TaxTMI Updates e-Newsletter
May 31,2023

Bail - non-bailable offence under Section 132(1)(a) of the Central Goods and Services Tax Act, 2017 - completion of investigation - no apprehension of tampering with evidence or influencing witnesses - absence of criminal antecedents and fixed place of residence - severity of punishment and complicity in offence

Bail - non-bailable offence under Section 132(1)(a) of the Central Goods and Services Tax Act, 2017 - completion of investigation - no apprehension of tampering with evidence or influencing witnesses - absence of criminal antecedents and fixed place of residence - severity of punishment and complicity in offence - Whether the applicant, accused under Section 132(1)(a) of the CGST Act, 2017, is entitled to bail - HELD THAT: - The Court noted that the applicant is not the proprietor or owner of the firm (the proprietor being his mother) and that no complaint had been filed against the proprietor. The investigation by the Department was completed, the applicant cooperated with the investigation, and there was no material to show risk of tampering with evidence or influencing witnesses. The Court observed that the maximum punishment under Section 132(1)(a) is five years and the offence is triable by a Magistrate. The applicant had no criminal history and possessed a fixed residence, reducing the risk of absconding. Although the Court took into account the alleged complicity and the seriousness of the revenue loss attributed to clandestine supplies, it declined to comment on the merits and, balancing the factors of liberty, cooperation, absence of tampering risk, lack of antecedents and the nature of punishment, found the case fit for bail. The grant of bail was made subject to furnishing personal bond and two sureties and to enumerated conditions including not leaving the country without trial court permission, attendance at court, and not misusing liberty. [Paras 12, 13, 14]

Bail allowed on furnishing personal bond and two sureties, subject to specified conditions; without prejudice to trial on merits.

Final Conclusion: Bail granted to applicant in Complaint Case No.03 of 2022-23 under Section 132(1)(a) of the CGST Act, 2017 on furnishing bond and sureties and subject to conditions, the Court observing completion of investigation, cooperation by the applicant and absence of risk of tampering or absconding while reserving comment on merits.

Concession/incentive not a matter of right - no provision for interest in scheme - delay due to non-availability of funds - discretionary budgetary support

Concession/incentive not a matter of right - no provision for interest in scheme - delay due to non-availability of funds - Entitlement of the petitioner to interest on delayed disbursement of sanctioned Budgetary Support under the Scheme. - HELD THAT: - The Court found that the Budgetary Support Scheme constituted a concessionary incentive granted to eligible industries and was not payable as a matter of right. Although the Scheme's implementing Circular required disposal of claims within two weeks, the petitioner did not allege that its claim remained undecided within that period; the sanction was granted in time. The actual delay in disbursement resulted from insufficient funds allocated by the Department of Industrial Policy and Promotion to the Commissionerate and not from any deliberate, arbitrary or unauthorised withholding by the respondents. There is no provision in the Scheme for payment of interest on delayed disbursement; absent a specific scheme provision or a demonstrated unauthorised withholding, the Court would not impose interest as a penal consequence on the respondents. Applying these conclusions, the Court held that the petitioner was not entitled to interest on the delayed payment. [Paras 5, 6, 7]

Petition dismissed insofar as it seeks interest on delayed disbursement; no entitlement to interest under the Scheme.

Final Conclusion: The petition is dismissed for lack of merit. The Court observed that the sanctioned amount has since been disbursed and directed that any remaining claims, if any, be processed and disposed of under the Scheme without undue delay, but declined to award interest for the delay.

Regular bail in economic offences - parity with co-accused - discretionary grant of bail - the triple test for grant of bail - conditions of bail including passport surrender and witness protection - seriousness of allegations not an absolute bar to bail

Regular bail in economic offences - parity with co-accused - seriousness of allegations not an absolute bar to bail - Grant of regular bail to the petitioner-Amrinder Singh in the criminal complaint under the GST Acts. - HELD THAT: - The Court exercised its discretion to grant bail having regard to the facts and circumstances. It noted that bail discretion must be exercised case-by-case and that economic offences, once investigation is complete and the final complaint is filed and the triple test satisfied, ordinarily permit bail; denial must be the exception. The petitioner had been in custody since 13.03.2021 in a case where the maximum sentence is five years, and several similarly situated co-accused had already been granted regular bail by an earlier order dated 31.08.2022. In these circumstances, and without expressing any opinion on merits, further incarceration was held unnecessary and bail was granted subject to satisfaction of the Trial Court which may impose appropriate conditions. [Paras 4, 7, 8, 9, 10]

Petitioner entitled to regular bail and is ordered released on bail subject to the Trial Court's satisfaction and any conditions it may impose.

Conditions of bail including passport surrender and witness protection - discretionary grant of bail - Imposition of specific bail conditions relating to passport surrender and protection of witnesses. - HELD THAT: - The Court directed the petitioner to surrender his passport before the Trial Court or, if he does not possess one, to furnish an affidavit to that effect. The Court further provided that any attempt by the petitioner or his associates to contact, threaten or intimidate witnesses would entitle the State/complainant to move for cancellation of bail. The Trial Court was left at liberty to impose any other stringent conditions it deems appropriate in the exercise of its supervisory discretion. [Paras 10, 11, 12]

Bail granted subject to passport surrender or affidavit and to the condition that any interference with witnesses will invite application for cancellation; Trial Court may impose further conditions.

Final Conclusion: Bail petitions allowed; petitioner-Amrinder Singh ordered released on bail subject to the Trial Court's satisfaction and conditions including surrender of passport or affidavit and prohibition on contacting or intimidating witnesses, with liberty to the State to move for cancellation on breach.

Opportunity of personal hearing under Section 75(4) - principle of natural justice - alternative remedy not a bar where opportunity of hearing is denied - remittal for fresh adjudication after affording personal hearing

Opportunity of personal hearing under Section 75(4) - principle of natural justice - Impugned adjudication passed without affording the personal hearing shown as contemplated in the show cause notice is not sustainable. - HELD THAT: - The show cause notice expressly contemplated a personal hearing by stating that the person may appear for personal hearing, but the table titled "Details of personal hearing etc." recorded "NA" against Date, Time and Venue, indicating no hearing was in fact afforded. Section 75(4) requires opportunity of hearing where an adverse decision is contemplated; accordingly, denial of such hearing violates the principles of natural justice. The Court followed the reasoning in the co ordinate Bench decision of Bharat Mint & Allied Chemicals and rejected the contention that availability of an alternative remedy (appeal) precludes interference: where due opportunity of hearing as required by law has not been afforded, the remedy by way of writ petition under Article 226 is maintainable.

Impugned order quashed and the matter remitted to the Deputy Commissioner, Audit Wing, Jabalpur for fresh adjudication after affording personal hearing to the petitioner.

Final Conclusion: Writ petition allowed; impugned order set aside and matter remitted for fresh decision after giving the petitioner the personal hearing required by law; no order as to costs.

Advance ruling - admissibility of application under Section 95 of the CGST Act, 2017 - supply of goods or services - transport of passengers by air - rejection under Section 98(2) of the CGST Act, 2017

Advance ruling - admissibility of application under Section 95 of the CGST Act, 2017 - transport of passengers by air - rejection under Section 98(2) of the CGST Act, 2017 - Whether the application by M/s Uttarakhand Civil Aviation Development Authority for an advance ruling on GST classification and rate of helicopter shuttle services is admissible under Section 95 of the CGST Act, 2017. - HELD THAT: - The Authority examined the applicant's own averments that it is a society formed by the State Government which issues tenders and grants licences to helicopter shuttle service operators but does not itself provide or receive the service of transport of passengers by air. The statutory definition of "advance ruling" in Section 95 contemplates a decision in relation to a supply of goods or services being undertaken or proposed to be undertaken by the applicant. Because the applicant neither provides nor receives the air transport service in question and therefore does not satisfy the condition in Section 95(a), the application falls outside the scope of matters eligible for an advance ruling. Consequently, the matter was not considered on merits and the application was held to be inadmissible and rejected in terms of Section 98(2). [Paras 5, 6, 7]

Application is not admitted and is rejected under Section 98(2) as the applicant does not fall within Section 95(a) for seeking an advance ruling on the air-transport services.

Final Conclusion: The Authority declined to admit the advance ruling application and rejected it under Section 98(2) because the applicant does not itself undertake or receive the supply of air-transport services and therefore does not satisfy the statutory requirement for seeking an advance ruling under Section 95.

Revision under section 263 - Erroneous and prejudicial to the interests of revenue - Assessment completed without inquiry or verification - Verification of tax residency and beneficial ownership - Treaty shopping and denial of treaty benefits - Permanent establishment / control and management

Revision under section 263 - Assessment completed without inquiry or verification - Erroneous and prejudicial to the interests of revenue - Whether the Commissioner was justified in invoking section 263 to set aside the assessment order for AY 2017-18 on the ground that the assessment was erroneous and prejudicial to the interests of revenue. - HELD THAT: - The Tribunal found that the assessing officer's order does not disclose what explanations or documents filed by the assessee were examined and contains no recorded reasons demonstrating that the issues flagged for CASS scrutiny were in fact enquired into and verified. In such circumstances, the assessment was held to be vitiated as having been completed without necessary inquiry or verification and therefore erroneous and prejudicial to revenue administration. The Tribunal relied on the principle that an assessment completed without requisite factual inquiry can be set aside under section 263 and observed that the findings recorded by the Commissioner remained uncontroverted before the Tribunal since the assessee failed to appear or file arguments. The assessee's grounds challenging the Commissioner's order were rejected for want of substance and contestation. [Paras 11, 12]

The Commissioner was justified in invoking section 263; the assessment order was erroneous and prejudicial and the appeal is dismissed.

Final Conclusion: Appeal dismissed; direction of the Commissioner to revise the assessment under section 263 in respect of AY 2017-18 upheld as the assessment was concluded without necessary inquiry or verification and thus prejudicial to the interests of revenue.

Validity of notice under section 143(2) of the Income tax Act - Reassessment proceedings under section 147 and notice under section 148 - Return filed in response to section 148 treated as a return under section 139 - Temporal limit for issuance of section 143(2) notice (six months from end of relevant financial year) - Consequences of assessment completed without mandatory statutory notice

Validity of notice under section 143(2) of the Income tax Act - Return filed in response to section 148 treated as a return under section 139 - Temporal limit for issuance of section 143(2) notice (six months from end of relevant financial year) - Consequences of assessment completed without mandatory statutory notice - Assessment completed under section 143(3) read with section 147 was quashed for want of a valid notice under section 143(2). - HELD THAT: - The Tribunal found that section 143(2) applies only where a return has been furnished under section 139 or in response to a notice under section 142(1), and that clause (ii) of section 143(2) requires a return to exist before the AO may issue a notice to verify understatement or under payment; further, the proviso prescribes issuance within six months from the end of the financial year in which the return is furnished (paras 8-9). In the facts, no return existed when the AO issued the first section 143(2) notice on 20/02/2011, hence that notice was ineffectual and could not operate as a notice on a return (para 10). The return filed on 31/03/2011 was within the period permissible under section 139(4) for the year 2009-10, so the return was validly filed in response to the section 148 notice and, therefore, the statutory requirement to issue a section 143(2) notice arose (paras 14-16). The second section 143(2) notice dated 17/10/2011 was issued after the six month period available (i.e. after 30/09/2011) and was therefore beyond the time permitted by the proviso to clause (ii), rendering it invalid (para 11). Because no valid section 143(2) notice was issued and the AO proceeded to conclude reassessment under section 143(3) read with section 147, the Tribunal held that the assessment proceedings were vitiated for non compliance with the mandatory statutory requirement and must be quashed (paras 17-18). The Tribunal rejected the Revenue's reliance on precedents treating belated returns as non est where, on the facts, the return here was within time under section 139(4) and, at the relevant time, section 148 did not deprive such returns of their character as returns under section 139 (paras 13-16). [Paras 14, 15, 16, 17, 18]

No valid notice under section 143(2) was issued; assessment completed under section 143(3) read with section 147 is null and void and is quashed.

