TaxTMI Updates e-Newsletter
May 15,2019

Summary order. Petition asserting that the right to avail transitional CENVAT credit under Section 140(3) of the Central GST Act is substantive and that the due date in Rule 117 of the CGST Rules is directory; affidavit-in-opposition directed to be filed within four weeks, reply within two weeks, matter listed in the monthly list of June, 2019.

Netting of interest for purpose of Explanation (baa) to Section 80HHC - Deduction of ninety per cent of net interest under Explanation (baa) to Section 80HHC - Application of Supreme Court precedent in tax matters

Netting of interest for purpose of Explanation (baa) to Section 80HHC - Deduction of ninety per cent of net interest under Explanation (baa) to Section 80HHC - Application of Supreme Court precedent in tax matters - Net interest (interest received less interest paid) is to be taken for computing the deduction of ninety per cent under Explanation (baa) to Section 80HHC; the assessee is entitled to netting. - HELD THAT: - The Court admitted the question concerning whether interest paid on inter-corporate deposits and interest received thereon should be netted for the purpose of applying Explanation (baa) to Section 80HHC. Relying on the subsequent decision of the Hon'ble Supreme Court in ACG Associated Capsules Pvt. Ltd., which held that ninety per cent is to be deducted from net interest (i.e., interest included in profits under 'Profits and Gains of Business or Profession'), the Court concluded that the same principle applies and answers the question in favour of the assessee. The Revenue did not dispute the binding Supreme Court decision. The Court therefore allowed the appeal on this question and directed that the assessee be benefited accordingly. The separate question on jurisdiction under Section 147 was not pressed by the assessee and was not adjudicated on merits. [Paras 4, 7, 8, 9]

Question on netting of interest under Explanation (baa) to Section 80HHC answered in favour of the assessee; net interest to be considered for the ninety per cent deduction.

Final Conclusion: The appeal is allowed insofar as the netting of interest for computing the deduction under Explanation (baa) to Section 80HHC is concerned, following the Supreme Court decision in ACG Associated Capsules; the question on jurisdiction under Section 147 was not pressed and is not decided.

Stay pending appeal - interim stay on deposit - transfer pricing comparables - judicial discretion to condition stay - financial hardship evidence

Stay pending appeal - transfer pricing comparables - financial hardship evidence - judicial discretion to condition stay - Whether the Tribunal's outright rejection of the petitioner's application for stay pending disposal of the appeal was proper and what relief, if any, should be granted. - HELD THAT: - The Court found that the Tribunal, in rejecting the stay application, did not take into account that the Assessing Officer had relied on a set of comparables for the impugned assessment which included entities excluded in the Tribunal's earlier order for a previous year and excluded by the DRP; that aspect was not considered by the Tribunal when refusing stay. Given this omission, the matter was not one where outright rejection of stay was appropriate. Rather than remanding the stay application to the Tribunal for rehearing (which might only generate further interlocutory proceedings), the Court exercised its supervisory jurisdiction to conditionally grant interim relief. Balancing the parties' interests and recognising the substantial liability and interest components noted in the assessment order, the Court directed a deposit as a precondition for an interim stay and required the Tribunal to endeavour to expedite hearing of the appeal.

Writ petition disposed by directing deposit of a sum (as a condition for interim stay of recovery of the balance) and directing the Tribunal to expedite the hearing of the appeal.

Final Conclusion: The Tribunal's summary rejection of the stay application was not sustained; the writ petition was disposed by granting an interim stay of collection of the balance subject to the petitioner making the directed deposit within the stipulated time and the Tribunal being directed to expedite the appeal hearing.

Attachment of immovable property under Rule 48 of the Second Schedule to the Income-tax Act, 1961 - Limitation on sale post-attachment under Rule 68-B(1) of the Second Schedule to the Income-tax Act, 1961 - Attachment limited to the subsisting interest of the assessee - Prohibition on registration under Section 22-A of the Registration Act, 1908

Limitation on sale post-attachment under Rule 68-B(1) of the Second Schedule to the Income-tax Act, 1961 - Attachment of immovable property under Rule 48 of the Second Schedule to the Income-tax Act, 1961 - Validity and continuing efficacy of the orders of attachment dated 07.10.2011 where no sale was effected within three years from the end of the financial year in which the order giving rise to the recovery was passed. - HELD THAT: - The Court observed that Rule 68-B(1) of the Second Schedule bars sale of immovable property after the expiry of three years from the end of the financial year in which the order giving rise to recovery was passed. The properties attached were not brought to sale within that three year period. Having regard to the statutory limitation on effecting a sale post-attachment, the orders of attachment dated 07.10.2011 had consequently lost their potency and could no longer operate to prevent the petitioners from asserting their rights in the properties. [Paras 9]

Orders of attachment dated 07.10.2011 have lost their potency because no sale was effected within the three year period contemplated by Rule 68-B(1).

Attachment limited to the subsisting interest of the assessee - Prohibition on registration under Section 22-A of the Registration Act, 1908 - Attachment of immovable property under Rule 48 of the Second Schedule to the Income-tax Act, 1961 - Whether the orders of attachment and consequent directions to the Sub-Registrar were valid insofar as the sixth respondent did not have an owner's interest in the properties on the date of the attachment because bona fide purchasers had acquired interests prior to the provisional order. - HELD THAT: - The Court accepted the legal stance that only the subsisting interest of the assessee on the date of attachment can be the subject matter of attachment. It was found on the record that the petitioners in the first writ petition had purchased the individual plots before the provisional order of attachment was passed. Consequently, the sixth respondent had no subsisting ownership interest to be attached in respect of those plots on the relevant date, rendering the orders of attachment and the directions issued under Section 22-A, insofar as they affected the petitioners, unsustainable. [Paras 8, 10, 11]

Attachment could extend only to the subsisting interest of the sixth respondent and, as the petitioners had acquired the plots prior to attachment, the orders of attachment and related directions to the Sub-Registrar were unsustainable insofar as they affected the petitioners.

Final Conclusion: All writ petitions are allowed; the orders of attachment dated 07.10.2011 have lost their potency and, insofar as they affected the petitioners who had acquired the plots prior to attachment, are unsustainable; pending miscellaneous applications stand dismissed; no order as to costs.

Rectification under section 154 - tax on surrendered income under section 115BBE - treatment of excess stock found during survey as business income - debatable issue and mistake apparent from record

Rectification under section 154 - tax on surrendered income under section 115BBE - treatment of excess stock found during survey as business income - debatable issue and mistake apparent from record - Whether the Assessing Officer was justified in invoking section 154 to rectify assessment and apply section 115BBE to tax surrendered income disclosed during survey in respect of excess stock - HELD THAT: - The Tribunal found that the surrendered amount related to excess stock of guar discovered during a survey and thereafter disclosed by the assessee as business income for AY 2014-15. Relying on a contemporaneous decision of the ITAT (SMC) bench which held that surrender of excess stock found during survey is taxable as business income and not under the special deeming provisions attracting section 115BBE, the Tribunal concluded that the question was debatable. Since the correctness of applying section 115BBE to such surrendered stock was not free from doubt, the invocation of section 154 on the ground of a 'mistake apparent from the record' was held to be impermissible. Applying this reasoning to the other appeals with similar facts, the Tribunal set aside the rectifications made by the Assessing Officer and held that section 154 could not be validly used to charge tax under section 115BBE in the circumstances of these cases. [Paras 14, 15, 16]

Rectification under section 154 to apply section 115BBE to the surrendered excess stock was set aside; the Assessing Officer was not justified in making the rectification.

Final Conclusion: Appeals allowed: rectification orders passed under section 154 confirming taxation of surrendered excess stock at the special rate under section 115BBE set aside on the ground that the issue was debatable and not a mistake apparent from record; the Assessing Officer's action held unjustified.

Ex-parte order - failure of service of notice / non-receipt of notice - restoration to the assessing officer for fresh adjudication - reasonable and effective opportunity of hearing - speaking order - remand for fresh consideration - assessment consequent to search and seizure

Ex-parte order - failure of service of notice / non-receipt of notice - restoration to the assessing officer for fresh adjudication - Whether the appeals should be restored where both the assessment orders and the first appellate orders were ex parte and the assessee did not receive notices for appellate hearings. - HELD THAT: - The Tribunal noted that the assessment orders under proceedings consequent to search were ex parte and that the Commissioner (Appeals) had passed ex parte orders on the grounds of non representation. The assessee's counsel stated the notices for appellate hearings were not received and the Revenue did not dispute that similar appeals arising from the same search in the group had been restored to the assessing officer. In these circumstances the Tribunal held that restoration was warranted to secure a fresh adjudication after affording the assessee an opportunity to be heard. The Tribunal relied on parity with other group appeals where restoration had been ordered and observed that both ex parte assessment and appellate proceedings militated in favour of fresh consideration. [Paras 7, 9]

All impugned appeals were restored to the Assessing Officer for fresh adjudication.

Reasonable and effective opportunity of hearing - speaking order - remand for fresh consideration - assessment consequent to search and seizure - The procedural directions to be given upon restoration, including the scope of fresh adjudication and standards to be followed by the Assessing Officer. - HELD THAT: - On remand the Tribunal directed the Assessing Officer to pass a speaking order in accordance with law after affording the assessee a reasonable and effective opportunity of hearing. The Tribunal emphasised that the assessee must not abuse the opportunity; if it does so the AO would be free to decide the matter on the material on record. The direction contemplates full opportunity to place fresh evidence and verification where necessary during reassessment arising from search linked proceedings. [Paras 8]

Direction that the AO shall pass a speaking order after giving reasonable and effective opportunity of hearing; the AO may act on material on record if the assessee abuses the opportunity.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes and remitted the matters to the Assessing Officer for fresh adjudication, directing issuance of a speaking order after affording the assessee a reasonable and effective opportunity of hearing, with liberty to the AO to decide on available material if the opportunity is abused.

Approval under section 80G(5)(vi) - genuineness of charitable activities - fulfilment of clauses (i) to (v) of section 80G(5) - procedure under Rule 11AA - remand for fresh consideration and hearing

Approval under section 80G(5)(vi) - genuineness of charitable activities - fulfilment of clauses (i) to (v) of section 80G(5) - procedure under Rule 11AA - Order of the Commissioner (Exemptions) denying approval under section 80G(5)(vi) was not passed in accordance with law and is remitted for fresh consideration. - HELD THAT: - For grant of approval under section 80G(5)(vi) the Commissioner must be satisfied and record in writing that the institution is established for charitable purposes, is genuinely carrying out such activities and fulfils the conditions in clauses (i) to (v) of section 80G(5); the procedural requirements of Rule 11AA (including production of prescribed documents and providing opportunity of hearing) are to be observed. The CIT(E)'s order lacks any specific finding on the genuineness of the activities of the trust or express recorded satisfaction as required by the statute. The reasons recorded by the CIT(E)-that the trust charges fees, has a large asset base, receives some cash payments, and contemplates a future Vridh Ashram not presently in its objects-were not connected by any finding to the statutory criteria and therefore do not, in themselves, justify denial of approval. The Tribunal accordingly concluded that the application was not considered in accordance with the statutory scheme and remitted the matter to the CIT(E) to reconsider afresh, record requisite findings on fulfillment of the statutory conditions and Rule 11AA, and pass an order in accordance with law after giving the assessee an opportunity of hearing. [Paras 8, 9]

Order of the CIT(E) denying approval under section 80G(5)(vi) set aside and the application remitted to the CIT(E) for fresh consideration and decision in accordance with law after giving the assessee opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The CIT(E)'s order denying approval under section 80G(5)(vi) is set aside and the matter is remitted to the CIT(E) to re-examine the application strictly in accordance with section 80G(5) and Rule 11AA, record necessary findings on the genuineness of activities and fulfilment of statutory conditions, and pass a fresh order after affording the assessee a hearing.

Agricultural land - aerial distance from municipal limits - municipal limits - capital asset - exemption from long term capital gains - Girdwari/Patwari revenue record - reliability of physical verification reports

Agricultural land - aerial distance from municipal limits - capital asset - exemption from long term capital gains - Girdwari/Patwari revenue record - reliability of physical verification reports - Whether the land sold by the assessee is agricultural land situated beyond eight kilometres from the outer limit of Jodhpur Nagar Nigam and hence not a capital asset for AY 2014-15, making the sale consideration exempt from long term capital gains tax. - HELD THAT: - The Tribunal examined the records including the Patwari/Girdwari entries showing sowing up to 16.10.2016, the Patwari certificate dated 26.03.2014 and the serving Inspector's report (which indicated about 9-10 kms based on Google Map). The AO relied on a retired/re employed Inspector's report which ultimately recorded an aerial distance of 7 kms. The Tribunal found the divergent physical verifications less reliable when pitted against contemporaneous revenue records and the Patwari/Girdwari reports, and noted precedents recognising the primacy of such revenue records over variant departmental verifications. Considering the Patwari certificate, the serving Inspector's report, the Google Map screenshot in the paper book and the overall factual matrix (including the memorandum of association permitting agricultural activity and evidence of cultivation), the Tribunal concluded that on balance the land is situated beyond eight kilometres from the municipal limits. Consequently, the land qualifies as agricultural land and is not a capital asset for the purpose of levy of long term capital gains for AY 2014-15. [Paras 2, 7, 9]

The claim of the assessee that the land is agricultural and situated beyond 8 kms of Jodhpur Nagar Nigam is accepted; the sale consideration is exempt from long term capital gains for AY 2014-15 and the appeal is allowed.

Final Conclusion: Appeal allowed: Tribunal held the land to be agricultural and situated beyond 8 kms from the municipal limits of Jodhpur Nagar Nigam for AY 2014-15, and directed that the sale consideration be treated as exempt from long term capital gains.

Section 68 - onus on assessee to explain sums credited - Distinction between a liability payable and monies received - Credit purchases / trade creditors not susceptible to addition under Section 68 - Estimation of income - requirement to reject books under Section 145(3) read with Section 144

Section 68 - onus on assessee to explain sums credited - Distinction between a liability payable and monies received - Credit purchases / trade creditors not susceptible to addition under Section 68 - Addition of Rs. 78,22,863/- made under Section 68 on account of unexplained sundry creditors deleted by the CIT(A) was upheld. - HELD THAT: - The Tribunal found that the outstanding amount represented freight payable to truck owners - a liability arising from trade transactions and not monies received by the assessee. The assessee had furnished details of the trade creditors (names, truck numbers, PANs, amounts and dates of payment) and explained that it acted as conduit for freight receipts, disbursing amounts to truck owners after deducting its booking charges. Relying on the Special Bench precedent that distinguishes liabilities arising from purchases/credit entries from cash credits attracting Section 68, and on analogous High Court authorities, the Tribunal held that where the credit in books represents a liability consequent to genuine trade transactions (and the corresponding turnover and purchases are accepted), Section 68 cannot be invoked. Having accepted the turnover and the nature of the liability, the Tribunal found no infirmity in the CIT(A)'s deletion of the addition. [Paras 4, 5, 9]

Deletion of the addition of Rs. 78,22,863/- under Section 68 is confirmed.

Estimation of income - requirement to reject books under Section 145(3) read with Section 144 - Addition of Rs. 11,86,100/- on account of alleged short reporting of bilty charges was deleted by the CIT(A) and that deletion was upheld. - HELD THAT: - The AO estimated bilty charges at 2% of receipts after finding the assessee's written response unsatisfactory. The CIT(A) recorded a factual finding - unchallenged by Revenue - that bilty charges were inclusive in receipts from the company. The assessee had produced books of account and earlier years' records showing comparable bilty percentages; the AO did not formally reject the books under the statutory procedure before making an estimation. The Tribunal held that estimation of income in these circumstances was arbitrary and vitiated, and that the CIT(A)'s verification and consequent deletion of the addition did not warrant interference. [Paras 11, 12, 13]

Deletion of the addition of Rs. 11,86,100/- on account of low bilty charges is confirmed.

Final Conclusion: The appeal by Revenue is dismissed; the CIT(A)'s deletions of additions under Section 68 in respect of sundry creditors and of the estimated shortfall in bilty charges are sustained for AY 2014-15.

