TaxTMI Updates e-Newsletter
May 27,2022

Writ of certiorari - mandamus - detention of goods under Section 129 of the Central Goods and Services Tax Act, 2017 - appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - remedy by statutory appeal

Writ of certiorari - detention of goods under Section 129 of the Central Goods and Services Tax Act, 2017 - appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - remedy by statutory appeal - Maintainability of the writ petition challenging the show cause notice and subsequent order of detention and whether the petitioner must pursue the statutory appeal. - HELD THAT: - The Court recorded that an order under the detention provisions (Section 129(1)(b)/129(3) read with the IGST Act) had been passed on 14.05.2022 pursuant to the impugned show-cause notice. The Court noted that the order is appealable under Section 107 of the CGST Act. Without expressing any opinion on the merits of the petitioner's contentions, the High Court declined to exercise writ jurisdiction to quash the impugned proceedings and/or order, and directed that the petitioner may avail the statutory appellate remedy. The dismissal was therefore on the basis that the appropriate forum for challenging the order is the prescribed statutory appeal, not by writ at this stage.

Writ petition dismissed without expressing opinion on merits; petitioner permitted to prefer appeal against the order dated 14.05.2022 under the statutory appeal provision.

Final Conclusion: The writ petition is dismissed; the petitioner is left free to file an appeal against the order dated 14.05.2022 under the statutory remedy available under the CGST Act.

Input Service Distributor - input tax credit - reverse charge mechanism - supply (as statutory test for ITC distribution) - proceedings under Section 74 - compulsory registration of Input Service Distributor - jurisdiction to adjudicate tax demands - recovery restraint in writ jurisdiction

Input Service Distributor - input tax credit - supply (as statutory test for ITC distribution) - compulsory registration of Input Service Distributor - Validity of the transactions by which unutilised input tax credit of the Odisha unit was transferred to the Mumbai office declared as ISD and thereafter distributed to other units in other States. - HELD THAT: - The Court examined whether the Odisha unit had made outward supplies to the Mumbai ISD so as to permit distribution of ITC through the ISD mechanism. It noted that the mining lease and execution were by the Odisha unit and that tax payments and transactions were conducted from the Odisha office. There was no clear disclosure or documentary evidence of any supply from the Odisha unit to the Mumbai ISD or of any identifiable support service forming the basis for issuance of tax invoices by the Odisha unit to the ISD. In view of the statutory definition of Input Service Distributor, which requires receipt of tax invoices in respect of input services, and the Rules requiring separate registration as ISD, the Court found that prima facie no case was made out that the Odisha unit had validly routed its excess ITC through the Mumbai ISD for distribution. The transactions were prima facie capable of being characterised as siphoning of tax amounts, thereby justifying initiation of proceedings under Section 74 for recovery and penalty. [Paras 7, 8, 9]

Prima facie the transfers and invoices do not demonstrate a valid ISD-based distribution of ITC and the transactions warrant adjudication under Section 74.

Proceedings under Section 74 - jurisdiction to adjudicate tax demands - recovery restraint in writ jurisdiction - Whether the High Court should grant interim relief restraining the Revenue from recovering the demand issued under the adjudication order dated 28.03.2022. - HELD THAT: - The Court considered the petitioner's challenge to the vires or jurisdictional competence of the assessing authority and the contention that the authority improperly switched from Section 73 to Section 74. However, the petition did not impugn the constitutional validity of the statutory provisions relied upon. Having found prima facie merit in the Revenue's view that the transactions could be sham and that proceedings under Section 74 were attracted, the Court declined to exercise equitable writ jurisdiction to restrain recovery. Instead, the Court issued notice and directed filing of counter-affidavit and adjudicatory steps, leaving the merits to be decided in the proceedings. [Paras 9, 10, 11, 12]

Prayer for restraint on recovery refused; writ petition admitted for adjudication on merits by issuing notice and directing procedural steps for contesting the order.

Final Conclusion: The Court refused interim stay of recovery and found prima facie that the ITC transfers through the Mumbai office declared as ISD were unsupported by evidence of supply and were susceptible to adjudication under Section 74; notice issued, counter-affidavit and objections directed to be filed and matter listed for further hearing.

Communication of ITC mismatch under Section 42(3) of the GST Act - show cause notice as adequate communication of discrepancy - obligation of recipient-dealer to substantiate claimed Input Tax Credit - reversal of wrongly claimed Input Tax Credit

Communication of ITC mismatch under Section 42(3) of the GST Act - show cause notice as adequate communication of discrepancy - Whether the show cause notice issued to the petitioner sufficed as communication under Section 42(3) for the alleged mismatch in Input Tax Credit claims. - HELD THAT: - The Court considered the contention that Section 42(3) imposes an obligation on the Revenue to communicate the mismatch to both supplier and recipient at the earliest point and that a show cause notice could not be treated as such communication. The Revenue's stand that the show cause notice itself amounted to communication of the detected mismatch was accepted. The Court held that upon detection of mismatch the Revenue was entitled to communicate it by issuing a show cause notice and that rectification could thereafter be undertaken by the recipient-dealer in response to that notice. The Court therefore rejected the argument that absence of a prior separate communication rendered the proceedings invalid. [Paras 3, 5, 9]

Show cause notice was an adequate communication of the ITC mismatch under Section 42(3) and absence of a separate prior communication did not vitiate the order.

Obligation of recipient-dealer to substantiate claimed Input Tax Credit - reversal of wrongly claimed Input Tax Credit - Whether the petitioner failed to rectify the alleged mismatch by producing supporting documents and whether, on that basis, reversal of the claimed ITC was sustainable. - HELD THAT: - The Court observed that after receipt of the show cause notice the petitioner had the opportunity to procure and file documents demonstrating that the supplier had paid output tax. The petitioner did not produce such supporting evidence in reply to the notice. In the absence of substantiating documents, the Revenue was entitled to conclude that the claimed ITC was not rectified and to reverse the ITC. The Court found no procedural infirmity in the Revenue proceeding to disallow the ITC for want of supporting proof from the recipient-dealer. [Paras 8, 9]

Petitioner's failure to produce supporting documents in response to the show cause notice justified reversal of the claimed Input Tax Credit.

Final Conclusion: Writ petition dismissed; impugned order sustaining reversal of the claimed ITC is upheld, with liberty granted to the petitioner to challenge the order before the appellate authority in accordance with law.

Condonation of delay - exclusion of time spent in writ petition - pre-deposit requirement in appellate proceedings - effect of encashment/invocation of bank guarantee on pre-deposit - restoration of appeal to file - court fee payable to Kerala Legal Benefit Fund

Condonation of delay - exclusion of time spent in writ petition - Whether the Appellate Authority was bound to exclude the time the petitioner spent in the writ petition when considering condonation of delay and whether refusal to do so rendered the rejection of the appeal perverse. - HELD THAT: - The High Court had earlier directed that if the petitioner filed a statutory appeal the Appellate Authority, while revoking limitation, must exclude the time the petitioner spent in the writ petition. That direction is binding on the Appellate Authority. The impugned order refused to condone the delay on the ground that the statute permits condonation only up to 30 days, but failed to apply the prior direction to exclude the period spent in the writ petition. The Appellate Authority's refusal to follow the binding direction and consequent dismissal of the appeal as barred by limitation is perverse and requires reconsideration. [Paras 8, 9]

The impugned order is set aside insofar as it refuses condonation without excluding the time spent in the writ petition; the matter is remanded to the Appellate Authority to reconsider condonation in conformity with the Court's earlier direction.

Pre-deposit requirement in appellate proceedings - effect of encashment/invocation of bank guarantee on pre-deposit - Whether a mandatory pre-deposit under the Act could be insisted upon where the tax and penalty secured by a bank guarantee had already been satisfied by invocation/encashment of that guarantee. - HELD THAT: - The Appellate Authority did not consider the petitioner's case that the bank guarantee furnished for release of goods was invoked and the entire tax and penalty secured thereby was realized by the first respondent. If the guarantee has been encashed and the amounts secured thereby fully satisfied the liability, there cannot be insistence on a further pre-deposit under the statutory provision. The failure to examine and decide this factual-legal contention rendered the impugned order perverse. The Appellate Authority must consider the effect of the alleged encashment on the requirement of a pre-deposit when re-deciding the appeal. [Paras 10]

The impugned order is set aside to the extent it dismissed the appeal for non-payment of pre-deposit without considering the encashment of the bank guarantee; the Appellate Authority is directed to reconsider the necessity of any pre-deposit in light of the encashment.

Court fee payable to Kerala Legal Benefit Fund - restoration of appeal to file - Whether the petitioner should be permitted to pay the court fee towards the Kerala Legal Benefit Fund and, upon payment, have the appeal restored to file for adjudication on merits. - HELD THAT: - The petitioner has offered to pay the court fee towards the Kerala Legal Benefit Fund and explained prior confusion about the amount payable. The Court granted the petitioner an opportunity to deposit the court fee within a specified time. Upon such deposit, the respondents are directed to reconsider the application, restore the appeal to file and proceed to consider the appeal on merits in accordance with law. The impugned order dated 10.02.2022 is set aside to permit this process. [Paras 11, 12]

If the petitioner deposits the Kerala Legal Benefit Fund court fee within 30 days from receipt of the judgment, the Appellate Authority shall restore the appeal to file and consider it on merits; the impugned order is set aside accordingly.

Final Conclusion: Writ petition allowed: the Appellate Authority's order rejecting the appeal as defective is set aside; the authority is directed to reconsider condonation of delay excluding the time spent in the writ petition, to examine the effect of invocation/encashment of the bank guarantee on any pre-deposit requirement, and, upon deposit of the Kerala Legal Benefit Fund court fee within 30 days, to restore the appeal to file and decide it on merits.

Taxability of commercial training and coaching services - classification under SAC 999293 - GST rate 18% on education services (Notification No.11/2017 - Sr. No.30) - exemption for training partners approved by National Skill Development Corporation - inapplicability of goods notifications to supply of services

Classification under SAC 999293 - taxability of commercial training and coaching services - GST rate 18% on education services (Notification No.11/2017 - Sr. No.30) - Whether training and awareness programmes on fire prevention conducted by the applicant attract GST and at what rate. - HELD THAT: - The Authority examined the nature of the applicant's activity and the notifications relied upon. The applicant's reference to a goods notification concerning "technical aids for education, rehabilitation, vocational training" was found inapposite because that notification pertains to intra State supplies of goods and the applicant is providing training services, not goods (para.12). The Authority considered the exemption available under Sr. No.69 of Notification No.12/2017 for services by training partners approved by the National Skill Development Corporation or Sector Skill Council, but the applicant did not establish that it is an approved training partner; therefore that exemption does not apply (para.13). The Authority then applied the explanatory notes and service classification: training on fire prevention falls within commercial training and coaching services under SAC 999293. Entry Sr. No.30 of Notification No.11/2017, which covers education services under Heading 9992, prescribes the applicable rate for such services; consequently the services are taxable at the rate provided therein (para.14). [Paras 12, 13, 14]

Training and awareness programmes on fire prevention conducted by the applicant are classifiable as commercial training services under SAC 999293 and are taxable at 18% as per Sr. No.30 of Notification No.11/2017.

Final Conclusion: Advance ruling: Training and Awareness Programmes on Fire Prevention & Emergency conducted by M/s. Fire Prevent Systems attract GST at 18% (classification as commercial training services under SAC 999293); notifications relied upon for reduced rates or goods/NSDC exemptions do not apply on the facts presented.

Bail under the Code of Criminal Procedure, 1973 - arrest and entitlement to bail in economic / GST fraud cases - cognizable and non-bailable offence - input tax credit fraud - fabrication of bogus invoices - gravity of offence and severity of punishment - interference with investigation and tampering with evidence - cooperation in investigation

Bail under the Code of Criminal Procedure, 1973 - arrest and entitlement to bail in economic / GST fraud cases - gravity of offence and severity of punishment - input tax credit fraud - fabrication of bogus invoices - interference with investigation and tampering with evidence - cooperation in investigation - Whether the applicant-accused Saurabh Srivastava was entitled to grant of bail under Section 439 CrPC in respect of the alleged GST input-tax-credit fraud. - HELD THAT: - The Court found that the accused is alleged to have availed input tax credit by creating fake bills and without actual supply of goods during the period July 2017 to November 2020, and that most suppliers' premises were found closed or their GST registrations cancelled. Investigation was at a nascent stage and material showing physical movement of goods was not produced by the accused. The complaint attributes to the accused the role of proprietor and the mastermind who orchestrated the fraud through a network of accomplices. Partial recovery by other entities does not dilute the alleged offence of the accused, and the prosecution raised a realistic apprehension that granting bail could hamper the ongoing investigation and risk tampering with evidence. Considering the gravity of the allegations and the severity of punishment for the offence, the Court exercised its discretion to refuse bail at this stage. The Court expressly stated that its order is without prejudice to the merits of the case. [Paras 8, 9]

The first bail application under Section 439 CrPC filed on behalf of the applicant-accused is dismissed.

Final Conclusion: On the facts and allegations of fabricated invoices, non-existent suppliers, nascent stage of investigation and the gravity of the offence, the District Court dismissed the first bail application filed by the accused; the order is without prejudice to the merits of the prosecution.

