TaxTMI Updates e-Newsletter
Jun 01,2019

Grant of interim relief on application - placement before GST Council for consideration - consultative meeting with the Central Board of Indirect Taxes & Customs - invitation of the Ministry of Renewable Energy to consultative proceedings - service and acceptance of notice by respondents

Grant of interim relief on application - service and acceptance of notice by respondents - CM Application 26886/2019 allowed and notice accepted for respondents in the writ petition. - HELD THAT: - The Court allowed the interlocutory application subject to just exceptions and recorded acceptance of notice by counsel for Respondents No.1 and No.3. These procedural orders were entered to permit the main petition to proceed to consideration on merits and to ensure respondents are represented for further proceedings. [Paras 1, 2]

Interim application allowed subject to exceptions and notice accepted for respondents.

Placement before GST Council for consideration - consultative meeting with the Central Board of Indirect Taxes & Customs - invitation of the Ministry of Renewable Energy to consultative proceedings - directions for pre-consultation and administrative referral - The petition is to be placed before the GST Council for its consideration, following a consultative process with CBIC and, if necessary, the Ministry of Renewable Energy. - HELD THAT: - Observing that a related petition by another industry association was already before the GST Council, the Court directed that the present petition also be placed for consideration before the GST Council. If a pre-consultation with the petitioner has already occurred, the matter should be placed on the same date as the related petition; if not, the petitioner is to be called for a consultative meeting before the Central Board of Indirect Taxes & Customs within four weeks. The Court further directed that, if necessary, the Ministry of Renewable Energy be invited to the consultative meeting and that the deliberations of that meeting be placed before the GST Council. The petitioner is to be informed of the meeting particulars at least one week in advance. These directions amount to sending the matter to the administrative forum (GST Council) for consideration after prescribed consultations rather than disposing of the substantive claims on the writ petition. [Paras 3, 4]

Matter remitted to the GST Council for consideration after prescribed consultative steps with CBIC and, if required, the Ministry of Renewable Energy.

Procedural listing for completion of pleadings and further hearing - Dates were fixed for completion of pleadings and subsequent listing before the Court. - HELD THAT: - The Court ordered the petitions to be listed before the Registrar on 10th July 2019 for completion of pleadings and fixed a further hearing date before the Court on 6th August 2019. These directions organize the remaining judicial process pending administrative consideration by the GST Council. [Paras 5, 6]

Petitions to be listed on specified dates for completion of pleadings and further hearing.

Final Conclusion: Interim application allowed; the writ petition is directed to be placed before the GST Council for consideration after a consultative meeting with the Central Board of Indirect Taxes & Customs (and the Ministry of Renewable Energy if necessary), and the petitions are listed for completion of pleadings and further hearing on the dates directed by the Court.

Authorization of proper officer for refunds under the Delhi GST Act - disbandment of administrative committee - crediting of Central and State components of GST refunds - claim for interest under the CGST/DGST Act - judicial oversight of administrative compliance with court orders

Disbandment of administrative committee - authorization of proper officer for refunds under the Delhi GST Act - Disbandment of the Refund Approval Committee and appointment/authorization of a proper officer to sanction refunds above a specified value in accordance with the Delhi GST Act. - HELD THAT: - The Court recorded the undertaking of the Commissioner (VAT) that the Refund Approval Committee (RAC) would be disbanded and that a proper officer would be authorized by notification to deal with refunds above a stipulated value strictly in accordance with the provisions of the Delhi GST Act. The Commissioner undertook to place, by affidavit on the next date, the steps taken to effect this change in procedure. The Court accepted this administrative undertaking as the operative remedy to ensure conformity with statutory procedure.

The RAC is to be disbanded and a proper officer authorized for high-value refunds; the Commissioner will file an affidavit detailing the steps taken.

Judicial oversight of administrative compliance with court orders - crediting of Central and State components of GST refunds - Ensuring that refunds processed result in actual credit to the petitioners' accounts, including both State and Central components, and examination of delay or partial disbursement. - HELD THAT: - The Court noted that refund orders in the petitioners' cases had been issued but that petitioners reported non-credit of amounts and, in some cases, release only of the State component. The Commissioner undertook to examine why the RAC had deferred proceedings and to call for an explanation from the concerned officer. The Central Government's counsel gave an assurance that where orders for the Central component had been passed, the amounts would be credited to the petitioners before the next date. The Court thus directed respondents to examine and rectify non-credit or partial disbursement and to place steps taken on record.

Respondents to examine and rectify non-credit or partial release of refund components; Central Government to ensure credit of Central component before the next date.

Claim for interest under the CGST/DGST Act - Petitioners permitted to file affidavits claiming interest in terms of the DGST/CGST Act in the facts and circumstances of these cases. - HELD THAT: - The Court allowed the petitioners to file affidavits explaining their claims for interest under the DGST/CGST Act and directed that such affidavits be filed at least one week prior to the next hearing to enable respondents to respond. This procedural direction enables adjudication of interest claims on the basis of material placed by the parties and does not decide the merits of any particular interest claim.

Petitioners may file affidavits claiming interest under the DGST/CGST Act; affidavits to be filed at least one week before the next date to permit response by respondents.

Final Conclusion: The Court recorded administrative undertakings: the RAC will be disbanded and a proper officer authorized for high-value refunds with steps to be placed on affidavit; respondents must examine and ensure actual credit of both State and Central refund components (Central Government to ensure credit before the next date); petitioners may file affidavits claiming interest under the DGST/CGST Act, to be filed one week prior to the next hearing.

Maintainability of writ jurisdiction where an efficacious statutory appeal exists - statutory appeal remedy under Section 107 - release of seized goods on furnishing bank guarantee under Rule 140 of the U.P. GST Rules, 2017 - obligation of appellate authority to decide appeals by reasoned and speaking order after hearing

Maintainability of writ jurisdiction where an efficacious statutory appeal exists - statutory appeal remedy under Section 107 - High Court will not exercise writ jurisdiction to interfere with the penalty order because an efficacious alternative remedy by statutory appeal is available under Section 107. - HELD THAT: - The petitioner had challenged the penalty order before this Court despite having an appeal available under the statutory scheme. Applying the principle that writ jurisdiction should not be invoked where an effective alternative remedy exists, the Court held that the statutory appeal under Section 107 is efficacious and the petitioner can raise the same contentions there. The authority in appeal is directed to consider the pleas raised and pass a reasoned and speaking order after affording opportunity of hearing.

Writ petition not entertained on merits insofar as it challenges the penalty order; petitioner permitted to file appeal and have it decided by the appellate authority.

Obligation of appellate authority to decide appeals by reasoned and speaking order after hearing - If the petitioner files the statutory appeal within the time permitted by this Court, the appellate authority must decide the appeal within three weeks by a reasoned order after providing hearing. - HELD THAT: - The Court granted a limited time extension to file the appeal and imposed a timeline for disposal to ensure effective redress. The appellate authority is required to consider the submissions made in the appeal and render a speaking, reasoned decision in accordance with law within the stipulated period.

Petitioner allowed one week to file appeal; appellate authority directed to decide the appeal within three weeks thereafter by a reasoned order.

Release of seized goods on furnishing bank guarantee under Rule 140 of the U.P. GST Rules, 2017 - Seized goods/vehicle are to be released on the petitioner moving an application and furnishing a bank guarantee to the satisfaction of the authority under Rule 140. - HELD THAT: - The Court noted Rule 140 provides for release of goods on security and observed the respondents did not dispute that release in accordance with that Rule was permissible. The petitioner was directed to apply for release and, upon furnishing a bank guarantee acceptable to the authority, the competent authority was expected to complete the release within one week of the application.

Petitioner to move application for release; competent authority to release goods/vehicle on bank guarantee within one week of such application.

Final Conclusion: Writ petition disposed: writ challenge to penalty declined for want of jurisdiction in presence of statutory appeal; petitioner given one week to file appeal and appellate authority directed to decide it within three weeks; seized goods may be released on bank guarantee under Rule 140 within one week of the application.

Remand for reconsideration - limitation for initiation of penalty proceedings - setting aside impugned judgment - revival of interim order

Limitation for initiation of penalty proceedings - Section 67 of the KVAT Act - Writ petition to be reconsidered by the Single Judge on the ground that penalty proceedings were initiated beyond the time limit as contended by the petitioner. - HELD THAT: - The Court observed that the Single Judge omitted to consider the appellant's contention based on limitation in respect of notices proposing penalty under the KVAT Act and that the Government Pleader conceded this omission. In view of that conceded omission and the pendency of related writ appeals, the Court exercised its discretion to set aside the impugned dismissal and remand the writ petition for fresh consideration limited to grounds other than the constitutional challenge to Section 174 of the KSGST Act. The direction confines the Single Judge's fresh enquiry to the limitation issue and any other grounds raised in the petition except the validity of Section 174, which remains dependent on the outcome of pending writ appeals. [Paras 5, 6]

Matter remitted to the Single Judge for reconsideration on limitation and other grounds except the validity of Section 174.

Constitutional validity of Section 174 of the KSGST Act - Question as to the constitutional validity of Section 174 of the KSGST Act was not decided and is to await the outcome of pending writ appeals. - HELD THAT: - The Court expressly excluded the issue of the validity of Section 174 from the remit to the Single Judge, noting that that question will depend upon the decision in writ appeals pending before this Court. Accordingly, no adjudication was made on the constitutional challenge in the present proceeding. [Paras 6]

Validity of Section 174 reserved for determination in the pending writ appeals; not decided in this remand.

Revival of interim order - setting aside impugned judgment - Interim order in force at the time of dismissal of the writ petition shall stand revived and continue in force; impugned judgment is set aside. - HELD THAT: - Having set aside the Single Judge's dismissal and remitted the matter for reconsideration, the Court directed that the interim order which was operative on the date of dismissal be revived and remain in force pending fresh adjudication. The Court therefore restored the procedural status quo ante and vacated the earlier dismissal to enable the Single Judge to consider the specified grounds. [Paras 6, 7]

Impugned judgment set aside and the prior interim order revived and continued in force.

Final Conclusion: Impugned dismissal of the writ petition is set aside and the matter is remitted to the Single Judge for reconsideration on limitation and other grounds except the constitutional challenge to Section 174 of the KSGST Act; the interim order in force at the time of dismissal is revived and shall continue pending fresh adjudication.

Summary order. Liberty to approach the trial court for interim bail is granted.

Interim protection from coercive action - liberty to effect private service - issuance of notice and returnable date - obligation to cooperate with investigation

Issuance of notice and returnable date - liberty to effect private service - Notice to respondent Nos.1 and 2 was issued and the petitioner was granted liberty to effect private service; matter posted to a specified returnable date. - HELD THAT: - The Court, noting that notice had been served on counsel for respondent Nos.1 and 2 and that no one appeared for them, directed that notice be issued to respondent Nos.1 and 2 and made the matter returnable on the date fixed by the bench. The petitioner was expressly permitted to serve respondent Nos.1 and 2 by private service in accordance with the direction.

Notice issued to respondent Nos.1 and 2; matter posted to be heard on the notified returnable date; petitioner permitted to effect private service.

Interim protection from coercive action - obligation to cooperate with investigation - Ad interim relief granted restraining respondents from taking coercive action against the petitioner until the next date, subject to the petitioner's cooperation with the investigation. - HELD THAT: - Having observed that the same issue is raised in other petitions listed for hearing on the same date, the Court granted ad interim protection by directing that no coercive action shall be taken against the petitioner until the next date of hearing. This protection was made conditional on the petitioner cooperating with the investigation of the subject case, thereby balancing the interim restraint on enforcement with the investigatory interests of the respondents.

Respondents restrained from taking coercive action against the petitioner until the next date; petitioner directed to cooperate with the investigation.

Final Conclusion: Notice issued to respondent Nos.1 and 2 returnable on the appointed date; petitioner permitted to serve respondents by private service; interim restraint on coercive action granted until the next date, conditional on the petitioner cooperating with the investigation.

Failure to remit Tax Deducted at Source - Criminal liability under Section 276B - Deemed assessee in default and consequences under Section 201 - Interest liability under Section 201(1A) - Reasonable cause defence under Section 278AA - Binding effect and scope of departmental circulars/Standard Operating Procedure

Deemed assessee in default and consequences under Section 201 - Criminal liability under Section 276B - Whether prosecution under Section 276B can be sustained without prior adjudication and quantification of liability under Section 201. - HELD THAT: - The Court held that a person who fails to deduct or to pay tax deducted at source is, without prejudice to other consequences, deemed to be an assessee in default under Section 201 and that failure to remit within the prescribed period may independently attract prosecution under Section 276B. Relying on the reasoning in Madhumilan Syntex Ltd., the Court accepted that statutory requirement of timely payment creates a distinct default which can give rise to penal proceedings and that prosecution is not rendered nugatory by the existence of civil consequences under Section 201. Thus determination of penalty under Section 201 is not a precondition for initiating criminal prosecution under Section 276B where the material discloses non-remittance within the prescribed time and no real dispute on liability is pleaded. [Paras 11, 13, 14, 17]

Prosecution under Section 276B can be launched notwithstanding absence of prior adjudication/penalty under Section 201 where the facts prima facie disclose failure to remit TDS within the prescribed period.

