TaxTMI Updates e-Newsletter
May 21,2022

Recommendations of the Goods and Services Tax Council - reverse charge mechanism - place of supply - transportation of goods by vessel - import of services / import of goods on CIF basis - composite supply - double taxation / aspect theory - excessive delegation - territorial nexus / extra territorial taxation

Recommendations of the Goods and Services Tax Council - Whether the recommendations of the GST Council are binding on the Union and the States - HELD THAT: - The Court held that the GST Council's recommendations are recommendatory and not automatically binding on the Union or the States. The deletion of the earlier draft provision for a binding dispute settlement authority and the text and constitutional placement of Articles 246A and 279A indicate Parliament intended the Council to play a cooperative, recommendatory role. Certain statutory provisions require the executive to act on Council recommendations when issuing notifications, but that statutory obligation does not convert all Council recommendations into binding law or displace the legislative function of Parliament and state legislatures. The nature and context of 'recommendation' in Article 279A and the constitutional scheme support a persuasive, not plenary, legislative effect of Council decisions. [Paras 148]

Recommendations of the GST Council are recommendatory in character and not per se binding on the Union and the States.

Place of supply - transportation of goods by vessel - import of services / import of goods on CIF basis - territorial nexus / extra territorial taxation - Whether transportation of goods by a foreign shipping line up to Indian customs station (in CIF imports) can be treated as an inter state supply with place of supply in India - HELD THAT: - The Court construed Section 13(9) of the IGST Act (place of supply of transportation of goods is place of destination) together with the definitions of import of services to conclude that where goods are transported to India the place of supply of that transportation service is the destination in India. The IGST/CGST scheme contemplates such deeming fictions; Parliament may legislate for extra territorial aspects where a real nexus with India exists. Given the destination nexus and consumption in India, the transportation service in CIF imports can be characterized as an inter state/import of service with a sufficient territorial connection. [Paras 148]

Services of transportation by vessel up to the customs station of clearance in India in CIF imports can constitute an inter state (import) supply with place of supply in India.

Reverse charge mechanism - excessive delegation - Section 5(3) and Section 5(4) of the IGST Act - Whether the impugned notifications (Notification 8/2017 and 10/2017) exceed delegated powers in specifying the importer as the person liable on reverse charge - HELD THAT: - The Court examined Sections 5(3) and the amended Section 5(4) of the IGST Act and the CGST definitions of 'recipient' and 'reverse charge'. It held that the statute contemplates reverse charge on specified categories of supply and that the Government may, on Council recommendation, notify such categories; the specification of the recipient in notifications is clarificatory rather than a usurpation of core legislative functions. The 2018 amendment to Section 5(4) expressly permits notification to specify classes of registered persons as recipients for reverse charge. Established principles permit upholding delegated instruments where a statutory source of power exists even if the notifications do not cite the precise enabling sub section. [Paras 148]

The issuance of notifications identifying categories of supplies and specifying the importer as liable on reverse charge falls within the delegated powers conferred by the IGST/CGST scheme and the amended Section 5(4).

Composite supply - double taxation / aspect theory - Whether imposing IGST again on the freight component (by treating the importer as recipient of shipping services) results in impermissible double taxation contrary to the composite supply scheme - HELD THAT: - The Court applied the CGST/IGST provisions on composite supply (Section 2(30) CGST and Section 8 CGST, applied mutatis mutandis) and observed that where a CIF contract results in a composite supply whose principal supply is goods, the tax liability is to be determined as that principal supply. The freight and insurance are components of the composite supply of goods; levying IGST again on the transportation service as a separate supply to the importer would conflict with the statutory rule governing composite supplies and produce double taxation on the same element. While aspect theory permits taxation of different aspects in some contexts, the statutory composite supply rule precludes treating the freight element as a separate taxable supply in CIF imports for the purpose of imposing an additional IGST on the importer. [Paras 148, 149]

A separate levy of IGST on the freight component in CIF imports, when IGST is already chargeable on the composite supply (goods) including freight, is inconsistent with the composite supply provisions and results in impermissible double taxation.

Final Conclusion: The notifications challenged were considered in light of the IGST/CGST scheme: the GST Council's recommendations are recommendatory; the place of supply of transportation to India in CIF imports can be India and the importer may be treated as recipient for reverse charge purposes under the statutory scheme; however, imposing an additional IGST on the freight component in CIF transactions conflicts with the composite supply rules and results in impermissible double taxation. For these reasons the appeals were dismissed.

Summary order. No advance ruling is issued on whether diesel filled free of cost by the service recipient in dedicated vehicles forms part of the value of GTA supply; the issue is not answered and no ruling is issued because the two members of the Appellate Authority for Advance Ruling have recorded divergent opinions.

Classification of goods as industrial fans - industrial grade fan - HSN 84145930 - applicability of CGST and SGST rates - rate notification applicability from 15-11-17

Classification of goods as industrial fans - HSN 84145930 - applicability of CGST and SGST rates - GST rate applicable on Fans (HSN-84145930) used in Poultry House for air circulation - HELD THAT: - The Authority examined the technical specification and brochure submitted by the applicant and found the fans to be industrial grade with electric motors having output exceeding 125 W. On classification grounds the fans fall under HSN 84145930 as industrial fans. The Authority noted that with effect from 15-11-17 such industrial fans are liable to tax at the rates specified in the relevant notification. Applying that classification and the notification, the Authority concluded that the tax incidence is under CGST and SGST at the prescribed rates.

GST rate on the said industrial fans is 18% (CGST 9% & SGST 9%).

Final Conclusion: The Advance Ruling holds that the fans supplied for air circulation in poultry houses are industrial fans (HSN 84145930) and are taxable at an aggregate rate of 18% (CGST 9% and SGST 9%).

Intermediary - place of supply of intermediary services - import of services - inter-state supply - reverse charge mechanism

Intermediary - place of supply of intermediary services - import of services - reverse charge mechanism - GST liability under the reverse charge mechanism in respect of services of arranging subscription supplied to the applicant by Managers located outside India. - HELD THAT: - The Managers' activities - initiating book building, soliciting and aggregating offers, arranging meetings and road shows, liaising between issuer and investors, collecting subscription proceeds and transferring them to the Note Trustee, and distributing disclosure documents - amount to arranging or facilitating the supply of securities between the issuer and investors. These ancillary activities fall within the statutory definition of intermediary in Section 2(13) of the IGST Act. For place of supply, Section 13(8)(b) applies to intermediary services and fixes the place of supply as the location of the supplier. The Managers are incorporated and located outside India; consequently the place of supply of their intermediary services is outside India. Since the place of supply is not in India, the supply does not qualify as import of services under the statutory definition and is not an inter state supply liable to tax in India. Accordingly, no liability arises on the applicant under the reverse charge mechanism for the subject services. [Paras 25, 26, 27]

No GST is leviable on the subject transaction under reverse charge mechanism by the applicant.

Final Conclusion: The Authority rules that the services rendered by the Managers constitute intermediary services whose place of supply is outside India; therefore the services are not import of services and the applicant is not liable to discharge GST under the reverse charge mechanism.

Classification of goods under the HSN - HSN Explanatory Notes as a guide to classification - Exclusion of firefighting pumps from heading 8424 and inclusion under heading 8413 - Distinction between firefighting equipment and firefighting vehicles - Pumps for liquids forming a unit with reservoir and pressure/nozzle control

Classification of goods under the HSN - HSN Explanatory Notes as a guide to classification - Exclusion of firefighting pumps from heading 8424 and inclusion under heading 8413 - Distinction between firefighting equipment and firefighting vehicles - Pumps for liquids forming a unit with reservoir and pressure/nozzle control - Classification of the 'fire safety product assembled on trolley' (water mist firefighting trolley) in the GST/HSN Tariff. - HELD THAT: - The Authority treated the HSN Explanatory Notes as a guiding and persuasive tool in determining tariff classification and relied upon them to interpret the scope of heading 8424 and heading 8413. Heading 8424 (fire extinguishers) is expressly drafted not to include firefighting pumps with or without internal reservoirs, which are instead covered by heading 8413 (pumps for liquids). The subject goods are an assembly comprising an engine-driven ultrahigh pressure pump, internal water tank (reservoir), hose reel and a nozzle/gun designed to discharge a controlled water mist at specified flow and pressure; they therefore constitute a firefighting pump with internal reservoir and include a nozzle permitting control of discharge. The product is not a firefighting vehicle within the description of tariff heading 8705. Given these features and the HSN Explanatory Notes excluding such pumps from 8424 and categorising them under 8413, the product fits the description of pumps falling under subheading 84131990. [Paras 4, 5, 6, 7]

The fire safety product trolley is classified under HSN 84131990.

Final Conclusion: The Authority ruled that the described water mist firefighting trolley is not classifiable under heading 8424 or as a vehicle under 8705, and is to be classified as a pump assembly under HSN 84131990, applying the HSN Explanatory Notes as the guiding basis for classification.

Composite supply - principal supply - treatment of composite supply as principal supply under Section 8 - events, exhibitions, conventions and trade shows organisation and assistance services - sponsorship services and brand promotion services - reverse charge mechanism for sponsorship services - input tax credit admissibility under proviso to Section 17(5)(b)(i) - input tax credit under Section 16

Composite supply - principal supply - professional service - treatment of composite supply as principal supply under Section 8 - Classification and nature of services supplied by ISCCM to delegates - HELD THAT: - The Authority found that the package supplied to delegates - comprising technical seminars, access to exhibitions, hotel accommodation, cultural programmes, meals and airport transfer - is a composite supply. Applying the indicators of natural bundling and the purposive inquiry as to why delegates attend, the Authority held that the essence and principal element of the package is the imparting of professional knowledge/workshops. Consequently the composite supply to delegates is to be treated as a professional service (principal supply) and classified accordingly (SAC 998399). [Paras 22]

ISCCM's supply to delegates is a composite supply whose principal supply is professional service; classified as SAC 998399.

Events, exhibitions, conventions and trade shows organisation and assistance services - Classification and nature of services supplied by ISCCM to exhibitors - HELD THAT: - The Authority held that the participation fees charged to exhibitors are for the service of organising the exhibition/trade fair. This activity squarely falls within events/exhibitions/trade shows organisation and assistance services and is classifiable under the relevant SAC entry for such services (SAC 998596). [Paras 23]

ISCCM's supply to exhibitors is 'exhibition/trade show organisation and assistance' and classified as SAC 998596.

Sponsorship services and brand promotion services - reverse charge mechanism for sponsorship services - Nature and GST liability for brand-promotion/sponsorship packages offered by ISCCM - HELD THAT: - The Authority held that placing name/logo/brand on event materials, souvenir display, time-slot presentations and DVD display constitute sponsorship services rather than a distinct 'brand promotion' supply. Sponsorship services are classifiable under the SAC entry for sponsorship/brand-promotion services (SAC 998397). Further, where the recipient is a body corporate or a partnership firm located in the taxable territory, GST on such sponsorship services is payable by the recipient under the reverse charge mechanism; where the recipient is not a body corporate or firm, ISCCM is liable on forward charge. [Paras 24]

Brand-promotion offerings are sponsorship services (SAC 998397); GST is payable on reverse charge by corporate/partnership recipients in taxable territory, otherwise ISCCM pays by forward charge.

Input tax credit admissibility under proviso to Section 17(5)(b)(i) - input tax credit under Section 16 - Admissibility of input tax credit claimed by ISCCM on hotel services (including convention), food and beverages, outside caterers, rent-a-cab and event-management services - HELD THAT: - Relying on illustrative guidance and statutory proviso, the Authority held that (i) a hotel's supply to ISCCM for the event is to be viewed as convention service (a composite supply) and ITC is admissible on the bundled invoice under Section 16; (ii) ITC on food and beverages supplied by hotel or outside caterers is available because such inward supplies are used as an element of an outward taxable composite supply (proviso to Section 17(5)(b)(i)); (iii) ITC on rent-a-cab services (for vehicles with seating capacity not exceeding 13) is admissible where used as part of the outward composite supply; and (iv) charges for exhibition stall set-up and tenting are input services used in business and eligible for ITC under Section 16(1). [Paras 25]

Input tax credit is admissible to ISCCM on the hotel/convention package, food and beverages (hotel or outside caterers), rent-a-cab services as described, and event-manager services used for exhibition stall set-up and tenting.

Final Conclusion: The Authority ruled that ISCCM's supply to delegates is a composite supply with professional service as the principal supply (SAC 998399); supplies to exhibitors are event/exhibition organisation services (SAC 998596); brand-promotion offerings are sponsorship services (SAC 998397) with reverse-charge liability on corporate/partnership recipients in the taxable territory and forward-charge liability on ISCCM if the recipient is not a corporate/firm; and input tax credit is admissible on the specified inward supplies used as elements of the outward taxable composite supplies.

Advance ruling limited to supplies undertaken or proposed to be undertaken by the applicant under Section 95(a) CGST Act - binding effect of an advance ruling confined to the applicant and the concerned jurisdictional officer under Section 103(1) CGST Act - non-maintainability of an advance ruling application for lack of locus standi

Advance ruling limited to supplies undertaken or proposed to be undertaken by the applicant under Section 95(a) CGST Act - non-maintainability of an advance ruling application for lack of locus standi - GRIMCO lacks locus standi to seek the advance ruling in respect of the supplier's proposed GST classification and therefore the application is non-maintainable. - HELD THAT: - The Authority noted that advance rulings are confined to decisions in relation to supplies being undertaken or proposed to be undertaken by the applicant. The applicant did not clarify whether it was seeking the ruling on its own behalf or on behalf of its supplier despite being asked to do so during the hearing and given opportunity to file a revised application. Because GRIMCO did not substantiate that the supply in question was its own, it failed to demonstrate the requisite locus under the advance ruling scheme. Consequently the application could not be entertained and was held non-maintainable. [Paras 7, 8]

Application rejected as non-maintainable for lack of locus standi.

Binding effect of an advance ruling confined to the applicant and the concerned jurisdictional officer under Section 103(1) CGST Act - The supplier of the kits is not bound by any ruling of the Authority in respect of GRIMCO's application. - HELD THAT: - The Authority referred to the statutory scheme providing that an advance ruling is binding only on the applicant who sought it and on the concerned officer/jurisdictional officer in respect of that applicant. Since GRIMCO failed to establish that it was the supplier or that the supplies were its own, any ruling in the present application would not bind the supplier. The Authority therefore recorded that the supplier is not bound by the Ruling. [Paras 7]

Supplier is not bound by the Authority's ruling in the present application.

Final Conclusion: The application by M/s Gujarat Rural Industries Marketing Corporation Ltd. is dismissed as non-maintainable for want of locus; any ruling in the proceedings would in any event not bind the supplier.

Consideration - value of taxable supply - nexus between payment and supply - non-monetary consideration - process loss - system use gas (SUG) - inclusions under Section 15(2) of the CGST Act - valuation rules (Rule 27 et seq.) - incidental expenses

System use gas (SUG) - consideration - nexus between payment and supply - value of taxable supply - inclusions under Section 15(2) of the CGST Act - incidental expenses - Whether the value attributable to System Use Gas (SUG) stipulated in the Agreement is includible in the value of re-gasification services for GST purposes - HELD THAT: - The Authority examined the contract, operational facts and admitted statements and concluded that the quantity designated as SUG is used by the applicant in several ways that are integral to provision of the re-gasification service: as fuel to run plant equipment (GTGs and SCV), for safety procedures (venting/flaring during unloading, storage pressure management and shutdowns), for planned/repair maintenance, and in some periods is reflected as a retained excess due to measurement uncertainties. The Authority found that these uses are costs incidental and ancillary to the scope of re-gasification services (which includes unloading, storage, vaporisation and delivery) and that the applicant in practice invoices a monetary value for SUG to customers and has earlier discharged service tax liabilities in respect of SUG under SVLDRS. The Authority held that SUG is not merely an abstract or unavoidable evaporative loss but, on the recorded facts, represents gas consumed/retained by the supplier in the course of supplying the service. Consequently, the invoiced SUG amount is a component of the transaction value of the taxable supply. Reliance was placed on: (a) the contractual clause by which customers provide SUG and the applicant raises invoices reflecting SUG value; (b) statements and records relied in earlier show-cause proceedings evidencing consumption/retention and measurement uncertainties; and (c) the definition and inclusions in Section 15 read with the nature of incidental expenses. The Authority therefore rejected the contention that SUG is outside consideration or merely a process loss that cannot be taxed, since on the material before it SUG has direct nexus with and forms an expense of providing the re-gasification service and falls within the inclusions contemplated by Section 15(2) (incidental expenses and amounts charged for anything done in respect of the supply). [Paras 96, 97, 98, 99, 100]

Value attributable to SUG is an indispensable part of the taxable value of the re-gasification service supplied by M/s Shell and is liable to GST.

Final Conclusion: The Advance Ruling holds that the contractual System Use Gas (SUG), as invoiced and evidenced on the record, constitutes a cost incidental and ancillary to the re-gasification service, has the requisite nexus with the supply and therefore must be included in the transaction value of the re-gasification service for GST purposes; accordingly the SUG value invoiced to customers is taxable under GST.

Locus standi - distinct persons under Section 25(5) CGST Act - prematurity of advance ruling application - place of project execution / change of address clause - maintainability under Section 95(a) CGST Act

Locus standi - place of project execution / change of address clause - Applicant had no locus standi to seek advance ruling because the contract identified the project execution unit and address in Bengaluru and no written intimation effecting change to the Ahmedabad unit was produced. - HELD THAT: - The Contract (clause 2.2.1) designates the project execution address as the Bengaluru unit of the supplier and provides that any change must be notified in writing. No written intimation notifying change of the place of orders to the Ahmedabad unit was placed on record. On that basis the Authority found that the application filed by the Ahmedabad-registered unit was not the contractually recognised project execution unit and therefore lacked locus standi to seek the ruling. [Paras 8, 9]

Application dismissed insofar as the applicant lacked locus standi because the project execution address in the contract remained Bengaluru and no written change was produced.