Benami property - attachment under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988 - requirement of satisfaction that the property may be alienated - show cause notice under Section 24(1) - jurisdictional requirement of satisfaction - interim relief and stay of operation - fresh consideration / restart of proceedings from Section 24(1)

Requirement of satisfaction that the property may be alienated - jurisdictional requirement of satisfaction - attachment under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988 - Adequacy of the satisfaction recorded before invoking Section 24(3) and validity of the attachment was not finally adjudicated and is to be considered afresh. - HELD THAT: - The Court observed that the petitioners challenged the order dated 31.03.2022 under Section 24(3) on the ground that the authority had not formed the requisite satisfaction that the property was likely to be alienated. The respondents placed internal notes dated 28.03.2022 and 30.03.2022 asserting that a prima facie satisfaction had been reached, and approval obtained. The Court, however, refrained from finally examining the adequacy or merits of those reasons. It noted prima facie concerns that the antecedent material to justify satisfaction may not be connected to the specific requirement of likely alienation, but expressly declined to make further observations on merits so as to avoid prejudice. Consequently the proceedings are to be recommenced from the stage of the procedure under Section 24(1) so that the requirement of forming a satisfaction and issuance of show cause notice can be considered in accordance with law. [Paras 8, 9, 10, 11, 15]

The question of whether a lawful satisfaction existed before passing the order under Section 24(3) is not finally decided and the matter is to be considered afresh in accordance with the procedure under Section 24(1).

Show cause notice under Section 24(1) - interim relief and stay of operation - fresh consideration / restart of proceedings from Section 24(1) - Interim relief granted permitting the petitioners to file a reply and staying the operation of the impugned order pending fresh consideration. - HELD THAT: - Relying on the petitioners' verified undertaking not to alienate the property and their willingness to file a reply to the show cause notice, the Court granted time to file the reply. The petitioners were afforded a period of 10 days from 06.06.2022 to submit their reply to the show cause notice dated 30.03.2022. The respondent authorities were directed to consider the reply strictly in accordance with Section 24 of the Act. Meanwhile, the impugned order dated 31.03.2022 shall not be given effect to, and the process will start afresh from the stage of the procedure in Section 24(1), all actions to be taken strictly in accordance with law. [Paras 12, 13, 14, 15, 16]

Petitioners granted 10 days to file reply; impugned order of attachment shall not be given effect to and authorities shall reconsider proceedings from Section 24(1) after considering the reply.

Final Conclusion: Writ petition disposed of by permitting the petitioners ten days to file reply to the show cause notice; the impugned attachment order is not to be given effect to and the authorities are directed to recommence and consider the proceedings strictly in accordance with Section 24 of the Prohibition of Benami Property Transactions Act, 1988; the Court refrained from adjudicating the adequacy of the recorded satisfaction, leaving that for fresh consideration.

Deduction under Section 43B of the Income-tax Act - payment versus deposit in a designated bank account for Section 43B purposes - electricity duty - additional depreciation under Section 32(1)(iia) - assets acquired before cutoff date but installed after 31-03-2005 eligible for additional depreciation

Deduction under Section 43B of the Income-tax Act - payment versus deposit in a designated bank account for Section 43B purposes - electricity duty - Deduction under Section 43B was allowable in respect of the electricity duty amounts deposited in the designated bank account and released to the State Government under this Court's orders. - HELD THAT: - The Court held that the facts of the present case differ from decisions where amounts remained in loan-lien or designated accounts and were inaccessible to the Government. A substantial portion of the amounts deposited pursuant to this Court's interim orders was in fact released to and received by the State Government. Given that the assessee had parted with the amounts and the Government had received payments (including the subsequent settlement recorded by the Supreme Court), the AO, the CIT(A) and the ITAT were not justified in treating the sums as non-payment for the purpose of Section 43B. The matter is remitted to the Assessing Officer for recomputation in light of the amounts already released to the State Government. [Paras 13, 14, 15]

Addition/disallowance of Rs.31,18,89,388/- under Section 43B in respect of electricity duty deposited in the SBI account is set aside; remand made for fresh computation considering amounts released to the State Government.

Additional depreciation under Section 32(1)(iia) - assets acquired before cutoff date but installed after 31-03-2005 eligible for additional depreciation - Components/parts of a plant acquired prior to 31-03-2005 but fitted/installed after 31-03-2005 are eligible for additional depreciation under Section 32(1)(iia). - HELD THAT: - Relying on the decision of the Gujarat High Court in PCIT v. IDMC Ltd., which was not disturbed by the Supreme Court, the Court held that machines or parts acquired before the statutory cutoff but installed thereafter fall within the scope of additional depreciation under Section 32(1)(iia) for the relevant assessment year. Applying that ratio, the disallowance of additional depreciation in the assessment under challenge was unsustainable. [Paras 16, 17, 18]

Disallowance of additional depreciation under Section 32(1)(iia) is set aside; components acquired before but installed after 31-03-2005 are eligible for additional depreciation.

Final Conclusion: The appeal is allowed: the addition under Section 43B in respect of electricity duty deposited in the designated bank account is set aside and remitted for recomputation in light of amounts paid to the State Government; the disallowance of additional depreciation under Section 32(1)(iia) is reversed, holding that items acquired before 31-03-2005 but installed thereafter qualify for additional depreciation (AY 2006-07).

Reopening of assessment beyond four years under Section 147 of the Income-tax Act - reason to believe - failure to disclose fully and truly all material facts - prima facie satisfaction for reopening - scope of judicial review of reopening - remand for fresh consideration of objections by assessing officer

Reopening of assessment beyond four years under Section 147 of the Income-tax Act - reason to believe - failure to disclose fully and truly all material facts - prima facie satisfaction for reopening - Validity of the notice under Section 148/147 reopening assessment for A.Y. 2012-13 and sufficiency of the reasons recorded together with disposal of the objections - HELD THAT: - The Court reviewed the statutory test for reopening beyond four years: the Assessing Officer must have a reason to believe that income chargeable to tax has escaped assessment and that such escapement is occasioned by failure to file a return or to disclose fully and truly all material facts; both conditions are concurrent and reasons must be recorded. The recorded reasons in the reopening notice relied upon alleged excess cash deposits and asserted that the assessee failed to explain them. However, on objection the assessee had advanced a specific explanation that the apparent difference arose from VAT being shown separately (exclusive accounting) and provided reconciliation documents. The Assessing Officer, while disposing objections, merely noted it was not the appropriate time to examine merits and declined to apply mind to the explanation, without dealing with the reconciliatory material. The Court held that reasons recorded must disclose satisfaction of the statutory conditions and the Assessing Officer is required to apply his mind to the objection and the primary facts put forth by the assessee; where the AO has not adequately considered the explanation and material, the Court should remit for fresh consideration rather than decide merits itself. The Court did not undertake merits of the proposed assessment beyond a prima facie review and emphasised that the merits of the transactions are not to be gone into at the stage of testing validity of reopening, but the objection pointed to material which required considered response by the AO. Consequently, the AO's order disposing the objections and the notice were quashed and remitted for fresh hearing and reasoned decision in accordance with law. [Paras 6, 7, 8]

Impugned reopening notice and the order disposing objections quashed; matter remitted to the Assessing Officer to give hearing and pass a fresh, reasoned order dealing with the objections within two months.

Final Conclusion: Writ petition partly allowed: the reopening notice and the order disposing objections are quashed and set aside; the matter is remitted to the Assessing Officer for fresh consideration of the objections with opportunity of hearing and a reasoned decision to be rendered within two months from the date of the order.

Writ of Mandamus - Section 263 of the Income Tax Act - power of Assessing Officer to proceed pending appeal - stay of revisional order - protective arrangement restraining demand pending appellate disposal - direction for expeditious disposal by the Appellate Tribunal

Section 263 of the Income Tax Act - power of Assessing Officer to proceed pending appeal - stay of revisional order - protective arrangement restraining demand pending appellate disposal - Legality of the Assessing Officer proceeding with assessment proceedings pursuant to an order passed under Section 263 while an appeal against that revisional order is pending before the ITAT. - HELD THAT: - The Court observed that although an appeal against a revisional order under Section 263 is pending before the ITAT (and an application for stay was rejected by the Tribunal), permitting the Assessing Officer to carry out assessment proceedings without limitation could render the appellate challenge otiose. Relying on the view taken in a recent similar petition, the Court permitted the Assessing Officer to proceed with the assessment proceedings called for by the revisional order, provided the assessee cooperates by filing replies, evidence or documents within a limited time. Simultaneously, to protect the assessee's appellate remedy, the Court directed that no further proceedings resulting in demand (including issuance of demand notices) shall be taken pursuant to any adverse order in the assessment until the pending appeal before the ITAT is disposed of. This arrangement was treated as balancing the interests of both Revenue and the assessee and as preserving the efficacy of the appellate process. [Paras 10, 11]

Assessing Officer allowed to carry on assessment proceedings on the basis of the Section 263 order subject to the assessee furnishing requested material within two weeks, and any demand resulting from an adverse assessment order shall not be enforced until disposal of the appeal before the ITAT.

Direction for expeditious disposal by the Appellate Tribunal - protective arrangement restraining demand pending appellate disposal - Whether the ITAT should be directed to expeditiously hear and decide the pending appeal against the revisional order. - HELD THAT: - The Court, noting the pendency of the appeal and the need to avoid prolonged uncertainty, directed the ITAT to complete the hearing and pass orders in the appeal on or before a specified date. The direction was framed as a measure to ensure timely adjudication so that the protective restraint on enforcement of demand need not be protracted, and to enable appropriate action thereafter in accordance with the Tribunal's outcome. [Paras 11]

ITAT directed to complete hearing and pass orders in the pending appeal by the date specified in the order.

Final Conclusion: Writ petition disposed by permitting the Assessing Officer to proceed with assessment proceedings pursuant to the revisional order under Section 263, subject to the assessee's cooperation and a protective bar on enforcement of any demand until the ITAT disposes of the pending appeal; the ITAT was directed to decide the appeal expeditiously by the date indicated.

Treatment of unexplained investment under Section 69A of the Income Tax Act, 1961 - discretionary scope of the word 'may' in Section 69A - appreciation of evidentiary materials in respect of taxpayers from the non-organised sector - best judgment assessment under Section 144 of the Income Tax Act, 1961

Treatment of unexplained investment under Section 69A of the Income Tax Act, 1961 - discretionary scope of the word 'may' in Section 69A - appreciation of evidentiary materials in respect of taxpayers from the non-organised sector - Addition of Rs.12,70,100 treated as unexplained investment and taxed under Section 69A was deleted - HELD THAT: - The Assessing Officer made an addition under the doctrine of unexplained investment after a best judgment assessment under Section 144 because the assessee had not filed a return and a credit of Rs.12,70,100 appeared in his bank account. On appeal the assessee produced an affidavit from his father, a confirmation from his brother and bank statements showing deposits and a subsequent RTGS transaction. The Tribunal recognised that Section 69A applies where the assessee offers no explanation about the nature and source of acquisition, but noted the statutory word 'may' confers discretion on the assessing authority. Applying that discretion in the facts, the Tribunal observed the assessee belongs to the non organised sector running a small rural shop and may not maintain meticulous records; the deposits were plausibly explained as family contributions towards his daughter's marriage and a business payment partly routed through the account for purchase of sugar. The Revenue produced no independent material (such as discovery of other assets or unexplained expenditure) to rebut the explanations or to demonstrate funds originated from undisclosed income. Given the evidentiary materials on record, the circumstances of the assessee and the discretionary language of Section 69A, the Tribunal concluded the deposits could not be treated as unexplained investment and deleted the addition. [Paras 6, 7, 8]

Addition of Rs.12,70,100 treated as unexplained investment under Section 69A deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2017-18 by deleting the addition of Rs.12,70,100 made under Section 69A, having accepted the explanations and evidentiary materials produced and exercised discretion under the statutory word 'may'.

Validity of notice under section 143(2) - Limited scrutiny vs complete scrutiny - Requirement of prior approval to convert limited scrutiny into complete scrutiny - Penalty under section 272A(1)(c) for failure to comply with summons under section 131 - Validity of demand notice under section 156

Validity of notice under section 143(2) - Limited scrutiny vs complete scrutiny - Requirement of prior approval to convert limited scrutiny into complete scrutiny - Scrutiny selection and the validity of the notice under section 143(2) insofar as the case was picked for complete scrutiny and whether any defect in the notice or lack of prior approval vitiated the assessment. - HELD THAT: - The Tribunal accepted the reasoning of the ld. CIT(A) that the case was originally selected by CASS for complete scrutiny and was not a limited-scrutiny file converted into complete scrutiny; therefore no written approval from the Principal CIT was required. The ld. CIT(A) had considered the contention that the section 143(2) notice was defective, observed that the notice was system-generated by CASS and that no specific defect was pointed out by the assessee, and concluded that the notice was not defective. The AO's assessment focused on the turnover and profit issues for which the case was selected and did not demonstrate exercise of jurisdiction beyond those reasons. The assessee raised no substantive challenge to the additions on merits before the first appellate authority or before this Tribunal. On these facts the Tribunal found no infirmity in the ld. CIT(A)'s conclusion and declined to interfere. [Paras 8]

The finding that the scrutiny notice and the notice under section 143(2) were valid and that no prior approval was required is upheld; the appeal on this issue is dismissed.

Penalty under section 272A(1)(c) for failure to comply with summons under section 131 - Validity of demand notice under section 156 - Levy of penalty under section 272A(1)(c) for non-compliance with summons issued under section 131 and the relevance of the signature on the demand notice. - HELD THAT: - The Tribunal recorded that the summons under section 131(1) dated 05.12.2016 required the assessee's personal appearance on 08.12.2016 with documents; the assessee failed to appear, did not furnish any reasonable cause or seek adjournment, and thus violated section 131. The AO rightly referred the matter to the Joint Commissioner for initiation of penalty proceedings and the penalty under section 272A(1)(c) was attracted and properly levied. The assesseee's objection that the demand notice under section 156 was signed by the Joint Commissioner rather than the Assessing Officer was held to be immaterial in the context of confirming the penalty under section 272A(1)(c). Accordingly the ld. CIT(A)'s confirmation of the penalty was sustained. [Paras 11, 12]

Penalty under section 272A(1)(c) for non-compliance with the summons is confirmed; the appeal on this issue is dismissed.

