bench Tribunal decisions and favour-the-assessee rule where High Court decisions conflict - Claim for deduction under Sec. 80P(2)(d) in respect of interest income received by the assessee (a co operative society) from deposits with co operative banks is allowable. - HELD THAT: - The Tribunal examined the scope of Sec. 80P(2)(d) and the effect of the Finance Act 2006 insertion of sub section (4) to Sec. 80P. While sub section (4) removed entitlement of co operative banks themselves to claim Sec. 80P, that amendment did not alter the fact that a co operative bank remains a "co operative society" as defined in Sec. 2(19). The determinative question is whether the interest was derived by the assessee co operative society from investments made with any other co operative society. Following the reasoning of several coordinate benches of the Tribunal (including Petit Towers and Solitaire) and relevant High Court decisions favorable to the assessee, the Bench concluded that interest earned by a co operative society on its deposits with co operative banks qualifies for deduction under Sec. 80P(2)(d). The Tribunal noted conflicting authorities but applied the principle that, where non jurisdictional High Court decisions conflict, a view favourable to the assessee is to be preferred. In consequence, the Tribunal set aside the CIT(A)'s confirmation of the assessment and directed the Assessing Officer to allow the claim of deduction under Sec. 80P(2)(d) on the interest income from co operative banks. The Tribunal also relied on the earlier coordinate bench reasoning that the A.O.'s view at assessment was a permissible view and therefore not erroneous under revisional jurisdiction grounds. [Paras 9, 10, 11]

The deduction under Sec. 80P(2)(d) is allowable in respect of interest earned from deposits with co operative banks; the CIT(A) order is set aside and the matter is restored to the A.O. to allow the deduction.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2014-15, 2015-16, 2016-17 and 2017-18, holding that interest income earned by the assessee co operative society on deposits with co operative banks is deductible under Sec. 80P(2)(d) and directing the Assessing Officer to allow the claim.

Condonation of delay - application under Section 5 of the Limitation Act - affidavit in opposition - improper affidavit language - exemplary costs - withdrawal of affidavit and tendering apology

Condonation of delay - application under Section 5 of the Limitation Act - Whether the application for condonation of delay of 535 days in filing the appeal should be considered at this stage - HELD THAT: - The Court recorded that the central controversy is the department's application for condonation of delay of 535 days in preferring the appeal. The matter was adjourned for further instructions to the learned standing counsel and for the filing of a reply to the affidavit-in-opposition; the Court did not adjudicate the merits of the condonation application on the papers before it. Instead, further material and the respondent's stand were directed to be placed before the Court before any final determination is made.

Proceedings on the condonation application are adjourned for consideration after the respondent files the affidavit and the parties place further instructions; no final decision on the condonation application was recorded.

Affidavit in opposition - improper affidavit language - exemplary costs - withdrawal of affidavit and tendering apology - Whether action should be taken in respect of the offensive averments contained in the affidavit-in-opposition sworn by the respondent's employee - HELD THAT: - The Court noted that the affidavit-in-opposition contains language and averments of an improper and depreciatory tenor, including accusations characterised as 'mala fide' against the standing counsel and incorrect characterisations of another affidavit. The Court expressed displeasure and indicated it might initiate action against the deponent and consider imposing exemplary costs. However, on representation by the respondent's counsel that the respondent could be advised to withdraw the affidavit and tender an appropriate apology, the Court deferred any punitive action and directed the respondent and the deponent to file an affidavit stating their stand.

No punitive action was imposed at present; the Court directed the respondent/the deponent to file an affidavit withdrawing or addressing the offensive averments and/or tendering an apology; the Court will await that affidavit before taking further steps.

Final Conclusion: The Court adjourned the matter to 10 May 2022 for further hearing; the condonation application was not finally adjudicated and the Court directed the respondent/deponent to file an affidavit addressing the offensive averments (including withdrawal and apology), reserving the Court's power to take action or impose costs thereafter.

Interpretation of "a residential house" in section 54 - Amendment substituting "one residential house" and its applicability from assessment year 2015-16 - Application of section 54 where property is purchased within one year before the date of transfer

Interpretation of "a residential house" in section 54 - Amendment substituting "one residential house" and its applicability from assessment year 2015-16 - Application of section 54 where property is purchased within one year before the date of transfer - Whether the assessee is entitled to claim deduction under section 54 for two flats purchased in assessment year 2014-15 despite an amendment, effective for assessment year 2015-16, substituting "one residential house" for "a residential house". - HELD THAT: - The Tribunal noted that prior to the amendment effective from assessment year 2015-16 the statutory phrase was "a residential house" and, being a beneficial provision, was to be construed liberally. Before substitution by Finance Act 2014 (applicable from 1 April 2015 for AY 2015-16) the expression "a residential house" could extend to more than one residential unit such as two adjacent flats. The factual matrix shows the assessee purchased the two flats in assessment year 2014-15 and the sale deed was executed in May 2015, which preceded the announcement of the amendment in July 2015 and the amendment's applicability to AY 2015-16. Section 54 also expressly permits purchase within one year before the date of transfer; on these facts the Tribunal held the amended provision limiting relief to "one residential house" did not apply to the assessee's purchases made in AY 2014-15. Applying these principles, the Tribunal directed that deduction under section 54 be allowed in respect of the second flat as well. [Paras 11, 12, 13]

Assessee entitled to deduction under section 54 in respect of both flats purchased in AY 2014-15; assessing officer directed to allow deduction for the second flat.

Final Conclusion: Appeal allowed: the amendment limiting exemption to "one residential house" (applicable from AY 2015-16) did not apply to the assessee's purchases made in AY 2014-15, and deduction under section 54 is to be granted in respect of the second flat.

Reopening of assessment under section 148 - reasons to believe / failure to make full and true disclosure - unexplained cash credit under section 68 - onus of proof on the assessee under section 68 - penalty under section 271D for receipt otherwise than by account payee cheque - inconsistency in departmental positions

Reopening of assessment under section 148 - reasons to believe / failure to make full and true disclosure - Validity of reassessment initiated under section 148/147 - HELD THAT: - The Tribunal upheld the reopening. The reassessment was initiated after information was received from the ITO, Vadodara indicating that the lender was involved in accommodation entries and that the assessee had claimed a loan from that party. The Tribunal accepted that such information from the investigation wing constituted relevant material on which a reasonable person could form the requisite belief that income had escaped assessment. The Tribunal also relied on the fact that the assessee did not produce the reasons recorded under section 148(2) before the CIT(A), and there was a finding of a false claim amounting to failure to make full and true disclosure. In view of these factors, the reopening was held to be justified despite the assessment having been completed earlier. [Paras 5, 6]

Reopening under section 148/147 sustained; grounds challenging legality of reassessment dismissed.

Unexplained cash credit under section 68 - onus of proof on the assessee under section 68 - Sustainability of addition made under section 68 treating the loan as unexplained cash credit - HELD THAT: - On merits the Tribunal found that the assessee failed to discharge the onus cast upon it under section 68 to satisfactorily explain the nature and source of the credit (loan) shown in its books. The Assessing Officer's finding that the cheque alleged to have been received was not deposited and that the lender was a paper/accommodation entry provider was accepted. In absence of any rebuttal or satisfactory explanation from the assessee (and with the assessee absent in the hearing), the Tribunal agreed with the CIT(A) and the AO that the sum constituted unexplained cash credit and that the addition under section 68 was justified. [Paras 7]

Addition under section 68 upheld; grounds attacking the addition dismissed.

Penalty under section 271D for receipt otherwise than by account payee cheque - inconsistency in departmental positions - Validity of penalty under section 271D where department simultaneously treated the loan as unexplained - HELD THAT: - The CIT(A) set aside the penalty on the ground that departmental records were internally inconsistent: the assessment proceedings treated the loan as a bogus/ unexplained credit (leading to addition under section 68), whereas the penalty proceedings under section 271D proceeded on the basis that the loan was in fact received but by a mode other than account payee cheque. The Tribunal agreed that the department cannot, in effect, accept the loan for the purpose of imposing penalty under section 271D while disallowing/holding it as bogus for assessment; such inconsistency makes the penalty unsustainable. In absence of any contrary clarification from the Additional CIT, the cancellation of penalty was held to be correct. [Paras 9]

Penalty under section 271D cancelled; Revenue's appeal dismissed.

Final Conclusion: Both the assessee's appeal against the reassessment and addition under section 68 and the Revenue's appeal against cancellation of penalty under section 271D were dismissed: reassessment and the addition were upheld for AY 2009-10, and the penalty was cancelled due to inconsistent departmental positions.

Unexplained cash credit under section 68 - burden of proof on assessee to prove identity, genuineness and creditworthiness - use of investigation reports in assessment proceedings - non-speaking order - remand for speaking order and fresh adjudication - application of precedents on unexplained cash credits (CIT v. Stellar Investment Ltd. , Sophia Investment Ltd. )

Unexplained cash credit under section 68 - burden of proof on assessee to prove identity, genuineness and creditworthiness - use of investigation reports in assessment proceedings - Validity of deletion by CIT(A) of addition made by Assessing Officer treating share application money as unexplained cash credit - HELD THAT: - The Tribunal found that the Assessing Officer had made the addition after inquiries under the investigation wing which reported that the four share applicants lacked identity, creditworthiness and genuineness, and that show-cause opportunities were afforded to the assessee but no effective reply was filed. The Assessing Officer's finding placed the onus on the assessee to prove identity, creditworthiness and genuineness of the source of the share application money. The CIT(A)'s order deleted the addition but did not consider or discuss the investigation reports, the enquiries undertaken by the Assessing Officer, or how the precedents referred to applied to the facts. For these reasons the CIT(A)'s order was held to be non-speaking and not to have addressed the determinative material relied upon by the Assessing Officer. [Paras 6]

The deletion by the CIT(A) is set aside because the appellate order failed to deal with the material on record and the Assessing Officer's findings that the share application money was unexplained cash credit.

Non-speaking order - remand for speaking order and fresh adjudication - Appropriate remedy where appellate order is non-speaking and does not address material findings of the Assessing Officer - HELD THAT: - Recognising that the CIT(A) did not discuss the investigation reports or explain the application of relevant judicial decisions to the facts, the Tribunal exercised its discretion to remit the matter to the CIT(A) for fresh consideration. The remand is directed for the CIT(A) to verify the materials on record, consider the Assessing Officer's investigation and findings, apply the legal principles appropriately, pass a speaking order and afford the parties an opportunity of being heard. [Paras 7, 8]

Matter is remitted to the file of the CIT(A) for fresh adjudication and passing of a speaking order in accordance with law; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the order of the CIT(A) deleting the addition treating share application money as unexplained cash credit, remitted the matter to the CIT(A) for fresh, reasoned consideration after verifying the material on record and directed that parties be given opportunity of being heard; appeal allowed for statistical purposes.

Jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - possible view doctrine - lack of enquiry versus inadequate enquiry

Jurisdiction under Section 263 - erroneous and prejudicial to the interest of revenue - possible view doctrine - lack of enquiry versus inadequate enquiry - Validity of revisionary proceedings initiated by the Principal Commissioner of Income Tax under Section 263 for assessment year 2015-16 - HELD THAT: - The Tribunal found that during scrutiny the Assessing Officer had issued notices under Section 142(1), called for explanation and documentary evidence in respect of the two seized profit and loss accounts and had considered the assessee's replies and audited books before framing the assessment under Section 143(3). The Principal Commissioner invoked Section 263 on the ground that the AO had not examined the seized documents, but the record (notices, questionnaire and the assessee's replies) showed that the issues were examined and a plausible view was taken by the AO. The Tribunal applied the settled twin-condition test for exercise of revisionary jurisdiction - the order sought to be revised must be both erroneous and prejudicial to revenue - and held that mere disagreement by the PCIT with a possible view taken by the AO or a belief that the AO's enquiry was inadequate does not make the order erroneous and prejudicial. The power under Section 263 is intended to correct orders where no enquiry has been conducted or where an order is not in accordance with law; it cannot be used to initiate roving or fresh enquiries where the AO has made enquiries and reached one of two permissible conclusions. Applying these principles to the facts, the Tribunal concluded that the PCIT failed to show that the assessment was erroneous in a manner prejudicial to revenue and therefore the revisionary proceedings were not maintainable. [Paras 7, 10]

Revisionary order passed under Section 263 quashed and the appeal of the assessee allowed.

Final Conclusion: The Tribunal held that the AO had examined the seized documents and taken a plausible view after giving opportunity to the assessee; Section 263 was therefore not maintainable as the twin conditions of an order being both erroneous and prejudicial to revenue were not satisfied, and the PCIT's revisionary order was quashed.

Revisionary jurisdiction under Section 263 of the Income Tax Act, 1961 - application of mind in assumption of jurisdiction - examination during assessment proceedings - deductibility under Section 80IE of the Income Tax Act - nexus of subsidies/remissions to business receipts - quashing of revisionary order where assessment not erroneous and prejudicial to revenue

Application of mind in assumption of jurisdiction - revisionary jurisdiction under Section 263 of the Income Tax Act, 1961 - Validity of initiation of proceedings under Section 263 where date discrepancies in proposal/notice suggested absence of application of mind. - HELD THAT: - The Tribunal examined the PCIT records and dispatch register and found that the discrepancy in dates was a clerical mistake which did not go to the root of the matter. The alleged conflict in dates did not establish that the PCIT assumed jurisdiction without application of mind. Accordingly the plea that the Section 263 proceedings were void ab initio for lack of jurisdiction or application of mind was rejected. [Paras 5]

The challenge to the initiation of Section 263 proceedings on the ground of non-application of mind due to date discrepancies is dismissed.

Examination during assessment proceedings - quashing of revisionary order where assessment not erroneous and prejudicial to revenue - Whether the assessment framed under Section 143(3) was erroneous and prejudicial to the revenue for non-examination of CSR expenses. - HELD THAT: - On perusal of the assessment record, including the assessee's reply to the Section 142(1) notice which contained detailed miscellaneous expenses (including CSR), the Tribunal concluded that the AO had examined the CSR claim and taken a plausible view in the scrutiny assessment. Therefore the PCIT's conclusion that the AO failed to examine the CSR expenditure was not tenable. Where the AO has in fact examined the issue and taken a plausible view, exercise of revisionary jurisdiction under Section 263 is not sustainable. [Paras 10]

The finding of the PCIT that the assessment was erroneous and prejudicial to the revenue for non-examination of CSR expenses is not sustained; revisionary action on this ground is quashed.

Deductibility under Section 80IE of the Income Tax Act - nexus of subsidies/remissions to business receipts - quashing of revisionary order where assessment not erroneous and prejudicial to revenue - Whether interest from sundry debtors and VAT remission formed part of eligible profits for the purpose of deduction under Section 80IE and whether the PCIT could validly hold the assessment erroneous on this ground. - HELD THAT: - The Tribunal found that interest earned from delayed payments by sundry debtors arose from the business activity and was attributable to the business profits. Similarly, the VAT remission under the Meghalaya Industries (Tax Remission) Scheme, 2006 arose directly from the assessee's sales and business operations and thus formed part of the eligible profit. Relying on the principle laid down by the Supreme Court that subsidies or reimbursements having direct nexus with business profits are to be treated as part of business income for purposes of eligibility for specified deductions, the Tribunal held that the PCIT's view was incorrect. Since these items were rightly treated as part of eligible income and the AO had taken a plausible view, revision under Section 263 was not justified. [Paras 10]

The PCIT's conclusion that interest and VAT remission were not part of eligible profits under Section 80IE is unsustainable; the exercise of revisionary jurisdiction on these grounds is quashed.

Final Conclusion: The appeal is allowed: the challenge to initiation of Section 263 proceedings for alleged non-application of mind is dismissed as based on a clerical error, but on the merits the PCIT's revisionary order is quashed because the AO had examined CSR expenses and correctly treated interest from debtors and VAT remission as part of eligible profits for deduction under Section 80IE; consequently the Section 263 order is set aside.

Charitable purpose - predominant object test - proviso to Section 2(15) - eligibility for exemption under sections 11 and 12 - corpus donation treatment - registration under Section 12A as sine qua non

Proviso to Section 2(15) - predominant object test - eligibility for exemption under sections 11 and 12 - Whether the assessee's activities during the relevant year are covered by the proviso to Section 2(15) so as to deny exemption under sections 11 and 12. - HELD THAT: - The Tribunal examined the nature and purpose of the assessee (a registered society under Section 12A) and the receipts relied upon by the Assessing Officer. Reliance was placed on coordinate Tribunal decisions and the jurisdictional High Court which upheld that where the dominant and prime objective is promotion of sports and not profit-making, mere receipts from activities such as ticket sales, ground booking, membership/maintenance fees, coaching camps or occasional events do not convert the entity into an undertaking in the nature of trade, commerce or business. The Tribunal also adverted to higher authorities emphasising that fundraising or profit-generating activities incidental to a charitable object do not destroy the charitable character. On the facts the Assessing Officer had not shown that the assessee carried on activities of trade/commercial nature with profit as predominant object; the elements required for applying the proviso to Section 2(15) were absent. The Tribunal therefore affirmed the CIT(A)'s conclusion that the proviso did not apply and that the assessee remained eligible for exemption under sections 11 and 12 for the year under consideration. [Paras 13, 14, 15, 16, 17]

The proviso to Section 2(15) does not apply to the assessee for AY 2009-10; the assessee is eligible for exemption under sections 11 and 12.

Corpus donation treatment - eligibility for exemption under sections 11 and 12 - Whether the subsidy received from the State cricket body (infrastructure subsidy) is taxable revenue or is to be treated as corpus/specific donation and outside income for assessment. - HELD THAT: - The Assessing Officer had treated the subsidy as taxable income because no explicit donor direction was recorded. The Tribunal relied on earlier Tribunal and High Court findings (including treatment of TV/infrastructure subsidies to cricket associations) that subsidies or grants given for creation of capital infrastructure, or under resolutions directing transfer to corpus, are to be treated as corpus/specific donations and are not revenue receipts. Applying that principle to the facts, the Tribunal sustained the view of the CIT(A) that the subsidy was not includible as taxable income for the assessment year. [Paras 3, 11, 17]

The infrastructure subsidy is to be treated as corpus/specific donation and is not assessable as revenue income for AY 2009-10.

Eligibility for exemption under sections 11 and 12 - charitable purpose - Whether the additions of Rs.67,03,176 (earmarked fund and membership receipts) should be included in taxable income. - HELD THAT: - The Assessing Officer included amounts shown as earmarked fund and membership fees in total income after treating the assessee as an AOP and outside the exemption regime. Having held that the proviso to Section 2(15) did not apply and that the assessee's activities are charitable in predominant object, the Tribunal agreed with the CIT(A) that those receipts are to be considered in the context of the assessee's charitable activities and not as indicia of a trade or business rendering them taxable. Accordingly, the additions were directed to be deleted. [Paras 4, 17]

The additions of Rs.67,03,176 are to be deleted and are not includible in the assessee's taxable income for AY 2009-10.

Eligibility for exemption under sections 11 and 12 - charitable purpose - Whether the claimed capital expenditure and ground renovation (net capital expenditure and renovation) are to be disallowed on the basis that the assessee is an undertaking in the nature of trade or business. - HELD THAT: - The Assessing Officer disallowed the claimed capital expenditure and ground renovation after treating the assessee as an AOP and determining that it carried on business activities. Since the Tribunal concluded that the proviso to Section 2(15) did not apply and that the assessee's predominant object remained the promotion of sports, the rationale for disallowance fell away. The Tribunal therefore affirmed the deletion of such disallowances by the CIT(A). [Paras 5, 17]

The capital expenditure and renovation claims are to be allowed and the disallowances sustained by the Assessing Officer are deleted for AY 2009-10.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, affirmed the order of the CIT(A) and held that the proviso to Section 2(15) did not apply to the assessee for AY 2009-10; consequential additions and disallowances made by the Assessing Officer (including the subsidy, earmarked/membership receipts and capital expenditure disallowances) were deleted.