Interest liability under Section 201(1A) - Deemed assessee in default and consequences under Section 201 - Whether delayed remittance accompanied by payment of interest (or quantification of interest under Section 201(1A)) precludes criminal prosecution. - HELD THAT: - The Court noted that Section 201(1A) imposes interest liability for delayed remittance but that payment of tax and interest after delay does not erase the statutory default if not made within the prescribed time. The Court observed the petitioners had not established that interest had been timely paid and that, on the material before it, the remittance occurred only after departmental survey and reminders. Consequently, the fact of subsequent payment did not immunize the petitioners from criminal proceedings for the earlier default. [Paras 12, 13, 17]

Payment of tax (and interest) after the prescribed time does not, by itself, preclude prosecution where there is prima facie default in timely remittance.

Reasonable cause defence under Section 278AA - Criminal liability under Section 276B - Effect of the defence of reasonable cause under Section 278AA on maintainability of prosecution. - HELD THAT: - The Court acknowledged that Section 278AA permits avoidance of punishment if the accused proves reasonable cause for failure, and that the onus of proving such defence lies on the accused. The Court held that allegations in the complaint were prima facie sufficient and that assertion of possible reasonable cause is a matter of defence to be established at trial; it does not justify quashing the prosecution at the threshold where material discloses default. [Paras 15, 16]

The availability of a reasonable-cause defence under Section 278AA does not bar initiation of prosecution; the burden to establish reasonable cause rests on the accused and is a matter for trial.

Binding effect and scope of departmental circulars/Standard Operating Procedure - Criminal liability under Section 276B - Whether reliance on the CBDT circular/SOP extending time for deposit (12 months or amended 60 days) absolves the petitioners of criminal liability or precludes prosecution. - HELD THAT: - While the Court accepted as a legal principle that departmental instructions may have bearing, it found no material before it showing the petitioners had complied with or relied upon the circular to make timely deposit. The Court further observed that the circular relied upon was not produced for scrutiny and, in any event, the prosecution case was that deposit was made only after departmental survey. The Court therefore concluded that on the facts before it the circular did not immunize the petitioners from prosecution and that claims based on such circulars are matters of fact and defence for trial. [Paras 5, 6, 18]

The departmental circular/SOP relied on by the petitioners does not, on the material before the Court, bar prosecution; applicability and effect of such circular is a factual question for trial.

Final Conclusion: The petition is dismissed. On the prima facie material placed before the Court the petitioners deducted TDS but failed to credit it within the prescribed period and therefore prosecution under Section 276B is maintainable; issues of interest, penalty, reasonable cause and the effect of departmental circulars are matters for trial and the observations in this order shall not influence the trial court.

Deduction under Section 80IA - enterprise engaged in developing, operating and maintaining infrastructure facility - Proviso to Section 80IA(4) extending benefit to transferee or contractor recognised by authority - qualification of subcontractor/recognised contractor for deduction - effect of retrospective amendment/explanation

Deduction under Section 80IA - qualification of subcontractor/recognised contractor for deduction - Assessee, though functioning as a sub contractor/recognised contractor, is entitled to deduction under Section 80IA for the years in question. - HELD THAT: - The Court applied its earlier decision in which it held that an enterprise recognised as transferee or contractor for development, operation and maintenance of an infrastructure facility attracts the first Proviso to Section 80IA(4) and is entitled to the deduction. The Tribunal's factual finding that the assessee was recognised to operate and maintain the railway sidings and had undertaken work of developing and operating the facility was accepted as unassailable. On that basis the status of being a subcontractor did not preclude the deduction when the assessee was the recognised contractor undertaking the relevant activities. [Paras 2]

The Tribunal was right to allow deduction under Section 80IA to the assessee despite its role as a subcontractor, and this conclusion is upheld.

Proviso to Section 80IA(4) extending benefit to transferee or contractor recognised by authority - effect of retrospective amendment/explanation - The Tribunal correctly applied the Proviso to Section 80IA(4) and there was no requirement of a direct contract with the specified authority where the assessee was a recognised transferee/contractor. - HELD THAT: - The Court held that the Proviso to Section 80IA(4) was intended to extend the deduction to a transferee or contractor recognised by the concerned authority, treating such transferee as if the transfer had not taken place, subject to conditions. The earlier decision accepted by the Court found that the assessee had been recognised by the Railways to operate and maintain the railway sidings; hence the absence of a direct contract between the assessee and the Railways did not disentitle it from the deduction. The Court distinguished the cited Covanta Samalpatti decision on facts and the absence of a similar proviso in the relevant clause there. [Paras 2]

Application of the Proviso to Section 80IA(4) in favour of a recognised transferee/contractor is correct and supports allowance of the deduction.

Enterprise engaged in developing, operating and maintaining infrastructure facility - requirement of contract with specified authority under Section 80IA(4) - The condition in Section 80IA(4) requiring a contract with the Central/State Government or specified authority was satisfied in substance by recognition of the assessee as transferee/contractor to develop, operate and maintain the infrastructure facility. - HELD THAT: - The Court accepted the Tribunal's factual finding that the railway sidings constituted an infrastructure facility within the Explanation and that the assessee, under agreement and by recognition, undertook development, operation and maintenance. The Proviso contemplates entitlement to the transferee or contractor recognised by the authority; therefore, a formal direct contract between the assessee and the specified authority is not an absolute prerequisite where recognition and assumption of the relevant obligations exist. [Paras 2]

The assessee satisfied the conditions of Section 80IA(4) through recognition as transferee/contractor and is entitled to the deduction.

Proviso to Section 80IA(4) extending benefit to transferee or contractor recognised by authority - transfer of infrastructure facility - The proviso's requirement regarding consequences of transfer does not preclude the assessee's claim where it was recognised as the transferee/contractor to operate and maintain the infrastructure facility. - HELD THAT: - The Court, following its earlier reasoning, held that the Proviso operates to treat the transferee or contractor as entitled to the deduction as if the transfer had not occurred, provided statutory conditions are fulfilled. The finding that the assessee was duly recognised by the Railways and had undertaken development and operation activities attracted the Proviso and rebutted the Revenue's contention that absence of transfer or lack of direct transfer document defeated the claim. [Paras 2]

Absence of a conventional transfer document did not defeat the assessee's entitlement under the Proviso; the assessee meets the proviso's requirements as recognised transferee/contractor.

Final Conclusion: The appeals filed by the Revenue are dismissed; the Tribunal's allowance of deduction under Section 80IA to the assessee for Assessment Years 2007-2008 and 2008-2009 is upheld in accordance with the Court's earlier decision.

Penalty under Section 271(1)(c) - Interdependence of penalty on deletion of quantum additions - Taxability in hands of the company - No question of law / absence of legal infirmity

Penalty under Section 271(1)(c) - Interdependence of penalty on deletion of quantum additions - Validity of penalty imposed under Section 271(1)(c) where the corresponding additions to income have been deleted by the Tribunal and upheld by the Court - HELD THAT: - The Tribunal deleted the additions made in the assessments and held that the income in question was taxable in the hands of the company. The CIT(A) quashed the penalty levied under Section 271(1)(c) on the ground that the foundational additions, which formed the basis for levy of penalty, had been deleted by the Tribunal. The High Court upheld the view that once the quantum additions have been deleted by the Tribunal (and those deletions have been judicially sustained), there remains no basis for sustaining the penalty imposed on that deleted income. The Court found no illegality or perversity in the concurrent findings of the CIT(A) and the Tribunal which led to deletion of the penalty. [Paras 5]

Penalty for the listed assessment years is not maintainable once the underlying additions are deleted; the deletion of penalty is upheld.

No question of law / absence of legal infirmity - Whether the revenue's appeals raised any question of law warranting interference - HELD THAT: - The Court examined the contentions of the revenue and concluded that no illegality or perversity was shown in the findings recorded by the CIT(A) and affirmed by the Tribunal. The determinations were factual and concurrent and did not disclose any question of law. Consequently, there was no ground for interference by the High Court. [Paras 6]

Revenue's appeals do not raise any question of law and are liable to be dismissed.

Final Conclusion: The appeals filed by the revenue are dismissed; the deletion of penalties for the assessment years 2006-07 and 2008-09, consequent upon deletion of the underlying additions, is upheld and no question of law arises.

Condonation of delay in refiling appeal - allowability of capital expenditure for computation of long-term capital gains - evidentiary value of quotations and absence of bills in substantiating renovation expenditure - proof of payment by account-payee cheque versus corroborative material - assessment and appellate scrutiny of deduction claims in income-tax proceedings

Condonation of delay in refiling appeal - Condonation of delay of 77 days in refiling the appeal was allowed. - HELD THAT: - The Court exercised its discretion to condone the delay of 77 days in refiling the appeal and proceeded to hear the substantive challenge to the Tribunal's order. The order records condonation without any indication that the delay raised a substantive jurisdictional bar to adjudication on merits. [Paras 1]

Delay of 77 days in refiling the appeal is condoned.

Evidentiary value of quotations and absence of bills in substantiating renovation expenditure - allowability of capital expenditure for computation of long-term capital gains - assessment and appellate scrutiny of deduction claims in income-tax proceedings - The claim for renovation/repair expenditure of Rs. 10,31,906/- was rejected for want of proof; the tribunal and lower authorities correctly upheld the addition. - HELD THAT: - The assessee relied on an architect's quotation dated 26.6.1999 to establish renovation expenditure. The Assessing Officer, and subsequently the CIT(A) and the Tribunal, held that a quotation is not evidence of actual expenditure incurred, especially when original bills were not produced. Despite the assessee's claim of theft of bills and production of FIR, no bills of material or labour or other corroborative evidence were placed on record to substantiate that the expenditure was actually incurred before sale. The Tribunal noted absence of specification as to when and from whom the renovation was carried out and observed that the assessee failed to avail opportunities to substantiate the claim. On this basis, the courts sustained the disallowance of the claimed renovation expenditure. [Paras 6, 7, 8]

Addition of Rs. 10,31,906/- on account of renovation/repair expenditure is confirmed.

Proof of payment by account-payee cheque versus corroborative material - assessment and appellate scrutiny of deduction claims in income-tax proceedings - Claim of Rs. 5,00,000/- paid to contractor for renovation of newly purchased house was examined; only Rs. 1,00,000/- was accepted by the CIT(A) and the Tribunal upheld that limited acceptance. - HELD THAT: - The Assessing Officer doubted the assessee's claim that payments for renovation were made through account-payee cheques in the absence of supportive material. The contractor's statement under Section 131 recorded that only petty renovation and whitewashing costing about Rs. 90,000-95,000 had been done. The CIT(A) allowed Rs. 1,00,000/- and rejected the balance; the Tribunal found no substantive or corroborative material to disturb that conclusion. The appellate findings as to quantum accepted were not shown to be illegal or perverse. [Paras 6]

Only Rs. 1,00,000/- of the claimed Rs. 5,00,000/- was accepted; the balance disallowance was upheld.

Final Conclusion: The High Court, after condoning the delay, found no merit in the appeal and declined to interfere with the Tribunal's upholding of the Assessing Officer's and CIT(A)'s findings on disallowance of renovation/repair expenditures; no substantial question of law arises and the appeal is dismissed.