Final Conclusion: Both appeals are dismissed: the assessment founded on the valid scrutiny selection and notice under section 143(2) is upheld, and the penalty under section 272A(1)(c) for failure to comply with the section 131 summons is confirmed.

Exemption of long term capital gains under section 10(38) - Unexplained cash credit treated under section 68 - Deemed dividend under section 2(22)(e) - Genuineness and human probabilities test - Findings of regulatory and investigation agencies as corroborative evidence

Exemption of long term capital gains under section 10(38) - Unexplained cash credit treated under section 68 - Genuineness and human probabilities test - Findings of regulatory and investigation agencies as corroborative evidence - Addition treating claimed tax exempt long term capital gains and related commission as unexplained cash credit was upheld. - HELD THAT: - The Tribunal upheld the Assessing Officer's and CIT(A)'s findings that the assessee's claim of exempt long term capital gains from sale of shares of Kailash Auto Finance Ltd was not genuine. Independent inquiries by SEBI and the Directorate of Investigation, Kolkata established that the company was a penny stock engaged in providing bogus long term capital gains to beneficiaries; SEBI had suspended/blacklisted the company and imposed penalties, and the promoter's statement under oath admitted the modus operandi. Market data showed anomalous, disproportionate price and turnover movement inconsistent with broader market trends. The assessee's mere payment by RTGS and payment of securities transaction tax, and denial in recorded statement, did not rebut the corroborated evidence of manipulation. Applying the genuineness and human probabilities test, the Tribunal found the transactions to be sham and that the exemption could not be allowed; accordingly the amounts were correctly added back as unexplained cash credits and the commission disallowed. [Paras 5, 6, 8, 9, 10]

The addition under section 68 in respect of the long term capital gains and the commission was sustained and grounds challenging those additions were dismissed.

Deemed dividend under section 2(22)(e) - Addition of advances received from a closely held company as deemed dividend under section 2(22)(e) was upheld. - HELD THAT: - The Tribunal found that the statutory conditions for deeming an advance as dividend were satisfied: the assessee held 25.34% of shares in M/s A.R. International Private Limited (thus not a company in which the public are substantially interested), the company had made an advance to the assessee (reflected as loans and advances in the company's books), and accumulated profits were available to the company. The assessee failed to produce documentary evidence to establish that the amount was a bona fide business advance. In the absence of satisfactory explanation or supporting documents, the advance was correctly treated as deemed dividend to the extent of accumulated profits and taxed under section 2(22)(e). [Paras 11, 12, 13, 15, 16]

The addition as deemed dividend under section 2(22)(e) was confirmed and the ground challenging it was dismissed.

Final Conclusion: Both the additions-(i) disallowance of claimed tax exempt long term capital gains (and related commission) as unexplained cash credit and (ii) treatment of advances as deemed dividend-were upheld by the Tribunal; the assessee's appeal is dismissed.

Allowability of deduction for employees' contribution to ESI/Provident Fund - application of section 36(1)(va) - application of section 43B - retrospective vs prospective effect of tax amendments - adjustment by intimation under section 143(1) - scope of section 143(1) intimation-adjustments on debatable or controversial issues

Allowability of deduction for employees' contribution to ESI/Provident Fund - adjustment by intimation under section 143(1) - scope of section 143(1) intimation-adjustments on debatable or controversial issues - Whether additions made by way of adjustment/intimation under section 143(1) in respect of employees' contributions to ESI/Provident Fund (deposited after the statutory due date under ESI/PF law but before the due date for filing return under section 139(1)) were sustainable. - HELD THAT: - The Tribunal held that the payments of employees' contribution to ESI/Provident Fund after the statutory due date under the respective social welfare statutes but before the due date for filing the return under section 139(1) was not disputed factually. The adjustments adding the amount to income were effected by intimation under section 143(1). The Tribunal observed that where the legal question underpinning an adjustment is debatable or controversial, making such an addition by way of summary intimation under section 143(1) is impermissible. The Tribunal relied on precedents holding that section 143(1) cannot be used to decide contested questions of law and that retrospective amendments cannot be invoked by summary intimation. In the factual matrix, binding decisions of the jurisdictional High Court favourable to the assessee were available prior to the date of intimation, and the correctness of the Revenue's contrary position (including any reliance on subsequently enacted amendments) was at best debatable. Consequently, the Tribunal found the additions made by intimation under section 143(1) to be unfair, unjust and bad in law and that the CIT(A) erred in confirming them.

The additions of Rs. 29,52,674/- made by way of adjustment and intimation under section 143(1) are beyond the scope of section 143(1) on a debatable and controversial issue and are to be deleted.

Final Conclusion: The appeal is partly allowed: the Tribunal sets aside the CIT(A)'s confirmation and directs deletion of the addition of Rs. 29,52,674/- made by adjustment/intimation under section 143(1). The Tribunal expressly declines to decide whether the Finance Act, 2021 amendments are retrospective or prospective.

Deduction under section 80IA(4)(iii) - income 'derived from' eligible business - interest on deferred payments/land premium as business receipts - nexus between receipts and eligible business

Deduction under section 80IA(4)(iii) - income 'derived from' eligible business - interest on deferred payments/land premium as business receipts - nexus between receipts and eligible business - Whether interest received on deferred payment of land premium in respect of allotment of plots in industrial parks is income 'derived from' the eligible business and thus eligible for deduction under section 80IA(4)(iii). - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the assessee, constituted to develop, operate and maintain industrial parks and entrusted with management and allotment functions, earns receipts from those core activities. The deferred payment scheme and the interest charged thereunder were held to form part of the contractual payment terms offered to allottees; the interest is compensation for delayed receipt and arises out of the primary activity of allotment of plots. The Tribunal rejected the Assessing Officer's characterisation of the interest as merely incidental financing income or as unrelated to the development business, and distinguished the decision relied upon by the AO (Liberty India) as factually different. On these foundations the Tribunal concluded that the interest has a direct nexus with the eligible business and is therefore 'derived from' it for the purposes of section 80IA(4)(iii). [Paras 12, 13]

Interest on deferred payments/land premium is derived from the eligible business of developing, operating and maintaining industrial parks and is eligible for deduction under section 80IA(4)(iii); the CIT(A)'s order allowing the deduction is affirmed and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that interest on deferred land-premium receipts is income derived from the eligible business of developing and operating industrial parks and is eligible for deduction under section 80IA(4)(iii); the revenue's appeal is dismissed.

Reopening of assessment beyond four years under the first proviso to section 147 - Failure to disclose fully and truly all material facts necessary for assessment - Change of opinion doctrine and requirement of tangible material with a live link to 'reason to believe' (Kelvinator) - Disallowance under section 40(a)(ia) for failure to deduct TDS under section 194C

Reopening of assessment beyond four years under the first proviso to section 147 - Change of opinion doctrine and requirement of tangible material with a live link to 'reason to believe' (Kelvinator) - Failure to disclose fully and truly all material facts necessary for assessment - Validity of reopening the assessment for AY 2012-13 where original assessment was completed under section 143(3) and the Assessing Officer issued notice beyond four years on the basis that TDS was not deducted on certain expenses - HELD THAT: - The Tribunal held that the reopening initiated at the fag end of the sixth year was impermissible because it fell within the first proviso to section 147 and there was no failure by the assessee to disclose fully and truly all material facts. The AO's reasons relied on material already available from the return and audit report (the particulars of the disputed expenses and absence of TDS entry in Form 3CD). Applying the legal principle in CIT v. Kelvinator of India Ltd., the Tribunal emphasised that post-amendment reopening must be founded on 'tangible material' coming to the AO's notice after the original assessment and there must be a live link between that material and the belief that income has escaped assessment. A mere change of opinion based on material available at the time of original assessment does not furnish a valid reason to reopen. Since the AO's reasons derived from the same material already before him at the time of the original section 143(3) assessment, the reopening was quashed as a change of opinion contrary to Kelvinator and the proviso to section 147. [Paras 5]

Reopening of assessment was quashed and the jurisdictional issue allowed in favour of the assessee; therefore the reassessment was invalid.

Final Conclusion: The Tribunal allowed the appeal by quashing the reopening of assessment for AY 2012-13 on the ground that the Assessing Officer relied on material already available at the time of the original assessment, amounting to an impermissible change of opinion; consequentially the reassessment was held invalid.

Allowability of directors' remuneration as business expenditure - reasonableness and excessiveness of directors' remuneration under section 40A(2) of the Income tax Act - application of Companies Act limits on managerial remuneration to private companies - taxation of remuneration by recipient directors and absence of revenue loss

Reasonableness and excessiveness of directors' remuneration under section 40A(2) of the Income tax Act - application of Companies Act limits on managerial remuneration to private companies - allowability of directors' remuneration as business expenditure - taxation of remuneration by recipient directors and absence of revenue loss - Whether the Assessing Officer and the Commissioner (Appeals) were justified in disallowing a portion of directors' remuneration as excessive by applying the Companies Act limits and section 40A(2) - HELD THAT: - The Tribunal found that the AO and CIT(A) did not bring any material on record to demonstrate that the payments to the three directors were excessive or unreasonable with reference to market rates, business needs or benefit derived by the assessee. The Tribunal accepted that the directors were actively involved in the company's affairs, that they had included the remuneration in their individual returns and had paid tax thereon at the maximum rate, and that no revenue loss to the Department was shown. The Tribunal relied on the reasoning in earlier decisions which require objective material to justify invoking section 40A(2) to disallow director remuneration and which distinguish the Companies Act managerial remuneration limits as not automatically applicable to private companies in this context. In absence of findings by the AO that the payments were excessive or of any evidence of tax evasion or profit shifting, the disallowance made by the authorities was held unsustainable and the remuneration was held allowable.

The disallowance of a portion of directors' remuneration was reversed and the remuneration was allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2012-13, holding that in absence of material demonstrating that directors' remuneration was excessive or paid to evade tax, and given that the directors had declared and paid tax on the amounts, the disallowance under section 40A(2) and by reference to Companies Act limits was unsustainable.

Revenue expenditure - Capital expenditure - Product development expenses - Testing and validation expenses - Upgradation of existing product - Allowability as business expenditure

Revenue expenditure - Product development expenses - Testing and validation expenses - Upgradation of existing product - Allowability as business expenditure - Whether product development, testing and validation expenses incurred for upgrading existing products are capital or revenue in nature and therefore allowable as business expenditure. - HELD THAT: - The Tribunal examined the nature of the expenditure claimed as product development expenses and accepted the assessee's unchallenged factual position that no new asset was created and no new product actually materialised; the outlay facilitated the existing manufacturing business and enabled improved operational efficiency. Relying on established precedents of the Supreme Court and the Karnataka High Court cited in the order, the Tribunal applied the principle that expenditure incurred for upgrading existing products is revenue in nature. On that reasoning the sum claimed for testing, prototyping and validation, being incurred for improvement and upgradation of existing products used in the ordinary course of business, cannot be treated as capital expenditure and must be allowed as revenue expenditure. [Paras 8, 9]

The expenditure on testing, prototyping and validation for upgradation of existing products is revenue in nature and is allowable as business expenditure.

Final Conclusion: The appeal is allowed: the product development/testing and validation expenses incurred for upgradation of existing products are held to be revenue expenses and are to be allowed accordingly.

Deduction under section 80IB of the Income Tax Act, 1961 - Doctrine that a deduction once allowed in the initial year cannot be denied in subsequent years

Deduction under section 80IB of the Income Tax Act, 1961 - Doctrine that a deduction once allowed in the initial year cannot be denied in subsequent years - Allowance of deduction under section 80IB to the assessee for AY 2011-12 and validity of rejecting that deduction by the AO after it had been allowed in the initial year and subsequent years. - HELD THAT: - The Commissioner (Appeals) allowed the claim of deduction for the assessee's project by recording that the deduction had been allowed in the initial year AY 2003-04 after due verification and was also allowed in AY 2004-05 and AY 2005-06. The appellate authority relied on judicial decisions holding that where deduction was rightly allowed in the initial year, the Revenue cannot, in subsequent years, deny the same. The Tribunal, on review of the appellate order and the material placed before the authorities, accepted the factual finding that the initial-year allowance was made after verification and remained undisturbed in subsequent years, and that the AO's rejection for AY 2011-12 was inconsistent with those findings and settled precedents. Applying the principle that a deduction correctly admitted in the first year cannot be disallowed in later years absent disturbing the initial finding, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's appeal. [Paras 4, 5]

The deduction under section 80IB for AY 2011-12 is upheld and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s allowance of the section 80IB deduction for AY 2011-12, treating the initial-year allowance (AY 2003-04) and subsequent undisturbed allowances as determinative for the later assessment.