Distinction between revenue expenditure and capital expenditure in the context of repairs - scope of 'current repairs' under section 31-distinction between revenue repairs and capital expenditure - effect of a lease covenant allocating repair and calamity liability on the characterisation of expenditure - treatment of insurance recoveries against repair expenses

Distinction between revenue expenditure and capital expenditure in the context of repairs - effect of a lease covenant allocating repair and calamity liability on the characterisation of expenditure - treatment of insurance recoveries against repair expenses - Whether the expenditure of Rs. 28,66,569/- incurred on account of repairs and electrical fittings after a fire is revenue expenditure deductible in the year or a capital expenditure to be disallowed for Assessment year 2017-18. - HELD THAT: - The Tribunal found as facts that the assessee was a lessee (lease dated 23/06/2016) and clauses in the lease (clauses 3 and 8) expressly placed responsibility for wear and tear, maintenance and repairs, and liability for calamity-related loss on the lessee. The fire damaged the premises occupied by the assessee and the assessee incurred expenses to restore the building and electrical fittings to working condition. Although the documents contained bills for constructional items, the authorities below had been shown that items of a capital nature had already been capitalised and that the net amount claimed (after reducing the settled insurance amount) represented expenditure to bring the existing asset back into use rather than the creation of a new asset. The Tribunal accepted that insurance recovery, insofar as already settled, had been netted off by the assessee and that any future receipts should be brought to account when received. On this basis, and having considered the totality of facts, the Tribunal concluded that the expenditure was incurred for restoration/repairs by a lessee bound by the lease covenant and did not result in the creation of a new capital asset; accordingly the expenditure was revenue in nature and deductible for the year. The Tribunal rejected the view that the lease clause could be overridden by the mere labeling of certain bills as constructional when the net effect and the factual matrix showed restoration of the pre-existing asset. [Paras 8]

The expenditure of Rs. 28,66,569/- is revenue expenditure for Assessment year 2017-18 and the assessment authority is directed to treat it as such (allow the claim after adjusting insurance recovery as appropriate).

Final Conclusion: The appeal is allowed; the Tribunal directs the Assessing Officer to treat the impugned expenditure as revenue expenditure for Assessment year 2017-18, with insurance recoveries adjusted or brought to account as and when received.

Deduction of bad debts written off in books - Allowability of unrealized foreign exchange loss under mercantile system - Application of provisions disallowing expenses for failure to deduct tax at source - Treatment of commission and brokerage paid to resident and non-resident agents and TDS applicability

Deduction of bad debts written off in books - Deletion of addition of bad debts made by the Assessing Officer - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition of Rs.17,86,898/- because the assessee had written off the debts as irrecoverable in its books and produced ledger evidence showing the amounts had been offered to tax in earlier years. The Tribunal applied the legal position that after 1-4-1989 an assessee need not establish actual irrecoverability; writing off in the accounts suffices, relying on the Supreme Court authority referred to in the appellate order, TRF Ltd Vs. CIT , and other decisions and noting CBDT circular guidance. On the facts the CIT(A) applied that principle to the assessee's book entries and records and the Tribunal found no infirmity in that conclusion. [Paras 6]

Addition of Rs.17,86,898/- for bad debts deleted; ground of appeal allowed.

Allowability of unrealized foreign exchange loss under mercantile system - Deletion of addition of unrealized foreign exchange loss made by the Assessing Officer - HELD THAT: - The Tribunal sustained the CIT(A)'s deletion of the addition of Rs.23,15,348/- on the basis that the assessee followed the mercantile system of accounting and had correctly reflected unrealized exchange differences in its books as trading loss. The CIT(A) relied on the Supreme Court decision referred to in the order, Woodward Governor India P. Ltd , and applied the tests (mercantile system, consistency, equal treatment of gains and losses, accounting standards and bona fides). On examining the ledger evidence and the manner of accounting, the Tribunal found the CIT(A)'s reasoning adequate and the AO's characterisation of the loss as merely contingent was not sustained. [Paras 6]

Addition of Rs.23,15,348/- on account of unrealized forex loss deleted; ground of appeal allowed.

Application of provisions disallowing expenses for failure to deduct tax at source - Deletion of disallowance of interest paid to others under the provisions disallowing expenses where TDS was not deducted - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance of Rs.1,14,29,361/-. The CIT(A) considered the details of interest payments and TDS records provided by the assessee in the appellate proceedings (and which the assessee stated were also placed before the AO) and observed that the factual matrix warranted deleting the AO's disallowance under the relevant TDS-linked disallowance provision. The Tribunal found that the Revenue failed to controvert the CIT(A)'s factual finding with new cogent material and therefore found no infirmity in deletion of the disallowance. [Paras 6]

Disallowance of interest of Rs.1,14,29,361/- deleted; ground of appeal allowed.

Treatment of commission and brokerage paid to resident and non-resident agents and TDS applicability - Deletion of additions in respect of commission and brokerage paid to resident and foreign agents - HELD THAT: - The Tribunal sustained the CIT(A)'s deletion of the additions made by the AO concerning commission and brokerage paid to resident and foreign agents. The CIT(A) examined party-wise ledger details, sample invoices and TDS certificates in respect of payments to resident agents (where TDS implications under domestic provisions were addressed) and considered the position that commission paid to foreign agents, who had no permanent establishment in India, was not taxable in India and therefore not subject to Indian TDS provisions. The Tribunal found the CIT(A)'s factual and legal conclusions to be reasoned and not rebutted by the Revenue with fresh material. [Paras 6]

Additions relating to commission and brokerage paid to resident and foreign agents deleted; ground of appeal allowed (as recorded by CIT(A)).

Final Conclusion: The Tribunal found the CIT(A)'s order to be reasoned and speaking on the disputed issues (bad debts, unrealized foreign exchange loss, interest payments and commission/brokerage), and, not having been shown any new cogent material by the Revenue, upheld the CIT(A) and dismissed the Revenue's appeal.

Preliminary satisfaction under Section 148A(d) for issuance of notice under Section 148 - consideration of assessee's reply/representation before forming satisfaction - prior approval of Principal Commissioner of Income Tax as part of the decision-making process - fresh reasoned order on remand

Preliminary satisfaction under Section 148A(d) for issuance of notice under Section 148 - consideration of assessee's reply/representation before forming satisfaction - fresh reasoned order on remand - Whether the Assessing Officer considered the assessee's reply/representation before forming satisfaction to issue a notice under Section 148 and whether the impugned order and notice should be set aside for fresh consideration. - HELD THAT: - The Court recorded that sub-clause (d) of Section 148A requires the Assessing Officer to decide, on the basis of material on record including the assessee's reply, whether it is a fit case to issue a notice under Section 148, with prior approval of the Pr. CIT. The learned senior counsel for the petitioner submitted that the reply/representation was not considered and that the Assessing Officer had proceeded with a pre-determined mind. The respondents did not controvert that the representation now placed on record but offered no objection to fresh consideration. In view of the absence of consideration of the representation and to ensure compliance with the statutory mandate to pass a reasoned order, the Court set aside the impugned order dated 25th March, 2022 and the notice dated 26th March, 2022 and directed the Assessing Officer to pass a fresh reasoned order in accordance with law within six weeks after considering the reply/representation dated 26th March, 2022 and the annexures thereto. [Paras 3, 7]

Impugned order dated 25th March, 2022 and notice dated 26th March, 2022 set aside; matter remitted to the Assessing Officer to pass a fresh reasoned order within six weeks after considering the assessee's representation.

Judicial non-adjudication of merits on remand - Whether the High Court adjudicated the merits of the controversy on the writ petition. - HELD THAT: - The Court expressly clarified that it has not commented on the merits of the controversy and that the rights and contentions of all parties are left open for determination in the proceedings before the Assessing Officer in accordance with law. [Paras 8]

No comment on merits; parties' rights and contentions remain open.

Final Conclusion: Impugned order under Section 148A(d) and the Section 148 notice set aside; Assessing Officer directed to consider the assessee's representation and pass a fresh reasoned order within six weeks; Court has not expressed any view on the merits and left the rights and contentions of the parties open.

Re-opening of assessment beyond the statutory period of limitation - limitation under Section 149 - finding or direction under Section 150 - failure to disclose fully and truly all material facts - completed contract method of accounting - percentage completion method - taxation in year of completion prevents earlier taxation

Re-opening of assessment beyond the statutory period of limitation - finding or direction under Section 150 - limitation under Section 149 - Validity of notices under Section 148 issued beyond six years and whether they were saved by being 'in consequence of or to give effect to' a finding or direction of the tribunal - HELD THAT: - The notices dated 19th January, 2012 seeking reopening of assessments for AYs 2001-02, 2002-03 and 2003-04 were issued beyond the six-year period prescribed by law. The Tribunal's order dated 24th November, 2010 merely observed confusion in figures of work-in-progress and restored the matter to the Assessing Officer for limited factual verification as to whether the projects shown as WIP in earlier years were the same projects completed and taxed in AY 2003-04. Those observations did not constitute a 'finding' or a statutory 'direction' within the meaning of Section 150 such as to enliven the proviso to Section 147 and permit reopening beyond six years. The court relied on the principle (as discussed in Pawan Murarka v. The Assistant Commissioner of Income Tax - 2(3) and another ) that a finding must be necessary for disposal of the appeal and a direction must be a positive order capable of enforcement by the authority empowered to give such directions. The Tribunal had in fact recorded that income was offered and accepted for AY 2003-04 on project completion and held that if so taxed then the same amount could not be taxed earlier years; its remand was for limited verification, not an instruction to reopen assessments for the earlier years. [Paras 14, 16]

Notices under Section 148 could not be sustained on the basis of the Tribunal's observations; the Tribunal's order was not a 'finding' or 'direction' under Section 150 to validate reopening beyond the statutory period.

Failure to disclose fully and truly all material facts - completed contract method of accounting - percentage completion method - Whether reasons recorded for reopening show failure by the assessee to disclose material facts or otherwise justify reopening after expiry of limitation; and effect of subsequent appellate orders - HELD THAT: - The reasons recorded for reopening do not indicate any failure by the assessee to fully and truly disclose material facts; there is no finding in the reasons that income had escaped assessment due to non-disclosure. Moreover, after the Tribunal's order the Assessing Officer passed a fresh order (29th December, 2011) which was appealed; the Appellate Authority (CIT(A)) allowed the appeal on 12th March, 2014 holding that the purpose of the ITAT remand had been limited and that there was no justification to question the revenue recognized in AY 2003-04; the Appellate Authority deleted the addition. The Revenue's subsequent appeal was dismissed by the Tribunal on 30th April, 2019 which held that the assessee had discharged its onus and that income from construction work was offered and taxed in AY 2003-04. Given absence of any cogent incriminating material and the appellate findings accepting the assessee's position, the reassessment notices and the order rejecting objections cannot stand. [Paras 17, 18, 19]

Reopening was not justified for failure to disclose; subsequent appellate decisions confirmed that income was offered and taxed in AY 2003-04 and deletions were accordingly sustained, rendering the reassessment and objection order invalid.

Final Conclusion: The re-opening notices and the order rejecting objections were quashed: the Tribunal's observations did not amount to a finding or direction under Section 150 to permit reassessment beyond six years, the reasons recorded do not show failure to disclose material facts, and subsequent appellate rulings accepted the assessee's position that the income was offered and taxed in AY 2003-04.

Section 148A(d) of the Income-tax Act, 1961 - obligation to decide on the basis of material available on record including assessee's reply before issuing notice under Section 148 - Reopening of assessment - quasi judicial duty to consider and dispose objections by a speaking order with application of mind - Quashing of notice under Section 148 where procedural mandate of Section 148A is not complied with - Remand for fresh consideration where order is mechanical and objections are not dealt with in substance

Section 148A(d) of the Income-tax Act, 1961 - obligation to decide on the basis of material available on record including assessee's reply before issuing notice under Section 148 - Reopening of assessment - quasi judicial duty to consider and dispose objections by a speaking order with application of mind - Validity of the order passed under clause (d) of Section 148A and issuance of notice under Section 148 for A. Y. 2018-19 in light of the assessee's objections - HELD THAT: - The Court held that clause (d) of Section 148A mandates that the Assessing Officer must decide, on the basis of material on record including the assessee's reply, whether it is a fit case to issue a notice under Section 148, and must do so with prior approval of the specified authority within the statutory timeframe. The Assessing Officer's order (paras 7-8 of the AO's order) merely recorded that the assessee's submissions were not acceptable without demonstrating consideration of the documentary evidence and specific objections filed. Such mechanical disposal falls short of the statutory and quasi judicial obligation to deal with each objection and to reflect application of mind. The Court relied on the established principle (as reflected in GKN Driveshaft jurisprudence and subsequent authorities) that objections to reopening must be disposed of by a reasoned order; Section 148A embodies that requirement. Because the AO failed to consider the objections in their true sense, the order under clause (d) of Section 148A and the notice under Section 148 could not stand and required interference. [Paras 12, 13]

The order passed under clause (d) of Section 148A and the notice under Section 148 for A. Y. 2018-19 are quashed; the matter is remitted to the Assessing Officer to consider all objections afresh and pass a reasoned order reflecting application of mind.

Remand for fresh consideration due to non-application of mind - Scope and direction on remand following quashing of the AO's order and notice - HELD THAT: - The Court directed that the Assessing Officer shall reconsider all objections raised by the assessee and pass an order under clause (d) of Section 148A that deals with the objections in substance and in consonance with the spirit of Section 148A. The remand is for fresh consideration on merits of the objections (including documentary evidence relied upon by the assessee) and not merely for quantification; the reassessment process shall proceed only if the AO, after applying his mind and with prior approval where required, forms a justified view that income has escaped assessment. The exercise was directed to be completed within three months from receipt of the writ of the order. [Paras 13]

Matter remitted to the Assessing Officer for fresh, reasoned consideration of the objections; exercise to be completed within three months.

Final Conclusion: Writ application succeeds in part: the order under clause (d) of Section 148A and the notice under Section 148 for A. Y. 2018-19 are quashed for failure to comply with the statutory obligation to consider the assessee's objections; matter remitted to the Assessing Officer for fresh, reasoned decision within three months.

Classification of origin for differential duty levy - direction to conclude inquiry within fixed time-frame - conditional interim relief for release of goods - storage of detained imported goods pending inquiry

Direction to conclude inquiry within fixed time-frame - storage of detained imported goods pending inquiry - Revenue directed to complete its inquiry into the origin of the imported goods and place a report on record within fifteen days. - HELD THAT: - The Court noted that the inquiry into whether the goods originated from UAE, Turkey or Pakistan had been pending for an extended period and that the goods remained in customs warehouse for over seven months. Observing that the inquiry should not continue indefinitely, the Court impressed upon the Revenue to conclude the investigation and file an appropriate report within fifteen days from the date of the order. The direction was expressed as a binding timeline to expedite administrative action while preserving the Revenue's investigatory role. [Paras 4]

Revenue directed to conclude the origin-inquiry and file a report within fifteen days.

Classification of origin for differential duty levy - conditional interim relief for release of goods - Court reserved the prospect of releasing the goods on such terms and conditions as it may consider appropriate if the inquiry is not completed within the stipulated period. - HELD THAT: - The Court recognised that duty liability depends on the proven origin of the goods (with different rates contended by the parties) but, given the prolonged detention and the applicants' inability to furnish tangible security (having offered only a bond), the Court declined immediate unconditional release. Instead, it recorded that, should the Revenue fail to conclude the inquiry within the directed timeframe, the Court may consider ordering release of the goods subject to appropriate terms and conditions. This preserves the applicants' entitlement to interim relief while protecting the Revenue's interest in a final determination of origin and duty. [Paras 3, 4, 5]

If the inquiry is not concluded within the directed fifteen days, the Court may consider releasing the goods subject to terms and conditions.

Final Conclusion: The Court has not adjudicated the substantive question of the goods' origin or the applicable duty; it has directed the Revenue to complete the inquiry within fifteen days and indicated that, if the inquiry remains unfinished, the Court may entertain an application for conditional release of the goods on appropriate terms. A hearing is posted for 21st April 2022.

Jurisdiction of Settlement Commission to adjudicate disputed questions - Requirement of full and true disclosure for invocation of settlement jurisdiction - Relegation to the Adjudicating Authority where settlement preconditions are not satisfied - Settlement proceedings are not a substitute for adjudication

Jurisdiction of Settlement Commission to adjudicate disputed questions - Requirement of full and true disclosure for invocation of settlement jurisdiction - Whether the Settlement Commission erred in adjudicating and confirming the demand raised in the show-cause notice instead of rejecting the settlement application and relegating the matter to the Adjudicating Authority when the jurisdictional preconditions were not satisfied. - HELD THAT: - The Court held that the Settlement Commission has limited powers confined to settlement under Chapter XV-A and is not a substitute adjudicatory authority to finally determine disputed questions of liability. Where the Commission records that the applicant has not made "full and true" disclosure or where the essential preconditions for invoking settlement jurisdiction are not satisfied, the proper course is to reject the settlement application and refer the matter to the Adjudicating Authority to decide the show-cause notice on merits. The Court relied on precedent establishing that the Settlement Commission must act within the four corners of its statutory power and should not proceed to adjudicate issues reserved for the adjudicating authority. Applying these principles, the Court found that the Commission in the present case proceeded to adjudicate and confirm the demand despite the lack of satisfaction of settlement preconditions, which amounted to an error of jurisdiction. [Paras 15]

The impugned order insofar as it adjudicates and confirms the demand in the show-cause notice is quashed.

Relegation to the Adjudicating Authority where settlement preconditions are not satisfied - Settlement proceedings are not a substitute for adjudication - What is the consequent remedy upon quashing the adjudicatory portion of the Settlement Commission's order? - HELD THAT: - The Court directed that legal consequences shall follow in accordance with law and that proceedings pursuant to the show-cause notice shall commence before the concerned adjudicating authority. The show-cause notice is to be decided on merits by the Adjudicating Authority after hearing the parties. The Court clarified that it has not decided the show-cause notice on merits and thereby limited its interference to setting aside the adjudicatory outcome of the Settlement Commission's order and directing fresh adjudication by the appropriate authority. [Paras 16]

Proceedings pursuant to the show-cause notice shall commence before the concerned authority and the show-cause notice shall be decided on merits after hearing the parties; no order as to costs.

Final Conclusion: The writ petition is partly allowed: the Settlement Commission's order is quashed to the extent it adjudicates and confirms the demand in the show-cause notice; the matter is relegated to the appropriate Adjudicating Authority for fresh adjudication of the show-cause notice on merits, with no order as to costs.

Violation of Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 - Public Notice compliance for courier imports - Due diligence obligation of an authorised courier - Mis-declaration and withholding of information to evade customs duty - Revocation of courier licence for breach of trust and non-compliance - Principle of proportionality in disciplinary action

Violation of Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 - Public Notice compliance for courier imports - Mis-declaration and withholding of information to evade customs duty - Whether the appellant violated the Courier Regulations and the Public Notice by mis-declaring consignor/consignee details, description, quantity and value of imported consignments. - HELD THAT: - The Tribunal, after examining the record and the Inquiry Officer's findings, accepted that invoices and electronic declarations/ECM did not match the particulars pasted on packages, and that eight boxes were destined to States other than those permitted by the Public Notice. The Inquiry Officer and Commissioner found that consignee/consignor details in ECM did not match the packages and that wrong ECM/invoice details were entered to bypass the Public Notice. The appellant's explanations of technical glitches, clerical errors, cancellations or interchange were not supported by evidence and were held to be implausible. Applying preponderance of probability, the Tribunal agreed with the Commissioner that the appellant had mis-declared details and withheld correct information, which was indicative of an attempt to obtain duty benefit; the appellant accepted enhanced value and paid differential duty without protest, reinforcing the finding of mis-declaration. [Paras 15, 17, 18]

The appellant breached the Courier Regulations and the Public Notice by mis-declaring consignor/consignee details and other particulars, and by withholding correct information from the assessing officer.

Due diligence obligation of an authorised courier - Revocation of courier licence for breach of trust and non-compliance - Whether revocation of the appellant's courier licence was justified in view of the violations and the trust reposed in courier agencies. - HELD THAT: - The registration terms expressly required adherence to the Regulations and permitted revocation for failure to comply or misconduct. The Tribunal observed that the Government places trust on courier agencies and imposes procedural responsibilities under the CIER, 2010. The appellant failed to exercise due diligence to ensure correct and complete information and thereby created scope for misuse and loss of revenue. Given the multiplicity and seriousness of violations, the Commissioner legitimately concluded that the trust was breached. The Tribunal held that leniency was not warranted in these circumstances and that revocation would serve as a proper deterrent. [Paras 19, 21]

Revocation of the courier licence was justified on account of failure to exercise due diligence, breach of regulatory obligations and erosion of the trust reposed in the appellant.

