TaxTMI Updates e-Newsletter
Jun 05,2019

Summary order. Application for advance ruling under Section 97 disposed of as withdrawn.

Verification of seized records in the presence of authorized representative - opportunity to explain entries in seized records - stay of proceedings pending verification of seized records

Verification of seized records in the presence of authorized representative - opportunity to explain entries in seized records - The 2nd respondent was directed to permit verification of the records seized (Ext. P2) in the presence of the petitioner's Authorized Representative and to give the petitioner an opportunity to explain the entries. - HELD THAT: - The petitioner requested examination of the seized records, including the CD, in the presence of its Authorized Representative by communications Exts. P11 and P12 so that it could explain any omissions or commissions allegedly noted by the 2nd respondent. The learned Government Pleader did not oppose verification in the presence of the Authorized Representative. On this basis the court directed the 2nd respondent to consider the petitioner's request, intimate a specific date and time for inspection to the petitioner, and permit the verification to be undertaken in the presence of the Authorized Representative. The petitioner was given liberty to communicate this order and to notify the name and designation of the Authorized Representative within two weeks from the date of the order. [Paras 4]

The 2nd respondent shall permit verification of the seized records in the presence of the petitioner's Authorized Representative, give the petitioner an opportunity to explain the entries, and the petitioner may notify the Authorized Representative within two weeks.

Stay of proceedings pending verification of seized records - The 1st respondent was restrained from taking further steps pursuant to Ext. P8 until the inspection directed by the court is completed. - HELD THAT: - Given the order directing verification of the seized records in the presence of the petitioner's Authorized Representative and the undertaking that the 2nd respondent would complete the exercise expeditiously, the court directed that the 1st respondent should not proceed with steps under Ext. P8 until the inspection is completed. The court further directed that the 2nd respondent should complete the verification preferably within four weeks from receipt of intimation from the petitioner. [Paras 4]

The 1st respondent is directed not to proceed with steps pursuant to Ext. P8 until completion of the inspection ordered to be undertaken by the 2nd respondent.

Final Conclusion: Writ petition disposed by directing the 2nd respondent to allow verification of the seized records in the presence of the petitioner's Authorized Representative (petitioner to inform details within two weeks) and to complete the verification expeditiously (preferably within four weeks), with the 1st respondent restrained from acting under Ext. P8 until such inspection is complete.

Detention and release under Section 129 of the Central Goods and Services Tax Act, 2017 - validity of transit documents and electronic way bill generation - bank guarantee as security for release of detained goods - opportunity of hearing and fresh consideration of detention

Detention and release under Section 129 of the Central Goods and Services Tax Act, 2017 - validity of transit documents and electronic way bill generation - opportunity of hearing and fresh consideration of detention - Whether the detention recorded in Ext. P3 and the handwritten endorsement in Ext. P4 could be sustained without affording fresh consideration and opportunity to the petitioner - HELD THAT: - The Court declined to adjudicate the merits of the detention at the writ stage, finding the matters to be at a preliminary stage and unsuitable for final determination in a writ petition. The handwritten endorsement rejecting the petitioner's contentions was set aside. The matter was directed to be reconsidered by the detaining authority strictly in accordance with the statutory scheme under Section 129, with the petitioner to be afforded a fair and reasonable opportunity in the enquiry. The Court thereby remitted the question of the validity of detention and the alleged omissions in transit documentation to the authority for fresh consideration and final decision after following the procedure and hearing mandated by the Act.

Handwritten endorsement in Ext. P4 set aside; detention and related objections remitted to the authority for fresh consideration with obligation to afford opportunity and pass a reasoned order under Section 129.

Bank guarantee as security for release of detained goods - detention and release under Section 129 of the Central Goods and Services Tax Act, 2017 - time-bound completion of enquiry - Whether the detained goods should be released pending the authority's fresh decision and on what terms - HELD THAT: - The Court directed an interim, conditional release mechanism: the petitioner was ordered to furnish a bank guarantee for the tax and penalty claimed in Ext. P3 within two days and to apply for release by enclosing a copy of the order. On receipt of the bank guarantee, the detaining authority was directed to release the goods within twelve hours. The bank guarantee was to be kept valid for six weeks; the authority was directed to complete the enquiry, afford the petitioner a fair hearing and pass a reasoned order within four weeks. If the authority failed to pass the order within that period, the petitioner was released from the obligation to keep the bank guarantee alive beyond six weeks. The direction balances the petitioner's interest in immediate release against the authority's interest in securing revenue pending final determination.