Distinct persons under Section 25(5) CGST Act - maintainability under Section 95(a) CGST Act - For GST purposes the Ahmedabad unit, Bengaluru unit and Hyderabad unit are distinct persons under Section 25(5) CGST Act, rendering the application by the Ahmedabad unit not maintainable. - HELD THAT: - The Authority applied Section 25(5) which treats establishments in different States as establishments of distinct persons for the purposes of the Act. Given that the units bear separate GSTINs in different States, they are distinct taxable persons under the GST scheme. This statutory separateness contributed to the conclusion that the advance ruling filed by the Ahmedabad GSTIN in respect of the project (contractually tied to the Bengaluru execution unit) was not maintainable. [Paras 9]

The Ahmedabad unit is a distinct person for GST purposes; the application is not maintainable on that ground.

Prematurity of advance ruling application - maintainability under Section 95(a) CGST Act - The application was premature and therefore rejected under Section 95(a) CGST Act. - HELD THAT: - The Authority recorded that the application sought an advance ruling for manufacturing activities that had not been finally located or notified as the project execution site to the purchaser as required by the contract. In light of the unsettled project location, absence of contractual notification and the distinct GST registrations, the Authority concluded that the matter was premature and not fit for advance ruling, and accordingly declined to admit the application under Section 95(a). [Paras 8, 9, 10]

Application rejected as premature and non-maintainable under Section 95(a) CGST Act.

Final Conclusion: The Authority refused to admit the Advance Ruling application: the contract designated the Bengaluru project execution unit and no written change to the Ahmedabad unit was produced; the Gujarat unit and other TASL establishments are distinct persons under Section 25(5) CGST Act; and the application was premature and therefore not maintainable under Section 95(a) CGST Act.

Anti-profiteering under Section 171 of the CGST Act, 2017 - Requirement to pass on benefit of Input Tax Credit (ITC) by way of commensurate reduction in price - Applicability of anti-profiteering provisions to pre-GST completed projects and unlaunched phases - Temporal applicability and comparison of pre-GST and post-GST tax/ITC positions - Investigation under Rule 133(5) of the CGST Rules, 2017

Anti-profiteering under Section 171 of the CGST Act, 2017 - Applicability of anti-profiteering provisions to pre-GST completed projects and unlaunched phases - Temporal applicability and comparison of pre-GST and post-GST tax/ITC positions - Whether the provisions of Section 171 of the CGST Act, 2017 were violated in respect of the Project "River View Heights" beyond the Phase already adjudicated. - HELD THAT: - The Authority examined the DGAP's expanded investigation covering all three phases of the project. Phase I was found to have been completed before the implementation of GST (occupancy certificates dated in 2011-2014) and therefore there was no post GST comparator for reduction in tax rate or increased ITC that could trigger Section 171. Phase III had not been launched or registered and construction had not commenced; consequently there was no pre GST tax/ITC position against which to compare any post GST benefit. Phase II had already been investigated earlier and profiteering for the period 01.07.2017 to 31.10.2018 in respect of 26 home buyers was confirmed by Order No. 51/2019. On these facts and the temporal test inherent in Section 171, the Authority concurred with the DGAP that the anti profiteering provisions were not applicable to Phase I and Phase III and no further violation required adjudication for the extended period covered by the DGAP's report. [Paras 5, 6, 7]

No violation of Section 171 was found in respect of Phase I and Phase III; the Authority accepted the DGAP report and concluded the proceedings directed in para 18 of Order No. 51/2019 are closed.

Requirement to pass on benefit of Input Tax Credit (ITC) by way of commensurate reduction in price - Investigation under Rule 133(5) of the CGST Rules, 2017 - Whether any additional quantum of profiteering remained to be determined for the project as a whole and, if so, the quantum. - HELD THAT: - The Authority noted that Phase II had already been the subject of a detailed investigation and an order confirming profiteering of the computed amount (for the period 01.07.2017 to 31.10.2018) had been issued by this Authority (Order No. 51/2019). The DGAP's further probe limited to confirming applicability across other phases found no additional instances requiring computation of profiteering because Phase I was pre GST and Phase III was unlaunched. Accordingly, no fresh profiteering quantification was required beyond the amount already confirmed for Phase II. [Paras 1, 5, 11]

No additional profiteering amount required to be computed; the previously confirmed profiteered amount for Phase II stands as adjudicated.

Final Conclusion: The Authority accepted the DGAP Report dated 27.08.2020, held that Section 171 of the CGST Act, 2017 does not apply to Phase I (completed pre GST) and Phase III (unlaunched) of "River View Heights", and concluded the proceedings ordered by para 18 of Order No. 51/2019; the earlier confirmation of profiteering for Phase II for the stated period remains undisturbed.

Profiteering under Section 171 of the CGST Act, 2017 - benefit of Input Tax Credit (ITC) - commensurate reduction in price - investigation under Rule 129 of the CGST Rules, 2017 - refund of profiteered amount with interest under Rule 133(3)(b) of the CGST Rules, 2017 - penalty for contravention under Section 171(3A) of the CGST Act, 2017 - withdrawal of complaint does not preclude investigation

Benefit of Input Tax Credit (ITC) - profiteering under Section 171 of the CGST Act, 2017 - commensurate reduction in price - Whether the respondent obtained additional benefit of ITC post-GST and failed to pass on the benefit to eligible flat buyers, thereby committing profiteering under Section 171 of the CGST Act, 2017. - HELD THAT: - On the material placed on record (project-wise turnover and credits submitted by the respondent), the Authority found that the ratio of ITC to turnover for the project was 3.26% in the pre-GST period (April 2016-June 2017) and 9.89% in the post-GST period (July 2017-May 2020), yielding an increase of 6.63% of turnover as additional ITC post-GST. The DGAP's computations, based on the respondent's returns, CENVAT/VAT orders and home buyers list, produced a recalibrated base price and a resulting excess collection. The Authority accepted the DGAP's computation that the respondent had not reduced prices commensurate with the additional ITC and therefore contravened Section 171(1), resulting in profiteering. The computation of the profiteered amount (aggregated for 150 identifiable homebuyers whose demands were raised post-GST) was accepted as correctly arrived at on the basis of respondent-supplied data and relevant statutory principles regarding provisional ITC for under-construction units and reversal where applicable. [Paras 22, 25, 36, 38, 39]

The Authority held that the respondent benefited from additional ITC post-GST and failed to pass it to eligible recipients, and thereby committed profiteering.

Refund of profiteered amount with interest under Rule 133(3)(b) of the CGST Rules, 2017 - commensurate reduction in price - Remedial measures to be directed for the profiteered amount identified in the investigation. - HELD THAT: - Having determined the existence and quantum of profiteering, the Authority ordered that the total profiteered amount (as computed and accepted) is to be refunded/passed on to the affected homebuyers. The respondent is required to reduce prices commensurate with the additional ITC and to refund or pass on the profiteered amount along with interest at 18% from the date the amount was profiteered until date of payment, in accordance with Rule 133(3)(b). The Authority specified the period for compliance and directed publication/notification measures and monitoring by the jurisdictional Commissioner to ensure beneficiaries are informed and can claim the benefit. [Paras 41, 44, 46, 47, 48]

The respondent is directed to pass/refund the profiteered amount to the identified homebuyers and pay interest @18%; the jurisdictional CGST/SGST Commissioner and DGAP are directed to ensure and monitor compliance, including public notice.

Penalty for contravention under Section 171(3A) of the CGST Act, 2017 - Whether proceedings for imposition of penalty under Section 171(3A) are warranted. - HELD THAT: - The Authority observed that contravention of Section 171(1) had occurred during the investigation period which extended into the period when Section 171(3A) was operational. Given the finding of profiteering for the investigation period, the Authority concluded that the respondent is liable to be proceeded against for penalty under Section 171(3A) and directed that a notice be issued to the respondent to show cause why penalty should not be imposed. [Paras 45]

Notice to be issued to the respondent seeking explanation as to why penalty under Section 171(3A) should not be imposed.

Investigation under Rule 129 of the CGST Rules, 2017 - withdrawal of complaint does not preclude investigation - Whether the withdrawal of the complainant's application precluded continuation or completion of the anti profiteering investigation. - HELD THAT: - The Authority noted that the applicant had withdrawn his complaint, but that there is no provision under the CGST Act or Rules to terminate an investigation on account of withdrawal. The Standing Committee had forwarded the matter having found prima facie evidence and the DGAP's statutory mandate required investigation to proceed. The Authority therefore upheld continuation of the investigation and the consequential findings despite the withdrawal. [Paras 6, 33, 37]

Withdrawal of the complainant's application did not bar or terminate the investigation; the DGAP was entitled and obliged to continue and complete the probe.

Final Conclusion: The Authority found that for the period 01.07.2017 to 31.05.2020 the respondent obtained additional ITC and failed to pass the benefit to eligible flat buyers, resulting in profiteering determined at Rs. 33,35,330/-, which the respondent is directed to pass/refund to identified buyers with interest @18% and against whom notice for penalty under Section 171(3A) will be issued; enforcement and public notification measures and monitoring by the jurisdictional Commissioner and DGAP are directed to ensure compliance.

Availability of alternative remedy - appealability of assessment order to Commissioner of Income Tax (Appeal) - principles of natural justice in assessment proceedings - order under Section 263 of the Income Tax Act binding on assessing officer - jurisdiction of assessing officer subordinate to Commissioner - imposition of costs for counsel misconduct

Availability of alternative remedy - appealability of assessment order to Commissioner of Income Tax (Appeal) - Maintainability of the writ petition in view of the availability of an alternative statutory remedy of appeal against the assessment order. - HELD THAT: - The impugned assessment order dated 30th March, 2022 is an appealable order before the Commissioner of Income Tax (Appeal). The petitioner had the statutory remedy of preferring an appeal to the appropriate appellate authority, and the Court declined to entertain the writ petition as it would be acting as an appellate forum on merits which is the province of the CIT (Appeal). The existence of that adequate and efficacious alternative remedy rendered the writ petition not maintainable and warranted dismissal without addressing merits.

Writ petition dismissed on the ground of availability of alternative remedy; petitioner directed to avail the appellate remedy before the Commissioner of Income Tax (Appeal).

Principles of natural justice in assessment proceedings - Whether principles of natural justice were violated in the assessment proceedings leading to the order dated 30th March, 2022. - HELD THAT: - The assessment order records issuance of notices, specific reference to communications issued on 19th January, 2022, a notice under Section 142(1) requiring reply by 20th February, 2022, and that the petitioner's reply dated 18th February, 2022 was considered. The Court found that the petitioner was given opportunity of hearing and participated in the assessment proceedings; consequently there was no demonstrable breach of natural justice that would justify intervention by the writ court in place of the appellate authority.

No violation of principles of natural justice was found in the assessment proceedings.

Order under Section 263 of the Income Tax Act binding on assessing officer - jurisdiction of assessing officer subordinate to Commissioner - Whether the assessment proceedings were vitiated by initiation of action pursuant to an order passed by the Commissioner under Section 263 and whether that rendered the assessing officer without jurisdiction. - HELD THAT: - The proceedings were conducted to give effect to the Commissioner's order under Section 263, and the assessing officer, being subordinate, was bound to implement that higher authority's direction. The Court observed that the validity of the Commissioner's order under Section 263 was not the subject matter before it, and initiation of proceedings pursuant to such an order did not establish inherent lack of jurisdiction in the assessing officer that would permit extraordinary writ relief in this case.

Proceedings under direction of the Commissioner under Section 263 did not render the assessing officer devoid of jurisdiction; challenge to such direction was not before the Court.

Imposition of costs for counsel misconduct - Whether costs should be imposed for counsel's conduct in court. - HELD THAT: - The Court recorded that the petitioner's counsel addressed the chair in a highly disrespectful manner. Having found such conduct unbecoming, the Court imposed costs on the counsel responsible for the misconduct as a discretionary judicial measure to uphold court decorum.

Writ petition dismissed with costs of Rs. 10,000 imposed upon the petitioner's counsel for misconduct in court.

Final Conclusion: The writ petition is dismissed for non availment of the statutory appellate remedy against the assessment order; no infirmity of natural justice or jurisdiction was found in the assessment proceedings, and the petitioner is left to seek relief before the Commissioner of Income Tax (Appeal). Costs of Rs. 10,000 are imposed on the petitioner's counsel for misconduct.

Application of proviso (c) to Section 148A where seized or requisitioned material in a search under section 132/132A relates to the assessee (Section 153C context) - scope of Section 148A in cases covered by Section 153C - prior approval of specified authority for actions under Section 148A - requirement to pass a reasoned order before issuance of notice under Section 148

Application of proviso (c) to Section 148A where seized or requisitioned material in a search under section 132/132A relates to the assessee (Section 153C context) - scope of Section 148A in cases covered by Section 153C - Validity of the order passed under Section 148A(d) and the notice issued under Section 148 where the case falls within proviso (c) to Section 148A (Section 153C situation). - HELD THAT: - The Court took note of the admitted position that the petitioner's case falls within Section 153C, and therefore within the ambit of proviso (c) to Section 148A. The relevant portion of Section 148A was reproduced and construed in that context. Because proviso (c) excludes application of Section 148A where seized or requisitioned books/documents in a search under section 132/132A of another person pertain to the assessee (with prior approval of the Principal Commissioner or Commissioner), the Court held that the impugned order under Section 148A(d) and the notice under Section 148 could not stand. On that basis the order and notice dated 9th April, 2022 were held to be untenable in law and were set aside. [Paras 4, 5, 6]

Impugned order under Section 148A(d) and notice under Section 148 dated 9th April, 2022 set aside as untenable where proviso (c) to Section 148A applies.

Requirement to pass a reasoned order before issuance of notice under Section 148 - prior approval of specified authority for actions under Section 148A - Remand for fresh consideration to the Assessing Officer to pass a reasoned order in accordance with law. - HELD THAT: - Having set aside the impugned order and notice on the ground that proviso (c) to Section 148A applies, the Court remanded the matter to the Assessing Officer with a direction to pass a fresh reasoned order in accordance with law. The remand contemplates that the Assessing Officer will consider the matter afresh, taking into account the statutory scheme of Section 148A (including prior approval requirements) and the applicability of proviso (c) where seized/requisitioned material relates to the assessee. [Paras 6]

Matter remanded to the Assessing Officer to pass a fresh reasoned order in accordance with law.

Final Conclusion: The writ petition succeeds: the order under Section 148A(d) and the notice under Section 148 dated 9th April, 2022 are set aside as untenable because proviso (c) to Section 148A applies; matter remitted to the Assessing Officer to pass a fresh reasoned order in accordance with law (AY 2018-19).

Reopening of assessment under Section 148 - applicability of Section 50C to sale of land - principle against change of opinion - natural justice in assessment proceedings - remand for de novo consideration

Reopening of assessment under Section 148 - principle against change of opinion - Validity of the order dated 17.12.2018 overruling the petitioner's objection to reopening the assessment. - HELD THAT: - The Court examined the material relied on by the Revenue, including information from ITO (I & CI)-2, Pune and the approval of DIT (I & CI), Pune, which recorded that a sale deed dated 23.07.2012 bore the signature of the company's director and that the transaction had been reflected in the company's financials. The report also noted a substantial difference between the sale consideration recorded and the guideline/market value, leading the Revenue to invoke the provisions embodied in Section 50C. Given these materials and the uncertainties surrounding ownership, financing and treatment of the transaction in the books, the Court found that there was material on which the Assessing Officer could form the belief necessary to issue the notice under Section 148 and to overrule the objections. The petition seeking to challenge the communication dated 17.12.2018 was therefore held to be infructuous and dismissed. [Paras 29]

Order dated 17.12.2018 overruling the objection to reopening the assessment is upheld; W.P.No.350 of 2019 dismissed as infructuous.

Applicability of Section 50C to sale of land - natural justice in assessment proceedings - remand for de novo consideration - Validity of the assessment order dated 20.12.2018 passed under Section 143(3) r/w Section 147 and whether the assessment could stand without clear findings on ownership, asset characterisation and opportunity to the petitioner. - HELD THAT: - The Court found that the assessment order recorded conclusions treating the land as a capital asset of the petitioner and invoking Section 50C, but the material on record did not clearly establish that the land was acquired and sold by the company itself. The sale deeds and other documents indicated purchases and sales in the name of the director in his individual capacity as an agriculturist, there was no clear explanation of how company funds financed those acquisitions, and the computation in the original scrutiny assessment did not show capital gains. Further, certain adverse findings (including suggestions of fabrication) appeared for the first time in the impugned assessment order, giving rise to concerns of breach of principles of natural justice. In view of these lacunae and factual uncertainties, the Court declined to uphold the consequential assessment order and directed a fresh adjudication on merits so that the Assessing Officer may examine ownership, characterisation of the asset, applicability of Section 50C and attendant evidentiary issues after affording the petitioner an opportunity of hearing. [Paras 28, 29]

Assessment order dated 20.12.2018 is set aside and the matter is remitted to the Assessing Officer for de novo consideration on merits and in accordance with law within six months, after hearing the petitioner.

Final Conclusion: Writ petition challenging the communication overruling the objection to reopening (dated 17.12.2018) is dismissed as infructuous; the consequential assessment order dated 20.12.2018 is set aside and the matter is remitted for fresh adjudication within six months with an opportunity to the petitioner to be heard; no costs.

Clause (e) of the first proviso to section 43(5) - speculative transaction - eligible transaction - commodity derivatives - recognised association - commodities transaction tax - set off of business losses under section 70(1) - speculation business exclusion under section 73(1)

Clause (e) of the first proviso to section 43(5) - eligible transaction - commodity derivatives - recognised association - commodities transaction tax - speculative transaction - Whether the transactions in the assessee's commodity derivatives trading qualify as non-speculative under clause (e) of the first proviso to section 43(5). - HELD THAT: - The Tribunal found on the material on record, including confirmations from recognised brokers and filings before the Assessing Officer and the CIT(A), that the assessee's trades were carried out on recognised associations, were in commodity derivatives as defined by Chapter VII of the Finance Act, 2013, were chargeable to commodities transaction tax and satisfied the requirements of an "eligible transaction" (electronically executed on screen-based systems with time-stamped contract notes and unique client/trade identifiers). Neither authority disputed fulfillment of these conditions. In consequence, the transactions met all elements of clause (e) of the first proviso to section 43(5) and therefore cannot be deemed speculative transactions. [Paras 11, 12, 13]

Transactions in the assessee's commodity derivatives trading are not speculative within the meaning of clause (e) of the first proviso to section 43(5).