Principle of proportionality in disciplinary action - Whether the principle of proportionality required lesser punishment (such as suspension) instead of revocation given the appellant's plea of inadvertent/technical error. - HELD THAT: - The Tribunal considered the appellant's reliance on proportionality authorities but found the factual matrix distinguishable. Unlike cases where concealment lacked evidence of broker's knowledge, here multiple violations, inconsistent explanations and acceptance of enhanced duty by the appellant indicated culpability. The Tribunal concluded that the gravity, multiplicity and nature of infractions did not make the case fit for a lesser penalty; revocation was not disproportionate in the circumstances and would act as an effective deterrent. [Paras 20, 21]

The proportionality argument was rejected and revocation was held not to be disproportionate given the seriousness and multiplicity of the violations.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Commissioner's findings of violations of the Courier Regulations and the Public Notice, and confirming revocation of the courier licence as justified and proportionate to the misconduct.

Transaction value - related persons - royalty and licence fees as a condition of sale - includibility of royalties under valuation rules - addition of miscellaneous charges to assessable value

Related persons - transaction value - Whether the buyer and seller are related persons and whether that relationship affected the transaction value - HELD THAT: - The Tribunal recorded that it was undisputed the importer and the overseas supplier are sister concerns and therefore related persons. However, both sides also agreed that the relationship did not influence the transaction value. The adjudicatory finding that related party status existed did not lead to rejection of the declared transaction value because no evidence showed the relationship influenced the price; Rule 3 (as read with Rule 10) was applied accordingly. [Paras 15]

Related party status accepted but relationship held not to have influenced the transaction value; transaction value accepted on that basis.

Addition of miscellaneous charges to assessable value - Whether the miscellaneous charges shown in the invoices were required to be added to the assessable value - HELD THAT: - It was common ground that the ex factory price did not include miscellaneous charges shown on invoices. The appellant demonstrated that those charges were nevertheless included in the Bill of Entry under a different column and that a zero was shown in the 'Miscellaneous Charges' column; the net effect was that these charges had already been accounted for in the assessable value. Therefore there was no justification for a further addition. [Paras 16]

Miscellaneous charges were found to have been included in the Bill of Entry and need not be added again to the assessable value.

Royalty and licence fees as a condition of sale - includibility of royalties under valuation rules - Whether the licence fee/royalty payable to the holding company, computed as a percentage of the appellant's turnover, is includible in the assessable value of the imported components under Rule 10(1)(c) - HELD THAT: - Rule 10(1)(c) requires adding royalties and licence fees that are related to the imported goods and which the buyer is required to pay, directly or indirectly, as a condition of sale. The Tribunal examined the Technical Aid Agreement and relevant precedents (including Matsushita and Ferodo) and found that, unlike the factual matrix in Matsushita where the agreement linked royalty to imported components and imposed approval/conditions affecting component supply, the present Technical Aid Agreement did not mandate imports nor require the licensor's approval for procurement of components. The agreement governed manufacture to specified standards and required payment of a licence fee on net turnover, but did not make payment a precondition for import or supply of the imported items. Mere computation of royalty as a percentage of turnover that includes imported component cost was held insufficient, by itself, to render the royalty a condition of sale of the imported goods. [Paras 15, 20, 22, 23]

Royalty/license fee payable to the holding company on turnover is not a condition of sale of the imported goods and therefore is not includible in the assessable value under Rule 10(1)(c).

Final Conclusion: The appeal is allowed: the Tribunal upheld that the declared transaction value need not be disturbed because relatedness did not influence price; miscellaneous invoice charges were already included in the Bill of Entry and should not be added again; and the licence/royalty payable to the holding company on turnover is not a condition of sale of the imported goods and is not includible in assessable value. The impugned order is set aside with consequential relief to the appellant.

Classification by principal and main function - General Rules of Interpretation - Common parlance theory - Interpretation of composite or multifunctional goods - Binding effect of prior adjudicatory decisions and finality of judgment

Classification by principal and main function - Interpretation of composite or multifunctional goods - General Rules of Interpretation - Common parlance theory - Binding effect of prior adjudicatory decisions and finality of judgment - Classification of imported 'Multimedia Speakers' for purposes of Customs Tariff heading - HELD THAT: - The Tribunal applied the General Rules of Interpretation and the common parlance test to conclude that, notwithstanding additional features such as USB playback or FM radio, the goods' principal and main function is that of a speaker. The Tribunal in the appellant's earlier matter held that such multifunctional items are classifiable under the speaker heading (CTH 8518 2200) because their predominant function remains sound amplification; invoices, brochures and dealer affidavits supported that the goods are traded and sold as speakers. The Department's re classification was contrary to this interpretative approach. The Tribunal's prior decision on the same controversy was upheld by dismissal of the Department's appeal before the Supreme Court, rendering the classification question no longer res integra. In view of the binding effect of the earlier final adjudication, the impugned order changing the classification could not be sustained and was set aside. [Paras 3, 5]

Impugned order re classifying the goods set aside; goods held classifiable as speakers under the principal function test and appeal allowed in favour of the appellant.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned classification order and restored the classification of the imported 'Multimedia Speakers' as speakers based on their principal function, following the Tribunal's earlier decision which attained finality after dismissal of the Department's appeal.

Maintainability of company petition under Sections 241-242 - removal of directors under Section 169 - special notice for removal of director - oppression and mismanagement - tribunal's powers under Section 242 and absence of implied power to reinstate - share transfer formalities under Section 56

Maintainability of company petition under Sections 241-242 - Petitioners' entitlement to maintain the Company Petition under Sections 241-242 of the Companies Act, 2013. - HELD THAT: - The Tribunal examined the affidavit filed by the 1st Petitioner showing he held 44.33% of the shares and that he swore the affidavit on behalf of the 2nd Petitioner who held 5.75%. The Tribunal held that the affidavit of the 1st Petitioner was sufficient to satisfy the statutory threshold and accepted the petition as maintainable under Sections 241-242 of the Companies Act, 2013. [Paras 20]

Petitioners are eligible to file the Company Petition under Sections 241-242.

Removal of directors under Section 169 - special notice for removal of director - share transfer formalities under Section 56 - Validity of the removal of the Petitioners from directorship and related share transfer allegations. - HELD THAT: - The Tribunal reviewed Section 169 and the documentary record including the special notice, postal acknowledgement, Form SH-4 and share transfer consent letters. The materials showed that a special notice was served, the Petitioners received notice of the EGM and the share transfer documents bore the Petitioners' signatures recorded on 29.01.2021 before the statutory auditor. The Tribunal observed that appointment or removal of directors by shareholders is a core corporate right and not ordinarily subject to judicial re writing where statutory procedure has been followed. Given the documents on record, the Tribunal found no infirmity in the procedural steps relied upon by respondents and found the Petitioners' contention regarding forged transfers to be unestablished on the record. [Paras 21, 23, 24, 27]

The removal of the Petitioners was not shown to be illegal and the share transfer contention was not substantiated.

Oppression and mismanagement - tribunal's powers under Section 242 and absence of implied power to reinstate - Whether the removals were oppressive or prejudicial so as to attract relief under Sections 241-242 and whether reinstatement could be granted. - HELD THAT: - Relying on the Supreme Court precedent cited in the judgment, the Tribunal reiterated that its jurisdiction under Section 242 is to remedy conduct that is oppressive or prejudicial and not to adjudicate purely on validity of removal unless such removal forms part of oppressive conduct. The Tribunal noted that even if a removal were procedurally infirm, relief under Section 242 would require a finding of oppression. The record did not disclose continuing oppressive or prejudicial conduct by the company or its management. The Tribunal further noted the settled principle that Section 242 does not confer an implied power to order reinstatement of directors as a general remedial measure. [Paras 25, 26, 28]

Removals did not amount to oppression or prejudice; no relief under Sections 241-242, including reinstatement, was warranted.

Final Conclusion: The Tribunal held the petition maintainable but, having negatived the challenges to the removal and to any oppressive or prejudicial conduct, dismissed the Company Petition (CP/30(KOB)/2021) as devoid of merit and declined to grant any relief, disposing of the interlocutory application accordingly.

Scheme of Arrangement - sanction of scheme - dispensation of meetings - notice and service to statutory authorities - appointed date - effective date - compliance with RD/ROC observations - undertaking regarding statutory dues and tax liabilities - compliance with section 185 and 186 - compliance with CSR obligations under section 135 - approval binding on shareholders and creditors

Dispensation of meetings - maintainability - Maintainability of the joint petition under the Rules and continuation of directions given in the First Motion order including dispensation of class and creditor meetings. - HELD THAT: - The Tribunal recorded that the Second Motion Petition was filed under Sections 230 and 232 of the Companies Act, 2013 and Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and held the joint petition to be maintainable in terms of Rule 3(2). It noted the First Motion Application and the earlier order dated 03.02.2022 dispensing with meetings of the specified classes of shareholders and creditors and proceeded on that basis. [Paras 1, 2]

The joint petition is maintainable and the earlier dispensation of the specified meetings stands as per the First Motion order.

Notice and service to statutory authorities - absence of objections - Sufficiency of notice/publication and service to statutory authorities and the absence of objections to the Scheme. - HELD THAT: - The Tribunal took on record proof of service and newspaper publications and noted service upon the Registrar of Companies, Regional Director, Income Tax authorities, Competition Commission, Reserve Bank of India and others. It observed that no objections had been received by the petitioner companies in response to the notices and public advertisement, and thus there was no impediment to proceeding with consideration of the Scheme on account of notice or non-service. [Paras 3, 4]

Notices and publications were duly effected and no objections having been received, there was no bar to further adjudication of the Scheme on that ground.

Compliance with RD/ROC observations - appointed date - effective date - Sufficiency of the petitioner companies' replies to the Regional Director and Registrar of Companies observations, including justification for the appointed date and competence of the resulting company. - HELD THAT: - The RD/ROC raised multiple concerns (including rationale for demerger to a newly incorporated resulting company, choice of appointed date, share exchange ratio, inter-corporate transactions, statutory dues and tax implications). The petitioners filed a detailed reply addressing each point: they produced a valuation showing negative net worth of the demerged undertaking as on the appointed date; explained commercial reasons for selecting the appointed date tied to transfer of ownership on March 9-10, 2021; explained group expertise of the incoming investors; gave undertakings and produced documents relating to inter-corporate advances, compliance with SEBI obligations, and treatment of tax and statutory dues. The Tribunal recorded that the RD, RoC and Income Tax reports and the petitioners' replies were taken on record and found that the objections/observations had been adequately replied to. [Paras 10, 11, 14, 15]

The responses and undertakings furnished by the petitioner companies adequately addressed the RD/ROC observations and did not prevent sanctioning of the Scheme.

Undertaking regarding statutory dues and tax liabilities - compliance with section 185 and 186 - compliance with CSR obligations under section 135 - Acceptance of undertakings given by the petitioner companies concerning payment of statutory dues, tax liabilities, compliance with provisions relating to inter-corporate transactions, and CSR obligations. - HELD THAT: - The Tribunal noted specific undertakings and evidence filed by the petitioners: undertaking to pay tax liabilities and other statutory dues when claims crystallize (including Income Tax demands brought to the Tribunal's notice), confirmation and supporting resolutions concerning inter-corporate deposits and exemptions argued under section 186, and affidavits clarifying CSR spend for the financial year ending 31 March 2021. The Tribunal, after hearing and reviewing the affidavits and confirmations, accepted these undertakings as satisfying the concerns raised by the authorities. [Paras 11, 12, 13]

The undertakings and supporting material regarding statutory dues, tax liabilities, inter-corporate transactions and CSR compliance were accepted by the Tribunal as adequate.

Sanction of scheme - approval binding on shareholders and creditors - Final sanction of the Scheme of Arrangement and incidental directions including dissolution of the demerged company on compliance, deposit directions and preservation of rights of tax and other authorities. - HELD THAT: - Having taken on record the statutory reports and the petitioners' replies and undertakings, the Tribunal approved the Scheme as annexed to the petition and declared it binding on all shareholders and creditors of the parties. The Tribunal clarified that its order did not exempt payment of stamp duty, taxes or other charges nor preclude actions by tax or other authorities under applicable laws. The Tribunal further directed filing of certified copy with the ROC leading to dissolution of the demerged company without winding up, consolidation of ROC files, deposit by the resulting company for Regional Director and Prime Minister's National Relief Fund, and filing of formal orders on submission of schedule property affidavits. [Paras 15, 16, 17]

The Scheme is sanctioned and shall be binding on shareholders and creditors; consequential directions regarding registration, dissolution of the demerged company, specified deposits and preservation of statutory rights were issued.

Final Conclusion: The Tribunal held the joint petition maintainable, found that notices and statutory consultations were properly conducted, concluded that the RD/ROC concerns and other statutory queries were satisfactorily addressed by the petitioners' replies and undertakings, and accordingly sanctioned the Scheme of Arrangement subject to the specified consequential directions and without prejudice to the rights of tax and other authorities.

Scheme of Amalgamation sanction - Appointed Date - Transfer of assets and liabilities - Allotment of shares under scheme - Compliance with statutory requirements and undertakings - Dissolution without winding up

Scheme of Amalgamation sanction - Appointed Date - Sanction of the Scheme of Amalgamation and fixation of the Appointed Date as 01.04.2018. - HELD THAT: - The Tribunal, after considering the petition, the statutory auditor's certificate, the approvals of the boards, the dispensation of shareholder meetings (by affidavit consent), service and publication of notices and the representations filed by the Regional Director and the Official Liquidator, held that the Scheme annexed to the petition is to be sanctioned. The Appointed Date as stated in the Scheme, namely 01.04.2018, was accepted and fixed. Objections and queries raised by the Regional Director concerning the relevance of the appointed date were noted and responded to by the petitioners, who produced consents and explained the timeline of approvals including RBI approval; the Tribunal nonetheless sanctioned the Scheme with the appointed date as proposed.

The Scheme is sanctioned and the Appointed Date fixed as 01.04.2018.

Transfer of assets and liabilities - Effect of the sanction on transfer of property, rights, liabilities, proceedings and employees from the Transferor Companies to the Transferee Company. - HELD THAT: - The Tribunal ordered that, from the Appointed Date, all property, rights, powers, debts, liabilities, duties and obligations of the Transferor Companies shall stand transferred to and become those of the Transferee Company without any further act or deed, in accordance with the Scheme and section 232(4) of the Companies Act, 2013. It was directed that employees of the Transferor Companies be transferred to the Transferee Company and that pending proceedings by or against the Transferor Companies shall continue by or against the Transferee Company as provided in the Scheme.

All assets, rights and liabilities, pending proceedings and employees of the Transferor Companies are transferred to the Transferee Company from the Appointed Date.

Allotment of shares under scheme - Compliance with statutory requirements and undertakings - Issue and allotment of shares to shareholders of the Transferor Companies in accordance with the amended terms of the Scheme and compliance with statutory requirements. - HELD THAT: - The Tribunal directed that the Transferee Company shall issue and allot shares to the shareholders of the Transferor Companies as per the Scheme as amended by the rejoinder affidavit dated 15th December, 2021, and ensured that there shall be no deviation. The Regional Director's concerns regarding fractional entitlements, potential buy-back implications and statutory compliances (including undertakings to comply with section 232(3)(i) and applicable provisions such as those relating to stamp duty and accounting standards) were addressed by the petitioners through rejoinder and affirmative undertakings. The Tribunal accepted the amended scheme and the petitioners' undertakings, and left compliance with applicable statutory and accounting formalities to the Transferee Company.

The Transferee Company shall allot shares in accordance with the amended Scheme and shall comply with applicable statutory, stamp duty and accounting requirements as undertaken.

Dissolution without winding up - Filing and registry compliance - Consequences following sanction: dissolution of Transferor Companies and procedural directions for filing schedules and certified copies with Registrar. - HELD THAT: - Upon the Scheme becoming effective, the Tribunal directed that the Transferor Companies shall stand dissolved without winding up from the effective date. The petitioners were granted leave to file the Schedule of Assets and Liabilities in the prescribed form within three weeks and were directed to deliver a certified copy of the order to the Registrar of Companies within thirty days. The Registry was directed to append legible printouts of the scheme and schedules to the certified copy upon verification. These procedural directions were made to give effect to the sanction and to ensure recordal with statutory authorities.

Transferor Companies to be dissolved without winding up; petitioners to file schedules and furnish certified copy of the order to the Registrar of Companies with registry compliance as directed.

Final Conclusion: The Tribunal allowed the petition, sanctioned the Scheme of Amalgamation as amended, fixed the Appointed Date as 01.04.2018, directed transfer of assets, liabilities, employees and pending proceedings to the Transferee Company, required allotment of shares in accordance with the amended Scheme subject to statutory compliances and ordered dissolution of the Transferor Companies without winding up, together with specified filing and registry directions.

Scheme of Arrangement - Demerger - Appointed Date - Dispensing with meetings of shareholders - No convening of creditor meetings where rights not affected - Creditor notice and right to submit representations - Notice to regulatory authorities under section 230(5) of the Companies Act, 2013

Dispensing with meetings of shareholders - Scheme of Arrangement - Meetings of the equity shareholders of the Applicant Companies for approving the Scheme were dispensed with on the basis of unanimous written consents. - HELD THAT: - The Tribunal recorded that all equity shareholders of both Applicant Companies had filed consent affidavits in respect of the proposed Scheme of Arrangement (demerger). In view of those affidavits, the statutory requirement to convene meetings of the equity shareholders for considering and voting on the Scheme was dispensed with and no shareholder meetings were required to be held. [Paras 10]

Meetings of the equity shareholders are dispensed with on the basis of the consent affidavits filed.

No convening of creditor meetings where rights not affected - Creditor notice and right to submit representations - Meetings of secured and unsecured creditors were not directed to be convened because the Scheme is an arrangement between the companies and their shareholders and does not compromise creditors' rights; however, creditors are to be served notice and given opportunity to submit representations within thirty days. - HELD THAT: - The Tribunal accepted the Applicants' submissions that the Scheme is between the Applicant Companies and their shareholders and that post-Scheme the assets will be sufficient to discharge liabilities, so that the rights of secured and unsecured creditors will not be affected. Consequently, no meetings of secured or unsecured creditors were ordered. Notwithstanding this, the First Applicant Company and the Second Applicant Company were directed to serve individual notices on their secured and unsecured creditors respectively and to allow those creditors thirty days from receipt to file representations with the Tribunal, failing which it would be presumed they had no representations. [Paras 11, 12, 14, 15, 16]

No meetings of creditors to be convened; creditors to be served notice and may file representations within thirty days.

Appointed Date - Notice to regulatory authorities under section 230(5) of the Companies Act, 2013 - The Appointed Date for the Scheme was fixed as 1 April 2021, and the Applicant Companies were directed to serve statutory notices on specified regulatory and tax authorities with provision for presumed no-objection after thirty days; affidavits of service must be filed. - HELD THAT: - The Tribunal recorded the Board resolutions and approved the Appointed Date as 1st April, 2021. It directed the First and Second Applicant Companies to serve notices upon the Central Government (Regional Director), Registrar of Companies, Income Tax Authority and GST Authority as specified, pursuant to the procedure under section 230(5) and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Tribunal stated that if no response is received from those authorities within thirty days of receipt of the notice, it would be presumed they have no objection. The Applicant Companies are required to file affidavits of service proving dispatch of the notices and report compliance to the Tribunal. [Paras 5, 6, 17, 18, 19]

Appointed Date fixed as 1 April 2021; statutory notices to authorities directed and affidavits of service to be filed.

Final Conclusion: The Tribunal, having recorded unanimous shareholder consent, dispensed with shareholder meetings, declined to convene creditor meetings while directing notice to creditors and regulatory authorities (with thirty-day response periods), fixed the appointed date as 1 April 2021, and required filing of affidavits of service to report compliance.