Substitution of consideration by reference to breakup value in capital gains computation - long term capital loss on sale of unquoted shares - capital gains characterisation: LTCG versus STCG and applicability of section 50 - disallowance of expenditure attributable to exempt income under section 14A read with Rule 8D - computation of proportionate interest and allocation of interest-free funds under Rule 8D - applicability of Minimum Alternate Tax adjustment to disallowance under section 14A

Substitution of consideration by reference to breakup value in capital gains computation - long term capital loss on sale of unquoted shares - Validity of Assessing Officer's rejection of disclosed sale consideration and recomputation of long term capital loss by reference to breakup value - HELD THAT: - The Tribunal held that where the genuineness of the share sale transaction is not in doubt and there is no material to infer a colourable device to conceal income, the Assessing Officer was not justified in substituting the disclosed sale consideration with breakup value and disallowing the long term capital loss claimed by the assessee. The CIT(A) rightly followed the coordinate-bench precedent in the assessee's own earlier year and the jurisdictional authorities which treat genuine inter-group transfers at disclosed value as not amenable to substitution absent cogent evidence of fraud or concealment. On these facts the AO's recomputation of loss by adopting breakup values was unsustainable in law and the grounds of appeal were allowed. [Paras 3, 4, 5]

AO's disallowance and recomputation of long term capital loss by reference to breakup value set aside; appeal allowed.

Capital gains characterisation: LTCG versus STCG and applicability of section 50 - Whether gains on sale of land were to be assessed as short-term capital gains under section 50 or as long-term capital gains - HELD THAT: - The Tribunal observed that the correctness of characterisation depends on the factual question whether the land was included in a block of assets for depreciation purposes. The CIT(A) directed verification of that factual position and the Tribunal recorded that the issue remains open for the Assessing Officer to decide upon verification of whether the land formed part of the depreciable block attracting section 50. As the factual determination had not been concluded, the Tribunal did not disturb the matter on merits. [Paras 6]

Matter remitted for factual verification by the Assessing Officer; issue left open for assessment proceedings.

Disallowance of expenditure attributable to exempt income under section 14A read with Rule 8D - computation of proportionate interest and allocation of interest-free funds under Rule 8D - applicability of Minimum Alternate Tax adjustment to disallowance under section 14A - Validity and quantum of disallowance under section 14A read with Rule 8D and whether such disallowance impacts MAT under section 115JB - HELD THAT: - The Tribunal found that the Assessing Officer had not recorded the mandatory satisfaction under section 14A(2) to negate the assessee's entitlement in principle, and that the CIT(A) correctly directed recomputation of disallowance confined to exempt-income-yielding investments in accordance with the coordinate-bench decision in REI Agro Ltd. The Tribunal accepted the presumption, on the presented facts, that interest-free funds were deployed in exempt-income investments and therefore rejected the AO's proportional interest adjustment under Rule 8D(2)(ii). As regards administrative expenditure, the CIT(A)'s direction for recomputation was upheld and the assessee's cross-objection that AO had not recorded satisfaction was rejected because the AO had examined the books and the assessee's computation before making the adjustment. Finally, the Tribunal affirmed that MAT under section 115JB does not admit an adjustment for disallowances made under section 14A read with Rule 8D, following the special bench authority. [Paras 7, 8, 9, 10]

CIT(A)'s directions on recomputation under Rule 8D upheld; AO directed to recompute disallowance as per law and precedents; MAT adjustment disallowed. Revenue's appeals dismissed.

Final Conclusion: Revenue's appeals and the assessee's cross-objection are dismissed. The Tribunal set aside the AO's substitution of consideration and disallowance of long term capital loss, remitted the land characterisation issue for factual verification by the AO, and upheld the CIT(A)'s directions for recomputation of disallowance under section 14A read with Rule 8D while rejecting MAT adjustment therefor.

Section 54 - exemption for investment in constructed residential house - construction versus purchase for section 54 - date of completion versus date of commencement for construction - Section 54EC - investment in specified bonds and financial year aggregation - interpretation of proviso to section 54EC pre-amendment - treatment of maintenance charges - taxable receipt versus amounts paid to service provider - evidentiary basis for additions - bank statements, TDS, confirmation

Section 54 - exemption for investment in constructed residential house - construction versus purchase for section 54 - date of completion versus date of commencement for construction - Allowability of exemption under section 54 where new house was booked with a builder by agreement dated 10.02.2006 and construction/possession completed within three years of sale. - HELD THAT: - The Tribunal held that the allotment/booking of the bare shell flat with the builder falls within the scope of 'construction' for section 54 (following CBDT Circular No.672 and appellate decisions). As construction (completion and possession) was achieved within three years from the date of transfer of the original asset and the agreement envisaged payments by instalments with internal fit-outs to be completed by the buyer, the relevant temporal requirement is date of completion, not date of commencement. Reliance was placed on precedents holding commencement prior to sale immaterial where completion falls within the statutory period. The CIT(A)'s deletion of the section 54 disallowance was upheld. [Paras 6]

Deduction claimed under section 54 allowed; disallowance deleted and CIT(A) order upheld.

Section 54EC - investment in specified bonds and financial year aggregation - interpretation of proviso to section 54EC pre-amendment - Whether two investments in specified bonds made across two financial years during the six month period can be treated together so as to allow deduction claimed under section 54EC prior to the 1.4.2015 amendment. - HELD THAT: - The Tribunal followed the reasoning in the Madras High Court decisions that, as the statutory restriction in the second proviso (limiting aggregate investment to Rs.50 lakh across the financial year and the subsequent financial year) was introduced with effect from 1.4.2015, the earlier proviso did not clearly preclude investments made within the six month period even if falling in two financial years. Consequently, the Assessing Officer's restriction of the claim to Rs.50 lakh was not sustained. The CIT(A)'s allowance of the claim to the extent made was therefore affirmed. [Paras 6]

Deduction under section 54EC upheld as claimed; AO's limitation rejected and CIT(A) order upheld.

Treatment of maintenance charges - taxable receipt versus amounts paid to service provider - evidentiary basis for additions - bank statements, TDS, confirmation - Validity of addition to rental income on account of alleged maintenance charges said to have been received from tenant M/s DT Cinemas Ltd. - HELD THAT: - The Tribunal found that the Assessing Officer's addition was based on conjecture and that the assessee produced contemporaneous evidence - tenant confirmation, bank statements, TDS certificates and Form 26AS - demonstrating that maintenance charges were paid to and discharged by the mall management/utility service (DLF Utilities) and not received by the assessee. The AO did not produce evidence contradicting these records. On that basis the CIT(A)'s deletion of the disputed addition was sustained. [Paras 6]

Addition of rental/maintenance amounts deleted; CIT(A) order upheld.

Final Conclusion: Revenue's appeals are dismissed; the Tribunal upholds the CIT(A)'s deletion of the additions and allowances of the claims under sections 54 and 54EC and confirms the deletion of the rental/maintenance addition for AY 2012-13.

Scope of assessment under section 153A limited to incriminating material found during search - treatment of share application money as unexplained cash credit under section 68 - requirement of incriminating material for reopening concluded assessments pursuant to search - finality of assessment completed before search

Scope of assessment under section 153A limited to incriminating material found during search - treatment of share application money as unexplained cash credit under section 68 - requirement of incriminating material for reopening concluded assessments pursuant to search - Addition of share application money treated as unexplained cash credit under section 68 in an assessment completed under section 153A when no incriminating material was found during search - HELD THAT: - The Tribunal held that where an assessment for the relevant year had attained finality before the date of search, the scope of reassessment under section 153A is confined to undisclosed income detected on the basis of incriminating material found during the search. Bank accounts and share application money that were disclosed in the assessee's original return and balance-sheet did not constitute incriminating material discovered during the search. Reliance was placed on precedents holding that exercise of powers under section 153A requires incriminating material and that absent such material additions treating disclosed share capital as unexplained cash credit under section 68 cannot be sustained in proceedings under section 153A. Applying this principle, the Tribunal concluded that the addition of the claimed share application money was made without being founded on incriminating material found in the search and therefore lay outside the permissible scope of section 153A. [Paras 7, 8]

Addition of Rs. 15,00,000 treated as unexplained cash credit under section 68 deleted as not based on incriminating material found during search and thus beyond the scope of assessment under section 153A.

Final Conclusion: The appeal is allowed and the addition of the share application money treated as unexplained cash credit under section 68 is deleted as not sustainable in proceedings under section 153A in the absence of incriminating material found during the search.

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - concealment of income - long term capital gains exemption under section 10(38) - reopening of assessment under section 147/148

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - long term capital gains exemption under section 10(38) - Whether penalty under section 271(1)(c) was leviable for the assessee's claim of exemption of long term capital gains which was subsequently offered to tax during reassessment - HELD THAT: - The assessee had declared long term capital gains in the original return and claimed exemption under section 10(38) on the basis of STT; the assessment was subsequently reopened under section 147/148 following investigative inputs and the assessee withdrew the exemption claim and offered the LTCG to tax. Section 271(1)(c) penalises concealment of particulars of income or furnishing inaccurate particulars. The Tribunal applied the settled principle that a mere claim which is unsustainable in law, or a subsequently withdrawn claim, does not by itself amount to furnishing inaccurate particulars or concealment unless the particulars furnished in the return are shown to be incorrect or false. Reliance was placed on the reasoning in the authorities reproduced in the judgment to the effect that the conditions in section 271(1)(c) must be established before imposing penalty. There is no finding in the assessment that any particulars supplied in the return were factually incorrect; at best the claim was unsubstantiated or wrong in law. On these facts, the essential condition for levy of penalty under section 271(1)(c) was not satisfied, and the penalty cannot be sustained.

Penalty under section 271(1)(c) deleted as not leviable

Final Conclusion: The appeals are allowed and the penalty imposed under section 271(1)(c) is deleted in all the consolidated matters.

Penalty under section 271D of the Income-tax Act - reasonable cause under section 273B - acceptance of loan in cash - repayment through banking channels (RTGS/cheque) - genuineness of transaction - discretion to not levy penalty

Penalty under section 271D of the Income-tax Act - reasonable cause under section 273B - acceptance of loan in cash - repayment through banking channels (RTGS/cheque) - Whether penalty under section 271D is leviable where the assessee accepted cash loans but established genuineness and repayment through banking channels and claimed reasonable cause under section 273B. - HELD THAT: - The Tribunal held that penalty under section 271D is not automatic and is subject to section 273B, which permits the authority to refrain from imposing penalty if the assessee proves reasonable cause. The assessee had explained that cash loans were taken for his sister's marriage, the genuineness of the loans was not controverted, and repayment was made through banking channels (RTGS/cheque). Relying on the Coordinate Bench decision in Lokaiah and the reasoning in Dimple Yadav , as well as the Supreme Court and High Court precedents discussed therein (including Chamundi Granites and Bhagwati Prasad Bajoria's (HUF) ), the Tribunal found that bona fides and routing/repayment through bank demonstrated reasonable cause within the meaning of section 273B. Consequently, the discretionary power to impose penalty under section 271D was not to be exercised against the assessee and the penalty was deleted.

Penalty under section 271D deleted as reasonable cause under section 273B was established by proof of genuine transaction and repayment through banking channels.

Final Conclusion: Assessee's appeal allowed; penalty under section 271D set aside for A.Y 2011-12 on grounds of reasonable cause and repayment through banking channels.

Allowability of bonus under Section 36(1)(ii) of the Income-tax Act - characterisation of remuneration to a director as dividend in lieu of bonus - burden on assessing officer to establish payment was payable as profit/dividend - doctrine of stare decisis

Allowability of bonus under Section 36(1)(ii) of the Income-tax Act - characterisation of remuneration to a director as dividend in lieu of bonus - burden on assessing officer to establish payment was payable as profit/dividend - Deletion of the addition made by the Assessing Officer disallowing bonus paid to a director under the principle that the payment was in lieu of dividend was upheld. - HELD THAT: - The Assessing Officer disallowed the claimed bonus on the ground that under Section 36(1)(ii) the payment could have been made as profit/dividend and therefore was not an allowable deduction. The Tribunal found that the AO did not produce material to establish that the amount was actually payable as dividend. The director held only 11% shares; if the amount were treated as dividend the company would have had to distribute a disproportionately larger sum to other shareholders, which was inconsistent with the company's financial position (loss for the year and limited accumulated profits). The bonus was determined by Board resolution prior to the year and was paid during the year in instalments; it was presented as variable remuneration for professional services rendered by a senior consultant. The Tribunal also relied on the fact that similar payments in earlier assessment years had been accepted on the same facts, and applied the doctrine of stare decisis. In light of the absence of substantiating material by the AO and the established facts about board approval, timing and the director's shareholding, the characterisation of the payment as dividend in lieu of bonus was not warranted, and the CIT(A)'s deletion of the addition was found to be correct.

The addition disallowing the bonus paid to the director was deleted and the CIT(A)'s order was upheld.

Final Conclusion: Revenue's appeals for AYs 2011-12 and 2012-13 are dismissed; the additions disallowing bonus payments to the director under Section 36(1)(ii) are deleted and the orders of the Commissioner (Appeals) are upheld.

Validity of reassessment under Section 147/148 of the Income tax Act - Quashing of reassessment notice - Arm's length principle and prohibition on further attribution of profit - Permanent Establishment and attribution limited by transfer pricing conformity

Validity of reassessment under Section 147/148 of the Income tax Act - Quashing of reassessment notice - Reassessment notices issued under Section 148 (read with Section 147) were quashed and consequent reassessment orders do not survive. - HELD THAT: - The Tribunal recorded that the assessee challenged the reassessment notices before the Supreme Court and relied on the Supreme Court's order dated 14/03/2018 which quashed the reassessment notices issued under Section 148. The Tribunal noted that the Supreme Court, applying its earlier decision in Assistant Director of Income Tax v. E Funds IT Solutions, held that where the arm's length principle has been satisfied, no further profit can be attributed to a person even if a Permanent Establishment exists; consequently notices issued solely on the allegation of a PE could not be sustained. In view of the Supreme Court's order quashing the reassessment notices, the Tribunal held that the reassessment orders framed pursuant thereto do not survive and are rendered infructuous. [Paras 6, 8, 9]

All appeals allowed as reassessment notices were quashed by the Supreme Court and the reassessment orders do not survive.

Arm's length principle and prohibition on further attribution of profit - Permanent Establishment and attribution limited by transfer pricing conformity - Where international transactions satisfy the arm's length principle, revenue cannot allocate additional profit to a non resident on account of an alleged Permanent Establishment. - HELD THAT: - The Tribunal applied the Supreme Court's finding that once the arm's length price procedure is followed and inter company transactions are found to be at arm's length, there can be no additional profit attributable to the non resident even if a Permanent Establishment is alleged to exist in India. The Tribunal observed that the Supreme Court recorded that if the revenue disputed the factual position that transactions were at arm's length it must approach the Supreme Court; absent such challenge, reassessment notices based solely on PE allegations cannot be sustained. The Tribunal therefore treated the Supreme Court's holding as determinative of the present matters and concluded that reassessment could not be upheld on the basis of a purported PE once ALP conformity was established. [Paras 8]

Tribunal declined to sustain reassessment based on PE allegations where arm's length conformity had been accepted by the taxpayer and addressed by the Supreme Court.

Final Conclusion: The appeals were allowed: reassessment notices under Section 148/147 were quashed by the Supreme Court and the reassessment orders became infructuous; applying the Supreme Court's ruling, no further profit could be attributed on account of an alleged PE where the arm's length principle had been satisfied.

Detention of imported goods - No objection Certificate under the Drugs and Cosmetics Act - Stay of administrative circular - Release of detained consignment subject to terms

Detention of imported goods - No objection Certificate under the Drugs and Cosmetics Act - Stay of administrative circular - Release of detained consignment subject to terms - Detention of the Petitioner's consignment imported by Bill of Entry dated 4th January, 2019 is not sustainable in view of an existing stay of the circular which mandated a No Objection Certificate, and the consignment is to be released subject to appropriate terms. - HELD THAT: - The consignments were detained on the ground that the Petitioner had not obtained a No Objection Certificate as required by a departmental circular dated 27th November, 2018. The operation of that circular has been stayed by an order dated 18th March, 2019 of the learned Single Judge in WP(C) No.2688/2019. Pursuant to that interim order, consignments of other importers of identical goods have been released. The Court found no reason to withhold release of the Petitioner's goods merely because the present writ petition remains pending, particularly when the impugned circular is stayed. The Respondent had no instructions regarding any intended appeal against the stay. In these circumstances the Court directed release of the goods detained under the Bill of Entry dated 4th January, 2019 within one week, subject to such terms as the Respondent may deem appropriate. [Paras 3, 6, 7, 8]

Goods detained under the Bill of Entry dated 4th January, 2019 shall be released within one week subject to such terms as the Respondent may think appropriate.

Final Conclusion: Writ petition dismissed after directing release of the detained consignment within one week, subject to appropriate terms, in view of the stay on the circular requiring a No Objection Certificate.