Final Conclusion: The assessee's appeal is allowed and the Revenue's appeal is dismissed; the reassessment for AY 2009-10 completed under section 143(3) read with section 147 is quashed for want of a valid section 143(2) notice.

Deemed dividend under section 2(22)(e) - beneficial owner of shares - reference to Larger Bench on interpretation of beneficial ownership - remand for fresh consideration pending higher court decision - disallowance under section 43B - treatment of amounts offered in subsequent assessment year

Deemed dividend under section 2(22)(e) - beneficial owner of shares - reference to Larger Bench on interpretation of beneficial ownership - remand for fresh consideration pending higher court decision - Deletion of additions made under section 2(22)(e) in the assessee's hands and the appropriate forum/party in whose hands deemed dividend should be assessed. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) deleted additions made as deemed dividend in the hands of the assessee relying on precedents holding that loans/advances from a company cannot be treated as deemed dividend where the recipient is not a shareholder. However, the Supreme Court has referred the question of whether beneficial ownership alone suffices (as in National Travel Services) to a Larger Bench, thereby casting doubt on earlier precedents. In view of this unsettled position at the Apex Court and because the Commissioner (Appeals) shifted the addition to the common director/shareholder (Shri Sanjay Gupta), the Tribunal held that the matter is not finally settled and cannot be conclusively decided at this stage. Consequently the Tribunal set aside the deletion and remitted the issue to the file of the Commissioner (Appeals) for fresh decision in accordance with law and subject to the final outcome of the Larger Bench of the Supreme Court; the appeal grounds concerning these additions were allowed for statistical purposes. [Paras 7]

Deletion of additions under section 2(22)(e) in the assessee's hands set aside and remitted to the Commissioner (Appeals) for fresh consideration, subject to the outcome of the Larger Bench reference.

Disallowance under section 43B - treatment of amounts offered in subsequent assessment year - Deletion by the Commissioner (Appeals) of disallowance under section 43B in respect of service tax collected but allegedly offered in the subsequent year. - HELD THAT: - The Commissioner (Appeals) directed the Assessing Officer to verify whether the service tax collected and deposited before the return due date was offered to tax in the subsequent assessment year; if so, the income of that subsequent year was to be reduced by the amount disallowed. The Tribunal found no infirmity in this direction, accepting that the factual verification and consequential adjustment in the year in which the amount was offered is appropriate under the circumstances. [Paras 8, 9]

Grounds challenging the deletion under section 43B are rejected; the Commissioner (Appeals)'s direction to verify and make consequential adjustment is upheld.

Final Conclusion: The Revenue appeal is dismissed overall; however, the Tribunal has set aside and remanded the issue of deemed dividend under section 2(22)(e) for fresh consideration by the Commissioner (Appeals) in light of the pending Larger Bench reference, while upholding the Commissioner (Appeals)'s direction regarding the section 43B matter.

Deduction under section 80P(2)(d) - Proviso excluding co-operative banks under section 80P(4) - Investment income from a co-operative bank - Definition of "co-operative society"

Deduction under section 80P(2)(d) - Proviso excluding co-operative banks under section 80P(4) - Investment income from a co-operative bank - Assessee, a co-operative credit society, is entitled to deduction under section 80P(2)(d) in respect of interest earned on deposits with a co-operative bank; section 80P(4) does not disentitle the assessee. - HELD THAT: - The Tribunal analysed section 80P(2)(d) and observed that two cumulative conditions must be satisfied: (i) the income must be by way of interest or dividends and (ii) the investment must be with another co-operative society. The assessee is an admitted co-operative society that deposited funds in a District Central Co-operative Bank in accordance with the Maharashtra Co-operative Societies Act and earned interest thereon. The Tribunal relied on the settled position that section 80P(4) is a proviso which excludes only those co-operative societies that are co-operative banks holding an RBI banking licence and operating as full-fledged banks; a co-operative credit society merely giving credit to its members does not become a co-operative bank for this purpose. The Tribunal referred to the Supreme Court decisions which distinguish credit societies from co-operative banks and to coordinate bench decisions allowing deduction for interest earned from co-operative banks. Applying these authorities and facts, the Tribunal concluded that section 80P(4) is not attracted to deny the deduction claimed under section 80P(2)(d) and directed the Assessing Officer to allow the deduction. [Paras 5, 6, 7, 8, 9]

Deduction under section 80P(2)(d) is allowable to the assessee in respect of interest income from deposits with the co-operative bank; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2017-18, holding that interest income earned from investment with a co-operative bank is deductible under section 80P(2)(d) and that section 80P(4) does not apply to the co-operative credit society; the Assessing Officer is directed to grant the deduction.

Bogus purchases - estimation of income from non-genuine transactions - profit element - restriction of addition to percentage of purchases - reopening of assessment

Bogus purchases - profit element - estimation of income from non-genuine transactions - restriction of addition to percentage of purchases - Whether the Commissioner of Income-tax (Appeals) was justified in restricting the addition on account of alleged bogus purchases to 6% of the purchase value. - HELD THAT: - The Tribunal considered the facts, the reasoning of the CIT(A) and the authorities relied upon by the CIT(A) (including decisions of the jurisdictional High Court and the Coordinate Bench). The CIT(A) assessed the genuineness controversy but, on the material before it, estimated only the profit element attributable to the alleged non-genuine purchases and fixed that estimate at 6% of purchases. The Revenue did not place any new cogent evidence before the Tribunal to controvert the CIT(A)'s factual conclusions or its reliance on the cited precedents. The Tribunal noted that the AO had not disputed the sales and that the CIT(A)'s approach of adding the profit element was a reasonable method of estimating escaped income in the circumstances. On that basis the Tribunal found no infirmity in the CIT(A)'s reasoned order and declined to restore the full addition made by the AO. [Paras 6, 7]

The Tribunal upheld the CIT(A)'s restriction of the addition to 6% of the alleged bogus purchases and dismissed the Revenue's grounds on this point.

Verification of parties - burden of proof in reassessment - reopening of assessment - Whether the Assessing Officer's disallowance for failure of the assessee to produce the parties for verification warranted sustaining the full addition. - HELD THAT: - The AO relied on information from investigation and on non-response to summons/notice to conclude purchases were non-genuine and made a complete disallowance. The CIT(A), after considering materials on record and relevant precedents, limited the addition to the profit element. The Tribunal observed that the Revenue failed to bring forward additional cogent material to show that the CIT(A)'s factual conclusion was incorrect or that the method of estimation was impermissible. In these circumstances the Tribunal found that the mere non-production of the parties did not mandate restoration of the full addition where the appellate authority had applied a reasoned estimation of the income element. [Paras 3, 6]

The Tribunal rejected the Revenue's contention and held that the non-production of parties did not justify overturning the CIT(A)'s restriction; the AO's full disallowance was not restored.

Final Conclusion: The appeal filed by the Revenue is dismissed; the Tribunal upholds the CIT(A)'s order restricting the addition in respect of alleged bogus purchases to 6% of purchases for AY 2011-12.

Unexplained cash credit treated as unexplained income - burden on assessee to satisfactorily explain source of cash deposits - reliance on bank statements and corroborative evidence to substantiate cash flow - allowance for presumed cash-in-hand as limited relief

Unexplained cash credit treated as unexplained income - burden on assessee to satisfactorily explain source of cash deposits - reliance on bank statements and corroborative evidence to substantiate cash flow - allowance for presumed cash-in-hand as limited relief - Whether the addition of Rs. 24.80 lacs as unexplained cash deposit can be sustained in absence of satisfactory explanation and corroborative bank evidence, and whether any part of the deposit merits allowance. - HELD THAT: - The assessing officer recorded large cash deposits in the assessee's bank account and, after examining withdrawals and cheque transactions, concluded there was no adequate cash-in-hand to account for the deposits; the assessee's summary/cash-flow statement was not supported by bank details or corroborative evidence. The Commissioner (Appeals) affirmed the addition for lack of explanation. The Tribunal examined the material and submissions and agreed that the assessee failed to satisfactorily explain the source of the cash and cheque deposits; the assessing officer's summary demonstrating immediate withdrawals and transfers was found persuasive. However, observing social practice that taxpayers may retain some cash, the Tribunal granted a limited benefit for presumed cash-in-hand, reducing the addition accordingly. The Tribunal therefore upheld the finding of unexplained income in respect of the bulk of the deposits but allowed a quantified allowance as not inconsistent with ordinary practice. [Paras 6, 7]

Addition of Rs. 24.80 lacs as unexplained income upheld except that Rs. 2,80,000 is allowed as presumed cash-in-hand; remaining addition of Rs. 22,00,000 is sustained.

Final Conclusion: Appeal partly allowed: addition on account of unexplained cash deposits substantially sustained for AY 2015-16, but a limited relief of Rs. 2,80,000 was granted, leaving an upheld addition of Rs. 22,00,000.

Condonation of delay and extension of limitation due to COVID-19 Supreme Court orders - application of section 69A - unexplained cash deposits - burden of proof on source of cash deposits and verification by bank statements/cash flow - treatment of additions and consequential penalty - joint bank account and cross-verification of cash flows

Condonation of delay and extension of limitation due to COVID-19 Supreme Court orders - Delay of 237 days in filing appeal before the Tribunal and whether appeal is within extended limitation period. - HELD THAT: - The Tribunal considered the assessee's plea that the appeal was filed after a delay of 237 days owing to receipt of the CIT(A)'s order and the COVID-19 lockdown. Having regard to the Hon'ble Supreme Court's restoration of its earlier orders extending limitation periods (suo moto Writ Petition, SMW(C) No.3/2020 and subsequent orders), the Tribunal held that the delayed filing falls within the period of extended limitation. Accordingly, the appeal was admitted for consideration as having been filed within the prescribed extended time limit. [Paras 2]

Delay condoned; appeal admitted as filed within extended limitation period.

Application of section 69A - unexplained cash deposits - burden of proof on source of cash deposits and verification by bank statements/cash flow - joint bank account and cross-verification of cash flows - Whether additions under section 69A in respect of cash deposits (Rs.17,50,000 and enhancement of Rs.20,00,000) were sustainable where the assessee produced bank statements, cash-flow charts and documentary explanation involving joint account transactions and repayment of cash advance on sale of land. - HELD THAT: - The Tribunal examined the bank statements, the cash-flow chart and the factual narrative that the cash advances received on sale (Rs.40 lakh) were deposited in joint accounts (Rs.20 lakh in the assessee's joint account and Rs.20 lakh in the son's account) and subsequently refunded to the purchaser from available funds after realization of cheque payments. The Tribunal found that the pattern of deposits (including an initial Rs.20 lakh on 19.10.2010 and subsequent deposits totaling Rs.17,50,000) followed by realization of large cheque amounts and prompt withdrawals (total cash withdrawals within the relevant period exceeding cash deposits) corroborated the assessee's explanation. The Revenue did not controvert the factual bank entries or the cash-flow chart. On cross-verification, the Tribunal concluded that the assessee successfully demonstrated the source and the refund of the cash deposits and that the additions made by the AO (and enhancement by the CIT(A)) therefore did not survive. The Tribunal allowed the assessee's grounds on merits and directed deletion of the entire addition. [Paras 4, 6, 9, 10, 11]

Additions under section 69A and the enhancement are deleted; grounds of the assessee allowed on merits.

Treatment of additions and consequential penalty - Whether penalty imposed is sustainable where the underlying additions are deleted. - HELD THAT: - The penalty contention was held to be consequential upon the deletion of the additions. Since the Tribunal deleted the additions on merits, the penalty did not survive. [Paras 12]

Penalty set aside as consequential to deletion of additions.