Limitation - Effect of acknowledgment in writing under Section 18 of the Limitation Act, 1963 - Pre existing dispute - Mobilox test for existence of dispute - Admission of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Requirement of Board resolution for fixation of Managing Director's remuneration

Limitation - Effect of acknowledgment in writing under Section 18 of the Limitation Act, 1963 - Requirement of Board resolution for fixation of Managing Director's remuneration - Whether the salary claims made in the Section 9 application are barred by limitation and whether any acknowledgement or board approval revived the limitation period. - HELD THAT: - The Tribunal examined Part IV of the Section 9 application and the Demand Notice to identify periods claimed and then applied Section 18 of the Limitation Act to see if any written acknowledgement extended limitation. The material relied upon by the operational creditor - emails, minutes and shareholders' discussions - did not disclose any definitive, board approved fixation of remuneration or an acknowledgement in writing signed by the corporate debtor which would restart limitation. The minutes relied upon were not approved (recorded as not discussed/approved), emails showed proposals and negotiations rather than conclusive acceptance, and Article 40 of the articles required Board determination of MD remuneration. On this basis the Tribunal concluded that claims relating to the periods prior to 31/03/2016 (as reflected in the Demand Notice and application) were time barred and could not be saved by Section 18 acknowledgements. [Paras 22, 24, 25, 26, 28]

Claims pertaining to the periods prior to 31/03/2016 are barred by limitation; no sufficient written acknowledgement or board resolution was proved to revive limitation.

Pre existing dispute - Mobilox test for existence of dispute - Admission of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether a pre existing dispute existed between the parties such that the Adjudicating Authority was required to reject the Section 9 application under the Mobilox principles. - HELD THAT: - Applying the Mobilox standard, the Tribunal considered whether there was a plausible, non spurious dispute which required further investigation and was not to be summarily rejected. The correspondence, minutes and meeting records, though not determinative of the quantum, evidenced a genuine factual dispute about the agreed remuneration and arrears which was not a mere fac ade. The Tribunal emphasised that under the Code the adjudicatory body need not decide merits but must reject a Section 9 application if a pre existing dispute truly exists. The Adjudicating Authority had not addressed either the time barred nature of significant portions of the claim or the existence of the pre existing dispute; on the material on record the dispute was held to be plausible and supported by evidence. [Paras 29, 30, 31]

There existed a pre existing, non spurious dispute regarding fixation and payment of the MD's remuneration; the Adjudicating Authority ought to have considered and rejected the Section 9 admission on that basis.

Final Conclusion: The Impugned Order dated 15/02/2022 admitting CIRP under the Section 9 application is set aside: significant portions of the claim were held to be time barred and a bona fide pre existing dispute existed which the Adjudicating Authority had not considered; both appeals are allowed and the deposit made by the appellant is directed to be refunded.

Operational Debt - Claim in respect of employment - Corporate Insolvency Resolution Process - Workmen dues - Service benefits and welfare claims - Jurisdiction of the Insolvency and Bankruptcy Code vis-a -vis Payment of Gratuity Act

Operational Debt - Claim in respect of employment - Service benefits and welfare claims - Corporate Insolvency Resolution Process - Whether unpaid gratuity, leave travel concession (LTC) and earned leave (EL) encashment claimed by a former employee constitute an "operational debt" actionable under Section 9 to initiate CIRP. - HELD THAT: - The Tribunal held that while Section 5(21) of the Code includes claims in respect of employment within the definition of "operational debt", the Code's object is resolution of corporate distress aimed at maximisation of asset value and balancing stakeholders' interests. Claims of employees must be understood as encompassing both service claims arising during employment (salary, wages, bonus) and welfare claims arising on cessation of employment (gratuity, leave encashment, superannuation). Seeking initiation of CIRP solely on account of non-payment of post employment welfare benefits such as LTC and EL encashment does not align with the intent and objective of the Code. Consequentially, such welfare/service-benefit demands cannot, in the facts of this case, sustain a Section 9 petition for CIRP. [Paras 9]

Claims for gratuity, LTC and EL encashment do not, in this context, qualify as operational debt enabling initiation of CIRP under Section 9.

Jurisdiction of the Insolvency and Bankruptcy Code vis-a -vis Payment of Gratuity Act - Workmen dues - Whether determination of gratuity (and interest thereon) under the Payment of Gratuity Act falls within the jurisdiction of the Adjudicating Authority under the Code. - HELD THAT: - The Tribunal noted that disputes arising under the Payment of Gratuity Act are to be decided by the competent authority such as the Regional Labour Commissioner. The principal gratuity amount had already been paid to the appellant and the question of interest remained for adjudication by the statutory authority under the Payment of Gratuity Act. The Tribunal observed that determination of interest under the Payment of Gratuity Act is not within the domain of the IBC and therefore outside the Adjudicating Authority's competence in insolvency proceedings. [Paras 5, 10]

Determination of gratuity/interest under the Payment of Gratuity Act is not within the IBC forum; the Adjudicating Authority rightly declined jurisdiction on that aspect.

Final Conclusion: The Appeal is dismissed: the Adjudicating Authority did not err in holding that the claimed post employment benefits do not sustain initiation of CIRP under Section 9, and the question of interest under the Payment of Gratuity Act falls outside the IBC process.

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - committee of creditors decision to liquidate approved by requisite voting share - appointment and powers of the liquidator on commencement of liquidation - cessation of moratorium under Section 14 and commencement of moratorium under Section 33(5) - entitlement to and reasonableness of professional fee of the resolution professional - payment of CIRP fees and reimbursement of expenses by the committee of creditors

Initiation of liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - committee of creditors decision to liquidate approved by requisite voting share - appointment and powers of the liquidator on commencement of liquidation - cessation of moratorium under Section 14 and commencement of moratorium under Section 33(5) - Liquidation of the corporate debtor was to be ordered pursuant to the CoC's decision and the RP's intimation under Section 33(2), and a liquidator was to be appointed with consequential directions. - HELD THAT: - The Tribunal examined the minutes of the seventh CoC meeting and the RP's intimation that the sole CoC member (Punjab National Bank) having 100% voting rights resolved to liquidate the corporate debtor. The Tribunal noted the statutory framework under Section 33(2) which empowers the Adjudicating Authority to pass a liquidation order where the RP intimates the CoC's decision to liquidate before confirmation of a resolution plan. Finding that the conditions of Section 33 were satisfied and that the RP had intimated the CoC's resolution, the Tribunal exercised its power under Section 33(2) to order liquidation. As no liquidator had been proposed or the RP had expressed unwillingness to act, the Tribunal appointed an Insolvency Professional from the IBBI list and directed handover of records, public announcement, filing of consent affidavit, submission of preliminary and periodic reports, vesting of management powers in the liquidator, cessation and fresh commencement of moratorium provisions as prescribed, and communication of the order to Registrar of Companies and IBBI. The Tribunal also directed the liquidator to pursue recoveries and clarified the position regarding institution of suits subject to Section 52 and Section 33(5). [Paras 16, 17]

Corporate debtor ordered to be liquidated with immediate effect; Mr. Amit Kumar Goyal appointed as liquidator; directions issued governing takeover of assets and records, moratorium, duties of liquidator, reporting, and communications.

Entitlement to and reasonableness of professional fee of the resolution professional - payment of CIRP fees and reimbursement of expenses by the committee of creditors - Claim for additional fees and expenses of the Resolution Professional for the lockdown period and for the post-liquidation resolution period was allowed in part and directions were issued for payment of fees and expenses for the specified post-liquidation period upon submission of bills. - HELD THAT: - The Tribunal recorded that the CoC had fixed the RP's CIRP fee at Rs. 3,00,000 in the first CoC meeting, and that expenses for an earlier period had been ratified by the CoC in the seventh meeting. Considering the RP's continued involvement, the work performed, and the necessity of reasonable compensation (including counsel fees and out-of-pocket expenses) for services rendered post the liquidation resolution, the Tribunal directed the CoC to pay the CIRP fees and expenses for the period from 11.03.2021 to 09.05.2022 after considering the bills submitted by the RP. The Tribunal held that the fee must be commensurate and reasonable and gave a timeline of three weeks for payment after submission of bills. The IA seeking payment for the lockdown period (25.03.2020 to 31.07.2020) was considered in light of the agreed fee for the CIRP period, and the adjudication focused on the post-liquidation period claim which was allowed as stated. [Paras 8, 9, 10]

IA No. 35/2022 allowed: CoC directed to pay the RP's fees and reimbursable expenses for the period 11.03.2021 to 09.05.2022 upon submission and scrutiny of bills, payment to be made within three weeks.

Final Conclusion: IA No. 294/2021 disposed of by ordering immediate liquidation of M/s Maruti Kesri Nandan Agrofoods Pvt. Ltd. and appointing the named liquidator with consequential directions; IA No. 35/2022 allowed in part directing the CoC to pay the Resolution Professional's fees and expenses for the period 11.03.2021 to 09.05.2022 on submission of bills, payable within three weeks.

Binding effect of an approved resolution plan - extinguishment of pre effective date claims under a resolution plan - claims to be submitted to and decided by the resolution professional - no fresh claims or demands against successful resolution applicant after plan approval - continuing liability for post approval/statutory dues

Extinguishment of pre effective date claims under a resolution plan - binding effect of an approved resolution plan - claims to be submitted to and decided by the resolution professional - The demand made by the Respondent in respect of amounts relating to the period prior to the Effective Date of the approved Resolution Plan stands extinguished. - HELD THAT: - The Tribunal applied the principle that an approved resolution plan binds the corporate debtor and its creditors and that claims in respect of the pre effective date period, which are discharged by the plan, cannot be revived thereafter. The Resolution Plan expressly provided that all claims of governmental authorities relating to the period prior to the Effective Date shall stand fully and finally discharged (clause 12.1.2). The Tribunal further relied on the Supreme Court's statement in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. that a successful resolution applicant cannot be confronted with "undecided" claims after plan approval and that all claims must be submitted to and decided by the resolution professional. Applying those principles to the facts, the Tribunal held that the portion of the Respondent's demand attributable to the period prior to 20th September, 2018 is extinguished and cannot be enforced against the Applicant. [Paras 10, 11, 12, 13]

The demand of the Respondent prior to 20th September, 2018 (part of the claim covering February, 2016 to April, 2019) is extinguished in terms of the approved Resolution Plan and the Essar Steel principle.

Continuing liability for post approval/statutory dues - The Applicant remains liable to pay statutory dues that have accrued after the Effective Date and must continue to make timely payments of current provident fund obligations. - HELD THAT: - While pre effective date claims have been held extinguished by the approved Resolution Plan, the Tribunal noted that obligations accruing after the Effective Date were not discharged by the plan. The Applicant furnished evidence of payment of provident fund dues computed after 20.09.2018. The Tribunal therefore directed that the Applicant shall continue to pay all statutory current dues, including provident fund amounts, in time. [Paras 13]

Applicant to continue making payment of all statutory current dues, including provident fund amounts arising post approval.

Admission and disposal of miscellaneous application under Section 60(5) IBC - The Miscellaneous Application under Section 60(5) of the IBC filed by the Applicant is admitted and disposed of in accordance with the above observations and directions. - HELD THAT: - Having found that the pre effective date portion of the demand is extinguished and directed payment of post approval dues to be maintained, the Tribunal admitted the MA and disposed of it with the stated directions. The order gives effect to the binding nature of the approved Resolution Plan and to the necessity of enforcing only those dues not discharged by the plan. [Paras 14]

MA (IBC) No. 01/GB/2021 is admitted and disposed of with the directions recorded in the order.

Final Conclusion: The Tribunal held that, in view of the approved Resolution Plan and the Supreme Court's Essar Steel principle, the Respondent's demand in respect of amounts accruing before 20th September, 2018 is extinguished; the Applicant must, however, continue to discharge statutory dues accruing after the Effective Date. The miscellaneous application is admitted and disposed of accordingly.

Fair value and liquidation value - CoC authority to obtain fresh valuation - determination of fair value and liquidation value under Regulation 35 of the CIRP Regulations, 2016 - distribution to dissenting financial creditors under Section 30(2)(b) - deduction of CIRP costs and estimated liquidation costs from liquidation value - commercial wisdom of the Committee of Creditors - limited judicial review of approval of a resolution plan

CoC authority to obtain fresh valuation - fair value and liquidation value - Validity of the decision of the Committee of Creditors to obtain and rely upon a fresh valuation as on 31.07.2020. - HELD THAT: - The Tribunal found that the earlier CIRP (initiated 29.09.2017) had effectively ended on approval of an earlier resolution plan and, following failure of implementation and re possession, circumstances arose which justified a fresh valuation. The minutes of CoC meetings show deliberation and unanimous decision in the 32nd CoC meeting to obtain a more recent valuation; Indian Bank participated and raised no contemporaneous objection. Regulation 35 prescribes procedure for determining fair and liquidation values but does not prohibit a subsequent valuation where cogent reasons exist. Prior Tribunal authority was noted to the effect that there is no bar on CoC calling for fresh valuation. On these facts the CoC's decision to obtain and rely on the valuation as on 31.07.2020 was held not to contravene the Code or Regulations. [Paras 13, 14, 15, 16, 17]

Decision of the CoC to obtain and rely on a fresh valuation as on 31.07.2020 was valid and not contrary to the Code or Regulations.

Deduction of CIRP costs and estimated liquidation costs from liquidation value - fair value and liquidation value - Whether the liquidation value ascribed to the appellant, after deduction of CIRP costs and estimated liquidation costs, violated the Code or Regulations. - HELD THAT: - The Tribunal observed that the distribution methodology, including adjustment for CIRP and estimated liquidation costs, was discussed in CoC and joint lenders meetings; the Resolution Professional had clarified the basis and minutes show the appellant raised no contemporaneous objection. The CoC, exercising commercial judgment, determined net liquidation value after such adjustments. Given that the distribution and adjustments were approved by the requisite CoC majority and do not prima facie contravene statutory provisions, the appellate forum found no illegality in the deduction of CIRP and liquidation costs for purposes of computing distribution to dissenting creditors. [Paras 14, 15, 31, 32]

The liquidation value as ascribed after adjustment for CIRP and estimated liquidation costs did not violate the Code or Regulations on the material before the Tribunal.

Distribution to dissenting financial creditors under Section 30(2)(b) - commercial wisdom of the Committee of Creditors - limited judicial review of approval of a resolution plan - Whether the allocation to the appellant, a dissenting financial creditor, complied with Section 30(2)(b) and warranted interference. - HELD THAT: - The Tribunal applied the settled law that allocation among creditors under a resolution plan is primarily a matter of the CoC's commercial wisdom and that judicial review is limited to checking compliance with statutory mandates in Section 30(2). The Amendment to Section 30(2)(b) and jurisprudence of the Supreme Court were noted: the dissenting financial creditor is entitled to the minimum prescribed but the CoC retains discretion in distribution amongst classes. The CoC had approved a uniform percentage allocation to dissenting secured creditors after deliberations; the appellant was not shown to have been treated discriminatorily nor was it established that the plan contravened any statutory requirement. Following relevant Supreme Court authority, the Tribunal declined to undertake quantitative reassessment of the commercial allocation. [Paras 24, 25, 26, 27, 33]

Allocation to the appellant complied with Section 30(2)(b) and did not call for interference by the Tribunal.

Final Conclusion: The Appeal is dismissed. The CoC's decision to obtain a fresh valuation, the adjustments made for CIRP and liquidation costs, and the allocation to the dissenting financial creditor were held not to be in contravention of the Code or Regulations and did not merit interference.

Performance Bank Guarantee - Mobilisation Advance Bank Guarantee - Moratorium under Section 14(1) of the IBC - scope and exception in Section 14(3)(b) - Security interest excludes performance guarantee - Bank guarantee as an independent contract payable on demand - Invocation/encashment of bank guarantees during CIRP

Performance Bank Guarantee - Security interest excludes performance guarantee - Moratorium under Section 14(1) of the IBC - scope and exception in Section 14(3)(b) - Whether a Performance Bank Guarantee issued to the appellant is an asset of the corporate debtor and/or barred from invocation by the moratorium declared under Section 14 of the IBC. - HELD THAT: - The Tribunal held that a Performance Bank Guarantee is expressly excluded from the definition of "security interest" under Section 3(31) and therefore does not fall within the prohibitions of Section 14(1). A bank guarantee is an independent contract between the issuing bank and the beneficiary, enforceable on invocation absent fraud or special equities. The legislative history and the Insolvency Law Committee's recommendation support that proceedings against sureties/guarantors are outside the moratorium's scope. Applying these principles, the Tribunal concluded that the Performance Bank Guarantee here did not constitute an asset of the corporate debtor and could be invoked by the appellant during the CIRP. [Paras 22, 24]

Performance Bank Guarantee is not an asset of the corporate debtor for purposes of the moratorium and could be invoked.

Mobilisation Advance Bank Guarantee - Performance Bank Guarantee - Bank guarantee as an independent contract payable on demand - Whether the Mobilisation Advance Bank Guarantee issued by the appellant must be treated as part of the corporate debtor's assets and thus be refunded to the corporate debtor by the Resolution Professional. - HELD THAT: - The Tribunal analysed the nature of a Mobilisation Advance Bank Guarantee as an arrangement to secure use of advance for contract performance and held that such an advance does not crystallise into a debt or asset of the corporate debtor until completion of the contract. Given its purpose and similarity in operation to a Performance Bank Guarantee, the Tribunal treated the Mobilisation Advance Bank Guarantee on par with a Performance Bank Guarantee. Consequently, the amount secured by the Mobilisation Advance Bank Guarantee was held not to belong to the corporate debtor and not subject to refund under the moratorium. [Paras 10, 11, 21]

Mobilisation Advance Bank Guarantee is to be treated like a Performance Bank Guarantee and is not an asset of the corporate debtor; refund was not warranted.

Invocation/encashment of bank guarantees during CIRP - Bank guarantee as an independent contract payable on demand - Adjudicating Authority's order setting aside encashment/refund - Whether the Adjudicating Authority was correct in directing the respondent (beneficiary) to refund amounts encashed under the bank guarantees during the CIRP. - HELD THAT: - The Tribunal found that the Adjudicating Authority erred in directing refund because it did not consider the exclusion of performance guarantees from "security interest" and the statutory amendment embodied in Section 14(3)(b). The Tribunal noted that the impugned decisions relied upon by the Adjudicating Authority predated the amendment and that established jurisprudence treats bank guarantees as independent, payable-on-demand obligations which, absent fraud or special equity, are to be honoured. Factually, the guarantees were invoked in relation to the contractor's inability to perform; treating those encashments as prohibited recovery actions under Section 14 was incorrect. For these reasons the Tribunal set aside the Adjudicating Authority's order directing refund. [Paras 23, 25, 26]

Impugned order directing refund was set aside; Adjudicating Authority ought not to have directed repayment of amounts encashed under the two bank guarantees.

Final Conclusion: The appeal is allowed. The Tribunal held that the Performance Bank Guarantee and the Mobilisation Advance Bank Guarantee are not assets of the corporate debtor for the purpose of the moratorium under Section 14 and may be invoked; the Adjudicating Authority's direction to refund the amounts encashed under those two guarantees is set aside.

Condonation of delay in filing claims in liquidation - exclusion of period for limitation by the Hon'ble Supreme Court in Suo Motu Writ Petition No. 3 of 2020 - power of the liquidator to admit or reject claims under the Insolvency and Bankruptcy Code and Liquidation Regulations - priority of government dues in the waterfall under liquidation

Condonation of delay in filing claims in liquidation - exclusion of period for limitation by the Hon'ble Supreme Court in Suo Motu Writ Petition No. 3 of 2020 - power of the liquidator to admit or reject claims under the Insolvency and Bankruptcy Code and Liquidation Regulations - priority of government dues in the waterfall under liquidation - Whether the Liquidator was justified in rejecting the Appellant's claim for alleged delay and whether that delay is to be condoned in view of the Supreme Court's order excluding the period for limitation, and consequential direction as to admission and adjudication of the claim by the Liquidator - HELD THAT: - The Tribunal examined the order of the Hon'ble Supreme Court in Misc. Application No. 21/2022 in Misc. Application No. 665/2021 in Suo Motu Writ Petition (C) No. 3 of 2020 which directed exclusion of the period from 15.03.2020 till 28.02.2022 for the purpose of limitation. Applying that dictum, the Tribunal held that the delay of 361 days in submitting the Appellant's claim falls within the excluded period and may be condoned. The Liquidator had rejected the claim citing delay under Section 38(1) of the Code and Regulation 31 of the Liquidation Regulations; however, the Tribunal found that the Supreme Court's exclusion of the limitation period makes condonation appropriate in this case. The Liquidator represented that he would accept the claim if the Adjudicating Authority condoned the delay; the Tribunal further observed that allowing the governmental claim would not improperly subordinate the priority of other stakeholders because government dues have statutory priority under the Code. In consequence, the Tribunal directed the Liquidator to accept the Appellant's claim and to adjudicate it in accordance with the applicable rules and regulations. [Paras 11, 12, 13]

Appeal allowed; delay condoned in view of the Supreme Court's order excluding the limitation period and the Liquidator is directed to accept the Appellant's claim and decide it in accordance with the extant rules and regulations.