Prohibited goods - restricted import versus prohibited import - Section 125(1) - redemption in lieu of confiscation - import subject to registration - Foreign Trade Act - restriction deemed prohibition

Section 125(1) - redemption in lieu of confiscation - prohibited goods - Whether an order giving the importer an option to pay a fine and re-export the imported goods falls outside the remedial scope of Section 125(1) of the Customs Act when the importer subsequently refuses to re-export. - HELD THAT: - The Court recorded that the petitioner, in the circumstances of accruing demurrage and lack of clearance, had offered to re-export the goods and accepted the option given by the authority to redeem on payment of a fine for the purpose of re-export. Having invited and accepted that remedy, the petitioner could not thereafter contend that Section 125(1) did not permit the authority to order re-export as an alternative to confiscation. The factual acceptance of the re-export option by the petitioner precludes a later challenge to the availability of that remedy under Section 125(1). [Paras 12]

Petitioner cannot challenge the order of re-export as beyond the scope of Section 125(1) after having accepted the re-export option and paid the redemption fine.

Prohibited goods - restricted import versus prohibited import - import subject to registration - Foreign Trade Act - restriction deemed prohibition - Whether the imported plant growth regulator, imported without registration required under the Insecticides Act (i.e., in contravention of the condition in the Foreign Trade Policy), qualifies as "prohibited goods" under the Customs Act. - HELD THAT: - The Court examined the definition of "prohibited goods" and the Import Policy entry for plant growth regulators showing they are "free" subject to the condition of registration. The requirement of registration constitutes a restriction on import under the Foreign Trade Policy. Applying the statutory scheme and consistent Supreme Court precedents, the Court held that a restriction imposed under the Foreign Trade Act/Policy operates as a prohibition for purposes of the Customs Act when imports are made without compliance with the condition. Consequently, plant growth regulators imported without the mandated registration fall within the ambit of "prohibited goods" under Section 2(33) as read with the Foreign Trade Act, and could be confiscated or released only in accordance with the statutory redemption regime. [Paras 16, 17, 20, 24, 27]

Plant growth regulators imported without the required registration are to be treated as "prohibited goods" for the purposes of the Customs Act, permitting confiscation subject to the redemption option under the statutory scheme.

Final Conclusion: Writ petition dismissed; impugned order directing confiscation with option of redemption for re-export upheld; no order as to costs.

Judicial review of administrative inaction - remand for consideration of representation - opportunity of hearing - requirement of a reasoned order - effect of pending appellate proceedings without stay - prevention of punitive/deterrent action under Foreign Trade (Development & Regulation) Act, 1992

Remand for consideration of representation - opportunity of hearing - requirement of a reasoned order - Direction to the Additional Director General of Foreign Trade to consider the petitioners' representation dated 2nd January, 2019 and to pass a reasoned order after hearing within a stipulated time. - HELD THAT: - The Court noted that the petitioners had made multiple representations, the last on 2nd January, 2019, which remained unconsidered by the respondent authority. The Court recorded that an adjudication order dated 14th March, 2012 had dropped earlier proceedings, and that an appeal against that adjudication by the Directorate of Revenue Intelligence before the CESTAT was pending without any stay. In exercise of supervisory jurisdiction over administrative inaction, the Court directed respondent no.2 to give the petitioners an opportunity of hearing, consider their submissions (including the position that no stay has been granted against the adjudication order), and pass a reasoned order addressing the representation. The consideration was ordered to be completed within two weeks from communication of the order by the petitioners to respondent no.2. The relief granted is procedural - a mandate to decide the pending representation afresh with reasons and after hearing - rather than an adjudication on the merits of the underlying dispute.

The respondent no.2 is directed to hear the petitioners, consider the representation dated 2nd January, 2019, and pass a reasoned order within two weeks of communication; W.P. No.56 of 2019 disposed of.

Final Conclusion: The writ petition was disposed by directing the Additional Director General of Foreign Trade to consider the petitioners' pending representation (dated 2 January 2019), afford a hearing, and pass a reasoned order within two weeks; no costs were imposed.

Claim for refund of Special Additional Duty - Exemption notification construed strictly - Identity of imported goods vis-a -vis goods sold - Discrepancy in description as curable defect - Reliance on auditor/chartered accountant certification - Appellate interference with findings in absence of fraud or material to disbelieve

Identity of imported goods vis-a -vis goods sold - Discrepancy in description as curable defect - Reliance on auditor/chartered accountant certification - Exemption notification construed strictly - Whether the Tribunal was justified in reversing the Commissioner (Appeals-II) by holding that discrepancies in the product description between bills of entry and sales invoices were not curable and therefore disentitled the importer from refund of SAD under the exemption notification. - HELD THAT: - The Court noted that while exemption notifications are to be strictly construed, entitlement for refund under the notification requires production of payment evidence, sales invoices and proof of payment of applicable sales tax/VAT. The adjudicating authority had accepted a substantial part of the claim and rejected only that portion where the sales invoices used generic descriptions without grade numbers. The Commissioner (Appeals-II) found that the generic descriptions (HDPE/LDPE/LLDPE) in the invoices corresponded with the imported goods and that non-mentioning of grade did not render the goods different. There was a Chartered Accountant's certificate certifying identity and no allegation of fraud or material on record to disbelieve that certificate. In these circumstances the Tribunal erred in treating the discrepancy as an incurable defect warranting denial of refund; the appellate authority's conclusion that the goods were co-relatable and that rejection on that ground was unsustainable was correct. The Tribunal's internal misstatement as to dismissal/allowance did not alter the substantive error in characterising the discrepancy as incurable. [Paras 6, 10, 11, 12, 13]

The Tribunal's conclusion that the discrepancy in description was not a curable defect is unsustainable; the Commissioner (Appeals-II) order restoring the refund was correct and is restored.

Final Conclusion: The appeal is allowed; the Tribunal's order is set aside and the Commissioner (Appeals-II) order allowing the refund claim (subject to the admitted substantial portion) is restored. No costs.

Refund of Special Additional Duty (SAD) under exemption notification - strict construction of exemption notification - curable discrepancy in description of goods - adjudicating authority's satisfaction as determinative - correlation between imported goods and goods sold certified by statutory auditor

Refund of Special Additional Duty (SAD) under exemption notification - curable discrepancy in description of goods - adjudicating authority's satisfaction as determinative - correlation between imported goods and goods sold certified by statutory auditor - Entitlement to refund of SAD where adjudicating authority sanctioned refund after examining stipulated documents despite appellate findings of mismatch in description between imported goods and goods sold locally. - HELD THAT: - The Court observed that the exemption/ refund scheme requires production of three classes of documents: proof of payment of the additional duty, invoices of sale of the imported goods, and documents showing payment of appropriate sales tax/VAT. The adjudicating authority conducted thorough scrutiny of the documents, recorded that the Chartered Accountant had certified the correlation between goods imported and goods sold, and granted the refunds in full. While exemption notifications must be construed strictly, the High Court held that the first appellate authority and the Tribunal's contrary findings-that the mismatch in description (import entries describing polymers and local invoices describing "plastic granules") rendered the claim incurable-were not sustainable on the facts. The Court treated the adjudicating authority's satisfaction, based on the certified correlation and the mandated documents, as determinative and concluded that the discrepancy was not of a nature to defeat the refund entitlement.

Appeals allowed; orders of the Tribunal and Commissioner (Appeals) set aside; substantial questions of law answered in favour of the appellant and refunds sustained as sanctioned by the adjudicating authority.

Final Conclusion: The High Court allowed the appeals, set aside the appellate and Tribunal orders and held that the adjudicating authority's grant of refund-after requisite documents and a statutory auditor's certification of correlation-was sustainable; the appellate findings of an incurable mismatch were not upheld.

Penalty under Section 112(b) of the Customs Act, 1962 - Goods liable to confiscation under Section 111 of the Customs Act - Job work documentation and accounting (job work challan and RG-1 register)

Penalty under Section 112(b) of the Customs Act, 1962 - Goods liable to confiscation under Section 111 of the Customs Act - Job work documentation and accounting (job work challan and RG-1 register) - Imposability of penalty under Section 112(b) of the Customs Act, 1962 on the appellant for dealing with acrylic fibre received from a 100% EOU on job work basis. - HELD THAT: - The appellant received acrylic fibre from a 100% EOU under proper job work challans and recorded the receipts in statutory books. A part of the converted yarn was returned to the supplier on valid documents; the remaining converted yarn was cleared in the open market after payment of appropriate Central Excise duty and entry in the RG-1 register. Section 112(b) penalises persons who deal with goods which they know or have reason to believe are liable to confiscation under Section 111. Because the goods handled by the appellant were covered by prescribed job work documentation, duly accounted for, and either returned to the supplier or cleared on payment of duty, those goods were not shown to be liable to confiscation under Section 111. Therefore the precondition for invoking Section 112(b) - that the goods be liable to confiscation - is absent in respect of the appellant.

Penalty under Section 112(b) is not attracted as the goods received by the appellant were not liable to confiscation; the imposition of penalty on the appellant is set aside.

Final Conclusion: The Order in Original imposing penalty under Section 112(b) on the appellant is without merit and is set aside; the appeal is allowed.

Definition of "drug" under the Drugs and Cosmetics Act, 1940 - scope of regulatory jurisdiction of drug control authorities over Electronic Nicotine Delivery Systems (ENDS) including e cigarettes - administrative communication and circulars challenging vires and jurisdiction

Definition of "drug" under the Drugs and Cosmetics Act, 1940 - substances intended to affect structure or function of the human body - Whether ENDS (including e cigarettes, Heat Not Burn devices, Vape, e Sheesha and like devices) fall within the definition of "drug" in Clause (b) of Section 3 of the Drugs and Cosmetics Act, 1940. - HELD THAT: - The Court examined Clause (b) of Section 3 which covers medicines for internal or external use and substances intended for use in diagnosis, treatment, mitigation or prevention of disease or to affect structure or function of the human body. The products before the Court were not shown to be sold as therapeutic devices, nor were they demonstrated to possess medicinal value or to be intended for diagnosis or treatment of any disease. The Court noted the 48th meeting of the Drugs Consultative Committee (24.07.2015) which recorded that e cigarettes are not covered under the definition of 'drug' and cannot be regulated under the Act. On the material placed before it, the Court was prima facie of the view that the devices do not fall within the statutory definition of "drug" under Section 3(b). [Paras 8, 9, 10]

Prima facie finding that ENDS and the like devices do not fall within the definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940.

Scope of regulatory jurisdiction of drug control authorities over Electronic Nicotine Delivery Systems (ENDS) including e cigarettes - administrative communication and circulars challenging vires and jurisdiction - Whether respondent no.1 had jurisdiction to issue the impugned communication and the circular directing prohibition and referral of ENDS consignments to drug control authorities, and the immediate consequence of the Court's prima facie view. - HELD THAT: - The Court held that if the products are not "drugs" within the meaning of the Act, respondent no.1 would lack jurisdiction to issue the impugned directions under the Drugs and Cosmetics Act. Given the prima facie conclusion on definition and the pending adjudication on merits, the Court found it appropriate to preserve the status quo by staying the impugned communication dated 22.02.2019 and the impugned circular dated 27.11.2018 until the next date of hearing, while permitting the respondents to file affidavits and the petitioners to file rejoinder. [Paras 11]

Impugned communication dated 22.02.2019 and circular dated 27.11.2018 stayed until the next date of hearing; respondents directed to file counter affidavit and petitioners may file rejoinder.

Final Conclusion: The High Court recorded a prima facie view that ENDS/e cigarette type devices do not fall within the definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940, and accordingly stayed the impugned communication and circular issued by respondent no.1 pending further proceedings and filing of affidavits.

Compounding of offences under the Companies Act - compoundable offence - jurisdiction of the Tribunal under section 441 - power to compound after institution of prosecution - corporate social responsibility obligations - constitution and spending requirement under section 135 - directors' report disclosure under section 134(3)(o) - compounding fee and directions for compliance

Compoundable offence - jurisdiction of the Tribunal under section 441 - power to compound after institution of prosecution - Tribunal's competence to compound the offence under section 134(3)(o) read with section 135 and to do so notwithstanding institution of prosecution. - HELD THAT: - The Tribunal held that the offences under section 134(3)(o) read with section 135 do not attract imprisonment-only punishment and therefore fall within the category of compoundable offences under section 441(1) of the Companies Act, 2013. The Tribunal further recorded that section 441(1) empowers it to compound offences even after the institution of prosecution, and noted that a prosecution had in fact been instituted before the Special Judge for Economic Offences at Hyderabad. Accordingly the Tribunal concluded that it possessed jurisdiction to entertain and decide the compounding application filed by the applicants. [Paras 5, 14, 15]

Tribunal has jurisdiction under section 441 to compound the admitted offence and may do so despite the pending prosecution.

Corporate social responsibility obligations - constitution and spending requirement under section 135 - directors' report disclosure under section 134(3)(o) - Admission of non-compliance with CSR disclosure and spending obligations for the financial year 2014-15 and subsequent remediation by spending carried-forward amounts. - HELD THAT: - The applicants admitted violation of the disclosure requirement under section 134(3)(o) read with the CSR obligations of section 135 for the financial year 2014-15. The Registrar's report recorded the amounts required to be spent for 2014-15 and 2015-16 and noted that the company did not spend in those years but formed a CSR Committee and disclosed policy subsequently. The applicants explained the non-compliance as unintentional due to CSR being a new statutory provision and asserted that the unspent amount for 2014-15 was carried forward and subsequently spent in financial years 2016-17 and 2017-18, with the remaining carried-forward obligation for 2015-16 to be spent in 2019-20. The Registrar recommended that the company be directed to spend the remaining amount and that the compounding application be decided on merits. [Paras 3, 9, 10, 11, 16]

Violation for FY 2014-15 was admitted; the company remedied by spending carried-forward amounts in later years and was directed to spend any remaining CSR obligation as noted by the Registrar.

Compounding fee - compounding of offences under the Companies Act - directions for compliance - Levy of compounding fee and timing and manner of payment as the sanction for compounding the admitted breaches. - HELD THAT: - After considering the material on record, the admission of violation, the Registrar's report and the applicants' submissions that the non-compliance was unintentional and partly remedied, the Tribunal exercised its power to compound the offence by imposing a compounding fee. The order sets out the fee apportioned between the company and the concerned director for the violations of section 135 and section 134(3)(o), and prescribes a timeline for payment and a date for compliance hearing. [Paras 17]

A compounding fee was levied on the company and specified director as recorded in the order; the fee is payable within 15 days and the matter was listed for compliance on May 6, 2019.

Final Conclusion: The Tribunal found the breaches under section 134(3)(o) read with section 135 to be compoundable, accepted the applicants' admission and remediation evidence, directed the remaining CSR obligation to be spent as recommended by the Registrar, imposed a compounding fee on the company and director to be paid within 15 days and scheduled a compliance hearing for May 6, 2019.

Striking off of company name under Section 560 - restoration of company to Registrar's register - non-filing of statutory documents (Balance Sheet and Annual Return) - burden of proof to show company was carrying on business - adverse inference for failure to produce statutory records - publication in the Official Gazette as conclusive step in striking off

Striking off of company name under Section 560 - publication in the Official Gazette as conclusive step in striking off - Validity of striking off the appellant company's name by ROC under the procedure of Section 560 of the Companies Act, 1956. - HELD THAT: - The Tribunal upheld that the name of the company had been struck off following the statutory procedure under Section 560 and that the notification published in the Official Gazette on 23.6.2007 constituted the decisive record of striking off. The ROC's action was founded on the company's sustained non-filing of statutory returns, and the published Gazette notification was placed on record and accepted. There was no dispute that the statutory procedure culminated in the publication under Section 560(5). [Paras 13, 14, 18]

The striking off under Section 560 was validly effected and recorded in the Official Gazette; the ROC's action in striking the name off is sustained.

Non-filing of statutory documents (Balance Sheet and Annual Return) - burden of proof to show company was carrying on business - adverse inference for failure to produce statutory records - Whether the appellant discharged the burden to prove that it was carrying on business and thus avoid striking off. - HELD THAT: - The Tribunal found that the appellant failed to produce statutory filings or other convincing contemporaneous evidence (such as income tax returns) to demonstrate continuous business activity since incorporation. The Bench noted the practice of issuing show cause notices and observed that no reply was filed by the appellant when given opportunity. In consequence, an adverse inference was properly drawn against the appellant and the factual matrix fortified the view that the company was not in operation. The appellate court rejected afterthought contentions (such as alleged postal collusion) as unsubstantiated and noted that mere assertions, belated production of documents, or explanations of business difficulties did not satisfy the burden of proof. [Paras 6, 16, 18, 20]

The appellant did not prove it was carrying on business; adverse inference for non-production of statutory records justified dismissal of the restoration plea.