Goods to be released on furnishing bank guarantee within specified timeframe; enquiry to be completed and final order passed within four weeks, with bank guarantee validity limited to six weeks unless further ordered.

Final Conclusion: Writ petition disposed of as premature; handwritten endorsement set aside; detention issues remitted for fresh decision under Section 129 after affording opportunity; interim release ordered on furnishing a bank guarantee within the timelines directed, and the authority directed to complete enquiry and communicate a reasoned order within four weeks.

Deduction under section 80IA - disallowance under section 14A read with Rule 8D - capitalisation / disallowance under section 36(1)(iii) - presumption of application of own (interest free) funds to investments - allocation of common expenses to eligible and non eligible units

Deduction under section 80IA - allocation of common expenses to eligible and non eligible units - Deletion of Assessing Officer's denial of entire deduction claimed under section 80IA for the power generating unit - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the Assessing Officer had no justification to deny the entire claim where only an allocation of common expenses may have been warranted. The CIT(A) found that the assessee satisfied the statutory conditions for claiming deduction under section 80IA, that there is no prescribed single formula for allocation of common expenses and that minor variations in allocation would not justify complete denial-particularly where the assessee limited its claim due to insufficient overall profits and the Assessing Officer had allowed the deduction in an earlier year under identical facts. The Tribunal agreed that the Assessing Officer should have reallocated expenses (if at all) instead of disallowing the entire claim and declined to interfere with the appellate finding.

Addition denying entire section 80IA deduction deleted; Revenue's ground dismissed.

Disallowance under section 14A read with Rule 8D - Validity and quantum of disallowance made under section 14A/Rule 8D in respect of expenditure attributable to tax exempt dividend income - HELD THAT: - The Tribunal confirmed the CIT(A)'s approach of restricting disallowance to the amount attributable to exempt income where applicable authorities have held that disallowance under section 14A cannot exceed the exempt income earned. Where the assessee possessed sufficient interest free own funds to meet the investments yielding exempt income, the Assessing Officer's computation under Rule 8D(2)(ii) was deleted. Administrative expense disallowance under Rule 8D(2)(iii) was to be computed on average of investments yielding exempt income and limited to specific direct expenditure admitted by the assessee plus the small Rule 8D(2)(iii) component accepted by CIT(A). The Tribunal relied on relevant High Court and Supreme Court authorities as applied by the CIT(A).

Disallowance under Rule 8D(2)(ii) deleted where own funds sufficed; limited disallowance under Rule 8D(2)(iii) and direct expenses sustained as directed by CIT(A); Revenue's ground dismissed.

Capitalisation / disallowance under section 36(1)(iii) - presumption of application of own (interest free) funds to investments - Deletion of addition by invoking section 36(1)(iii) in respect of interest on funds allegedly used for capital work in progress and capital advances - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance on the basis that the assessee had sufficient own (interest free) funds to meet the investments and had already capitalised interest on term loans where appropriate. The Tribunal accepted the appellate finding and applicable precedents that, where own interest free funds are adequate to cover investments, it may be presumed that investments were made from such funds and no disallowance under section 36(1)(iii) arises. The Tribunal rejected Revenue's submission that the presumption should be reversed to presume use of borrowed funds, and treated relevant Supreme Court and coordinate bench decisions as supportive of the appellate outcome.

Addition under section 36(1)(iii) deleted; Revenue's ground dismissed.

Final Conclusion: The Tribunal dismissed all Civil Appeals brought by the Revenue for the assessment years in dispute, affirming the CIT(A)'s deletion or restriction of additions under section 80IA, section 14A/Rule 8D and section 36(1)(iii) on the grounds set out above.

Exemption under section 10(38) - assessment under section 68 - bogus long term capital gains - accommodation entries - circumstantial evidence and confessions under section 131 - trade pattern and market manipulation in penny stocks - onus on assessee to prove genuineness of transactions