Final Conclusion: Delay in filing the appeal was condoned under the Supreme Court's extension of limitation; on merits the Tribunal accepted the assessee's bank-statements and cash-flow explanation regarding joint account transactions and sale proceeds, deleted the additions made under section 69A (including the enhancement) for the relevant year, and set aside the consequential penalty; the appeal is partly allowed.

Cessation of liability - application of Section 41(1) - acknowledgement of debt in audited accounts - acceptance of balances in preceding assessment

Cessation of liability - application of Section 41(1) - acknowledgement of debt in audited accounts - acceptance of balances in preceding assessment - Validity of addition on account of alleged cessation of liability of sundry creditors amounting to Rs. 16,55,085/- in assessment for AY 2013-2014. - HELD THAT: - The Tribunal found that the case did not involve doubtful expenditure but a discrepancy between balances confirmed by creditors and balances shown in the assessee's audited books. The assessee had acknowledged the liabilities in audited financial statements, produced invoices and ledger accounts, and the same Assessing Officer had accepted these creditor balances in the immediately preceding assessment year. There was no act by the assessee to write off the liabilities nor any unequivocal extinguishment or legal unenforceability of the debts. On these facts and materials, the addition treated as cessation of liability under Section 41(1) could not be sustained and was deleted. [Paras 10, 11]

Addition on account of alleged cessation of liability deleted and the ground of appeal allowed.

Final Conclusion: Appeal allowed; the addition treating creditor balances as cessation of liability for AY 2013-2014 is deleted, the assessee having acknowledged the debts in audited accounts and produced supporting invoices and ledger entries, with the same balances having been accepted in the preceding assessment year.

Weighted deduction under section 35(2AB) - approval by the prescribed authority (DSIR) as condition precedent for deduction - distinction between recognition of R&D facilities and approval for deduction under section 35(2AB) - strict construction of exemption/deduction provisions

Weighted deduction under section 35(2AB) - approval by the prescribed authority (DSIR) as condition precedent for deduction - distinction between recognition of R&D facilities and approval for deduction under section 35(2AB) - Entitlement to weighted deduction under section 35(2AB) for R&D expenditure in the absence of requisite approval from the prescribed authority (DSIR). - HELD THAT: - The Tribunal held that section 35(2AB) entitles a company to weighted deduction only where expenditure is incurred on in-house R&D facility that is approved by the prescribed authority. The approval by DSIR is a condition precedent to claim the weighted deduction; mere incurrence of R&D expenditure or prior recognition of facilities does not substitute for the statutory approval required for deduction. In the present case the assessee's application for extension of approval was denied by the prescribed authority for non-adherence to prescribed conditions and that denial was communicated to the Assessing Officer. The Tribunal observed that where approval is denied the statutory remedy lies by challenging that denial before the High Court by writ, but that does not supply the missing statutory approval for the assessment year in question. Reliance on decisions holding that the date of approval is not a limiting cut-off or that prior recognition suffices was found inapplicable because those cases involved facts where requisite approval/formal authorisation existed; they do not assist where approval was not granted. The Tribunal also referred to the principle of strict construction of exemption/deduction provisions as enunciated by the Constitution Bench in Commissioner of Customs (Import), Mumbai Vs Dilip Kumar & Company & Others to support requiring the condition precedent to be strictly satisfied. [Paras 7, 9]

Claim for weighted deduction under section 35(2AB) denied for assessment year 2015-16 for lack of requisite approval from the prescribed authority; appeal dismissed.

Final Conclusion: The Tribunal upheld the orders of the lower authorities and dismissed the assessee's appeal for AY 2015-16, holding that absence of DSIR approval (denial of extension) precluded entitlement to weighted deduction under section 35(2AB), and that the remedy against denial of approval is by writ jurisdiction before the High Court.

Jurisdiction under section 263 of the Act - debatable issue doctrine in exercise of revisionary power - set-off of long term capital loss (STT paid) against long term capital gain (non-STT) - carry forward of long term capital loss

Jurisdiction under section 263 of the Act - debatable issue doctrine in exercise of revisionary power - set-off of long term capital loss (STT paid) against long term capital gain (non-STT) - carry forward of long term capital loss - Whether the exercise of revisional jurisdiction under section 263 was valid in respect of the AO's allowance of set-off and carry forward of long term capital loss (STT paid) against long term capital gain (non STT), where conflicting judicial views exist. - HELD THAT: - The Tribunal examined the material and authorities on record and found that tribunals and courts have taken conflicting views on whether a long term capital loss on securities on which STT was paid can be set off against long term capital gain on securities where STT was not paid, and whether such loss may be carried forward. The AO had accepted the assessee's position and framed assessment under section 143(3) allowing the set-off and carry forward. Given the existence of contrary decisions (including an adverse view of the Gujarat High Court) as well as several decisions in favour of the assessee, the question was held to be a debatable one. Applying the settled principle that section 263 cannot be invoked to reopen an assessment on a mere debatable point, and relying on the precedents of the Apex Court and the Delhi High Court to that effect, the Tribunal concluded that the Principal Commissioner of Income Tax wrongly exercised revisional jurisdiction. Consequently the order passed under section 263 was held to be without jurisdiction and a nullity. [Paras 6]

Revisional jurisdiction under section 263 was invalidly exercised because the issue was debatable; the order under section 263 is quashed and the assessment stands.

Final Conclusion: The appeal is allowed: the order passed by the Principal Commissioner of Income Tax under section 263 dated 29.03.2022 is quashed as the matter involved a debatable point of law and the revisional jurisdiction was not available.

Condonation of delay in filing appeal - condonation of delay in filing audit report in Form No.10B - denial of exemption under Section 11 for non-filing of Form No.10B - application and scope of CBDT Circular No.10/2019 dated 22.05.2019 - assessment of income as business income with allowance of deductions under Sections 30 to 38

Condonation of delay in filing appeal - Whether the 94-day delay in filing the appeal before NFAC should be condoned and the appeal admitted for adjudication. - HELD THAT: - The Tribunal examined the affidavit of the managing trustee explaining the delay (medical/psychiatric treatment) and noted the absence of any counter-affidavit from the department. Accepting these facts as true, the Tribunal found sufficient cause to condone the 94-day delay in filing the appeal before NFAC and admitted the appeal for adjudication. [Paras 4]

Delay of 94 days in filing the appeal before NFAC is condoned and the appeal is admitted.

Condonation of delay in filing audit report in Form No.10B - application and scope of CBDT Circular No.10/2019 dated 22.05.2019 - denial of exemption under Section 11 for non-filing of Form No.10B - Whether the delay in filing the audit report in Form No.10B can be condoned under the CBDT circular and whether exemption under Section 11 should be allowed. - HELD THAT: - The Tribunal held that the CBDT Circular No.10/2019 does not entail automatic condonation in every case; the assessee must explain the delay with reasonable cause for the relevant assessment year. The assessee claimed medical emergency of the trustee as the cause for belated filing, but the Tribunal noted that the assessee had filed audited financial statements contemporaneous with the return and did not satisfactorily explain why the audit report in Form No.10B itself could not be furnished along with the return. On this basis the Tribunal found there was no good and sufficient reason to condone the delay in filing Form No.10B and upheld the denial of exemption under Section 11 by the lower authorities. [Paras 4]

Delay in filing Form No.10B not condoned; exemption under Section 11 is denied for AY 2017-18.

Assessment of income as business income with allowance of deductions under Sections 30 to 38 - How the income of the assessee is to be assessed where exemption under Section 11 is denied for non-filing of Form No.10B. - HELD THAT: - The Tribunal accepted the submission that once exemption under Section 11 is denied, the assessee's income must be assessed as business income. The assessee is entitled to claim ordinary deductions allowable for computing business income, including deductions under Sections 30 to 38. The Tribunal therefore directed the Assessing Officer to compute tax on the net income after allowing such usual business expenditure and not on the gross receipts. [Paras 5, 6]

Income to be assessed as business income; AO to allow usual deductions (including under Sections 30-38) and tax only the net income.

Final Conclusion: The Tribunal condoned the 94 day delay in filing the appeal and admitted it; it refused to condone the belated filing of Form No.10B for AY 2017 18 and upheld denial of exemption under Section 11, but directed the AO to assess the assessee's income as business income allowing usual deductions (including under Sections 30-38), resulting in the appeal being partly allowed.

Disallowance under section 14A read with Rule 8D - computation of disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii) - prior period expenses - netting against prior period income - principle of consistency

Disallowance under section 14A read with Rule 8D - computation of disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii) - principle of consistency - Deletion of the disallowance of Rs.29,15,045/- made under section 14A read with Rule 8D. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's disallowance. The assessee had made a suo-moto disallowance after taking into account only those investments which actually yielded exempt income; the AO, however, computed additional disallowance by treating total investments instead of only investments yielding exempt income and applied Rule 8D(2)(ii) and (iii). The CIT(A) relied on Tribunal and High Court decisions in the assessee's own earlier and subsequent years and found no change in facts for the year under consideration; on that basis and following the principle of consistency the AO was held not justified in making the disallowance. The Tribunal found no infirmity in that approach and dismissed the Revenue's ground challenging the deletion. [Paras 12]

Ground No.1 dismissed; the disallowance under section 14A read with Rule 8D was deleted.

Prior period expenses - netting against prior period income - principle of consistency - Deletion of the disallowance of Rs.8,81,44,000/- treated as prior period expenses. - HELD THAT: - The assessee had shown prior period income and prior period expenses in the Profit & Loss account and followed a consistent policy of netting prior period income against prior period expenses, disclosing the net effect in the computation. The AO disallowed the prior period expenses by relying on earlier assessment years, but the CIT(A) deleted the addition by following Tribunal decisions in the assessee's own earlier years where the netting treatment and the fact that certain expenses crystallised in the year under consideration were accepted. Applying the principle of consistency and having regard to the Tribunal's earlier findings, the Tribunal found no justification to interfere with the CIT(A)'s deletion of the addition. [Paras 17]

Ground No.2 dismissed; the disallowance of prior period expenses was deleted.

Final Conclusion: The appeal by the Department is dismissed; the Tribunal sustained the CIT(A)'s deletion of the disallowances under section 14A read with Rule 8D and of the prior period expenses, applying earlier decisions in the assessee's own cases and the principle of consistency.

Presence of lawyer at visible but not audible distance during interrogation - Right to record voluntary statement in own handwriting - Interrogation under Section 108 of the Act - Aspect of fair investigation

Presence of lawyer at visible but not audible distance during interrogation - Aspect of fair investigation - Interrogation under Section 108 of the Act - The petitioner is entitled to have his advocate present at visible but not audible distance during interrogation under Section 108 of the Act. - HELD THAT: - Having considered precedent of the Apex Court and Coordinate Benches of this Court, and noting that Poolpandi was distinguished by the Apex Court in Birendra Kumar Pandey where active participation by counsel was the concern, this Court found that permitting the advocate at visible but not audible distance is an element of fair investigation. The Court observed that earlier Coordinate Bench decisions, including recent orders of this Court, have authorised such presence and that contrary High Court decisions possess only persuasive value. On this basis the petition was allowed to the extent of permitting the advocate's presence at visible but not audible distance during interrogation, while emphasising that the petitioner must ensure the advocate's availability and that absence of counsel will not excuse attendance for interrogation. [Paras 6, 8, 9, 10]

Presence of the petitioner's advocate during interrogation is permitted at visible but not audible distance; petitioner must ensure counsel's presence and non-availability is not a ground to avoid interrogation.

Right to record voluntary statement in own handwriting - Aspect of fair investigation - The petitioner is not permitted to record his voluntary statement in his own handwriting. - HELD THAT: - The Court considered the request to allow the petitioner to record his voluntary statement in his own handwriting but declined that relief. While recognising procedural safeguards by permitting the advocate at visible but not audible distance, the Court did not find it appropriate to allow the petitioner to personally write his voluntary statement and therefore refused that specific relief. [Paras 10]

Request to permit the petitioner to record his voluntary statement in his own handwriting is refused.