Set off of business losses under section 70(1) - speculation business exclusion under section 73(1) - clause (e) of the first proviso to section 43(5) - Whether the non-speculative loss from commodity derivatives trading can be set off against profits of the assessee's medical derivatives business. - HELD THAT: - Section 70(1) permits set off of loss from any source against income from any other source under the same head (business income). Section 73(1) restricts set off only where the loss is computed in respect of a speculation business. Having held that the commodity derivatives transactions are not speculative by operation of clause (e) of the first proviso to section 43(5), the restriction in section 73(1) is inapplicable. Consequently, the loss arising from the assessee's commodity derivatives trading is eligible to be set off against profits of the medical derivatives business under section 70(1). The Tribunal also rejected the authorities' reliance on expertise or alleged intermingling, noting the loss was specifically identified and matched by confirmations, and those matters are not requisites of clause (e). [Paras 15, 17, 19, 20, 21]

The non-speculative loss from commodity derivatives trading can be set off against the profit of the medical derivatives business; the addition made by the Assessing Officer (as confirmed by the CIT(A)) is cancelled.

Final Conclusion: The Tribunal allowed the appeal: the assessee's commodity derivatives transactions qualified as non-speculative under clause (e) of the first proviso to section 43(5) for AY 2015-16, and the resulting loss may be set off against the assessee's business income from the medical derivatives business; the addition confirmed by the CIT(A) is cancelled.

Foreign Tax Credit - Form No.67 - mandatory versus directory nature of procedural requirements under Rule 128(9) of the Income Tax Rules, 1962 - priority of DTAA over domestic enactments to the extent beneficial to taxpayer - power of the Board to prescribe procedure under Section 295 of the Income Tax Act

Foreign Tax Credit - Form No.67 - mandatory versus directory nature of procedural requirements under Rule 128(9) of the Income Tax Rules, 1962 - priority of DTAA over domestic enactments to the extent beneficial to taxpayer - Denial of Foreign Tax Credit on the sole ground of delayed filing of Form No.67 - HELD THAT: - The Tribunal considered whether failure to furnish Form No.67 on or before the due date for filing the original return under section 139(1) disentitles an assessee to claim FTC. Following the reasoning of the Coordinate Bench of ITAT, Bangalore, the Tribunal held that Rule 128(9) does not mandate disallowance of FTC in case of delay in filing Form No.67; the requirement to furnish Form No.67 is procedural/directory and not a substantive condition which extinguishes the treaty right. The Tribunal further observed that the DTAA (and Section 90 read with the treaty) confers a vested right to claim credit and that domestic rules cannot operate contrary to the treaty to deny substantive relief where no such condition is prescribed in the DTAA. On this basis the denial of FTC by the CPC/NFAC solely for late filing of Form No.67 was held to be not sustainable. [Paras 5, 6]

Denial of FTC solely for delay in filing Form No.67 is set aside and the assessee is entitled to claim FTC in accordance with law.

Foreign Tax Credit - power of the Board to prescribe procedure under Section 295 of the Income Tax Act - Direction to the Assessing Officer to examine and allow the quantum of Foreign Tax Credit in accordance with law - HELD THAT: - Having held that the procedural delay did not disentitle the assessee to FTC, the Tribunal remitted the matter to the Assessing Officer for examination of the quantum of credit claimed. The Tribunal did not decide the quantification on merits but directed the AO to verify and allow the FTC as per the statutory and treaty provisions and applicable rules, ensuring that the claim is given effect to in accordance with law. [Paras 6]

Matter remitted to the Assessing Officer to examine and allow the FTC claimed by the assessee in accordance with law.

Final Conclusion: Appeal allowed for statistical purposes: the denial of Foreign Tax Credit on the ground of delayed filing of Form No.67 is set aside; the Assessing Officer is directed to examine and allow the claimed FTC for AY 2018-19 in accordance with law.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1) requiring addition or disallowance for deeming concealment - Scope of Explanations 5 and 5A limited to search cases - Voluntary disclosure during survey and inclusion in return not amounting to concealment for penalty - Distinguishing MAK Data Pvt. Ltd. on facts where assessed income exceeds returned income

Penalty under section 271(1)(c) - Explanation 1 to section 271(1) requiring addition or disallowance for deeming concealment - Voluntary disclosure during survey and inclusion in return not amounting to concealment for penalty - Whether penalty under section 271(1)(c) can be imposed on income surrendered during a survey and voluntarily declared in the return where the Assessing Officer has not made any addition in the assessment. - HELD THAT: - Explanation 1 to section 271(1) treats, for the purpose of clause (c), as income in respect of which particulars are concealed only the amount added or disallowed in computing total income when the assessee fails to explain or substantiate material facts. A particular income can be treated as "added" by the AO only if it was not offered in the return. Where the assessee voluntarily surrendered income during survey proceedings and that surrendered income was subsequently included in the return, there is no addition by the AO on that score. Explanations 5 and 5A, which address imposition of penalty even where income is declared in a return, apply specifically to search cases and are not attracted to survey cases. Consequently, in absence of any addition or disallowance by the AO in respect of the surrendered amount, the statutory scheme does not permit treating that voluntarily declared income as the basis for penalty under section 271(1)(c). The decision in MAK Data Pvt. Ltd. was rendered in a different factual matrix where the assessed income exceeded the income returned, and therefore is distinguishable and inapplicable to the present facts. [Paras 3, 5, 6]

Penalty under section 271(1)(c) cannot be imposed on the income voluntarily surrendered during survey and included in the return where no addition was made by the Assessing Officer; penalty deleted.

Final Conclusion: Appeal allowed; penalty imposed under section 271(1)(c) set aside in respect of income voluntarily surrendered during survey and declared in the return for Assessment Year 2013-14.

Revisional jurisdiction under section 263 - Deduction under section 80IC - profits and gains "derived from" eligible undertaking - First degree nexus test for profit linked deductions - Plausable view / sustainability of AO's decision - Netting of interest (net interest) for computing eligible profits - Export incentives as cost subsidy (no profit element) for deduction purposes - Erroneous and prejudicial to the interests of revenue

Revisional jurisdiction under section 263 - Deduction under section 80IC - profits and gains "derived from" eligible undertaking - First degree nexus test for profit linked deductions - Plausable view / sustainability of AO's decision - Validity of the Pr. CIT's exercise of revisional powers under section 263 to set aside the assessment for AY 2015-16 on the ground that the AO wrongly allowed deduction under section 80IC in respect of certain "other income" and export incentives. - HELD THAT: - The Tribunal found that the Assessing Officer had made enquiries, considered the assessee's explanations and applied his mind before allowing the deduction under section 80IC. On the substance, items of "other income" (interest on security deposits, foreign exchange differences, write backs of provisions/unclaimed balances, insurance receipts) and export incentives were held on identical facts by a coordinate bench in the assessee's own earlier appeal to qualify as profits and gains "derived from" the eligible undertaking or, at least, to represent a plausible view sustainable in law. The coordinate bench reasoning-that (i) interest on mandatory security deposits bears a direct nexus with the unit's operations (alternatively net interest may be considered), (ii) forex fluctuation gains arise directly from export/import transactions, (iii) write backs and insurance receipts relate to the business of the eligible unit, and (iv) export incentives operate as subsidies reducing cost of production and lack a profit element-demonstrates that the AO's conclusion was not an unsustainable legal view. In these circumstances the jurisdictional precondition for invoking section 263, namely that the assessment order is erroneous insofar as it is prejudicial to the revenue, was absent. Therefore the Pr. CIT's setting aside of the assessment was without jurisdiction and liable to be quashed. [Paras 8, 11, 12]

The order of the Pr. CIT passed under section 263 setting aside the assessment for AY 2015-16 is quashed; the action under section 263 was without jurisdiction because the AO's view on allowance of deduction under section 80IC was a plausible view supported by precedent.

Final Conclusion: The assessee's appeal is allowed; the order of the Pr. CIT under section 263 is quashed and the assessment order passed under section 143(3) for AY 2015-16 is restored.

Reopening under section 147 - reasons to believe - non-application of mind - annual information return (AIR) reliance - live link between material and belief - undated reasons and approval - quashing reassessment

Reopening under section 147 - reasons to believe - non-application of mind - annual information return (AIR) reliance - live link between material and belief - undated reasons and approval - quashing reassessment - Validity of reassessment proceedings initiated by notice under section 148 read with section 147 - HELD THAT: - The Tribunal held that the reasons recorded by the Assessing Officer were based solely on AIR information of cash deposits and contained material factual errors - viz., stating deposits only in ICICI Bank when deposits were in two accounts and recording that no return had been filed though the assessee had filed return for the year. The reasons were undated and the AO had neither verified bank statements nor otherwise applied independent mind to the material before forming belief. The Principal CIT's approval was also recorded mechanically without application of mind. There was therefore no tangible, cogent or relevant material demonstrating a live link between the information and a belief that income had escaped assessment; at best the notings amounted to suspicion. Reliance on AIR information without examination of its contents or corroborative material, and issuance of undated and factually incorrect reasons, vitiate the formation of the requisite belief for reopening. Applying these principles, the Tribunal found the reassessment unlawful and liable to be quashed, and accordingly did not decide the remaining merits which became academic. [Paras 12, 13, 14, 18, 20]

Reopening was invalid for want of application of mind and on the basis of factually incorrect and undated reasons/approval; reassessment order quashed.

Final Conclusion: The appeal is allowed on the preliminary jurisdictional ground: the reassessment initiated by notice under section 148/147 was quashed for lack of application of mind, reliance on unverified AIR material and factually incorrect/undated reasons and approval; other grounds left undecided as academic.

Deduction under section 80IA(8) of the Income-tax Act - computation of book profit under section 115JB - additional depreciation under section 32(1)(iia) - classification and rate of depreciation for railway sidings - application of binding precedents in assessee's own case

Deduction under section 80IA(8) of the Income-tax Act - application of binding precedents in assessee's own case - Validity of deletion of disallowance claimed by the Assessing Officer on account of alleged excess deduction under section 80IA(8). - HELD THAT: - The Tribunal examined the recurring controversy regarding computation of market price of power transferred for captive use and the exclusion of electricity duty/cess components by the Assessing Officer. Relying on co ordinate Bench decisions in the assessee's own case and the confirmation by the jurisdictional High Court, the Tribunal held that those binding precedents require acceptance of the assessee's method of treating the transfer price for captive consumption and the resultant deduction under section 80IA(8). In view of those prior decisions, the Revenue's ground challenging the CIT(A)'s deletion is dismissed. [Paras 11]

Revenue's ground challenging deletion of the disallowance under section 80IA(8) is dismissed.

Computation of book profit under section 115JB - application of binding precedents in assessee's own case - Validity of deletion of additions made while computing book profit under section 115JB (disallowance of depreciation and other adjustments). - HELD THAT: - The Tribunal followed the reasoning adopted by the CIT(A) and prior co ordinate Bench decisions in the assessee's own case, which applied the principle in Apollo Tyres that the Assessing Officer's power to adjust profits is limited to the adjustments specified in the Explanation to section 115JB. The Tribunal found no material to take a contrary view and accordingly upheld the deletion of the additions for computing book profit. [Paras 17]

Revenue's ground disputing deletion of additions in computation of book profit under section 115JB is dismissed.

Additional depreciation under section 32(1)(iia) - application of binding precedents in assessee's own case - Allowability of additional depreciation claimed on plant and machinery used for power generation under section 32(1)(iia). - HELD THAT: - Having regard to prior co ordinate Bench decisions in the assessee's own case and other Tribunal precedents holding that generation of electricity is akin to manufacture and that electrical installations and power plant are eligible for additional depreciation, the Tribunal allowed the assessee's grounds. The Assessing Officer's and CIT(A)'s conclusions to the contrary were set aside in view of those binding precedents. [Paras 24]

Assessee's appeal on disallowance of additional depreciation under section 32(1)(iia) is allowed.

Classification and rate of depreciation for railway sidings - Whether the claim to treat railway sidings as plant and machinery (at higher rate of depreciation) instead of factory building should be adjudicated by the Assessing Officer. - HELD THAT: - The assessee contended that railway sidings were used for business purposes (transporting raw material/machinery) and that the item was inadvertently shown as factory building in the books. The Assessing Officer had not recorded any finding on the claim raised during assessment. Applying principles permitting fresh claims where appropriate and relying on authority permitting appellate-stage claims to be considered, the Tribunal held that the matter requires verification of records and factual adjudication by the Assessing Officer. Accordingly the issue is remanded for fresh consideration with opportunity to the assessee to be heard. [Paras 29]

Grounds relating to enhancement of depreciation rate for railway sidings are remanded to the Assessing Officer for fresh consideration and appropriate decision after giving the assessee an opportunity of being heard.

Final Conclusion: For Assessment Year 2011-12 the Tribunal (i) dismissed the Revenue's appeals challenging deletion of the section 80IA(8) disallowance and deletion of additions in computation of book profit under section 115JB, (ii) allowed the assessee's appeal on additional depreciation under section 32(1)(iia), and (iii) remanded the claim for higher depreciation on railway sidings to the Assessing Officer for fresh adjudication.

Exemption u/s 10(38) - conversion of investments into stock-in-trade - taxability under section 45(2) - scope of revision under section 263 and de novo adjudication by Assessing Officer

Exemption u/s 10(38) - conversion of investments into stock-in-trade - taxability under section 45(2) - Allowability of exemption under section 10(38) in respect of long term capital gains computed under section 45(2) where securities held as investments were converted into stock in trade. - HELD THAT: - The Tribunal found as an undisputed fact that certain shares were held as investments prior to 30.11.2007 and that on 30.11.2007 the remaining investments were converted into stock in trade. The difference between market value as on the date of conversion and the cost of those investments was computed under section 45(2) as long term capital gains. The Assessing Officer had denied exemption relying on the revisional view, but on a de novo consideration the Commissioner (Appeals) accepted the working and allowed exemption under section 10(38). The Tribunal observed there was no dispute about the computation under section 45(2) and that the characterization of securities before and after conversion was established on the record. Applying the statutory scheme, the Tribunal upheld the allowance of exemption under section 10(38) to the extent claimed, finding no illegality in the Commissioner (Appeals)'s conclusion.

Exemption under section 10(38) was held allowable in respect of the long term capital gains computed under section 45(2) and the Commissioner (Appeals)'s order granting the exemption was sustained.

Scope of revision under section 263 and de novo adjudication by Assessing Officer - Whether the Assessing Officer was precluded from re examining the claim on merits after the assessment was set aside in revision proceedings. - HELD THAT: - The Tribunal examined the revision order and concluded that the revisional authority had set aside the assessment directing the Assessing Officer to re do the assessment after examination of documentary evidence and after giving the assessee opportunity of being heard. The revisional order did not finally adjudicate the exemption claim against the assessee; it left the matter open for de novo consideration by the Assessing Officer. In view of that, the Commissioner (Appeals) properly addressed the merits and accepted the claimed exemption. The Tribunal found no error in treating the revision as leaving the question open for fresh adjudication and therefore no basis to interfere with the appellate conclusion.

The revisional order under section 263 did not operate as a final negative finding preventing de novo examination; the Assessing Officer and appellate authority were entitled to examine the claim on merits and the appellate finding was upheld.

Final Conclusion: The Revenue's appeal was dismissed; the Tribunal upheld the Commissioner (Appeals)'s allowance of exemption under section 10(38) in respect of long term capital gains computed under section 45(2) following conversion of investments into stock in trade, and rejected the contention that the revisional order precluded de novo examination.

Reopening of assessment under Section 147/148 - ex parte assessment under Section 144 - disallowance of bogus purchases - disallowance limited to profit element - reliance on search/investigation reports for formation of belief - consistent bench view fixing disallowance at 6% of disputed purchases

Reopening of assessment under Section 147/148 - ex parte assessment under Section 144 - reliance on search/investigation reports for formation of belief - Validity of reopening the assessments and consequential completion of assessment ex parte - HELD THAT: - The Assessing Officer reopened the assessments on the basis of information from the Directorate of Investigation that the seller (group managed by Bhanwarlal Jain) was providing accommodation entries and that the assessee was a beneficiary. Notices under Section 148 were issued and served and the assessee failed to participate in proceedings or file submissions; the authorised representative stated he was not authorised to represent. The Tribunal applied the jurisdictional High Court precedent (Priya Blue Industries) holding that where investigation/inquiries furnish material grounding the AO's belief that income has escaped assessment due to accommodation entries and non-disclosure, reopening is justified. In these circumstances the ex parte completion under Section 144 was sustained given non-appearance and absence of rebuttal to the recorded reasons for reopening. [Paras 8]

Reopening under Section 147/148 and the ex parte assessments under Section 144 are upheld.

Disallowance of bogus purchases - disallowance limited to profit element - consistent bench view fixing disallowance at 6% of disputed purchases - Extent of disallowance where purchases are shown from a party alleged to be an accommodation-entry operator - HELD THAT: - Though the AO disallowed 100% of purchases from the alleged hawala dealer group relying on third-party information, the books were not rejected and sales were not disputed. The Tribunal found the ratio in M/s N.K. Proteins Ltd. inapplicable on these facts and reiterated the settled position in the Gujarat decisions that only the profit element embedded in such disputed purchases is generally to be disallowed to prevent revenue leakage while avoiding confiscation of genuine business turnover. Having regard to the assessee's low declared gross and net margins and consistent approaches adopted by this Bench in similar cases involving the same group, the Tribunal exercised its discretion to restrict the disallowance to a fixed bench-determined percentage of the impugned purchases, namely 6%. This approach balances prevention of tax evasion with protection of bona fide business turnover where books remain prima facie intact and sales are acknowledged. [Paras 9, 10, 12]

Addition confirmed only to the extent of 6% of the disputed purchases; the 100% disallowance is reduced accordingly.