Exemption under section 10(38) - assessment under section 68 - bogus long term capital gains - accommodation entries - circumstantial evidence and confessions under section 131 - trade pattern and market manipulation in penny stocks - onus on assessee to prove genuineness of transactions - Whether the long term capital gain claimed by the assessee in respect of sale of shares of M/s. Blue Circle Services Ltd. is genuine and exempt under section 10(38) or is to be treated as unexplained income and assessed under section 68. - HELD THAT: - The Tribunal upheld the conclusion of the revenue that the declared LTCG was not genuine and the exemption under section 10(38) was rightly withdrawn and the entire sale consideration assessed as unexplained income under section 68. The finding rests on the investigation report and corroborative material: (a) SEBI's action including suspension of trading in numerous shell/penny stocks and identification of the scrip as one of the manipulated issues; (b) trade data showing highly synchronized, fraction-of-a-second trades at identical prices indicative of pre-arranged transactions; (c) identification of purchaser entities (exit providers) and brokers linked to accommodation-entry operations; (d) sworn confessions and statements recorded by the investigation wing and brokers/operators describing the modus operandi of providing accommodation entries for LTCG in return for cash/commission; and (e) absence of any corporate or financial justification in the company's records to support the abnormal price rise. The assessee failed to rebut these materials or to prove the genuineness of the purchase and sale notwithstanding opportunity to do so; the Assessing Officer's enquiries to the seller went unserved and no counter-statements were filed. The Tribunal applied the established test that documentary evidence alone, in face of unusual and corroborative circumstantial evidence pointing to arranged trading and admissions by operators, cannot sustain the claim of genuine LTCG. Reliance on precedent where similar facts led to assessment under section 68 was found appropriate. On these cumulative facts and the assessee's failure to discharge the onus of proving genuineness, the withdrawal of exemption and assessment under section 68 was sustained. [Paras 15, 21, 22, 26, 27]

The addition under section 68 for the amount representing the sale consideration of the penny-stock transactions was confirmed and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal for AY 2013-14, upholding the Assessing Officer and CIT(A) in treating the claimed LTCG as arranged/ accommodation entries and assessing the sale proceeds as unexplained income under section 68 after withdrawing exemption under section 10(38).

Dismissal of appeal ex parte for non-prosecution - adjournment on account of professional engagement - remand for fresh hearing - grant of costs in lieu of immediate dismissal - direction against further adjournments

Dismissal of appeal ex parte for non-prosecution - adjournment on account of professional engagement - remand for fresh hearing - grant of costs in lieu of immediate dismissal - direction against further adjournments - Whether the ex parte dismissal of the appeals by the CIT(A) was justified and what relief, if any, should be granted to the assessees. - HELD THAT: - The Tribunal examined the history of hearings and adjournments and noted that the CIT(A) had fixed the matters on eight occasions and granted adjournments on six earlier dates while the assessee's authorised representative filed adjournment applications on seven occasions. On the last scheduled date (20.11.2018) the authorised representative had applied in advance for adjournment explaining that he was engaged in the election of the Central Council of the Institute of Chartered Accountants of India on 8th and 9th December 2018, which the Tribunal treated as a reasonable cause. In these circumstances, and having regard to the prior grant of multiple opportunities, the Tribunal concluded that the refusal to grant one further opportunity and dismissal of the appeals ex parte was inappropriate. The Tribunal exercised its discretion in the interest of justice to set aside the ex parte orders and remand the matters to the CIT(A) for fresh disposal after hearing the assessees. As a balance between the parties and to deter further delay, the Tribunal imposed costs of Rs. 2,500 on each assessee and directed that the assessees shall not seek any further adjournment before the CIT(A). [Paras 4, 5]

Ex parte dismissal set aside; matters remitted to the CIT(A) for fresh hearing after affording opportunity to the assessees, subject to costs of Rs. 2,500 each and a direction not to seek further adjournment.

Final Conclusion: Both appeals allowed for statistical purposes and the impugned ex parte orders of the CIT(A) set aside; matters remitted to the CIT(A) for fresh adjudication after hearing the assessees, subject to costs and a prohibition on further adjournments.

Assessment of income from undisclosed sales by applying the net profit rate disclosed in books - disallowance under Section 40A(3) and Section 40(a)(ia) where income is estimated as a percentage of turnover - taxation of excess stock found on survey limited to the gross profit embedded in such stock

Assessment of income from undisclosed sales by applying the net profit rate disclosed in books - Income from undisclosed sales is to be assessed by applying the net profit rate that the assessee disclosed on recorded sales in its books, and not by applying a gross profit rate to suppressed sales. - HELD THAT: - The Tribunal found that suppression of sales was undisputed but, in the absence of contrary precedent cited by the Revenue, applied the legal proposition from the cited High Court decisions that only the net profit embedded in unaccounted sales is taxable. The Tribunal directed the Assessing Officer to adopt the net profit rate as reflected in the assessee's regular books of account for the relevant assessment year instead of applying a gross profit rate to the undisclosed turnover. The relief was allowed in part accordingly. [Paras 6]

Directed AO to assess undisclosed sales by applying the net profit rate shown in the assessee's books; ground allowed in part.