Restoration of company to Registrar's register - subsequent actions and documents tendered in support of restoration - Whether the subsequent filing of an audited balance sheet for 2015-16, deposit of lease rentals after being asked, and consents of shareholders/creditors warranted restoration of the company's name. - HELD THAT: - The Tribunal held that documents and acts performed after initiation of proceedings or only after directions from the Tribunal (such as depositing lease rentals when asked) could not retrospectively establish continuous operation. The shareholder and creditor consents filed were noted to be family members and, together with belated documents, were insufficient to rebut the inference of non-operation. The Bench observed that subsequent compliance or payments upon being prompted by adjudicatory direction cannot be treated as proof of prior regular business activity. [Paras 21]

Belated filings, post-direction payments, and familial consents were insufficient to justify restoration; restoration was rightly refused.

Final Conclusion: The appeal is dismissed. The Tribunal affirmed that the company's name was validly struck off under Section 560 following non-filing of statutory records; the appellant failed to discharge the burden to prove continuous business activity and belated documentary and transactional steps did not merit restoration.

Removal of name from register of companies - Procedure for striking off under Section 248(1) and STK notices - Requirement of filing of balance sheets and annual returns - Restoration of company name on satisfaction of conditions - Assessment of ongoing concern / substantial assets for restoration - Discretionary relief subject to compliance and costs

Procedure for striking off under Section 248(1) and STK notices - Requirement of filing of balance sheets and annual returns - Whether the Registrar of Companies followed the prescribed procedure and gave sufficient notice before striking off the company - HELD THAT: - The Tribunal found on the record that the Registrar verified non-filing on the MCA-21 portal, issued Form STK-1 notices to the company and its directors, published consolidated STK-5/STK-5A notices on the Ministry website and Gazette and effected STK-7 publication when no cause was shown and no returns were filed. The appellate bench observed that the appellant chose not to reply within the 30-day period and that sufficient notice had been served on the appellant to show cause for non-compliance. Therefore the striking off action proceeded after the prescribed notices and time for reply had expired. [Paras 35]

Sufficient notice was served and the ROC followed the prescribed procedure for striking off in the absence of filings or a show-cause response.

Assessment of ongoing concern / substantial assets for restoration - Restoration of company name on satisfaction of conditions - Discretionary relief subject to compliance and costs - Whether the company's name should be restored despite non-filing and apparent lack of revenue from operations - HELD THAT: - Although balance sheets filed with the NCLT showed no revenue from operations, the appellate bench examined documents concerning allotment of land by KIADB and payments/deposits made by or on behalf of the company since 2013, including allotment letter and receipts. The Tribunal noted that the deposits were not reflected in the company's balance sheets but accepted that directors had made substantial investments and that the company had been actively pursuing allotment and approvals to set up industry. Balancing the absence of statutory filings against the material showing continued steps to set up operations and ongoing payments, the Tribunal exercised its discretion to quash the NCLT order and restore the name, while imposing conditions to protect statutory compliance and ROC's rights. [Paras 38, 40, 41, 42]

The company's name was ordered to be restored on exercise of discretion, subject to compliance with conditions and payment of costs.

Restoration of company name on satisfaction of conditions - Discretionary relief subject to compliance and costs - What conditions should be imposed upon restoration - HELD THAT: - The Tribunal directed restoration subject to specific compliance: payment of costs to the ROC, filing all outstanding annual returns and financial statements within 30 days of restoration, payment of requisite fees and late fee/charges, and recorded that ROC remained free to initiate any other proceedings under the Companies Act for non-filing or late filing. These conditions operationalise the Tribunal's discretionary grant of relief while preserving ROC's enforcement powers. [Paras 42]

Restoration granted subject to payment of costs, filing of outstanding statutory documents and fees within stipulated time and without prejudice to ROC's power to take further action.

Final Conclusion: The appeal succeeds in part: the NCLT order refusing restoration is quashed and the company's name is ordered to be restored. The Tribunal held that the ROC had given sufficient notice before striking off, but in view of material showing ongoing efforts to set up industry and payments made, restoration is warranted subject to payment of costs and prompt filing of all outstanding statutory records, with liberty to the ROC to pursue further action for non-compliance.

Valuation by independent valuer and right to file objections - finality of appellate tribunal's modified directions - procedure of offer and counter offer for shareholder exit - restoration as director and requirement of reasonable compliance time - implementation of tribunal directions by NCLT

Valuation by independent valuer and right to file objections - procedure of offer and counter offer for shareholder exit - finality of appellate tribunal's modified directions - Whether the appellant was entitled to inspect accounts or to have objections heard to the valuer's report before deciding to exercise the right to purchase or be bought out after respondents made the acquisition offer as per this Tribunal's order. - HELD THAT: - The Tribunal's order dated 21.7.2017 required the respondents to quote acquisition value within one month and provided the appellant a defined right to purchase (with a 10% discount) within specified timelines. The appellate order did not preserve an interlocutory right for the appellant to insist on hearing objections to the valuer's report or to inspect accounts before taking a decision once the respondents made the offer. The NCLT correctly held that compliance by respondents in making the quoted offer within the period prescribed by the appellate order precludes the appellant from claiming a separate entitlement to have his objections to the valuer's report entertained as a precondition to exercising or declining his purchase/right of exit. The appellant did not challenge the appellate order in the Supreme Court, which renders that order final for these purposes. [Paras 10, 11]

Appellant not entitled to compel prior hearing of objections to the valuer's report or inspection of accounts once respondents complied with the Tribunal's direction to quote acquisition value; NCLT's conclusion in this regard affirmed.

Restoration as director and requirement of reasonable compliance time - implementation of tribunal directions by NCLT - Whether delay in restoring the appellant as director vitiated the process or entitled the appellant to relief against implementation of the buy/sell directions. - HELD THAT: - The appellate order directed restoration of the appellant as director but did not prescribe a specific timeframe. While restoration ought to occur within a reasonable time, the NCLT examined respondents' case that restoration had been decided in August 2017 and that technical difficulties in filing with the ROC were pointed out. The record also showed the appellant had pursued separate remedy before the High Court regarding restoration. In these circumstances the Tribunal found no basis to interfere with NCLT's factual and procedural conclusions about restoration and its impact on implementation of the exit process. [Paras 12, 13]

No interference with NCLT's finding regarding restoration delay; delay did not warrant setting aside the impugned order or frustrate implementation of the Tribunal's directions.

Final Conclusion: The appeal is dismissed; the NCLT order implementing the Tribunal's modified directions is upheld and there shall be no order as to costs.

Interim injunction/modification of interim order - nominee director and shareholder rights under articles of association - creation of charge/encumbrance and corporate financing subject to shareholders' consent - arbitrability and effect of sub judice proceedings on interim relief - prima facie case and balance of convenience for grant or modification of interim relief - protection of minority investor rights

Interim injunction/modification of interim order - prima facie case and balance of convenience for grant or modification of interim relief - Whether the NCLT erred in modifying its interim order of 16.08.2017 by permitting the respondent company to create charges/encumbrances over its assets by IA 242/2018. - HELD THAT: - The Appellate Tribunal held that NCLT had earlier recorded on 27.07.2018 that it could not decide the Section 8/arbitrability issue because the matter was sub judice before the Supreme Court, yet subsequently entertained IA 242/2018 and modified the interim order to permit creation of substantial loans and encumbrances. The Tribunal found that NCLT did not appear to have satisfied itself of the requisite prima facie case or that the balance of convenience and irreparable injury favoured disturbing the interim protection previously granted. Given the specific nature of the interim restraints and the submissions that the respondents had earlier disclaimed any intention to create encumbrances, the Tribunal concluded that modification was inappropriate in the facts of the case and that the NCLT's impugned order was not legally sustainable.

Modification of the interim order by NCLT permitting creation of charges/encumbrances was quashed and set aside; the earlier interim order dated 16.08.2017 was restored.

Nominee director and shareholder rights under articles of association - protection of minority investor rights - creation of charge/encumbrance and corporate financing subject to shareholders' consent - Whether, on a prima facie reading of the Articles of Association, the petitioner (Metmin) was entitled to protection against unilateral creation of liabilities/encumbrances in the absence of its nominee director and investor consent. - HELD THAT: - The Tribunal examined the Articles of Association (notably the definition of "Investor/s", provisions on nomination and removal of investor directors, quorum requirements and Article 20 which requires affirmative investor director assent for specified matters, including significant changes in liability structure and encumbrances). Reading the Articles purposively and as a whole, the Tribunal found that the petitioner had made out a prima facie case that the Articles afforded investor protection that could not be ignored by allowing unilateral creation of substantial liabilities without investor consent or presence of an investor nominee on the Board. The Tribunal observed that the Articles did not indicate that the exit of one investor (Avigo) would strip the remaining investor of the protective rights conferred, and therefore concluded that the petitioner's rights under the Articles warranted preservation at the interim stage.

On a prima facie basis, the petitioner's rights under the Articles of Association warranted protection and supported reversal of the modification that would have permitted encumbrances in the absence of investor consent/nominee director.

Arbitrability and effect of sub judice proceedings on interim relief - interim injunction/modification of interim order - Whether the pendency of arbitration-related proceedings before the Supreme Court justified NCLT's modification of the interim order allowing encumbrances. - HELD THAT: - The Tribunal noted that NCLT had itself recorded that the question of referring disputes to arbitration was pending before the Supreme Court and that the Tribunal could not decide the matter. In those circumstances, the Tribunal found it was inconsistent for NCLT to thereafter permit modification of the interim order without evident consideration of the petitioner's objections and without demonstrating that the customary interim relief tests had been met. The pendency of arbitration proceedings reinforced the need for caution in permitting actions that could render the petitioner's claims nugatory, and therefore weighed against the impugned modification.

The pendency of arbitration proceedings before the Supreme Court militated against the NCLT's modification of the interim order; the modification was set aside.

Final Conclusion: The appeal is allowed; the impugned NCLT order dated 06.09.2018 permitting the respondent company to create charges/encumbrances is quashed and set aside and the NCLT interim order dated 16.08.2017 is restored. Observations in this judgment are without prejudice to the NCLT's final decision on the company petition; parties to bear their own costs.

Liquidation under the Insolvency and Bankruptcy Code - time bound submission of a resolution plan and placement before the Committee of Creditors - non consideration of belated resolution plan - role and duties of the liquidator to explore compromise or arrangement under Section 230 of the Companies Act during liquidation - Tribunal's power to extend liquidation period where revival by arrangement is possible - maximisation of assets and balancing of stakeholders as object of the I&B Code

Time bound submission of a resolution plan and placement before the Committee of Creditors - non consideration of belated resolution plan - Whether the Adjudicating Authority was justified in passing the liquidation order where a purported resolution plan was submitted belatedly and not placed before the Committee of Creditors. - HELD THAT: - The Tribunal found that the Corporate Insolvency Resolution Process commenced on 9th January, 2018 and by the time the Resolution Professional filed the application under Sections 33 and 34, approximately 270 days had elapsed. An Expression of Interest had been invited on 31st May, 2018 and the Committee of Creditors was informed on 27th June, 2018 that an entity had expressed interest. No resolution plan was filed within the prescribed/expected timeframe; the plan was submitted only on 4th October, 2018 and intimated to the Committee on 5th October, 2018. Because the plan was submitted belatedly, the Committee declined to consider it. On these facts the Tribunal held that the Adjudicating Authority's order for liquidation could not be said to be illegal and there was no reason to interfere with the impugned order. [Paras 2, 3, 4, 5]

The liquidation order was upheld because the purported resolution plan was submitted late and was not placed before or considered by the Committee of Creditors.

Role and duties of the liquidator to explore compromise or arrangement under Section 230 of the Companies Act during liquidation - Tribunal's power to extend liquidation period where revival by arrangement is possible - maximisation of assets and balancing of stakeholders as object of the I&B Code - Directions concerning the conduct of the liquidator after liquidation, including exploration of revival by arrangement under Section 230 of the Companies Act and the Tribunal's power to permit additional time for such steps. - HELD THAT: - Relying on the Appellate Tribunal's earlier observations, the Court directed that the liquidator must act in accordance with law and take steps to explore compromise or arrangement under Section 230 of the Companies Act, 2013. The Tribunal noted that ordinarily liquidation should be completed preferably within two years but that the Tribunal may allow additional time if there is a realistic chance of revival via arrangement. The liquidator is to facilitate consideration of any proposal for compromise or arrangement (including constituing a Committee of Creditors to opine on viability), move an application under Section 230 where appropriate, and, if such efforts fail, proceed to an outright sale so as to protect continuing interests such as employee interest. These directions flow from the objective of the I&B Code to maximise assets and balance stakeholders. [Paras 6]

The liquidator was directed to explore and, where appropriate, pursue arrangements under Section 230 of the Companies Act before completing liquidation, with the Tribunal entitled to extend the liquidation period if revival appears feasible; failing revival, steps for sale are to be taken.

Final Conclusion: The appeal is dismissed; the liquidation order dated 5th December, 2018 is upheld on the ground that the resolution plan was belated and not considered by the Committee of Creditors, and the liquidator is directed to act in accordance with the Tribunal's stated directions regarding exploration of Section 230 arrangements, possible extension of liquidation period for viable revival, and, if unsuccessful, to proceed to sale.

Financial debt - default - admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - completeness of application in Form 1 - proposed interim resolution professional - no disciplinary proceedings - moratorium under section 14 - corporate insolvency resolution process

Financial debt - default - Existence of financial debt and occurrence of default by the corporate debtor - HELD THAT: - The record shows that the applicant granted various credit facilities to the corporate debtor which were availed in full and carry interest/penalty as per sanction terms, thereby constituting a financial debt. The Authority applied the statutory definitions in the Code, noting that default-as defined-means non payment of a debt once due and payable and includes part payment or instalments. On the material placed, including account classification as NPA and demand notices, the Authority was satisfied that a debt was due and that default had occurred, sufficient to trigger the Code (which requires default of rupees one lakh or more). [Paras 11, 13]

There exists a financial debt and a default has occurred.

Completeness of application in Form 1 - Whether the application filed by the financial creditor is complete and in the prescribed form and manner - HELD THAT: - The petition was filed in Form 1 under the Rules with the prescribed fee and was accompanied by the documentary evidence and records specified by the Rules (Particulars of applicant, corporate debtor, proposed IRP, particulars of financial debt and evidence of default). On perusal, the Authority found the application to be complete in all respects as required by the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. [Paras 14]

The application is complete and filed in the prescribed form and manner.

Proposed interim resolution professional - no disciplinary proceedings - Whether any disciplinary proceeding is pending against the proposed interim resolution professional - HELD THAT: - The financial creditor proposed a named insolvency professional as interim resolution professional and filed Form 2 along with the certificate of registration. The declaration on record stated that no disciplinary proceeding is pending against the proposed professional with the Board or the Indian Institute of Insolvency Professionals of ICAI. The Authority accepted the documentary assurance placed on record. [Paras 12]

No disciplinary proceeding is pending against the proposed interim resolution professional.

Admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - moratorium under section 14 - corporate insolvency resolution process - Admissibility of the petition under section 7 and consequential declaration of moratorium - HELD THAT: - Having found existence of financial debt and default, the completeness of the application and the eligibility of the proposed interim resolution professional, the Authority held that the requirements of section 7 were fulfilled. Consequently, the petition was admitted. In accordance with the Code, the Authority declared the moratorium prohibiting institution or continuation of suits or proceedings, transfer or disposal of assets by the corporate debtor, actions to enforce security interests (including under SARFAESI), and recovery of property occupied by the corporate debtor. The Authority also directed continuity of supply of goods and essential services during the moratorium and stated its temporal effect until completion of the corporate insolvency resolution process or until approval of a resolution plan or an order for liquidation. [Paras 15, 16, 17, 18]

The petition is admitted under section 7 and moratorium is declared in terms of section 14 of the Code.

Final Conclusion: The Tribunal admitted the section 7 petition filed by the financial creditor after finding a financial debt and occurrence of default, held the application to be complete and the proposed interim resolution professional to have no disciplinary proceedings pending, and accordingly appointed the interim regime by admitting the petition and declaring the statutory moratorium; the petition is disposed of with no costs.

Maintainability of appeal by the corporate debtor - withdrawal of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 after settlement prior to constitution of the Committee of Creditors - setting aside of moratorium and actions taken by the Interim Resolution Professional - release of the corporate debtor from the rigour of insolvency law - payment of costs of the resolution process to the Interim Resolution Professional

Maintainability of appeal by the corporate debtor - The appeal preferred by the corporate debtor is not maintainable. - HELD THAT: - The Tribunal noted that the appeal in the present matter had been preferred by the 'Corporate Debtor' and observed that such an appeal is not maintainable in view of the decision of the Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank . The court recorded the appellant's counsel's request for permission to seek substitution by a director/shareholder but proceeded on the basis that the appeal as presented by the corporate debtor was not maintainable.

Appeal by the corporate debtor was held not maintainable.