Final Conclusion: Writ petition allowed in part: the petitioner's advocate is permitted to be present during interrogation at visible but not audible distance; the request to record the voluntary statement in the petitioner's own handwriting is declined; the petitioner must ensure availability of his lawyer and inability of the lawyer to attend does not exempt the petitioner from interrogation.

Limitation in filing appeals under Section 129D(3) of the Customs Act - date of communication versus date of receipt for computation of limitation - evidentiary burden to prove date of receipt of Order in Original by the review cell - suspect nature of seals or documentary proof and inference of delay in review orders - forgery/fabrication of documents and interference with administration of justice

Limitation in filing appeals under Section 129D(3) of the Customs Act - date of communication versus date of receipt for computation of limitation - evidentiary burden to prove date of receipt of Order in Original by the review cell - Whether the appeals filed by the Department were barred by limitation because the review orders were passed beyond the three month period and whether the Department discharged the evidentiary burden to show the date on which the Order in Original was received by the review cell. - HELD THAT: - The Tribunal examined the impugned orders of the Commissioner (Appeals) which recorded that the reviewing authority passed review orders beyond the three month period prescribed under Sub section (3) of Section 129D and that no reliable evidence was placed before the Commissioner (Appeals) to establish the date on which the Orders in Original were received by the review cell. The Department relied on seals on photocopies and assertions in grounds of appeal to show later receipt, but the Tribunal found the seals and documentary proof to be suspect and there was no substantiation before the Commissioner (Appeals) despite repeated requests. Earlier like matters considered by the Tribunal were cited, where identical contentions were rejected for want of evidence and where the Commissioner (Appeals)'s finding of delay was sustained. In the absence of admissible proof of the date of receipt, the correct computation could not be shifted from the date of communication as recorded, and the appeals filed by the Department were therefore held to be time barred. The Tribunal found no reason to interfere with the Commissioner (Appeals)'s limitation finding and reasoning. [Paras 5, 6, 7, 8]

The Commissioner (Appeals)'s finding that the appeals were hit by limitation is sustained and the appeals filed by the Department are dismissed.

Suspect nature of seals or documentary proof and inference of delay in review orders - forgery/fabrication of documents and interference with administration of justice - Whether the Tribunal should record a caution and issue administrative directions concerning presentation of documentary evidence and potential fabrication or deceptive acts in appellate proceedings. - HELD THAT: - In view of repeated instances where the Department failed to place acceptable evidence establishing the date of receipt of Orders in Original by the review cell, the Tribunal expressed concern about the filing of suspect or unsubstantiated documents. Relying on the statutory character of proceedings before the Tribunal as judicial proceedings, the Tribunal cautioned that filing forged or fabricated documents would amount to interference with the administration of justice and attract penal consequences. The Tribunal directed that a copy of the order be sent to the jurisdictional Principal Chief Commissioner with a request to issue instructions to the Committee of Commissioners to ensure that appeals of this nature are filed with due seriousness and after verifying the truth of material facts, and to ensure that review orders include the date of receipt of the Order in Original by the review cell. [Paras 6, 7]

The Tribunal recorded a caution against submission of suspect documents, and directed the Registry to forward the order to the Principal Chief Commissioner to issue instructions to the Committee of Commissioners to prevent recurrence and to ensure review orders record the date of receipt of the Order in Original.

Final Conclusion: The Tribunal found no merit in the Department's contention that review orders were within time because the Department failed to prove the date of receipt by the review cell; the Commissioner (Appeals)'s limitation findings were upheld, the departmental appeals were dismissed, and the Tribunal issued a caution and administrative directions to the Principal Chief Commissioner to prevent filing of unsubstantiated or deceptive documents and to ensure review orders record the date of receipt.

Revocation of customs broker licence - forfeiture of security deposit - adherence to time lines under Regulation 20 (directory v. mandatory) - sub letting of customs broker licence - evidentiary burden to prove alienation of licence and employment status of authorised persons - duties of customs broker regarding verification of clients and discharge of functions with speed and efficiency

Adherence to time lines under Regulation 20 (directory v. mandatory) - recording of reasons for delay - Whether non observance of time lines prescribed in the Customs Broker Licensing Regulations, 2013 vitiated the revocation proceedings - HELD THAT: - The Tribunal found that inquiry completion by order dated 17th February 2016 breached the time lines in the Regulations. However, following the approach in Principal Commissioner of Customs (General) v. Unison Clearing Pvt Ltd, the time limit in Regulation 20 is to be construed as directory and not per se fatal. When time limits are exceeded fairness requires that reasons for delay be recorded and tested for reasonableness; absence of such scrutiny may jeopardise enforcement but does not automatically invalidate proceedings. The Court held that the licensing authority had not adequately scrutinised the circumstances of the delay nor found contributory negligence on the part of the customs broker, and therefore the mere breach without justificatory findings did not sustain the action taken. [Paras 8, 15]

Breach of prescribed time lines was established but Regulation 20 is directory; licensing authority failed to record and scrutinise reasons for delay and did not establish contributory fault by the broker.

Sub letting of customs broker licence - evidentiary burden to prove alienation of licence and employment status of authorised persons - Whether the appellant had sub let its licence by permitting two persons to act in its stead and thereby breached regulation 10 - HELD THAT: - The Tribunal examined the inquiry findings that two persons were employees of another firm and that appellant had provided access to credentials. It held that 'sub letting' was loosely alleged and that mere presence of another entity in the service chain or part time/alternative employment does not ipso facto constitute sub letting. Regulations do not prohibit employees from having other engagements and the inquiry did not establish clear alienation of the licence; the authority impermissibly relied on preconceived notions about master servant relationships and failed to scrutinise business practices prevailing in the sector. On that basis the evidence was held insufficient to prove breach of regulation 10. [Paras 9, 12]

Charge of sub letting under regulation 10 not proved for lack of sufficient evidence of alienation of licence.

Duties of customs broker regarding verification of clients and discharge of functions with speed and efficiency - liability for acts of employees and verification of client antecedents - Whether the appellant breached regulations 11(d), 11(e) and 11(m) (relating to client authorisation, handling by authorised persons, and due diligence/efficiency) as found by the licensing authority - HELD THAT: - The Tribunal treated the remaining charges as consequent on the primary finding of sub letting. In light of the rejection of the sub letting charge and on the record that authorisation (albeit indirectly) existed and that the two persons had been issued customs passes as employees of the appellant, the findings against the appellant on regulation 11(d), 11(e) and 11(m) could not be sustained. The Tribunal also relied on precedent and principle that a customs broker is not obliged to verify the correctness of exporters' declarations beyond taking reasonable steps to establish identity and advise clients, and there was no evidence that the appellant knew of or colluded in mis declaration. The licensing authority had gone beyond the articles of charge by relying on extraneous incidents, which was impermissible. [Paras 13, 15, 16]

Findings of breach of regulations 11(d), 11(e) and 11(m) are not sustained; charges based on lack of verification and inefficiency are not proved.

Final Conclusion: All charges against the appellant were not proved; the Tribunal set aside the revocation of licence and the forfeiture of the security deposit and allowed the appeal.

Possession of mortgaged collateral following discharge of secured debt - effect of no-dues certificate and return of title deeds on prior charge - proprietary rights of corporate guarantor vis-a -vis company in liquidation - duty of Official Liquidator to deliver property where charge has been lifted - injunction restraining interference with enjoyment of property - payment of rents/receipts held by custodian after deduction of maintenance expenses

Effect of no-dues certificate and return of title deeds on prior charge - possession of mortgaged collateral following discharge of secured debt - Whether the charge over the subject land and assets was lifted on settlement and return of title documents and, if so, whether the applicant is entitled to possession. - HELD THAT: - The Court found on the materials before it (including the no-dues certificate issued by Pegasus Assets Reconstruction Private Limited, the handing over of title documents to the applicant, and letters to the Sub Registrar for lifting the lien) that the secured debt in respect of Deve Sugars Limited had been settled by the applicant as corporate guarantor and that Pegasus had returned title deeds and represented that no further dues remained. The Court noted corroborating affidavits and admissions by parties (including MTitanium Apartments Private Limited) that the lands belong to the applicant and that they had no objection to handing over possession. Having regard to these facts, the Court concluded that the charge against the properties stood discharged and the applicant was entitled to possession of the land, plant and machinery. [Paras 12, 14, 15]

The charge is lifted; the applicant is entitled to possession of the subject land, plant and machinery.

Duty of Official Liquidator to deliver property where charge has been lifted - injunction restraining interference with enjoyment of property - Whether the Official Liquidator must hand over possession of the scheduled properties to the applicant and whether an injunction should be granted restraining interference. - HELD THAT: - The Court observed that the Official Liquidator was appointed and had taken possession in 1999, but subsequent settlements between creditors, the corporate guarantor and workmen resulted in resolution of disputes. Given the discharge of the secured charge and the absence of outstanding disputes between the parties (as evidenced by settlement documents and the no-dues certificate), the Court held that continued custody by the Official Liquidator was not warranted. In the exercise of its supervisory jurisdiction the Court emphasised that procedural requirements should not defeat an otherwise settled resolution of disputes and directed restoration of possession. Consequently, an injunction was imposed to prevent the Official Liquidator from interfering with the applicant's enjoyment of the properties. [Paras 13, 14, 15]

The Official Liquidator is directed to hand over possession to the applicant and is restrained by injunction from interfering with the applicant's enjoyment of the properties.

Payment of rents/receipts held by custodian after deduction of maintenance expenses - Whether the Official Liquidator should pay arrears of warehouse rent and other balance funds to the applicant and on what terms. - HELD THAT: - The Court took note that workmen's dues and other claims had been settled, and that the Official Liquidator held rents/receipts in respect of the warehouse. Balancing the settlements and the Official Liquidator's role in safeguarding assets, the Court directed that arrears of rent and balance funds available with the Official Liquidator be paid to the applicant after deducting security and maintenance expenses incurred in protecting the properties. A time frame of four weeks from receipt of the order was fixed for payment. [Paras 13, 15]

The Official Liquidator shall pay arrears of rent and the balance funds to the applicant after deducting security/maintenance expenses within four weeks.

Proprietary rights of corporate guarantor vis-a -vis company in liquidation - effect of cancelled transfer agreement and non-completion of conveyance - Whether the properties were ever vested in the company in liquidation or remained the proprietary assets of the applicant following cancellation of the transfer agreement. - HELD THAT: - The Court examined the history of the alleged transfer by agreement dated 15.01.1994 and its subsequent cancellation on 30.09.1998, noting that conveyance deeds were not completed and no amalgamation or court order effected any transfer. The Registrar of Companies' records and correspondence supported that the applicant and the company in liquidation were separate entities. On this basis the Court held that the assets did not vest in the company in liquidation and remained the applicant's property, reinforcing entitlement to restoration of possession once the charge was discharged. [Paras 12, 14]

The properties did not vest in the company in liquidation; they remained the proprietary assets of the applicant after cancellation of the transfer agreement.

Judicial preference for effecting amicable settlements over procedural technicalities - Whether the Court should give effect to the amicable settlements reached by parties notwithstanding procedural non-cooperation by the Official Liquidator. - HELD THAT: - The Court noted that creditors, the corporate guarantor and workmen had settled their disputes among themselves and that the Official Liquidator had not cooperated with those settlements. Emphasising that rules are instruments to advance justice, not to defeat settlements, the Court accepted the settlements as achieving final resolution of disputes relevant to possession and payments, and proceeded to grant reliefs consistent with those settlements. [Paras 13]

The Court gave effect to the settlements and declined to allow procedural non-cooperation by the Official Liquidator to prevent resolution.