Advertising, Marketing and Promotion (AMP) expenses not constituting an international transaction in absence of an agreement or arrangement - Bright Line Test (BLT) inapplicable for characterising AMP spend as an international transaction - Burden on Revenue to establish existence of an international transaction before applying Chapter X adjustments - Medical Council of India (MCI) regulations govern medical practitioners only; CBDT circular cannot retrospectively enlarge their scope to pharmaceutical/medical-device companies - Block of assets / Written down value (WDV) principle for depreciation - depreciation allowable notwithstanding discontinuance of manufacturing activity - Non-compete payment treated as capital in nature with consequential depreciation admissible

Advertising, Marketing and Promotion (AMP) expenses not constituting an international transaction in absence of an agreement or arrangement - Bright Line Test (BLT) inapplicable for characterising AMP spend as an international transaction - Burden on Revenue to establish existence of an international transaction before applying Chapter X adjustments - Whether AMP expenses could be treated as an international transaction and subjected to transfer pricing adjustment - HELD THAT: - Following the coordinate-bench decision in the assessee's own case for an earlier year, the Tribunal held that AMP expenditure cannot be treated as an international transaction in the absence of any agreement, arrangement or understanding obliging the assessee to incur such spend for the benefit of the AE. The Tribunal applied the line of authority that the pre-condition for invoking Chapter X is establishment of an international transaction; mere incidental benefit to the AE is insufficient. The Bright Line Method was held inappropriate to create an international transaction by quantifying 'excessive' AMP spend, and the Revenue bears the burden to first show existence of a transaction and its disclosed price before any ALP determination under Section 92C can follow. Given the facts mirror those in the coordinate-bench ruling, the Tribunal decided the AMP-related grounds in favour of the assessee. [Paras 5]

Grounds 3 to 23 allowed; AMP expenses not treated as international transactions and TP adjustment deleted

Block of assets / Written down value (WDV) principle for depreciation - depreciation allowable notwithstanding discontinuance of manufacturing activity - Allowability of depreciation on building/plant & machinery where manufacturing operations had been discontinued - HELD THAT: - Adopting the coordinate-bench precedent in the assessee's own case, the Tribunal reiterated that once the block-of-assets concept applies, depreciation is to be allowed on the aggregate WDV of the block and individual assets lose separate identity for depreciation. Prior decisions in the assessee's case established that discontinuance of manufacturing did not preclude depreciation under the block regime. On this basis the Tribunal deleted the disallowance of depreciation made by the AO. [Paras 7]

Ground No. 24 allowed; disallowance of depreciation deleted

Medical Council of India (MCI) regulations govern medical practitioners only; CBDT circular cannot retrospectively enlarge their scope to pharmaceutical/medical-device companies - Whether convention / payments to doctors (alleged freebies) are disallowable under Explanation to section 37(1) by virtue of MCI regulations and CBDT Circular - HELD THAT: - Relying on the coordinate-bench ruling and relevant High Court decisions, the Tribunal held that MCI regulations are directed at medical practitioners and do not, by themselves, govern corporate entities such as pharmaceutical or medical-device companies. The CBDT circular, which sought to interpret the MCI amendment, cannot be used to retrospectively enlarge the regulatory reach over corporate taxpayers. Where the AO/DRP did not dispute genuineness of expenditure and no statutory prohibition applicable to the assessee was shown, the disallowance could not be sustained. Accordingly, the Convention/doctor-payment grounds were decided for the assessee. [Paras 10]

Grounds 25 to 42 allowed; disallowance of convention/doctor-related expenses deleted

Non-compete payment treated as capital in nature with consequential depreciation admissible - Admissibility of consequential depreciation on non-compete fee previously held capital in nature - HELD THAT: - The Tribunal, following its coordinate-bench decisions in the assessee's earlier years, admitted the additional ground and directed the AO to allow consequential depreciation on the non-compete payment that had earlier been held to be capital in nature. The coordinate precedents had mandated allowance of depreciation on such non-compete consideration as forming part of capital assets. [Paras 13]

Additional ground allowed; Assessing Officer directed to allow depreciation on the non-compete fee

Final Conclusion: Appeal partly allowed: transfer pricing adjustment on AMP expenses deleted; disallowance of depreciation on block assets deleted; disallowance of convention/doctor-related expenses deleted; consequential depreciation on non-compete fee admitted and directed to be allowed; consequential and interest/penalty grounds dismissed as consequential.

Charitable purpose - Proviso to section 2(15) concerning activities in the nature of trade, commerce or business for a fee - exemption under section 11 - rule of consistency (Radhasoami Satsang) - assessment and accreditation activities incidental to education

Charitable purpose - Proviso to section 2(15) concerning activities in the nature of trade, commerce or business for a fee - exemption under section 11 - rule of consistency (Radhasoami Satsang) - assessment and accreditation activities incidental to education - Whether receipts of the assessee from fees/subscriptions are hit by the Proviso to section 2(15) and thereby disentitle the assessee to exemption under section 11 for AY 2013-14. - HELD THAT: - The Tribunal examined the assessee's objects and activities of assessing, grading and accrediting technical and professional institutions and found these activities to be incidental to education and directed to promoting academic environment, teaching quality and advancement of knowledge. The record showed no change in aims or activities from the preceding year (AY 2012-13) when exemption under section 11 was allowed. The AO did not place any material on record to demonstrate that the assessee was carrying on activities in the nature of trade, commerce or business with a profit motive or that the receipts fell within the Proviso to section 2(15). Applying the rule of consistency as articulated in Radhasoami Satsang, and noting that the accreditation work was undertaken in accordance with statutory norms (AICTE framework) and without an element of profit, the Tribunal held that the First Proviso to section 2(15) was not attracted and the exemption under section 11 was rightly granted by the CIT(A). [Paras 8, 10, 11, 12, 13]

Tribunal dismissed the Revenue's appeal and upheld the grant of exemption under section 11 for AY 2013-14; the Proviso to section 2(15) was held not applicable to the assessee's receipts from fees/subscriptions.

Final Conclusion: Appeal of the Revenue dismissed; exemption under section 11 sustained for AY 2013-14 as the assessee's accreditation and related receipts were held charitable and not hit by the Proviso to section 2(15). The assessee's cross-objection is dismissed as infructuous.

Exemption under section 54EC - time limit of six months for investment - condonation of delay due to non availability of bonds - availability of REC Bonds - cap on investment in a financial year

Exemption under section 54EC - time limit of six months for investment - condonation of delay due to non availability of bonds - availability of REC Bonds - Allowability of deduction under section 54EC in respect of second tranche of investment of Rs. 50 lakh made after the six month period - HELD THAT: - The Tribunal examined factual material showing that the assessee transferred the capital asset on 19th December 2006 and was required to invest within six months i.e., by 18th June 2007. The assessee invested Rs. 50 lakh on 31st March 2007 but could not invest the balance Rs. 50 lakh within the six month window because REC Bonds were issued with a per person cap of Rs. 50 lakh for the Series available up to 31st March 2007 and fresh Series were not available until 2nd July 2007. The Tribunal accepted that it was impossible for the assessee to invest more than Rs. 50 lakh during the first availability window and that non availability of bonds thereafter made timely investment impossible. Relying on the jurisdictional High Court decision cited by the assessee and applying the principle that an assessee cannot be penalised for an impossibility beyond its control, the Tribunal condoned the delay and held the second tranche eligible for deduction under section 54EC. [Paras 7, 8]

Deduction under section 54EC in respect of the second tranche of Rs. 50 lakh is allowable as delay is excused by non availability of REC Bonds; entire claimed amount of Rs. 1 crore is allowable.

Cap on investment in a financial year - exemption under section 54EC - Whether investments spread over two financial years disentitle the assessee from claiming deduction under section 54EC - HELD THAT: - The Tribunal construed the statutory scheme and its proviso to conclude that the statutory cap operates with reference to the amount that may be invested in a particular financial year and does not bar claiming deduction where investments exceeding the per year limit are made across two financial years. The Tribunal found no embargo in section 54EC against claiming exemption when investments are spread over two financial years and held the decisions relied upon by the assessee to support this construction. [Paras 8]

No bar to claim deduction under section 54EC even if investments are made across two financial years; the per year cap does not defeat the exemption.

Verification of TDS credit - Claim of TDS credit disallowed by Assessing Officer - direction for verification - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) in earlier proceedings had directed the Assessing Officer to give credit for TDS as per law. The assessee's additional ground challenging disallowance of claimed TDS was admitted, but the Tribunal found it appropriate to remit the matter to the Assessing Officer to verify the claim and the TDS certificate and to grant credit in accordance with law based on the facts and materials on record. [Paras 10]

Issue restored to the Assessing Officer for verification of TDS claim and grant of credit as per law; additional ground allowed for statistical purposes.

Final Conclusion: Appeal partly allowed: deduction under section 54EC in respect of the full Rs. 1 crore upheld (delay in second tranche condoned due to non availability of REC Bonds and investments across two years permitted); the TDS claim remitted to the Assessing Officer for verification and grant of credit as per law.

Income from house property - Annual value - Owner - Stock-in-trade - Completion/occupancy certificate requirement - Legislative intent of section 23(5) regarding stock-in-trade

Income from house property - Owner - Stock-in-trade - Completion/occupancy certificate requirement - Annual value - Whether deemed annual value of finished apartments held in closing inventory for AY 2011-12 could be taxed as income from house property in the hands of the assessee - HELD THAT: - The Tribunal held that the charge under the head 'Income from house property' applies only where the assessee is the 'owner' of a property capable of being let. On the facts the assessee was an SPV/developer appointed under a development scheme to construct and allot apartments to purchasers; the developer held completed apartments in trust for allottees and had executed allotment documentation and received substantial consideration, thereby vesting in the allottees vested rights of specific performance and right to obtain conveyance. Consequently the assessee could not be regarded as the 'owner' of the allotted apartments for the purposes of Chapter IV-C. Further, the property lacked a completion/occupancy certificate from the competent authority until 01.07.2015, and without such certificate the units were not legally habitable or capable of being let. The Tribunal noted the legislative recognition in sub-section (5) of Section 23 that where property held as stock-in-trade lacks a completion certificate the annual value is to be treated as nil for the relevant period, reinforcing that the absence of a completion/occupancy certificate precludes charging notional annual value. Applying these principles, the Tribunal deleted the addition of deemed notional annual value made for AY 2011-12. [Paras 9, 10, 11, 12, 13]

Addition of deemed notional annual value for AY 2011-12 deleted; assessee not taxable under head 'Income from house property' on the finished apartments held in inventory.

Income from house property - Stock-in-trade - Completion/occupancy certificate requirement - Annual value - Legislative intent of section 23(5) regarding stock-in-trade - Whether deemed annual value of finished apartments held in closing inventory for AY 2012-13 could be taxed as income from house property in the hands of the assessee - HELD THAT: - The Tribunal found the legal and factual issues for AY 2012-13 identical to those decided for AY 2011-12: the unsold apartments were held as stock-in-trade by a developer/SPV and the projects in question had not obtained completion/occupancy certificates from the competent authority during the relevant year (the completion certificate for the project in question was issued on 03.10.2016). Applying the same reasoning - that the developer was not the 'owner' for the purposes of Section 22 and that without a completion/occupancy certificate the property was not legally lettable, together with the legislative intent reflected in Section 23(5) - the Tribunal deleted the addition of deemed notional annual value for AY 2012-13. [Paras 14]

Addition of deemed notional annual value for AY 2012-13 deleted; assessee not taxable under head 'Income from house property' on the finished apartments held in inventory.

Final Conclusion: Both appeals for AY 2011-12 and AY 2012-13 allowed; additions of deemed notional annual value in respect of finished apartments held as stock-in-trade were deleted because the developer was not the 'owner' for purposes of income from house property and the units lacked completion/occupancy certificates rendering them not legally lettable.

Effect of deletion of additions in quantum appeal on penalty under section 271(1)(c) - penalty under section 271(1)(c) of the Income Tax Act, 1961 - ex parte disposal where assessee absent

Effect of deletion of additions in quantum appeal on penalty under section 271(1)(c) - penalty under section 271(1)(c) of the Income Tax Act, 1961 - Whether the penalty imposed under section 271(1)(c) survives after the additions on which it was based were deleted in the quantum appeal. - HELD THAT: - The Tribunal noted that the additions which formed the basis for imposition of penalty under section 271(1)(c) had been deleted by the Tribunal while deciding the assessee's quantum appeal. The Commissioner (Appeals), on perusal of the Tribunal's quantum order, held that the penalty would not survive in view of that deletion. The Revenue accepted that the additions had been deleted. Having regard to the uncontroverted factual position that the foundational additions no longer subsist, the Tribunal found no infirmity in the Commissioner (Appeals)'s conclusion that the penalty could not be sustained.

Penalty under section 271(1)(c) deleted; order of Commissioner (Appeals) upheld.

Final Conclusion: Appeal dismissed; the deletion of the additions in the quantum proceedings rendered the penalty under section 271(1)(c) unsustainable and the Commissioner (Appeals)'s order deleting the penalty is affirmed.

Ex parte dismissal for non-prosecution - penalty under section 271(1)(c) of the Income-tax Act - restoration of appeal for fresh hearing in the interest of justice - final opportunity to the assessee to substantiate its case - CIT(A) to decide the issue on merits

Ex parte dismissal for non-prosecution - restoration of appeal for fresh hearing in the interest of justice - final opportunity to the assessee to substantiate its case - CIT(A) to decide the issue on merits - Whether the appeal dismissed by the CIT(A) for non-prosecution should be restored and directed to be decided on merits with a final opportunity to the assessee in respect of levy of penalty under section 271(1)(c). - HELD THAT: - The Tribunal noted that the CIT(A) dismissed the appeal for non-prosecution relying on earlier judicial decisions but did not decide the matter on merits. Considering the totality of facts and in the interest of justice, the Tribunal exercised its power to restore the appeal to the file of the CIT(A). The Tribunal directed the CIT(A) to grant one final opportunity to the assessee to appear and substantiate its case and to decide the penalty issue as per fact and law. The assessee was warned that failure to appear would entitle the CIT(A) to pass an appropriate order in accordance with law. The grounds raised by the assessee were allowed for statistical purposes only. [Paras 5, 6]

The appeal is restored to the CIT(A) with directions to grant a final opportunity to the assessee and decide the penalty under section 271(1)(c) on merits; the appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the ex parte dismissal by the CIT(A), restored the appeal relating to Assessment Year 2005-06 for fresh consideration, and directed the CIT(A) to grant one final opportunity to the assessee and decide the penalty matter on merits; the appeal is allowed for statistical purposes.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - second proviso to section 40(a)(ia) - retrospective effect from 01.04.2005 - consequence where payee has already paid tax - payer's liability limited to interest on delay - remand to Assessing Officer for verification of payee's tax payment and CA certificates

Second proviso to section 40(a)(ia) - retrospective effect from 01.04.2005 - disallowance under section 40(a)(ia) for failure to deduct tax at source - consequence where payee has already paid tax - payer's liability limited to interest on delay - Whether the second proviso to section 40(a)(ia) applies retrospectively and, if the payee has paid tax on the receipt, whether the payer can be held liable to disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal observed that there are conflicting High Court views but that the weight of later authority supports retrospective operation of the second proviso to section 40(a)(ia) from 01.04.2005. The Tribunal relied on decisions accepting the retrospective effect and on the principle in Hindustan Coca Cola Beverages P. Ltd. v. CIT that where the payee has paid tax on the receipt, the payer/deductor's exposure is, at best, limited to interest for delay and no further disallowance should be sustained. Applying this legal principle, the Tribunal held that if the payee has in fact paid the requisite tax on the interest received, the payer cannot be subjected to disallowance under section 40(a)(ia). [Paras 9]

The Tribunal accepted the retrospective application of the second proviso and the proposition that payment of tax by the payee negates a disallowance under section 40(a)(ia), subject to verification.