Disallowance under Section 40A(3) and Section 40(a)(ia) where income is estimated as a percentage of turnover - Disallowances under Section 40A(3) and Section 40(a)(ia) cannot be sustained where the Assessing Officer has estimated the assessee's income by applying a net profit percentage to total turnover. - HELD THAT: - Relying on the Supreme Court authority reproduced in the order, the Tribunal accepted that when income is determined by applying a net profit rate to total receipts, further disallowance under Section 40A(3) or Section 40(a)(ia) is not warranted. No contrary decision was placed before the Tribunal by the Revenue; accordingly, the Tribunal deleted the disallowances made under these provisions. [Paras 7]

Deleted disallowances under Section 40A(3) and Section 40(a)(ia); ground allowed.

Taxation of excess stock found on survey limited to the gross profit embedded in such stock - Where physical stock discovered on survey exceeds book stock, the addition to taxable income is limited to the gross profit embedded in the excess stock and not the full value of the undisclosed stock. - HELD THAT: - The Tribunal followed the jurisdictional High Court and coordinate bench precedents which held that the correct method is to tax the profit element embedded in undisclosed purchases or excess stocks discovered during survey. The Tribunal observed that no contrary authority was shown by the Revenue and directed the Assessing Officer to assess only the gross profit attributable to the excess stock while deleting the balance addition. [Paras 8, 9]

Directed AO to assess only the gross profit embedded in the excess stock found on survey; balance addition deleted and ground allowed in part.

Final Conclusion: All appeals are allowed in part: undisclosed sales to be assessed on the net profit rate shown in the books for each year; disallowances under Section 40A(3) and Section 40(a)(ia) deleted where income was estimated by applying a net profit percentage to turnover; and additions for excess stock found on survey limited to the gross profit embedded therein.

Characterisation of non compete fees as capital or revenue receipt - taxability of non compete fees on accrual and timing of receipt - effect of insertion of sub clause (va) to section 28 on non compete fees - distinction between capital and revenue receipts on termination of an agency/venture - treatment of termination fee and severance as capital receipt

Characterisation of non compete fees as capital or revenue receipt - taxability of non compete fees on accrual and timing of receipt - effect of insertion of sub clause (va) to section 28 on non compete fees - Deletion of addition of Rs. 5,00,000/- towards non compete fees upheld and amount treated as capital receipt disclosed in AY 2002 03. - HELD THAT: - The non compete arrangement was originally for ten years for which Rs. 50,00,000/- was paid and, by the supplementary agreement dated 14.01.2002, the annual termination option was removed so that the balance deposit of Rs. 35,00,000/- became payable and constituted lumpsum consideration for the remaining period. The supplementary agreement's execution is supported by board minutes, and the stated commercial reason for the amendment (takeover) is plausible. The AO's reliance on the subsequent insertion of sub clause (va) to section 28 as a basis to treat Rs. 5,00,000/- as business income was not a sustainable reason to disturb the factual and legal characterisation made by the assessee and accepted by the CIT(A). Consequently, the CIT(A)'s conclusion that the balance sum ceased to be a deposit and was correctly disclosed as capital receipt in AY 2002 03 is upheld. [Paras 7]

First ground dismissed; addition restored by AO deleted and amount treated as capital receipt for AY 2002 03.

Distinction between capital and revenue receipts on termination of an agency/venture - treatment of termination fee and severance as capital receipt - Termination fee and severance received on termination of the joint venture are capital receipts and taxable as capital gains, not as income from other sources or salary. - HELD THAT: - The amounts received pursuant to the termination agreement dated 31.07.2006 were paid to compensate for termination of the joint venture arrangement. Applying the principle that where cancellation of a contract impairs the trading structure or deprives the assessee of what is in substance the source of income, the compensation is a capital receipt, the Tribunal held that both the termination fee and the severance payment were received on account of termination of the JV and therefore properly treated as capital receipts and offered as long term capital gains. The AO's characterisation of the termination fee as income from other sources and the severance as salary was reversed on this basis. [Paras 12]

Second ground dismissed; termination fee and severance treated as capital receipts (taxable as capital gains).

Final Conclusion: The revenue's appeal is dismissed in entirety; the CIT(A)'s deletion of the addition relating to non compete fees is upheld and the termination and severance payments are held to be capital receipts taxable as capital gains.