Revision under section 263 - Assessments under section 153A read with section 143(3) - Requirement of incriminating material from search to disturb concluded assessments - Claim of deduction under section 80IB - Effect of search under section 132 on completed assessments

Revision under section 263 - Assessments under section 153A read with section 143(3) - Requirement of incriminating material from search to disturb concluded assessments - Claim of deduction under section 80IB - Whether the Principal Commissioner was correct in invoking revision under section 263 to set aside assessment orders passed under section 143(3) read with section 153A and direct re-examination of the claim of deduction under section 80IB where no incriminating material was found during the search. - HELD THAT: - The Tribunal held that completed assessments reiterated under proceedings pursuant to search cannot be disturbed in the absence of incriminating material unearthed during the search which relates to the subject matter sought to be reopened. The Court applied the legal proposition that section 153A proceedings do not permit upsetting a finalized assessment unless the materials gathered in the course of the search establish that the concluded assessment is contrary to such material. On the facts, the assessments for AYs 2011-2012 and 2012-2013 had been completed before the search and the record did not disclose any incriminating material relating to the claim of deduction under section 80IB. Since the Assessing Officer under section 143(3) r.w.s. 153A could not lawfully disallow the 80IB claim in absence of such material, the revisional jurisdiction under section 263 could not be exercised to direct re-examination. The Tribunal followed the precedents relied upon in the order, including IBC Knowledge Park Private Limited v. CIT and Pr.CIT v. M/s.Delhi International Airport Pvt. Ltd. , and applied those principles to conclude that there was no error in the assessment orders warranting revision. [Paras 6]

Impugned orders passed under section 263 setting aside the assessment orders under section 143(3) read with section 153A and directing re-examination of deduction under section 80IB are quashed.

Final Conclusion: The appeals are allowed; the revisionary orders dated 19.03.2021 passed by the Principal Commissioner under section 263 quashing the assessment orders under section 143(3) read with section 153A and directing re-examination of the section 80IB claim are set aside for lack of incriminating material to justify disturbing concluded assessments.

Ancestral property - vested right under Section 6 of the Hindu Succession Act - apportionment of capital gains among family members - taxability of capital gains in the hands of the rightful person - colourable device doctrine

Ancestral property - vested right under Section 6 of the Hindu Succession Act - apportionment of capital gains among family members - taxability of capital gains in the hands of the rightful person - Whether the long term capital gain arising from sale of the land should be taxed entirely in the hands of the assessee or apportioned as declared (one third each) among the assessee and his two sons - HELD THAT: - The Assessing Officer and the CIT(A) treated the entire sale consideration as taxable in the hands of the assessee, observing absence of proof of ancestral character or of any partition and expressing concern about possible colourable device. The assessee and his sons, however, had declared one third each of the capital gain in their returns. The Tribunal accepted that, although the ideal course might have been taxation in the hands of the HUF, the practical position on record showed that the assessee and his two sons had declared one third each. On this basis the Tribunal held it was not justified to include the entire capital gain in the hands of the assessee alone and directed that the Assessing Officer assess the capital gain at one third as shown by the assessee and delete the rest of the addition. The Tribunal accordingly set aside the CIT(A) order and restored the matter to the file of the Assessing Officer with directions to give effect to its decision. [Paras 7, 8]

Capital gain to be assessed at one third in the hands of the assessee as declared; balance addition deleted and matter remanded to the Assessing Officer to give effect to this order.

Final Conclusion: The appeal is allowed for statistical purposes; the Tribunal directs assessment of the capital gain at one third as declared by the assessee and two sons and restores the matter to the Assessing Officer to give effect to this direction.

Anticipatory bail - custodial interrogation - multi-victim fraud, cheating and criminal breach of trust - directorship and signatory to company resolutions as evidence of involvement - medical infirmity as a factor in bail consideration - role of forensic audit and Interim Resolution Professional in investigation

Anticipatory bail - medical infirmity as a factor in bail consideration - custodial interrogation - directorship and signatory to company resolutions as evidence of involvement - role of forensic audit and Interim Resolution Professional in investigation - Prayer for grant of anticipatory bail in relation to FIR No.59/2019 was declined and interim protection withdrawn. - HELD THAT: - The Court verified the applicant's medical condition (diagnosed prostate cancer Stage-4; undergoing chemotherapy and targeted therapy, with admission and discharge records) but found that he had been discharged in a stable condition. The forensic audit produced by the IRP and material collected during investigation prima facie indicated large-scale irregularities in the project accounts, bogus invoices, substantial dubious cash payments, defaults in statutory dues, inter related party transactions, and significant loans in respect of which the applicant was a signatory/borrower/guarantor. The applicant was shown by ROC records to be a Director and had received salary; he was a signatory to resolutions authorising loans and other corporate acts. On the State's case the applicant remained non cooperative at stages of the investigation and it was asserted that custodial interrogation was necessary to trace the money trail, recover cheated amounts and unearth the alleged conspiracy involving multiple victims. Weighing the verified medical condition against the prima facie evidence of the applicant's participation in transactions central to the alleged multi victim fraud, and the investigative need for custodial interrogation to secure evidence and witness testimony, the Court held that the medical infirmity did not outweigh the requirements of the investigation at this stage. Consequently anticipatory bail was refused and the interim protection earlier granted was withdrawn. [Paras 34, 36, 37, 38]

Anticipatory bail refused; interim protection withdrawn; State to ensure provision of chemotherapy in custody if required.

Final Conclusion: Anticipatory bail application dismissed on merits: the applicant's medical condition was verified but, in view of prima facie evidence of involvement as a director and signatory to loans and the findings of the forensic audit necessitating custodial interrogation to trace funds and recover amounts for multiple victims, interim protection was withdrawn; custodial medical needs to be accommodated by the State if the applicant is detained.

Restoration of name under section 252(3) of the Companies Act, 2013 - striking off for failure to file statutory returns and consequent dissolution - conditional revival subject to filing of pending annual accounts and returns - payment of costs for revival and procedural compliance for restoration - standing of a shareholder-director to file petition for restoration - limitation and COVID-19 filing exemption

Standing of a shareholder-director to file petition for restoration - limitation and COVID-19 filing exemption - Maintainability of the petition filed by a director/shareholder and timeliness of the appeal. - HELD THAT: - The Tribunal found that the petitioner, being a shareholder and director of the deregistered company, is eligible to file the appeal for restoration of the company's name and, therefore, the petition is maintainable. The Tribunal observed that the company's name was struck off on 13.09.2018 and the present appeal was filed on 23.12.2021; taking into account the COVID-19 pandemic-related exemption, the appeal was held to have been filed within the prescribed period and not time-barred. [Paras 13, 14]

Petition is maintainable and was filed within time considering the COVID-19 exemption.

Restoration of name under section 252(3) of the Companies Act, 2013 - striking off for failure to file statutory returns and consequent dissolution - conditional revival subject to filing of pending annual accounts and returns - payment of costs for revival and procedural compliance for restoration - Whether the company's name should be restored and on what conditions the Tribunal would exercise its power under section 252(3). - HELD THAT: - After considering the materials and submissions, the Tribunal accepted the petitioner's contention that the failure to file annual returns and financial statements was inadvertent and not deliberate, and that the company had been active. Exercising its powers under section 252(3), the Tribunal held that it would be just and equitable to restore the company's name but did so only on specified conditions. The restoration is directed to be carried out as if the company's name had not been struck off, subject to the petitioner filing all pending statutory documents (annual accounts and annual returns) for the financial years from 31.03.2013 to 31.03.2021 with prescribed fees/additional fees/fines as decided by the ROC, delivery of a certified copy of the order to the ROC within thirty days, publication of the order by the ROC in the Official Gazette, payment of a specified cost for revival by online payment, and personal oversight by the company's representative to ensure compliance. The Tribunal also clarified that the order is confined to the violations that led to striking off and does not preclude the ROC from taking appropriate action for any other violations/offences. [Paras 16, 17, 18]

The appeal is partly and conditionally allowed: the ROC is directed to restore the company's status to 'Active' as if not struck off, subject to the stated compliance conditions (filing pending documents for 31.03.2013 to 31.03.2021, payment of prescribed fees and costs, delivery of certified copy, and publication), and without prejudice to ROC's power to act on any other violations.

Final Conclusion: The Tribunal partly and conditionally allowed the company petition under section 252(3), directing restoration of the company's name to the register as if never struck off, subject to filing of all pending annual accounts and returns for 31.03.2013 to 31.03.2021 with prescribed fees/additional fees/fines, payment of the directed revival cost, delivery of a certified copy to the ROC and publication in the Official Gazette; the petition was held maintainable and filed within time considering COVID-19 exemptions, and the ROC remains entitled to proceed against the company for any other violations.

Applicability of the Limitation Act to IBC proceedings - Article 137 of the Limitation Act - Article 1 (suits relating to accounts) - Accrual of right to apply - Section 9 Insolvency and Bankruptcy Code - Section 5 Limitation Act - condonation of delay

Article 1 (suits relating to accounts) - Section 9 Insolvency and Bankruptcy Code - Application under Section 9 of the IBC is not a "suit relating to accounts" attracting Article 1 of the Limitation Act. - HELD THAT: - Article 1 of the Limitation Act falls under Part I dealing with suits relating to accounts and prescribes a special rule for balance due on mutual, open and current accounts. The Court examined the nature of an application under Section 9 and held that such an application cannot be treated as a suit relating to accounts for the purpose of Article 1. Reliance on authorities concerning mutual account provisions therefore does not convert a Section 9 proceeding into a "suit relating to accounts", and the special computation rule in Article 1 (counting limitation from the close of the year in which the last item is entered) is not applicable to the Section 9 application filed by the appellant. [Paras 15, 16]

Article 1 of the Limitation Act is not attracted to the Section 9 application; the plea to compute limitation from the close of the financial year (31 March 2017) under Article 1 is rejected.

Article 137 of the Limitation Act - Accrual of right to apply - Applicability of the Limitation Act to IBC proceedings - Section 5 Limitation Act - condonation of delay - Period of limitation for filing a Section 9 application is governed by Article 137 of the Limitation Act and begins to run from the date when the right to apply accrues; the Section 9 application in this case was time-barred. - HELD THAT: - The Court reiterated binding precedents that the Limitation Act applies to IBC proceedings and that Article 137 governs the limitation for applications under Sections 7 and 9, with the period running from the date the right to apply accrues (i.e., the date of default/non-payment). The invoices on which the appellant relied were dated well over three years prior to filing the Section 9 application on 24 October 2019. Given that the right to apply accrued on non-payment of those invoices, the claim was time-barred under Article 137. The appellant's contention that Section 5 should be applied to condone any short delay was noted but the Court was not persuaded to treat the matter as one warranting condonation; the Adjudicating Authority therefore correctly rejected the application as barred by limitation. [Paras 8, 12, 13, 16]

Article 137 governs limitation for Section 9; limitation began on accrual of the right to apply and the Section 9 application was time-barred, justifying its rejection by the Adjudicating Authority.

Final Conclusion: The Tribunal held that Article 1 of the Limitation Act does not apply to Section 9 proceedings; Article 137 governs limitation for Section 9 and runs from accrual of the right to apply. The Section 9 application, being filed beyond the three-year period calculated under Article 137, was time-barred and the appeal is dismissed.

Liquidation as last resort - CIRP failure for want of viable resolution plan - Appointment of Liquidator - Effect of liquidation on moratorium - Vesting of management powers in Liquidator - Powers and duties of Liquidator under the Code and Liquidation Regulations - Liquidator's remuneration under Section 34(8) - Public announcement in liquidation - Service of liquidation order to Registrar, Regional Director and Official Liquidator

Liquidation as last resort - CIRP failure for want of viable resolution plan - Liquidation of the Corporate Debtor is ordered because no viable resolution plans were received and the CIRP period could not yield a resolution. - HELD THAT: - The Adjudicating Authority recorded that no viable resolution plans were received by the last date for submission of EoIs and noted the timelines under the Code. While recognising that liquidation is a last resort, the Authority held that in the absence of any plans and given the need to preserve asset value and adhere to prescribed timelines, the only option available was to direct liquidation of the Corporate Debtor. This conclusion follows from the material on record regarding the conduct of the CIRP and the absence of any prospective resolution applicants. [Paras 3, 5]

The Corporate Debtor is ordered to be liquidated.

Appointment of Liquidator - Shri. Pradeep Kumar Sravanam is appointed as Liquidator with his consent recorded. - HELD THAT: - The Authority noted the resolution passed by the COC proposing Shri. Pradeep Kumar Sravanam as Liquidator and recorded his written consent to act as Liquidator. On that basis the Authority appointed him to conduct the liquidation process, as reflected in the operative directions. [Paras 4]

Shri. Pradeep Kumar Sravanam is appointed as Liquidator.

Effect of liquidation on moratorium - Vesting of management powers in Liquidator - Powers and duties of Liquidator under the Code and Liquidation Regulations - Public announcement in liquidation - Liquidator's remuneration under Section 34(8) - Service of liquidation order to Registrar, Regional Director and Official Liquidator - Consequential measures on liquidation: moratorium ceases, management powers vest in the Liquidator, public announcement and exercise of statutory powers and duties are mandated, remuneration to be as specified by the Board, and the order is to be served on statutory authorities. - HELD THAT: - The Authority directed that the moratorium under Section 14 shall cease from the date of the liquidation order and that all powers of the board and KMP shall stand vested in the Liquidator. The Liquidator was required to make the public announcement in terms of the Liquidation Regulations and to exercise powers and perform duties under the relevant provisions of the Code read with the Liquidation Process Regulations. The Authority also recorded that the Liquidator shall be entitled to fees as may be specified by the Board under Section 34(8) and directed service of the order upon the Registrar of Companies, Regional Director and Official Liquidator for information and compliance. Personnel connected with the Corporate Debtor are directed to cooperate with the Liquidator.

Operative consequences of liquidation are directed, including cessation of moratorium, vesting of management powers in the Liquidator, public announcement, adherence to statutory powers and duties, remuneration as specified by the Board, and service of the order on statutory authorities.