Final Conclusion: Company Application Nos.298-300 of 2021 are allowed: the charge over the scheduled properties is found discharged on settlement and return of title deeds, the Official Liquidator is directed to hand over possession and is restrained from interfering, and arrears of rent/balance funds are to be paid to the applicant after deduction of maintenance expenses within four weeks. Company Application No.626 of 2017 is dismissed.

Obligation to retain books for eight financial years - definition of books of account under the Companies Act - production of books beyond statutory retention period - proviso to Section 128(5) of the Companies Act - Central Government direction to extend retention period - cooperation with investigation

Obligation to retain books for eight financial years - definition of books of account under the Companies Act - proviso to Section 128(5) of the Companies Act - Central Government direction to extend retention period - production of books beyond statutory retention period - Petitioner is not obliged to produce books of account for financial years 2010-11 and 2011-12 which fall beyond the statutory eight-year retention period in the absence of a Central Government direction under the proviso to Section 128(5). - HELD THAT: - The court accepted the petitioner's submission that no records of books of account exist for the financial years 2010-11 and 2011-12 and noted that the Companies Act defines "books of account" to include vouchers, receipts, records of sums received and expended, sales and purchases and assets and liabilities. Section 128(5) permits retention of books for eight financial years immediately preceding the current year; the proviso to sub-section (5) extends that period only upon a direction by the Central Government. As no such direction was shown to have been issued, the respondent cannot compel production of books beyond the eight-year period. The court therefore allowed the petition insofar as it records the petitioner does not possess books beyond the eight-year period, while permitting the respondent to pursue further action in accordance with law and directing the petitioner to continue cooperating with the investigation. [Paras 2, 3, 4, 5, 6]

Petition allowed to the extent that the petitioner is not required to produce books for FY 2010-11 and 2011-12 absent a Central Government direction under the proviso to Section 128(5); respondent free to proceed as per law and petitioner to cooperate.

Final Conclusion: The petition is allowed on the limited ground that the petitioner does not have books of account for the financial years 2010-11 and 2011-12 and cannot be compelled to produce them in the absence of a Central Government direction under the proviso to Section 128(5); the respondent may take further action in accordance with law and the petitioner shall continue to cooperate with the investigation.

Execution of consent decree/Consent Terms - NCLT's power to execute orders under section 424(3) of the Companies Act, 2013 - Non-compete obligation and consequence for breach under consent terms - Obligation to approach the Tribunal for adjudication of alleged breach/termination - Attachment and sale of shares in execution of a consent decree - Limitation on execution - executing court cannot go behind a valid decree - Protective direction on sale - limited sale to raise decree amount with interest and release of remaining shares - Interest on delayed payment as part of execution relief

Execution of consent decree/Consent Terms - NCLT's power to execute orders under section 424(3) of the Companies Act, 2013 - Limitation on execution - executing court cannot go behind a valid decree - Whether the NCLT could lawfully entertain and execute the Consent Terms filed and approved by it - HELD THAT: - The Tribunal held that once the Consent Terms were taken on record and approved by the NCLT, the NCLT was bound to execute its order and had power to do so under section 424(3) read with the NCLT Rules, with the same powers as a civil court executing a decree. Reliance on precedents established that an executing forum may not go behind a valid decree unless the decree is a patent nullity; if interpretation is necessary the executing court may construe the decree and execute it. Applying these principles to the Consent Terms recorded and approved by NCLT, the Tribunal found no jurisdictional defect in the Execution Application being entertained and acted upon by NCLT. [Paras 22, 23, 24, 25, 26]

NCLT rightly exercised its power to execute the Consent Terms; the Execution Application could be entertained and acted upon.

Non-compete obligation and consequence for breach under consent terms - Obligation to approach the Tribunal for adjudication of alleged breach/termination - Whether the appellants could unilaterally terminate the Consent Terms on alleged breach of non-compete without approaching the NCLT as required by the Consent Terms - HELD THAT: - The Consent Terms provided that alleged defaults/breaches would render the terms unenforceable as to the non-defaulting party but also required parties to approach the Tribunal for determination of defaults. The Tribunal noted the appellants sent a unilateral notice of termination and ratified that decision at a board meeting, but did not place any adjudication of breach before the NCLT as mandated by the Consent Terms. Having regard to clause(s) requiring recourse to the Tribunal, the appellate Tribunal held that the unilateral termination remained an allegation and not an established breach, and therefore could not sustain refusal of execution by the decree-holder. [Paras 28, 29]

Unilateral termination by the appellants without seeking Tribunal adjudication did not establish breach; NCLT correctly proceeded with execution.

Attachment and sale of shares in execution of a consent decree - Protective direction on sale - limited sale to raise decree amount with interest and release of remaining shares - Interest on delayed payment as part of execution relief - Extent and manner in which shares attached in execution should be sold and ancillary directions to safeguard the company's interest - HELD THAT: - While upholding the right to execute the Consent Terms, the Tribunal recognised the commercial purpose of the settlement - to secure an orderly and honourable exit while preserving company continuity. To avoid disruption or sale to competitors, the Tribunal directed that only so many attached shares of the appellants (A-2 and A-3) be sold as are necessary to realise the decree amount due under clause 3(b) together with interest at 10% per annum for delay. Any remaining attached shares are to be released back to the appellants. The Tribunal also observed that questions as to execution of other prayers in the Execution Application remain open for adjudication by the NCLT. [Paras 32, 33, 34, 35, 37]

Only such number of attached shares shall be sold as are required to realise the decree amount plus interest @10% p.a.; remaining shares to be released to A-2 and A-3; other execution issues to be adjudicated by NCLT.

Execution of consent decree/Consent Terms - Contempt and refund applications rendered infructuous upon execution - Whether the Contempt Application and Refund Application had to be separately adjudicated after the Execution Application was decided - HELD THAT: - The Tribunal held that once the Execution Application was considered and the Consent Terms were ordered to be executed, the Contempt and Refund Applications became infructuous and could be disposed of as such. The appellate Tribunal agreed with the NCLT's approach that execution of the decree provided the primary relief and rendered ancillary applications inutile in the circumstances adjudicated. [Paras 36]

Contempt and Refund Applications became infructuous upon disposition of the Execution Application and were rightly dismissed.

Final Conclusion: The appeal is dismissed. The NCLT did not err in executing the Consent Terms; the appellants' unilateral termination without Tribunal adjudication did not establish breach; execution shall proceed so that only sufficient attached shares of A-2 and A-3 are sold to realise the decree amount plus interest @10% p.a. with remaining shares released, and other execution matters remain for the NCLT to decide; no order as to costs.

Summary order. Appeal against the Securities Appellate Tribunal, Mumbai order dated 24 August 2022 is dismissed; pending application, if any, disposed of.

Scope of Section 66 of the Insolvency and Bankruptcy Code, 2016 - personal liability for fraudulent trading - liability of persons responsible for conduct of business - civil remedies against third parties independent of Section 66 - application of ratio in Usha Ananthasubramanian to Section 66

Scope of Section 66 of the Insolvency and Bankruptcy Code, 2016 - civil remedies against third parties independent of Section 66 - Whether the Court's earlier dismissal should be clarified to permit the applicant to persuade the Resolution Professional to initiate proceedings under Section 66 of the IBC against third parties and organisations with whom the corporate debtor transacted business. - HELD THAT: - The application for clarification sought to enable the applicant to indirectly overturn the Tripura High Court's order by permitting initiation of proceedings under Section 66 against third parties. The Court held that such an endeavour in the guise of clarification cannot be permitted. The Court observed that remedies against third parties for recovery of dues are civil remedies available in law and are independent of Section 66 of the IBC; it is for the Resolution Professional or a successful resolution applicant to pursue such civil remedies. Consequently, the earlier order will not be read as empowering Section 66 to reach third parties, and the applicant's attempt to obtain such a clarification is misconceived.

Application for clarification dismissed; the earlier order is not to be construed as permitting Section 66 proceedings against third parties, and civil remedies against third parties remain independent of Section 66.

Personal liability for fraudulent trading - liability of persons responsible for conduct of business - application of ratio in Usha Ananthasubramanian to Section 66 - Whether Section 66 of the IBC can be invoked against organisations or entities (and persons responsible in such organisations) with whom the corporate debtor carried out business, or is it confined to persons responsible for the conduct of the corporate debtor's business. - HELD THAT: - The Court agreed with the Tripura High Court's reliance on this Court's observations in Usha Ananthasubramanian, noting that the principle concerning personal liability for fraudulent trading under the Companies Act provision (pari materia) applies to Section 66. The NCLT and other fora have taken a similar view. Section 66 is directed to making persons personally liable who are responsible for fraudulent trading by the corporate debtor; it does not confer power on the adjudicating forum to pass orders against other organisations or legal entities (or persons in those entities) merely because business was carried out with the corporate debtor. Any action against such third parties would be by independent civil proceedings.

Section 66 is confined to persons responsible for the conduct of the corporate debtor's business and does not extend to imposing liability on other organisations or entities with whom the corporate debtor transacted; actions against third parties lie by separate civil remedy.

Final Conclusion: The application for clarification is dismissed. Section 66 of the IBC is confined to imposing personal liability on persons responsible for the corporate debtor's fraudulent trading and does not extend to third-party organisations; remedies against third parties remain civil actions independent of Section 66 and may be pursued by the Resolution Professional or successor in accordance with law.

Operational Debt - interpretation of Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - broad and purposive interpretation - remand for fresh consideration - preservation of parties' rights on merits

Operational Debt - interpretation of Section 5(21) of the Insolvency and Bankruptcy Code, 2016 - broad and purposive interpretation - Whether the advance payment alleged by the respondent falls within the definition of "operational debt" under Section 5(21) of the IBC and the legal consequence of the NCLAT's reversal of the NCLT order. - HELD THAT: - The NCLT had held that the advance payment did not fall within the four corners of "operational debt" and dismissed the Section 9 petition. The NCLAT reversed that conclusion, applying this Court's decision in Consolidated Construction Consortium Ltd v Hitro Energy Solutions Pvt Ltd that Section 5(21) must be given a broad and purposive construction to include transactions that give rise to an operational debt. The Supreme Court disposed of the appeal subject to the clarification that the matter is to be remitted so that the tribunal may consider and decide the merits. By disposing the appeal in this manner the Court accepted the NCLAT's legal approach on interpretation of Section 5(21) and directed further adjudication on the factual and other legal contentions before the NCLT.

The NCLAT's reversal of the NCLT on the interpretation of Section 5(21) is accepted for the purpose of further adjudication; the matter is remitted for determination of whether the advance constitutes an operational debt under the broad and purposive interpretation.

Remand for fresh consideration - preservation of parties' rights on merits - Scope of remand and whether the parties may raise all defences and contentions before the NCLT on remand. - HELD THAT: - The Supreme Court noted that the NCLT had not considered other defences raised by the corporate debtor against the Section 9 petition. Consequently, the Court remitted the matter to the NCLT and explicitly kept open all rights and contentions of the parties so that the tribunal may consider them on the merits. The remand is for fresh consideration of the substantive issues and defences, not a limited remand for computation only.

Matter remitted to the NCLT for fresh consideration of all the parties' contentions and defences; all rights on the merits are preserved.

Final Conclusion: The civil appeal is disposed of by accepting the NCLAT's approach to the interpretation of Section 5(21) for purposes of further adjudication and remitting the matter to the NCLT to decide on the merits; all parties' rights and contentions are kept open. Pending applications stand disposed of.