Remand to Assessing Officer for verification of payee's tax payment and CA certificates - opportunity of hearing before adjudication - Whether the matter should be remitted for verification of the claim that the payee paid tax and for fresh adjudication. - HELD THAT: - The assessee produced Chartered Accountant certificates asserting that the payee (Tata Capital Housing Finance Ltd.) had offered the interest received to tax. The Tribunal found that these factual assertions required verification in order to apply the legal principle favourably to the assessee. Considering the ex parte nature of the CIT(A) order and the need for verification of documentary evidence, the Tribunal set aside the CIT(A) order and restored the matter to the file of the Assessing Officer with directions to verify the payee's tax payments and adjudicate the issue after affording the assessee a reasonable opportunity of hearing. [Paras 10]

The Tribunal remitted the matter to the Assessing Officer for verification of the payee's tax payment and directed fresh adjudication after affording opportunity of hearing.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(A) order and restored the matter to the Assessing Officer to verify whether the payee paid tax on the interest received (on the basis of CA certificates) and to decide the issue afresh after giving the assessee an opportunity of hearing, applying the view that the second proviso to section 40(a)(ia) operates retrospectively and that a payee's payment of tax negates disallowance under section 40(a)(ia) (subject to verification).

Penal proceedings under section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - recording of satisfaction for initiation of penalty - notice under section 274 - principles of natural justice

Penal proceedings under section 271(1)(c) - recording of satisfaction for initiation of penalty - notice under section 274 - principles of natural justice - Validity of the penalty imposed under section 271(1)(c) where the Assessing Officer did not specify which limb of section 271(1)(c) was invoked and did not record satisfaction for initiating penalty proceedings - HELD THAT: - The Tribunal held that the assessment order recorded additions but did not record the Assessing Officer's satisfaction as to whether penalty proceedings under section 271(1)(c) were being initiated for concealment or for furnishing inaccurate particulars, and the separate penalty notice under section 274 likewise failed to specify the limb relied upon. Reliance was placed on the Division Bench decision in CIT vs Manjunatha Cotton & Ginning Factory and the jurisdictional High Court decision in CIT vs Virgo Marketing (P) Ltd. , which establish that initiation and imposition of penalty under section 271(1)(c) must proceed on the same grounds and that the assessee must be put on notice of the specific limb so as to have an effective opportunity to meet the charge. The Tribunal found that omission to record satisfaction and to specify the ground caused prejudice to the assessee and offended principles of natural justice. On the facts of the case the Tribunal concluded that the AO had not properly assumed jurisdiction to levy the penalty and therefore the penalty could not be sustained. [Paras 5, 6, 8, 9]

Penalty levied under section 271(1)(c) quashed for failure to record satisfaction and for defective notice under section 274, resulting in prejudice to the assessee.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(c) is quashed due to non-recording of requisite satisfaction and defective notice, which deprived the assessee of a fair opportunity to defend the specific charge.

Export obligation period - Advance Authorization - Appendix-30A - Registered source - Discretion under paragraph 2.5 of FTP - Genuine hardship - Policy Relaxation Committee - Relaxation of policy

Export obligation period - Appendix-30A - Registered source - Applicability and duration of the export obligation period for the imports under the Advance Authorization in question. - HELD THAT: - The Court found that the petitioner cannot raise, as a new contention, that the export obligation (EO) period was thirty six months when no such contention was advanced before the Licensing Authority or the PRC. The Court examined the relevant policy materials and held that Appendix 30A to the Handbook prescribes a twelve months EO for the drugs in question from the date of clearance of each import consignment. Paragraph 4.22 confirms that EO shall be fulfilled within 36 months generally but where Appendix 30A specifies a period against an entry, that stipulated period applies and extensions are not available for those inputs. Thus, even assuming imports were from a registered source, the specific entry in Appendix 30A governing the drug controls and fixes the EO at twelve months from clearance of each consignment, not thirty six months. [Paras 16, 18, 19, 20]

The export obligation period applicable to the petitioner's imports was twelve months as stipulated in Appendix 30A; the plea that a thirty six months period applied is rejected.

Discretion under paragraph 2.5 of FTP - Genuine hardship - Policy Relaxation Committee - Relaxation of policy - Whether the PRC erred in refusing to grant further extension of the export obligation period under paragraph 2.5 of the FTP on the ground of genuine hardship. - HELD THAT: - Paragraph 2.5 of the FTP confers wide discretion on the DGFT to grant relaxation or exemption in cases of genuine hardship or adverse impact on trade, subject to consultation with the PRC for such matters. The Court clarified the scope of that discretion: normal commercial risks or vagaries do not amount to 'genuine hardship' warranting relaxation; the applicant must show circumstances beyond reasonable anticipation by a person engaged in the trade. Applying these principles to the facts, the Court observed there was no material demonstrating that the petitioner's inability to export within the stipulated period arose from circumstances amounting to genuine hardship. The petitioner had imported against Advance Authorization aware of the twelve months EO and, while commercial difficulties were possible, they do not suffice to qualify for policy relaxation to the extent sought (effectively three years). The Court further held that relaxation is not a matter of right and the PRC's decision to refuse further extension was neither perverse nor arbitrary. [Paras 22, 24, 25, 26, 27]

The PRC did not err in refusing to grant the extension; refusal to extend the EO period on the facts was lawful and not arbitrary.

Final Conclusion: The writ petition is dismissed: the Court upheld the PRC's decision refusing further extension of the export obligation period, ruled that the applicable EO for the relevant drug was twelve months as per Appendix 30A, and concluded that no 'genuine hardship' existed to justify exercise of paragraph 2.5 relaxation powers in the petitioner's favour.

Mandatory pre-deposit - restoration of appeal - verification of compliance by appellate tribunal - condonation of non-compliance in the interest of justice

Mandatory pre-deposit - restoration of appeal - condonation of non-compliance in the interest of justice - Restoration of the appellant's appeal before the CESTAT on condition of deposit of 20% of the penalty within eight weeks. - HELD THAT: - The court noted that an earlier order permitted deposit of a reduced amount (10% of the penalty) which the appellant failed to deposit, resulting in dismissal of the appeal by the CESTAT for non-compliance. Although the appellant's conduct in not complying was criticised, the court accepted the appellant's averment of severe financial constraint and willingness now to deposit the entire mandatory amount. Since the appeal was dismissed for procedural non-compliance and was not adjudicated on merits, the court exercised its discretion in the interest of justice to restore the appeal on the specified conditional deposit. This direction balances the statutory requirement of pre-deposit with the appellant's present offer and the need to decide the appeal on merits rather than by default. [Paras 3, 4, 5]

If the appellant deposits 20% of the penalty within eight weeks, the appeal shall stand restored.

Verification of compliance by appellate tribunal - restoration of appeal - Obligation of the CESTAT to verify compliance with the deposit condition and thereafter hear and dispose of the appeal on merits after due notice. - HELD THAT: - The court directed that upon deposit of the stipulated amount the CESTAT is to verify that the appellant has complied with the condition. After such verification and after giving due notice to the parties, the CESTAT must hear and dispose of the appeal having regard to the contentions of the parties in accordance with law. The order thereby confines the restoration to verification of compliance and mandates adjudication on merits by the tribunal rather than automatic reinstatement without scrutiny. [Paras 4, 5]

CESTAT shall verify compliance with the deposit condition and, after due notice, hear and dispose of the appeal on merits.

Final Conclusion: The appeal and connected applications are disposed of: the appeal will be restored if the appellant deposits 20% of the penalty within eight weeks; the CESTAT is directed to verify compliance and, after notice, hear and decide the appeal on merits.

Claim for refund of duty under Section 27 of the Customs Act - self-assessment - re-assessed bill of entry / order of assessment as a pre-condition for refund - exemption from countervailing duty subject to non availment of Cenvat credit - application of SRF Ltd. (2015) to imported goods

Claim for refund of duty under Section 27 of the Customs Act - self-assessment - re-assessed bill of entry / order of assessment as a pre-condition for refund - Whether re assessed bills of entry or an assessment order are a mandatory precondition for maintaining a refund claim under Section 27 after the 08.04.2011 amendment introducing self assessment. - HELD THAT: - The Tribunal examined the pre amendment and post amendment language of Section 27 and held that the erstwhile provision required refund claims to be in respect of duty "paid in pursuance of an order of assessment." The 08.04.2011 amendment, however, rewords Section 27 to permit any person who has "paid by him, or borne by him" duty to file a refund application in the prescribed manner within the limitation period. Consequently, where duty is paid under the self assessment regime there need not be an assessment order and a refund claim may be filed without having filed an appeal against a bill of entry. The Tribunal relied on and followed the reasoning of judicial authorities which have distinguished earlier Supreme Court decisions that were decided in the context of assessment orders, holding that post amendment the absence of a reassessment does not preclude maintenance of a refund claim. The Tribunal concluded that the Deputy Commissioner was not justified in rejecting the claims solely for want of re assessed bills of entry. [Paras 6]

Re assessed bills of entry or an assessment order are not a mandatory precondition to maintain a refund claim under the amended Section 27 where duty has been paid or borne under self assessment; rejection solely on that ground was unsustainable.

Exemption from countervailing duty subject to non availment of Cenvat credit - application of SRF Ltd. (2015) to imported goods - Whether the exemption condition requiring non availment of Cenvat credit is satisfied in respect of imported goods, in light of the Supreme Court's decision in SRF Ltd. - HELD THAT: - The Tribunal noted that the Supreme Court in SRF Ltd. interpreted a notification condition requiring that no Cenvat credit be taken, and held that the condition is fulfilled in the case of imported inputs because the Cenvat Credit Rules operate only where inputs are produced in India; therefore no question of availing Cenvat credit arises for imported goods. The Tribunal observed that this view was upheld on review and that the principle applies to the present facts where the respondents paid CVD at a higher rate but were eligible for concessional CVD under the notification subject to the non availment condition. The Tribunal treated SRF Ltd. as settling the issue that the exemption is available in respect of imported goods where the condition is thus satisfied. [Paras 6]

The condition of non availment of Cenvat credit is satisfied in respect of imported goods and the SRF Ltd. (2015) ratio applies; the exemption from CVD is available for such imports where the condition is met.

Final Conclusion: The Tribunal upheld the Order in Appeal dated 21.06.2018 and dismissed the Revenue's appeal as devoid of merit.

Oppression and mismanagement - validity of board resolutions and authority letters - effect of Memorandum of Understanding on post-resignation cooperation and authorization - power of attorney in favour of bank for sale/transfer of company property - effect of guarantor discharging company loan and consequent transfer of secured property - subjudice civil proceedings and forum bar to adjudication of title disputes

Oppression and mismanagement - Whether acts of oppression and mismanagement by respondents were established against the appellants and warranted relief under Section 421 of the Companies Act, 2013. - HELD THAT: - The Tribunal found that the petitioners failed to place material on record to establish alleged acts of oppression and mismanagement or the alleged siphoning of funds. The NCLT's reasoning, affirmed by the Appellate Tribunal, notes that the company had ceased operations after sale of machinery and that the only remaining property (plots) was the subject-matter of separate civil proceedings. Given absence of evidentiary foundation for the claimed conduct and the factual position that the company's affairs had effectively wound down, appointment of a managing committee or ordering an audit was unnecessary. The Appellate Tribunal accordingly upheld the NCLT conclusion that no relief under the oppression/mismanagement jurisdiction was called for. [Paras 47, 48, 79, 80]

Findings of no acts of oppression or mismanagement are affirmed and no relief under the petition is warranted.