Final Conclusion: The Tribunal, having found that no viable resolution plan was received within the CIRP timeline and in view of the need to preserve asset value, ordered the Corporate Debtor to be liquidated, appointed the proposed Liquidator with his consent, and directed the usual consequential measures including cessation of moratorium, vesting of management powers in the Liquidator, public announcement, exercise of statutory duties, entitlement to Board specified fees, and service of the order on concerned authorities.

Enforcement of adjudicating authority's order - Obligation to comply pending appeal - Contempt for non-compliance - Time bound compliance under the Insolvency and Bankruptcy Code

Enforcement of adjudicating authority's order - Time bound compliance under the Insolvency and Bankruptcy Code - Direction for Respondent No.1 to comply with the Tribunal order dated 23.08.2021 within a stipulated time - HELD THAT: - The Resolution Professional filed IA-5137/2021 seeking enforcement of the Adjudicating Authority's order dated 23.08.2021 which had directed the respondents to contribute to CIRP costs in proportion to their claims. The Tribunal noted non compliance by the respondents despite service of the order and follow ups. Having found no stay from any superior authority against the impugned order as it relates to Respondent No.1, the Tribunal exercised its power to enforce its earlier directions and granted a limited time for compliance. The application for enforcement was therefore allowed and Respondent No.1 was directed to make full compliance within two weeks, failing which the Resolution Professional was at liberty to seek further orders as per law. [Paras 2, 6]

IA-5137/2021 allowed; Respondent No.1 directed to comply with the Tribunal order dated 23.08.2021 within two weeks

Obligation to comply pending appeal - Contempt for non-compliance - Whether pendency of an appeal by another respondent absolves Respondent No.1 from complying with the Tribunal's order - HELD THAT: - Counsel for Respondent No.1 sought adjournment on the ground that the department was in the process of filing an appeal; counsel for Respondent No.2 confirmed an appeal had been filed by the Income Tax Department. The Tribunal rejected the adjournment and held that the existence of an appeal by Respondent No.2 does not relieve Respondent No.1 of its independent obligation to obey the Tribunal's order. In the absence of a stay from a superior forum applicable to Respondent No.1, the order remains enforceable against it. The Tribunal therefore enforced compliance against Respondent No.1 despite appeals by another party. [Paras 3, 4, 5]

Pendency of an appeal by another respondent does not excuse Respondent No.1; no stay exists and the order is enforceable against Respondent No.1

Final Conclusion: The application for enforcement was allowed: Respondent No.1 was directed to comply with the Tribunal's order dated 23.08.2021 within two weeks, and in the absence of any stay the pendency of an appeal by another party does not relieve Respondent No.1 of its obligation to comply.

Maintainability of application under Section 94 read with Section 122 of the Insolvency and Bankruptcy Code, 2016 - admission to initiate insolvency resolution process against personal guarantor - misuse of interim moratorium - collusive or malafide filing to stall recovery proceedings - effect of existing recovery proceedings and recovery certificate on maintainability

Maintainability of application under Section 94 read with Section 122 of the Insolvency and Bankruptcy Code, 2016 - admission to initiate insolvency resolution process against personal guarantor - misuse of interim moratorium - collusive or malafide filing to stall recovery proceedings - effect of existing recovery proceedings and recovery certificate on maintainability - Application under Section 94 read with Section 122 filed by the applicant for initiation of insolvency resolution process against the applicant (personal guarantor) was not maintainable and was rejected as an abuse/misuse of the Code. - HELD THAT: - The Tribunal considered the material placed on record showing that recovery proceedings, including a recovery certificate issued by DRT-I and criminal process (notice to arrest), were already pending against the corporate debtor and the applicant. Relying on the principle that petitions filed collusively or with malafide intent to obtain the protection of interim moratorium are not to be admitted, the Tribunal observed that the present application was filed with the ulterior motive of stalling ongoing recovery proceedings and thereby misusing the protection of interim moratorium under the Code. The Tribunal referred to the NCLAT decision in Hytone Merchants Private Limited v. Satabadi Investment Consultants Private Limited [as cited in the order] for the proposition that even if formal requirements are met, an application filed collusively or not with bona fide intent of insolvency resolution need not be admitted. Applying that principle to the facts-existence of recovery certificate, pending recovery proceedings and notice to arrest-the Tribunal concluded that admission would defeat the recovery process and result in loss to public interest, and therefore refused to admit the application. [Paras 6, 7, 8, 9]

The application under Section 94 read with Section 122 of the Code is rejected as an abuse of process and misuse of interim moratorium to stall ongoing recovery proceedings.

Final Conclusion: The application for initiation of insolvency resolution process against the applicant (personal guarantor) was refused on the ground of collusive/malafide filing to misuse the interim moratorium and to stall existing recovery proceedings; the application is rejected.

Default under the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - service of petition and ex-parte proceedings - cheque dishonour under the Negotiable Instruments Act

Default under the Insolvency and Bankruptcy Code, 2016 - cheque dishonour under the Negotiable Instruments Act - The Financial Creditor established existence of a debt and default by the Corporate Debtor, warranting admission of the Section 7 petition. - HELD THAT: - The Adjudicating Authority examined the loan agreement, payment history of interest, extensions sought by the Corporate Debtor and the fact that a cheque given towards repayment was dishonoured. The Authority found the corporate loan was advanced and that the Corporate Debtor failed to honour agreed repayment terms; the bounced cheque and cessation of interest payments after a specified period were treated as evidencing default. On the basis of these documents and oral submissions, the requirements for admission under section 7 were satisfied and the petition was held fit for admission. [Paras 5]

Section 7 petition admitted as Financial Creditor established debt and default.

Service of petition and ex-parte proceedings - Service of the petition on the Corporate Debtor was held sufficient and the Corporate Debtor was set ex-parte for non-filing of reply. - HELD THAT: - The Authority recorded proof of service by courier and e-mail, noting delivery and non-bounce of e-mail; despite multiple opportunities the Corporate Debtor did not file vakalatnama or reply. Having satisfied itself as to service, the Authority proceeded ex-parte against the Corporate Debtor and continued with admission proceedings. [Paras 3]

Service held sufficient; Corporate Debtor set ex-parte.

Appointment of Interim Resolution Professional - The Resolution Professional proposed by the Financial Creditor was appointed as Interim Resolution Professional (IRP). - HELD THAT: - The Financial Creditor proposed a candidate for IRP and produced Form-2 showing no disciplinary proceedings pending against him. Satisfied with the proposal and compliance, the Authority appointed the proposed person as IRP and directed him to take charge and perform statutory functions including public announcement and calling for claims. [Paras 6]

Proposed candidate appointed as Interim Resolution Professional and directed to take charge and comply with statutory obligations.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium was declared with operative prohibitions as provided under the Code. - HELD THAT: - Upon admission of the Section 7 application and appointment of the IRP, the Authority declared the moratorium effective from the date of the order until completion of the CIRP. The order specified the statutory prohibitions on institution or continuation of suits or execution of decrees, transfer or disposal of assets, enforcement of security, and recovery of property, and noted continuation of supply of essential goods or services as provided in the Code and notifications. [Paras 7, 8]

Moratorium declared and statutory prohibitions directed to be observed during CIRP.

Final Conclusion: The Tribunal admitted the Section 7 petition, set the Corporate Debtor ex-parte for non-response, appointed the proposed Interim Resolution Professional to take charge and commence CIRP formalities, and declared the moratorium under the Code.

Default - Corporate Insolvency Resolution Process - operational creditor - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - admission under Section 9(5) of the Code - appointment of Interim Resolution Professional - deposit towards IRP expenses - moratorium under Section 14 of the Code

Default - operational creditor - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - admission under Section 9(5) of the Code - Whether the application under Section 9 of the Code by the operational creditor deserves admission and CIRP initiation against the corporate debtor - HELD THAT: - The Tribunal found that invoices were raised by the operational creditor and demand notice under the Code was issued and received. The corporate debtor, in its reply, admitted the occurrence of default and inability to pay due to lack of funds and did not raise a substantiated dispute in response to the demand notice. In view of the admission of default and absence of a bona fide dispute, the bench held that the statutory preconditions for admission under Section 9(5) are satisfied and that initiation of CIRP is appropriate to place the management in the hands of a professional agency. [Paras 6, 7]

The application under Section 9 is admitted and CIRP is ordered to be initiated against the corporate debtor.

Appointment of Interim Resolution Professional - declaration of no pending disciplinary proceedings - Appointment of the proposed Interim Resolution Professional - HELD THAT: - The operational creditor proposed an Interim Resolution Professional who had signed Form 2 and made requisite disclosures, including a declaration that no disciplinary proceedings were pending against him. On that basis and his agreement to accept appointment, the Tribunal appointed the proposed individual as the Interim Resolution Professional. [Paras 8]

Mr. Mukesh Gupta is appointed as Interim Resolution Professional.

Deposit towards IRP expenses - regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Person) Regulations, 2016 - Direction to the operational creditor to deposit funds for IRP expenses - HELD THAT: - The Tribunal directed the operational creditor to deposit a specified sum with the Interim Resolution Professional to meet expenses for performing IRP functions, to be adjusted by the Committee of Creditors and reimbursed as accounted by the IRP. The timeline for payment was fixed within one week from receipt of the order by the operational creditor. [Paras 9]

Operational creditor directed to deposit funds with the IRP within one week; amount subject to adjustment by the Committee of Creditors.

Moratorium under Section 14 of the Code - Application of moratorium consequent to admission of the Section 9 application - HELD THAT: - Upon admission under Section 9(5), the Tribunal applied the moratorium envisaged by Section 14(1) of the Code in relation to the corporate debtor, thereby triggering the prohibitions specified in the provisos and bringing into effect the provisions of Sections 14(2) to 14(4) during the moratorium period. [Paras 10]

Moratorium under Section 14 is declared to operate in relation to the corporate debtor.

Communication to ROC and IBBI - obligations of parties on admission - Directions regarding communication of the order and consequential compliances - HELD THAT: - The Tribunal directed communication of the order to the operational creditor, the corporate debtor and the appointed IRP; forwarding a copy to the IBBI for records; and directed the operational creditor to provide the IRP with the complete paper book. The Registry was also directed to send a copy to the ROC for updating master data and to obtain a compliance report for filing with the Tribunal. [Paras 11]

Registry to communicate the order to parties and IBBI; operational creditor to provide papers to IRP; ROC to be advised to update master data and report compliance.

Final Conclusion: The Tribunal admitted the Section 9 application on the ground of admitted default and no substantiated dispute, directed initiation of CIRP, appointed the proposed Interim Resolution Professional, ordered an operational deposit to meet IRP expenses, declared the moratorium under Section 14, and issued directions for communication to the IRP, IBBI and ROC and for provision of the paper book to the IRP.

Corporate Insolvency Resolution Process - financial creditor - default - admission under Section 7 - interim resolution professional - moratorium - public announcement - territorial jurisdiction

Corporate Insolvency Resolution Process - financial creditor - default - admission under Section 7 - Maintainability and admission of the Section 7 application filed by the financial creditor against the corporate debtor - HELD THAT: - The Tribunal examined the material placed on record including the loan documents, statement of account and record of default. It found that the applicant falls within the definition of a financial creditor and that the corporate debtor had an outstanding financial debt and had committed default. The Form under the Rules was complete and there was no infirmity in the application. The corporate debtor did not successfully refute the claim and declined to file a substantive reply. In view of the statutory threshold for default and the evidence produced, the application satisfied the requirements for initiation of the corporate insolvency resolution process and was fit for admission. [Paras 9, 10, 11, 12]

The Section 7 application was admitted and the corporate insolvency resolution process was ordered to be initiated.

Interim resolution professional - Appointment of the proposed Interim Resolution Professional - HELD THAT: - The proposed individual had been nominated in compliance with the statutory requirement, submitted Form 2 signifying willingness to accept appointment, made the requisite disclosures and declared absence of disciplinary proceedings against him. The Tribunal found that the requirements for appointment under the Code and Rules were satisfied. [Paras 7, 13]

The nominated person was appointed as Interim Resolution Professional for the corporate debtor.

Moratorium - public announcement - protection and preservation of assets - Imposition of moratorium and ancillary directions following admission - HELD THAT: - On admission, the Tribunal directed the Interim Resolution Professional to make the statutory public announcement within the prescribed time and to perform the functions entrusted by the Code. The Tribunal declared the moratorium and recorded the legal consequences that flow therefrom, while also clarifying the limited exceptions to the moratorium as reflected by the statute and subsequent amendment. The Tribunal directed the financial creditor to deposit an amount to enable the Interim Resolution Professional to meet initial expenses and directed communication of the order to relevant parties and the Registrar of Companies. [Paras 15, 16, 17, 18, 19]

Moratorium was declared; directions were issued for public announcement, deposit for IRP expenses, preservation of corporate debtor's assets and communication of the order to concerned authorities.

Territorial jurisdiction - Whether the Tribunal has territorial jurisdiction to admit the application - HELD THAT: - The corporate debtor's registered office falls within the territorial limits of the Tribunal's Bench. The Tribunal accordingly proceeded as the Adjudicating Authority under the Code for the corporate debtor's registered office location. [Paras 3]

The Tribunal held that it has territorial jurisdiction to entertain and decide the Section 7 application.

Final Conclusion: The Tribunal admitted the Section 7 application filed by the financial creditor, appointed the nominated Interim Resolution Professional, declared the moratorium and issued consequential directions including public announcement, initial deposit for IRP expenses and communication of the order; the Bench also recorded that it had territorial jurisdiction to decide the matter.