Disqualification under Section 29A - Declaration as willful defaulter and its operative effect - Finality of liquidation order and its effect on CIRP - Compromise or arrangement under Section 230 and Regulation 2B of the Liquidation Regulations, 2016

Disqualification under Section 29A - Declaration as willful defaulter and its operative effect - Appellant's eligibility to submit and have considered the Resolution Plan at the time of submission and consideration - HELD THAT: - The Tribunal examined whether the Appellant was disqualified under Section 29A at the time the Resolution Plan was submitted (04.08.2020) and when it was considered by the CoC (meetings dated 30.09.2020 and 09.11.2020). The show cause communication of 13.11.2019 only warned of a future declaration if no reply was received; the Identification Committee's formal declaration of willful default was made only on 25.05.2021 and the Review Committee confirmed it on 01.07.2021. The Bombay High Court granted an interim stay of the Identification Committee and Review Committee orders by its order dated 20.09.2021, which remains in operation. In these circumstances the Tribunal held that there was no operative declaration of willful defaulter at the relevant earlier dates and therefore the Appellant was not disqualified under Section 29A on the dates the plan was submitted and considered. The Tribunal set aside the Adjudicating Authority's conclusion that the Appellant was ineligible under Section 29A. [Paras 12, 13, 14]

Appellant was eligible to submit a Resolution Plan on the date of submission and on the dates it came up for consideration; the Adjudicating Authority's finding of ineligibility under Section 29A is set aside.

Finality of liquidation order and its effect on CIRP - Compromise or arrangement under Section 230 and Regulation 2B of the Liquidation Regulations, 2016 - Effect of the unchallenged liquidation order on the possibility of reconsideration of the Appellant's Resolution Plan and permitted alternative relief - HELD THAT: - Although the Tribunal held the Appellant was not disqualified under Section 29A at the earlier dates, it recognised that a separate order dated 20.01.2022 directing liquidation (in I.A. No. 173 of 2021) has not been challenged and has attained finality. Once liquidation has commenced and the liquidation order is final, there is no occasion to direct reconsideration of a Resolution Plan in the CIRP. The Tribunal, however, permitted an alternate remedy under company law and the Liquidation Regulations: the Appellant may submit a proposal for compromise or arrangement as contemplated by Section 230 and Regulation 2B of the Liquidation Regulations. The Tribunal exercised its discretion to stay further liquidation steps for a limited period to enable that process: the Appellant to submit a compromise or arrangement within 30 days, the Liquidator to endeavour to decide within 60 days thereafter, and liquidation proceedings to be kept on hold for 90 days in total; if no approval is obtained, liquidation shall continue. [Paras 13, 14]

No direction to reconsider the Resolution Plan can be issued because the liquidation order has attained finality; Appellant permitted to propose a compromise or arrangement to the Liquidator within 30 days, Liquidator to decide within 60 days, and liquidation proceedings stayed for 90 days pending that process.

Final Conclusion: The Adjudicating Authority's finding that the Appellant was ineligible under Section 29A is set aside because there was no operative willful-defaulter declaration at the relevant dates; however, because the unchallenged liquidation order of 20.01.2022 has attained finality, the Tribunal declined to remand the Resolution Plan for reconsideration and instead permitted the Appellant a time-limited opportunity to seek compromise or arrangement under Section 230 and Regulation 2B while staying liquidation for 90 days.

Right to assistance of counsel during recording of statement - Presence of counsel at visible but not audible distance - Apprehension of coercion as prerequisite for permitting counsel - Videography and audiography as safeguards against coercion - Recording of statement under Section 50 of PMLA

Right to assistance of counsel during recording of statement - Presence of counsel at visible but not audible distance - Apprehension of coercion as prerequisite for permitting counsel - Whether the respondent is entitled as of right to have his lawyer present at a safe distance (able to see but not hear) during recording of his statement under Section 50 of PMLA. - HELD THAT: - The Court held that there is no absolute right to have a lawyer physically present at the time of recording a statement under the statutory enquiry provisions; precedents such as Poolpandi, Sudhir Gulati and Ramesh Chandra Mehta establish that assistance of counsel during such departmental enquiries is not a matter of right. The Division Bench in Sandeep Jain permits presence of counsel at visible but not audible distance only when the accused produces credible material showing a real and live apprehension of coercion or threats during recording. In the absence of any such apprehension or credible material indicating the possibility of coercive measures, the direction to allow a counsel to be present at visible-but-not-audible distance was not warranted. The Court further observed that when recording is videographed and audiographed, such safeguards dispel apprehension of coercion and weigh against allowing the special form of presence sought. [Paras 4, 14]

The direction permitting counsel to remain at a visible but not audible distance during recording of the respondent's statement was not a matter of right and was therefore stayed.

Videography and audiography as safeguards against coercion - Whether the interim order dated 03.06.2022 staying the trial court's direction should be confirmed in view of the investigation being complete and the respondent not contesting the matter. - HELD THAT: - The Court noted that investigation had been completed and the prosecution complaint filed, and that the respondent had not filed a counter or otherwise come forward to contest. Having already stayed the impugned direction by order dated 03.06.2022, and having considered the law and facts, the Court found no impediment to confirming that order. [Paras 4, 5, 6]

Order dated 03.06.2022 staying the trial court's direction is confirmed and the petition is allowed in terms of that order; the petition is disposed of.

Final Conclusion: The High Court confirmed its earlier order dated 03.06.2022 staying the trial court's direction that an advocate be allowed to remain present at a visible but not audible distance during recording of statements; such presence is not a matter of right and may be permitted only on credible proof of a real apprehension of coercion, and the petition is disposed of accordingly.

Grant of bail under PMLA Section 45 - Power of arrest under Section 19 of PMLA - Twin conditions for bail: reasonable grounds to believe not guilty and no likelihood of committing offence while on bail - Non-bailable and cognizable character of offences under PMLA

Grant of bail under PMLA Section 45 - Twin conditions for bail: reasonable grounds to believe not guilty and no likelihood of committing offence while on bail - Petitioner entitled to regular bail despite invocation of Section 45 of the PMLA - HELD THAT: - The Court applied the twin condition test under Section 45(1) of the PMLA and considered whether there were reasonable grounds to believe that the petitioner is not guilty of a scheduled offence and is not likely to commit an offence while on bail. The material on record showed that (a) the predicate FIR (crime No.29 of 2021) has not resulted in any charge sheet implicating the petitioner though investigated for over 14-15 months, (b) no monies have been shown to have flown into the petitioner's accounts, (c) searches of his residence and office did not produce incriminating material, (d) he has been cooperating with multiple investigating agencies and had earlier been granted anticipatory bail in the predicate case, and (e) he is a Chartered Accountant and there are no prior complaints against him. Having regard to these facts and the authorities regarding the scope of judicial enquiry under Section 45 - which require the court to form a view on broad probabilities and not finally weigh evidence - the Court concluded that continued incarceration was not justified and the second condition in clause (ii) would be satisfied. The Court therefore exercised judicial discretion to enlarge the petitioner on bail subject to conditions. [Paras 11, 12, 16, 17, 18]

Criminal petition allowed and petitioner enlarged on bail on conditions (personal bond with two sureties, weekly attendance, surrender of passport)

Power of arrest under Section 19 of PMLA - Non-bailable and cognizable character of offences under PMLA - Sufficiency of material relied upon for arrest and justification for continued custody considered but detention not sustained - HELD THAT: - The Court examined the requirements of Section 19 (recorded reasons based on material in possession) and noted the investigative steps including examinations under Section 50 PMLA, searches and eventual arrest. Notwithstanding these steps, the Court found absence of tangible material connecting monies to the petitioner or demonstrating his active receipt of diverted funds; no incriminating documents were seized; and the petitioner had repeatedly cooperated with investigations. While the provisions permit arrest without warrant and the PMLA makes offences non bailable and cognizable, the factual matrix did not warrant further detention of the petitioner. The Court did not set aside the arrest per se but concluded that continued custody was not justified in the circumstances and released the petitioner on bail with conditions. [Paras 9, 12, 14, 17]

Arrest examined and detention found unnecessary; petitioner released on bail subject to conditions

Final Conclusion: The Criminal Petition is allowed: the petitioner is enlarged on bail on furnishing a personal bond with two sureties, subject to weekly attendance before the investigating agency and surrender of passport; miscellaneous petitions, if any, stand closed.

Return of complaint by a court before taking cognizance - Taking cognizance and summoning - requirement of prima facie satisfaction - Separate trials and joint trial principles under Sections 218-223 CrPC - Proceeds of crime and offence of money laundering under the PMLA - Pre cognizance examination of merits

Return of complaint by a court before taking cognizance - Pre cognizance examination of merits - Validity of order dated 28.04.2022 returning the joint complaint for filing fresh and separate complaints - HELD THAT: - The court held that the impugned order dated 28.04.2022 was passed prior to taking cognizance and therefore amounted to a pre cognizance order. Established authorities permit a Magistrate/court to return a complaint before taking cognizance, and such return may involve consideration of certain merits (for example, the question of sanction or whether the complaint is maintainable), because the act of returning the complaint occurs at a stage antecedent to the Chapter XV proceedings under Sections 200 et seq. The High Court found that the Special Judge acted within jurisdiction in returning the joint complaint and that the return did not amount to an act done after taking cognizance. The court therefore declined to set aside the order returning the complaint. [Paras 32, 33, 34, 45]

Order dated 28.04.2022 returning the complaint was within jurisdiction and does not warrant interference.

Proceeds of crime and offence of money laundering under the PMLA - Taking cognizance and summoning - requirement of prima facie satisfaction - Validity of cognizance and summoning orders in Special Sessions Trial Nos. 14, 15, 16 and 17 of 2022 - HELD THAT: - The High Court examined the complaints and the annexed material to determine whether a prima facie case was made out against the accused for offences under Section 3 read with Section 4 of the PMLA. Having regard to the statutory definition of "proceeds of crime" and the wide ambit of Section 3 (which includes concealment, possession, acquisition, use and projecting as untainted property), the court applied the usual standard for summoning - whether material, if believed, could establish the offence at the prima facie stage. The averments in the respective complaints delineated individual roles (passing awards, preparing/submitting reports, making entries, layering/transferring funds) and the trial court's orders were detailed, showing application of mind to the material. The High Court found no illegality in the cognizance and summoning orders impugned in SST Nos. 14, 15, 16 and 17 of 2022 and refused interference. [Paras 86, 96, 99, 101, 102]

Cognizance and summoning orders dated 06.09.2022 (SST Nos. 14, 15, 16) and 14.10.2022 (SST No. 17) are sustainable; no interference warranted.

Separate trials and joint trial principles under Sections 218-223 CrPC - Whether the return order rendered subsequent separate complaints void or otherwise invalidated proceedings - HELD THAT: - Petitioners contended that returning the joint complaint and directing separate complaints was beyond the court's power and that consequent proceedings were vitiated. The High Court observed that return of the complaint before cognizance did not make subsequent complaints invalid. The court noted petitioners' practical grievances (multiple bail applications, sureties etc.) but indicated these could be addressed (for example by applying for joinder or for consolidated relief such as common bail) before the trial court. The High Court therefore held that subsequent complaints filed after the return are not automatically void merely because the original complaint was returned. [Paras 44, 45]

Subsequent separate complaints filed pursuant to the return are not struck down by virtue of the return order; they do not fall for automatic vitiation.

Separate trials and joint trial principles under Sections 218-223 CrPC - Whether the question of joint trial between the scheduled offences and money laundering complaints required final adjudication at this stage - HELD THAT: - The High Court recognised that Sections 218-223 govern joinder and separate trials and that the PMLA also contemplates consolidation of scheduled offences and money laundering proceedings before the Special Court. However, the court emphasised that the impugned return was a tentative pre cognizance finding and that the issue of joint trial arising from the subsequently filed complaints remains open. The petitioners were admonished that an application for joinder or joint trial may be moved before the trial court, which would have the advantage of hearing the petitioners' views; the High Court declined to decide the joinder question in the writ proceedings to avoid prejudicing rights to seek relief before the trial forum. [Paras 34, 43, 44]

Question of joint trial is left open for decision by the trial court upon any application for joinder or joint trial; not finally decided in these petitions.