Withdrawal of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 after settlement prior to constitution of the Committee of Creditors - Swiss Ribbons principle on settlement before constitution of the Committee of Creditors - Application under Section 7 filed by the financial creditor was allowed to be withdrawn because the parties settled prior to constitution of the Committee of Creditors. - HELD THAT: - The Tribunal recorded that the parties settled on 28th February, 2019 and that no Committee of Creditors had been constituted when the settlement was reached. Applying the principle in Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. , the Tribunal allowed the respondent's prayer to withdraw the Section 7 application, set aside the impugned admission order dated 14th February, 2019, and disposed of the Section 7 application as withdrawn.

Section 7 application was dismissed as withdrawn and the impugned admission order was set aside.

Setting aside of moratorium and actions taken by the Interim Resolution Professional - release of the corporate debtor from the rigour of insolvency law - payment of costs of the resolution process to the Interim Resolution Professional - Consequential orders arising from withdrawal: moratorium and IRP actions set aside; corporate debtor restored to its board; and remaining IRP fees directed to be paid. - HELD THAT: - Consequent to allowing withdrawal of the Section 7 application, the Tribunal set aside orders passed by the Adjudicating Authority declaring moratorium and any actions taken by the Interim Resolution Professional. The corporate debtor was released from the rigour of the insolvency process and permitted to function through its Board of Directors with immediate effect. The Tribunal also recorded the IRP's claim for fees and costs, noted amounts already paid, and directed the corporate debtor to pay the balance of the IRP's fees within three weeks. The settlement terms including post-dated cheques were noted, and the Tribunal recorded that failure to honour those would permit revival of the resolution process.

Moratorium and IRP actions set aside; corporate debtor released; balance of IRP's fees to be paid and post-dated cheque terms to be enforced, with liberty to revive the resolution process on default.

Final Conclusion: The appeal was allowed insofar as the Section 7 application was permitted to be withdrawn following a pre Committee of Creditors settlement; the admission order was set aside, moratorium and IRP actions were annulled, the corporate debtor was restored to its Board, and the corporate debtor was directed to pay the balance of the IRP's fees with the settlement terms enforceable and an option to revive the resolution process in case of default.

Principles of natural justice - service of notice prior to admission under Section 9 of the I&B Code - limited notice and ascertainment of default before admission - maintainability of intervention at admission stage - consequence of invalid admission-setting aside consequential orders - condonation of delay in filing appeal

Service of notice prior to admission under Section 9 of the I&B Code - principles of natural justice - limited notice and ascertainment of default before admission - Impugned admission order under Section 9 of the I&B Code was passed without issuing/serving notice on the corporate debtor and thereby violated the principles of natural justice. - HELD THAT: - The Tribunal observed that there was nothing on the record to show that the Adjudicating Authority had issued or served notice on the corporate debtor before admitting the Section 9 application. Relying on precedents affirming that the adjudicating authority must issue a limited notice to the corporate debtor to ascertain existence of default (and that natural justice is not ousted by the Code), the Court held that admission in the absence of such notice amounted to violation of natural justice. The appellant's plea that he came to know of the admission order only when forwarded by the operational creditor was accepted for limitation purposes, and the absence of service by the Adjudicating Authority was treated as material to the validity of admission. [Paras 9, 10, 11, 12, 13]

Admission order dated 8th June, 2018 set aside for want of notice and breach of natural justice.

Consequence of invalid admission-setting aside consequential orders - Legal consequence of setting aside the admission order including status of interim orders passed pursuant to that admission. - HELD THAT: - Having held the admission to be vitiated by non-service and breach of natural justice, the Tribunal declared all consequential orders passed by the Adjudicating Authority pursuant to the impugned admission-including appointment of Interim Resolution Professional, declaration of moratorium, freezing of accounts, advertisement for claims and any actions taken by the Interim Resolution Professional-illegal and set them aside. The Section 9 application was dismissed and the Adjudicating Authority directed to close the proceeding, releasing the corporate debtor to function through its board. [Paras 14]

All orders and actions pursuant to the impugned admission declared illegal and set aside; Section 9 application dismissed and proceedings closed.

Maintainability of intervention at admission stage - Intervener lacked locus to object at the stage of admission and intervention application was not entertained for that purpose. - HELD THAT: - The Tribunal observed that an intervener cannot, at the admission stage, challenge the admission order since the stage is not appropriate for entertaining such objections; accordingly submissions by the intervener regarding settlements and MOUs during moratorium were rejected as not constituting proper locus to oppose admission. [Paras 7, 8]

Intervention at the admission stage not entertained; intervener's objections rejected for want of locus.

Condonation of delay in filing appeal - Short delay in filing the appeal was condoned. - HELD THAT: - The appellant explained that knowledge of the impugned order arose when the operational creditor forwarded the order; certified copy had not been sent by the Adjudicating Authority. The Tribunal accepted the appellant's explanation of the date of knowledge and, being satisfied with the grounds, condoned delay of approximately six days in preferring the appeal. [Paras 2, 5, 9]

Delay of six days in filing the appeal condoned.

Fee of Interim Resolution Professional - Liability to pay fees of the Interim Resolution Professional for the period he functioned despite setting aside admission. - HELD THAT: - Though the admission and consequential orders were set aside, the Tribunal directed the Adjudicating Authority to fix the fee of the Interim Resolution Professional and directed the corporate debtor to pay such fees for the period the Interim Resolution Professional acted. [Paras 14, 15]

Adjudicating Authority to fix IRP fee; corporate debtor to pay fees for the period IRP functioned.

Final Conclusion: The appeal is allowed: delay in filing condoned; the admission order dated 8th June, 2018 is set aside for want of notice and breach of natural justice; all consequential orders and actions pursuant thereto are declared illegal and set aside, the Section 9 application is dismissed and proceedings closed; the Adjudicating Authority to fix the IRP's fee which the corporate debtor shall pay; no order as to costs.

Writ petition under Articles 226/227 - Relegation to alternative statutory remedy - Maintainability of appeal before the Special Director (Appeals) - Penalty under the Foreign Exchange Management Act

Writ petition under Articles 226/227 - Relegation to alternative statutory remedy - Maintainability of appeal before the Special Director (Appeals) - Penalty under the Foreign Exchange Management Act - Whether the High Court should entertain the writ petition challenging the penalty order when an alternative statutory appeal lies before the Special Director (Appeals). - HELD THAT: - The Court recorded that it was not disputed by the petitioner that an appeal against the impugned adjudication order is maintainable before the Special Director (Appeals), O/o the Commissioner of Income Tax (Appeals), Aayakar Bhawan, Delhi. Given the availability of this alternative statutory remedy, the Court declined to exercise writ jurisdiction. The petition was therefore not entertained and the petitioner was relegated to seek relief by availing the prescribed appellate remedy in accordance with law. [Paras 2, 3]

Writ petition dismissed; petitioner directed to avail the alternative statutory appeal before the Special Director (Appeals).

Final Conclusion: The High Court declined to exercise writ jurisdiction over the challenge to the FEMA adjudication and penalty, and disposed of the petition by directing the petitioner to pursue the available statutory appeal before the Special Director (Appeals).

Regulation 5(1) - Foreign Direct Investment scheme and automatic route - Automatic Route for FDI in townships, housing and construction-development projects - Minimum capitalization condition for automatic route - Regulation 3 - Restriction on issue or transfer by a person resident outside India - Exoneration under Section 4 of FEMA - Vicarious liability of director for FEMA contravention

Regulation 3 - Restriction on issue or transfer by a person resident outside India - Applicability of Regulation 3 to the appellant company and SDRPL - HELD THAT: - On plain reading Regulation 3 applies to a person resident outside India and prohibits issue or transfer of securities by such person. Both DFS (the appellant) and SDRPL are persons resident in India. Therefore Regulation 3 is not attracted to the transactions under challenge and its inclusion in the charge was misplaced. The Tribunal so held and set aside any finding based on Regulation 3. [Paras 9]

Regulation 3 does not apply to DFS or SDRPL; the charge under Regulation 3 is misplaced.

Regulation 5(1) - Foreign Direct Investment scheme and automatic route - Automatic Route for FDI in townships, housing and construction-development projects - Minimum capitalization condition for automatic route - Whether the sale of SDRPL shares to M2N2 contravened Reg.5(1)/Schedule I because M2N2 was not eligible for the automatic route or failed to comply with conditions - HELD THAT: - The Tribunal examined the 2005 amendment to Schedule I (serial no.23) which brought townships, housing and construction-development projects within the automatic route for foreign companies subject to prescribed conditions. As SDRPL was engaged in township development and M2N2 (a foreign company) made the investment in March 2007, the automatic route, as amended in 2005, was available. The Adjudicating Authority had incorrectly applied the pre-2005 understanding and relied on the earlier serial no.2 to restrict automatic route to NRIs. Further, the minimum capitalization condition requires the specified funds to be brought in within six months of commencement of business; because the respondent's own actions (investigation) prevented commencement of business, applying the minimum capitalization requirement at that stage was premature. The adjudicating finding of contravention under Reg.5(1)/Schedule I as regards SDRPL was therefore misapplied and unsustainable. [Paras 26, 27, 28, 29, 30]

The finding of contravention under Reg.5(1)/Schedule I in respect of the SDRPL transaction is quashed; the automatic route under the 2005 amendment applied and the minimum capitalization condition was misapplied and premature.

Exoneration under Section 4 of FEMA - Validity of the adjudicating authority's exoneration of the appellants on the charge under Section 4 of FEMA - HELD THAT: - The adjudicating order had found the charge under Section 4 not made out for want of essential ingredients and relevant evidence. The Tribunal recorded that the appellants were exonerated of the Section 4 charge in the impugned order and there is no challenge to that conclusion in the appeals before it. [Paras 5]

The appellants were exonerated of the charge under Section 4 of FEMA; that finding stands.

Vicarious liability of director - Liability of Shri Ashok Jain for the alleged contravention by the company - HELD THAT: - The adjudicating authority had fastened vicarious liability on Shri Ashok Jain. The Tribunal found no specific averments of incriminating acts of commission or omission against him and noted that he had carried out the transaction with due diligence and complied with post-transaction reporting prescribed by RBI. Given that the company was held not guilty of contravention, and absent evidence of disregard or neglect by the director, the order imposing penalty on him was set aside. [Paras 30, 31]

Penalty and findings against Shri Ashok Jain are set aside; he is not liable for the contravention.

Final Conclusion: The impugned adjudicating order is quashed and set aside insofar as it holds the appellants guilty of contravention in respect of the SDRPL share transfer; the charges under Regulation 3 were misplaced, the automatic route under Regulation 5(1) as amended in 2005 applied to the township activity, the minimum capitalization condition was misapplied and premature, the Section 4 charge remained exonerated, and the penalty and findings against the director Ashok Jain are set aside. All appeals and pending applications disposed of; no costs.

Attachment of property under Prohibition of Money Laundering Act - Proceed of Crime - Reason to believe under Section 5 of the PMLA - PMLA as a preventive measure and not punitive - Excessive attachment relative to value of proceeds - Concurrent security already secured before investigative/criminal court - Non-application of mind and discriminatory attachment

Attachment of property under Prohibition of Money Laundering Act - Proceed of Crime - Impugned attachment of the appellant's residential property was quashed and the attachment lifted. - HELD THAT: - The Tribunal found that the residential property at 144, Golf Links, New Delhi was purchased in 1993, prior to the alleged generation of proceeds of crime (2008-2010), and the material on record did not show that the property constituted proceeds of crime. The object of proceedings under the Act is to secure proceeds of crime; where the property is not shown to be such proceeds and substantial conflicting material (including arbitration findings and performance certificate) indicates no loss, continued attachment of the house was not warranted. In consequence the Adjudicating Authority's confirmation of the PAO was set aside and the attachment lifted. [Paras 25, 35]

The impugned order dated 13.08.2018 and PAO dated 28.03.2018 are quashed as regards the appellant and the attachment of the house at 144, Golf Links is lifted forthwith.

Reason to believe under Section 5 of the PMLA - PMLA as a preventive measure and not punitive - Adjudicating Authority failed to follow the procedure of recording and producing the 'reason to believe' required at the stage of provisional attachment. - HELD THAT: - The Tribunal recorded that no copy of any 'reason to believe' was produced before it or shown to have been served; such reasons were neither reproduced in the notice under section 8(1) nor annexed to the counter-affidavit. The Tribunal accepted that PMLA proceedings are preventive in nature and stressed that procedural safeguards connected with provisional attachment (including recording of reasons) must be complied with; prima facie material indicated the appellant was not involved in money laundering as alleged. [Paras 32, 33, 34]

Proceedings were vitiated by non-compliance with the procedure of recording/reproduction of reasons to believe, supporting quashing of the attachment.

Concurrent security already secured before investigative/criminal court - Excessive attachment relative to value of proceeds - Attachment of the appellant's high-value immovable property to secure an alleged proceed of crime already secured elsewhere was excessive and unjustified. - HELD THAT: - The Tribunal noted that the alleged proceeds (quantum disputed) had already been secured by FDRs before the CBI court (total secured figure recorded in the order), with the appellant having deposited a significant FDR himself. Given that the object is to secure proceeds until final adjudication, duplicative or multiple attachments of the same proceeds by different agencies in different forums is not called for. Further, attaching immovable property of far greater value than the alleged proceeds amounted to abuse of process and harassment when the proceeds were otherwise traceable/secured. [Paras 26, 28, 29, 30, 31]

Attachment cannot be maintained where the alleged proceeds are already secured elsewhere and where the immovable attached is disproportionate to the proceeds; hence attachment was lifted.

Non-application of mind and discriminatory attachment - Adjudicating Authority acted without proper application of mind and in a discriminatory manner in attaching only the appellant's property. - HELD THAT: - The Tribunal observed that the appellant was not named as an accused in the FIR and had been discharged of several offences by the CBI Court; other accused had declared properties and the investigation record did not reflect efforts to trace proceeds from them. The Adjudicating Authority's confirmation of the PAO was held to be mechanical, ignoring arbitration findings, AAI's performance certificate and statements of AAI officials, and amounted to arbitrary selection of the appellant's property for attachment. [Paras 11, 12, 20, 22, 23]

The attachment was set aside on account of non-application of mind and discriminatory treatment of the appellant.

Final Conclusion: The appeal succeeds; the Adjudicating Authority's confirmation of the provisional attachment order is quashed in respect of the appellant, the attachment of the residential property at 144, Golf Links, New Delhi is lifted forthwith, and the matter is left without prejudice to the adjudication of pending complaints on merits by the Special Court.

Provisional attachment - confirmation of attachment - attachment of property under PMLA - continuation of attachment pending proceedings - Section 8(3)(a) amendment limiting continuation of attachment - requirement of prosecution complaint for continued attachment

Section 8(3)(a) amendment limiting continuation of attachment - confirmation of attachment - requirement of prosecution complaint for continued attachment - Whether the Adjudicating Authority's confirmation of provisional attachment could be sustained in the absence of a prosecution complaint against the appellant after the amendment to Section 8(3)(a) of PMLA. - HELD THAT: - The Tribunal examined the amended statutory provision introduced by Act 13 of 2018 (operative from 19.04.2018) which places a limit on the period during which attachment may continue pending investigation or proceedings. The Adjudicating Authority had confirmed the provisional attachment by order dated 24.07.2018. The Enforcement Directorate admitted that no prosecution complaint had been filed against the appellant and that, up to the date of argument, the appellant was not made a party to any prosecution complaint though his property had been included in a complaint filed against another person. The Tribunal noted that the legislative intent behind the amendment is to prevent indefinite retention of property under the guise of investigation and that continuation of confirmed attachment in the absence of proceedings against the person whose property is attached is untenable. In light of the amendment and the admitted absence of a prosecution complaint against the appellant despite the passage of more than 250 days since the impugned order, the Tribunal did not consider other legal grounds and held that the confirmation could not survive. [Paras 5, 8, 9]

The confirmation of the provisional attachment insofar as it relates to the appellant is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the Adjudicating Authority's order confirming attachment of the appellant's property on the ground that, after the amendment to Section 8(3)(a) of PMLA, continuation of confirmed attachment could not be sustained in the absence of prosecution proceedings against the appellant; the appellant was permitted to seek appropriate remedy before the Special Court where the prosecution complaint is pending.