Final Conclusion: The appeals are partly allowed: the reopening and ex parte assessments are sustained, but the disallowance of purchases from the alleged accommodation-entry operators is restricted to 6% of the impugned purchases for both AY 2007-08 and AY 2009-10.

Disallowance under section 36(1)(va) - allowability under section 43B - scope of adjustments under section 143(1)(a)(iv) - retrospective effect of Explanation 2 to section 36(1)(va) - due date for filing return under section 139(1)

Disallowance under section 36(1)(va) - scope of adjustments under section 143(1)(a)(iv) - due date for filing return under section 139(1) - Whether the disallowance made in processing under section 143(1) of employees' contributions to PF and ESIC (reported as paid after the statutory 'due date' but paid before the due date for filing the return under section 139(1)) was justified. - HELD THAT: - The Tribunal accepted the assessee's case that the employee contributions, though deposited after the statutory 'due date' referred to in the tax-audit report, were paid before the due date for filing the return under section 139(1). Relying on the reasoning in a Coordinate Bench decision, the Tribunal held that the auditor's report of payment dates in Form 3CD is a factual reporting and does not by itself amount to a disallowance under section 143(1)(a)(iv). Where payments are made before the return filing due date, the judicial view that the 'due date' in Explanation to section 36(1)(va) is not decisive for computation of income in such circumstances was applied; consequently the processing adjustment in the intimation was vitiated and required deletion. The Tribunal therefore set aside the CIT(A)'s confirmation of the disallowance and directed deletion of the adjustment. [Paras 10, 11]

The disallowance in processing under section 143(1) in respect of employees' PF and ESIC contributions was deleted and the ground of appeal in favour of the assessee allowed.

Retrospective effect of Explanation 2 to section 36(1)(va) - allowability under section 43B - Whether the amendment (Explanation 2 to section 36(1)(va)) introduced by Finance Act, 2021 w.e.f. 1-4-2021 applies to the assessment year 2018-19. - HELD THAT: - The Tribunal examined the temporal application of the Finance Act, 2021 amendment and observed that the Explanation was introduced with effect from 1-4-2021. The Tribunal held that the amendment, which could cast additional liability on the assessee, is not applicable retrospectively to A.Y. 2018-19. In consequence, the law as prevailing for the relevant assessment year governs the allowability of contributions and the post-2021 Explanation does not alter the result in respect of those earlier years. [Paras 12]

The Explanation inserted by Finance Act, 2021 w.e.f. 1-4-2021 was not applied to A.Y. 2018-19 and the amendment was held not to affect the assessment year in question.

Final Conclusion: The Tribunal allowed the appeals, set aside the CIT(A)'s confirmation of disallowance, directed deletion of the impugned additions in respect of employees' PF and ESIC contributions for the stated assessment years, and held that the Finance Act 2021 amendment (Explanation 2 to section 36(1)(va)) does not apply to A.Y. 2018-19.

Revision of assessment as erroneous and prejudicial to the interests of revenue - Obligation to make inquiries or verification before passing assessment - Exercise of power under Section 263 read with Explanation 2 - Assessment framed under Section 143(3) - Where Assessing Officer takes a possible view - Insufficiency of suspicion to invoke revisionary powers - Principle of natural justice - opportunity to furnish further evidence

Revision of assessment as erroneous and prejudicial to the interests of revenue - Obligation to make inquiries or verification before passing assessment - Exercise of power under Section 263 read with Explanation 2 - Where Assessing Officer takes a possible view - Insufficiency of suspicion to invoke revisionary powers - Whether the Principal Commissioner of Income-tax was justified in invoking his power under Section 263 to set aside the assessment order dated 31.05.2017 for AY 2015-16 on the ground that the Assessing Officer failed to make requisite inquiries and that the assessee did not furnish documentary evidence. - HELD THAT: - The Tribunal examined whether the twin conditions for exercise of jurisdiction under Section 263 - that the order is erroneous and prejudicial to the interests of revenue - were satisfied. Explanation 2(a) declares an order erroneous if it is passed without making inquiries or verification which should have been made. The record, however, shows that the Assessing Officer had issued a questionnaire along with notice under Section 142(1), received the assessee's replies, and issued notices under Section 133(6) to verify parties; documentary material and confirmations were placed on record during assessment and were before the Assessing Officer. The Principal CIT's conclusion rested on perceived deficiencies and suspicion - in particular that some documentary proof (e.g., specific bank statement pages showing repayments) was not produced later - and on an alternative view about source and inter-family transfers. The Tribunal held that where the Assessing Officer has made inquiries, considered the evidence and taken a view which is permissible in law, mere disagreement by the Principal CIT or suspicion does not justify invoking Section 263. Revision is warranted only where there is a blatant failure to make necessary inquiries resulting in prejudice to revenue; that threshold was not shown on the facts. The Tribunal therefore found that the Pr.CIT had not demonstrated actual prejudice to revenue or a manifest lack of inquiry by the AO sufficient to warrant revision, and that setting aside the assessment on such basis was unjustified. [Paras 8, 9]

The Pr.CIT's order under Section 263 setting aside the assessment was held to be unjustified and is set aside; the assessment dated 31.05.2017 is restored.

Final Conclusion: The appeal is allowed: the Tribunal set aside the Principal CIT's order under Section 263 for AY 2015-16 and restored the assessment passed under Section 143(3), holding that the Assessing Officer had made requisite inquiries and that mere suspicion or a different view by the Pr.CIT did not establish an erroneous and prejudicial order warranting revision.

Treatment of on money received on sale of agricultural land - admissibility and evidentiary value of loose sheets / 'dumb documents' - application of deeming provisions for unexplained income and unexplained expenditure (Sections 69, 69A, 69C) - telescoping of additions against admitted/disclosed undisclosed income - requirement of corroborative evidence before making additions post search

Treatment of on money received on sale of agricultural land - requirement of disclosure in return to claim exemption - Addition of Rs.2.49 crores as income on account of on money received from sale of land upheld - HELD THAT: - The Tribunal accepted that the assessee admitted receipt of on money and loose sheets seized corroborated cash consideration entries. Although agricultural land is generally outside the purview of asset taxability under the definition relied upon by the assessee, the Tribunal rejected the contention that on money is an exempt capital receipt in the facts of this case because the assessee did not disclose the sale consideration (including on money) in the return for the relevant year. In these circumstances and having regard to admissions and incriminating material found during search, the Tribunal held that the explanation that the on money was an exempt receipt could not be accepted and sustained the additions made by the AO and affirmed by the CIT(A).

Upheld addition of Rs.2.49 crores as income from on money received on sale of land.

Application of Section 69 to income from unregistered chit and finance business - admissibility and evidentiary value of seized loose sheets - Addition of Rs.2,26,89,820 as unexplained income from unregistered chit and finance business sustained - HELD THAT: - Loose sheets seized during search recorded chit/finance transactions and the assessee admitted running chit/finance business and quantified outstanding loans; he also offered additional income but returned a lesser amount. The Tribunal noted that the assessee failed to explain or reconcile the seized entries and outstanding loans fully and that the CIT(A) had correctly allowed telescoping to the extent of income offered in the return but sustained the balance as unexplained income. On the evidence and admissions in this case, the Tribunal found no error in upholding the addition under Section 69.

Sustained addition of Rs.2,26,89,820 as unexplained income from chit and finance business.

Unexplained expenditure under Section 69C - telescoping of additions against admitted undisclosed income - Addition of Rs.15 lakhs as unexplained expenditure for gifts to beneficiaries deleted by telescoping against income admitted from chit/finance business - HELD THAT: - The assessee admitted Rs.15 lakhs in respect of gift/assistance and no independent evidence was produced by the Department to sustain the addition. The Tribunal held that, in view of the assessee's admission of undisclosed income from chit and finance business, the expenditure could be explained by that source. Consequently the AO was directed to telescope the expenditure against the additional income offered and delete the addition under Section 69C.

Directed telescoping of Rs.15 lakhs against admitted undisclosed income and deleted the addition under Section 69C.

Unexplained expenditure under Section 69C - alleged cash distribution at election time - requirement of corroborative evidence to sustain additions based on seized material and electronic messages - inadmissibility of speculative inferences from WhatsApp/SMS without corroboration - Addition of Rs.17 crores as unexplained expenditure for alleged distribution of cash to voters deleted - HELD THAT: - The AO's substantive addition rested on seized identity card bundles and WhatsApp messages which the AO interpreted as coded records of cash distribution. The Tribunal held that the WhatsApp messages and loose seized bundles, without corroborative evidence linking source and destiny of cash, were 'dumb' or inconclusive documents and could not sustain a high value addition. The Tribunal also noted absence of independent evidence (witnesses, beneficiaries, monitoring agency complaints) and that the assessee did not contest the election, making the inference speculative. On these grounds the Tribunal found the AO's conclusion to be based on suspicion and surmise and set aside the addition.

Deleted the Rs.17 crores addition under Section 69C for alleged cash distribution to voters.

Protective addition in hands of another assessee where substantive addition is deleted - Protective addition of Rs.17 crores made in hands of the Trust dismissed as untenable after deletion of substantive addition in hands of Mr. A. Johnkumar - HELD THAT: - The Revenue's protective addition in the hands of M/s. Johnkumar Trust was maintained to protect departmental interest. The Tribunal observed that since it deleted the substantive addition in the hands of the principal assessee for the same allegations and reasons, the protective addition could not be sustained. Accordingly the AO was directed to delete the protective addition in the hands of the Trust.

Dismissed the protective addition of Rs.17 crores made in the hands of the Trust.

Final Conclusion: For AY 2017-18 the Tribunal partly allowed the assessee's appeal: it sustained the addition relating to on money from sale of land and the unexplained income from chit/finance business (after allowing telescoping to the extent admitted), deleted the additions for election time cash distribution and directed telescoping of Rs.15 lakhs of gifts against admitted undisclosed income. The Revenue's appeal against deletion of the protective addition was dismissed.

Compulsory scrutiny - survey under section 133A - impounding of books of accounts - authority to initiate compulsory scrutiny - binding CBDT instructions for selection of scrutiny cases - jurisdiction to issue notice under section 143(2)

Compulsory scrutiny - survey under section 133A - impounding of books of accounts - binding CBDT instructions for selection of scrutiny cases - jurisdiction to issue notice under section 143(2) - Assessing Officer's initiation of compulsory scrutiny by issuing notice under section 143(2) where the survey under section 133A did not involve impounding of books during the survey, the books were impounded later under section 131 by an officer not authorised for the survey, and no prior approval was obtained in contravention of CBDT criteria. - HELD THAT: - The Tribunal found as an undisputed factual matrix that a survey under section 133A took place on 6.1.2012, that the authorised survey team was different from the Assessing Officer who later issued summons under section 131 and impounded books on 27.1.2012, and that the Assessing Officer had not been authorised to conduct the survey. Clause (d) of para 3 of the CBDT instruction (No.10/2013 dated 5.8.2013 as amended) makes all assessments pertaining to survey under section 133A compulsorily scrutinisable except where there are no impounded books/documents during the survey and the returned income (excluding any disclosure made during survey) is not less than the returned income of the preceding year. The Tribunal held that the exception in the instruction expressly requires impounding to have occurred during the survey proceedings under section 133A; impounding under section 131 by an officer who was not part of the authorised survey team cannot be equated with impounding in the course of a section 133A survey. Reliance on authoritative decisions (including SKY View Consultants and Moolchand Salecha) supported the distinction between powers under section 133A and powers under section 131, and the principle that impounding/seizure during survey is impermissible under section 133A(4). Further, the notice under section 143(2) was issued on 11.6.2013, prior to the CBDT instruction dated 5.8.2013, and the Assessing Officer did not obtain prior approval required for manual compulsory selection. Applying the unambiguous criteria in the CBDT instructions to the material facts, the Tribunal concluded that the mandatory conditions for treating the case as one of compulsory scrutiny were not satisfied; accordingly the Assessing Officer lacked authority to initiate compulsory scrutiny and the assessment framed was vitiated for want of jurisdiction.

Initiation of compulsory scrutiny by issuing notice under section 143(2) was invalid for want of jurisdiction; the assessment is quashed and the additional ground is allowed.

Final Conclusion: The Tribunal allowed the additional ground: because the mandatory CBDT criteria for compulsory scrutiny were not satisfied (no impounding during the section 133A survey, impounding was under section 131 by an unauthorised officer, and no prior approval was obtained), the Assessing Officer lacked authority to issue the section 143(2) notice and the assessment is vitiated and quashed.

Distinction between industrial grade and food grade Hexane - chemical sample analysis and certification by CRCL - use restriction based on import declaration - judicial direction for affidavit and production of test reports

Distinction between industrial grade and food grade Hexane - chemical sample analysis and certification by CRCL - use restriction based on import declaration - Whether the Hexane Liquid Chemical imported as for Industrial purpose is in fact Food Grade Hexane and whether further verification is required - HELD THAT: - The court noted competing contentions: the writ applicants contend the consignments were imported for industrial use and, if the material is to be used for food purposes, separate legal formalities would be required; the respondents assert that though imported as industrial Hexane, analysis by CRCL, Vadodara, certified the samples to be Food Grade Hexane and that the two types are different. The court found that it was not clear whether the chemical is inherently dual-use or two distinct products and that the basis of CRCL's conclusion must be examined. Rather than deciding the factual or technical question on the papers, the court directed CRCL to file an affidavit by a responsible officer accompanied by the relevant test reports explaining the basis for its certification and placed the matter for further hearing. The writ applicants gave an undertaking to use the chemical only for industrial purposes if the chemical is capable of both uses. [Paras 6, 7, 8]

Matter remanded for factual and technical verification; CRCL directed to file an affidavit with test reports and documents to be furnished to the petitioners' counsel, and the matter listed for hearing on 05.05.2022.

Final Conclusion: Proceedings adjourned for further consideration after directed production of CRCL's affidavit and test reports; interim undertaking given by the writ applicants regarding industrial use, and matter listed on 05.05.2022.

Duomatic Principle - Application of Duomatic Principle by acquiescence of members - Scope of appellate review under Section 10 F of the Companies Act, 1956 - Distinction between civil title disputes (inheritance/will) and proceedings under Sections 397/398 for oppression and mismanagement - Limits on judicial directions contrary to statutory provisions regarding appointment and continuance of directors - Prohibition on exemption from age limit for managerial persons under Section 196 and Part I of Schedule V of Companies Act, 2013 - Mandatory retirement/rotation of directors under Section 152(6) read with Articles 135 and 136 of the Articles of Association

Scope of appellate review under Section 10 F of the Companies Act, 1956 - Whether the High Court, in entertaining the Company Appeal under Section 10 F, was entitled to re appreciate evidence and substitute its own factual findings for those of the Company Law Board. - HELD THAT: - The High Court exceeded the limited appellate jurisdiction conferred by Section 10 F by re appraising the entire evidence and recording independent factual findings. Reliance on precedent establishes that an appellate court ordinarily cannot substitute its discretion for that of the Company Law Board; the High Court's elaborate factual analysis was therefore impermissible and constituted error. [Paras 24]

High Court erred by re appraising evidence beyond the appellate scope under Section 10 F; its order is set aside to the extent it substituted its own factual conclusions.

Duomatic Principle - Application of Duomatic Principle by acquiescence of members - Whether the resignation of G.V. Rao was effectively withdrawn and whether the Duomatic Principle applied to validate his continuance as director. - HELD THAT: - The Court applied the Duomatic Principle - that unanimous assent of members may validate actions which could otherwise require formal resolution - and held that, absent any allegation of fraud or dishonesty, the facts showed respondent No.1 acquiesced in Mr. G.V. Rao's continuation. Documentary evidence and conduct (including subsequent letters and participation in meetings without protest) established that the resignation was not accepted and Rao continued as director; consequently the High Court's contrary finding was erroneous. [Paras 25, 26, 30, 31, 32]

G.V. Rao's resignation was effectively withdrawn; the Duomatic Principle applies and he continued as a director.

Ratification by general meeting - Validity of board meetings in light of acquiescence and subsequent AGM ratification - Validity of the Board Meetings dated 09.04.2013, 10.04.2013 and 11.04.2013 and the effect of their subsequent ratification at the AGM. - HELD THAT: - Having held that Mr. G.V. Rao continued as director by acquiescence, the Court rejected the High Court's reasons for invalidating the said Board Meetings. The subsequent ratification of those meetings at the 60th AGM and the conduct of respondent No.1 (including acceptance of appointments) precluded her from taking an inconsistent stand. The High Court erred in refusing to recognise the ratification and in treating the meetings as void. [Paras 33, 34]

The Board Meetings of 09.04.2013, 10.04.2013 and 11.04.2013 are not invalid on the grounds relied upon by the High Court; ratification by the AGM and acquiescence render the challenge unsustainable.

Distinction between civil title disputes (inheritance/will) and proceedings under Sections 397/398 for oppression and mismanagement - Whether the High Court could adjudicate the inheritance/transfer of shares claimed under competing wills while deciding a petition under Sections 397/398. - HELD THAT: - The Court held that disputes as to succession and title to shares, including competing wills, are civil questions of title and not matters for determination in proceedings under Sections 397/398. The High Court's application of Hindu Succession principles to award partial transmission pending the civil suit was beyond the scope of company oppression/mismanagement jurisdiction and therefore impermissible. [Paras 16, 37, 38]

High Court erred in adjudicating inheritance and ordering transmission of shares; such title disputes belong to the civil court and should not have been decided in the company petition appeal.

Prohibition on exemption from age limit for managerial persons under Section 196 and Part I of Schedule V of Companies Act, 2013 - Mandatory retirement/rotation of directors under Section 152(6) read with Articles 135 and 136 - Whether the High Court validly directed exemptions from statutory provisions governing age limit for managerial persons and ordered directors to hold office for three years contrary to retirement/rotation provisions. - HELD THAT: - The impugned directions contravened the statutory scheme. Section 196 and Part I of Schedule V prescribe age limits and the manner of permitting appointment beyond seventy years by special resolution; the High Court's direction excluding applicability of those provisions to respondent No.1 was unlawful. Likewise, the High Court's direction permitting directors to hold office for three years irrespective of the retirement/rotation provisions violated Section 152(6) and Articles 135 and 136 of the AoA. [Paras 35, 36]

Directions of the High Court exempting statutory age limits and fixing three year tenure are illegal and contrary to the Companies Act, 2013 and the Articles of Association.