Admissibility of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Operational debt and default - Pre-existence of dispute and its effect on maintainability - Prospective operation of executive notification increasing minimum threshold of default - Appointment of Interim Resolution Professional and public announcement - Moratorium under section 14 of the IBC, 2016

Admissibility of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Operational debt and default - Pre-existence of dispute and its effect on maintainability - Prospective operation of executive notification increasing minimum threshold of default - Admission of the petition filed under Section 9 of the IBC, 2016 against the corporate debtor and declaration that default exists. - HELD THAT: - The Tribunal found on the material on record that the operational creditor had supplied goods as evidenced by invoices and that the corporate debtor had not raised any dispute prior to filing its reply; the belated objections and the production/rejection reports placed by the corporate debtor were viewed as doubtful on the facts and could not be relied upon to defeat the claim at the admission stage. The ledger and admitted chronology established an outstanding amount and default occurring prior to issuance of the government notification dated 24 March 2020 which enhanced the minimum amount of default; the Tribunal held that such notification, being prospective unless expressly retrospective, did not apply to a petition filed for defaults that occurred before the notification. On these bases the application under Section 9 was admitted and CIRP was ordered to be initiated. [Paras 6]

Petition under Section 9 admitted; default held to exist and pre filing dispute not established so as to bar admission.

Appointment of Interim Resolution Professional and public announcement - Duties and powers of Interim Resolution Professional - Appointment of an Interim Resolution Professional (IRP) and direction to make public announcement and call for claims. - HELD THAT: - The Tribunal appointed an Insolvency Professional from the IBBI list as IRP to take charge of the corporate debtor's management immediately. The IRP was directed to cause public announcement and to call for submission of claims in the manner prescribed by the Code and regulations. The IRP was also directed to comply with statutory duties under the Code and regulations. [Paras 7]

IRP appointed and directed to undertake public announcement and claims process and to perform statutory duties.

Moratorium under section 14 of the IBC, 2016 - Declaration of moratorium consequent to admission of the Section 9 petition. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium operative from the date of the order until completion of CIRP and specifically prohibited institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets, enforcement of security interests and recovery of property occupied by the corporate debtor, subject to the statutory exceptions for supply of essential goods or services. [Paras 8, 9]

Moratorium declared with the prohibitions and exceptions as stipulated under section 14 of the IBC.

Interim directions as to fees and cooperation with IRP - Directions to the operational creditor to pay an advance to the IRP and to the corporate debtor's officers to cooperate with the IRP. - HELD THAT: - The Tribunal directed the operational creditor to pay an advance to the IRP for performing his duties, to be adjustable on constitution of the Committee of Creditors. The directors, promoters and persons associated with the corporate debtor were directed to extend assistance and cooperation to the IRP as required by the Code. [Paras 10]

Operational creditor to deposit advance to IRP; corporate debtor's management directed to cooperate with the IRP.

Effect of admission on pending interim applications - Disposition of interim applications filed in the main petition following admission. - HELD THAT: - The Tribunal observed that since the main Section 9 petition had been admitted, the reliefs sought in the interim applications filed by the applicant were rendered unnecessary and the issues in those interim applications were addressed by the admission order; accordingly those interim applications were disposed of in view of the admission. [Paras 13]

The interim applications stood disposed of in view of the admission order.

Final Conclusion: The Section 9 petition filed by the operational creditor is admitted; CIRP is ordered to be initiated, an Interim Resolution Professional is appointed and directed to make public announcement and call for claims, moratorium is declared with statutory exceptions, the operational creditor is directed to deposit an advance for the IRP and ancillary interim applications are disposed of.

Corporate Insolvency Resolution Process - Operational Creditor - Operational debt/default - Demand notice under Section 8 of the Insolvency and Bankruptcy Code - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Interim Resolution Professional appointment - Pre-existing dispute - Authorization of signatory

Operational debt/default - Demand notice under Section 8 of the Insolvency and Bankruptcy Code - Pre-existing dispute - Authorization of signatory - Admission of application under Section 9 on the ground of default in payment of operational debt - HELD THAT: - The Tribunal found that the Operational Creditor proved existence of the debt and default by producing invoices, certificate of debt from the information utility and proof of service of the demand notice. The Corporate Debtor's contention that no amount was due was not supported by evidence, whereas an email from the Corporate Debtor admitted that some sum remained payable. The challenge to the validity of the demand notice on the ground that it was signed by the Insolvency Professional was negatived by production of valid authorization. The plea of a pre-existing dispute was not substantiated by material on record. On these findings the Tribunal concluded that the Corporate Debtor committed default and that the Section 9 application was otherwise free from defects. [Paras 8, 9, 10, 11, 12]

The Section 9 petition was allowed and the Corporate Debtor was admitted into the Corporate Insolvency Resolution Process.

Corporate Insolvency Resolution Process - Interim Resolution Professional appointment - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Consequential orders on appointment of IRP, declaration of moratorium and directions for conduct of CIRP - HELD THAT: - Following admission, the Tribunal appointed the proposed Interim Resolution Professional to conduct the CIRP and directed him to perform statutory functions and to make the public announcement and call for claims. The moratorium under Section 14 was declared prohibiting institution or continuation of suits and certain enforcement actions and protecting the corporate debtor's assets during the CIRP. The Tribunal directed the Operational Creditor to provide interim funds for smooth conduct of the process and issued consequential administrative directions including communication of the order to registry and registrar of companies.

Appointment of the IRP, declaration of moratorium and related directions for conducting the CIRP were made operative.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code was allowed: the Corporate Debtor was admitted into CIRP for default on operational debt, the proposed IRP was appointed, and moratorium and ancillary directions were imposed to facilitate the insolvency resolution process.

Dissolution of corporate debtor - assets completely liquidated - liquidation process - final report and compliance certificate - liquidator's application under Section 54 of the Insolvency and Bankruptcy Code, 2016 - cost of liquidation disproportionate to realizable assets - Regulation 45 - Final report under the IBBI (Liquidation Process) Regulations, 2016

Dissolution of corporate debtor - assets completely liquidated - liquidator's application under Section 54 of the Insolvency and Bankruptcy Code, 2016 - final report and compliance certificate - Whether the Corporate Debtor may be dissolved under Section 54 of the Insolvency and Bankruptcy Code, 2016 on the liquidator's application after submission of the final report and compliance certificate where no realizable assets remain and further liquidation would only increase costs - HELD THAT: - The liquidator submitted that the liquidation process commenced, periodic reports were filed and the Final Report along with the Compliance Certificate in Form H was filed under Regulation 45. The liquidator reported that the corporate debtor had no tangible or realizable assets except nominal bank balances and disputed/unverifiable book-entry loans, and that attempts to realise supposed shareholding were unsuccessful. The liquidator concluded that no assets are available for liquidation and that further pursuit would only increase liquidation costs. Applying Section 54, which contemplates an application by the liquidator where assets have been completely liquidated and requires the Adjudicating Authority to order dissolution, the Tribunal examined the records and the final progress report and accepted the liquidator's factual findings and conclusion that no assets remain realizable and that dissolution is appropriate. [Paras 11, 13, 14, 16]

Application under Section 54 is allowed; the Corporate Debtor is dissolved and the Registrar/concerned authorities to be informed as prescribed.

Final Conclusion: The Tribunal allowed the liquidator's application under Section 54, accepting the final report that no realizable assets remain and that further liquidation would be uneconomical, and ordered dissolution of the corporate debtor with directions to forward the order to the registrar and concerned authorities.

Corporate Insolvency Resolution Process - operational debt - default - demand notice under Section 8 - pre-existing dispute - moratorium - appointment of Interim Resolution Professional - jurisdiction of the Adjudicating Authority

Operational debt - default - demand notice under Section 8 - pre-existing dispute - Whether the application under Section 9 is maintainable and the operational debt and default are established, entitling the Operational Creditor to initiation of CIRP - HELD THAT: - The Tribunal examined the documentary record consisting of invoices, ledger and the demand notice issued under Section 8 and noted that the Operational Creditor had complied with the requirements of Section 9(3)(b) by swearing that no notice of dispute had been received. Reliance was placed on the settled approach that a pre-existing dispute must exist prior to the demand notice; subsequent or bald denials in reply do not displace the prima facie satisfaction derived from the documents tendered by the Operational Creditor. The Adjudicating Authority found that the Corporate Debtor had not paid the claimed operational dues and had not produced evidence of pre-existing dispute or payment that would negate the default. On this basis the Tribunal concluded that the statutory conditions for admission under Section 9 were fulfilled and the application was liable to be admitted. [Paras 11, 16, 17, 18, 19]

Application under Section 9 admitted as the operational debt and default were established and no pre-existing dispute recorded prior to the demand notice.

Jurisdiction of the Adjudicating Authority - Whether the Tribunal has jurisdiction to entertain the Section 9 application - HELD THAT: - The Tribunal noted the registered office of the Corporate Debtor is situated within its territorial limits and, on that basis, recorded that it had jurisdiction to entertain and try the application. [Paras 20]

Tribunal has jurisdiction to entertain and try the application.

Appointment of Interim Resolution Professional - moratorium - Corporate Insolvency Resolution Process - Appointment of Interim Resolution Professional and imposition of moratorium following admission of the Section 9 application - HELD THAT: - Upon admitting the application, the Tribunal confirmed the Operational Creditor's nominee as Interim Resolution Professional and directed her to undertake functions mandated under the Code. Consequential directions were issued declaring the moratorium prohibiting institution or continuation of suits, transfer or encumbrance of assets, enforcement of security and other actions specified by the Code; supply of essential goods or services was protected; and the public announcement of the CIRP was ordered. The Tribunal also directed deposit of an amount to meet IRP expenses and communication of the order to relevant authorities for updating records. [Paras 22, 24, 25, 26, 27]

IRP appointed; moratorium declared; public announcement and ancillary directions issued to effectuate commencement of CIRP.

Final Conclusion: The Tribunal admitted the Section 9 application on finding that an operational debt and default were established with no pre-existing dispute, held that it had jurisdiction, appointed the nominated Interim Resolution Professional and declared the moratorium, directing steps to commence the Corporate Insolvency Resolution Process.

Manner of distribution of CENVAT credit by an Input Service Distributor under Rule 7 of the Cenvat Credit Rules, 2004 - Limitations on distribution by ISD - credit not to exceed service tax paid and not to units exclusively engaged in exempted activities - Excess availment of CENVAT credit and reconciliation under Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - Interest on wrongly availed or utilised CENVAT credit - compensatory character and period of liability - Imposition and setting aside of penalty under Rule 14 of the Cenvat Credit Rules, 2004

Manner of distribution of CENVAT credit by an Input Service Distributor under Rule 7 of the Cenvat Credit Rules, 2004 - Limitations on distribution by ISD - credit not to exceed service tax paid and not to units exclusively engaged in exempted activities - Legality of distribution of Cenvat credit by the Tirupati ISD to other units - HELD THAT: - The Tribunal accepted the appellant's submission and followed the decision of the Hon'ble Karnataka High Court that Rule 7 permits an input service distributor to distribute Cenvat credit to its manufacturing or service-providing units subject only to two limitations: (a) distribution cannot exceed the service tax paid on the eligible document and (b) credit attributable to services used exclusively in units engaged only in exempted goods or services cannot be distributed. Merely because input service tax was paid at one unit and the benefit is availed at another does not prohibit distribution where the statutory conditions are met. Applying that principle, the Tribunal set aside the demand relating to ISD distribution. [Paras 3]

Demand of Cenvat credit of Rs.93,62,730/- on account of ISD distribution is set aside.

Excess availment of CENVAT credit and reconciliation under Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - Verification of calculations and opportunity to be heard - Correctness of the appellant's claim of excess Cenvat credit vis-a -vis service tax payable under Rule 6(3)(c) - HELD THAT: - The Tribunal observed that the controversy turns on quantitative reconciliations and calculations that were supported by additional submissions not placed before the lower authority. Given that the issue depends on verification of the appellant's calculations and supporting records, the Tribunal did not decide the matter on merits but remanded it to the adjudicating authority for re-examination after providing the appellant an opportunity to produce relevant statements and be heard and for the authority to pass a reasoned and speaking order. [Paras 4]

Matter remanded to the adjudicating authority for verification of the appellant's calculations relating to excess credit availment of Rs.1,56,70,418/- under Rule 6(3)(c).

Interest on wrongly availed or utilised CENVAT credit - compensatory character and period of liability - Imposition and setting aside of penalty under Rule 14 of the Cenvat Credit Rules, 2004 - Liability to pay interest and penalty on Cenvat credit availed on capital goods in the first year and on amounts utilised - HELD THAT: - Relying on the Karnataka High Court authority, the Tribunal treated interest as compensatory and payable only where there is an actual liability to pay tax; interest is attracted from the date Cenvat credit was taken or utilised wrongly and not merely from book entry. In the present case the Tribunal found the amounts were utilised by the appellant and accordingly held interest payable from date of availment until the due date; computation was remanded to the adjudicating authority. Since the demand of Cenvat credit itself has been set aside in part proceedings, the Tribunal held that penalty under Rule 14 does not survive and set all penalties aside. [Paras 5, 6]

Appellant liable to pay interest as applicable on the amounts utilised; all penalties are set aside.

Final Conclusion: The Tribunal set aside the demand relating to ISD distribution, remanded the claim of excess availment under Rule 6(3)(c) for verification of the appellant's calculations with opportunity to be heard, held interest payable on amounts actually utilised from the date of availment and remitted computation to the adjudicating authority, and quashed all penalties.