Validity of board resolutions and authority letters - effect of Memorandum of Understanding on post-resignation cooperation and authorization - power of attorney in favour of bank for sale/transfer of company property - effect of guarantor discharging company loan and consequent transfer of secured property - Whether the challenged Board resolutions, authority letter, MOU(s), power of attorney and the conveyance/assignment in favour of the guarantor were forged or void and whether such documents supported transfer of the plots to the guarantor. - HELD THAT: - The Tribunal reviewed the MOU dated 16.11.2010 and observed the express undertaking by the ex-directors to cooperate in proceedings and execute documents where required; this fact undermined the appellants' contention that the authority letter and subsequent deed were forged. The Tribunal found the Board resolutions (including those dated 12.8.2010, 1.8.2012, 14.9.2012 and 15.10.2012) to bear the appellant's signature or otherwise to be in the appellant's knowledge; some were attested by a notary. The power of attorney given to the bank by the appellant and co-director was accepted as valid; when the bank could not locate a buyer, the guarantor (respondent No.3) paid the outstanding loan and the bank released title documents leading to transfer. The Appellate Tribunal held these documents not to be convincingly shown to be forged and treated the steps taken (payment by guarantor and consequent transfer) as legally effective in the circumstances, absent a prior discharge by the appellants. [Paras 29, 38, 41, 47]

The challenged resolutions, the MOU-based authorisations and the power of attorney/conveyance leading to transfer to the guarantor are not shown to be forged or invalid; the transfers consequent on repayment by the guarantor are treated as effective.

Subjudice civil proceedings and forum bar to adjudication of title disputes - Whether issues concerning certain resolutions, the MOU dated 15.02.2012 and the orders of the local authority (respondent No.10) relating to the mutation/transfer of plots could be adjudicated in the company petition or required adjudication in pending civil proceedings. - HELD THAT: - The Tribunal recorded that specific issues touching the validity of certain resolutions, the MOU dated 15.02.2012 (and related transfer applications) and the first order passed by respondent No.10 raised questions of title and transfer that were already the subject of civil proceedings. The NCLT had held, and the Appellate Tribunal accepted, that those matters are essentially for determination by the civil court where they are subjudice. Consequently, the company petition could not be used to decide those title/transfer questions which remain pending before the civil forum. [Paras 80]

Disputes concerning the identified resolutions, the MOU dated 15.02.2012 and respondent No.10's initial order are left to be decided in the pending civil proceedings (remitted/subordinate to the civil court).

Final Conclusion: The appeal is dismissed. The Appellate Tribunal affirms the NCLT's conclusion that no acts of oppression or mismanagement were proved, upholds the validity of the material Board resolutions, MOU-based authorisations, power of attorney and the transaction effectuated by the guarantor's repayment, and leaves title/transfer questions that are the subject of pending civil proceedings to be adjudicated by the civil court.

Oppression and mismanagement - illegal transfer of shares - rectification of the register of members - validity of share allotment - fiduciary duty of directors in a closely held/private company - binding effect of out of court settlement/arbitral award on pending company proceedings

Binding effect of out of court settlement/arbitral award on pending company proceedings - Whether the document dated 12.07.2015 should operate as an arbitral award/settlement to oust the Tribunal's jurisdiction and require dismissal of the company petition. - HELD THAT: - The Tribunal examined the document relied on by the respondents as an arbitral appointment and award and found that the formalities and terms of reference required by the Arbitration and Conciliation Act, 1996 were not followed and that the document could not be treated as an arbitral award binding upon all parties to the company petition. The appellate court agreed with the NCLT's reasoning that the document, at best, amounted to a compromise signed by some parties outside the Tribunal and was not sufficient to mandate disposal of the company petition in terms of that document. The Court therefore declined to treat the document as an arbitral award or as a binding settlement that would bar the Tribunal from adjudicating the contested corporate claims. [Paras 21, 40]

The dismissal of CA 255/2015 (challenge based on the alleged arbitration/settlement) is upheld; the alleged award/settlement does not bar the company petition.

Illegal transfer of shares - rectification of the register of members - fiduciary duty of directors in a closely held/private company - Whether the second transfer dated 24.05.2010 of 14,96,000 shares (recorded as transfer from Aar Kay to Dhuri) was valid, and what remedy follows if it was not. - HELD THAT: - Material on record showed that the shares stood in the name of Aar Kay on 19.05.2010. The transfer form dated 24.05.2010 bore signatures of directors who were common across the companies, but there was no Board resolution of the transferor company (Aar Kay) authorising the transfer, nor reliable contemporaneous authorisation by the transferee, and compliance certificates did not record any board meeting on that date. Given that the shares were property of the company (Aar Kay), their transfer required proper corporate authority; the presence of common directors did not substitute for the corporate approvals required. The appellate court agreed with the NCLT that the second transfer was not legally valid, but held that the correct consequence is to ignore the second transfer and direct rectification so that the shares are shown as standing in the name of Aar Kay with effect from 19.05.2010 (i.e., as if the disputed second transfer had never taken place). The Court declined to uphold ancillary directions of the Tribunal (such as writing off the alleged loan) as matters for the companies' auditors. [Paras 30, 40]

The second transfer dated 24.05.2010 is illegal; the register of members of AP Refinery shall be rectified to reflect 14,96,000 shares standing in the name of Aar Kay with effect from 19.05.2010 and the second transfer shall be ignored.

Validity of share allotment - fiduciary duty of directors in a closely held/private company - Whether the allotments of 3,50,000 shares (29.06.2011) and 4,00,000 shares (10.10.2012) by AP Refinery were valid. - HELD THAT: - The Tribunal declined to adjudicate these allotments on the ground that respondents had offered to make proportionate allotments; the appellate court found that there was no acceptance of that offer by all affected parties and that the Tribunal could not bypass deciding the legality of the allotments. On the merits, the Court examined the material including the Form 2s and board resolutions and found discrepancies between the copies filed with the Registrar and papers that later surfaced, absence of adequate disclosure to all shareholders, and no satisfactory justification for selective allotment without offering shares pro rata to existing shareholders. Applying the fiduciary obligations of directors in a closely held/private company to issue shares only for a proper purpose and with disclosure, the Court concluded that both the June 2011 and October 2012 allotments were not bona fide and were made in a manner that prejudiced the petitioners. [Paras 36, 40]

The allotments of 3,50,000 shares (29.06.2011) and 4,00,000 shares (10.10.2012) are illegal and are struck down.

Oppression and mismanagement - rectification of the register of members - Scope of the Tribunal's operative directions and consequential reliefs, and costs. - HELD THAT: - The appellate court accepted the Tribunal's finding that the conduct complained of attracted the provisions dealing with oppression and mismanagement but concluded that several of the Tribunal's specific operative directions (other than dismissal of CA 255/2015) could not be sustained in their recorded form. Consequently, the Court set aside the operative directions of the NCLT except the dismissal of CA 255/2015, ordered that any steps taken pursuant to the set aside directions be treated as void pending the appeals, directed rectification of the register as to the disputed shares and struck down the challenged allotments. The Court also awarded costs against certain respondent directors to the original petitioners. [Paras 40]

Operative directions of the NCLT except dismissal of CA 255/2015 are set aside; register rectification and striking down of allotments ordered; costs awarded against Respondents 3-5 to the original petitioners.

Final Conclusion: The appeal disposes both matters: CA 255/2015 dismissal is upheld; the second transfer of 14,96,000 shares recorded on 24.05.2010 is declared illegal and shall be ignored with the register of members rectified to show those shares as standing in the name of Aar Kay with effect from 19.05.2010; the allotments of 3,50,000 (29.06.2011) and 4,00,000 (10.10.2012) shares are held illegal and struck down; other operative directions of the NCLT are set aside and costs are awarded against specified respondents.

Resolution Plan approval under Section 31 - Maximisation of value of assets - Treatment of operational creditors vis-a -vis financial creditors - Liquidation value relevance in resolution - Committee of Creditors' commercial wisdom and voting - Power to modify an approved resolution plan - Implementation of resolution plan and change of management

Resolution Plan approval under Section 31 - Treatment of operational creditors vis-a -vis financial creditors - Liquidation value relevance in resolution - Maximisation of value of assets - Power to modify an approved resolution plan - Validity of the approved resolution plan and whether it conforms to the Code by maximising asset value and giving operational creditors treatment not less than liquidation value. - HELD THAT: - The Tribunal examined the valuation exercise, the CoC voting and the payments proposed under the plan. Although the CoC had approved the plan with requisite majority, the plan provided an upfront payment lower than the average liquidation value adopted by the CoC and resulted in discriminatory treatment of operational creditors compared to financial creditors. The Court applied the scheme and objectives of the I&B Code, including the requirement that resolution plans maximise asset value and balance stakeholders' interests, and followed precedents and regulatory amendments strengthening operational creditors' priority. Considering the shortfall between the upfront payment and the CoC-adopted average liquidation value, the Tribunal held that the plan, as approved, does not conform to the statutory mandate and directed that the successful resolution applicant must raise the upfront consideration to the average liquidation value so that distribution to financial and operational creditors is made on an equal percentage basis. The Tribunal while recognising the CoC's commercial wisdom also recorded that the Adjudicating Authority and appellate forum may require modification of a plan to bring it into conformity with the Code. [Paras 37, 41, 42, 46, 47]

Approval of the resolution plan set aside unless the resolution applicant increases the upfront payment to the CoC-adopted average liquidation value by depositing the additional amount within 30 days; on deposit the plan will stand validated with distribution as directed; failure will lead to the approval being treated as set aside and the Adjudicating Authority to proceed as per law.

Implementation of resolution plan and change of management - Power to modify an approved resolution plan - Maximisation of value of assets - Whether the resolution applicant could take over possession and effect change in management prior to complying with the modification ordered and whether authorities should be directed to assist in taking possession. - HELD THAT: - The Tribunal held that because the plan was ordered to be modified to comply with the Code, the resolution applicant could not take over the corporate debtor until it complied with the deposit direction. The Tribunal directed that in the interim the resolution professional should take physical possession of the plant, premises and assets to preserve them, and that the Adjudicating Authority may direct the District Collector and Superintendent of Police to assist the resolution professional in taking and maintaining possession pending compliance. On successful compliance by the resolution applicant within the prescribed period, the Adjudicating Authority would permit the resolution applicant to take over possession; failure to comply would render the approval set aside and invite appropriate orders by the Adjudicating Authority. [Paras 54, 55, 56]

Until the resolution applicant complies with the Tribunal's modification and deposit directions, it cannot take over the corporate debtor; the resolution professional shall take possession and the Adjudicating Authority may direct executive assistance to preserve assets; on compliance the resolution applicant may be permitted to take over, otherwise the approval shall be treated as set aside.

Final Conclusion: The appeals are disposed by directing modification of the approved resolution plan: the successful resolution applicant must raise the upfront payment to the CoC-adopted average liquidation value by depositing the additional sum within 30 days, failing which the approval will be set aside; until compliance the resolution applicant cannot take over the corporate debtor, the resolution professional shall take and preserve possession with executive assistance, and on compliance the plan implementation shall proceed as directed.

Doctrine of unjust enrichment - refund of duty paid under protest - evidentiary value of CA certificate - balance sheet treatment as advances recoverable - disbursement of refund with interest

Doctrine of unjust enrichment - evidentiary value of CA certificate - Whether the doctrine of unjust enrichment barred the refund claim - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s finding that the appellant paid the excise duty under protest and produced CA certificates which certified that the incidence of the duty was not passed on to customers but borne by the appellant. The Commissioner (Appeals) examined the CA certificates and relied upon them, together with the audited balance sheet disclosures, to conclude that there was no evidence of recovery of the duty from buyers; consequently the doctrine of unjust enrichment did not apply. The Revenue did not challenge the appreciation of these financial records or the CA certificate before the Tribunal and offered no contrary material to displace the findings recorded by the Commissioner (Appeals). [Paras 3, 4]

The doctrine of unjust enrichment is not attracted and the refund claim is not barred on that ground.

Refund of duty paid under protest - balance sheet treatment as advances recoverable - disbursement of refund with interest - Whether the Commissioner (Appeals) rightly allowed the refund claim on the basis of the accounts and directed disbursement - HELD THAT: - The Commissioner (Appeals) found the amount claimed as refund reflected in the audited balance sheet under Current Assets - Loans and Advances and specifically shown as advances recoverable, with a sub-head indicating duty payment under protest. The Tribunal found no merit in Revenue's contention and no material disputing the financial disclosures; on that basis it affirmed the Commissioner (Appeals)'s conclusion that the refund was due. The Tribunal accordingly dismissed the Revenue's appeal and directed that the adjudicating authority disburse the refund with interest as per rules within a stipulated period. [Paras 3, 4]

The Commissioner (Appeals) correctly allowed the refund based on the accounts and CA certification; the Revenue's appeal is dismissed and the refund is to be disbursed with interest.

Final Conclusion: The Revenue's appeal is dismissed. The Commissioner (Appeals)'s allowance of the refund claim is affirmed on the findings that the duty was paid under protest and not passed on to customers; the adjudicating authority is directed to disburse the refund with interest within 60 days.