Final Conclusion: The appeal is allowed; the Tribunal condoned the delay by applying the Supreme Court's exclusion of limitation period and directed the Liquidator to admit the governmental claim and adjudicate it in accordance with the applicable provisions and regulations.

Maintainability of interlocutory application under Section 60(5) read with Rule 11 of the IBC, 2016 - verification and collation of claims by the Interim Resolution Professional - role and appointment of Authorized Representative and validity of Committee of Creditors' meeting - no right for a claimant to scrutinize or adjudicate claims of other claimants during CIRP

Maintainability of interlocutory application under Section 60(5) read with Rule 11 of the IBC, 2016 - IA(IBC)/39/KOB/2022 is not maintainable and is dismissed - HELD THAT: - The Tribunal examined whether the application seeking various directions against the IRP was maintainable. The factual record showed that claims of 22 of the 53 members were admitted prior to the publicised cut-off date and they participated in the first CoC meeting through an Authorized Representative; subsequently, on submission of appropriate documents, claims of the remaining members were also admitted and they participated through the duly appointed Authorized Representative. Given that the members were represented in the CoC and the IRP/RP had followed the claim verification and admission process under the Code and Regulations, the applicants' grievance was effectively addressed in the CIRP process. The Tribunal found no basis in the IBC for the reliefs sought in the interlocutory application and concluded the application was not maintainable. [Paras 19, 20, 21, 22]

Application dismissed as not maintainable

Verification and collation of claims by the Interim Resolution Professional - no right for a claimant to scrutinize or adjudicate claims of other claimants during CIRP - IRP's role to verify and collate claims is administrative and claimants have no statutory right to scrutinise other claimants' submissions; the IRP admitted claims following the prescribed process - HELD THAT: - The Tribunal observed that the IRP, as an officer acting under the Code and Regulations, is entrusted with verifying and collating claims and following the procedural steps laid down for admission. Verification of claims is an ongoing process up to the prescribed period and the IRP does not exercise judicial adjudicatory powers in that exercise. The Tribunal found that the IRP accepted claims on the basis of uniform documentary criteria (sales/construction agreements and proof of payment) and invited rectification where attachments could not be opened, and therefore there was no arbitrariness in admitting claims including those of the claimant whose claims were challenged. The Tribunal also held that there is no provision permitting a claimant to scrutinise or adjudicate the claims of others as part of the CIRP verification process. [Paras 13, 14, 15, 21]

IRP's verification and admission process upheld; no entitlement for claimants to scrutinise other claimants' submissions

Role and appointment of Authorized Representative and validity of Committee of Creditors' meeting - Appointment of Authorized Representative and holding of the first CoC meeting on 22.02.2022 were valid and the decisions taken therein are not vitiated by the applicants' grievances - HELD THAT: - The Tribunal noted that appointment of the Authorized Representative was made by the Tribunal on 16.02.2022 and the first CoC meeting was held thereafter with the valid claims received as on the public announcement date. Members of the applicant association were represented through the Authorized Representative and participated in decision-making, including agreeing to interim finance for the CIRP. Consequently, the Tribunal considered the applicants to be factual beneficiaries of the CoC decisions and concluded there was no ground to stay or set aside the CoC meeting or its decisions on the basis of non-inclusion of claimants. [Paras 12, 13, 20]

Appointment of Authorized Representative and CoC meeting upheld; no interference warranted

Effect of reliefs sought in IA(IBC)/51/KOB/2022 consequent to dismissal of IA(IBC)/39/KOB/2022 - IA(IBC)/51/KOB/2022 is dismissed as infructuous consequent to the dismissal of IA(IBC)/39/KOB/2022 - HELD THAT: - Since the primary application seeking directions regarding claim admission and restraint on implementation of CoC decisions was dismissed as not maintainable, the secondary application seeking stay of CoC decisions and related reliefs had no live controversy to be adjudicated. The Tribunal therefore dismissed IA(IBC)/51/KOB/2022. [Paras 23]

IA(IBC)/51/KOB/2022 dismissed

Final Conclusion: Both interlocutory applications are dismissed: IA(IBC)/39/KOB/2022 as not maintainable on the facts and law because the applicant-members were represented in the CoC and the IRP's claim verification process was in accordance with the Code and Regulations; IA(IBC)/51/KOB/2022 is dismissed as infructuous consequent thereto.

Financial Creditor - Corporate Insolvency Resolution Process - Claim admission under Form C - Rejection of claim by Resolution Professional - Inclusion of claim in Committee of Creditors - Liability of corporate debtor for third-party disbursements - Guarantees and security for repayment (personal and corporate guarantees, PDC, equitable mortgage) - Section 60(5) of the Insolvency and Bankruptcy Code, 2016

Liability of corporate debtor for third-party disbursements - Guarantees and security for repayment (personal and corporate guarantees, PDC, equitable mortgage) - Claim admission under Form C - Corporate Debtor's liability to repay the Harvesting & Transportation loan disbursed through individual contractor accounts. - HELD THAT: - The sanction letter dated 29.03.2017 and the documents executed pursuant thereto demonstrate that the H & T loan was granted at the behest of the Corporate Debtor with express undertakings by the Corporate Debtor to ensure repayment. The terms provided for disbursement to individual contractors' accounts while imposing on the Corporate Debtor the obligation to deduct instalments from contractors' bills and to repay from its own resources where bills were insufficient. The Corporate Debtor also furnished board resolutions, undertakings, personal guarantees, corporate guarantees, post-dated cheques and equitable mortgages as security and assurance for repayment. On the factual matrix before the Tribunal the contractual scheme and the securities established a primary liability on the Corporate Debtor to repay the amounts due under the H & T facility. [Paras 14, 17]

The Corporate Debtor is liable to repay the monies under the Harvesting & Transportation loan.

Rejection of claim by Resolution Professional - Inclusion of claim in Committee of Creditors - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Validity of the IRP/Resolution Professional's rejection of the Applicant's claim and consequent relief. - HELD THAT: - The Resolution Professional initially placed the bank guarantee claim under verification and subsequently rejected the claims including the H & T loan claim. Having found that the sanction letter and attendant documents establish the Corporate Debtor's liability and the nature of the claim submitted in Form C, the Tribunal concluded that the rejection was not sustainable. In exercise of jurisdiction under section 60(5) of the Code and the NCLT Rules, the Tribunal set aside the RP's rejection and directed corrective steps to recognise the Applicant as a Financial Creditor and to reconstitute the Committee of Creditors accordingly. [Paras 16, 18]

The RP's rejection of the Applicant's claim is set aside; the RP is directed to include the Applicant's claim as Financial Creditor and reconstitute the CoC.

Final Conclusion: IA 2392 of 2021 is allowed; the Tribunal has held that the Corporate Debtor is liable for the H & T loan, set aside the Resolution Professional's rejection of the claim and directed inclusion of the Applicant as Financial Creditor with reconstitution of the Committee of Creditors.

Attachment of bank account - operation of Overdraft Cash Credit Account - liability under section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - invocation of recovery powers under section 8F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - submission of claim in the liquidation process - protection of corporate debtor's estate and waterfall mechanism under the Insolvency and Bankruptcy Code

Attachment of bank account - operation of Overdraft Cash Credit Account - invocation of recovery powers under section 8F of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - submission of claim in the liquidation process - Whether the attachment of the applicant's ODCC account by the Provident Fund Authorities pursuant to the notice dated 21st September, 2021 could be sustained and whether the account should be permitted to be operated. - HELD THAT: - The Tribunal noted that a major portion of the Provident Fund demand relates to periods prior to the applicant taking possession pursuant to the lease and that the applicant (Daaksh Jute LLP) has represented that contributions from the date it took over have been paid; the Provident Fund Authorities had, in any event, submitted their claim before the Liquidator and the disputed dues are the subject matter of the liquidation process. The Tribunal also took note of the Hon'ble Calcutta High Court's clarification permitting operation of the Overdraft Cash Credit Account in related proceedings, which had stayed earlier notices and allowed immediate operation of the account. In view of these circumstances - namely substantial payment/settlement by the applicant in respect of post-transfer contributions, the PF Authorities' existing claim in the liquidation process, and the High Court's order permitting operation of the ODCC account - the Tribunal found little left to be contested and granted the relief sought to allow operation of the account. [Paras 24, 26, 27, 28]

The prayer to permit operation/defreezing of the ODCC account was allowed and IA(IB) 849/KB/2021 was disposed of in the terms of the application.

Liability under section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 - protection of corporate debtor's estate and waterfall mechanism under the Insolvency and Bankruptcy Code - submission of claim in the liquidation process - Whether the applicant is precluded from contesting the attachment because the Provident Fund Authorities have tabled their claim before the Liquidator and whether the contested demand falls under the insolvency waterfall. - HELD THAT: - The Tribunal recorded the Liquidator's submission that an entity which is not the corporate debtor does not enjoy protection under section 33(5) of the IBC and that remedies pursued by EPF Authorities are not, for that reason alone, barred. However, the Tribunal's operative decision was influenced by the factual position that the PF claim for pre-lease periods had already been submitted in the liquidation process and that the applicant had discharged or was willing to discharge amounts attributable to its period of occupation. The Tribunal therefore did not sustain the attachment in the circumstances of this case, allowing the applicant's limited relief without pronouncing a general bar on the PF Authorities' recovery powers or on application of section 17B in other facts. [Paras 18, 20, 21, 27]

The Tribunal did not uphold a blanket estoppel or immunity from PF recovery measures simply because a claim was filed in liquidation; but on the facts (substantial payment by applicant and claim before the Liquidator) granted relief to permit operation of the account and disposed of the IA.

Final Conclusion: The Tribunal allowed the application insofar as it sought directions to defreeze and permit operation of the applicant's Overdraft Cash Credit Account, having regard to the payments made by the applicant in respect of its period of operation and the Provident Fund Authorities' lodging of their claim with the Liquidator; IA(IB) 849/KB/2021 stands disposed of in terms of the order.

Appointment of registered valuers and methodology for fair and liquidation value under the CIRP Regulations - third valuation under Regulation 35 and its admissibility - relevance of liquidation value for payment to operational creditors under section 30(2)(b) of the IBC - commercial wisdom of the Committee of Creditors and limited judicial review under Section 30(2)/Section 31 - duties of the resolution professional in obtaining and communicating valuation and forensic reports - forensic audit, possible recovery under Chapter III and section 66 (fraudulent/wrongful trading) - remand for fresh consideration/implementation of revised allocation of payments

Third valuation under Regulation 35 and its admissibility - appointment of registered valuers and methodology for fair and liquidation value under the CIRP Regulations - Validity of the third valuation report relied upon by the Committee of Creditors for fixing liquidation value. - HELD THAT: - The Tribunal held that Regulations 27 and 35 require two registered valuers to determine fair and liquidation value and permit a third valuer only if the Resolution Professional, in his opinion, finds the two estimates to be significantly different. Although the CoC may, in commercial wisdom, consider fresh information, the procedure and safeguards in Regulations 27 and 35 ought to be followed when a fresh valuation is to be treated as the basis for distribution. Here, the third valuation (dated 8.10.2020) produced a liquidation value materially lower than the two earlier valuations of 28.5.2018; the wide variance, absence of adherence to the prescribed process and the fact that explanations were sought from an interested CEO rather than the valuers themselves led the Tribunal to conclude that the third valuation was not in accordance with the stipulated procedure and must be discarded. [Paras 23, 25, 26, 28, 44]

The third valuation report is discarded as not being in accordance with the CIRP Regulations and its estimate is not to be treated as the liquidation value.

Relevance of liquidation value for payment to operational creditors under section 30(2)(b) of the IBC - commercial wisdom of the Committee of Creditors and limited judicial review under Section 30(2)/Section 31 - Whether liquidation value is material to computation of payments to operational creditors and whether the Tribunal should interfere with CoC's commercial wisdom in this respect. - HELD THAT: - The Tribunal reaffirmed that while the commercial wisdom of the CoC is primary and judicial review is limited, liquidation value is a material statutory parameter for determining payments to operational creditors under section 30(2)(b). Consequently, where the liquidation value relied upon is shown to be defective (as here because the third valuation was discarded), the Adjudicating Authority/ Appellate Tribunal may require re-assessment of allocations to ensure compliance with Section 30(2) parameters. Applying that principle, the Tribunal treated the liquidation value as the average of the first two valuers' liquidation estimates and directed revision of allocations accordingly. [Paras 31, 33, 43, 44]

Liquidation value is material for computing payments under section 30(2)(b); the correct liquidation value is the average of the first two valuations (i.e., Rs.123.66 crores as adopted by the Tribunal) and allocations must be revised on that basis.

Duties of the resolution professional in obtaining and communicating valuation and forensic reports - forensic audit, possible recovery under Chapter III and section 66 (fraudulent/wrongful trading) - Whether the forensic audit report and pending recovery applications should have been placed/decided and the consequence of non-placement or summary disposal. - HELD THAT: - The Tribunal noted that a forensic audit report (received by the RP on 20.1.2021) identified irregularities that could affect recoveries available to the corporate debtor, and that certain applications for recovery (totaling approximately Rs.85 crores) had been reserved and thereafter dealt with summarily. The RP sent the forensic report to creditors on 8.2.2021 but it was not placed before the Adjudicating Authority. Given the potential impact of recoveries on the liquidation pool and hence on distributions, the Tribunal considered that these matters required adjudication and any monies realized should augment the liquidation value. The Tribunal also observed the RP's duties under the Code to take steps for preservation/realisation of assets and to place material information before appropriate forums. [Paras 8, 9, 40, 41, 47]

The pending applications and the forensic audit-related recovery issues are to be adjudicated and any sums recovered shall be added to the liquidation value for distribution purposes.

Remand for fresh consideration/implementation of revised allocation of payments - Relief and directions consequent upon discarding the third valuation and reassessing allocations under the approved resolution plan. - HELD THAT: - The Tribunal, while not setting aside the entire approval of the resolution plan, set aside the Impugned Order insofar as it relates to allocation of payments to stakeholders and creditors. Considering that the Successful Resolution Applicant has already begun implementation and in the interests of finality and commercial efficacy, the Tribunal directed the SRA to revise payments in the resolution plan in light of the accepted liquidation value (average of first two valuations) and to place the revised plan before the CoC for approval within two months. The Tribunal further directed that the pending recovery applications be disposed of preferably within two months and any monies realized be treated as part of the liquidation value. [Paras 44, 45, 46, 47]

Impugned order set aside only insofar as allocations; SRA to revise allocations based on the accepted liquidation value and place revised plan before CoC within two months; pending recovery applications to be adjudicated and proceeds added to liquidation value.

Final Conclusion: The Tribunal discarded the third valuation as not complying with the CIRP Regulations, treated the liquidation value as the average of the first two valuations, set aside the approval order only insofar as allocation of payments, and directed the Successful Resolution Applicant and the CoC to revise and approve allocations within two months; pending recovery applications are to be decided and any recoveries added to the liquidation pool.

Condonation of delay - refund of service tax - service tax not leviable in duty-free area - precedential effect of Tribunal decision - adjournment pending decision of a higher court

Condonation of delay - Application for condonation of delay in refiling the appeal was allowed. - HELD THAT: - The application for condonation of delay, in respect of a delay of 10 days as asserted by the appellant, was considered on the reasons furnished in the accompanying application. The Court, having examined the explanation, exercised its discretion in favour of the appellant and permitted the delayed refiling. [Paras 1, 2, 3, 4, 5]

Condonation of delay allowed and the application disposed of.

Refund of service tax - service tax not leviable in duty-free area - precedential effect of Tribunal decision - adjournment pending decision of a higher court - Whether the appeal against the Tribunal's order sustaining the respondent's refund claim should be adjudicated immediately or awaited pending the Supreme Court decision in a related matter. - HELD THAT: - The respondent's refund claim for the period October 2016 to December 2016 rests on the Tribunal Bench decision in Flemingo Duty Free Shop Pvt. Ltd., which held that service tax was not leviable in the duty-free area. The revenue has challenged that Tribunal decision in the Supreme Court and notice has been issued in the revenue's appeal. Given that the foundation of the refund claim derives from the Tribunal decision now sub judice before the Supreme Court, the High Court considered it appropriate to await the authoritative pronouncement from the Supreme Court rather than decide the matter on merits at this stage. Consequently, the Court listed the appeal for further hearing after the pronouncement in the pending Supreme Court matter. [Paras 6, 7, 8, 9, 10]

The High Court adjourned consideration of the appeal and listed it for hearing on 17.08.2022 to await the Supreme Court's decision in the related challenge to the Tribunal ruling.

Final Conclusion: The application for condonation of delay was allowed and, on the substantive challenge to the Tribunal's order sustaining the refund claim for October 2016 to December 2016, the High Court deferred adjudication and listed the appeal for 17.08.2022 pending the Supreme Court's decision in the related matter.

Classification of services as Works Contract Service versus Erection, Commissioning and Installation Service - Entitlement to abatement / composition benefit of 67% under the Composition/Abatement notification - Invoke extended period of limitation under proviso to Section 73 - requirement of suppression or fraud - Adverse inference for non-production of documents where records are in Department's possession

Classification of services as Works Contract Service versus Erection, Commissioning and Installation Service - Contracts for setting up petrol pumps were services of the nature of Works Contract Service and not merely Erection, Commissioning and Installation Service. - HELD THAT: - The Tribunal examined the nature of the contracts, noting that they included installation of tanks, dispensing pumps and other equipment and involved supply/transfer of goods leviable to sales tax/VAT. In absence of any documentary evidence produced by the Department to rebut the appellant's plea and having regard to earlier decisions of the Tribunal in the appellant's own case and in similar matters, the contracts were held to be composite works contracts. The mere raising of bills category-wise did not convert the composite contract into separate services. The Tribunal therefore concluded that the contracts are to be taxed as Works Contract Service. [Paras 6, 7, 8, 9, 10]

Contracts adjudicated as Works Contract Service; not Erection, Commissioning and Installation Service.

Entitlement to abatement / composition benefit of 67% under the Composition/Abatement notification - Appellant entitled to benefit of 67% abatement / composition on the gross amount charged in respect of works contracts comprising value of goods. - HELD THAT: - Having held the contracts to be works contracts involving goods the Tribunal applied the abatement benefit (composition) and observed that the appellant had opted under the Work Contract Composition Scheme and furnished requisite undertakings. The Tribunal noted that the quantification and verification of abatement/composition is a matter for the original authority to determine on production of supporting documents, but as a legal proposition the appellant was entitled to the abatement for the period in dispute. [Paras 7, 11, 12]

Appellant entitled to 67% abatement / composition benefit; liability must be reworked accordingly.

Invoke extended period of limitation under proviso to Section 73 - requirement of suppression or fraud - Extended period of limitation could not be invoked as there was no suppression or mala fide intent by the appellant; regular filing of ST-3 returns negated invocation of proviso. - HELD THAT: - The Tribunal observed that the appellant was a registered service provider who was regularly submitting ST-3 returns and there was no allegation or evidence of suppression of facts or malafide intent to evade duty. In these circumstances the proviso to Section 73 permitting extended period was not attracted, and the demand could not be sustained on that basis. [Paras 13]

Extended period of limitation not invokable; demand cannot be sustained on that ground.

Adverse inference for non-production of documents where records are in Department's possession - Demand confirmed solely for non-production of contract documents was unsustainable where those documents had been taken into Department's possession during anti-evasion action. - HELD THAT: - The adjudicating authority confirmed the demand because the appellant had not produced contracts for certain sites. The Tribunal found on record that the contracts and documents had been seized/taken into possession by the Department (panchnama/resumption memo dated 23.9.2013), rendering physical production impossible for the appellant. The Commissioner (Appeals) could and should have summoned the seized records rather than confirm the demand for non-production; in absence of any evidence to falsify the appellant's account, the demand could not be sustained on that sole basis. [Paras 6, 8]

Demand cannot be sustained merely for non-production where relevant documents were in Department's possession; confirming demand on that ground was improper.