Export of services - part performance treated as performed outside India under Rule 3(1) of the Export of Services Rules, 2005 - delivery of report completes the service - unjust enrichment not applicable to export transactions

Export of services - delivery of report completes the service - part performance treated as performed outside India under Rule 3(1) of the Export of Services Rules, 2005 - Market Research Agency Services rendered by the appellant qualify as export of services. - HELD THAT: - The Tribunal applied its precedent that where collected data and analysis are required to be delivered to foreign clients and such delivery is essential to complete the service, the service is partly performed outside India and so falls within the proviso to Rule 3(1) of the Export of Services Rules, 2005. Reliance was placed on earlier decisions holding that performance is incomplete until the analysis/report is delivered to the client and that part performance outside India is to be treated as performance outside India. The invoices showed that the benefit of the services accrued to overseas customers and, applying the cited ratio, the MRAS services are export of services. [Paras 5, 6]

The MRAS services are export of services; the appellant's rebate claim qualifies on that ground.

Unjust enrichment not applicable to export transactions - The question of unjust enrichment need not be considered because unjust enrichment principles do not apply to export transactions. - HELD THAT: - Having held that the services constitute export of services, the Tribunal followed its prior view that unjust enrichment is not applicable to export transactions and therefore declined to examine the revenue's contention on unjust enrichment. [Paras 7]

Unjust enrichment contention is not applicable and requires no consideration in view of the finding of export of services.

Final Conclusion: Appeal allowed; MRAS services for the period January 2010 to November 2010 are held to be export of services and the rebate claim is entitled to consequential relief; the unjust enrichment ground is inapplicable to the export transactions.

Refund of tax - interest on delayed refund under the DVAT Act - computation of interest from expiry of two months from date of return - effect of delay in furnishing C Forms on interest computation - contingent payment pending determination in appellate proceedings

Refund of tax - interest on delayed refund under the DVAT Act - Refund claim for the fourth quarter of 2016-17 has been allowed and a refund order has been passed in favour of the petitioner. - HELD THAT: - The Court recorded that the respondent/revenue had passed a refund order dated 11.05.2022 in favour of the petitioner approving payment of the principal refund amount and a quantified sum as interest. The speaking order filed sets out the period, rate and computation adopted by the revenue for interest on the refund. Having noted the respondent's action in passing the refund order and computing interest, the Court disposed of the writ petition with respect to the refund by recording the approval already granted by the revenue.

Refund order in favour of the petitioner has been recognized and the principal refund has been approved.

Computation of interest from expiry of two months from date of return - effect of delay in furnishing C Forms on interest computation - contingent payment pending determination in appellate proceedings - The court did not finally adjudicate the competing contentions on the correct date from which interest should run (assessment triggered date versus expiry of two months from date of return, and the impact of delayed C Forms); instead it directed conditional processing and payment of any remaining interest contingent on the outcome of the pending higher forum proceedings. - HELD THAT: - Counsel for the parties advanced opposing contentions: the revenue treated the assessment order date (with interest computation starting two months thereafter) as the trigger, and relied on factoring in any delay in furnishing C Forms; the petitioner relied on the proviso and explanation to the statutory provision to contend interest should run from expiry of two months from when the return was furnished. The Court noted that identical issues were the subject matter of earlier coordinated proceedings and that a coordinate bench's judgment had been stayed by the Supreme Court (now Civil Appeal No.242/2018). In view of that appellate lis, the Court followed the approach adopted by other coordinate benches and disposed of the petition by directing that the petitioner's claim for remaining interest be processed and paid in the event the respondent/revenue does not succeed in the pending higher forum proceedings.

The petitioner's claim for any further interest shall be processed and paid by the respondent if the respondent fails in the pending appeal; the court did not make a final determination on the competing legal contentions.

Final Conclusion: Writ petition disposed: the respondent has passed a refund order in favour of the petitioner; any claim for additional interest is to be processed and paid by the respondent if it fails in the pending appellate proceedings (Civil Appeal No.242/2018).

1st point sales tax - last point sales tax - amenability to tax - pile carpets - point of levy under the OST Act - adjustment/refund of tax paid under bona fide mistake - restitution / unjust enrichment

1st point sales tax - last point sales tax - pile carpets - adjustment/refund of tax paid under bona fide mistake - restitution / unjust enrichment - point of levy under the OST Act - Carpets on which 1st point sales tax had been paid to the selling dealer were not liable to be taxed again at the last point of sale. - HELD THAT: - The Court examined the point of levy under the OST Act and held that the reference to the rate entry for carpets in the schedule did not preclude consideration of whether the goods already bore 1st point tax. The materials established that the carpets dealt with by the petitioner were in fact pile carpets and had been purchased on which 1st point sales tax had been collected by the selling dealer. Applying established principles reflected in P. Rama Rao and Sons (and authorities on restitution), the Court held that a purchaser who has already borne tax at the first point should not be subjected to double taxation at the last point. Where tax has been paid under a bona fide belief, equity and the law of restitution/prevention of unjust enrichment permit adjustment or refund rather than permitting the State to retain an erroneous or duplicative levy. On these grounds the claims of the petitioner for relief were accepted and the impugned orders to the extent of demanding last point tax on such carpets were set aside. [Paras 15, 16, 19]

The petitions are allowed insofar as carpets on which 1st point sales tax was paid shall not be subject to sales tax again at the last point of sale; impugned orders are set aside to that extent.

Final Conclusion: The revision petitions are allowed: carpets on which 1st point sales tax had been paid by the petitioner to the selling dealer are not amenable to last point sales tax for the years 1992-93 and 1993-94; no order as to costs.

Exemption for increased commercial production under diversification - diversification of industrial unit as distinct from expansion/modernization - interpretation of the expression 'over and above' - power of the Tribunal to enhance assessment - opportunity to show cause before enhancement under Rule 50(3)

Exemption for increased commercial production under diversification - interpretation of the expression 'over and above' - diversification of industrial unit as distinct from expansion/modernization - Disallowance of tax exemption on sale of finished products manufactured by the industrial unit under the diversification scheme was erroneous. - HELD THAT: - The Court held that where an SSI unit ceased production of goods falling within its original installed capacity and produced only new goods pursuant to a certified diversification project, withdrawal of exemption on sale of such finished products was unjustified. Reliance was placed on the IPR-89 scheme, the Director of Industries' clarification on 'existing installed capacity' and judicial interpretation distinguishing diversification from expansion/modernization, which indicates that exemption applies to the actual production of new products arising from diversification. The Commissioner's circular and the plain meaning of 'over and above' (i.e., 'in addition to') were applied to conclude that since no products of the original installed capacity were being manufactured, the exemption could not be denied. The Tribunal's contrary conclusion was set aside and the corresponding orders of the STO and ACST were quashed. [Paras 15, 16, 17, 18]

Tribunal erred in disallowing the tax exemption on finished products manufactured under the diversification scheme; that portion of the Tribunal's order and the orders of STO and ACST are set aside.

Power of the Tribunal to enhance assessment - opportunity to show cause before enhancement under Rule 50(3) - Tribunal exceeded its jurisdiction in remanding the matter for enhancement of assessment in the absence of a cross-objection by the Revenue and without compliance with Rule 50(3). - HELD THAT: - The Court held that the Tribunal's power to enhance assessment is exercisable in the context of an appeal or a cross-objection by the Revenue; absent such a cross-appeal there was no jurisdiction to remit the matter for enhanced levy. Further, Rule 50(3) requires that an assessee be given reasonable opportunity to show cause against any proposed enhancement, which the Tribunal did not observe. The Court relied on the reasoning in Shyamsunder Sahoo to conclude that the Tribunal was not justified in directing restoration or enhancement in the present circumstances and therefore set aside that portion of the impugned order. [Paras 13, 14]

That part of the Tribunal's order remanding the issue to the ACST for determination of enhanced tax and surcharge is set aside as beyond the Tribunal's jurisdiction and procedurally infirm.

Power of the Tribunal to enhance assessment - opportunity to show cause before enhancement under Rule 50(3) - Tribunal committed error of jurisdiction by deciding issues not before it in the absence of a cross-objection filed by the State. - HELD THAT: - The Court observed that the Tribunal dealt with and remanded issues which required a cross-objection by the Revenue for enhancement; since no such cross-objection existed, the Tribunal exceeded its jurisdiction and could not validly decide or remit those issues. The earlier authority (Shyamsunder Sahoo) was cited to underline that enhancement by an appellate forum presupposes a revenue appeal/cross-objection and compliance with the procedure for giving the assessee a chance to show cause. [Paras 13, 14]

Tribunal erred in adjudicating and remanding issues not properly before it in absence of a cross-objection; that portion of its order is set aside.

Final Conclusion: Revision petition allowed: the Tribunal's disallowance of exemption on finished products manufactured under the diversification scheme is set aside and corresponding STO/ACST orders quashed; the Tribunal's remand for enhanced assessment and its decision on issues in absence of a revenue cross-objection are held to be beyond jurisdiction and are set aside.

Sales tax exemption for small scale industry - installed capacity - eligibility certificate for sales tax concession - excess production taxable - interpretation of I.P.R.1989

Sales tax exemption for small scale industry - installed capacity - excess production taxable - Whether the petitioner is entitled to sales tax exemption for the entire production of 16,670 MT or only up to the installed capacity of 15,000 MT - HELD THAT: - The Court upheld the Tribunal's conclusion that the exemption is confined to the installed capacity certified in the eligibility certificates and does not extend to production in excess of that capacity. The instalment capacity as recorded in the PMT/eligibility certificates constitutes the benchmark for the concession and remains determinative unless altered by formal expansion, modernization or amendment of registration. While excess production may occur (for example by operating more than one shift), that fact does not enlarge the scope of the exemption. Accordingly, the excess production of 1,670 MT is exigible to tax and cannot be covered by the concession claimed for the year 1995-96. [Paras 7, 9, 11]

Exemption restricted to 15,000 MT; excess production of 1,670 MT held taxable.

Eligibility certificate for sales tax concession - interpretation of I.P.R.1989 - Whether the letter of the Project Manager, District Industries Centre (PM, DIC) or other communications could operate to amend the installed capacity or confer exemption in respect of excess production without formal amendment of the eligibility certificate or registration - HELD THAT: - The Court rejected the petitioner's reliance on the PM, DIC letter as effecting any change in entitlement. The Court noted that once an eligibility certificate for sales tax exemption is issued, it cannot be treated as amended except by formal alteration arising from valid expansion/modernization/diversification supported by amendment of the registration. There is no provision in I.P.R.1989 or its operational guidelines permitting informal amendment of the eligibility certificate to enlarge the concession. Consequently, the administrative clarification relied upon did not entitle the petitioner to exemption for production beyond the certified installed capacity. [Paras 8, 9]

Letter of PM, DIC does not amend eligibility certificate; no entitlement to exemption for excess production absent formal amendment.

Final Conclusion: The revision is dismissed; the Tribunal's order sustaining assessment for the year 1995-96 is affirmed: the concession is confined to the installed capacity certified in the eligibility certificate (15,000 MT) and the excess production (1,670 MT) is exigible to sales tax.

Authority of District Industries Centre to grant retrospective eligibility certificate - exemption from sales tax for small-scale industrial unit on the strength of DIC certificate - retrospective enhancement of production capacity and its effect on pre-existing tax period - concurrent findings of fact by assessing and appellate authorities and scope for judicial interference

Authority of District Industries Centre to grant retrospective eligibility certificate - exemption from sales tax for small-scale industrial unit on the strength of DIC certificate - Whether the District Industries Centre had authority in law to issue, with retrospective effect, an eligibility certificate enhancing production capacity so as to confer exemption from sales tax for the year 1994-95. - HELD THAT: - The Court examined the evidence that the assessee's original DIC certificate authorised production up to a specified capacity and that the certificate dated 2nd September, 1997 purported to enhance capacity retrospectively. The assessment by the Sales Tax Officer found surplus sales in 1994-95 beyond the capacity authorised by the earlier certificate and disallowed exemption for that excess. Both the Assistant Commissioner of Sales Tax and the Tribunal held that the DIC had no power to grant retrospective exemption for expansion or modernization and therefore the later-issued certificate could not validate the earlier transactions for the purpose of exemption. The Court found no legal infirmity in the concurrent findings of the STO, the ACST and the Tribunal, noting that a certificate issued subsequently could not be used to claim exemption for production and sales made in the earlier tax period where no authority existed to backdate such eligibility. [Paras 11, 12, 13]

The Tribunal was justified in holding that the DIC lacked authority to issue a retrospective eligibility certificate and the assessee's claim to exemption for 1994-95 on that basis fails.

Final Conclusion: The revision petition is dismissed. The Tribunal's affirmation of the assessment for 1994-95 and the finding that the DIC could not lawfully grant retrospective eligibility for exemption are upheld; no order as to costs.

Judicial review under Article 226/227 - stay of realization pending appeal under Section 17(7) of the Odisha Entry Tax Act, 1999 - setting aside ex parte order for lack of opportunity / right to be heard - relegation for fresh hearing and decision by the assessing authority

Setting aside ex parte order for lack of opportunity / right to be heard - judicial review under Article 226/227 - Ex parte revision order dated 5th April, 2022 set aside on ground that the petitioner was not afforded adequate opportunity to be heard. - HELD THAT: - The Court found that the petitioner had a record of prior vigilance before the authority and that on the last occasion the notice for hearing was short (alleged to be less than 24 hours) and the petitioner's counsel was unavailable. These facts were not controverted. Without entering into the merits of the underlying tax dispute, the Court held that the ends of justice required setting aside the ex parte order and restoring the revision file to enable the petitioner to be heard. The Court emphasised that its intervention was limited to correcting the procedural defect and did not decide the substantive claim for stay or the assessment itself. [Paras 11, 12]

Order dated 05.04.2022 set aside and the revision case restored for fresh hearing before the Commissioner of Sales Tax.