Requirement for proof of oppression/mismanagement under Sections 397/398 - Whether respondent No.1 established oppression or mismanagement warranting relief under Sections 397/398. - HELD THAT: - The Court reviewed statutory tests for relief under Section 397 (need for affairs conducted prejudicial to public interest or oppressive conduct and, in some cases, just and equitable winding up) and observed there was no evidence that the company's affairs were being conducted prejudicially or that mismanagement warranted winding up or other reliefs under Sections 397/398. The High Court's finding of oppression was unsupported by material and thus unsustainable. [Paras 18, 39, 40]

No case of oppression or mismanagement was made out by respondent No.1; the High Court erred in so holding.

Restoration of Company Law Board order with terms to settle litigation - Final disposition of appeals and the reliefs to be granted in place of the High Court's order. - HELD THAT: - The Supreme Court set aside the High Court's order and restored the CLB order dated 30.05.2016, subject to specified conditions to achieve an amicable settlement and to put an end to litigation. The Court imposed terms including appointment of respondent No.1 as Emeritus Consultant, specified payments and facilities to her, and recorded the parties' undertakings to put a quietus to litigation. The appeals were disposed accordingly. [Paras 42, 43]

Impugned High Court order set aside; CLB order restored with added conditions and the appeals disposed of on those terms.

Final Conclusion: The High Court's order dated 17.11.2017 is set aside insofar as it re appraised evidence, adjudicated civil title to shares, and issued directions contrary to the Companies Act, 2013; the Company Law Board's order dated 30.05.2016 is restored with specified conditions to settle the dispute and to put an end to the litigation.

Restoration of company name - strike off proceedings under Section 248 - application under Section 252(3) of the Companies Act, 2013 - going concern - consequential actions on restoration

Restoration of company name - application under Section 252(3) of the Companies Act, 2013 - strike off proceedings under Section 248 - going concern - consequential actions on restoration - Whether the name of YSK Infra Projects Limited should be restored to the Register of Companies - HELD THAT: - The Tribunal found that the company had been identified and struck off under the strike off procedure for default in filing annual returns and financial statements for multiple years pursuant to the statutory process. The company thereafter filed the present application under Section 252(3) and produced audited financial statements and annual returns for the defaulting periods; the Registrar acknowledged receipt and reported that the company had generated revenue and produced bank statements and income tax filings for the later period. On the material before it the Tribunal concluded that the company was in existence and was a going concern. Exercising the powers under Section 252 and Rule 87A, the Tribunal directed restoration of the company's name and specified consequential actions to be taken by the Registrar and obligations on the company (filing of outstanding statutory documents with prescribed fees/fines, payment of costs, delivery of certified copy of the order), while reserving the Registrar's right to take lawful action in respect of any other violations. [Paras 6, 7, 8]

Name of the company restored in the Register of Companies; directions issued for consequential actions and compliance by the company.

Final Conclusion: The Tribunal allowed the application under Section 252(3), restored the company's name as a going concern, directed the Registrar to effect all consequential actions and ordered the company to file outstanding statutory documents, pay costs and comply with the directions; the Registrar remains free to take action for any other violations in accordance with law.

Moratorium under Section 14(1)(c) of the IBC - provisions of this Code to override other laws (Section 238 of the IBC) - completion of statutory sale under Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 - effect of partial payment on transfer of title in a statutory auction - allegation of mala fide initiation of insolvency proceedings and Section 65 of the IBC

Completion of statutory sale under Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 - effect of partial payment on transfer of title in a statutory auction - Whether the SARFAESI sale in question was complete prior to commencement of CIRP or only on payment of the full sale consideration on 8 March 2019. - HELD THAT: - The Court held that a statutory sale under the SARFAESI scheme is governed by Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 and is complete only when the auction purchaser makes the entire payment and the authorised officer issues the sale certificate in the prescribed form. Although precedents on sale and partial payment under general transfer law examine the intention of the parties, a statutory sale under SARFAESI requires completion in accordance with the Rules; the balance was accepted by the bank on 8 March 2019, which falls after initiation of CIRP on 3 January 2019. Therefore the sale could not be treated as complete prior to commencement of CIRP merely because part payment had been received earlier. [Paras 32, 33, 34, 35]

The sale stood completed only on 8 March 2019 upon full payment and issuance of the sale certificate; it was not complete before commencement of CIRP.

Moratorium under Section 14(1)(c) of the IBC - provisions of this Code to override other laws (Section 238 of the IBC) - Whether actions to foreclose, recover or enforce security under the SARFAESI Act could be continued after commencement of CIRP and imposition of moratorium. - HELD THAT: - The Court reiterated that Section 14(1)(c) imposes a complete prohibition on any action to foreclose, recover or enforce security interests created by the corporate debtor, expressly including actions under the SARFAESI Act, once CIRP commences. Coupled with Section 238 which gives the IBC overriding effect over inconsistent laws, the bank could not lawfully continue SARFAESI proceedings or realise security after the moratorium took effect. The continuation of the SARFAESI process and acceptance of the balance consideration after initiation of CIRP was therefore impermissible. [Paras 23, 24, 25, 26, 35]

The moratorium under Section 14(1)(c), read with Section 238, prohibited continuation of SARFAESI action after CIRP commencement; the bank could not lawfully proceed.

Allegation of mala fide initiation of insolvency proceedings - mala fide initiation of insolvency proceedings and Section 65 of the IBC - Whether the petition under Section 10 of the IBC filed by the ex promoter was mala fide and therefore liable to be dismissed under Section 65. - HELD THAT: - The Court found no merit in the contention that the insolvency petition was mala fide. The petition specifically disclosed the actions taken by the bank, and the allegation of mala fide was not established. The Court also noted that remedies under Section 65 exist but observed that the bank had not pursued those specific remedies; pending proceedings regarding liquidation were not determinative of mala fide for the purpose of this challenge. [Paras 36]

No merit in the contention of mala fide initiation; allegation rejected.

Final Conclusion: The concurrent orders of the NCLT (15 July 2020) and NCLAT (26 March 2021) were upheld; the appeal is dismissed. Pending applications stand disposed of and there is no order as to costs.

Revival of Section 9 proceedings - settlement agreement - default for non-payment of TDS - pecuniary jurisdiction of the Adjudicating Authority - remedies under the Income Tax Act for TDS defaults - misuse of the Insolvency and Bankruptcy Code

Revival of Section 9 proceedings - settlement agreement - Admission of the Section 9 application where a composite settlement had been entered into and liberty to revive was limited to failure of settlement talks. - HELD THAT: - The Adjudicating Authority had earlier disposed of the Company Petition with liberty to revive only if settlement talks failed. The parties executed a composite settlement on the day following that order and the Supplementary Affidavit filed by the Corporate Debtor stated that the claims had been paid pursuant to the settlement. There was therefore no factual basis that settlement talks had failed such as would justify revival under the liberty granted. The Appellate Tribunal found that revival and admission of the Section 9 Application in these circumstances was not in accordance with the liberty previously granted and amounted to error in admitting the petition. [Paras 7, 9]

Revival and admission of the Section 9 Application was unsustainable because the settlement had been executed and revival was not justified under the earlier liberty.

Default for non-payment of TDS - pecuniary jurisdiction of the Adjudicating Authority - remedies under the Income Tax Act for TDS defaults - Whether non-payment of two TDS amounts constituted a default actionable under Section 9 and justified admission of the Section 9 Application. - HELD THAT: - The Adjudicating Authority admitted the Section 9 Application on the ground that two TDS amounts remained unpaid. The Appellate Tribunal held that non-payment of TDS falls within the consequences provided under the Income Tax Act and that such non-payment, in the factual matrix where the operational creditor's claim had otherwise been discharged under the settlement, was not a proper basis to invoke corporate insolvency resolution under Section 9. The Tribunal observed that it was not appropriate to treat the TDS shortfall as a standalone operational debt justifying initiation of insolvency proceedings, and that the process of the I&B Code could not be utilised for that purpose in the circumstances of the case. [Paras 10, 14]

Non-payment of the two TDS amounts did not warrant admission of the Section 9 Application and the Adjudicating Authority erred in treating such non-payment as a default justifying insolvency proceedings.

Misuse of the Insolvency and Bankruptcy Code - Whether the Operational Creditor misused the insolvency process by seeking revival of Section 9 for the TDS shortfall. - HELD THAT: - Having found that the settlement had been executed and that the TDS shortfall did not justify initiation of insolvency proceedings, the Tribunal concluded that the Operational Creditor had misused the I&B Code by seeking revival of the Section 9 Application on that basis. In consequence, the Tribunal allowed the appeal and directed a cost to be paid by the Operational Creditor to the Corporate Debtor. [Paras 9]

Operational Creditor misused the I&B Code; appeal allowed with costs payable by the Operational Creditor.

Final Conclusion: Appeal allowed. The Adjudicating Authority's order admitting the Section 9 Application is set aside on the grounds that revival was not justified after the parties' settlement and that non-payment of the two TDS amounts did not properly support initiation of insolvency proceedings; the Operational Creditor is directed to pay costs to the Corporate Debtor within one month.

Related Party - Financial Debt - Conversion of loan into equity - Committee of Creditors membership exclusion - Time value of money as prerequisite for financial debt

Related Party - Committee of Creditors membership exclusion - Whether the appellants are 'Related Parties' of the corporate debtor and thereby barred from representation, participation or voting in the Committee of Creditors. - HELD THAT: - The Tribunal found on the documentary record, including the MCA master data and the appellants' own earlier pleadings in M.A. 3182/2019, that the appellants held substantial shareholding (about 48%), were recorded as directors in MCA master data, and had acted in the day-to-day management of the corporate debtor. The Tribunal relied on the broad construction of 'related party' in the jurisprudence cited and on the statutory definition to conclude that the appellants fall within Section 5(24) of the Code. The Tribunal also noted that one appellant accepted notices, agendas and minutes of CoC meetings while described as a suspended director, which is inconsistent with a claim to be an independent financial creditor. In view of the appellants being related parties, the proviso to the statutory provision governing constitution and membership of the CoC operates to exclude their rights of representation, participation and voting in the CoC. [Paras 7, 8]

Appellants are 'Related Parties' of the corporate debtor and are excluded from representation, participation and voting in the Committee of Creditors.

Financial Debt - Conversion of loan into equity - Time value of money as prerequisite for financial debt - Whether the amounts advanced by the appellants qualify as 'Financial Debt' under the Code. - HELD THAT: - The Tribunal examined the nature of the payments and the contemporaneous corporate records, including board resolutions and notices evidencing approval of conversion of loan to equity and related documents. It observed that a payment of Rs.50 lakhs was made directly to SIDBI to discharge the corporate debtor's liability in furtherance of the appellants' aim to enhance their equity, and that documentary evidence showed conversion of the loan into equity. The Tribunal held that such advances were not made as a financial disbursement carrying the 'time value of money' characteristic required for treatment as 'financial debt' under Section 5(8). Given the conversion to equity and the appellants' intention and conduct to acquire equity, the claim could not be maintained as a financial debt. [Paras 8, 9]

The amounts advanced do not qualify as 'Financial Debt' and are treated as converted into equity; the appellants' claim as financial creditors does not survive.

Related Party - Financial Debt - Whether there are grounds to interfere with the Adjudicating Authority's order dismissing the application and treating the appellants as related parties whose claims are not financial debt. - HELD THAT: - Applying the foregoing findings - that the appellants were related parties on documentary and conduct-based grounds and that the alleged loan had been converted into equity and lacked characteristics of financial debt - the Tribunal found no infirmity in the Adjudicating Authority's conclusion. The appellants' inconsistent pleadings (asserting directorship in earlier proceedings and denying it in the challenge) and their conduct reinforced the factual findings. Having considered the evidence and legal principles, the Tribunal concluded there were no substantial grounds to interfere with the impugned order. [Paras 5, 10]

No interference is warranted; the Adjudicating Authority's order is affirmed and the appeal is dismissed.

Final Conclusion: The Tribunal affirms the Adjudicating Authority's order: the appellants are 'Related Parties', their advances are treated as converted into equity and not as 'Financial Debt', and there is no merit in the appeal which is dismissed.

Pre-existing dispute under the Insolvency and Bankruptcy Code - admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt and demand notice under Section 8 - sham or fictitious dispute - responsibility for Agency Debit Memos (ADMs) under IATA/airline ADM policy - requirement to supply supporting ADMs to contest claims

Pre-existing dispute under the Insolvency and Bankruptcy Code - requirement to supply supporting ADMs to contest claims - sham or fictitious dispute - Whether a bonafide pre-existing dispute existed between the parties sufficient to bar admission of the Section 9 application. - HELD THAT: - The Tribunal examined the correspondence and ADM policies relied upon by the parties. Although the Adjudicating Authority treated the email of 10.01.2018 as indicating a pre-existing dispute because ADMs were then not in possession of the Corporate Debtor, the record shows that copies and details of the ADMs were subsequently furnished by the Operational Creditor by emails dated 19.01.2018 and 24.03.2018, i.e., well before issuance of the demand notice under Section 8 dated 18.10.2019. The ADM policies of airlines (formulated pursuant to IATA regulation) place primary responsibility on the ticketing agent, and the ADMs in the present case were raised against the Operational Creditor's ticketing platform. The Tribunal held that the Corporate Debtor did not raise any substantive objection as to quality or timeliness of services before the Section 8 notice and that the contention of non-receipt of ADMs was not tenable given the emails supplying those documents. On these facts the Tribunal concluded that the purported dispute was a sham or fictitious dispute raised to avoid payment of the operational debt and therefore could not operate to deny admission of the Section 9 application. [Paras 11, 13, 14, 15, 16]

The purported pre-existing dispute was not bonafide; it was a sham dispute and therefore did not bar admission of the Section 9 application.

Final Conclusion: Impugned order rejecting the Section 9 application on the ground of a pre-existing dispute is set aside; the Section 9 application is admitted and the matter is remanded to the Adjudicating Authority to pass necessary orders, including consequential actions upon admission, within 15 days.

Existence of pre-existing dispute before receipt of demand notice - adjudicating authority's examination under Section 9 of the Insolvency and Bankruptcy Code - plausible contention requiring further investigation versus spurious defence

Existence of pre-existing dispute before receipt of demand notice - notice under Section 8 and requirement to raise dispute within statutory time - Whether there was a pre-existing dispute between the parties prior to receipt of the Section 8 demand notice - HELD THAT: - The Tribunal held that the documentary material relied upon by the appellant - principally email correspondence of September 2017 and the MOU dated August 2016 - did not demonstrate that a dispute existed prior to the receipt of the demand notice. The MOU's term having been subject to review as on 30.09.2016, and the invoices being raised between 10.03.2017 and 15.09.2018, meant the MOU had no nexus with the claimed invoices. The corporate debtor had not raised the alleged dispute in reply to the Section 8 notice. The Tribunal applied the legal test in Transmission Corporation of Andhra Pradesh Limited and Mobilox Innovations Pvt. Ltd. , emphasising that to be effective the dispute must be pre-existing and supported by evidence rather than being a belated or negotiating stance. The email exchanges showed correspondence on price and willingness to settle accounts rather than a clear, pre-existing contested claim; consequently the asserted dispute was found to be a patently feeble legal argument unsupported by evidence. [Paras 11, 12, 13]

No pre-existing dispute was established prior to the demand notice; the defence was held to be spurious and unsupported by evidence.

Adjudicating authority's examination under Section 9 of the Insolvency and Bankruptcy Code - plausible contention requiring further investigation not spurious - Whether the Adjudicating Authority erred in admitting the Section 9 application - HELD THAT: - Applying the principles in Mobilox Innovations Pvt. Ltd. and related authorities, the Tribunal observed that an adjudicating authority must admit a Section 9 application if the operational debt is shown to be due and payable and there is no pre-existing dispute. The record showed supply of goods under invoices, issuance and dishonour of three cheques, and no documentary evidence of a pre-existing dispute brought to the operational creditor's notice before the demand. The Tribunal found that the adjudicating authority correctly examined the material and that there was no plausible, non-frivolous contention warranting rejection of the application; opportunities to negotiate and proposals to settle did not convert into an antecedent dispute that would bar admission. [Paras 1, 6, 11, 13, 14]

The Adjudicating Authority did not err in admitting the Section 9 application; admission was proper in the absence of a demonstrated pre-existing dispute.

Final Conclusion: The appeal is dismissed; the admission order under Section 9 is upheld for lack of any established pre-existing dispute, and no order as to costs.

Operational Debt - Operational Creditor - Corporate Insolvency Resolution Process (CIRP) initiation - Default in repayment - Effect of Arbitral Award and finality after dismissal of Section 34 challenge and SLP - Appointment of Interim Resolution Professional - Moratorium under Section 14

Authorisation to institute proceedings - The application was filed by a duly authorised person on behalf of the Applicant. - HELD THAT: - The Tribunal examined the record and found a Board Resolution (annexed as Exhibit-2) authorising Shri Narendra Kumar to represent the Applicant in legal matters. The certified resolution dated 18.11.2019 established that the petition was instituted by an authorised signatory. The technical objection regarding want of authorization was therefore rejected. [Paras 14]

The contention that the application was not filed by a duly authorised person fails and is overruled.

Operational Debt - Operational Creditor - The claimed marketing fees and related claims fall within the definition of 'Operational Debt' and the Applicant qualifies as an 'Operational Creditor', including as assignee of ILPL's claims. - HELD THAT: - The Tribunal applied the statutory definitions in Section 5(21) and Section 5(20) of the Code and held that claims arising from provision of services (identification of prospective customers and marketing services) and security deposits made under the agreements are operational in nature. The Agreements between the parties evidenced a business relationship for marketing services and the security deposits were incidental to those services. The Tribunal relied on the established distinction between operational and financial creditors (as explained in Swiss Ribbons) and concluded that the marketing fee and assigned claims are operational debts, bringing the Applicant within the scope of an Operational Creditor. [Paras 15, 16]

The second ground of objection is rejected; the claimed amounts are operational debt and the Applicant is an Operational Creditor.