Input service - Cenvat Credit - refund of service tax - export of services - renting of immovable property service - debit note compliance with Rule 4A

Input service - Cenvat Credit - refund of service tax - air travel agent service - Entitlement to refund of service tax (Cenvat credit) in respect of Air Travel Agent Service used for official travel. - HELD THAT: - The Tribunal found that Air Travel Agent Service, being availed for official travel of employees (site visits, interviews, etc.), falls within the scope of the definition of input service under the Cenvat provisions and, therefore, the appellant is entitled to the benefit of refund of service tax paid on such input service. The conclusion rests on the application of the definition of input service to the facts that the service was used for business purposes and in the provision of the appellant's output services, which were exported. [Paras 5]

Refund allowed in respect of Air Travel Agent Service and Cenvat credit accepted.

Input service - Cenvat Credit - refund of service tax - membership of club & association service - Entitlement to refund of service tax (Cenvat credit) in respect of Membership of Club or Association service paid to bodies like CII and IMA for business requirements. - HELD THAT: - The Tribunal held that membership subscriptions paid to business bodies (such as CII and IMA) for meeting business requirements are not excluded as recreational facilities and therefore constitute input service. Consequently, the appellant is entitled to refund of service tax paid on such services, since the subscriptions were for business purposes and not for providing recreational facilities to employees. [Paras 5]

Refund allowed in respect of Membership of Club or Association service and Cenvat credit accepted.

Input service - Cenvat Credit - refund of service tax - rent-a-cab service - Entitlement to refund of service tax (Cenvat credit) in respect of Rent-a-Cab Service availed for the period prior to April 2011. - HELD THAT: - Applying the un-amended definition of input service (effective up to 31.03.2011), the Tribunal held that Rent-a-Cab Service availed during the pre-April 2011 period qualifies as input service. On that basis the appellant is entitled to the refund of service tax paid on such service as Cenvat credit. [Paras 5]

Refund allowed in respect of Rent-a-Cab Service and Cenvat credit accepted.

Renting of immovable property service - Cenvat Credit - refund of service tax - Entitlement to refund of service tax (Cenvat credit) in respect of Renting of Immovable Property Service where the service provider was registered and had paid service tax. - HELD THAT: - The Department had denied refund on the ground that the services related to electricity charges on the rented premises. The Tribunal observed that the service provider was registered with the Service Tax Department and had paid tax on the relevant entry (renting of immovable property service), and the Department had not objected to the provider's levy. Since the tax had been accepted at the provider's end, the recipient cannot be denied Cenvat credit on the ground of non-levy; the recipient is entitled to avail credit of service tax paid by the provider. Accordingly, denial of refund benefit on this ground was set aside. [Paras 5]

Refund allowed in respect of Renting of Immovable Property Service and Cenvat credit accepted.

Debit note compliance with Rule 4A - Cenvat Credit - refund of service tax - Whether debit notes issued by the service provider satisfy the documentary requirements for availment of Cenvat credit under Rule 4A. - HELD THAT: - The Tribunal examined the debit notes and found that they contained the requisite particulars prescribed in Rule 4A of the Service Tax Rules, 1994. Further, as there was no specific allegation by the Department that the service provider had not paid service tax or that services were not received, denial of refund on the ground that a debit note is not a prescribed document was not sustainable. Therefore the appellant could avail the refund/Cenvat credit based on the debit notes. [Paras 5]

Debit notes held to comply with Rule 4A; refund/Cenvat credit allowed.

Final Conclusion: The impugned order denying refund of service tax on the specified input services is set aside; the appeal is allowed and the appellant is granted consequential refund benefits in respect of the Air Travel Agent Service, Membership of Club & Association service, Rent a Cab service (pre April 2011), Renting of Immovable Property service and debit note based claims compliant with Rule 4A.

Service under Section 37C of the Central Excise Act - proof of delivery by registered post with acknowledgment - limitation for preferring appeal - typographical error in service address - negligence and dilatory conduct disentitling relief - preferability of merits over technical dismissal subject to absence of mala fide/delay

Limitation for preferring appeal - negligence and dilatory conduct disentitling relief - Whether the appeal before Commissioner(Appeals) and the Tribunal was barred by limitation and whether the appellant's conduct warranted dismissal notwithstanding arguments on non-receipt of the Order-in-Original. - HELD THAT: - The Tribunal found that the appellant had received the SCN and subsequent notices for personal hearing but did not file a reply nor appear, which established a pattern of neglect in pursuing the adjudication. The appellant's claim that the Order-in-Original was served at a wrong address (slash instead of numeral) was treated as a mere typographical error; the rest of the address matched and there was no evidence that the dispatched order was returned undelivered. The request letter for a copy of the Order-in-Original failed to assert non-receipt due to wrong address and in fact referenced details of the order, supporting the conclusion that the appellant was aware of the adjudication. While the law prefers adjudication on merits, the Tribunal applied the principle that statutory limitation must be enforced where delay results from negligence or dilatory tactics. Given the absence of any convincing explanation free from mala fides for the delay in filing the appeal, the earlier finding that the appeal was time-barred was upheld.

Appeal dismissed as barred by limitation due to appellant's negligent conduct and no satisfactory proof of non-service.

Service under Section 37C of the Central Excise Act - proof of delivery by registered post with acknowledgment - typographical error in service address - Whether service of the Order-in-Original was valid despite a minor typographical error in the address, and whether the Department had to prove return/undelivered dispatch under Section 37C. - HELD THAT: - The Tribunal accepted the Commissioner(Appeals)'s view that a single-character typographical variation in the address did not render service invalid where the remainder of the address matched and there was no record of the dispatched order being returned undelivered. The settled principle relied upon is that service is complete when sent by registered post with acknowledgment due to the addressee; mere typographical discrepancy which would not prevent postal delivery does not vitiate service. In the absence of evidence of non-delivery or of any proof contradicting dispatch and delivery, the appellant's contention of defective service was rejected.

Service held valid; no defect of service established from a minor typographical error and no proof of non-delivery produced.

Final Conclusion: The Tribunal upheld the Commissioner(Appeals) in holding the appeal time barred and rejected the contention of defective service based on a minor typographical error; appeal dismissed.

Site formation and clearance, excavation and earth moving and demolition - inclusive definition - de-silting of slimes after construction does not constitute site formation

Site formation and clearance, excavation and earth moving and demolition - inclusive definition - de-silting of slimes - Whether the appellant's contract for de-silting of slimes and transportation from an existing tailing dam falls within the taxable service of site formation and related activities. - HELD THAT: - The Court examined the statutory definition of "Site formation and clearance, excavation and earth moving and demolition" and the explanatory Budget Letter, noting that the definition is inclusive and the illustrative activities are indicative of preparatory works undertaken prior to construction of buildings, factories or other civil structures. The Agreement shows that the tailing dam was already in existence and the appellant's obligation was limited to de-silting of slimes, transportation, maintenance of the road and management of the dump yard. Activities described in the inclusive definition and the Budget Letter relate to works undertaken to make land suitable prior to construction or for preparatory mining/laying of cables or pipes. De-silting carried out after the dam's construction is a maintenance/operational activity and not a preparatory site-formation activity. The Commissioner (Appeals) erred in treating post-construction de-silting as falling within the site formation service. [Paras 8, 10, 11]

The impugned orders confirming demand, interest and penalty under the site formation service were set aside; the appeal is allowed.

Final Conclusion: The Tribunal held that de-silting of slimes carried out on an existing tailing dam does not constitute the taxable service of site formation as defined; the Commissioner (Appeals)'s order upholding demand, interest and penalty was set aside and the appeal allowed.

Construction of Commercial Complex - Construction of road versus construction of driveway - Service tax exigibility - gross amount charged - value of goods supplied free - taxable turnover

Construction of Commercial Complex - Construction of road versus construction of driveway - Service tax exigibility - Construction of the petrol-pump driveway, made under a separate contract, is not exigible to service tax as construction of a commercial complex where it is held to be akin to road construction and covered by the cited coordinate Tribunal decision. - HELD THAT: - The Tribunal considered whether driveway construction for a petrol pump under a separate contract falls within the taxable category of 'Construction of Commercial Complex'. Relying on the coordinate Bench decision in CST, Ahmedabad v. Shilpa Constructions Pvt. Ltd., the Court accepted the view that construction of road is not subject to service tax and that the driveway in question cannot be equated with a taxable commercial-complex construction. The Revenue's contention that a driveway serving a petrol pump is not for public utility and hence outside the road exclusion was rejected in light of the precedent applied by the Tribunal, leading to relief for the appellant on this point. [Paras 2, 3]

The activity of constructing the petrol-pump driveway is not exigible to service tax under the head 'Construction of Commercial Complex'.

Gross amount charged - value of goods supplied free - taxable turnover - Value of materials supplied free by the principal to the contractor, which were neither adjusted in the contractor's bill nor reflected by credit/debit entries or book adjustments, is not includible in the taxable turnover for 'Construction of Commercial Complex'. - HELD THAT: - The Tribunal examined whether free supply of materials by the principal to the contractor must be added to the contractor's taxable turnover. Applying the Supreme Court's reasoning in CST v. Bhayana Builders (as quoted), the Court held that the inclusive definition of 'gross amount charged' in Explanation (c) contemplates modes of payment or book adjustments and does not permit adding the notional value of goods supplied free where no credit/debit notes or book entries were made and no amount was credited or debited. Consequently, the value of such free supplies, not forming part of the contract value or billed amount, cannot be treated as consideration for service and cannot be added to determine taxable services. [Paras 4]

The notional value of goods/materials supplied free by the principal is not to be included in the taxable turnover for service-tax valuation.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is entitled to consequential benefits as per law.

Consultation with noticee before issuance of show cause notice - pre-show cause notice - stay of proceedings pursuant to show cause notice

Consultation with noticee before issuance of show cause notice - pre-show cause notice - stay of proceedings pursuant to show cause notice - Interim relief in respect of the show cause notice dated 12.4.2019 and the petitioner's contention regarding the issuance of the show cause notice immediately after a pre-show cause notice. - HELD THAT: - The petitioner relied on Circular No.1053/2/2017-CX dated 10.3.2017, in particular paragraph 5.0 which contemplates consultation with the noticee before issuance of a show cause notice. The petitioner alleged that a pre-show cause notice was issued on 12.4.2019 and, on the same date, the impugned show cause notice was issued despite the petitioner requesting reasonable time to consult the person aware of the facts. Having considered the submissions, the High Court issued notice returnable on 27th June, 2019 and granted ad-interim relief by staying further proceedings pursuant to the impugned show cause notice dated 12.4.2019. Direct service on respondent No.2 was permitted.

Issued notice and granted interim stay of further proceedings arising from the show cause notice dated 12.4.2019; direct service on respondent No.2 permitted.

Final Conclusion: The High Court issued notice and granted ad interim stay of proceedings under the show cause notice dated 12.4.2019, with the matter listed for further hearing on 27th June, 2019.

Refund of Education Cess and Secondary & Higher Education Cess - Entitlement to refund where excise duty is exempted - Claim for refund under Notification No.20/2007 dated 25.04.2007 - Direction to refund within specified time-frame

Refund of Education Cess and Secondary & Higher Education Cess - Entitlement to refund where excise duty is exempted - Following binding precedent of the Apex Court - Direction to refund Education Cess and Secondary & Higher Education Cess collected along with excise duty. - HELD THAT: - The petitioner sought refund of Education Cess and Secondary & Higher Education Cess collected along with excise duty by invoking Notification No.20/2007 dated 25.04.2007. The Court recorded that the Apex Court in Civil Appeal Nos.2781-2790 of 2010 (M/s SRD Nutrients Private Limited v. Commissioner of Central Excise Guwahati) allowed the appeals and held entitlement to refund where excise duty itself was found exempted; the Review Petition against that decision was dismissed on 10.07.2018. Having regard to that binding precedent and to this Court's earlier disposal of a similar petition (WP (C) No.98 of 2018 - M/s Maithan Alloys Ltd. v. Union of India & ors) directing refund, the Court applied the same reasoning to the present petition and directed refund of the cesses collected with excise duty.

The respondents are directed to refund the Education Cess and Secondary & Higher Education Cess collected from the petitioner along with excise duty within three months from the date of this order.

Final Conclusion: The petition is disposed of by directing respondents to refund the Education Cess and Secondary & Higher Education Cess collected with excise duty, in accordance with the Apex Court precedent, within three months.

Cenvat credit admissibility - Reasonable steps under Rule 9(3) of Cenvat Credit Rules, 2004 - Proof of bogus invoices and delivery - Burden on buyer to verify supplier's discharge of excise duty

Cenvat credit admissibility - Proof of bogus invoices and delivery - Whether the departmental order disallowing and reversing the appellant's cenvat credit on the basis of alleged bogus/unaccompanied invoices was sustainable. - HELD THAT: - The Tribunal found that the Department's case for irregular availment of cenvat credit rested principally on statements recorded during a DGCEI investigation, including that of Shri Amit Gupta and certain transporters, but the appellant was not permitted to cross-examine those witnesses and one witness retracted his earlier statement. No independent inquiry was shown to have been made with the appellant's customers and there was no material establishing non-delivery or that the invoices were bogus. The appellant's records showed purchases from a registered dealer, entries in books and stock accounts, and assertions that goods were received and accounted for at the factory. The Tribunal also noted that the alleged kingpin (Shri Amit Gupta) was not made a party nor proceeded against. On this factual matrix the Department failed to prove that the invoices were not genuine or that there was non-delivery, and hence the confirmation of reversal was not sustainable. [Paras 4, 5, 6, 8]

The order-in-original disallowing the cenvat credit was set aside for lack of sufficient evidence that the invoices were bogus or that goods were not received.