Eligibility under the Voluntary Compliance Encouragement Scheme (VCES) - first proviso to Section 106(1) - exclusion of persons who furnished return, disclosed true liability but did not pay - interpretation of 'return' and application return wise - indivisibility of a single declaration under VCES - consequence of a single defective return on a composite declaration - distinction between rejection under Section 106(2) and action under Section 111 - time bar under Section 111(2) in relation to rejection of declarations

First proviso to Section 106(1) - exclusion of persons who furnished return, disclosed true liability but did not pay - interpretation of 'return' and application return wise - Whether a person who furnished returns and disclosed true liability but did not pay the disclosed amount is excluded from eligibility under the first proviso to Section 106(1) of Chapter VI of the Finance Act, 2013. - HELD THAT: - The court held that the main part of Section 106(1) allows any person to declare tax dues provided no notice or order of determination was made before 01.03.2013, and the first proviso carves out an exception. The proviso applies only to persons who (1) furnished a return under Section 70, (2) disclosed their true liability in that return, and (3) failed to pay the disclosed amount (or any part thereof). The proviso therefore does not exclude persons who never filed returns or who filed returns but did not disclose true liability. All three conditions must be satisfied for the exclusion to apply. The Department's broader contention that mere filing of ST 3 returns makes an assessee ineligible was held to be incorrect; the exclusion is limited to the specific category described in the proviso and must be applied return wise to determine applicability. [Paras 13, 14, 15, 16, 19]

The proviso to Section 106(1) excludes only those declarants who filed returns, disclosed true liability and did not pay the disclosed amount; mere filing of returns without satisfying all three conditions does not bar eligibility.

Indivisibility of a single declaration under VCES - consequence of a single defective return on a composite declaration - Whether a single composite declaration under VCES can be partly accepted for those periods not falling within the first proviso while rejected for periods that do, or whether a single defective return renders the entire declaration liable to rejection. - HELD THAT: - The scheme contemplates only one declaration which may cover the whole or part of the scheme period; it does not provide for multiple declarations correlatable to each half yearly return. While the tests in the first proviso (filing, disclosure, non payment) are to be applied return wise to ascertain whether the exclusion applies to any portion of the period covered, the declaration itself is indivisible. If on application of the proviso to each return within the declaration period one of the returns falls within the exclusion (i.e., the declarant furnished that return, disclosed true liability and failed to pay), the existing statutory scheme does not permit accepting the declaration in part and rejecting it in part. Applying this to the petitioner, of the six half yearly returns covered by the single declaration for October 2010 to March 2013, one return (April 2011 to September 2011) satisfied the proviso's conditions; hence the composite declaration became defective and liable for rejection. [Paras 35, 36, 37, 38, 39]

A single composite declaration under VCES is indivisible; if any return within the declared period falls within the first proviso, the whole declaration is liable to be rejected.

Distinction between rejection under Section 106(2) and action under Section 111 - time bar under Section 111(2) in relation to rejection of declarations - Whether the rejection order dated 10.02.2016 was time barred under Section 111(2) because it was passed more than one year after the declaration dated 31.12.2013. - HELD THAT: - Section 111(1) and (2) concern action where a declaration is found to be substantially false and prescribe that no action under Section 111(1) shall be taken after one year from the date of the declaration. The order impugned in this case was a rejection under Section 106(2) on the ground that the declaration was ineligible because the proviso applied to one of the returns; it was not an action under Section 111(1) for a substantially false declaration. Therefore the one year limitation in Section 111(2) is inapplicable to a rejection decision founded on Section 106(1)'s proviso and Section 106(2). [Paras 42, 43]

The rejection order under Section 106(2) is not time barred by Section 111(2), as Section 111 addresses different corrective action for substantially false declarations.

Final Conclusion: The High Court dismissed the writ petition, holding that the petitioner fell within the exclusion in the first proviso to Section 106(1) in respect of the half year April 2011 to September 2011, that a single composite VCES declaration is indivisible and therefore defective if any return within its period triggers the proviso, and that the rejection under Section 106(2) was not time barred by Section 111(2).

Violation of principles of natural justice - service of show cause notice - compliance with Section 37(C) of the Central Excise Act, 1944 made applicable to Service Tax - failure to intimate change of address under Rule 4(5A) of the Service Tax Rules, 1994 - opportunity of personal hearing - remand for fresh adjudication

Violation of principles of natural justice - service of show cause notice - opportunity of personal hearing - Whether the impugned order was vitiated for breach of natural justice requiring quashing. - HELD THAT: - The Court examined the respondents' record of attempts to effect service of the show cause notice, the Panchanama evidencing address vacancy and the letters of intimation for personal hearing returned undelivered. While noting that had the original assessee (Opportunity Media Private Limited) appeared before the Court the plea of breach of natural justice would have been rejected for failure to intimate change of address and because statutory service steps under Section 37(C) were complied with, the petitioner before the Court is the successor company post-amalgamation and became aware of the proceedings only after amalgamation. The Court accepted that the petitioner's lack of knowledge was bona fide and that, in those circumstances, fairness requires permitting the petitioner an opportunity to be heard before final adjudication. [Paras 5, 7, 8]

Impugned order set aside for the limited purpose of affording the petitioner an opportunity to file a response and be heard.

Compliance with Section 37(C) of the Central Excise Act, 1944 made applicable to Service Tax - failure to intimate change of address under Rule 4(5A) of the Service Tax Rules, 1994 - Whether respondents complied with statutory service requirements and whether service was excused by the assessee's failure to intimate change of address. - HELD THAT: - The respondents produced the show cause notice, the Panchanama showing attempted service and returned postal covers and letters of intimation for personal hearing. On that material the Court found that the respondents had made genuine attempts to serve the notice and had complied with the requirements prescribed under Section 37(C) as applicable to Service Tax. The Court also observed that the original assessee had failed to intimate change of address as required by Rule 4(5A) of the Service Tax Rules, 1994, which would have justified refusal of relief had the original assessee been before the Court. [Paras 5, 6, 7]

Respondents' service efforts were in compliance with statutory requirements; the original assessee's failure to intimate change of address would have been a bar to relief.

Remand for fresh adjudication - opportunity of personal hearing - Extent of relief to be granted and consequent direction for further proceedings. - HELD THAT: - Because the petitioner is the transferee company post-amalgamation and its lack of knowledge of the proceedings was found to be bona fide, the Court directed that the impugned order be set aside and the petitioner be permitted to file its response to the show cause notice by a specified date. The respondents are directed thereafter to fix a date for personal hearing and pass orders in accordance with law. This preserves the respondents' statutory compliance findings but requires fresh adjudication after hearing the petitioner. [Paras 8, 9]

Matter remitted for fresh adjudication after petitioner files response and is afforded personal hearing; impugned order set aside only to that extent.

Final Conclusion: Writ petition allowed in part: impugned order set aside to afford the petitioner (successor by amalgamation) a chance to file response and obtain personal hearing; respondents to thereafter proceed to decide the matter in accordance with law. No costs.

Suppression of facts with intent to evade duty - transaction value and inclusion of free supplies in assessable value - amortisation of moulds supplied free of cost - invocation of extended period of limitation - penalty for suppression under Section 11AC

Transaction value and inclusion of free supplies in assessable value - amortisation of moulds supplied free of cost - Whether the value of items supplied free of cost by buyers must be included in the assessable value and in computing the aggregate turnover for SSI exemption. - HELD THAT: - The court accepted the factual finding recorded by the authorities that the assessee included the amortised cost of free items when paying duty on individual clearances but excluded that amortised cost when computing the aggregate value to claim SSI exemption. The Tribunal and earlier authorities found, on the material gathered during verification (purchase orders, goods issue notes, technical conditions, correspondence and invoices), that inclusion of the amortised cost would have caused the aggregate clearances to exceed the threshold for exemption. These findings involve fact appreciation and application of valuation principles to the materials on record; the High Court declined to reappreciate those facts or disturb the concurrent findings. [Paras 5, 6, 7, 18, 19]

Concurrent factual findings that the amortised value of free supplies had to be taken into account for assessable value and aggregate turnover are upheld; no substantial question of law is made out.

Suppression of facts with intent to evade duty - invocation of extended period of limitation - Whether the assessee suppressed material facts with intent to evade duty so as to invoke the extended period of limitation. - HELD THAT: - The Tribunal and lower authorities found that the matter came to light only upon departmental verification of documents and that the assessee had not voluntarily declared that it excluded the value of free supplies while claiming SSI benefit. The court held these are findings of fact - the authorities could legitimately infer suppression from the conduct and documentary record - and therefore the extended period of limitation was properly invoked. The High Court will not act as a re appellate forum to re weigh these factual conclusions. [Paras 20, 21]

Findings of suppression with intent to evade and consequent invocation of extended limitation are sustained; no substantial question of law arises.

Penalty for suppression under Section 11AC - Whether imposition of penalty was improper because differential duty had been paid before issuance of the show cause notice. - HELD THAT: - The appellate and adjudicating authorities noted that although part of the differential duty had been paid earlier, the authorities recorded a factual conclusion of deliberate non inclusion of values to claim exemption, constituting suppression. The court observed that the propriety of imposing penalty in such circumstances was a factual determination resting on the finding of suppression and will not be re examined in the present second appeal absent a substantial question of law. [Paras 12, 13, 16, 21]

Penalty confirmed by the Tribunal is not interfered with by the High Court in absence of any substantial question of law.

Forms and returns filed (Form ER-1) - assessment confirmation by appellate authority and Tribunal - Whether the Tribunal erred in confirming the assessment without appreciating monthly ER-1 returns filed by the assessee. - HELD THAT: - The High Court found that the question raised was essentially factual - whether the ER 1 returns negated the finding of suppression and justified excluding free supplies from aggregate turnover - and that the authorities had considered the totality of documents and the assessee's conduct. As these are concurrent factual findings, the High Court declined to interfere, holding that no substantial question of law was demonstrated to warrant reappraisal of the evidence. [Paras 15, 18, 21]

Tribunal's confirmation of assessment without accepting the ER 1 returns is sustained; no substantial question of law is disclosed.

Final Conclusion: The High Court dismissed the appeal for want of any substantial question of law, upholding the concurrent factual findings of the original authority, the first appellate authority and the Tribunal regarding non inclusion of free supplies' value, suppression of facts with intent to evade duty, invocation of extended limitation and levy of penalty; appeal dismissed.

Rectification of mistake - Cenvat credit reversal - appropriation - demand and penalty

Rectification of mistake - Cenvat credit reversal - appropriation - demand and penalty - Application by Revenue for rectification of the Tribunal's earlier order on the ground that Cenvat credit had already been reversed and therefore there was no demand or penalty. - HELD THAT: - The Tribunal examined the Revenue's submission that the appellant had already reversed the Cenvat credit, which would negate any demand and render the imposition of penalty unsustainable. The Tribunal found that although the appellant had effected a reversal of Cenvat credit, there was no proposal for appropriation of the reversed amount. In the absence of appropriation, the circumstance relied upon by the Revenue did not establish that the earlier order contained a mistake requiring rectification. Consequently, the rectification application lacked merit and could not be allowed. [Paras 3]

Application for rectification dismissed as the reversal of Cenvat credit without proposal for appropriation did not warrant rectification of the earlier order concerning demand and penalty.

Final Conclusion: The Revenue's application for rectification of the Tribunal's order dated 13/12/2018 is dismissed; reversal of Cenvat credit without appropriation does not justify rectification or negate the basis for demand and penalty as alleged.

Cenvat credit on inputs and capital goods - Rule 2(k) and Rule 2(a) of the Cenvat Credit Rules, 2004 - supporting structures embedded in earth - reliance on precedent and effect of judicial reversal

Cenvat credit on inputs and capital goods - Rule 2(k) and Rule 2(a) of the Cenvat Credit Rules, 2004 - supporting structures embedded in earth - Entitlement to cenvat credit on steel items used in fabrication of capital goods for use in the appellant's factory. - HELD THAT: - The Tribunal examined the show cause notices and the impugned orders and found the sole basis for denial was the Larger Bench decision in Vandana Global Ltd., which treats steel items used for supporting structures embedded in earth as not being inputs. The show cause notices, however, did not allege that the steel items were not used in fabrication of capital goods nor raise any other ground to treat them as neither capital goods nor inputs. Given that the items were used for fabrication of capital goods which were ultimately employed in manufacture of the final products, the appellant falls within the ambit of Rule 2(k)/2(a) of the Cenvat Credit Rules, 2004. Reliance on the Chhattisgarh High Court decision in Vandana Global Ltd. was unnecessary in the absence of any allegation of non-use; the determinative fact recorded is use of the steel items in fabrication of capital goods. Applying the statutory definitions and the material on record, the Tribunal concluded that cenvat credit was rightly claimable on the steel items and there was no merit in the denial. [Paras 6, 7]

The appeals are allowed; the impugned orders denying cenvat credit are set aside and consequential relief, if any, granted.

Final Conclusion: The Tribunal allowed the appeals and set aside the orders denying cenvat credit on steel items used in fabrication of capital goods for the period April, 2006 to December 2010, holding that such credit is admissible under Rule 2(k)/2(a) of the Cenvat Credit Rules, 2004 where no allegation of non-use was made.

Violation of principles of natural justice - retest of samples / right to independent testing - classification of goods (lace v. braid) - examination of process of manufacture for classification - admissibility and conclusiveness of laboratory report

Violation of principles of natural justice - retest of samples / right to independent testing - admissibility and conclusiveness of laboratory report - Whether denial of the appellant's request for retest of samples and refusal to inspect the manufacturing process amounted to a violation of principles of natural justice, rendering the laboratory report and consequent classification unsustainable. - HELD THAT: - The Tribunal found that the CRCL report, which classified the product as lace, had been challenged by the appellant by letter dated 17.05.2004 requesting a retest and inspection of the manufacturing process and machinery. The request for retest was denied despite the procedure for retesting being provided in the CBEC Central Excise Manual. Reliance on earlier Tribunal authority established that declining a request for retesting can amount to a breach of natural justice. Further, this Tribunal has held that determination of whether a product is braid or lace requires examination of the manufacturing process; here, CRCL's classification was made without such examination and the appellant's request for verification was rejected. On these grounds the Tribunal concluded that denial of retest and non-examination of the manufacturing process amounted to a gross violation of the principles of natural justice, undermining the conclusiveness and admissibility of the laboratory report and the classification based thereon. [Paras 6, 7]

The impugned order classifying the goods as lace is set aside for violation of principles of natural justice; the appeal is allowed with consequential relief, if any.

Final Conclusion: The appeal succeeds: because the request for retest and inspection of the manufacturing process was wrongly denied, the CRCL classification could not be treated as conclusive and the adjudicating order classifying the product as lace is set aside; the appeal is allowed with consequential relief.

Compounding duty scheme under Rule 96ZO(3) - confirmation of duty under Section 11A read with Rule 96ZO(3)(i) - imposition of interest and penalty under Rule 96ZO(3)(ii) - appellate interference based on facts not placed before the original adjudicating authority - scope of powers of Commissioner (Appeals) to admit fresh factual material

Appellate interference based on facts not placed before the original adjudicating authority - scope of powers of Commissioner (Appeals) to admit fresh factual material - confirmation of duty under Section 11A read with Rule 96ZO(3)(i) - imposition of interest and penalty under Rule 96ZO(3)(ii) - Validity of the Commissioner (Appeals) order setting aside the confirmed demand of duty, interest and penalty where the Commissioner (Appeals) relied on facts not placed before the original adjudicating authority - HELD THAT: - The Tribunal found that at the original adjudication the respondent-assessees did not contend that they had opted out of the compounding duty scheme from 01.04.1998; their pleaded grounds before the Adjudicating Authority related only to an abatement claim and alleged monthly quantification errors. The Commissioner (Appeals) relied on additional factual material (a letter dated 01.04.1998) and other facts which were not presented to the Adjudicating Authority. Having regard to the appellate function and the record, the Tribunal held that the Commissioner (Appeals) travelled beyond the facts and allowed relief on grounds not before the original authority. On that basis the Tribunal concluded the Order in Appeal was without merit and bad in law. The Tribunal therefore set aside the Commissioner (Appeals) order and restored the effect of the adjudication confirming duty, interest and penalty as earlier determined by the Adjudicating Authority. [Paras 5, 6, 7]

Order in Appeal set aside; Revenue's appeal allowed and the adjudicating authority's confirmation of duty, interest and penalty is sustained.

Final Conclusion: The Tribunal allowed the Revenue's appeal, set aside the Commissioner (Appeals) order which had relied on facts not before the original adjudicating authority, and thereby upheld the adjudicating authority's confirmation of the duty, interest and penalty for the specified periods.