Final Conclusion: Impugned order set aside; appeal allowed. The contracts are held to be works contract services, appellant entitled to 67% abatement/composition benefit and quantification is to be determined by the original authority; extended limitation period cannot be invoked and confirmation of demand for non-production of documents in the Department's possession is unsustainable.

Doctrine of mutuality - taxability of services between incorporated cooperative societies and their members - club or association services - business support services - service tax liability prior to July 2012

Doctrine of mutuality - taxability of services between incorporated cooperative societies and their members - club or association services - Whether service tax was leviable on the RCDF cess charged by the appellant for services rendered to its member milk unions for the period March 2010 to June 2012. - HELD THAT: - The Tribunal applied the Constitution Bench decision in State of West Bengal v. Calcutta Club Ltd. and held that the doctrine of mutuality applies to incorporated clubs or associations constituted under statute. Although the appellant and the member milk unions are separate legal entities registered under the Cooperative Societies Act, the relationship between the apex federation and its member unions is analogous to that of a club and its members. Services rendered by the appellant to its members in that factual matrix amount to self-service within the doctrine of mutuality and therefore are not amenable to service tax. The Tribunal followed earlier Tribunal precedent on a cooperative federation to the same effect and found no good reason to distinguish the present case from the principles laid down in Calcutta Club. [Paras 8, 9, 11, 12]

No service tax was payable on the RCDF cess charged by the appellant for services to its member milk unions for the period in question; the confirmed demand is unsustainable.

Business support services - service tax liability prior to July 2012 - Whether the departmental contentions regarding taxability as business support services, limitation, and imposition of interest and penalties could sustain in view of the finding on mutuality. - HELD THAT: - The Department's case that the appellant provided taxable business support services was considered but the Tribunal held that the determinative legal principle of mutuality precluded levy of service tax on the amounts charged to member unions. Consequentially, demands confirmed as service tax, interest under the Act and penalties imposed under the relevant provisions could not survive. The Tribunal therefore set aside the interest and penalties, without remanding these questions for fresh adjudication, because the primary demand itself was quashed. [Paras 13]

Interest and penalties imposed along with the service tax demand were set aside as consequential to the finding that no service tax was leviable.

Final Conclusion: Appeal allowed. Impugned order confirming service tax demand, interest and penalties is set aside in view of the application of the doctrine of mutuality to the services rendered by the appellant to its member milk unions for the period March 2010 to June 2012.

Business auxiliary service - customer care service provided on behalf of the client - outdoor catering service - exemption for value of goods sold under Notification No. 12/2003-ST - mutual exclusivity of Notification No. 12/2003-ST and Notification No. 1/2006-ST - extended period of limitation - simultaneous penalty under Section 76 and 78 cannot be imposed

Business auxiliary service - customer care service provided on behalf of the client - extended period of limitation - simultaneous penalty under Section 76 and 78 cannot be imposed - Liability to service tax on supply of bedroll kits to passengers classified as Business Auxiliary Service and consequential penalties/interest. - HELD THAT: - The Tribunal found on the admitted facts that the appellant supplied bedroll kits to passengers on behalf of IRCTC under the contractual arrangement, raised monthly bills to IRCTC and did not charge passengers. The supply of bedroll kits rendered by the appellant to passengers was held to be a service rendered on behalf of IRCTC falling within the category of customer care service provided on behalf of the client and thus chargeable as business auxiliary service. The Tribunal rejected the reliance on the contrary decision cited by the appellant as being on different facts and held that the demand for the extended period is sustainable since there was no bona fide legal question of interpretation on the material facts. With regard to penalties, the Tribunal held that simultaneous imposition of penalty under both Section 76 and Section 78 is impermissible and therefore set aside the penalty imposed under Section 76 while upholding other penalties and interest to the extent the demand was sustained. [Paras 5]

Demand on supply of bedroll kits is sustainable as Business Auxiliary Service; extended period demand sustained; penalty under Section 76 set aside, other penalties and interest sustained to the extent demand stands.

Outdoor catering service - exemption for value of goods sold under Notification No. 12/2003-ST - mutual exclusivity of Notification No. 12/2003-ST and Notification No. 1/2006-ST - Levy/demand in respect of outdoor catering services (sale of packaged and non-packaged food and beverages) and the applicability of Notification No.12/2003-ST vis-a -vis Notification No.1/2006-ST. - HELD THAT: - The adjudicating authority had found that packaged and a-la-carte items were sold to passengers on trains and, since no CENVAT credit was availed on such goods, the benefit of Notification No.12/2003-ST (exemption to the extent of value of goods sold) would apply. The Revenue contested that (a) there was diversion of taxable value in the books (discrepancy between declared purchases and detected purchases) which the adjudicating authority did not address, and (b) a service provider availing benefit under Notification No.1/2006 cannot also claim Notification No.12/2003. The Tribunal observed that these factual and legal aspects were not examined by the adjudicating authority and, as they require fresh consideration and opportunity of hearing, set aside the impugned order on this issue and remanded the matter to the adjudicating authority to decide after following principles of natural justice. [Paras 5, 76, 77, 78, 79]

Impugned order on outdoor catering services set aside and remanded to the adjudicating authority for fresh consideration after affording opportunity of hearing; revenue appeal allowed by way of remand.

Final Conclusion: Assessee's appeal partly allowed (penalty under Section 76 set aside; demand in respect of bedroll kits upheld); Revenue's appeal allowed in part by remitting the issue of outdoor catering services and the applicability of Notifications for fresh adjudication.

Refund of CENVAT credit under transitional provisions - reverse charge mechanism on import of services - continuation of proceedings under repealed Acts by saving clause - maintainability of appeal before CESTAT for pre-GST CENVAT refund - cash refund in lieu of unutilised CENVAT credit - prohibition of conditioning refund on payment of GST

Continuation of proceedings under repealed Acts by saving clause - maintainability of appeal before CESTAT for pre-GST CENVAT refund - Appeal against rejection of refund of CENVAT credit instituted under the pre-GST law is maintainable before CESTAT despite commencement of GST Act. - HELD THAT: - The Tribunal examined Section 174(2)(f) (saving clause) which provides that repeal of the earlier Acts shall not affect any proceedings, including appeals, instituted before, on or after the appointed day and such proceedings shall be continued under the repealed Acts as if the GST Act had not come into force. Applying that saving provision, the Tribunal held that proceedings and appeals relating to claims for CENVAT credit initiated under the existing law continue to be governed by the existing law and its appellate mechanism. Prior decisions holding that GST appellate fora would hear transitional disputes were considered, but the saving clause was found decisive and was not addressed in those decisions. Consequently the CESTAT is competent to entertain the present appeal which arises from a refund claim filed under the earlier law and pursued through the appellate process available under that law. [Paras 6, 7]

The appeal is maintainable before CESTAT and this Bench is competent to decide the refund claim instituted under the existing law.

Refund of CENVAT credit under transitional provisions - cash refund in lieu of unutilised CENVAT credit - prohibition of conditioning refund on payment of GST - reverse charge mechanism on import of services - Whether the appellant is entitled to refund of CENVAT credit paid as service tax (including amounts paid under reverse charge) when such refund proceedings were instituted under the pre-GST law. - HELD THAT: - The Tribunal noted that Section 142(3) contemplates that any amount of CENVAT credit found admissible shall be refunded in cash in accordance with the existing law. The appellant had paid service tax under reverse charge for services received from associated enterprises and filed refund claims under the pre-GST regime. The Commissioner (Appeals) rejected the refund on the ground that GST was payable because final booking in the accounts occurred post-appointed day. The Tribunal held that rejection on the sole ground that GST was payable and absence of GST payment evidence was erroneous because the refund application instituted under the existing law must be dealt with under that law and any recovery under the GST Act can be pursued by competent authorities without making payment of GST a pre-condition for the grant of refund under the earlier law. Applying these principles, the Tribunal found the appellant entitled to cash refund of the admitted CENVAT credit paid as service tax, including amounts paid under reverse charge. [Paras 7, 8]

The Commissioner (Appeals) order is set aside; appellant is entitled to refund of the CENVAT credits paid as service tax and the Department is directed to pay the refund with interest.

Final Conclusion: The appeal is allowed: the CESTAT is competent to decide refund proceedings instituted under the pre GST law by virtue of the saving clause, and the appellant is entitled to cash refund of the CENVAT credit paid as service tax (including reverse charge payments); the order of the Commissioner (Appeals) is set aside and the refund with applicable interest is directed to be paid.

Option to pay service tax under Composition Scheme for Works Contract - classification of composite works contracts as Works Contract Service - taxability of indivisible composite works contracts from 01.06.2007 (Larsen & Toubro ratio) - effect of departmental Circular No.98/1/2008 ST in view of judicial precedent - remand for verification and adjustment of taxes paid under composition scheme

Option to pay service tax under Composition Scheme for Works Contract - classification of composite works contracts as Works Contract Service - taxability of indivisible composite works contracts from 01.06.2007 (Larsen & Toubro ratio) - Entitlement of the appellants to exercise the option to pay service tax under the Composition Scheme for Works Contract from 01.06.2007 despite earlier payment under Construction of Complex / Commercial or Industrial Construction head. - HELD THAT: - The Tribunal applied the legal position laid down by the Supreme Court in Larsen & Toubro that indivisible composite works contracts were not liable to service tax prior to 01.06.2007 and therefore, payment earlier under Construction of Complex does not preclude exercising the composition option for Works Contract after 01.06.2007. Rule 3(1) and Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 permit a person liable in relation to Works Contract Service to opt for payment under the composition scheme prior to payment of service tax for that works contract; the appellants exercised such option by letter dated 14.06.2007. The departmental reliance on Circular No.98/1/2008 ST and on Nagarjuna is inapposite in view of the L&T ratio which settled that composite contracts became taxable only from 01.06.2007. The Tribunal relied on precedent (B.R. Kohli) and concluded that denial of the composition scheme merely because the appellants had discharged tax under a different head before 01.06.2007 is not sustainable. [Paras 11, 12, 13, 14, 15]

The appellants are entitled to opt for and be allowed payment of service tax under the Composition Scheme for Works Contract from 01.06.2007.

Taxability of indivisible composite works contracts from 01.06.2007 (Larsen & Toubro ratio) - non sustainability of demands for periods prior to 01.06.2007 - tax liability of sub contractor and advances received before 01.06.2007 - Sustainability of demands raised for periods prior to 01.06.2007 including demands on services rendered as a sub contractor, advances received before 01.06.2007 and client disputed amounts relating to pre 01.06.2007 period. - HELD THAT: - Having held that composite works contracts were not taxable before 01.06.2007, the Tribunal found demands for periods prior to that date to be unsustainable. Consequently, demands confirmed in respect of services rendered as a sub contractor during April 2006 to March 2007, and other proposed recoveries attributable to periods before 01.06.2007, cannot be sustained. The Tribunal observed that the appellants had been regular taxpayers and had informed the Department of their option; no mala fide was found to justify invocation of extended limitation for the pre 01.06.2007 period. [Paras 11, 16]

Demands in respect of periods prior to 01.06.2007 are not sustainable and are set aside.

Remand for verification and adjustment of taxes paid under composition scheme - verification of payment at compounded rates and adjustment against amount payable - setting aside of extended period invocation where bona fide position exists - Whether demands and calculations relating to post 01.06.2007 liabilities (including advances, client disputed amounts and mobilization) have been correctly computed, and whether extended period invocation is maintainable. - HELD THAT: - The Tribunal found that certain post 01.06.2007 claims require factual verification because the show cause notice and annexed calculation sheets did not clearly reflect deductions or adjustments for service tax already paid by the appellants at compounded rates. Given the appellants' communication of option dated 14.06.2007, their status as regular taxpayers and the legal interpretation issues involved, the Tribunal held that invocation of extended limitation was not justified and that extended period demands should be set aside. The matter was therefore remitted for the lower authority to verify payments made at composition rates, adjust taxes paid towards liabilities under the composition scheme, and compute any genuinely payable differential for the normal period. [Paras 16, 17, 18]

The impugned order is set aside and the matter is remanded: appellants to be allowed the composition option; demand limited to the normal period; lower authorities to verify payments, adjust taxes paid against composition liabilities and compute any balance payable.

Final Conclusion: The appeal is allowed in part: appellants are entitled to pay service tax under the Works Contract Composition Scheme from 01.06.2007; demands for periods prior to 01.06.2007 are set aside; extended period invocation is rejected; matters relating to verification of post 01.06.2007 payments, adjustments and any differential tax are remanded to the lower authority for verification and computation, with directions to allow adjustment of amounts already paid under the composition scheme.

Rectification of mistake - application under Section 74 of the Finance Act, 1994 - limitation under Section 85 of the Finance Act, 1994 - relevant date for computing period of limitation - finality of original order after disposal of ROM - remand for adjudication on merits

Rectification of mistake - relevant date for computing period of limitation - limitation under Section 85 of the Finance Act, 1994 - finality of original order after disposal of ROM - Date from which the two-month limitation under Section 85 is to be reckoned where an application for rectification of mistake under Section 74 has been adjudicated by the original authority. - HELD THAT: - The Tribunal held that when an application for rectification of mistake (ROM) filed under Section 74 is adjudicated by the original adjudicating authority, the original order attains finality only on disposal and communication of that ROM order. Consequently, the two-month period prescribed by Section 85 for filing an appeal before the Commissioner (Appeals) must be computed from the date on which the ROM order is communicated to the appellant, irrespective of whether the ROM was allowed or rejected. The Tribunal relied on the statutory scope of Section 74 which permits amendment of the original order upon adjudication of a ROM and on prior decisions treating the disposal date of the ROM as the relevant date for limitation. Applying this principle to the facts, the ROM order dated 06.10.2020 was the relevant date for computation, and the appeal filed on 07.12.2020 fell within the two-month period (excluding the date of the order as per General Clauses Act). [Paras 9, 14, 15]

The relevant date for computing the two-month limitation under Section 85 is the date on which the original adjudicating authority disposes of and communicates the ROM application (06.10.2020); the appeal filed on 07.12.2020 was within time.

Remand for adjudication on merits - Whether the matter should be remitted to the Commissioner (Appeals) for adjudication on merits after the limitation objection is held to be invalid. - HELD THAT: - The Tribunal found that Commissioner (Appeals) had rejected the appeal solely on limitation grounds, a conclusion which was held to be erroneous after determining the correct limitation date. As the lower appellate authority did not decide the substantive merits, the Tribunal directed that the appeal be restored for fresh and precise adjudication on merits by the Commissioner (Appeals). The Tribunal therefore set aside the order rejecting the appeal as time-barred and remanded the matter for consideration on merits. [Paras 16]

Order of Commissioner (Appeals) rejecting the appeal on limitation is set aside and the matter is remanded to Commissioner (Appeals) for adjudication on merits.

Final Conclusion: The Tribunal held that the two-month period under Section 85 is to be reckoned from the date the ROM order is communicated to the appellant (06.10.2020), concluded that the appeal filed on 07.12.2020 was timely, set aside the Commissioner (Appeals)'s order rejecting the appeal as barred by limitation, and remitted the matter to the Commissioner (Appeals) for fresh adjudication on merits.

Maintainability of writ petition in presence of alternate statutory remedy - violation of principles of natural justice - exhaustion of statutory remedies / discretionary writ jurisdiction under Article 226

Maintainability of writ petition - alternate statutory remedy - violation of principles of natural justice - Article 226 discretionary jurisdiction - exhaustion of statutory remedies - Writ petition under Article 226 is not maintainable as an alternative statutory remedy by way of appeal under the Central Excise Act exists and no exception (such as breach of natural justice, lack of jurisdiction, or challenge to vires) is made out. - HELD THAT: - The Court applied the settled principle that, ordinarily, when a statutory remedy exists that is appropriate to challenge an adjudicatory order, the High Court should not exercise its discretionary writ jurisdiction under Article 226 and the rule of exhaustion of statutory remedies applies. The Court examined the material and the Order in Original and recorded that opportunities of personal hearing were afforded to the petitioner (the order records hearings on 17.11.2020, 17.12.2020 and a hearing held on 08.01.2021 when representatives appeared), and therefore found no cogent violation of the principles of natural justice. Reliance on the Apex Court's restatement of principles regarding exceptions to alternate remedy (including enforcement of fundamental rights, breach of natural justice, want of jurisdiction or challenge to vires) led to the conclusion that none of those exceptions is established on the record. Consequently, the petition was dismissed on maintainability with liberty granted to the petitioner to pursue the statutory appeal under Section 35B of the Central Excise Act and to raise all grounds (including substantial compliance) before the appellate authority. [Paras 9, 11, 13]

Writ petition dismissed on the ground of maintainability; petitioner granted liberty to prefer an appeal under Section 35B of the Central Excise Act, 1944.

Final Conclusion: The writ petition was dismissed on the ground that an efficacious statutory remedy exists and no exception to the rule of exhaustion of statutory remedies (such as breach of natural justice or want of jurisdiction) was made out; the petitioner is permitted to raise all grounds before the appellate authority under Section 35B.

Classification of goods under tariff headings - manufacture by mounting on chassis (Chapter Note 5 to Chapter 87) - motor vehicles for the transport of goods (heading 8704) - trailers and semi trailers; non mechanically propelled vehicles (heading 8716) - fiscal fiction of manufacture by fitting on duty paid chassis - entitlement to exemption under Notification No. 6/2006 CE (Serial No. 39 subject to condition 9)

Classification of goods under tariff headings - manufacture by mounting on chassis (Chapter Note 5 to Chapter 87) - motor vehicles for the transport of goods (heading 8704) - trailers and semi trailers; non mechanically propelled vehicles (heading 8716) - Whether the bulkers fabricated by the appellant and mounted on duty paid chassis are classifiable under Chapter Heading 8704 or under Chapter Heading 8716. - HELD THAT: - The Tribunal examined the text of headings 8704 and 8716 and Chapter Note 5 to Chapter 87. Note 5 creates a legal fiction that building a body or mounting/fitting structures on a chassis falling under heading 8706 shall amount to "manufacture" of a motor vehicle. The admitted facts show duty paid chassis fitted with engine were supplied by customers and the appellant fabricated bulkers and mounted them on those chassis, clearing the integrated article as a complete vehicle used for transport of goods (fly ash/cement). Heading 8716 relates to trailers and semi trailers which are non mechanically propelled bodies; bodies fabricated for trailers/semi trailers are classifiable under 8716 only when they are, in substance, standalone trailer bodies. Where the body is mounted on a chassis falling under 8706 and cleared as an integrated motor vehicle for transport of goods, Note 5 renders such activity a manufacture of a motor vehicle and heading 8704 is the appropriate classification. The adjudicating authority's classification of the bulkers mounted on chassis under 8716 was therefore incorrect on the facts and law found in the record. [Paras 4]

Bulkers fabricated and mounted on duty paid chassis are classifiable as motor vehicles for the transport of goods under heading 8704 and not under heading 8716.

Entitlement to exemption under Notification No. 6/2006 CE (Serial No. 39 subject to condition 9) - fiscal fiction of manufacture by fitting on duty paid chassis - Whether the appellant is entitled to exemption under Notification No. 6/2006 CE (Serial No. 39) for motor vehicles falling under 8704, having regard to condition No. 9 regarding Cenvat credit. - HELD THAT: - Serial No. 39 to Notification No. 6/2006 exempts motor vehicles for the transport of goods falling under heading 8704 subject to condition 9, which disqualifies manufacturers who avail Cenvat credit on chassis or other inputs used in manufacture. The record shows the appellant did not avail Cenvat credit on inputs or on duty paid chassis. Coupled with the Tribunal's finding that the goods are motor vehicles under 8704 by operation of Chapter Note 5, the appellant meets the condition for exemption. Consequently, there is no duty liability on the bulkers manufactured and cleared in the form of integrated motor vehicles under 8704 for the period in dispute. [Paras 4]

Appellant is entitled to exemption under Notification No. 6/2006 CE (Serial No. 39) because the goods are motor vehicles under 8704 and the appellant has not availed Cenvat credit as barred by condition 9.