Reasonable steps under Rule 9(3) of Cenvat Credit Rules, 2004 - Burden on buyer to verify supplier's discharge of excise duty - Whether the appellant had taken reasonable steps within the meaning of Rule 9(3) CCR, 2004 to ensure entitlement to cenvat credit such that reversal could not be legitimately imposed. - HELD THAT: - The Tribunal applied the principle that a buyer who receives invoices and makes payments is ordinarily entitled to assume that the supplier has discharged or will discharge the excise liability, and that it is neither reasonable nor practicable to require the buyer to verify the supplier's accounts or payment of duty. Considering that the appellant had recorded the purchases in books and inventory, had purchased from a registered dealer, and had been subject to prior audits without such allegations, the Tribunal concluded that the appellant had taken reasonable steps. The Tribunal emphasised that whether reasonable steps were taken is a question of fact and that an impossible or impractical burden cannot be cast on the assessee. [Paras 4, 7, 8]

The appellant was held to have taken reasonable steps under Rule 9(3) and therefore could not be compelled to reverse the cenvat credit on the facts of the case.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order disallowing the cenvat credit, and held that the Department had not established the invoices as bogus nor that the appellant failed to take reasonable steps under Rule 9(3) CCR, 2004.

Limitation and extended period of limitation - Availment of Cenvat credit on input services for setting up plant - Suppression or misrepresentation as condition for invoking extended limitation - Nexus between input services and manufacturing activity

Limitation and extended period of limitation - Suppression or misrepresentation as condition for invoking extended limitation - Availment of Cenvat credit on input services for setting up plant - Whether the demand raised in the impugned order is barred by limitation and whether the extended period of limitation was rightly invoked. - HELD THAT: - The Tribunal found that the appellant had obtained Central Excise registration in 2009 and regularly filed ER-1 returns disclosing Cenvat credit; the alleged irregularity was detected during departmental audit. There was no finding of fraud, suppression or falsification of records. In these circumstances, and having regard to earlier decisions of this Tribunal in the appellant's own case and various High Court precedents cited, invocation of the extended period of limitation was held to be impermissible. Consequently the demand raised by the Commissioner for the period April, 2012 to March, 2016 was held to be time-barred. The Tribunal therefore set aside the impugned order on the ground of limitation without adjudicating the merits of the claim on availment of Cenvat credit.

Demand is barred by limitation; invocation of extended period was not justified and the impugned order is set aside without deciding the merits.

Final Conclusion: The appeal is allowed on limitation grounds: the demand for the period April, 2012 to March, 2016 is time-barred, the extended period of limitation cannot be invoked in absence of suppression, and the impugned order is set aside without entering into the merits.

Pre-deposit requirement under Section 35F(i) of the Central Excise Act, 1944 - computation of mandatory pre-deposit excluding penalties confirmed against a third party - penalties under the Central Excise Rules, 2002 - remand for fresh adjudication on merits

Pre-deposit requirement under Section 35F(i) of the Central Excise Act, 1944 - computation of mandatory pre-deposit excluding penalties confirmed against a third party - penalties under the Central Excise Rules, 2002 - Whether the appellant had complied with the mandatory pre-deposit requirement so as to maintain the appeal before the Commissioner (Appeals). - HELD THAT: - The Tribunal examined the order-in-original and the Commissioner (Appeals) rejection which rested on non-payment of the requisite 7.5% pre-deposit calculated by aggregating three penalties. The original order confirmed recovery of interest and imposed penalties of the appellant under Rule 25 and Rule 27 of the Central Excise Rules, 2002; a separate penalty of equal amount was confirmed against M/s Neo Corp International Ltd. as notice No.2. For computation of the mandatory pre-deposit, only penalties imposed on the appellant themselves are to be taken into account. The penalty confirmed against Neo Corp (a third party not before the Commissioner (Appeals)) could not be included in the quantum for pre-deposit determination for the appellant. Applying this principle, the 7.5% pre-deposit obligation, computed on the penalties actually confirmed against the appellant, amounted to Rs. 19,569/-, which the appellant had already deposited. Consequently the condition precedent for entertaining the appeal before the Commissioner (Appeals) stood satisfied.

The Tribunal held that the appellant had complied with the pre-deposit requirement and set aside the Commissioner (Appeals) order rejecting the appeal for non-compliance.

Remand for fresh adjudication on merits - Whether the appeal should be remanded to the Commissioner (Appeals) for consideration on merits. - HELD THAT: - Having found that the mandatory pre-deposit condition was satisfied by the deposit already made by the appellant, the Tribunal directed that the Commissioner (Appeals) proceed to decide the appellant's appeal on merits. The Tribunal recorded that the deposited amount (Rs. 19,569/-) be treated as proper compliance with the pre-deposit requirement and remitted the matter for adjudication on merits by the Commissioner (Appeals).

The appeal was remanded to the Commissioner (Appeals) for fresh consideration on merits, treating the existing deposit as compliance with Section 35F(i).

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order rejecting the appeal for non-compliance of pre-deposit, held that the appellant's deposit satisfied the mandatory pre-deposit obligation (excluding penalty confirmed against a third party), and remanded the appeal to the Commissioner (Appeals) for decision on merits.

Place of removal - FOR sales - cenvat credit on outward freight - risk in transit - input service - Rule 2(l) of Cenvat Credit Rules, 2004

Place of removal - FOR sales - cenvat credit on outward freight - risk in transit - Rule 2(l) of Cenvat Credit Rules, 2004 - Entitlement to cenvat credit on outward freight for goods sold on FOR basis and determination of place of removal. - HELD THAT: - The appellant sold goods on FOR basis where the invoice price included freight to the customer's premises and retained liability for safe delivery and risk in transit until the customer accepted delivery. On these admitted facts, the place of removal is the customer's doorstep. Applying Rule 2(l) of the Cenvat Credit Rules, 2004, input services attributable to outward transportation up to the place of removal qualify as inputs for the manufacturer. The Tribunal, following the reasoning that the place of sale must be determined with reference to the premises referable to the manufacturer and the factual point of sale here being the customer's doorstep, held that outward freight up to that point is eligible for cenvat credit and granted consequential relief by modifying the impugned order.

Appeal allowed in part; appellant entitled to cenvat credit on outward freight up to the customers' doorstep and impugned order modified accordingly.

Extended period of limitation - show cause notice - Whether the question of limitation for issuing the show cause notice was finally adjudicated. - HELD THAT: - The Tribunal expressly refrained from deciding the question of limitation. Although the Commissioner (Appeals) had addressed limitation and the Revenue relied on audit findings to invoke the extended period, the Tribunal left the issue open under the facts of the present case and did not render a conclusive finding on applicability of extended limitation for the show cause period.

Question of limitation left open for determination; no adjudication on extended period of limitation.

Final Conclusion: On the admitted facts that goods were sold on FOR basis with freight included and risk in transit resting with the seller until acceptance, the place of removal is the customer's doorstep; accordingly cenvat credit on outward freight up to that place is allowable and the appeal is allowed with consequential relief, while the limitation issue is left open.

Transaction value - inclusion of VAT refund/ incentive in transaction value - subsidy/financial assistance via VAT 37B challans not additional consideration - VAT actually paid versus VAT discharged through subsidy challans

Transaction value - subsidy/financial assistance via VAT 37B challans not additional consideration - VAT actually paid versus VAT discharged through subsidy challans - Whether the 75% VAT refunded under the Madhya Pradesh Industrial Investment Promotion Assistance Scheme is includable in the transaction value and therefore subject to central excise duty - HELD THAT: - The Tribunal held that transaction value comprises the price actually paid or payable by the buyer, and does not encompass amounts not paid by the buyer as additional consideration. The amount received by the assessee under the Madhya Pradesh industrial promotion scheme was a financial assistance/subsidy paid by the State Government and credited by way of VAT 37B challans, and was not retained or appropriated from VAT collected from buyers. Consequently, the remission cannot be characterized as additional consideration forming part of the transaction value. The Tribunal observed that such 37B challans, while functionally 'as good as cash' for limited statutory purposes (i.e., payment of VAT in subsequent periods), do not convert the subsidy into an amount paid by the buyer or into an element of the sale price. Reliance was placed on earlier decisions treating subsidy-challan receipts similarly, and the Tribunal found no infirmity in the Commissioner (Appeals) conclusion that the refunded/subsidy amount is not includable in transaction value for excise duty purposes. [Paras 4, 5]

The order under challenge upholding that the subsidy received under the Scheme is not includable in transaction value is affirmed and the departmental appeal is dismissed.

Final Conclusion: The Tribunal affirms the appellate order in favour of the assessee, holding that the VAT refund/subsidy credited by way of 37B challans under the State industrial promotion scheme does not form part of the transaction value and is not liable to central excise duty; the departmental appeal is dismissed.

Cenvat credit on outward transportation - place of removal - extended period of limitation - suppression of facts - divergent judicial views and bona fide controversy - penalty for erroneous credit - remand for quantification and verification

Extended period of limitation - suppression of facts - divergent judicial views and bona fide controversy - Whether the extended period of limitation could be invoked by Revenue for recovery of Cenvat credit claimed on outward transportation. - HELD THAT: - The Tribunal found no case of suppression or concealment by the appellant warranting invocation of the extended period. The show cause arises from audit and similar show cause notices had been issued earlier; the matter involved a debatable question with divergent judicial views and earlier orders in favour of the appellant for preceding periods. In these circumstances the Tribunal held that extended limitation was not available to Revenue and recovery must be confined to the normal limitation period. [Paras 7]

Extended period of limitation not available; recovery limited to the normal period.

Cenvat credit on outward transportation - place of removal - Whether the appellant was entitled to Cenvat credit on outward transportation of finished goods for the period in question. - HELD THAT: - On further evidence (invoices) the appellant's counsel conceded that transport charges were shown separately and did not form part of transaction value, and thus on merits the appellant may not be entitled to Cenvat credit. The Tribunal, having regard to the concession and to earlier conflicting decisions (including the appellant's own preceding favourable orders and subsequent Supreme Court clarity), confined the appellant's liability to reverse credit only for the period within normal limitation. The Tribunal therefore allowed the appeal in part rather than granting full relief on merits. [Paras 6, 7]

Appellant not entitled to retain the disputed Cenvat credit for periods beyond the normal limitation; reversal required only for the limited period July, 2012 to December, 2012.

Penalty for erroneous credit - divergent judicial views and bona fide controversy - Whether penalty imposed on the appellant in relation to the disputed Cenvat credit should be sustained. - HELD THAT: - Given the absence of suppression and the existence of divergent judicial views on the entitlement to credit (including prior decisions favourable to the appellant), the Tribunal concluded that imposition of penalty was not justified. The Tribunal therefore set aside the penalty. [Paras 7]

Penalty set aside.

Remand for quantification and verification - Mechanism for determining the precise amount of Cenvat credit to be reversed for the period allowed by limitation. - HELD THAT: - The Tribunal directed the appellant to file calculations of the amount required to be reversed before the original adjudicating authority. The Commissioner was directed to verify the calculation and point out any discrepancy, with the appellant to act accordingly. This leaves quantification and verification to the adjudicatory authority rather than deciding computation in the present order. [Paras 8]

Matter remitted to the Original Adjudicating Authority/Commissioner for calculation, verification and finalisation of reversal amount.

Final Conclusion: Appeal allowed in part: extended limitation cannot be invoked and reversal of Cenvat credit is limited to July, 2012 to December, 2012; penalty set aside; matter remitted to the original adjudicating authority for quantification and verification of the amount to be reversed.

Inclusion of VAT subsidy in assessable value/transaction value - remission of sales tax versus exemption - discharge of VAT liability by utilisation of VAT 37B challans - consequence for penalty where demand for differential duty is set aside

Inclusion of VAT subsidy in assessable value/transaction value - discharge of VAT liability by utilisation of VAT 37B challans - Whether VAT subsidy amounts received under RIPS and later utilised via VAT 37B challans are includable in transaction value for central excise duty. - HELD THAT: - The Tribunal held that the appellants paid the full VAT to the State and the subsidy under the Rajasthan Investment Promotion Scheme was a remission granted thereafter; the subsidy was credited to the assessee's sales tax account and discharged the output VAT liability for subsequent periods by means of VAT 37B challans. Once sales tax/VAT is payable at the time of removal and is assessed or discharged by the Sales Tax Department, the amount cannot be included in the transaction value for central excise. The factual distinction from cases where sales tax was retained by the assessee was noted: here nothing was retained and the scheme operated as remission rather than exemption. Relying on the Tribunal's earlier findings and reasoning that discharge by VAT 37B challans is a legally sustainable method of payment, the demand for differential duty by including the subsidy in assessable value was set aside.