Effect of Arbitral Award and finality of disputes - Once the Arbitral Awards dated 11.04.2019 were rendered in favour of the Applicant and the challenge under Section 34 before the High Court and the SLP before the Supreme Court were dismissed, the disputes between the parties stood finally resolved and the claim could not be treated as 'disputed' for the purpose of Section 9. - HELD THAT: - The Tribunal noted that the Applicant obtained two Arbitral Awards and that the Corporate Debtor's Section 34 petitions before the Delhi High Court were dismissed (order dated 28.01.2020) and subsequent SLP(s) were dismissed by the Supreme Court. Having regard to these final adjudications, the Tribunal held that the existence of prior counterclaims or defences in the arbitration proceedings did not amount to a continuing 'dispute' after the awards became final. Consequently, the plea of 'disputed debt' taken by the Corporate Debtor did not preclude initiation of insolvency proceedings under Section 9. [Paras 11, 17]

The objection that the claim is 'disputed' is repelled; the arbitral awards are final and resolve the disputes, permitting Section 9 proceedings.

Default in repayment - CIRP initiation - There was a default in repayment of the operational debt and the Section 9 petition was maintainable; the application is admitted and CIRP is ordered to commence. - HELD THAT: - After evaluating the agreements, invoices, arbitral awards and the procedural history, the Tribunal concluded that the Corporate Debtor had failed to pay the amounts awarded and that the Operational Creditor had satisfied the statutory requirements for initiating CIRP under the Code. The Tribunal found that evidence placed on record established default by the Corporate Debtor and that the petition met the procedural stipulations under Section 9 and the applicable rules. Accordingly, the Tribunal was satisfied to admit the petition and commence Corporate Insolvency Resolution Process. [Paras 18, 19, 20]

The petition under Section 9 is admitted and CIRP is ordered to commence in accordance with the timelines prescribed by the Code.

Appointment of Interim Resolution Professional - Moratorium under Section 14 - An Interim Resolution Professional (IRP) is appointed and a moratorium is declared with the statutory prohibitions and protections specified by the Code. - HELD THAT: - The Tribunal appointed Mr. Rajesh Donkeshwar as IRP from the IBBI-recommended panel and directed him to take charge, make the public announcement and perform statutory duties. The Tribunal directed the Operational Creditor to pay an advance to the IRP and set out obligations of the IRP and cooperation by the Corporate Debtor's management. Further, the moratorium under Section 14 was declared effective from the date of the order, prohibiting institution or continuation of proceedings, transfer or encumbrance of assets, actions to enforce security interests, and recovery of property by lessors, while preserving supplies of essential goods and services subject to the conditions in the Code. [Paras 22, 23, 24, 25, 26]

Mr. Rajesh Donkeshwar is appointed as IRP; the IRP shall take requisite steps and the moratorium is imposed as directed.

Final Conclusion: The Tribunal rejected procedural and substantive objections, held that the claimed amounts are operational debts and that the arbitral awards rendered the disputes final; the Section 9 petition was admitted, CIRP ordered to commence, an IRP appointed from the IBBI panel, and moratorium declared with directions for compliance.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial debt - default - threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 - quantum of claim not to be adjudicated at admission stage - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial debt - default - threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 - quantum of claim not to be adjudicated at admission stage - Whether the Company Application filed by the Financial Creditor under Section 7 of the IBC, 2016 should be admitted. - HELD THAT: - The Adjudicating Authority examined whether there exists a financial debt and a default exceeding the pecuniary threshold prescribed by the Code. The Authority applied the settled principle that at the admission stage disputes as to the quantum of claim are not to be adjudicated by the Adjudicating Authority and that such matters are to be dealt with by the Resolution Professional or in the resolution process, relying on the precedent that once satisfied that default has occurred the application must be admitted unless incomplete. The Corporate Debtor's contention that receipts from sale of assets were not reflected in the Financial Creditor's account was held to be a dispute as to quantum which does not defeat admission. The petitioned claim, even after considering the alleged unaccounted amounts, remains above the Section 4 threshold. On the material placed by the Financial Creditor the Authority was satisfied that a financial debt and default existed and that the statutory requirements for initiating CIRP were met. [Paras 6, 7, 8, 9]

The Section 7 application is admitted; the Corporate Insolvency Resolution Process is ordered to commence.

Appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Consequential orders following admission: appointment of Interim Resolution Professional and declaration of moratorium. - HELD THAT: - Having admitted the application, the Tribunal appointed the proposed Interim Resolution Professional who had furnished written consent and directed him to take charge and perform statutory duties, including public announcement and calling for claims. The Tribunal also declared the moratorium under Section 14, specifically prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security, and recovery of property by owners or lessors, and directed continuity of essential supplies subject to payment for current dues. Directions were issued for compliance with statutory provisions by the IRP, cooperation of management, payment of advance fees to the IRP, and communication of the order to relevant authorities. [Paras 14, 15, 16, 17, 18]

Kalavakolanu Murali Krishna Prasad is appointed as Interim Resolution Professional; moratorium under Section 14 is declared and related directions for CIRP administration are issued.

Final Conclusion: The Tribunal admitted the Section 7 application, held that a financial debt and default exist above the statutory threshold, appointed the Interim Resolution Professional proposed by the Financial Creditor, declared the moratorium and directed compliance with statutory requirements to commence and conduct the CIRP.

Ineligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016 - Locus standi of a non-participating bidder to challenge a liquidation sale - Validity and regularity of e-auction process and compliance with pre-bid requirements

Ineligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016 - connected person - Whether the successful auction purchaser is ineligible to participate under Section 29A of the Code on the basis of the alleged familial relationship with promoters of the corporate debtor. - HELD THAT: - The Tribunal compared the alleged familial relationship with the statutory tests and explanations contained in Section 29A. The finding was that the relationship as pleaded (marriage connection between families) does not, on the material before the Adjudicating Authority, bring the successful bidder within the ambit of ineligibility under Section 29A. The record did not establish that the successful bidders were connected persons falling foul of the statutory disqualifications, and the Liquidator's preliminary inquiry and due diligence led to the conclusion that the successful bidders were not ineligible under Section 29A. [Paras 10]

Successful auction purchaser is not ineligible under Section 29A of the Code on the basis of the alleged relationship; the bid is not vitiated for that reason.

Locus standi of a non-participating bidder to challenge a liquidation sale - aggrieved person - Whether the applicant, having not submitted the requisite documents, EMD or participated in the auction, has locus to maintain the challenge to the e-auction process and the purported successful bidder. - HELD THAT: - The Tribunal observed that the applicant failed to comply with the pre-bid requirements including timely submission of documents and EMD and did not participate in the auction. The application was characterised as an attempt to gain a 'back door entry' and to stall liquidation. In these circumstances the applicant was held not to be an aggrieved party entitled to challenge the outcome of the e-auction. [Paras 11, 13]

Applicant has no locus to maintain the instant application and the application is liable to be dismissed on that ground.

Validity and regularity of e-auction process and compliance with pre-bid requirements - due diligence by Liquidator - Whether the third e-auction process was vitiated by secret dealings, arbitrary conduct or wrongful acceptance of an ineligible bidder. - HELD THAT: - The Tribunal noted the Liquidator's account that the reserve price, EMD and timelines were fixed after stakeholder consultation and that the Liquidator received and verified requisite EoIs and EMDs from the successful bidders within the stipulated timelines. The applicant's allegations of secret meetings and manipulation were unsubstantiated and unsupported by evidence. The Liquidator's preliminary inquiry and due diligence indicated compliance with the liquidation process and regulations. [Paras 11, 12]

Allegations that the e-auction process was vitiated are unsubstantiated; the process stands and no interference is warranted.

Final Conclusion: The applications challenging the third e-auction (I.A. Nos. 51 & 52 of 2022) are rejected: the successful bidders were held not to be ineligible under Section 29A, the applicant lacked locus to maintain the challenge, and the alleged vitiation of the auction process was not established; order accordingly, no costs.

Operational creditor - Operational debt - pre-existing dispute under Section 9(3)(b) - admission under Section 9(5) of the IBC, 2016 - moratorium under Section 14 of the IBC, 2016 - appointment of Interim Resolution Professional

Operational creditor - Operational debt - The applicant is an Operational Creditor and the claim constitutes an Operational Debt. - HELD THAT: - The Tribunal noted that the applicant supplied goods to the corporate debtor pursuant to the seller's contract and held that such supply falls within the concept of operational creditors and operational debt. Reliance was placed on the interpretation of those definitions as reflecting supply of goods and services in the operation of business, as explained in Swiss Ribbons. On the material facts the Tribunal found that goods were supplied and invoices were raised, and therefore the applicant qualifies as an Operational Creditor and the claim is an Operational Debt. [Paras 16]

Applicant is an Operational Creditor and the debt claimed is an Operational Debt.

Pre-existing dispute under Section 9(3)(b) - No pre-existing dispute existed between the parties prior to issuance of the demand notice. - HELD THAT: - The corporate debtor alleged a dispute based on non-compliance with the seller's contract and raised the defence that invoices were unauthorised. The Tribunal observed that the corporate debtor did not produce contemporaneous documentary evidence of objection when the shipper communicated about the consignment, and noted communications showing acceptance by the corporate debtor to take delivery. The Tribunal regarded the pleaded dispute as unsubstantiated and characterised the defence as a moonshine attempt to defeat the claim. The applicant's affidavit under Section 9(3)(b) recording service of the demand notice was also noted. [Paras 17, 18]

There was no valid pre-existing dispute prior to the demand notice.

Admission under Section 9(5) of the IBC, 2016 - appointment of Interim Resolution Professional - moratorium under Section 14 of the IBC, 2016 - The petition under Section 9 is admitted; an Interim Resolution Professional is appointed and moratorium is declared. - HELD THAT: - Having held that the applicant is an Operational Creditor and that no pre-existing dispute barred the application, the Tribunal admitted the petition under Section 9(5). The Tribunal appointed an Interim Resolution Professional from the IBBI panel subject to verification of disclosures and no pending disciplinary proceedings, directed the IRP to act under the statutory provisions and to file reports, and declared the moratorium under Section 14 with the statutory exclusions and duration. The Tribunal also directed payment to the IRP for expenses and directed communication of the order to the parties, IBBI and the Registrar of Companies. [Paras 20, 21, 22, 23, 24]

The Section 9 petition is admitted; Ms. Chitra Perinkulam Ragavan is appointed as Interim Resolution Professional subject to conditions and the moratorium under Section 14 is imposed.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that the applicant is an Operational Creditor and the claim is an Operational Debt with no pre-existing dispute, appointed an Interim Resolution Professional subject to conditions, and imposed the statutory moratorium; consequential directions regarding IRP functions, payment for IRP expenses and communication of the order were issued.

Admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code - Effect and scope of moratorium and protections under Section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional and compliance with Regulation 7A of IBBI (Insolvency Professionals) Regulations - Service and effect of demand notice and Form 3 in operational creditor proceedings

Admissibility of petition under Section 9 of the Insolvency and Bankruptcy Code - Service and effect of demand notice and Form 3 in operational creditor proceedings - The petition under Section 9 was admissible and liable to be admitted on the ground of default by the corporate debtor. - HELD THAT: - The Tribunal found that the corporate debtor had entered into a lease agreement and subsequently defaulted in payment of rent as per the agreement. The operational creditor issued a demand notice (Form 3) which was served on the corporate debtor and, after the statutory period, no dispute had been raised. The record shows an earlier legal notice, a demand notice, a termination notice, and an MOU in which the corporate debtor acknowledged the notices but failed to pay. The claim amount exceeded the statutory monetary threshold and the petition was filed prior to the referenced notification, rendering the petition admissible. On these findings the Adjudicating Authority admitted the petition under Section 9 of the Code. [Paras 2, 3, 5]

Petition under Section 9 admitted and corporate insolvency resolution process initiated.

Effect and scope of moratorium and protections under Section 14 of the Insolvency and Bankruptcy Code - A moratorium under Section 14 was declared with the standard prohibitions and protections for the duration of the CIRP. - HELD THAT: - Upon admission of the petition, the Tribunal directed that the moratorium provided under Section 14 shall operate from the date of the order until completion of the corporate insolvency resolution process or earlier approval of a resolution plan or order of liquidation. The order prohibits institution or continuation of suits or proceedings against the corporate debtor, transfer or alienation of its assets, enforcement of security interests, and recovery of property by an owner or lessor where occupied by the corporate debtor. It also protected continuing supplies of essential goods or services and noted exceptions as may be notified by the Central Government in consultation with financial sector regulators. The Tribunal further directed immediate public announcement of CIRP as prescribed under the Code.

Moratorium declared with the specified prohibitions and directions and public announcement to be made.

Appointment of Interim Resolution Professional and compliance with Regulation 7A of IBBI - The proposed Interim Resolution Professional was appointed after being found fit in terms of Regulation 7A of the IBBI (Insolvency Professionals) Regulations. - HELD THAT: - The Operational Creditor proposed an individual for appointment as Interim Resolution Professional. The Tribunal observed compliance with Regulation 7A, including the availability of details on the IBBI website and the validity of authorisation for assignment, and accordingly appointed the proposed professional to perform the functions under the Code. The appointed IRP was directed to file Form-B within three days and the Registry was directed to notify the Registrar of Companies to mark the corporate debtor as under CIRP.

Proposed IRP appointed; Form B to be filed and Registrar of Companies to be informed.

Interim expenses and provisional payment to Interim Resolution Professional - The petitioner was directed to pay a provisional amount to the Interim Resolution Professional, subject to adjustment by the Committee of Creditors. - HELD THAT: - The Tribunal directed the petitioner to pay a sum to the IRP to meet out expenses for performing functions in accordance with the IBBI regulations, noting that such payment is subject to adjustment by the Committee of Creditors as accounted for by the IRP and shall be refunded to the petitioner if so accounted. This direction conforms to the power to provide for interim costs in initiating CIRP and preserves adjustment by the Committee of Creditors.

Petitioner directed to make provisional payment to the IRP, subject to subsequent adjustment by the Committee of Creditors.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated the Corporate Insolvency Resolution Process, declared moratorium as prescribed, appointed the Interim Resolution Professional after finding compliance with relevant IBBI regulation, directed immediate public announcement and Registrar of Companies notification, and ordered provisional payment to the IRP subject to adjustment by the Committee of Creditors.

Liquidation under Section 33(2) IBC - Appointment of Liquidator - Committee of Creditors' resolution as basis for liquidation - Effect of moratorium on commencement of liquidation - Public announcement and notice of discharge under Section 33(7) - Investigation of financial affairs including preferential and undervalued transactions - Regulation 13 - Preliminary report in liquidation - Intimation to Registrar of Companies and tax/regulatory authorities

Liquidation under Section 33(2) IBC - Appointment of Liquidator - Committee of Creditors' resolution as basis for liquidation - Application for liquidation was allowed and the Resolution Professional was appointed as Liquidator. - HELD THAT: - The Tribunal recorded that the CoC, in its 8th meeting, resolved to liquidate the Corporate Debtor after no resolution plan was received despite two publications inviting EoIs and the maximum permitted period for completion of CIRP had expired. The proposed Liquidator gave written consent and his Authorization for Assignment was valid. The applicant/RP had filed the requisite compliance certificate. In view of the CoC resolution, absence of any viable resolution plan, the RP's consent and valid authorization, the Tribunal allowed the application and appointed Mr. Tharuvai Ramachandran Ravichandran as Liquidator to carry out the liquidation process. [Paras 9, 10, 11, 12, 13]

IA/293/CHE/2022 for liquidation of the Corporate Debtor is allowed and Mr. Tharuvai Ramachandran Ravichandran is appointed as Liquidator.

Effect of moratorium on commencement of liquidation - Public announcement and notice of discharge under Section 33(7) - Investigation of financial affairs including preferential and undervalued transactions - Regulation 13 - Preliminary report in liquidation - Intimation to Registrar of Companies and tax/regulatory authorities - Directions governing the conduct of the liquidation process were issued and shall apply to the Liquidator. - HELD THAT: - The Tribunal directed that the Liquidator shall act in accordance with the IBC and the Liquidation Process Regulations. A public announcement that the Corporate Debtor is in liquidation is to be made and, for officers/employees/workers, the order is deemed notice of discharge under the relevant provision. The Liquidator is required to investigate the financial affairs of the Corporate Debtor, including preferential, undervalued and fraudulent preference transactions, and to file appropriate applications before the Adjudicating Authority. The Registry is to communicate the order to the Registrar of Companies and the IBBI, and the Liquidator must intimate the Income Tax Department and other fiscal/regulatory authorities. The moratorium under Section 14 ceases and a fresh moratorium under Section 33(5) commences. The Liquidator must submit a preliminary report within 75 days from the liquidation commencement date as mandated by the Regulations. [Paras 12]

The Liquidator is to undertake liquidation in accordance with the IBC and Liquidation Regulations, make required announcements and intimations, investigate financial affairs and file the preliminary report within 75 days.

Final Conclusion: The application for liquidation is allowed; the Resolution Professional is appointed as Liquidator and directed to carry out the liquidation in accordance with the Code and the Liquidation Process Regulations, with specified obligations relating to announcements, investigations, regulatory intimations and filing of reports.

Computation of possession-linked timeline for completion - waiver of interest for delay attributable to handing over - penalty clause applicability for delayed dismantling - effect of liquidation on prior charges and liens

Computation of possession-linked timeline for completion - Period of 9 months for dismantling and removal to be computed from the date of handing over of peaceful possession of the site by the Liquidator. - HELD THAT: - The Tribunal found that the applicant was prevented from obtaining peaceful possession of the plant and machinery due to trespass, assaults and law-and-order disturbances and that the issue was only resolved with intervention of the District Administration and Police. In view of these facts, the Tribunal directed that the nine-month timeline for completion of dismantling and removal shall commence from the date on which the Liquidator hands over peaceful possession to the applicant, thereby excluding the period during which the applicant was effectively denied access. [Paras 5, 6]

Nine-month period to be computed from date of handing over of peaceful possession by the Liquidator.