Unexplained cash credit u/s 68 - identity, creditworthiness and genuineness - onus on assessee to prove identity, creditworthiness and genuineness of shareholders - banking channels and audited accounts as evidence of genuineness - adverse inference not sustainable based on surmise and conjecture - discreet enquiries and duty to confront the assessee with findings

Unexplained cash credit u/s 68 - identity, creditworthiness and genuineness - onus on assessee to prove identity, creditworthiness and genuineness of shareholders - banking channels and audited accounts as evidence of genuineness - adverse inference not sustainable based on surmise and conjecture - discreet enquiries and duty to confront the assessee with findings - Deletion of addition made under section 68 in respect of share capital and share premium was justified. - HELD THAT: - The assessee produced detailed contemporaneous records - ITR acknowledgements, audited financial statements, bank statements, charts of funds flow and confirmations - tracing the funds into the assessee through group companies and special purpose vehicles, including the 'source of source'. These documents established the identity of the share applicants, their creditworthiness (including high networth of SGJHL, EFJL and other source entities) and the genuineness of the transactions routed through banking channels. The AO's conclusion rested on general allegations that the subscriber companies were paper entities and on unspecified "discreet enquiries"; he did not produce specific contrary evidence, nor did he confront the assessee with the results of such enquiries or verify records from banks or other departmental sources. Summons issued under section 131 seeking collateral information irrelevant to the genuineness of the share subscriptions did not justify rejection of the documentary proof furnished. On the totality of the material, the Tribunal found that the assessee had discharged the onus under section 68 and that the AO's adverse inference was based on surmise and conjecture; consequently the CIT(A)'s deletion of the addition was sustained. [Paras 7, 8, 9]

The Tribunal upheld the deletion of the addition made under section 68, dismissing the revenue's grounds.

Final Conclusion: The appeals of the revenue are dismissed; the Tribunal affirms the CIT(A)'s deletion of the addition under section 68 for Asst Year 2012-13 on the basis that the assessee proved identity, creditworthiness and genuineness and the AO's adverse finding was unsupported by specific evidence.

Interim stay - stay application - interference by writ court with tribunal orders - part payment as factor for grant of stay - pending appeals for earlier assessment years as relevant consideration - expeditious disposal of statutory appeals

Interim stay - stay application - part payment as factor for grant of stay - pending appeals for earlier assessment years as relevant consideration - interference by writ court with tribunal orders - Whether the High Court should interfere with the ITAT's interim order dated 2nd January 2019 granting stay in ITA 8058/Del/2018 (AY 2015-16) and what directions, if any, should be given. - HELD THAT: - The Court examined the original ITAT record, which contained a stenographer's note dated 2nd January 2019 indicating dictation of an order and a file endorsement showing the matter listed on 14th January 2019. In view of these records, the Court was unable to reach a definite conclusion that the stay was not disposed of on 2nd January 2019. On the merits of the impugned stay, the ITAT had regarded two factors as relevant: the assessee's part payment towards the demand and the existence of appeals challenging re-opening of earlier assessments (AYs 2013-14 and 2014-15). The Court noted that those earlier appeals were subsequently allowed by the ITAT on 11th March 2019 and that appeals by the Revenue against that order were pending. Balancing these considerations and absent a clear basis to set aside the interim order, the Court declined to interfere with the ITAT's stay order. However, the Court directed that the main appeal (ITA 8058/Del/2018 for AY 2015-16) be listed before the ITAT for hearing on merits at the earliest practicable date and instructed the ITAT to endeavour to dispose of the appeal expeditiously, with co-operation of counsel. [Paras 5, 6, 7, 8, 10]

The petition challenging the ITAT's interim order dated 2nd January 2019 is dismissed insofar as interference is sought; the ITAT is directed to list and hear ITA 8058/Del/2018 (AY 2015-16) on merits and to dispose of it expeditiously.

Final Conclusion: The High Court refused to disturb the ITAT's interim order dated 2nd January 2019 granting stay in respect of AY 2015-16, but directed that the main appeal ITA 8058/Del/2018 be listed for hearing on merits at the earliest and expeditiously disposed of; the petition is disposed accordingly.