Demand for differential central excise duty by including the VAT subsidy in transaction value is set aside.

Consequence for penalty where demand for differential duty is set aside - Whether penalties and interest confirmed along with the demand survive once the demand for differential duty is set aside. - HELD THAT: - The Tribunal reasoned that penalties and interest founded on the impugned demand cannot be sustained when the foundational demand for differential duty is set aside. Having allowed the appeal and set aside the demand on merits, there is no justification for the attendant penalties, which were accordingly set aside as well.

Penalties and interest imposed along with the demand are set aside.

Final Conclusion: The appeal is allowed: the demand for differential central excise duty by including VAT subsidy amounts (utilised through VAT 37B challans) in transaction value is set aside, and consequential penalties and interest are also set aside.

Entitlement to cenvat credit on supplementary invoices - effect of pendency of demand before the Hon'ble Supreme Court on availability of cenvat credit - failure to ascertain absence of fraud, collusion or suppression under Rule 9(1)(b) of Cenvat Credit Rules - absence of fraud, collusion or wilful suppression as bar to cenvat credit

Entitlement to cenvat credit on supplementary invoices - effect of pendency of demand before the Hon'ble Supreme Court on availability of cenvat credit - absence of fraud, collusion or wilful suppression as bar to cenvat credit - failure to ascertain absence of fraud, collusion or suppression under Rule 9(1)(b) of Cenvat Credit Rules - Appellant entitled to avail cenvat credit on supplementary invoices issued by M/s SECL; impugned disallowance set aside. - HELD THAT: - The Tribunal examined whether cenvat credit taken by the appellant on supplementary invoices could be denied on the ground that the credit related to duty which was in dispute and that Rule 9(1)(b) required the appellant to ascertain absence of any misconduct by the supplier. Noting the pendency of the challenge to the demand raised against M/s SECL before the Hon'ble Supreme Court and relying upon earlier decisions of the Tribunal in connected matters, the Bench held that where a demand against the supplier is sub judice, the supplementary invoice based credit cannot be treated as payment made by reason of fraud, collusion or wilful suppression by the supplier. The Tribunal further recorded satisfaction that there was no element of fraud or suppression on the part of the appellant and that the issue was recurring in nature; accordingly the condition in Rule 9(1)(b) did not disqualify the appellant from availing the credit. On these grounds the order of confirmation was set aside and the appeal allowed.

Impugned Order-in-Original set aside; appellant entitled to take cenvat credit on the supplementary invoices.

Final Conclusion: Appeal allowed: cenvat credit on supplementary invoices held admissible in view of pendency of supplier's challenge before the Supreme Court and absence of fraud or suppression; impugned demand/denial set aside.

Cenvat credit admissibility for input services used in disposal of industrial waste - input service used indirectly in or in relation to manufacture and clearance of final products - compliance with Environmental Laws as integral to manufacturing activity - site formation/excavation services for tailing dam as input service - interpretation of Rule 2(1) of Cenvat Credit Rules, 2004

Cenvat credit admissibility for input services used in disposal of industrial waste - site formation/excavation services for tailing dam as input service - input service used indirectly in or in relation to manufacture and clearance of final products - compliance with Environmental Laws as integral to manufacturing activity - Admissibility of Cenvat credit on service tax paid for excavation and related services for construction, maintenance and operation of tailing dam used to dispose industrial waste and polluted water required under environmental laws - HELD THAT: - The Tribunal upheld the Commissioner (Audit)'s conclusion that services such as site formation/excavation for deepening the tailing dam and related maintenance are input services within the meaning of Rule 2(1) of the Cenvat Credit Rules, 2004. It reasoned that compliance with directions of the Pollution Control Board and attendant activities for disposal of hazardous effluents are integral to the manufacturer's ability to operate; apparatus and services used for treatment or safe disposal of industrial waste form part and parcel of the manufacturing process rather than being mere ancillary or construction works outside the manufacturing activity. The Tribunal relied on its earlier decision in the respondent's own case holding identical credits allowable and found no infirmity in the impugned order which allowed the credit, thereby dismissing the Revenue's appeal. [Paras 3, 5, 6]

Cenvat credit in dispute is allowable; the impugned order setting aside the demand is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirmed that expenditure on excavation, construction and maintenance of tailing dam-undertaken to comply with environmental directions and to dispose industrial waste and polluted water-is an input service eligible for Cenvat credit under the Cenvat Credit Rules, 2004; the departmental appeal is dismissed.

Validity of notice issued under Section 45 - admission by conduct and effect of handing over cheques - coercion and undue influence vitiating purported payment - classification of goods as capital goods under Section 2(11) - applicability of concessional tax rate on sales to unregistered dealers - directions under Section 48-A and administrative clarification

Validity of notice issued under Section 45 - admission by conduct and effect of handing over cheques - Impugned notice dated 27.01.2016 issued to the petitioner's bankers under Section 45 was examined for validity where the notice was predicated on a presumed admission by the petitioner. - HELD THAT: - The Court found that the respondent issued the bank notice on the premise that the petitioner had admitted liability. Other than the fact that the petitioner handed over four cheques during an inspection, there was no conclusive evidence of an admission of liability. The petitioner consistently maintained that the goods were capital goods and taxable at the concessional rate, and had given stop payment instructions, also intimating the respondent. In these circumstances the conclusion that the petitioner had admitted liability, followed by issuance of the bank notice without affording sufficient opportunity, was not justified. The Court therefore held that the notice issued under Section 45 could not be sustained in the present facts. [Paras 9, 10, 11, 12]

Impugned notice dated 27.01.2016 quashed on the ground that it was issued without affording sufficient opportunity and on an unjustified presumption of admission.

Admission by conduct and effect of handing over cheques - coercion and undue influence vitiating purported payment - Whether the handing over of cheques to Enforcement Wing Officers amounted to payment or admission of tax liability and whether such cheques were obtained under coercion. - HELD THAT: - The Court observed that the petitioner contended the cheques were handed over only under threat and undue influence and subsequently stop payment instructions were given and intimated to the respondent. The Court held that whether the handing over of the cheques amounts to payment or admission cannot be finally determined on the record before it and requires consideration of all materials and evidence. Consequently, the matter was not decided on merits but required fresh consideration by the respondent. [Paras 7, 9, 10, 11, 12]

Issue remanded for fresh consideration; not finally adjudicated on merits.

Classification of goods as capital goods under Section 2(11) - applicability of concessional tax rate on sales to unregistered dealers - directions under Section 48-A and administrative clarification - Whether the petitioner's goods qualify as capital goods attracting the concessional tax rate (5%) even for sales to unregistered dealers, having regard to the clarification issued under Section 48-A. - HELD THAT: - The Court noted the statutory definition of capital goods in Section 2(11) and recorded the existence of an earlier clarification by the Principal Commercial Taxes Officer under Section 48-A dated 11.09.2007 stating applicability even for sales to unregistered dealers. The petitioner consistently maintained entitlement to tax at the concessional rate; the respondent contended that, given the admission that sales were to unregistered dealers, Section 2(11) would not apply. The Court did not decide the question on merits but directed that the respondent consider the matter afresh and pass final orders in line with the stated clarification after affording opportunity to the petitioner. [Paras 8, 9, 11, 12]

Issue remanded to the respondent for fresh consideration and final orders in line with the Section 48-A clarification after affording the petitioner opportunity to raise objections.

Final Conclusion: Impugned bank notice dated 27.01.2016 quashed; matter remitted to the respondent for fresh consideration and final orders, after affording the petitioner an opportunity to be heard, and with liberty to initiate fresh action consistent with the Section 48-A clarification within eight weeks.

Application of amended Section 148 of the Negotiable Instruments Act to appeals arising from complaints filed before the amendment - purposive interpretation of statute - construction of discretionary 'may' as rule in the context of amended Section 148 - notwithstanding clause overriding Code of Criminal Procedure - power of Appellate Court to direct deposit pending appeal

Application of amended Section 148 of the Negotiable Instruments Act to appeals arising from complaints filed before the amendment - purposive interpretation of statute - Amended Section 148 of the Negotiable Instruments Act is applicable to appeals against convictions under Section 138 even where the criminal complaints were filed prior to the amendment coming into force. - HELD THAT: - The Court examined the Statement of Objects and Reasons and the text of amended Section 148 and held that the amendment is procedural in nature and intended to curb delay tactics which frustrate the object of Section 138. Since the appeals and applications for suspension of sentence were made after the amendment came into force, applying amended Section 148 does not take away any substantive vested right of appeal. A purposive construction is necessary to effectuate the legislative object; excluding cases where complaints were filed before the amendment would frustrate that object. Consequently, amended Section 148 applies to the appeals in question. [Paras 8]

Amended Section 148 applies to the appeals even though the complaints were filed prior to 01.09.2018.

Construction of discretionary 'may' as rule in the context of amended Section 148 - power of Appellate Court to direct deposit pending appeal - The appellate power under amended Section 148, though framed with the word 'may', is to be construed so as to make directing deposit of a minimum percentage the rule and non-direction the exception requiring special reasons. - HELD THAT: - Reading Section 148 with the Objects and Reasons, the Court held that although the statute uses 'may', the provision contemplates that the Appellate Court ordinarily will direct deposit of not less than the statutory minimum (20%). The requirement of deposit within a specified time and the legislative purpose of preventing delay and injustice to payees justify construing the discretionary language so that not directing deposit is an exception that must be specially reasoned. [Paras 9]

The Appellate Court's power to order deposit is to be treated as the normal rule; refusal to direct deposit is an exception which must be specially justified.

Notwithstanding clause overriding Code of Criminal Procedure - interaction between amended Section 148 and Section 357(2) Cr.P.C. - Amended Section 148, beginning with a 'notwithstanding' clause, overrides and displaces the operation of Section 357(2) Cr.P.C. to the extent inconsistent, permitting the appellate court to direct deposit despite Section 357(2). - HELD THAT: - The Court observed that amended Section 148 expressly commences with a 'Notwithstanding anything contained in the Code of Criminal Procedure' qualifier. Consequently, any inconsistent protection under Section 357(2) Cr.P.C. against recovery of fine during appeal does not preclude the appellate court from directing deposit under amended Section 148. The statutory scheme and legislative purpose support this override. [Paras 10]

The 'notwithstanding' provision in amended Section 148 displaces Section 357(2) Cr.P.C. and empowers the appellate court to direct deposit pending appeal.

Final Conclusion: The High Court's confirmation of the appellate court's direction to deposit 25% of the amount of fine/compensation pending appeal is upheld: amended Section 148 applies to the appeals before the courts after 01.09.2018, the Appellate Court ordinarily ought to direct deposit of the statutory minimum (refusal being exceptional), and the amended provision overrides inconsistent Cr.P.C. protection; appeals dismissed with limited extension of time to deposit.

Leave to defend - triable issues - sham and moonshine defence - acknowledgement of debt - post-dated cheques and dishonour - summary suit under Order XXXVII CPC - criminal proceedings under Section 138 of the Negotiable Instruments Act - tests for granting leave to defend (IDBI Trusteeship principle)

Leave to defend - triable issues - sham and moonshine defence - acknowledgement of debt - post-dated cheques and dishonour - tests for granting leave to defend (IDBI Trusteeship principle) - Whether the defendant/appellant raised a bona fide and triable defence sufficient to obtain leave to defend in a summary suit under Order XXXVII CPC - HELD THAT: - The Court held that the defence advanced by the appellant was sham and moonshine and did not raise a bona fide triable issue. The memorandum of settlement of 23.08.2012 was duly signed by the appellant, the signatures and execution were not denied, and the document admitted the principal sum and an instalment schedule. Earlier agreements and the handing over of post-dated cheques, together with part payments and the appellant's conduct in seeking to involve overseas investors to discharge the debt, constituted consistent acknowledgements of liability. The plea of coercion, undue influence and threat was rejected as implausible given the long course of dealings from 29.10.2007 to 23.08.2012, absence of any police complaint or invocation of Section 156(3) Cr.P.C., and lack of prosecution of any asserted criminal remedy. Applying the principles laid down in the IDBI Trusteeship decision concerning tests for granting leave to defend, the Court found no substantial defence or genuine triable issue - paragraph 17.5 of that decision (that frivolous or vexatious defences justify refusal of leave) was held applicable. In these circumstances the Single Judge correctly refused leave to defend and the suit proceeded to decree. [Paras 17, 18, 19, 20, 21]

Application for leave to defend was rightly dismissed; the defence was found to be sham and not a triable issue, and the decree in the Order XXXVII summary suit stands affirmed.

Final Conclusion: The appeal is dismissed; the Single Judge's order refusing leave to defend in the summary suit under Order XXXVII CPC is affirmed and the respondent is entitled to judgment.