Final Conclusion: The High Court dismissed the petitions. It held that the Special Judge was within jurisdiction in returning the joint complaint before taking cognizance; the subsequent separate complaints and the cognizance and summoning orders in SST Nos. 14, 15, 16 and 17 of 2022 disclose prima facie cases and do not merit interference; the plea for joint trial remains open and may be raised before the trial court, which shall decide it in accordance with law.

Provisional attachment under Section 5(1) of the PMLA - opportunity of hearing / principles of natural justice in adjudication - adjudication and claim by third parties under Section 8 of the PMLA - exhaustion of alternate statutory remedy - appeal under Section 26 of the PMLA - exception to exhaustion rule where principles of natural justice are violated

Provisional attachment under Section 5(1) of the PMLA - opportunity of hearing / principles of natural justice in adjudication - Validity of the provisional attachment order and whether prior notice or opportunity of hearing is required before issuing a provisional attachment under the PMLA. - HELD THAT: - The Court held that the power to pass a provisional attachment under Section 5(1) is exercisable when the authority has a "reason to believe" that any person is in possession of proceeds of crime and such proceeds are likely to be concealed or dealt with so as to frustrate confiscation proceedings. Section 5(1) does not contemplate prior notice or an opportunity of hearing before issuance of the provisional attachment; therefore the contention that rules of natural justice require prior notice at the stage of provisional attachment was rejected. The Court observed that "reason to believe" suffices for forming the opinion necessary to invoke provisional attachment and noted that the statutory scheme provides separate adjudicatory processes for claims concerning the property. [Paras 6, 11]

Provisional attachment upheld as not vitiated for lack of prior notice; no requirement of prior opportunity at the stage of provisional attachment under Section 5(1).

Adjudication and claim by third parties under Section 8 of the PMLA - exhaustion of alternate statutory remedy - appeal under Section 26 of the PMLA - exception to exhaustion rule where principles of natural justice are violated - Whether the writ petitions are maintainable before the High Court without first availing the statutory appellate remedy under the PMLA. - HELD THAT: - The Court emphasised the principle that when an efficacious alternative statutory remedy exists, ordinarily a writ under Article 226 should not be entertained. The statutory adjudicatory and appellate mechanism under the PMLA (including the appeal under Section 26) must be availed of by an aggrieved person, and the High Court will not ordinarily usurp the functions of the appellate authority by re-examining merits or evidence. Exceptional intervention by writ is confined to cases of gross injustice, abuse of process, or proven violation of fundamental principles of natural justice. Applying these principles, the Court held that the petitioner had not shown such exceptional circumstances and therefore should approach the appellate authority; the adjudicating authority and appellate forum are to be trusted in the normal course. [Paras 12, 13, 14]

Writ petitions are not maintainable in the absence of exhaustion of the statutory appellate remedy; petitioner is at liberty to prefer an appeal under Section 26, which shall be considered on merits.

Final Conclusion: Writ petitions dismissed; the petitioner is directed to prefer an appeal under Section 26 of the PMLA and the same shall be decided on merits in accordance with law; no order as to costs.

Reimbursable expenses excluded from taxable value - Valuation under Rule 5(1) - scope regarding reimbursed costs - Service tax on cost of spares reimbursed for warranty services - Sale of spares subject to VAT not exigible to service tax

Reimbursable expenses excluded from taxable value - Valuation under Rule 5(1) - scope regarding reimbursed costs - Sale of spares subject to VAT not exigible to service tax - Whether the cost of spares and accessories reimbursed by the manufacturer for free warranty services must be included in the taxable value for levy of service tax. - HELD THAT: - The Tribunal applied the principle in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. that reimbursable expenses cannot be included in the taxable value. It noted that the period in question predates the amendment to Section 67 and therefore the earlier ratio applies. The Tribunal also relied on its precedent in ABT Ltd. and on its own subsequent decision for later periods, which held that where spare parts are in fact sold on payment of VAT and reimbursement is made by the manufacturer for parts supplied during warranty/extended warranty, those amounts are not to be treated as consideration for taxable service. Given that the spares were dealt with as sales subject to VAT and that the payments by the manufacturer were reimbursements for such parts used during free warranty services, the amounts could not be included in the taxable value under Rule 5(1). Applying these legal principles to the facts before it, the Tribunal concluded that the demand for service tax on reimbursed cost of spares was not sustainable. [Paras 7, 8, 11]

Demand of service tax on cost of spares reimbursed by the manufacturer for free warranty services set aside; appeal allowed with consequential reliefs.

Final Conclusion: Applying the Supreme Court ratio that reimbursable expenses are not includible in taxable value and following Tribunal precedents, the impugned demand for service tax on spares reimbursed during warranty is unsustainable; the order is set aside and the appeal is allowed with consequential reliefs.

Applicability of Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - Exclusion of capital goods credit and services specified in Rule 6(5) from the 20% ceiling - Standard for invoking extended period of limitation - requirement of positive evidence of suppression - Requirement of consistency in departmental adjudication where department had prior knowledge

Applicability of Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - Exclusion of capital goods credit and services specified in Rule 6(5) from the 20% ceiling - Whether the 20% ceiling under Rule 6(3)(c) applies to CENVAT credit availed on capital goods and to credit in respect of the 17 input services specified in Rule 6(5). - HELD THAT: - The Tribunal accepted the appellant's contention, following the Principal Bench in M/s. Idea Cellular Ltd., that the 20% ceiling under Rule 6(3)(c) must be compared only with credit other than capital goods credit and credit in respect of the 17 input services under Rule 6(5). Sub rule (4) permits capital goods credit unless capital goods are exclusively used for exempted services, and sub rule (5) permits credit for the specified services unless they are used exclusively for exempted services. The Board Circular relied upon by the Principal Bench was held to support the proposition that capital goods credit and Rule 6(5) service credit are not subject to the 20% utilization ceiling; the restriction applies only to inputs and input services not covered by Rule 6(5). The Commissioner had himself recorded awareness of the appellant providing both taxable and exempted services and did not rebut the availability of the exclusion; hence the denial of benefit for lack of supporting evidence was not sustained. [Paras 10, 11, 12, 13]

The 20% ceiling in Rule 6(3)(c) does not apply to credit on capital goods and to the 17 input services specified in Rule 6(5); such credit could be fully utilized unless shown to be exclusively used for exempted services, and the demand on that basis was unsustainable.

Standard for invoking extended period of limitation - requirement of positive evidence of suppression - Requirement of consistency in departmental adjudication where department had prior knowledge - Whether the demand could be sustained by invoking the extended period of limitation based on alleged suppression by the appellant. - HELD THAT: - The Tribunal held that invocation of the extended period requires proof of something positive beyond mere inaction or failure to disclose; mere allegation of suppression without documentary evidence is insufficient. The Commissioner's own findings recorded that the Department was aware of the appellant's provision of both taxable and exempted services and of credit utilisation reflected in returns, yet the adjudication adopted inconsistent positions across two show cause notices without documentary justification. In view of absence of positive evidence of deliberate suppression and the Department's prior knowledge, the extended period could not be invoked. [Paras 11, 14]

The demand confirmed by invoking the extended period of limitation could not be sustained for lack of positive evidence of suppression and because the Department had prior knowledge; the demand was barred on limitation grounds.

Final Conclusion: The appeal is allowed: the demand confirmed in the impugned order is set aside both on merits (since the 20% ceiling does not apply to capital goods credit and Rule 6(5) services) and on limitation (extended period not invokable in absence of positive evidence of suppression and given departmental awareness).

Limitation for filing appeal under section 85(3A) of the Finance Act, 1994 - power to condone delay under the proviso to section 85(3A) - service of order and date of receipt for computing limitation - entitlement to admission of appeal where departmental records establish later date of receipt - remand for fresh decision on merits by Commissioner (Appeals)

Limitation for filing appeal under section 85(3A) of the Finance Act, 1994 - service of order and date of receipt for computing limitation - power to condone delay under the proviso to section 85(3A) - Whether the appeal before the Commissioner (Appeals) was barred by limitation and properly rejected as time barred. - HELD THAT: - The Tribunal examined the applicability of the two month limitation in Section 85(3A) computed from the date of receipt of the adjudicating authority's order and the limited power of the Commissioner (Appeals) to admit an appeal beyond two months only for an additional one month on satisfaction of 'sufficient cause'. Departmental communications produced during the appeal process established that the impugned order dated 16.01.2018 was actually received by the appellant on 21.12.2018. The appeal was filed on 11.02.2019, which falls within two months from 21.12.2018. Once the appellant had recorded the date of receipt in the ST IV form, the onus lay on the Department to controvert that date rather than to require the appellant to explain delay in receipt. On the material placed before it, the Tribunal found that the Commissioner (Appeals) erred in dismissing the appeal solely on the ground of being time barred beyond the period permissible under the proviso to Section 85(3A).

The Tribunal held that the appeal was filed within the statutory two month period computed from actual receipt on 21.12.2018 and that dismissal as time barred was incorrect.

Remand for fresh decision on merits by Commissioner (Appeals) - Whether the matter should be restored for adjudication on merits by the Commissioner (Appeals). - HELD THAT: - Having found the dismissal for limitation to be unsustainable, the Tribunal set aside the Commissioner (Appeals)'s order and remitted the appeal for fresh adjudication on merits. The Tribunal directed that the Commissioner (Appeals) decide the appeal expeditiously, given the age of the matter. No decision was made by the Tribunal on the substantive merits of the appeal; those aspects are left to be considered afresh by the Commissioner (Appeals).

Impugned order set aside and the appeal remitted to the Commissioner (Appeals) for fresh decision on merits.

Final Conclusion: The dismissal of the appeal by the Commissioner (Appeals) as time barred was set aside because departmental records established receipt of the order on 21.12.2018 and the appeal filed on 11.02.2019 was within two months; the matter is remitted to the Commissioner (Appeals) to decide the appeal on merits expeditiously.

Reversal of Cenvat credit treated as credit not availed - application of Rule 6(3A) of the Cenvat Credit Rules, 2004 - allocation and reversal of credit on common inputs/services - distinction between full reversal and proportional reversal of credit

Reversal of Cenvat credit treated as credit not availed - application of Rule 6(3A) of the Cenvat Credit Rules, 2004 - distinction between full reversal and proportional reversal of credit - Whether complete reversal of Cenvat credit on common inputs/services relieves the assessee from liability to reverse amounts under Rule 6(3A)(ii) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal examined the factual position that the appellants had reversed the entire Cenvat credit taken on common inputs and services. It noted consistent precedent holding that where entire credit is reversed it is to be treated as though the credit was not availed. The Tribunal distinguished authorities relied on by Revenue (notably Lally Automobiles) as addressing proportional reversal and the methodology for quantifying partial reversal, which is not analogous to the facts here involving full reversal. Applying the ratio of the cited High Court and Tribunal decisions, and having regard to the complete reversal effected by the appellants, the Tribunal concluded that the adjudicating authority was correct in treating the reversed credit as not availed and in dropping the demand. [Paras 10, 11, 12]

The adjudicating authority's finding that complete reversal of credit obviated the requirement to reverse amounts under Rule 6(3A)(ii) is upheld; Revenue has not made out a case for interference.

Final Conclusion: The appeal is dismissed and the impugned order dated 15.01.2016, which dropped the demand after the appellants reversed the entire Cenvat credit, is upheld.