Final Conclusion: The appeals are allowed. The impugned order classifying the bulkers under heading 8716 and confirming duty is set aside; the bulkers mounted on duty paid chassis are classifiable under heading 8704 and, having not availed Cenvat credit, the appellant is entitled to exemption under Notification No. 6/2006 CE (Serial No. 39).

Cenvat credit admissibility - inputs - capital goods - repair and maintenance of plant and machinery - use within the factory / nexus with manufacture - joint verification report as factual foundation - captive power plant treated as integrated unit for credit - furniture and goods used in offices/guest house within factory

Cenvat credit admissibility - joint verification report as factual foundation - use within the factory / nexus with manufacture - Whether Cenvat credit claimed on various steel items, structures and other goods used in the factory for manufacture and for repair/maintenance is admissible for the period June 2007 to December 2007. - HELD THAT: - The Tribunal found that the Department had incorrectly relied upon an Explanation inserted with effect from 2009 while the credits in question relate to June-December 2007. The jointly executed verification report describing the usage of the disputed goods within the factory was not challenged by the Revenue and constitutes the factual foundation for allowing credit. Subsequent judicial pronouncements of the High Courts holding that steel items and supporting structures used in plant and machinery form an essential part of machinery and are eligible for credit were applied to the facts. The Tribunal also noted precedents accepting credit for items used in repair and replacement of worn parts of capital goods. In view of the undisputed usage recorded in the verification report and the applicable case law, the Commissioner correctly allowed the Cenvat credit on the disputed goods. [Paras 4]

Cenvat credit on the disputed steel items, structures and goods used for manufacture and for repair/maintenance was allowed.

Cenvat credit admissibility - inputs - laboratory consumables used for quality checks - Whether Cenvat credit on aluminium zinc anodes used in the factory laboratory for quality checks is admissible. - HELD THAT: - The Tribunal observed that the laboratory functions within the factory to carry out quality checks of raw materials and finished goods and that materials used in such quality-control processes form part of the manufacturing process. The impugned aluminium zinc anodes used in the laboratory therefore satisfy the definition of 'input' for the relevant period and credit rightly could not be denied. [Paras 4]

Cenvat credit on laboratory consumables (aluminium zinc anodes) was allowed.

Cenvat credit admissibility - capital goods - use within the factory / captive power plant as integrated unit - Whether Cenvat credit is admissible on goods used in erection of transmission towers and supporting structures located outside immediate factory premises but used to bring electricity to the factory. - HELD THAT: - The Tribunal relied on the principle that mere physical location of capital goods outside the factory is not a ground to deny credit where the goods are used for manufacture in an integrated unit or to bring inputs (electricity) into the factory. The Tribunal referred to prior decisions treating captive power plants and their apparatus as integral to manufacturing where electricity generated is predominantly used in the factory. Since the electricity transmitted through the disputed towers is used in the factory for manufacture, and the disputed goods were used in erection of those towers, the goods qualify for credit. The Tribunal noted that only the portion of input duty attributable to use outside manufacture (if any) would be excluded, and that quantification issues (if any) would require factual determination. [Paras 4]

Cenvat credit on goods used for erection of transmission towers bringing electricity to the factory was allowed subject to appropriate quantification if part use lies outside manufacture.

Cenvat credit admissibility - furniture used in guest house within factory - use within the factory / nexus with manufacturing operations - Whether Cenvat credit is admissible on furniture used in the guest house that is part of the factory premises and used for operations of the factory. - HELD THAT: - The Tribunal recorded that the guest house is used for operations of the factory and there was no material to show any other purpose. It relied on administrative guidance recognising credit for furniture and stationery used in offices within the factory and on earlier Tribunal authority holding that goods used within the factory for purposes connected with manufacture are eligible for credit for the relevant period. Consequently, furniture used in the guest house forming part of factory operations qualified for Cenvat credit. [Paras 4]

Cenvat credit on furniture used in the guest house within the factory was allowed.

Final Conclusion: For the period June 2007 to December 2007 the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, holding that Cenvat credit was properly admissible on the disputed goods (steel items and supporting structures, laboratory consumables, transmission-tower related goods and furniture in the factory guest house) in view of the unchallenged joint verification, the law applicable to the relevant period and established precedents.

Deemed export - refund claim under Section 11B of the Central Excise Act - payment under protest - limitation/time bar for refund claims - bona fides and filing before wrong forum - disclaimer certificate by main contractor

Refund claim under Section 11B of the Central Excise Act - deemed export - payment under protest - limitation/time bar for refund claims - bona fides and filing before wrong forum - disclaimer certificate by main contractor - Rejection of the appellant's refund claim for duty paid in respect of supplies to a deemed export project - HELD THAT: - The Tribunal found that supplies to the project were covered by the deemed export exemption and hence no duty was leviable. The appellant paid duty because its name did not appear in the project certificate but promptly filed a refund claim (albeit before an incorrect forum), which the Tribunal treated as demonstrating bona fides and constituting a claim within the statutory limitation. The purchase order and tax invoice describing the supply as for a deemed export, together with the main contractor's categorical disclaimer that it had not reimbursed duty and had no objection to the appellant claiming refund, supported the conclusion that the payment was made under protest and that the appellant was entitled to seek refund. Given these findings, the Tribunal concluded that the Adjudicating Authority and the Commissioner (Appeals) were incorrect to reject the refund solely on the ground of delay. [Paras 9, 10, 11, 12, 13]

Impugned order rejecting the refund claim is set aside and the appeal is allowed; consequential benefits to follow as per law.

Final Conclusion: The appeal is allowed: the Tribunal held that duty paid in respect of deemed export supplies was paid under protest, the refund claim filed promptly though before a wrong forum evidenced bona fides, and the rejection by lower authorities on limitation grounds was unsustainable; the order rejecting refund is set aside with consequential benefits as per law.

Clandestine removal - requirement of corroborative evidence to prove clandestine removal - evidentiary value of third party documents - inadmissibility of uncorroborated statements as admissions - violation of section 9D-right to cross examination - penalty under Rule 26 of Central Excise Rules, 2002 - burden of proof on Revenue to establish clandestine activity

Clandestine removal - requirement of corroborative evidence to prove clandestine removal - evidentiary value of third party documents - burden of proof on Revenue to establish clandestine activity - The demand for duty and confirmation of clandestine removal based primarily on third party documents and the appellants' recorded statements. - HELD THAT: - The Tribunal held that allegations of clandestine removal are serious and cannot be sustained on presumptions alone; corroborative and tangible evidence is required. The adjudicating authorities relied principally on documents recovered from a third party (M/s Bhiwadi Rolling Mills) and on statements of the appellants; no search or relevant documents were found at the appellants' premises and the Department did not pursue independent lines of investigation (for example, excess production/raw material checks, transport/dispatch particulars, realization of sale proceeds or corroboration from buyers/transporters). In the absence of such corroboration, third party records and the impugned statements do not constitute clinching evidence to sustain the demand. Applying the principle that the onus of proving clandestine removal lies on the Revenue, the Tribunal found the statements did not contain clear admissions of clandestine removal and thus could not support the confirmed demand. [Paras 10, 11, 12, 13, 14]

Demand for duty predicated on alleged clandestine removal, based chiefly on third party documents and the appellants' statements, is unsustainable and set aside.

Inadmissibility of uncorroborated statements as admissions - violation of section 9D-right to cross examination - penalty under Rule 26 of Central Excise Rules, 2002 - Validity of penalty imposed on the appellants where the adjudication relied on investigation stage statements and cross examination requests were not permitted. - HELD THAT: - The Tribunal observed that the adjudicating authorities treated investigation stage statements as sufficient admissions to impose penalties under Rule 26. However, the record showed that requests for cross examination were not adequately addressed, raising a clear question under the protection envisaged by section 9D. Further, the statements did not disclose unequivocal admissions of clandestine removal. Given the absence of corroborative evidence and procedural lacunae in testing the statements, the imposition and confirmation of penalty on the appellants were held to be erroneous. [Paras 12, 13, 14]

Penalty imposed on the appellants was wrongly confirmed and is set aside.

Discharge certificate under Sabka Vishwas (Legacy Dispute Resolution) Scheme - penalty under Rule 26 of Central Excise Rules, 2002 - Effect of a discharge certificate issued in favour of the main party on the liability of the appellants. - HELD THAT: - The Tribunal noted the appellants' submission that the principal assessee had obtained a discharge certificate under the Sabka Vishwas scheme and sought waiver of penalties on that basis. The Tribunal expressed that it was not persuaded that the discharge certificate automatically absolved the present appellants, and it did not accept the cited decision relied upon by the appellants as decisive for this case. Nevertheless, because the demand and penalties were unsustainable for lack of cogent evidence against these appellants, the Tribunal set aside the penalties on evidentiary and procedural grounds rather than by operation of the discharge certificate. [Paras 15]

Discharge certificate of the main party did not itself determine the appellants' liability; however, penalties against the appellants were set aside due to lack of cogent evidence.

Final Conclusion: For lack of corroborative evidence and in view of procedural deficiencies in relying on investigation stage statements and third party records, the confirmed demand and penalties against the appellants are set aside and the appeals are allowed.

Cenvat credit - Goods Transport Agency Service - place of removal - FOR destination basis - outward transportation - reverse charge - allowability of credit up to the place of removal

Cenvat credit - Goods Transport Agency Service - place of removal - FOR destination basis - outward transportation - reverse charge - Entitlement of the appellant to cenvat credit of service tax paid on Goods Transport Agency services for outward transportation of finished goods cleared on FOR destination basis. - HELD THAT: - The Tribunal found as fact that the appellant, the manufacturer, had paid the GTA charges on reverse charge basis and taken cenvat credit. Documentary material (purchase/sales orders and sale invoices) showed sales priced on a FOR destination basis with no separate transportation charge in the invoice, and the transportation was from factory gate to the buyer's premises. In these circumstances the Tribunal held that the 'place of removal' for the goods was the buyer's premises rather than the factory gate. Applying the principle that cenvat credit is allowable in respect of outward transportation up to the place of removal, the Tribunal concluded that the appellant was entitled to the disputed cenvat credit on the GTA service for outward transportation of goods cleared on FOR destination basis. [Paras 9]

The appellant is entitled to cenvat credit of the service tax paid on the GTA service for outward transportation where goods were cleared on FOR destination basis; the appeals are allowed and the impugned order is set aside.

Final Conclusion: Appeals allowed; impugned order set aside and the appellant granted entitlement to consequential benefits in law for cenvat credit on GTA services relating to outward transportation where goods were cleared on FOR destination basis.

Lack of jurisdiction due to prior assessment under the Central Sales Tax Act - conflict with Article 286 of the Constitution and territorial/subject-matter allocation under the DVAT framework - quashing of orders passed under the DVAT Act as void for want of jurisdiction - direction to adjudicate refund claim including interest for delayed payment

Lack of jurisdiction due to prior assessment under the Central Sales Tax Act - conflict with Article 286 of the Constitution and territorial/subject-matter allocation under the DVAT framework - quashing of orders passed under the DVAT Act as void for want of jurisdiction - Impugned orders dated 05.10.2019 passed under the DVAT Act in respect of Financial Year (FY) 2016-2017 were without jurisdiction and are liable to be quashed. - HELD THAT: - The Court found that assessment orders for the four quarters of FY 2016-2017 had already been passed under the Central Sales Tax Act, 1956. In that factual and legal matrix the subsequent orders dated 05.10.2019 issued under the DVAT Act could not be validly passed. The impugned exercise of power under Section 32 of the DVAT Act (in the circumstances recorded) conflicted with the prior assessment under the Central Sales Tax regime and accordingly was held to be without jurisdiction. The suggestion that withdrawal of the earlier assessment orders would suffice was rejected as not an adequate remedy in the circumstances. The impugned DVAT orders were therefore quashed. [Paras 3, 4, 5]

Impugned orders dated 05.10.2019 concerning all four quarters of FY 2016-2017 are quashed for want of jurisdiction.

Direction to adjudicate refund claim including interest for delayed payment - refund claim adjudication - interest on delayed refund - The respondents were directed to decide the petitioner's refund application for the 2nd quarter of FY 2016-17 and to deal with the question of interest for the delay. - HELD THAT: - Consequent to the quashing of the impugned DVAT orders, the Court required the respondents to take up and decide the refund application filed by the petitioner for the second quarter of FY 2016-17. The adjudication must include consideration of interest payable on account of the delayed refund. The Court prescribed a time-bound obligation - decision to be taken within two weeks from receipt of the copy of the judgment - and required compliance to be placed before the Court on the listed date. [Paras 5]

Respondents to deal with the refund application for the 2nd quarter of FY 2016-17, including the interest claim, within two weeks of receipt of the judgment; compliance to be listed.

Final Conclusion: Writ petition allowed; DVAT orders dated 05.10.2019 quashed as without jurisdiction for FY 2016-2017. Respondents directed to adjudicate the petitioner's refund claim for the 2nd quarter of FY 2016-17, including interest, within two weeks and to comply with the Court's order.

Setting aside ex parte assessment under the Bombay Sales Tax regime by timely application under Section 33D - duty of revenue to decide application for cancellation filed in prescribed form within a reasonable time - consequential quashing of bank attachment where underlying ex parte assessment is set aside - availability of alternative appellate remedy and restraint on exercise of writ jurisdiction

Setting aside ex parte assessment under the Bombay Sales Tax regime by timely application under Section 33D - duty of revenue to decide application for cancellation filed in prescribed form within a reasonable time - Timely filed applications under Section 33D justified setting aside the ex parte assessment orders where the revenue left those applications undecided for a prolonged period. - HELD THAT: - The petitioner filed annual returns belatedly and, within thirty days of the assessment orders dated 25 March 2010, applied in Form No.30AA under Section 33D for cancellation of ex parte assessments. The Court found no dispute on these facts and observed that the statute mandates cancellation and fresh assessment if the assessee satisfies the Commissioner about non appearance and the application is within time. The authorities, despite receipt of the applications, did not adjudicate them for about ten years and communicated only that the applications were neither allowed nor rejected. In those circumstances the Court held that the revenue's prolonged inaction was unjustified and that the ex parte assessments must be set aside so as to afford the assessee a hearing and opportunity to justify the returns, directing fresh assessment in accordance with law. [Paras 10, 13]

Ex parte assessment orders dated 25 March 2010 were set aside and the petitioner directed to be afforded hearing for fresh assessment.

Consequential quashing of bank attachment where underlying ex parte assessment is set aside - Bank attachment made in furtherance of the ex parte assessment was quashed as consequential to setting aside those assessments. - HELD THAT: - Given the Court's setting aside of the ex parte assessments for failure of the authorities to decide the Section 33D applications, the consequential attachment of the petitioner's current and overdraft bank accounts could no longer subsist. The Court accordingly held that the attachment would remain no longer in force and quashed the attachment orders, while permitting the revenue to pursue recovery after conducting a fresh assessment following hearing. [Paras 13, 14]

The consequential bank attachment orders were quashed; the revenue may take recovery steps only after a fresh assessment following hearing.

Availability of alternative appellate remedy and restraint on exercise of writ jurisdiction - Writ Court declined to decide the merits of the assessments, observing that alternative two tier appeal remedies are available and those points should be agitated before the appropriate forum. - HELD THAT: - The Court acknowledged that the assessments are subject to statutory appeals (first appeal and second appeal/tribunal) and reiterated the settled principle that writ jurisdiction should be exercised with restraint where alternative remedies exist. Consequently, issues going to the correctness or timeliness of the assessments on merits were left open for determination in the appellate proceedings rather than being adjudicated in writ proceedings. [Paras 12]

Merits of the assessments were left open to be agitated and decided before the appropriate appellate forum; writ jurisdiction was not used to decide those points.

Final Conclusion: Ex parte assessment orders dated 25 March 2010 are set aside for the revenue's prolonged non decision of timely Section 33D applications; consequential bank attachments are quashed. The assessee is to appear on fresh notice, be given hearing and assessed afresh; issues on merits may be pursued before the statutory appellate authorities.

Entitlement to input tax credit for purchases during transition period - effective date of cancellation of registration upon service/publication - effect of Rule 17(19) and Rule 17(20) of the KVAT Rules on cancellation - status of dealer as unregistered and consequence under Section 11(4) of the KVAT Act - continuous business / no break in business during transition

Entitlement to input tax credit for purchases during transition period - status of dealer as unregistered and consequence under Section 11(4) of the KVAT Act - continuous business / no break in business during transition - Assessee's entitlement to input tax credit for purchases effected in the transition period 1.2.2014 to 26.2.2014. - HELD THAT: - The Tribunal found there was no break in the period of business from 1.2.2014 to 26.2.2014 and accordingly allowed input tax credit for purchases made during the transition. The State contended that Section 11(4) of the KVAT Act disqualifies an unregistered dealer from claiming input tax credit because the assessee's registration was said to have ceased with effect from 31.12.2013. The Court examined the KVAT Rules, particularly Rule 17(19) and Rule 17(20), which make cancellation effective only from the date on which a copy of the cancellation order is served on the dealer or from the date of publication of such cancellation, whichever is later. The application for cancellation was filed on 20.2.2014 and there was no service/publication prior to that date; the fresh partnership registration was effective on 26.2.2014. Applying those rules, the period without effective registration was limited and the Tribunal's factual conclusion of continuity of business and entitlement to input tax credit for the transition period was supported. The Court therefore declined to overturn the Tribunal's allowance of input tax credit.

Tribunal's finding that the respondent was entitled to input tax credit for purchases during 1.2.2014 to 26.2.2014 is upheld.

Effective date of cancellation of registration upon service/publication - effect of Rule 17(19) and Rule 17(20) of the KVAT Rules on cancellation - Whether the cancellation of registration could be treated as effective from an earlier date (31.12.2013) in the absence of service or publication. - HELD THAT: - The Court held that under Rule 17(19) and (20) of the KVAT Rules the cancellation of registration becomes effective only upon service of the cancellation order on the dealer or upon publication of the cancellation as prescribed. The dealer's application for cancellation dated 20.2.2014 did not establish any prior service or publication; consequently, the assertion that cancellation was effective from 31.12.2013 was untenable. As the necessary formalities for effective cancellation were not shown to have occurred before the fresh registration on 26.2.2014, the short interval without effective registration did not justify denying input tax credit for the transition period.

Cancellation of registration cannot be treated as effective from 31.12.2013 in the absence of service/publication; the effective date follows the requirements of Rule 17(19) and (20).

Final Conclusion: Revision dismissed; the Tribunal's order allowing input tax credit for the transition period and reversing the findings to the extent stated is upheld. Order is not to be treated as a precedent.

Payment of Gratuity Act, 1972-applicability to Anganwadi workers and helpers - establishment within the meaning of Section 1(3)(b) and (c) of the Payment of Gratuity Act, 1972 - employee within the meaning of Section 2(e) of the Payment of Gratuity Act, 1972 - wages within the meaning of Section 2(s) of the Payment of Gratuity Act, 1972 - beneficial interpretation of social security legislation - Anganwadi centres as statutory agencies under the National Food Security Act, 2013 - interest payable under Section 7(3A) of the Payment of Gratuity Act, 1972

Payment of Gratuity Act, 1972-applicability to Anganwadi workers and helpers - establishment within the meaning of Section 1(3)(b) and (c) of the Payment of Gratuity Act, 1972 - Anganwadi centres as statutory agencies under the National Food Security Act, 2013 - Whether the Payment of Gratuity Act, 1972 applies to Anganwadi centres and, consequently, to Anganwadi workers and Anganwadi helpers. - HELD THAT: - The Court held that Anganwadi centres perform statutory duties effected by the National Food Security Act, 2013 (notably Sections 4-6) and are entrusted with delivering entitlements (supplementary nutrition, pre school non formal education, identification and feeding of malnourished children) through Anganwadi centres. Reading Section 1(3)(b) broadly in light of prior precedents, an 'establishment' for the purposes of the 1972 Act includes establishments defined by laws relating to establishments in the State; further, where educational institutions are notified under Section 1(3)(c) the 1972 Act also reaches such classes. The State rules and Resolution governing selection, duties, tenure and discipline of Anganwadi workers/helpers demonstrate that Anganwadi centres operate as an establishment (an extended arm of the State) to implement statutory obligations. Accordingly, the 1972 Act applies to Anganwadi centres and to persons working therein, and earlier decisions declining such applicability that pre date the 2013 Act and the subsequently framed State rules do not govern the present issue. [Paras 21, 24, 30, 31, 32]

Anganwadi centres are establishments covered by the 1972 Act and the Act applies to Anganwadi workers and Anganwadi helpers.