Stay of realization pending appeal under Section 17(7) of the Odisha Entry Tax Act, 1999 - relegation for fresh hearing and decision by the assessing authority - Application under Section 17(7) for stay of realization remitted to the Commissioner of Sales Tax for fresh hearing and decision in accordance with law. - HELD THAT: - The Court declined to adjudicate the merits of the petitioner's request for stay of realization of interest and penalty. Instead, having set aside the ex parte order, the Court directed the petitioner to appear before the Commissioner on a specified date and permitted the Commissioner to hear the matter afresh or adjourn it, and thereafter pass an appropriate order uninfluenced by the Court's observations. The Court also cautioned against unnecessary adjournments, thereby confining its role to ensuring procedural fairness and leaving substantive determination to the statutory authority. [Paras 12]

Matter remitted to the Commissioner of Sales Tax to hear the petitioner afresh on the application under Section 17(7) and pass appropriate order in accordance with law; petitioner directed to appear on 31st May, 2022.

Final Conclusion: Writ petition disposed of by setting aside the ex parte revision order dated 05.04.2022 and restoring the revision file for fresh hearing by the Commissioner of Sales Tax; the Commissioner to decide the petitioner's application for stay under Section 17(7) of the OET Act after hearing the petitioner, without being influenced by the Court's observations.

Exemption from sales tax where additional excise duty applies - tobacco as covered by the Additional Duties of Excise (Goods of Special Importance) Act - interpretation of Entry 38 of the Exempted List (List A) under the Orissa Sales Tax Act - scope of 'other manufactured tobacco' and inclusion of Gudakhu

Exemption from sales tax where additional excise duty applies - interpretation of Entry 38 of the Exempted List (List A) under the Orissa Sales Tax Act - Whether the Tribunal was justified in holding the sale of Gudakhu taxable under the Orissa Sales Tax Act - HELD THAT: - The Court examined Entry 38 of List A of the OST Act which exempts "Tobacco as described in column 3 of the first schedule to the ADE Act." The First Schedule to the ADE Act expressly recognises Gudakhu under the relevant chapter heading. The Court relied on subsequent legislative amendments that continue to treat Gudakhu as a tobacco product and on authoritative precedents treating Gudakhu/gutkha as manufactured tobacco. Applying the settled principle that goods amenable to additional excise duty under the ADE Act are exempt from sales tax, the Court concluded that the Tribunal erred in holding the sale of Gudakhu taxable under the OST Act and set aside the impugned orders. [Paras 12]

The Tribunal's holding that the sale of Gudakhu was amenable to sales tax under the OST Act is set aside.

Tobacco as covered by the Additional Duties of Excise (Goods of Special Importance) Act - scope of 'other manufactured tobacco' and inclusion of Gudakhu - Whether Gudakhu is a 'tobacco' covered by the ADE Act and thereby exempt under Entry 38 of the OST Act - HELD THAT: - The Court identified the description of Gudakhu in the First Schedule to the ADE Act (Chapter Heading 2404.99) and noted legislative amendments that explicitly recognise Gudakhu as a tobacco product and as "other manufactured tobacco." The Court also referred to Supreme Court decisions which treated Gudakhu/gutkha as falling within manufactured tobacco for exemption purposes. On that basis, the Court held that Gudakhu falls within the scope of tobacco described in the ADE Act and thus qualifies for exemption from sales tax under Entry 38 of List A of the OST Act. [Paras 8, 9, 10, 11, 12]

Gudakhu is 'tobacco' covered by the ADE Act and is exempt from sales tax under Entry 38 of List A of the OST Act.

Final Conclusion: The revision petitions are allowed: the orders of the Assessing Officer, the Assistant Commissioner of Sales Tax and the Tribunal are set aside; Gudakhu is held to be tobacco within the ADE Act and exempt from sales tax under Entry 38 of List A of the OST Act for the periods in question.

Deemed sale - transfer of right to use goods - situs of sale - availability of goods for delivery - real operator of services - binding Full Bench precedent - distinguishing earlier precedent

Deemed sale - transfer of right to use goods - availability of goods for delivery - real operator of services - Rendering of air transport services by the assessee constitutes a 'sale' under Section 2(g)(iv) of the OST Act. - HELD THAT: - The Court examined whether hire charges for offering air transport services amounted to a transfer of the right to use goods such that they would be a deemed sale. Reliance was placed on the Supreme Court decisions in 20th Century Finance Corporation Ltd. and Bharat Sanchar Nigam Limited, the latter explaining that a transfer of right to use requires goods to be available for delivery and deliverable and that, where goods exist, the contract creating the right must relate to identifiable goods. In the present case possession and control of the aircraft never passed to hirers: the pilot remained employed by the assessee, operational costs and statutory obligations were borne by the assessee, and the permit expressly prohibited transfer or assignment that would make the hirer the real operator. Applying the parameters laid down by the Supreme Court, the transaction lacked the necessary attributes of a transfer of right to use and therefore did not amount to a deemed sale under Section 2(g)(iv). [Paras 15, 16, 17, 18, 19]

Rendering of the air transport services by the assessee does not amount to 'sale' as envisaged by Section 2(g)(iv) of the OST Act.

Binding Full Bench precedent - distinguishing earlier precedent - situs of sale - Whether the Tribunal was justified in distinguishing the Tribunal's earlier Full Bench decision in the assessee's own case by reference to the Supreme Court's decision in 20th Century Finance Corporation Ltd. - HELD THAT: - The Tribunal sought to distinguish the Full Bench decision that had held similar charges were not sales, relying on 20th Century Finance Corporation Ltd. The High Court observed that the Supreme Court decision in 20th Century did not consider transactions of the present nature (charging for air taxi services where possession never passed) and primarily addressed the question of situs of sale. Further clarification in Bharat Sanchar Nigam Limited showed that delivery/availability of goods is integral to a transfer of the right to use. Given the materially different facts and the binding Full Bench decision in the assessee's own case, the Tribunal erred in distinguishing that Full Bench on the basis of 20th Century Finance Corporation Ltd. [Paras 11, 16, 19, 20]

The Tribunal was in error in distinguishing the earlier Full Bench decision; the Full Bench precedent stands and the Tribunal's contrary view is set aside.

Final Conclusion: The Tribunal's order insofar as it held the hire receipts to be taxable as sales is quashed; the assessment order is set aside and the Assistant Commissioner of Sales Tax's order allowing the assessee's appeals is restored. Revision petitions disposed of in these terms.

Pre-deposit for entertainment of appeal - statutory right of appeal - no power to waive statutory pre-deposit by appellate authority - adjustment of payments made under protest towards pre-deposit - strict construction of taxing statutes - stay of realization on admission of appeal

Pre-deposit for entertainment of appeal - statutory right of appeal - strict construction of taxing statutes - Validity of summary rejection of appeals for non-compliance with statutory pre-deposit requirements under the OVAT Act and the OET Act - HELD THAT: - The Court held that the requirement of depositing the prescribed portion of the tax in dispute as a condition precedent to entertainment of an appeal is a legislative condition attached to the statutory right of appeal and must be strictly complied with. Relying on precedent and principles of strict construction of taxing statutes, the Court observed that neither the appellate authority nor the revisional authority has jurisdiction to dispense with the statutory pre-deposit condition. Accordingly, the revisional authority was legally justified in sustaining the appellate authority's summary rejection of the appeals for want of the requisite pre-deposit. [Paras 6, 9, 10]

Summary rejections for failure to make statutory pre-deposit were legally sustainable and could be upheld.

No power to waive statutory pre-deposit by appellate authority - pre-deposit for entertainment of appeal - Whether hardship, including financial difficulty or pandemic-related distress, permits appellate or revisional authorities to waive the statutory pre-deposit requirement - HELD THAT: - The Court reaffirmed that perceived hardship or financial stress cannot be a basis for appellate or revisional authorities to relax or override a clear statutory pre-deposit mandate. The Court noted authoritative precedents that hold the power to grant or amend legislative conditions lies with the legislature and not with the adjudicatory authority; while genuine hardship remedies may exist, they cannot be effected by contravening the statute's clear language. Therefore, authorities were not obliged to admit the appeals merely on the ground of financial hardship. [Paras 5, 10]

Hardship does not empower the appellate or revisional authorities to waive the statutory pre-deposit condition.

Adjustment of payments made under protest towards pre-deposit - stay of realization on admission of appeal - Whether amounts already paid by the dealer after assessment (including payments made under protest) can be adjusted and treated as compliance with the statutory pre-deposit and the consequent relief available - HELD THAT: - Applying the principle affirmed in VVF (India) Limited and allied authorities, the Court held that payments made by the dealer after issuance of demand, including payments made under protest, are to be taken into account for the purpose of satisfying the statutory pre-deposit requirement unless the statute expressly excludes such adjustment. On this basis the Court directed that the petitioner may, subject to verification and adjustment of amounts already deposited after the assessment orders, deposit the balance required (10% for OVAT and 20% for OET) by the stipulated date. Upon such compliance the appellate authority is to restore the appeals to file and proceed to decide them on merits. The Court also observed that realization of balance tax and penalty under the OVAT Act shall remain stayed in terms of the statutory provision on admission. [Paras 11]

Amounts previously deposited after assessment may be adjusted towards the statutory pre-deposit; petitioner permitted to make requisite deposit by the specified date, upon which appeals shall be restored and heard, with statutory stay as applicable.

Final Conclusion: The Court confirmed the legality of summary rejection of the appeals for non-compliance with the statutory pre-deposit condition but granted the petitioner a limited remedial opportunity: after adjustment of amounts already paid (including payments made under protest), the petitioner may deposit the balance of the prescribed pre-deposit (10% under the OVAT Act and 20% under the OET Act) by the date specified by the Court, whereupon the appellate authority shall restore the appeals for adjudication on merits; statutory stay provisions shall apply as indicated. No costs.

Imposition of penalty under Section 73 of the GST Act - Withdrawal of assessment on filing return within thirty days under Section 62(2) of the GST Act - Liability for interest and late fee notwithstanding withdrawal of assessment - Availability of appellate remedy and limitation on writ interference

Imposition of penalty under Section 73 of the GST Act - Withdrawal of assessment on filing return within thirty days under Section 62(2) of the GST Act - Liability for interest and late fee notwithstanding withdrawal of assessment - Validity of the penalty imposed by invoking Section 73 where returns were filed belatedly and tax with interest was paid after assessment. - HELD THAT: - The Court examined the contention that penalty could not be imposed under Section 73 because the assessee had subsequently filed returns and paid tax with interest. Section 62(2) provides that where a registered person furnishes a valid return within thirty days of service of an assessment order the assessment shall be deemed withdrawn, but the liability for payment of interest under Section 50(1) and late fee under Section 47 continues. The petitioner did not avail of that opportunity because returns and payment were not made within thirty days of the assessment order. Consequently Section 62(2) could not be relied upon to negate the assessment or penalty. The Court further observed that Section 73 encompasses determination of tax not paid (including short paid or erroneously refunded amounts and related matters), and therefore invocation of Section 73 by the Revenue to determine and quantify tax, interest and penalty in the circumstances of non-filing of monthly returns was proper. The petitioner's plea that only Section 61 should have been applied and that penalty could not be levied was rejected on these grounds. [Paras 8, 9, 10, 11, 12]

Penalty imposed under Section 73 is sustainable; Section 62(2) does not assist the petitioner as returns and payment were not made within thirty days of the assessment order, and the challenge to the penalty is rejected.

Availability of appellate remedy and limitation on writ interference - Whether the writ petition should be entertained in view of the availability of appeal against the assessment order. - HELD THAT: - The Court noted that the assessee has a statutory appellate remedy against the assessment order and that an appeal had not been filed. The learned Government Advocate submitted that the petitioner could prefer an appeal before the Appellate Authority. The Court refused to exercise writ jurisdiction to interfere with the impugned assessment and penalty, indicating that the appropriate course is to seek relief through the statutory appeal process. The Court clarified that its reasons are confined to the decision in the writ and should not influence the Appellate Authority in adjudicating any appeal on its merits. [Paras 5, 12, 13]

Writ petition dismissed; petitioner is not precluded from preferring an appeal against the assessment order before the competent Appellate Authority.

Final Conclusion: Writ petition dismissed: the penalty imposed under Section 73 is upheld on the facts that returns and payments were not made within the prescribed period to attract withdrawal under Section 62(2), and the petitioner remains free to challenge the assessment and penalty by filing the available statutory appeal.

Restoration of proceedings dismissed for default - recall of order dismissing for default - restoration of case to original file

Restoration of proceedings dismissed for default - recall of order dismissing for default - Application for restoration of STREV No.41 of 2002, dismissed for default by order dated 13th September, 2019, was allowed and the dismissal order recalled. - HELD THAT: - The Court considered the application for restoration and, for the reasons stated in the proceedings, allowed the application. The order dated 13th September, 2019, which had dismissed STREV No.41 of 2002 for default, was recalled and the revision petition was directed to be restored to its original file. The Court further directed issuance of an urgent certified copy of the order as per rules. [Paras 3]

STREV No.41 of 2002 restored to the original file; order dated 13th September, 2019 recalled; urgent certified copy to be issued.

Final Conclusion: Application for restoration of STREV No.41 of 2002 allowed; the earlier dismissal order of 13th September, 2019 was recalled and the matter restored to the file.