Eligibility for exemption under Notification No. 30/2004-CE - reversal of Cenvat credit treated as credit not taken ab initio - deeming provision in Rule 6(3D) of the Cenvat Credit Rules - payment under Rule 6(3)(i) of the Cenvat Credit Rules - consequential relief

Eligibility for exemption under Notification No. 30/2004-CE - payment under Rule 6(3)(i) of the Cenvat Credit Rules - deeming provision in Rule 6(3D) of the Cenvat Credit Rules - reversal of Cenvat credit treated as credit not taken ab initio - Whether payment of amount under Rule 6(3)(i) read with Rule 6(3D) of the Cenvat Credit Rules satisfies the condition of Notification No. 30/2004-CE so as to entitle the assessee to the exemption. - HELD THAT: - The Tribunal accepted the appellant's contention that sub rule (3D) of Rule 6 creates a deeming fiction that payment of amount under sub rule (3) is to be treated as Cenvat credit not taken for the purpose of exemption notifications. On a conjoint reading, reversal/payment of 6% under Rule 6(3)(i), when read with the deeming provision in Rule 6(3D), operates to satisfy the condition in Notification No. 30/2004 CE that no Cenvat credit should have been availed on inputs. The Tribunal relied on earlier authorities holding that reversal of credit can be considered as credit not availed ab initio and rejected reliance on certain CBEC circulars because Rule 6(3D) was inserted with effect from 01/04/2011, thereby making the deeming provision applicable. Consequently, the demand confirmed for the period concerned was held unsustainable insofar as it arose from the claim of exemption where reversal/payment under Rule 6(3)(i) had been made and was treated as satisfying the notification's condition.

The Tribunal set aside the impugned order and allowed the appeal, holding that payment under Rule 6(3)(i) read with Rule 6(3D) renders the assessee eligible for exemption under Notification No. 30/2004 CE; consequential benefit granted.

Final Conclusion: Appeal allowed; impugned order set aside and exemption held available where reversal/payment under Rule 6(3)(i) is treated as credit not taken by virtue of Rule 6(3D); consequential relief granted for the period November, 2015 to June, 2017.

Taxability of flavoured milk as milk - taxability of cream milk mixed as milk - rate of tax at 8% on flavoured and cream-milk mixed - binding effect of departmental circular - re-assessment proceedings under Section 21 of the U.P. Trade Tax Act - quashing of reassessment

Taxability of flavoured milk as milk - rate of tax at 8% on flavoured and cream-milk mixed - binding effect of departmental circular - Flavoured milk and cream milk mixed sold by the dealer are taxable at the rate of 8%. - HELD THAT: - The Tribunal and the first appellate authority were right in holding that flavoured milk and cream milk mixed fall within the entry 'milk' and are taxable at 8%. The department's circular dated 27.11.2002, which treats flavoured milk as covered by the definition of milk and indicates that flavouring does not change the nature of the commodity, is not disputed and is binding on the department. This Court applied the earlier decisions of this Court (including the decision in Sales/Trade Tax Revision No.101 of 2017 and Sales/Trade Tax Revision No.75 of 2007) and the departmental circular to conclude that the products retain the character of milk and are liable to tax at the rate admitted by the assessee, namely 8%.

The finding that flavoured milk and cream milk mixed are taxable at 8% is upheld.

Re-assessment proceedings under Section 21 of the U.P. Trade Tax Act - quashing of reassessment - Re-assessment proceedings initiated under Section 21 and the consequential revision to tax these items at higher rates were not sustainable and the reassessment was quashed. - HELD THAT: - The assessing authority initiated reassessment under Section 21 and sought to classify flavoured milk as an unclassified item at a higher rate, and to tax cream milk mixed at a higher rate. The Joint Commissioner (Appeals) allowed the dealer's appeal, restoring the original assessment which accepted books and turnover and taxed the items at 8%. The Tribunal affirmed that view. Having regard to the binding departmental circular and the Court's earlier decisions, the Court held that the re-assessment and the imposition of higher rates were correctly set aside by the lower authorities and required no further interference.

The reassessment under Section 21 and the enhanced taxation imposed in reassessment are quashed and the appellate and Tribunal orders upholding the original assessment are affirmed.

Final Conclusion: The orders of the Joint Commissioner (Appeals) and the Commercial Tax Tribunal affirming taxation of flavoured milk and cream milk mixed at 8% and quashing the reassessment are upheld; the revision filed by the Commissioner, Commercial Tax, U.P. is dismissed.

Refund under Section 38 of the DVAT Act - time-limit for refund of quarterly returns - default assessment invoked to defeat refund - abuse of statutory power in reopening assessments at refund stage - entitlement to interest under Section 42 of the DVAT Act

Refund under Section 38 of the DVAT Act - time-limit for refund of quarterly returns - Refund claimed for the quarter 01.01.2014 to 31.03.2014 was liable to be processed and paid within two months and could not be lawfully withheld pending issuance of the default assessment orders dated 14.11.2018. - HELD THAT: - The Court examined Section 38 and observed that for a dealer whose tax period is a quarter the refund claimed must be processed within two months of filing the return or claim. The returns and earlier assessments for the relevant years had already been completed and the refund ought to have been processed by 25.06.2014. The subsequent default assessment orders dated 14.11.2018 were issued much later and could not justify withholding a refund that was statutorily due. The Court relied on its earlier decisions holding that pendency of a refund application does not entitle the Department to create fresh demands beyond applicable time-limits, and that reopening at the refund stage in such circumstances is impermissible. [Paras 6, 7, 9]

Refund claim for the quarter 01.01.2014 to 31.03.2014 was held to be due and the statutory time-limit under Section 38(3)(ii) entitled the petitioner to payment.

Default assessment invoked to defeat refund - abuse of statutory power in reopening assessments at refund stage - Default assessment orders dated 14.11.2018 and the consequential refund adjustment order dated 15.11.2018 were set aside as an abuse of statutory power and as being made to defeat the petitioner's refund claim. - HELD THAT: - On the material on record the Department continued processing the refund claim until September 2018 and thereafter, pursuant to internal notes and an approval on 12.11.2018, issued the default assessment and adjustment orders. The impugned orders were found to have been generated to defeat the refund; they did not disclose a lawful basis such as a time barred re opening justified by statutory conditions and in fact the default assessment orders themselves stated no mismatch between selling and purchasing dealers yet sought to raise a demand. Following the Court's previous precedents where similar default assessments were set aside as an abuse of power, the Court concluded that the impugned orders could not be sustained. [Paras 8, 11, 12]

The default assessment orders dated 14.11.2018 and the refund adjustment order dated 15.11.2018 were set aside as unlawful and an abuse of power.

Final Conclusion: The writ petition was allowed: the default assessment orders of 14.11.2018 and the refund adjustment order of 15.11.2018 were set aside and the petitioner directed to be paid the refund claimed (Rs.17,59,874/-) together with interest under Section 42 of the DVAT Act within four weeks.

Place of first sale - any other eating house - payment of tax by hotels, restaurants and sweet-stalls - clarificatory amendment versus substantive amendment - retrospective operation of statute - effect of substitution in amending legislation - departmental clarifications and circulars vis-a -vis judicially declared law - transplanting definitions from one enactment to another

Place of first sale - any other eating house - payment of tax by hotels, restaurants and sweet-stalls - Whether sales of food and drinks by the assessee qualified for concessional 2% rate under Section 3 D(1) by virtue of being sales in "any other eating houses". - HELD THAT: - Section 3 D(1) is a stand alone fiscal provision commencing with a non obstante clause and must be strictly construed. The provision applies on the basis of two preconditions: the dealer's turnover threshold and the "first point of sale". The words "in hotels, restaurants, sweet stalls and any other eating houses" must be read conjunctively; "any other eating houses" denotes places of first sale analogous to the named establishments. Sales effected to or within industrial, hospital or similar canteens where the first point of sale is to the establishment (and the establishment pays) do not constitute sale "in" such eating houses for the purposes of Section 3 D(1). Hence the petitioner, who supplied food to establishments where the first sale was not in a hotel/restaurant/sweet stall/other eating house as contemplated, is not entitled to the concessional rate. [Paras 11, 12, 21]

Sales effected by the petitioner to establishment canteens or similar outlets do not qualify as sales "in any other eating houses" under Section 3 D(1); concessional 2% rate is not available.

Clarificatory amendment versus substantive amendment - retrospective operation of statute - effect of substitution in amending legislation - Whether the amendment to Section 3 D by Act No.20/2002 (substituting sub sections (1) and (2)) was clarificatory and thus applicable to the assessment years in question prior to 01.04.2002. - HELD THAT: - The substituted Section 3 D introduced materially different concepts - a changed turnover threshold, specification of "ready to eat unbranded foods", and explicit inclusion of "caterers" and indoor/outdoor catering - which are not in pari materia with the pre amendment provision. Although the amendment was published on 03.06.2002, the legislature made it effective from 01.04.2002; nevertheless the court will not attribute effect prior to that date. Substitution does not ipso facto render the new provision retrospective to a date anterior to the legislative intent; where an amendment introduces new substantive concepts, it cannot be treated as merely clarificatory and applied to earlier assessment years. [Paras 13, 14, 16, 18, 20]

The amended Section 3 D is substantive and not clarificatory; it is not applicable to the assessment years 2000 2001 and 2001 2002.

Departmental clarifications and circulars vis-a -vis judicially declared law - What legal weight, if any, do departmental clarifications issued earlier bear on the question whether the petitioner qualified for the concessional rate under Section 3 D(1)? - HELD THAT: - Clarifications issued by the Commissioner are assessee specific and premised on the material placed in those cases. Such administrative orders cannot bind the Court and cannot supplant statutory text or judicially declared law. Executive instructions may supplement or cover areas not addressed by the statute but cannot contravene or narrow statutory provisions. Therefore the petitioner cannot rely uniformly on prior clarifications to displace the statutory interpretation required under Section 3 D. [Paras 22, 23, 24]

Departmental clarifications relied upon by the petitioner do not decide the legal question and cannot override statutory interpretation; they are not binding on the Court.

Transplanting definitions from one enactment to another - Whether a definition of "caterer" from other enactments could be read into the TNGST Act to determine the petitioner's status. - HELD THAT: - A definition in a different enactment cannot be blindly transplanted into another statute. The court must interpret terms in the statute in their context and in their popular sense where no definition is provided. Reliance on definitions from the Shops and Establishments Act or Tamil Nadu Catering Establishments Act to define "caterer" under the TNGST Act was rightly rejected by the Tribunal and the court, in line with authorities disallowing uncritical importation of definitions from other statutes. [Paras 25, 26]

Definitions from other enactments cannot be imported into the TNGST Act to qualify the petitioner as a "caterer" for Section 3 D purposes.

Payment of tax by hotels, restaurants and sweet-stalls - Whether earlier appellate orders in the assessee's favour for prior years bar the revenue from contesting the legal question in subsequent assessment years. - HELD THAT: - An unchallenged appellate order in earlier assessment years does not preclude the revenue from raising a substantial question of law in later years. Where the legal issue goes to the root of liability under the statute, the revenue retains the right to question earlier conclusions. The decision in Catholic Syrian Bank Ltd. was followed to hold that finality in earlier years does not automatically bind subsequent proceedings on questions of law. [Paras 27, 28]

Earlier favourable appellate orders in the petitioner's prior assessment years do not prevent the revenue or the Court from deciding the substantial questions of law now raised.

Final Conclusion: All substantial questions of law framed were answered against the petitioner: the sales did not qualify as sales "in any other eating houses" for concessional taxation under Section 3 D(1) for the assessment years 2000 2001 and 2001 2002; the 2002 substitution to Section 3 D is substantive and not clarificatory and does not apply to these years; departmental clarifications and imported definitions cannot override the proper statutory interpretation. The tax case revisions are dismissed. No costs.

Entirety of transaction - concessional rate of tax by production of Form-C - reappreciation of documentary evidence - inadequacy of writ jurisdiction where facts require re-examination - stay of coercive recovery pending statutory appeal

Inadequacy of writ jurisdiction where facts require re-examination - Whether the writ court should entertain challenge to the assessment order or relegation to the statutory appellate remedy was appropriate. - HELD THAT: - The Court held that the question whether the appellant was entitled to the benefit of Form C and concessional tax involved factual reappraisal of documents (invoices, lorry way bill, tripartite agreement and related agreements) which could not be undertaken in writ proceedings. Given the nature of the controversy the Single Bench correctly directed the appellant to seek remedy before the Appellate Authority; the High Court affirmed that relegation to the statutory appellate forum was appropriate rather than entertaining the writ petition. [Paras 8]

Affirmed the Single Bench's direction to pursue the statutory appeal; writ petition not entertained on merits.

Concessional rate of tax by production of Form-C - reappreciation of documentary evidence - entirety of transaction - Whether the appellant was entitled to claim concessional rate by producing Form C and whether the Assessing Officer was justified in relying on the lorry way bill endorsement 'Self' without examining the totality of documents. - HELD THAT: - The Court observed that the Assessing Officer's reliance on a single endorsement in the lorry way bill was insufficient without considering the tripartite agreement, the invoices showing multiple parties and the overall contractual arrangements. The entitlement to Form C and concessional rate calls for detailed factual and documentary scrutiny which the Appellate Authority must undertake independently. The Court directed that the Appellate Authority should consider all documents and the nature of the transaction afresh and may allow the benefit of the Form C if satisfied on merits. [Paras 7, 8, 10]

Remitted to the Appellate Authority for independent consideration of the documentary evidence and the entitlement to Form C; not decided on merits by the High Court.

Stay of coercive recovery pending statutory appeal - Whether coercive action for recovery of tax and penalty should be stayed pending prosecution of the statutory appeal. - HELD THAT: - The Court directed a limited interim protection: the appellant was permitted to file the statutory appeal within four weeks from receipt of the order and, until such appeal is filed and disposed in the appellate process as directed, the respondent shall not initiate coercive recovery of the tax and penalty quantified in the assessment orders. The appellant is entitled to raise all points before the Appellate Authority. [Paras 11]

Directed that no coercive recovery be initiated pending statutory appeal filed within four weeks; appellant may raise all points before the Appellate Authority.

Final Conclusion: Writ appeal disposed by affirming relegation to statutory appellate remedy; entitlement to concessional tax by Form C remitted to the Appellate Authority for independent factual and documentary reappraisal; interim protection granted against coercive recovery pending filing of statutory appeal within four weeks.

Seizure and sale of movable property for arrears of revenue - demand in writing as first step under the rules for distraint - notice in Form-I under the revenue recovery procedure - determination of tax liability and its finality preceding recovery - service of assessment and penalty orders by registered post - recovery of tax as arrears of land revenue

Demand in writing as first step under the rules for distraint - notice in Form-I under the revenue recovery procedure - determination of tax liability and its finality preceding recovery - service of assessment and penalty orders by registered post - Validity of the Form I notice under the Andhra Pradesh Revenue Recovery Act, 1864, and the contention that the statutory procedure under Section 8 was not followed because the Form contained blanks and the amount claimed had doubled. - HELD THAT: - The Court held that the Form I impugned notice functions as the statutory "demand in writing" which is the first of the three steps prescribed for distraint and sale of movable property. The determinative tax and penalty liabilities for the relevant periods had been provisionally proposed, assessed and communicated to the petitioner (assessments and penalty orders having been dispatched by registered post). Where assessment and penalty determinations have been made following due process and served on the assessee, the assessee cannot feign ignorance of liability; omission to fill every column in the Form I is not a valid ground to invalidate a demand. The Court therefore found no irregularity in issuing the demand in Form I and dismissed the challenge to the Form I notice. [Paras 6, 14, 15, 16, 17]

The challenge to the Form I demand notice is rejected and the writ petition insofar as it assails the Form I notice is dismissed.

Interim restraint on coercive steps - time for payment as condition for withholding execution - Prayer for time to make payment and for restraint on coercive recovery steps. - HELD THAT: - Although the substantive challenge to the demand was dismissed, the Court exercised discretion to permit the petitioner a limited period to make payment. On the request of learned counsel and as a reasonable interim measure, the Court granted two weeks from receipt of the order for payment and restrained the respondents from taking coercive action during that period. [Paras 18]

Petitioner granted two weeks from receipt of the order to make payment; respondents restrained from taking coercive steps during that period.

Final Conclusion: Writ petition dismissed on merits as the Form I demand was valid in view of prior assessment and service of orders; petitioner granted two weeks from receipt of the order to pay and respondents restrained from coercive action until then; miscellaneous petitions closed; no order as to costs.

Denial of opportunity of hearing - Service of notice and change of address - Remand for fresh adjudication - Treatment of assessment order as show cause notice

Denial of opportunity of hearing - Service of notice and change of address - Validity of the assessment order in view of alleged non service of show cause and other notices after change of address was submitted by the dealer - HELD THAT: - The Court accepted the petitioner's contention that notices were issued to the old address despite the dealer having filed Form 112 about change of address, and that the assessment order was served at the new address which indicated that the dealer had not been given an opportunity to object to the show cause notice. The Department disputed availability of Form 112 in its files and relied on earlier returns showing the old address, but the Court declined to engage in extended factual reconstruction. In the interest of granting a fair opportunity to be heard, the Court found it appropriate to set aside the impugned assessment order and remit the matter for fresh consideration rather than finally adjudicating on the conflicting factual assertions regarding service and record keeping.