Employee within the meaning of Section 2(e) of the Payment of Gratuity Act, 1972 - wages within the meaning of Section 2(s) of the Payment of Gratuity Act, 1972 - beneficial interpretation of social security legislation - Whether Anganwadi workers/helpers qualify as 'employees' and whether the honorarium paid to them falls within the definition of 'wages' under the 1972 Act. - HELD THAT: - The Court observed that the definition of 'employee' in Section 2(e) covers any person employed for wages in or in connection with the work of an establishment to which the Act applies. The duties and responsibilities assigned to Anganwadi workers/helpers by statute and the State Resolution are pervasive and full time in character (including pre school education, nutrition, home visits, monitoring growth, record keeping and coordination). Given the wide definition of 'wages' in Section 2(s) as all emoluments earned by an employee while on duty, the honorarium paid to AWWs/AWHs constitutes 'wages' for the purposes of the Act. The Court reiterated that social security statutes merit liberal and beneficial construction to effectuate their protective object; applying that principle, the appellants qualify as employees entitled to gratuity. [Paras 28, 29, 31]

Anganwadi workers and helpers are 'employees' within Section 2(e) and the honorarium paid to them is 'wages' within Section 2(s); they are therefore entitled to benefits under the 1972 Act.

Payment of Gratuity Act, 1972-applicability to Anganwadi workers and helpers - interest payable under Section 7(3A) of the Payment of Gratuity Act, 1972 - Relief and ancillary consequences: whether past gratuity claims of eligible Anganwadi workers/helpers are to be given effect and whether interest is payable. - HELD THAT: - The Controlling Authority and Appellate Authority had granted gratuity and directed payment; the Single Judge upheld those orders and the Division Bench had reversed them. This Court restored the Single Judge's decision, set aside the Division Bench judgment and directed that concerned authorities in the State of Gujarat take steps within three months to extend the benefits of the 1972 Act to eligible AWWs and AWHs. The Court further directed that all eligible Anganwadi workers and helpers are entitled to simple interest at 10% per annum on overdue gratuity amounts from the date specified under Section 7(3A) of the Act. [Paras 31, 32, 53]

The appeals are allowed; the Division Bench judgment is set aside, the Single Judge's orders are restored, eligible AWWs/AWHs are to be extended gratuity and shall receive simple interest at 10% per annum on overdue amounts.

Payment of Gratuity Act, 1972-applicability to Anganwadi workers and helpers - Ameerbi (2007) - scope and applicability of precedent - Whether the earlier decision in Ameerbi (2007) precludes the present conclusion that Anganwadi workers/helpers are covered by the 1972 Act. - HELD THAT: - The Court distinguished Ameerbi, which addressed whether Anganwadi workers held civil posts attracting Article 311 and the jurisdiction of Administrative Tribunals, noting that the 2013 National Food Security Act and the State Rules (post Ameerbi) have materially altered the statutory landscape. Since Anganwadi centres and the status, duties and selection of AWWs/AWHs have been rendered statutory by subsequent enactments and rules, Ameerbi does not control the present issue concerning entitlement to gratuity under the 1972 Act. [Paras 16, 18, 51]

Ameerbi is not determinative of the present appeals and does not preclude application of the 1972 Act to Anganwadi workers/helpers in the present statutory context.

Final Conclusion: The Supreme Court allowed the appeals, held that Anganwadi centres are establishments to which the Payment of Gratuity Act, 1972 applies, that Anganwadi workers and helpers are 'employees' whose honorarium amounts to 'wages' within the Act, set aside the Division Bench judgment of the Gujarat High Court, restored the Single Judge's orders, directed the State to extend gratuity benefits to eligible AWWs/AWHs within three months and awarded simple interest at 10% per annum on overdue gratuity amounts.

Admissibility of document admitted without objection - service of demand notice under proviso to Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - conviction under sections 138/141 of the Negotiable Instruments Act

Admissibility of document admitted without objection - Legal effect of admission in evidence of a photocopy of the demand notice when the original had been dispatched and no objection was taken at trial - HELD THAT: - The Court held that Exhibit 12, a photocopy of the demand notice, having been admitted in evidence without objection by the defence, was not required thereafter to have its contents separately proved. Relying on the principle in Dayamathi Bai v. K.M. Shaffi, an objection as to the mode of proof, if not taken at the point of admission, is waived and cannot be raised subsequently. The learned Magistrate erred in treating the demand notice as not proved when it had been admitted without objection; omission to object at admission was fatal to the defence and the contents were therefore available for reliance. [Paras 30, 31]

Exhibit 12, admitted without objection, must be relied upon and its contents are treated as proved.

Service of demand notice under proviso to Section 138 of the Negotiable Instruments Act - Whether service of the demand notice was effected in accordance with the proviso to Section 138 such as to enable prosecution - HELD THAT: - The Court found on reappraisal of evidence and documents (including postal receipts and A/D cards produced as exhibits) that the demand notice dated 02.09.2000 was sent by registered post with A/D and was served upon the accused persons on the dates recorded in the evidence. The record showed that the AD cards were returned to the complainant's advocate and that the accused did not make payment within the statutory period. In these circumstances the statutory requirement of service for the purpose of Section 138's proviso was satisfied and the accused could not rely on a subsequent contention that the notice's contents were unproved. [Paras 27, 28, 30]

Service by registered post with A/D was established and the requirement of the proviso to Section 138 was satisfied.

Presumption under Section 139 of the Negotiable Instruments Act - conviction under sections 138/141 of the Negotiable Instruments Act - Whether the presumption under Section 139 was rebutted and whether the accused were rightly convicted for offences under Sections 138/141 - HELD THAT: - The Court held that the presumption under Section 139, arising from the cheque being drawn and dishonoured, was not rebutted by the accused. The material on record - dishonoured cheque, return memo, bank statements, admitted demand notice and evidence of service - established the essential ingredients of the offence. The learned Magistrate's acquittal based on non-proof of the demand notice was contrary to the evidence and law. Consequently, on reappraisal the accused company and its directors were found guilty of the offences under Sections 138/141 and convicted, with sentence and compensation ordered. [Paras 29, 31, 33]

Presumption under Section 139 stood unrebutted; accused are convicted under Sections 138/141 and sentenced with fine and default sentence directed.

Final Conclusion: The High Court set aside the magistrate's acquittal, held that the photocopy of the demand notice having been admitted without objection was proved, found service by registered post with A/D to be established, concluded the presumption under Section 139 was not rebutted and convicted the accused company and its directors for offences under Sections 138/141 of the Negotiable Instruments Act, awarding fine and consequential sentence and compensation.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of impleading the company as primary accused - strict construction of penal provisions - amendment of criminal complaint to cure foundational defects

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of impleading the company as primary accused - strict construction of penal provisions - Whether a complaint under Section 138 N.I. Act is maintainable against the Managing Director without impleading the Company and whether vicarious liability under Section 141 can be attracted in the absence of the Company being arraigned. - HELD THAT: - The Court applied the ratio of the three Judge Bench in Aneeta Hada which holds that Section 141 creates vicarious liability only when the primary offence under Section 138 is attributable to the Company; consequently the Company must be arraigned as an accused before vicarious liability can be fastened on its officers. The Court noted that previous decisions relied upon by the petitioner (including U.P. Pollution Control Board, Rajneesh Aggarwal and Bilakchand Gyanchand Co.) were considered in Aneeta Hada and do not displace its clear conclusion that commission of the offence by the Company is an express condition precedent to invoke Section 141. Applying that principle to the record, the complaint contains averments only against the respondent individually and contains no pleading that the Company committed the offence; therefore the deeming fiction in Section 141 could not be invoked to fasten liability on the Managing Director. [Paras 16, 17, 20, 21, 22]

Complaint not maintainable insofar as it seeks to fasten vicarious liability under Section 141 without impleading the Company; dismissal by Trial and Appellate Courts was rightly founded on Aneeta Hada.

Amendment of criminal complaint to cure foundational defects - requirement of impleading the company as primary accused - Whether the petitioner should be permitted to amend the complaint to add or implead the Company so as to cure the defect. - HELD THAT: - The Court distinguished authorities relied on by the petitioner which permitted amendments in different factual contexts (for example where cognizance had not been taken, summons not issued, or the defect was merely nomenclatural). It observed that amendments which merely cure minor, technical infirmities may be permitted, but where no averment exists that the Company committed the offence, allowing amendment would amount to permitting a substantive re pleading or filing of a fresh complaint in the guise of amendment. Given that Section 141 imposes penal consequences and must be strictly construed, such a foundational omission is not a curable technical defect and amendment to introduce the Company and make substantive averments as to its liability was not appropriate. [Paras 23, 24, 25, 26, 27]

Prayer to amend the complaint to implead the Company and overhaul the pleadings refused; amendment would not be a cure of a mere technical infirmity but a substantive re pleading and is therefore inappropriate.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. The courts below correctly applied the law that a company must be arraigned as primary accused before vicarious liability under Section 141 N.I. Act can be invoked, and the foundational omission in the complaint could not be cured by permitting amendment.

Compounding of offence under Section 138 of the Negotiable Instruments Act - requirement of consent of the complainant for compounding - scope and application of Section 147 of the Negotiable Instruments Act vis-a -vis Section 320 CrPC - binding effect of conflicting co-ordinate Bench decisions and doctrine in Pranay Sethi - judicial discretion to quash proceedings where complainant is compensated

Requirement of consent of the complainant for compounding - compounding of offence under Section 138 of the Negotiable Instruments Act - Consent of the complainant is an essential ingredient for compounding an offence under Section 138 of the Negotiable Instruments Act and compounding cannot be ordered unilaterally in the absence of such consent except in the limited discretion recognised by higher precedent. - HELD THAT: - The Court reviewed competing Supreme Court decisions and co ordinate Bench rulings. Applying the principle in the Constitutional Bench decision in Pranay Sethi, the Court concluded that where two co ordinate Bench decisions are in direct conflict the earlier decision must be followed. The judgment in JIK Industries (which held that the basic mode and manner of compounding under Section 320 CrPC, including the requirement of consent, remains applicable despite Section 147) is binding and mandates that compounding under Section 138 ordinarily requires the complainant's consent. Damodar S. Prabhu does not negate the consent requirement; it addressed the stage of compounding and provided guidelines to discourage delay. Although Meters and Instruments suggested a discretionary power to close proceedings where the complainant is compensated even without consent, that view does not displace the earlier JIK Industries ratio which this Court must follow. [Paras 11, 12, 13]

Application for compounding could not be allowed in the absence of the complainant's consent; the trial Court did not err in refusing unilateral compounding.

Scope and application of Section 147 of the Negotiable Instruments Act vis-a -vis Section 320 CrPC - binding effect of conflicting co-ordinate Bench decisions and doctrine in Pranay Sethi - Section 147 makes offences under the NI Act compoundable but does not obliterate the fundamental compounding principles in Section 320 CrPC; where co ordinate Bench conflicts exist, the earlier decision governs unless referred to a larger Bench. - HELD THAT: - The Court examined Damodar S. Prabhu, JIK Industries and Meters and Instruments. It held that Section 147 is to be construed to make offences compoundable while preserving the main principles of compounding under Section 320 CrPC, including the role of complainant's consent. Where later co ordinate Bench rulings differ, Pranay Sethi requires the earlier decision of equal strength to be followed unless the subsequent Bench refers the matter to a larger Bench. Consequently, JIK Industries' exposition that consent is integral prevails over later divergent co ordinate Bench views. [Paras 10, 11, 12]

Section 147 does not displace the essential compounding principles of Section 320 CrPC; the Court will follow the earlier co ordinate Bench decision (JIK Industries) in view of Pranay Sethi.

Judicial discretion to quash proceedings where complainant is compensated - compounding of offence under Section 138 of the Negotiable Instruments Act - Even if the Court has discretion to close proceedings where the complainant is fully compensated, the payment offered by the petitioners in the present case was inadequate; therefore the Court would not exercise discretion to close the proceedings or allow compounding. - HELD THAT: - The Court acknowledged authorities (including Meters and Instruments and Hem Lata) recognizing a limited discretion to close proceedings when the complainant is duly compensated. Applying that principle to the facts, the petitioners offered to pay an amount after a long delay which the Court found 'grossly inadequate' to compensate the complainant given the elapsed period and circumstances. In absence of adequate compensation and without complainant's consent, the exercise of discretion to compound or quash was not warranted. [Paras 13, 14]

The payment offered by the petitioners was inadequate; the Court declined to exercise discretion to close the proceedings and dismissed the petition.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. The High Court upheld the requirement of the complainant's consent for compounding under Section 138 (subject to limited judicial discretion where full compensation is made), found the petitioners' offer insufficient, and concluded that the trial/Appellate Court did not err in refusing the compounding application.

Interim compensation under Section 143(A) of the Negotiable Instruments Act - directory versus mandatory nature of statutory provision - requirement of application of mind before directing interim compensation - non-speaking order - remand for fresh consideration of interim compensation

Interim compensation under Section 143(A) of the Negotiable Instruments Act - requirement of application of mind before directing interim compensation - non-speaking order - directory versus mandatory nature of statutory provision - Validity of the trial Court's order directing deposit of 20% of cheque amount as interim compensation under Section 143(A) of the Negotiable Instruments Act - HELD THAT: - The High Court found that the trial Court had directed interim compensation under Section 143(A) in a mechanical manner without giving the petitioner an opportunity to file a reply and without application of mind. The Court observed that earlier decisions of other High Courts had held that Section 143(A) is not mandatory but directory in nature and that the trial Court had proceeded on the erroneous impression that the provision was mandatory. The impugned direction was therefore held to be a non-speaking order lacking requisite judicial consideration. The Court accordingly set aside the impugned portion of the order and remitted the matter to the trial Court for fresh disposal on the question of grant of interim compensation in accordance with law. The High Court noted the Delhi High Court decision in M/s Jsb Cargo (remitted there) and a similar view taken by the Karnataka High Court in Vijaya , as reflecting the settled position that the provision is directory, and directed the trial Court to decide the matter afresh after affording appropriate opportunity and applying mind.

Impugned order directing deposit of interim compensation set aside as non-speaking and passed without application of mind; matter remanded to the trial Court to consider grant of interim compensation under Section 143A in accordance with law within one month of receipt of certified copy.

Final Conclusion: The petition is allowed to the extent challenged: the trial Court's order of 24.09.2021 directing interim compensation under Section 143(A) is set aside as non-speaking and the matter is remanded to the trial Court to decide the entitlement to interim compensation afresh in accordance with law within one month of receipt of certified copy.

Presumption under Section 139 of the Negotiable Instruments Act is rebuttable - Burden on prosecution to prove that cheque was issued in discharge of subsisting liability - Accused need not always testify under Section 315 Cr.P.C.; defence may be probabilised by cross examination - Acquittal where prosecution fails to produce material evidence or the proper witness to prove transaction

Presumption under Section 139 of the Negotiable Instruments Act is rebuttable - Burden on prosecution to prove that cheque was issued in discharge of subsisting liability - Whether the statutory presumption under Section 139 was rebutted so as to justify conviction under Section 138 of the Negotiable Instruments Act - HELD THAT: - The High Court held that the lower appellate Court erred in concluding that the presumption under Section 139 remained intact. PW1, the prosecution witness called, was unable to furnish particulars of the transaction, and expressly stated that a director (Ravi) was the person aware of the transaction but was not examined by the prosecution. The accused had, by cross examination, advanced a plausible explanation that the cheque had been given earlier as security for a different transaction. Given that the presumption under Section 139 is rebuttable, and that the prosecution failed to lead evidence to establish that the cheque was issued in discharge of a subsisting liability, the trial Court correctly found the defence to be prima facie established and acquitted the accused. The appellate Court's reliance on mere proof of signature without requiring the prosecution to prove the subsistence of liability was held to be misplaced. [Paras 9, 10]

The presumption under Section 139 was held to have been rebutted on the material on record and the appellate conviction could not stand.

Accused need not always testify under Section 315 Cr.P.C.; defence may be probabilised by cross examination - Whether the accused was obliged to enter the witness box and formally testify under Section 315 Cr.P.C. to repel the presumption - HELD THAT: - The Court observed that it is not necessary in every case for the accused to give evidence under Section 315 Cr.P.C.; it suffices if the accused, through cross examination and other material, probabilises his defence and discredits the prosecution's case. In the present case the accused had advanced a plausible explanation in cross examination and thereby raised sufficient doubt regarding the existence of a legally enforceable debt, which the prosecution failed to dispel. [Paras 9]

No adverse inference arises from the accused not entering the box where the defence has been probabilised by available material and cross examination.

Acquittal where prosecution fails to produce material evidence or the proper witness to prove transaction - Whether the trial Court's acquittal should be confirmed because the prosecution failed to produce the person having direct knowledge of the transaction - HELD THAT: - The Court noted that the prosecution's complaint was lodged and PW1 examined, but PW1 could not give details of the transaction and repeatedly indicated that the director (Ravi) would be the proper witness. The prosecution did not examine that director or otherwise lead evidence to establish the particulars of the transaction and liability. In those circumstances the trial Court's conclusion-that the prosecution had failed to prove the necessary ingredients of the offence-was correct. [Paras 8, 10]

The trial Court's acquittal is affirmed and the appellate Court's conviction set aside for want of proof.

Final Conclusion: Criminal Revision allowed; the judgment of conviction and sentence of the lower appellate Court is set aside and the accused is acquitted, thereby confirming the trial Court's judgment of acquittal.

Section 311 Cr.P.C. - power to recall witnesses - essential to the just decision of the case - exercise of judicial discretion under Section 311 - ends of justice - belated application and delay in seeking recall - imposition of costs as condition for recall

Section 311 Cr.P.C. - power to recall witnesses - essential to the just decision of the case - exercise of judicial discretion under Section 311 - belated application and delay in seeking recall - Whether the trial court erred in rejecting the accused's application under Section 311 Cr.P.C. to recall PW 1 for further cross examination. - HELD THAT: - The High Court analysed the scope and limits of Section 311 Cr.P.C., recognising the wide discretionary power conferred on a court to recall witnesses when their evidence appears essential to a just decision, but also acknowledging that such discretion must be exercised with caution and for strong and valid reasons. The trial court had refused the recall on the ground of lateness and because the accused did not specify the omitted aspects of cross examination; it also noted that cross examination had been completed on 26.08.2019 and that the accused had been absent on several occasions. The High Court accepted that an application under Section 311 can be made at any stage but must be judged on whether recall is essential to avoid failure of justice. The petitioner produced material showing that the earlier counsel who cross examined PW 1 had died of COVID 19, which the High Court found to be a circumstance warranting reconsideration of the recall request and justifying an opportunity for further cross examination despite the belatedness asserted by the trial court. Applying the principles in the cited Supreme Court authorities, the High Court concluded that the exceptional circumstance (death of counsel due to COVID 19) coupled with the aim of preventing failure of justice justified allowing the recall. [Paras 7, 8]

The trial court's order rejecting the Section 311 application was quashed and the petitioner was permitted one opportunity to further cross examine PW 1.

Imposition of costs as condition for recall - ends of justice - Whether recall should be allowed subject to conditions and what conditions are appropriate. - HELD THAT: - Having found merit in the petitioner's claim of exceptional circumstance, the High Court balanced the need to prevent failure of justice against the interests of finality and expedition of trial. In exercise of judicial discretion and to prevent abuse or repeated delay, the Court imposed a cost as a condition precedent to the recall and limited the relief to a single occasion of further cross examination to be concluded on a specified date. The Court directed payment of costs to PW 1 as a precondition and made it clear no further opportunity would be granted, thereby tailoring relief to the exigencies of the case while safeguarding orderly progress of the trial. [Paras 8]

Recall of PW 1 granted for one occasion only, to be conducted on the specified date subject to payment of costs as a condition precedent; no further opportunities will be allowed.

Final Conclusion: Writ petition allowed; the trial court's order rejecting the Section 311 application is quashed, the petitioner is permitted one opportunity to further cross examine PW 1 on the specified date subject to payment of costs as a condition precedent, and no further recall will be permitted.