Exemption under Notification No. 12/2003-ST - Service tax on maintenance and repair services - Requirement of documentary proof for value of goods forming part of service - Penalty for failure to take registration under Section 77(1)(a) - Invocation of extended period for recovery of service tax - Deposit of collected service tax into Government account

Exemption under Notification No. 12/2003-ST - Requirement of documentary proof for value of goods forming part of service - Service tax on maintenance and repair services - Benefit of Notification No. 12/2003-ST was rightly denied to the appellant. - HELD THAT: - The lower authority and the Tribunal found that the appellant failed to produce documentary evidence (invoices or sale bills) specifically indicating the value of consumables or spare parts sold in relation to AMC/4C services. The notification grants exemption only to the extent of value of goods sold by the service provider where documentary proof specifically indicates that value. The appellant, engaged both in sales and in providing maintenance services, did not produce invoices or correlate VAT/sales tax documents to the AMC services and the contracts did not disclose a breakup of goods and services. In these circumstances, the Tribunal held that the essential condition for exemption was not satisfied and the benefit of the notification could not be allowed. [Paras 5]

Benefit of Notification No. 12/2003-ST denied for the period in question.

Penalty for failure to take registration under Section 77(1)(a) - Deposit of collected service tax into Government account - Penalty under Section 77(1)(a) was legally imposable but required modification to Rs. 10,000. - HELD THAT: - The Tribunal accepted that the appellant failed to obtain service tax registration and did collect service tax without depositing it to the Government account, thereby attracting penalty under Section 77(1)(a). While the amount computed by the authority was legally sustainable, the Tribunal considered the subsequent amendment in Finance Act, 2013 which caps the maximum penalty at Rs. 10,000. In the interest of justice and taking a lenient view in the facts of the case, the Tribunal restricted the penalty under Section 77(1)(a) to Rs. 10,000, noting that the appellant had obtained registration on 08.04.2009. [Paras 5]

Penalty under Section 77(1)(a) reduced and limited to Rs. 10,000.

Invocation of extended period for recovery of service tax - Deposit of collected service tax into Government account - Extended period for demand and imposition of penalties was rightly invoked. - HELD THAT: - The Tribunal observed that the appellant collected service tax from customers without registration, failed to file ST-3 returns and did not credit the collected tax to the Government account. The conduct, including entries in the P&L account showing service tax payable and minimal payments post-registration, evidenced non-compliance and justified invocation of the extended period and imposition of penalties. The Tribunal found the case laws cited by the appellant distinguishable on facts and therefore upheld the extended period invocation. [Paras 5]

Invocation of extended period upheld and penalties sustained (subject to modification of Section 77(1)(a) penalty).

Final Conclusion: The appeal is dismissed except that the penalty imposed under Section 77(1)(a) is modified and restricted to Rs. 10,000; other demands, invocation of extended period and penalties are upheld.

Exemption under Notification No. 89/95-CE - waste versus manufactured product - marketability and excisability of by-products - availment of exemption for by-products arising in course of manufacture - binding effect of judicial precedent

Exemption under Notification No. 89/95-CE - waste versus manufactured product - marketability and excisability of by-products - availment of exemption for by-products arising in course of manufacture - Denial of exemption under Notification No. 89/95-CE in respect of gums and recovered oil generated during manufacture of rice bran oil was held to be unsustainable. - HELD THAT: - The Tribunal found that the question whether by-products such as gums and recovered oil are to be treated as waste (entitling them to exemption under Notification No. 89/95-CE) or as distinct, marketable, excisable products has been authoritatively addressed by earlier decisions of the Tribunal. The Tribunal had earlier extended the benefit of the notification to similar by-products for a different period, and the Larger Bench decision in Ricela Health Foods Ltd. was relied upon. Further, the Supreme Court's dismissal of the Commissioner's appeal in the Marico Ltd. matter confirmed the principle that fatty acids, wax and gum arising in the course of manufacture of refined vegetable oil are waste and eligible for the notification. In view of these precedents and the settled legal position, the impugned findings that the by-products were distinct, marketable and excisable were rejected and the exemption held to apply.

Appeals allowed; orders of the Commissioner (Appeals) denying exemption set aside with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, applying settled precedent that by-products (gums and recovered oil) arising in the course of manufacture of refined edible oil are waste and entitled to exemption under Notification No. 89/95-CE, and set aside the impugned orders with consequential relief.

Provisional assessment - premature show cause notice - demand under proviso to Section 11A - finalisation of provisional assessment - non-retrospective application of interest on finalisation of provisional assessment - penalty under Rule 173Q(1)(a) - appropriation of amounts deposited under protest

Provisional assessment - premature show cause notice - finalisation of provisional assessment - Show cause notice issued under Section 11A before finalisation of provisional assessments - HELD THAT: - The Tribunal found that the clearances of the goods in the period were subject to provisional assessment under Rule 9B, as directed by the Assistant Collector and as reflected in the interim orders of the High Court; therefore the show cause notice dated 17.10.1988 issued prior to finalisation of those provisional assessments was premature. Following precedent and an analysis of Rule 9B, the Tribunal held that demands for duty or refunds arising from provisional assessments can be effected only after finalisation of the assessment; hence a demand under Section 11A based on a pre-finalisation show cause notice cannot be sustained. The Tribunal accordingly directed the authorities to finalise the provisional assessments and to appropriate amounts deposited under protest as required. [Paras 4]

Show cause notice under Section 11A issued without finalisation of provisional assessment was premature; provisional assessments to be finalised and amounts appropriated accordingly.

Demand under proviso to Section 11A - non-retrospective application of interest on finalisation of provisional assessment - penalty under Rule 173Q(1)(a) - Consequences of holding the show cause notice premature on demand, interest and penalty - HELD THAT: - Because the Tribunal held the show cause notice and consequent demand under Section 11A to be premature, it followed that the demand confirmed in the impugned order could not be sustained. The Tribunal further held that interest provisions applicable to demands arising on finalisation of provisional assessment were not in force for the relevant period and that the delegated rule introducing interest (Rule 7(4) of Central Excise (No.2) Rules, 2001) could not be applied retrospectively; reliance on post facto interest provisions was therefore impermissible. For the same reason, and because the principal demand under Section 11A was set aside, the penalty imposed under Rule 173Q(1)(a) was also set aside. The Tribunal also observed that the Commissioner (Appeals) relied on a High Court decision that had been reversed by the Supreme Court, which was not proper. [Paras 4]

Demand under Section 11A, interest and penalty set aside; interest provisions held not retrospectively applicable to the provisional-assessment period.

Final Conclusion: The appeal is allowed: the Tribunal set aside the demand confirmed under Section 11A, and the consequential demand for interest and penalty, as the show cause notice was premature pending finalisation of provisional assessments; authorities are directed to finalise the provisional assessments for September 1982 to March 1985 and appropriate amounts deposited under protest.

Finality of reassessment order - right to cross-examination of third party in reassessment proceedings - maintainability of review under statutory limitation - non-remand and its consequence for limitation under reassessment provisions - entitlement to refund pursuant to a final appellate order

Finality of reassessment order - maintainability of review under statutory limitation - non-remand and its consequence for limitation under reassessment provisions - Whether the reassessment order and the Tribunal's order became final because the department's application for review was time-barred, and whether Section 18 (two-year period for remand) is inapplicable where the Tribunal did not remand the matter to the Assessing Authority. - HELD THAT: - The Court examined the sequence of orders concluding that the Tribunal's decision dated 03.10.2012 held that cross-examination of the third party was warranted but did not remand the matter to the Assessing Authority. The statutory scheme permits an application for review to the Tribunal within one year, and the Tribunal may suo motu review within eight years. The Department filed an application for modification only on 09.01.2020, long after the one-year period had lapsed and after an inordinate delay of years; therefore the application for review is not maintainable as time-barred. Because the Tribunal did not remand the case back, Section 18 (which prescribes a two-year period for completing remanded proceedings) does not commence; there was no remand to trigger that limitation. Having found the review application materially delayed and the Tribunal order unremitted, the reassessment proceedings and the orders up to 19.12.2002 have attained finality. [Paras 17, 18]

The reassessment order and the Tribunal's order attained finality; the department's review application is time-barred and Section 18 is not attracted as no remand was made.

Entitlement to refund pursuant to a final appellate order - right to cross-examination of third party in reassessment proceedings - Whether the petitioner is entitled to refund of the amount demanded in the reassessment order together with statutory interest because the reassessment had been held violative of principles of natural justice and the impugned orders have attained finality. - HELD THAT: - The Tribunal had found that the reassessment was vitiated for failure to afford opportunity to cross-examine the third party and set aside the departmental orders. The High Court, on challenge by the State, dismissed the appeal without restoring the matter to the Assessing Authority. Given that the departmental application to review the Tribunal's order is time-barred and the reassessment orders stand concluded, the petitioner is entitled to restitution. In consequence of the finality of the orders and the Tribunal's finding that principles of natural justice were not observed, the Court directed refund of the demand reduced by appellate order along with statutory interest as per law. [Paras 17, 19]

Petitioner entitled to refund of the amount demanded pursuant to the appellate order dated 19.12.2002 together with statutory interest; writ petition allowed and respondents directed to refund the claimed amount.

Final Conclusion: Writ petition allowed. The Tribunal's order dated 03.10.2012 and consequent departmental proceedings have attained finality because the statutory period for review elapsed; no remand was effected to attract the two-year limitation. The petitioner is directed to be refunded the amount determined in the departmental order dated 19.12.2002 together with statutory interest.

Withdrawal or cancellation of exemption for non compliance with conditions of Rule 28A(11) of the HGST Rules, 1975 - application of the proviso to Rule 28A(11) where loss of production is due to circumstances beyond the control of the unit - entitlement to previously granted sales tax exemption and its forfeiture - judicial review of administrative remand and appellate orders in exemption cases

Withdrawal or cancellation of exemption for non compliance with conditions of Rule 28A(11) of the HGST Rules, 1975 - application of the proviso to Rule 28A(11) where loss of production is due to circumstances beyond the control of the unit - entitlement to previously granted sales tax exemption and its forfeiture - Whether the cancellation/withdrawal of the exemption certificate and the consequent demand were justified where the unit ceased production during the exemption period and claimed that cessation was due to factors beyond its control. - HELD THAT: - The Court examined the factual matrix including the grant of exemption for the period 14.8.1991 to 13.8.1998, the limited benefit actually availed by the assessee during that period, the findings of the authorities and the Tribunal, and precedents where loss owing to events beyond the unit's control attracted the protection of the proviso to Rule 28A(11). Noting that the assessee had availed only a small portion of the sanctioned exemption and that identical units in the market had also suffered loss of market due to structural changes (buyers starting their own units and vertical integration into woven fabrics), the Court found that the cessation of production during the exemption period could not be summarily treated as a deliberate violation attracting automatic forfeiture. The Court held that the circumstances as presented were within the ambit of reasons beyond the control of the unit and that the authorities' conclusion to cancel/withdraw the exemption and treat the benefit as forfeited was not sustainable on the facts. The Court therefore set aside the impugned administrative and appellate orders which had upheld the withdrawal/cancellation.

Impugned orders cancelling/withdrawing the exemption and denying relief were set aside on the finding that the unit's cessation of production fell within reasons beyond its control and the proviso to Rule 28A(11) applied.

Judicial review of administrative remand and appellate orders in exemption cases - Whether the orders of the assessing authority, the first appellate authority and the Tribunal dealing with the cancellation/withdrawal should be sustained. - HELD THAT: - The Court reviewed the sequence of orders including the assessing authority's computation, the treating of the matter as a remand, the appellate orders and the Tribunal's decision. Having concluded on the primary factual and legal question in favour of the assessee, the Court found no basis to sustain the impugned orders which had upheld cancellation/withdrawal. In consequence, the Court exercised its writ jurisdiction to set aside the orders dated 10.03.2003, 07.05.2010 and 09.11.2017 and remitted no further matter for fresh consideration.

Orders dated 10.03.2003, 07.05.2010 and 09.11.2017 were set aside and the writ petition was allowed.

Final Conclusion: The writ petition was allowed: the High Court set aside the orders cancelling/withdrawing the exemption certificate and the appellate and Tribunal orders upholding such cancellation, holding that the cessation of production fell within circumstances beyond the appellant's control under the proviso to Rule 28A(11) and thereby restoring the appellant's entitlement as found appropriate on the facts.