Impugned order of assessment set aside and matter remanded for fresh adjudication to afford the dealer an opportunity of hearing.

Remand for fresh adjudication - Treatment of assessment order as show cause notice - Update of departmental records - Directions on the procedure to be followed on remand, including timeline for filing objections, holding personal hearing, and updating address in departmental records - HELD THAT: - The Court directed that the petitioner may file objections treating the impugned assessment order itself as a show cause notice and fixed a timeline for submission of those objections. The Assessing Officer was directed to thereafter fix a date for personal hearing and pass fresh orders in accordance with law. The Department was also directed to update the petitioner's address in its records as per the Form VAT 112 produced with the petition. The Court, exercising supervisory jurisdiction, imposed these procedural directions to ensure the petitioner receives an effective opportunity to be heard while leaving substantive adjudication to the Assessing Authority.

Petitioner to file objections treating the order as a show cause notice by the specified date; Assessing Officer to hold personal hearing and pass fresh orders; Department to update address as per Form VAT 112.

Final Conclusion: Writ petition allowed; assessment order for 2013-14 set aside and remitted for fresh adjudication with directions for filing objections, holding personal hearing and updating the dealer's address in departmental records; no order as to costs.

Refund entitlement contingent on completion of assessment - completion of assessment before payment of refund - set aside of system-generated arrear notice - production of documents for assessment

Set aside of system-generated arrear notice - refund entitlement contingent on completion of assessment - Validity of the impugned system-generated arrear notice in the light of a quantified refund and an incomplete assessment - HELD THAT: - The Court observed that although a refund for the year 2013-14 had been quantified by earlier proceedings, the assessment for 2014-15 remained uncompleted because the department considered the documents produced by the petitioner to be insufficient. The Court held that until the assessment liability for 2014-15 is quantified, the net amount payable could not be determined and it was therefore inappropriate to allow recovery to proceed by way of the impugned arrear notice. Acting on this principle, the Court directed that the arrear notice be set aside and that the assessment process be completed before the question of refund/payment is taken up. [Paras 6, 7]

Impugned arrear notice set aside; assessment to be completed and refund/payment to be considered thereafter.

Production of documents for assessment - completion of assessment before payment of refund - Obligation of the petitioner to produce documents and scope of further proceedings for completion of assessment and decision on refund - HELD THAT: - The Court directed the petitioner to produce the documents listed by the department in its letter dated 23.10.2018 and any other documents called for, so that the assessment for 2014-15 may be completed. The Court remitted the matter to the assessing authority for completion of the assessment on the basis of the documents produced; only after such completion should the refund quantified earlier be reconsidered for payment. The order therefore leaves the factual and quantification aspects of the 2014-15 assessment to the assessing authority for fresh consideration upon production of the specified documents. [Paras 7]

Petitioner directed to produce listed documents; assessment for 2014-15 remitted for completion and thereafter refund to be considered.

Final Conclusion: The writ petition is disposed by setting aside the impugned system-generated arrear notice; the petitioner must produce the documents specified by the department for completion of the 2014-15 assessment, after which the previously quantified refund for 2013-14 shall be taken up for consideration.

Stay of recovery of tax pending appeal - prima facie case not sole criterion for grant of stay - apportionment of liability between successor State corporations after bifurcation - undue hardship/financial distress as factor in exercise of discretion for stay

Stay of recovery of tax pending appeal - prima facie case not sole criterion for grant of stay - undue hardship/financial distress as factor in exercise of discretion for stay - Whether the Additional Commissioner erred in rejecting the petitioner's request for stay of recovery of disputed entertainment tax pending disposal of statutory appeals. - HELD THAT: - The Additional Commissioner examined the question of prima facie case but treated it as the sole criterion for refusing stay. The Court held that prima facie satisfaction is not the only factor to be considered when exercising discretion to stay recovery of tax pending appeal. The petitioner's consistent losses, as shown by income-tax returns, constitute undue hardship/financial distress that the Court may take into account. Further, the tax demand relates to a period when the State was undivided, and even if the appeals are ultimately dismissed, the ultimate liability may require apportionment between successor State tourism corporations; this consequence was not considered by the Additional Commissioner. In the exercise of discretionary relief the Court found it appropriate to grant interim protection while safeguarding the revenue by directing a deposit.

Impugned orders rejecting stay set aside; stay of recovery granted subject to deposit of Rs. 10,00,000 within eight weeks.

Final Conclusion: Writ petitions allowed; impugned Orders set aside and recovery of the disputed tax stayed on deposit of Rs. 10,00,000 within eight weeks; connected miscellaneous petitions dismissed; no order as to costs.

Penalty under Section 48(5) of the U.P. VAT Act - Goods duly accounted in books of dealer and storage records - Non-applicability of Section 21(5) / Rule 41 requirement of challan/transfer invoice where goods are deposited in cold storage on purchaser's instruction - Abuse of process in seizure and penalty proceedings

Penalty under Section 48(5) of the U.P. VAT Act - Goods duly accounted in books of dealer and storage records - Payment by banking and existence of tax invoice - Abuse of process - Imposition and confirmation of penalty under Section 48(5) was not legally sustainable where the goods were shown in the dealer's books and in the cold storage records, tax invoice was issued and payment was effected through bank. - HELD THAT: - The Court examined Sub section (5) of Section 48 which applies only where goods are omitted from being shown in accounts, not traced to any bona fide dealer, not properly accounted for, documents contain wrong particulars, or goods are undervalued by more than fifty percent with intent to evade tax. The material on record established that the seller issued a tax invoice charging tax and mandi shulk, the goods were dispatched to the cold storage on the purchaser's instructions and were recorded in the cold storage's stock register, the revisionist produced books of account to the investigating authority, and payment was made through banking. There is no finding by any authority that the statutory conditions for invoking Section 48(5) were fulfilled. The submission relying on Section 21(5) and Rule 41 (challan/transfer invoice) was held inapposite because those provisions govern consignments or deliveries and the facts show the goods were deposited in cold storage on the purchaser's instruction rather than being delivered or dispatched by the purchaser such as to attract the challan/transfer invoice requirement. In these circumstances the seizure and the consequent penalty proceedings amounted to an abuse of the process of law and could not be sustained.

Penalty order confirmed by the Tribunal is set aside and the revision is allowed.

Final Conclusion: The Tribunal's confirmation of the penalty under Section 48(5) is quashed because the goods were properly invoiced, recorded in dealer and cold storage accounts and payment was made through banking; the penalty proceedings were an abuse of process and the revision is allowed.

Urban land - agricultural land not exigible to wealth-tax - re-opening of assessment under Section 17 of the Wealth-tax Act - measurement of distance - aerial (as the crow flies) versus by road - prospective operation of substituted statutory provision - authority/municipality character of BIAPPA

Urban land - authority/municipality character of BIAPPA - measurement of distance - aerial (as the crow flies) versus by road - prospective operation of substituted statutory provision - agricultural land not exigible to wealth-tax - Whether the lands at Akkelenahalli-Mallenahalli qualify as 'urban land' and are exigible to wealth-tax - HELD THAT: - The Tribunal held that the lands do not qualify as 'urban land' but are agricultural lands and hence not exigible to wealth-tax. The finding follows the decisions of co-ordinate benches in WTA Nos.24/Bang/2017 and 29/Bang/2017 dated 17.08.2018 and ITA No.1654/Bang/2012 (M.R. Seetharam), which concluded that BIAPPA does not have the character of a Municipality or analogous authority for the purpose of bringing the lands within the definition of 'urban land'. The Revenue's contention that distance should be measured aerially (as the crow flies) was rejected: the substituted provision relied upon (Finance Act, 2013 w.e.f. 01/04/2014) is prospective and therefore inapplicable to Assessment Years 2007-08 and 2009-10; consequently the law in force for those years requires distance to be reckoned by approach roads rather than by straight-line measurement. Having applied the law and relevant precedent, the Tribunal dismissed Revenue's grounds and allowed the appeals in favour of the assessee on merits. [Paras 4]

The lands are agricultural and not 'urban land'; Revenue's appeals are dismissed.

Re-opening of assessment under Section 17 of the Wealth-tax Act - Whether the Assessing Officer validly assumed jurisdiction by issuing notice under Section 17 for re-opening the assessments - HELD THAT: - The assessee challenged the jurisdictional validity of the notices issued under Section 17. The Tribunal did not adjudicate this jurisdictional issue because it became academic after the Tribunal decided on the merits that the lands were not exigible to wealth-tax. Consequently, the Tribunal declined to examine or decide the assessee's objections to the reasons for reopening and the legality of the notices at this stage. [Paras 6]

The cross objections challenging jurisdiction are treated as academic and are not adjudicated; they are dismissed as infructuous.

Final Conclusion: Following co-ordinate-bench precedents and applying the law in force for the relevant assessment years, the Tribunal held the lands to be agricultural (not urban) and not exigible to wealth-tax; Revenue's appeals for AY 2007-08 and AY 2009-10 are dismissed, and the assessee's cross objections on jurisdiction are treated as academic and dismissed.

Offences by companies - vicarious liability in penal statutes - meaning of "company" for Section 141 - arraignment of juristic person before prosecuting natural persons - application of Section 141 to sole proprietorship

Meaning of "company" for Section 141 - application of Section 141 to sole proprietorship - Offences by companies - vicarious liability in penal statutes - arraignment of juristic person before prosecuting natural persons - Validity of the complaint where the cheque was issued in the name of a sole proprietorship and the proprietorship was not impleaded as a separate accused under Section 141 of the Negotiable Instruments Act - HELD THAT: - The Court examined Section 141 (Offences by companies) and its Explanation (defining 'company' to include a body corporate, firm or other association of individuals) and held that the Explanation cannot be stretched to cover a sole proprietary concern which has no separate legal personality. A proprietorship is a trade name or cloak of a single natural person and does not create a juristic entity; an 'association of individuals' and a 'firm' necessarily involve two or more persons. The statutory fiction equating partners to directors (for firms) is confined to partnerships and does not extend to sole proprietorships. Authorities of the Supreme Court (including Ashok Transport Agency v. Awadhesh Kumar, Bhagwati Vanaspati Traders v. Supt. of Post Offices and Raghu Lakshminarayanan v. Fine Tubes) were applied to conclude that vicarious liability under Section 141 is inapplicable to sole proprietors and that there is no requirement to implead the proprietorship as a separate accused before proceeding against the natural person who is the proprietor. The Court further observed that the decision relied upon by the applicant (Hitendra Kishan Lal Jain) was contrary to the binding Supreme Court precedents and rendered per incuriam, and therefore it did not govern the present matter. Applying these principles to the facts, the complaint against the applicant in his capacity as sole proprietor was not defective for failure to implead the proprietorship separately. [Paras 14, 15, 23, 25, 26]

Complaint is not defective for not impleading the sole proprietary concern separately; Section 141 does not apply to a sole proprietorship and the application to quash is dismissed.

Final Conclusion: The application under Section 482 Cr.P.C. is dismissed; there was no requirement to implead the sole proprietorship M/s Manoj Rice Mill as a separate accused and the complaint against the applicant in his capacity as sole proprietor is valid.

Reopening of evidence - Rebuttal evidence - Relevancy of prior judicial testimony under Section 33, Indian Evidence Act - Order 18 Rule 17 CPC - power to reopen evidence - Keeping witness out of the way

Reopening of evidence - Rebuttal evidence - Order 18 Rule 17 CPC - power to reopen evidence - Relevancy of prior judicial testimony under Section 33, Indian Evidence Act - The revision against the dismissal of the petitioner's application to reopen the plaintiff's evidence to mark the certified deposition of D.2 and the criminal judgment was allowed. - HELD THAT: - The Court held that the petitioner legitimately sought reopening of its evidence for the limited purpose of marking the certified deposition of the 2nd defendant (D.2) given in a criminal proceeding and the judgment in that criminal case as exhibits in rebuttal to DW.1. At the time PW.1 was examined it was not known whether D.2 would be produced as a witness; only after DW.1 (the 3rd defendant) testified did it become evident that D.2 would not come to the witness box, thereby depriving the petitioner of the opportunity to confront D.2 with his earlier testimony. The Court applied the principle in Section 33 of the Evidence Act, observing that the petitioner's case satisfied the proviso to Section 33 (proceedings between the same parties/representatives in interest; right and opportunity to cross-examine in the earlier proceeding; substantially the same questions in issue). While recognising that Order 18 Rule 17 CPC must not be invoked as a routine device (as explained by the Supreme Court), the Court held that reopening for rebuttal in these circumstances was justified and that risks of misuse can be addressed by awarding exemplary costs if necessary. The Commercial Court's reasoning - that existing evidence on record was sufficient to show who was the Managing Director - failed to appreciate the distinct need for rebuttal by marking the prior deposition when the direct witness (D.2) was not produced. For these reasons the impugned order was set aside and the application for reopening allowed to enable marking the deposition of D.2 and the criminal judgment as exhibits. [Paras 10, 11, 15, 19, 20]

Revision allowed; impugned order set aside and application for reopening of evidence permitted to enable marking the deposition of D.2 and the criminal judgment as exhibits; no order as to costs.

Final Conclusion: The High Court allowed the revision, set aside the Commercial Court's order refusing reopening, and permitted the plaintiff to reopen evidence to mark the certified deposition of the 2nd defendant and the criminal judgment as exhibits; no costs were ordered.

Confirmation of sale and refund of auction consideration - Conditional stay of auction - Effect of initiation of corporate insolvency resolution process on maintainability of writ by corporate borrower - Guarantors' rights in respect of properties not covered by corporate insolvency - Sale in "AS IS WHERE IS" condition - no post-auction due diligence - Impleadment of auction purchasers

Effect of initiation of corporate insolvency resolution process on maintainability of writ by corporate borrower - Closure of writ filed by the corporate borrower in view of initiation of insolvency proceedings under the IBC. - HELD THAT: - The Court recorded that after invocation of the Insolvency and Bankruptcy Code, 2016 and appointment of a resolution professional, the corporate borrower could not maintain W.P. No.43368 of 2018 and the petition was closed for that reason. The existence of the corporate insolvency process was determinative of the borrower company's inability to pursue the writ remedy before this Court. [Paras 5, 8]

W.P. No.43368 of 2018 closed on account of the corporate insolvency resolution process initiated against the borrower.

Confirmation of sale and refund of auction consideration - Conditional stay of auction - Whether the petitioners (guarantors) could seek acceptance of offers in respect of properties where sale had been conducted, and the effect where a sale certificate had already been issued. - HELD THAT: - The Court held that where a sale certificate had already been issued and the sale consideration fully paid, the purchaser's title in respect of that property could not be disturbed and the guarantors' offer in respect of that property must be rejected. As to other properties where confirmation had not reached finality, the Court exercised its discretion to permit payment by the guarantors to supersede the highest bids, subject to timelines, and directed that upon compliance the bank shall refund amounts paid by the auction purchasers. [Paras 9, 12]

Prayer in relation to the property for which a sale certificate was issued is rejected; for other properties, petitioners permitted to pay higher amounts and bank to refund auction purchasers if petitioners comply by the stipulated date.

Sale in "AS IS WHERE IS" condition - no post-auction due diligence - Permissibility of post-auction due diligence by the highest bidder after the auction. - HELD THAT: - The Court observed that the sale is conducted on an "AS IS WHERE IS" basis and therefore a request by a successful bidder to undertake due diligence after the auction cannot be permitted. This principle informed the Court's refusal to allow post-auction re-opening of the sale process for due diligence. [Paras 10]

Post-auction due diligence by the highest bidder cannot be permitted; sale remains on "AS IS WHERE IS" basis.

Impleadment of auction purchasers - Guarantors' rights in respect of properties not covered by corporate insolvency - Procedural direction to implead auction purchasers and the ability of guarantors to seek relief for properties not subsumed in corporate insolvency proceedings. - HELD THAT: - The Court directed impleadment of the highest bidders to enable adjudication of competing interests. Separately, recognising that the corporate insolvency process precluded the corporate borrower from pursuing the writ, the individual guarantors were allowed to press their separate petition as to properties not already confirmed by sale certificate, and to offer payments to protect their interests in those properties. [Paras 3, 6, 11]

Auction purchasers were impleaded; guarantors may pursue relief for properties not covered by the corporate insolvency process and are permitted to make payments to secure those properties as ordered.

Final Conclusion: W.P. No.43368 of 2018 closed in view of initiation of corporate insolvency proceedings; W.P. No.4994 of 2019 disposed of by rejecting relief in respect of the property for which a sale certificate had been issued, permitting the guarantors to pay amounts above the highest bids for the remaining three properties by the stipulated date to avail the benefit, directing refund to auction purchasers if petitioners comply, and recording that sales are on an "AS IS WHERE IS" basis with no post-auction due diligence permitted.