Waiver of interest for delay attributable to handing over - Liquidator may consider waiver of interest on delayed payment if the delay is directly related to failure to hand over peaceful possession. - HELD THAT: - Having recorded that disturbances at the site caused interruption in the buyer's ability to commence works and affected payment timings, the Tribunal left scope for the Liquidator to consider waiving interest on the last instalment where that interest is directly attributable to delay in handing over peaceful possession. The direction is discretionary, limited to instances where causation between handing-over delay and delayed payment is established. [Paras 6]

Liquidator may consider waiver of interest on the last instalment if directly related to delay in handing over peaceful possession.

Penalty clause applicability for delayed dismantling - Penalty under Clause 9 of the Letter of Intent will be leviable only if the applicant fails to dismantle and remove the plant and machinery within the extended period (nine months from 17.11.2021). - HELD THAT: - The Tribunal clarified the application of the contractual penal clause in the Letter of Intent by conditionally limiting its operation to failures occurring after the extended period. By fixing the extended period as nine months from 17.11.2021, the Tribunal insulated the applicant from penalty for delays caused prior to peaceful handover, while preserving the Liquidator's right to levy penalties for non-completion during the extended period. [Paras 6]

Penalty under Clause 9 leviable only for failure to remove within nine months from 17.11.2021.

Effect of liquidation on prior charges and liens - No separate order required regarding other reliefs, since no prior charge or lien survives once assets are liquidated by the Liquidator. - HELD THAT: - The Tribunal observed that, following liquidation and sale by the Liquidator, prior encumbrances do not subsist in a manner that would warrant separate relief from this Authority. Consequently, prayers seeking release of embargos/encumbrances and similar directions were held not to require further orders from the Tribunal. [Paras 6]

Other reliefs unnecessary as no prior charge or lien survives post-liquidation by the Liquidator.

Final Conclusion: Application disposed of with directions that the nine-month dismantling period runs from the date of peaceful handover by the Liquidator; Liquidator may consider waiving interest where delay in payment is directly attributable to delay in handing over possession; penalties under the Letter of Intent apply only if removal is not completed within nine months from 17.11.2021; and no separate order is required on prior charges or liens as they do not survive the liquidation sale.

Corporate Insolvency Resolution Process - debt and default - Settlement Agreement forming part of tribunal order - moratorium under Section 14 - appointment of Interim Resolution Professional - restraint/attachment of property

Corporate Insolvency Resolution Process - debt and default - Settlement Agreement forming part of tribunal order - Admission of the Section 9 petition and initiation of CIRP on account of proved debt and default under the Settlement Agreement - HELD THAT: - The Tribunal found that a Settlement Agreement dated 25.07.2017, which was recorded as forming part of the Tribunal's order dated 10.08.2017, obliged the Corporate Debtor to pay the Operational Creditor a specified sum on or before September 2018. The record shows that the Corporate Debtor violated the terms of that Settlement Agreement and failed to make the agreed payments despite communications from the Operational Creditor. Having concluded that 'debt' and 'default' are proved, the Tribunal held that the Section 9 petition must be admitted and the Corporate Insolvency Resolution Process be initiated against the Corporate Debtor. [Paras 7, 18]

Section 9 petition admitted; CIRP initiated against the Corporate Debtor.

Restraint/attachment of property - relief to lift attachment - Application to lift the restraining/attachment order over specified property dismissed and the restraint order kept in force - HELD THAT: - The Tribunal noted an earlier order dated 02.05.2019 restraining the Corporate Debtor from selling a specified vacant land based on the asset list produced. As the Section 9 petition was being admitted and CIRP initiated, the Tribunal declined to vacate the restraint and dismissed the Corporate Debtor's application to raise the attachment order, leaving the restraining order intact during the CIRP. [Paras 8]

MA(IBC)/7(CHE)/2022 dismissed; existing restraining order over the property remains in force.

Contempt for breach of settlement - revival of company petition - Contempt application arising from breach of the Settlement Agreement closed in view of admission of the Section 9 petition - HELD THAT: - The Operational Creditor's application seeking contempt proceedings for willful breach of the Tribunal's order recording the Settlement Agreement resulted in revival of the earlier petition. However, since the breach furnished the basis for admitting the present Section 9 petition and initiating CIRP, the Tribunal treated the contempt application as effectively subsumed by the admission order and closed the contempt proceedings. [Paras 6, 9]

MA/259/2018 stands closed.

Appointment of Interim Resolution Professional - powers and duties of IRP - supersession of board - Appointment of a named Interim Resolution Professional and directions as to his functions, reporting and supersession of the board - HELD THAT: - The Operational Creditor had not proposed an IRP; the Tribunal appointed Mr. R. Sugumaran from the IBBI panel as Interim Resolution Professional for the specified period, noting his Authorization for Assignment. The IRP was directed to take charge immediately, cause the public announcement, call for claims, take steps mandated by the Code and Regulations (including filing reports within prescribed timelines), and exercise functions under the Code. Consequent to CIRP initiation, the powers of the board of directors are superseded, and directors, promoters and management are directed to cooperate with the IRP. [Paras 10, 14, 15, 16]

Mr. R. Sugumaran appointed as IRP with directions to perform statutory functions; board's powers superseded.

Moratorium under Section 14 - Moratorium comes into effect from the date of the order and its operative scope during CIRP - HELD THAT: - Upon admission of the petition under Section 9, the Tribunal declared that the moratorium under Section 14 will operate from the date of the order until completion of the CIRP, subject to statutory exceptions. The order reproduced the prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property, and noted statutory clarifications and exceptions regarding licences, supply of essential goods and specified transactions. The Tribunal directed communication of the order to relevant parties and authorities. [Paras 11, 12, 13, 18]

Moratorium under Section 14 imposed with stated scope and statutory exceptions, effective from the date of this order.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated CIRP against the Corporate Debtor, imposed the moratorium under Section 14 with statutory exceptions, appointed an Interim Resolution Professional who shall take statutory steps and supersede the board, dismissed the application to lift the prior restraint on specified property, and closed the contempt application arising from the Settlement Agreement breach.

Existence of dispute - notice of dispute / record of dispute - admissibility of application under Section 9 of the IBC, 2016 - operational creditor - Mobilox principle

Existence of dispute - notice of dispute / record of dispute - Mobilox principle - Pre-existing disputes raised by the corporate debtor render the Section 9 application non-admissible and warrant rejection. - HELD THAT: - The Tribunal examined the correspondence and emails produced by the corporate debtor which, commencing in 2015, repeatedly complained of poor quality, quantity mismatches and billing/authenticity issues. Those documents constituted a plausible, non-spurious contention of dispute which, under the principle laid down in Mobilox Innovative Pvt. Ltd. v. Kirusa Software Pvt. Ltd., must be seen as notice/record of dispute at the threshold; the adjudicating authority is not required to decide merits but only to determine whether a real dispute exists requiring further investigation. On the material before it the Tribunal found the dispute genuine and not merely bluster, and therefore the Section 9 application could not be admitted. [Paras 13, 14, 15]

The Section 9 application is rejected and dismissed on account of existence of a genuine pre-existing dispute.

Admissibility of application under Section 9 of the IBC, 2016 - operational creditor - The Tribunal has territorial jurisdiction and the petition is not barred by limitation. - HELD THAT: - The Tribunal recorded that the corporate debtor's registered office lies in Ahmedabad, Gujarat, thereby satisfying territorial jurisdiction. The dates of default as stated in Part IV, Form 5 ranged from 26.12.2016 to 07.12.2017 and the Section 9 application was filed on 28.09.2020; on that basis the Tribunal concluded the application was within the limitation period and not time-barred. [Paras 11, 12]

The Tribunal has jurisdiction to entertain the application and the application is not barred by limitation.

Final Conclusion: The petition under Section 9 is dismissed and disposed of: the Tribunal, while satisfied as to its jurisdiction and that the application was not time-barred, held that the existence of a genuine pre-existing dispute (as evidenced in the record) required rejection of the Section 9 application under the Mobilox principle.

Simultaneous claims in CIRP of principal borrower and corporate guarantor - Section 3(6) definition of "claim" - financial debt under Section 5(8)(i) - financial creditor under Section 5(7) - Section 60(2) adjudicating authority for corporate guarantor - verification and admission of claim by Resolution Professional

Simultaneous claims in CIRP of principal borrower and corporate guarantor - Section 3(6) definition of "claim" - financial debt under Section 5(8)(i) - Section 60(2) adjudicating authority for corporate guarantor - verification and admission of claim by Resolution Professional - Whether a financial creditor may submit and have admitted contemporaneous claims in the CIRP of a principal borrower and in the CIRP of the corporate guarantor for the same underlying liability, and whether the RP of the corporate guarantor was justified in rejecting such a claim because it had been admitted in the CIRP of the principal borrower. - HELD THAT: - The Tribunal held that a claim submitted by the creditor in the CIRP of the corporate guarantor falls within the statutory definition of "claim" under Section 3(6) of the IBC, 2016 and that liability arising from a corporate guarantee qualifies as a "financial debt" under Section 5(8)(i), making the creditor a "financial creditor" under Section 5(7). Section 60(2) permits applications relating to insolvency of a corporate guarantor to be filed before the same Adjudicating Authority where proceedings against the corporate debtor are pending; there is therefore no bar in the Code to simultaneous claims in both CIRPs. Reliance was placed on the reasoning in the cited NCLAT decision which permitted filing claims in CIRP against both principal borrower and surety and envisaged adjustments between proceedings when recoveries are made. Consequently, the RP of the corporate guarantor erred in rejecting the claim solely on the ground that an identical claim had been admitted in the CIRP of the principal borrower. The Tribunal directed the RP of the corporate guarantor to verify and admit the claim with respect to the corporate guarantee for both credit facilities and bank guarantees, leaving any consequential adjustment between proceedings to be effected as appropriate. [Paras 12, 13, 14, 15, 16]

The application is allowed; the RP of the corporate guarantor is directed to verify and admit the claim submitted by the applicant in respect of the corporate guarantee, the prior admission of the claim in the CIRP of the principal borrower not being a ground for rejection.

Final Conclusion: The Tribunal allowed the application under Section 60(5) IBC and directed the Resolution Professional of the corporate guarantor to verify and admit the creditor's claim arising from the corporate guarantee; the mere prior admission of the claim in the CIRP of the principal borrower does not preclude admission in the CIRP of the guarantor.

Manpower recruitment or supply agency - service recipient - secondment / deputation - provision of service by an employee to the employer (exclusion under the definition of service) - substance over form - extended period of limitation (wilful misstatement or suppression)

Manpower recruitment or supply agency - service recipient - secondment / deputation - provision of service by an employee to the employer (exclusion under the definition of service) - substance over form - Whether the overseas group companies supplied manpower services taxable under the service tax regime and whether the assessee was the service recipient in respect of seconded employees. - HELD THAT: - Having examined the service, secondment and master services agreements as a whole, the Court applied a totality-of-factors approach rather than any single determinative test. The agreements show that (i) the overseas group companies identified and seconded skilled employees to NOS, (ii) during secondment NOS exercised operational control and bore responsibility and risk for the employees' work, (iii) remuneration and benefits were paid by the overseas employer and reimbursed by NOS by design to preserve social security rights, and (iv) the secondees' tenure was for a specified period with repatriation thereafter. On the cumulative effect of these features the Court held that the overseas entities provided manpower supply services which benefited NOS and that NOS was the service recipient; substance, not nomenclature, governs the characterization. The Court rejected reliance on the manner of salary disbursement or on asserted absence of mark-up as dispositive, and treated the economic benefit to the assessee and the contractual scheme as indicative of a taxable supply of services. [Paras 50, 51, 52, 55, 65]

The overseas group companies supplied taxable manpower services by secondment and the assessee is adjudged to be the service recipient liable to service tax for the normal periods covered by the SCNs.

Extended period of limitation (wilful misstatement or suppression) - substance over form - Whether the revenue was justified in invoking the extended period of limitation on the basis of wilful misstatement or suppression of facts. - HELD THAT: - The Court reviewed authority requiring a finding of wilful misstatement or intent to evade duty to invoke extended limitation. Having regard to the facts, the existence of a bona fide view by the assessee (including favourable findings for later periods and reliance on earlier tribunal orders) demonstrated absence of wilful suppression. The revenue's reliance on extended limitation was therefore held unsustainable. The Court treated the question of potential refundability or input credit as irrelevant to the threshold question of invoking extended limitation. [Paras 62, 63, 64, 66]

Invocation of the extended period of limitation was not justified and any demand for the extended period is excluded.

Final Conclusion: The CESTAT's common order is set aside; the Commissioner's original orders are restored to the extent they impose service tax liability on the assessee as service recipient for the periods specified in the SCNs, but demands based on the extended period of limitation are held unjustified and excluded. The appeals are partly allowed.

Manpower Recruitment or Supply Agency Service - distinction between manpower supply and job work - change of law with effect from 01.07.2012 - remand for re-computation and examination of cum tax benefit - penalty unwarranted where liability is an interpretational issue and assessee obtained registration

Manpower Recruitment or Supply Agency Service - distinction between manpower supply and job work - Whether the activity carried out by the appellants falls within the taxable category of manpower recruitment or supply agency service for periods prior to 1.7.2012. - HELD THAT: - The Tribunal examined the terms of the contracts and the nature of the work performed for M/s TAFE and followed earlier Tribunal decisions holding that contractors engaged on piece rate to execute manufacturing processes, accountable for workmanship and defects, and exercising control over deployment of their own employees, are performing job work rather than supplying manpower. The Tribunal observed that mere engagement of workers by the contractor, accompaniment of labour law compliance conditions or presence of workers within factory premises does not convert the contract into a manpower supply arrangement absent evidence that manpower was at the disposal and under effective control of the recipient. Applying those precedents, the Tribunal concluded that demands for periods prior to June 2012 could not be sustained and set them aside. [Paras 10, 14]

Demand for service tax prior to 1.7.2012 set aside; appeals allowed for the pre June 2012 period with consequential relief, if any.

Change of law with effect from 01.07.2012 - remand for re-computation and examination of cum tax benefit - penalty unwarranted where liability is an interpretational issue and assessee obtained registration - Treatment of demands, quantification and penalties for the period after 1.7.2012. - HELD THAT: - Recognising the change in law from 1.7.2012 and reliance on the Board's clarification distinguishing manpower supply from job work, the Tribunal did not finally adjudicate liability for the post 1.7.2012 period. Instead, following earlier Tribunal practice, the matters for the period after 1.7.2012 were remanded to the adjudicating authority to determine afresh whether service tax liability subsists in light of the Board circular and to verify if service tax has been discharged; the adjudicating authority is also to examine entitlement to cum tax benefit and to re compute taxable value correctly (excluding inappropriate ledger items). As the issue is interpretational and appellants had obtained registration and paid tax after 2012, the Tribunal held imposition of penalty to be unwarranted and set aside penalties for the post 2012 period. [Paras 11, 12, 13]

Post 1.7.2012 demands remanded to the adjudicating authority for fresh determination and re computation (including cum tax benefit verification); penalties for the post 2012 period set aside.

Final Conclusion: Appeals allowed insofar as demands for periods prior to 1.7.2012 are set aside. For the period after 1.7.2012 the matters are remanded to the adjudicating authority for fresh determination of liability and re computation (including examination of cum tax benefit); penalties for the post 2012 period are set aside.

Refund of mistaken deposit - applicability of section 11B of Central Excise Act - deposit under mistake of law or fact not constituting duty - refund of revenue deposit - exemption for construction services under Notification No. 9/2016

Deposit under mistake of law or fact not constituting duty - applicability of section 11B of Central Excise Act - refund of revenue deposit - Whether the amount deposited by the appellant was duty/tax so as to attract section 11B time bar, and whether refund of the deposit is permissible. - HELD THAT: - The Tribunal found on the facts that the appellant had deposited the sum on 14.3.2016 only because of confusion about liability and that the construction services in question fell within the exemption notified by Notification No. 9/2016 because the contract pre-dated 1.3.2015. Consequently the deposited amount was not an amount of duty/tax but a revenue deposit made under a mistake of law/fact. The Court held that section 11B governs refund of duty/ tax and its time bar cannot be invoked where the amount claimed is not duty but a mistaken deposit. The Tribunal relied on precedents treating such deposits as refundable and distinguishing them from claims of duty, and accepted that the provisons applicable to refund of revenue deposits (including that rate of interest is not prescribed) differ from section 11B claims. On this basis the adjudicating authorities erred in rejecting the refund application as time barred under section 11B, and the order under challenge was set aside. [Paras 7, 8, 9, 10, 12]

Section 11B is not applicable to the appellant's claim because the deposited amount was not duty but a mistaken deposit; the rejection on time bar grounds is incorrect and refund is allowable.

Final Conclusion: The order under challenge is set aside and the appeal is allowed; the appellant is entitled to refund of the amount deposited as a mistaken revenue deposit, the invocation of section 11B being held inapplicable.

Refund of unutilized CENVAT credit under Rule 5 - input service - nexus between input services and exported services - narrow interpretation of Input Service definition impermissible - consumption without objection and estoppel

Refund of unutilized CENVAT credit under Rule 5 - input service - nexus between input services and exported services - narrow interpretation of Input Service definition impermissible - consumption without objection and estoppel - Whether rejection of the appellant's refund claims of unutilized CENVAT credit under Rule 5 on the grounds that certain services did not qualify as 'input service' and/or lacked nexus with exported services was sustainable. - HELD THAT: - The Tribunal found the issue not res integra and applied the reasoning of earlier CESTAT decisions considering substantially similar facts. The authorities below adopted a narrow interpretation of the definition of input service, excluding services (such as real estate agency services for identifying office premises and works contract/repair and maintenance of office premises) that are directly related to the appellant's primary business of exporting software services. The Bench held that such services have a direct nexus with the exported output services and, where modernization, renovation, repair and maintenance of office premises fall within the scope of input service, denial of refund is unsustainable. The Tribunal also noted that the impugned objection was raised only at the stage of claiming refund whereas no objection was recorded when the input services were consumed, and that raising such objections at the refund stage defeats the purpose of the CENVAT scheme, engaging the principle of estoppel by earlier acceptance of consumption. In the absence of any contrary order or judgment on record, the rejection of the refund claims was set aside and the appeals allowed with consequential benefits as per law. [Paras 6, 7, 8, 9, 10]

Impugned orders rejecting the refund claims were set aside and the appeals were allowed with consequential benefits.

Final Conclusion: The Tribunal allowed the appeals, holding that the services in question qualified as input services with requisite nexus to exported services and that rejection of the refund claims was unsustainable; impugned orders were set aside with consequential benefits.

Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 - Suppression of facts / mens rea for imposition of penalty - Effect of payment of duty with interest prior to show cause notice on jurisdiction to impose penalty

Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 - Suppression of facts / mens rea for imposition of penalty - Effect of payment of duty with interest prior to show cause notice on jurisdiction to impose penalty - Whether the penalty imposed under Section 11AC read with Rule 25 can be sustained where the duty and interest were paid prior to issuance of the show cause notice and there is no evidence of suppression of facts. - HELD THAT: - The Tribunal found on the material before it that the appellant had paid the duty and interest before the show cause notice was issued. In those circumstances the authorities had no jurisdiction to initiate proceedings that would give rise to a penalty for suppression or evasion. The Commissioner(Appeals) drew an inference that but for departmental detection the deficit would not have been paid, but that conclusion is not supported by any allegation in the notice nor by evidence establishing deliberate suppression by the appellant. Absent proof of suppression or mens rea to evade duty, imposition of penalty under Section 11AC read with Rule 25 is not sustainable. Applying these principles, the penalty confirmed by the Commissioner(Appeals) was set aside. [Paras 6]

Penalty imposed under Section 11AC read with Rule 25 set aside as unsustainable where duty and interest were paid prior to show cause notice and no evidence of suppression.

Final Conclusion: The appeal is allowed to the extent that the penalty confirmed by the Commissioner(Appeals) is set aside; the impugned order is quashed insofar as it confirms the penalty.

Utilisation of CENVAT Credit for payment of duty on inputs - Procurer as deemed manufacturer under Rule 4(2) - Liability to pay excise duty under Rule 4(2) - Payment by debit to CENVAT account versus cash/PLA - Confiscation and penalty under Rule 25 - Recovery of interest under Section 11AA - Invocation of Section 11AC for willful misstatement

Utilisation of CENVAT Credit for payment of duty on inputs - Procurer as deemed manufacturer under Rule 4(2) - Payment by debit to CENVAT account versus cash/PLA - Whether the appellant could lawfully discharge the excise liability on molasses procured from khandsari units by utilising CENVAT credit under the CENVAT Credit Rules, having regard to Rule 4(2) of the Central Excise Rules, 2002. - HELD THAT: - The Tribunal examined Rule 3(4) of the CENVAT Credit Rules, 2004 which permits utilisation of CENVAT credit for payment of duty on a final product, and the specific definitions and exceptions in the CCR that treat certain persons as 'manufacturer' for CCR purposes. Commissioner (Appeal) had relied on the definition provisions to deny utilisation by the procurer in the present case. The Tribunal observed that Rule 4(2) expressly makes the procurer liable to pay duty "in the same manner as if such molasses have been produced by the procurer," and that analogous statutory provisions (Rule 4(1A) and Rule 12AA) have been treated as creating parity enabling utilisation of CENVAT credit where legislature so provided. On the basis of parity between these provisions and the express deeming in Rule 4(2), the Tribunal did not agree with the impugned order's refusal to recognise the applicability of CCR provisions for such payment and held that the Commissioner (Appeal) was not correct in denying the benefit on that ground. [Paras 5]

Impugned order modified to the extent indicated in paragraph 5.3: Commissioner (Appeal)'s denial of utilisation of CENVAT credit for payment of duty on molasses procured under Rule 4(2) is not sustained.

Liability to pay excise duty under Rule 4(2) - Payment by debit to CENVAT account versus cash/PLA - Whether duty on 3521.565 MT of molasses procured in June and July 2012 remained unpaid, having regard to the appellant's earlier availing and later reversal of CENVAT credit. - HELD THAT: - The Tribunal recorded that it is undisputed the appellant procured the specified quantity of molasses and did not discharge the duty by the due dates. The adjudicating authority found, and the appellant did not challenge, that the appellant had availed CENVAT credit in respect of the molasses without payment of duty and that the subsequent debit/reversal entries in October, December 2012 and February 2013 did not amount to payment of duty. The Tribunal accepted the finding that reversal of credit taken without prior payment cannot be treated as payment of duty and that the factual position established non-payment of the excise on the procurements. [Paras 5]

The duty in respect of the procured molasses remained unpaid; reversal of CENVAT credit availed without prior payment did not constitute discharge of duty.

Recovery of interest under Section 11AA - Whether interest under Section 11AA is recoverable on the duty found to be unpaid. - HELD THAT: - The Tribunal noted that interest is compensatory in nature and follows the duty liability; it relied on consistent precedent that interest is associated with delay in payment of duty. The impugned order's conclusion that interest under Section 11AA is recoverable was accepted. [Paras 5]

Interest under Section 11AA is recoverable on the duty not paid.

Confiscation and penalty under Rule 25 - Invocation of Section 11AC for willful misstatement - Whether penalty under Rule 25 (and invocation of Section 11AC) for alleged willful misstatement, suppression and evasion of duty is sustainable. - HELD THAT: - The Tribunal considered the facts that the appellant had availed CENVAT credit without payment of duty and thereafter utilised/debited that credit, concluding there was planned evasion and attempted concealment rather than voluntary disclosure. The Tribunal found that these facts satisfied the threshold for invoking Section 11AC and Rule 25 for penalty, and observed that the adjudicator's reasoning is in line with higher court authorities on deliberate evasion and misstatement under the self-assessment regime. [Paras 5]

Penalty under Rule 25 (with invocation of Section 11AC) is upheld.

Final Conclusion: Appeal dismissed. The impugned order is modified as indicated at paragraph 5.3 concerning the entitlement to treat the procurer under Rule 4(2) in relation to CENVAT credit utilisation; otherwise the confirmation of duty, recovery of interest and imposition of penalty under Rule 25 (with Section 11AC implication) are upheld.

Definition of input service - place of removal - Cenvat credit on outward transportation of final products upto buyer's premises - interpretation of the phrase 'from the place of removal' vis-a -vis 'upto the place of removal' - applicability of binding Supreme Court decisions

Definition of input service - place of removal - Cenvat credit on outward transportation of final products upto buyer's premises - interpretation of the phrase 'from the place of removal' vis-a -vis 'upto the place of removal' - applicability of binding Supreme Court decisions - Whether Cenvat credit of service tax paid on outward transportation of finished goods to buyers' / dealers' premises is admissible for periods prior to 01.04.2008. - HELD THAT: - The Tribunal examined the unamended scope of the definition of input service which relevantly spoke of services used by the manufacturer for clearance of final products "from the place of removal". The court applied the interpretative approach adopted by the Supreme Court in M/s. Vasavadatta Cements Ltd. and The Andhra Sugars Ltd., holding that the expression "from the place of removal" covers transportation of the final product from the place of removal up to the first point (whether depot or customer's premises) and therefore attracts Cenvat credit for such outward transportation for periods prior to the amendment effective 01.04.2008. The Tribunal noted that the post-1.4.2008 amendment substituted "from" with "upto the place of removal", which curtailed credit thereafter, but that for the disputed periods the unamended wording and the authorities, including the Board circular and definition of place of removal under Section 4, support allowing credit where facts establish that removal continued to the depot/consumer as the place of sale or first point of delivery. Applying these principles to the material before it, the Tribunal found the cited Supreme Court decisions squarely applicable and concluded that the credit on outward transportation up to buyers' / dealers' premises is admissible for the periods in dispute. [Paras 10, 11, 12, 13]

Cenvat credit of service tax paid on outward transportation of finished goods up to the buyers' / dealers' premises is eligible for the disputed periods prior to 01.04.2008; impugned orders disallowing such credit are set aside and the appeals are allowed.

Final Conclusion: Appeals allowed. Impugned orders disallowing Cenvat credit on outward transportation up to buyers' / dealers' premises for the periods specified are set aside and credit is held admissible for the periods prior to 01.04.2008; consequential relief, if any, to follow.

Interest on delayed refund of amount deposited under section 35F - applicability of amended section 35FF to pre-deposit refunds - non-applicability of section 11B to refund of revenue/pre-deposit - entitlement to interest from date of payment of pre-deposit - prohibition on adjustment of pre-deposit against unrelated demands

Interest on delayed refund of amount deposited under section 35F - applicability of amended section 35FF to pre-deposit refunds - entitlement to interest from date of payment of pre-deposit - Appellant entitled to interest on refund of pre-deposit under amended Section 35FF, payable from the date of payment of the pre-deposit. - HELD THAT: - The Tribunal found that the sums in question were pre-deposits under section 35F and that the right to refund arose after the amendment of section 35FF (post 6.8.2014). The amended provision mandates payment of interest on amounts deposited under section 35F from the date of payment until refund, specifying a rate not below 5% and not exceeding 36% as may be notified. There is no three month sanctioning time-limit in the amended provision; hence the three month concept under section 11B (which relates to duty refunds) is inapplicable to revenue/pre-deposit refunds. Relying on precedent, the Tribunal held that the appellant is therefore entitled to interest on the refunded pre-deposit and fixed the rate at 12% per annum to be calculated from the respective dates of deposit shown in the record. [Paras 6, 7, 9]

Refund of pre-deposit carries interest under amended Section 35FF, payable from date of payment; interest to be computed at 12% per annum from respective deposit dates.

Prohibition on adjustment of pre-deposit against unrelated demands - non-applicability of section 11B to refund of revenue/pre-deposit - Adjustment of part of the pre-deposit against an unrelated demand was unjustified and must be set aside; full amount of pre-deposit is to be disbursed to appellant. - HELD THAT: - The Tribunal noted the admitted fact that Rs.60 lakh represented the total pre-deposit paid on specified dates. The Original Authority had adjusted a portion of that pre-deposit against other dues (amount specified in the record). The Tribunal held that such adjustment was unreasonable and not pertaining to the impugned issue; since the amount was a revenue deposit/pre-deposit refundable following the appellate order, it could not be so appropriated. Consequently the adjustment was held to be unjustified and the order sanctioning refund was set aside to the extent of the wrongful adjustment, directing disbursement of the entire pre-deposit. [Paras 5, 9, 10]

The prior adjustment of part of the pre-deposit is set aside; the entire pre-deposit is to be refunded to the appellant.

Final Conclusion: Appeal allowed: the order under challenge is set aside. The appellant is entitled to return of the entire pre-deposit and interest (directed at 12% per annum) from the respective dates of deposit until refund; the prior partial adjustment is quashed.

Imposition of penalty under Rule 12(6) of the Central Excise Rules - Repeal and savings on introduction of GST - Liability for filing returns under the erstwhile Central Excise Act after 1 July 2017 - Validity of show cause notice issued post-repeal

Imposition of penalty under Rule 12(6) of the Central Excise Rules - Repeal and savings on introduction of GST - Validity of show cause notice issued post-repeal - Whether penalty for non-filing of ER-1 returns for the period July, 2017 to February, 2018 could be validly imposed under the repealed Central Excise law after introduction of GST w.e.f. 1 July 2017, and whether the show cause notice and impugned order were sustainable. - HELD THAT: - The Tribunal found that the Central Excise Act and its Rules stood repealed with effect from 1 July 2017 upon implementation of the GST regime, and the appellant had obtained GST registration and was filing returns under the GST law. The appellant's bona fide explanation that it believed ER-1 returns under the erstwhile Central Excise Act were no longer required was placed before the Commissioner (Appeals), but no findings were recorded on that contention. The Tribunal examined the saving provision relied upon and observed that Section 174 of the CGST Act does not contain a saving clause that preserves the authority to initiate and impose penalty under the erstwhile Central Excise Rules for non-filing of ER-1 returns after the GST provisions came into force. In view of the absence of a saving to sustain such penal proceedings post-repeal, the show cause notice was held to be misconceived and the consequential order imposing penalty was without legal sanctity. The Tribunal therefore concluded that the penalty imposed for the period July 2017 to February 2018 was not maintainable.

The impugned order imposing penalty is set aside; the appeal is allowed and the appellant is entitled to consequential benefits.

Final Conclusion: Penalty imposed under Rule 12(6) of the Central Excise Rules for non-filing of ER-1 returns for July, 2017 to February, 2018 was invalid after repeal of the Central Excise law w.e.f. 1 July 2017; the show cause notice and order imposing penalty were misconceived and are set aside, and the appeal is allowed with consequential benefits.

Job work exemption - compliance with conditions of Notification No. 83/94 (and linked Notification No. 8/2003) - supply of raw material on job work basis and requisite undertaking by supplier - clandestine clearance and evidentiary reliance on statements recorded during investigation - suppression of facts attracting extended period of limitation

Job work exemption - compliance with conditions of Notification No. 83/94 (and linked Notification No. 8/2003) - supply of raw material on job work basis and requisite undertaking by supplier - Whether the appellant complied with the substantial conditions of Notification No. 83/94 (as read with Notification No. 8/2003) in respect of raw material supplied by Shri Mohan Lal Barfa so as to attract the job-work exemption. - HELD THAT: - The Tribunal examined the conditions of the exemption notification which require (i) that the supplier give the prescribed undertaking to the proper officer having jurisdiction over the job-worker's factory, (ii) that the supplier use the goods returned from job work in the manufacture of specified exempted goods, and (iii) that the supplier undertake to pay duty if the conditions are not met. The adjudicating authorities relied on statements recorded during investigation. Those statements establish that Mohanlal Barfa sent battery scrap to the appellant for conversion into lead powder on job-work basis and that the resultant lead powder was sold by Mohanlal (a trader) to his brother Laxman and to other traders. The appellant failed to produce documentary evidence to show that job-work goods were sent back to the factory of Mohanlal Barfa for use in manufacture of goods exempt under Notification No. 8/2003, or that the supplier had given the required undertaking to the proper officer. On this factual and evidentiary basis the Commissioner (Appeals) correctly concluded that the substantial conditions of the notification were not complied with and therefore the appellant was not entitled to the exemption for the quantities in dispute. [Paras 6, 7, 8]

The exemption under Notification No. 83/94 (read with Notification No. 8/2003) was not available to the appellant in respect of the raw material supplied by Shri Mohan Lal Barfa because the substantial conditions of the notification were not fulfilled.

Suppression of facts attracting extended period of limitation - extended period of limitation - invocation based on non-compliance with exemption conditions - Whether invocation of the extended period of limitation was justified. - HELD THAT: - Having found that the appellant did not satisfy the substantive conditions for entitlement to SSI/job-work exemption, the Tribunal accepted the reasoning of the Commissioner (Appeals) that such non-compliance amounted to suppression of facts. In that factual matrix the Department was entitled to invoke the extended period of limitation. The Tribunal noted that the appellant's reliance on authorities arguing absence of suppression did not negate the finding of non-compliance with the notification conditions on the record of this case. [Paras 9]

Invocation of the extended period of limitation was justified on account of suppression arising from non-fulfilment of the substantial conditions of the exemption notification.

Final Conclusion: The order of the Commissioner (Appeals) upholding the demand of Rs.12,17,012/- (and related confirmation) is affirmed; the appeal is dismissed.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - identity of the drawer of the cheque - requirement of notice to the drawer under Section 138 - necessity of arraigning the company where the company is the drawer - vicarious liability of company officers and applicability of legal fiction under Section 141

Identity of the drawer of the cheque - necessity of arraigning the company where the company is the drawer - requirement of notice to the drawer under Section 138 - Complaint under Section 138 NI Act was not maintainable where the cheque account-holder was the company and the company was not given the statutory notice or opportunity to be proceeded against. - HELD THAT: - The Court examined whether the drawer of the cheque was the respondent personally or the accused company. The cheque, though signed by the respondent, bore the name of the accused company as the account-holder and, therefore, primacy of liability lay with the company as drawer. Section 138 requires the payee to give written notice to the drawer within the prescribed period; the petitioner issued notice only to the respondent and did not intimate the company. Reliance on the principles in Aneeta Hada and subsequent decisions establishes that where a company is the drawer the company is a necessary party and must be arraigned and given an opportunity to defend; vicarious or personal liability of an officer arises only in accordance with the conditions for extending liability and not merely because he signed a cheque on behalf of the company. In the present facts the company was impleaded in complaint proceedings without having been furnished the statutory notice, and hence the complaint was prima facie not maintainable against the company and liability could not be fastened on the respondent in his personal capacity merely because he signed the cheque on the company's account. [Paras 11, 13, 14, 16]

Complaint was not maintainable as the company was the drawer and had not been given the statutory notice; respondent could not be held personally liable in the circumstances.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - vicarious liability of company officers and applicability of legal fiction under Section 141 - The revisional court (ASJ) did not commit error in setting aside the summoning order and dismissing the Section 216 application; its order was passed after proper appreciation of law and facts. - HELD THAT: - The High Court reviewed the impugned revisional order and the contentions that the ASJ had overstepped by deciding factual questions or had erred in treating the application under Section 216 Cr.P.C. as not maintainable. Having found that the fundamental defect in the prosecution was non-compliance with the statutory notice requirement vis-a -vis the company-drawer and that the cheque prima facie established the company as drawer, the High Court concluded that the ASJ's exercise of revisional jurisdiction was justified. The Court found no perversity or illegality in the ASJ's conclusion that the complaint was not maintainable and that the Section 216 application could be dismissed on that basis. [Paras 16, 17]

Impugned revisional order is lawful and does not suffer from error, illegality or impropriety.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the High Court finds no error in the Additional Sessions Judge's order setting aside the summoning order and holding the complaint not maintainable because the company was the drawer of the cheque and had not been given the statutory notice.