New litigation policy - CBDT circular dated 11.07.2018 - Minimum tax effect threshold for High Court litigation - Retrospective application of administrative litigation policy - Withdrawal of appeal

New litigation policy - Minimum tax effect threshold for High Court litigation - CBDT circular dated 11.07.2018 - Withdrawal of appeal - Permissibility of withdrawal of the Revenue's appeal in light of the CBDT circular prescribing a minimum tax-effect threshold for High Court litigation and its retrospective application. - HELD THAT: - The appeal was filed in June 2018 and the Revenue conceded that the tax effect in dispute was Rs. 34,01,999/-, which is below the minimum value of Rs. 50,00,000/- required by the Department's 'new litigation policy' as encapsulated in the CBDT circular dated 11.07.2018. The Court noted that the Apex Court has held that the circular has retrospective application to pending litigations. In consequence, and on the Revenue's request, the Court permitted withdrawal of the appeal rather than adjudicating the merits of the underlying income-tax dispute. [Paras 4, 6, 7]

Permission granted to withdraw the appeal; appeal dismissed as withdrawn.

Final Conclusion: The High Court allowed the Revenue to withdraw the appeal under the Department's litigation policy (CBDT circular dated 11.07.2018), and accordingly dismissed the appeal as withdrawn since the tax effect fell below the prescribed threshold.

Writ jurisdiction under Articles 226 and 227 - Alternative statutory remedy of appeal and relegation to appellate forum - Right to reasons for issuance of notice under Section 153A - Interim protection to make statutory appeal meaningful - Bar on coercive recovery pending short period to file appeal

Writ jurisdiction under Articles 226 and 227 - Alternative statutory remedy of appeal and relegation to appellate forum - Whether the High Court should exercise writ jurisdiction or remit the petitioner to the statutory remedy of appeal. - HELD THAT: - The Court held that ordinarily disputes under fiscal legislation must be ventilated through the statutory appellate forum and that the existence of an alternate, efficacious remedy of appeal ordinarily precludes exercise of writ jurisdiction. The petitioner had not plausibly shown that the statutory remedy was ineffective; the contention that payment conditions imposed on filing an appeal rendered the remedy illusory was considered inadequate in law in view of authorities treating the right of appeal as subject to statutory conditions. Consequently, the writ petitions could not be entertained to set aside the assessment orders insofar as they sought final adjudication on merits, and the petitioner is to be relegated to the Commissioner of Income Tax (Appeals) or other competent appellate authority to challenge the assessment orders. [Paras 8, 9, 10]

Petitioner relegated to the statutory appellate remedy; writ jurisdiction declined for final adjudication while keeping other contentions open.

Right to reasons for issuance of notice under Section 153A - Whether the petitioner is entitled to be furnished the reasons for issuance of the notices under Section 153A. - HELD THAT: - The Court found the petitioner's contention that reasons were not furnished to be sustainable. The Revenue conceded during proceedings that reasons would be furnished in view of the petitioner having now filed the returns. The Court accordingly directed the Income Tax Officer to furnish the reasons for issuing the subject notices forthwith, recognising the procedural entitlement to reasons as material to the petitioner's ability to challenge the notices and subsequent assessment. [Paras 11]

Respondent directed to furnish reasons for issuance of the Section 153A notices to the petitioner forthwith.

Interim protection to make statutory appeal meaningful - Bar on coercive recovery pending short period to file appeal - Whether limited interim protection should be granted to enable the petitioner to file appeals and to prevent coercive recovery while the statutory remedy is pursued. - HELD THAT: - The Court observed that although the petitioner must be relegated to the appellate forum, equity requires limited protection to ensure the right of appeal is meaningful where appeals had not yet been filed and certain procedural defects in reassessment orders were alleged. By analogy with precedents cautioning against hasty coercive recovery, the Court granted a four-week period within which the petitioner may file appeals; during this period the Appellate Authority shall not raise limitation or delay as a defence and the Revenue shall not coerce payment under the reassessment or impugned notices. The Court emphasised that this relief is confined to the peculiar facts of the case and is not to serve as a precedent. [Paras 12]

Petitioner given four weeks to file appeals; Appellate Authority not to raise limitation/delay and Revenue restrained from coercive recovery for that period.

Final Conclusion: Writ petitions partly allowed: final relief on merits declined and petitioner relegated to statutory appeal, but Revenue directed to furnish reasons for the Section 153A notices and limited interim protection granted - petitioner permitted four weeks to file appeals without limitation/delay objections and without coercive recovery; other contentions kept open.

Stay of recovery - condition for grant of stay - deposit as pre-condition for continuation of stay - statutory appeal as an important legal remedy - direction to dispose of appeal expeditiously

Stay of recovery - condition for grant of stay - deposit as pre-condition for continuation of stay - Grant of interim stay of recovery despite earlier non-compliance with condition imposed by the Commissioner of Income Tax (Appeals). - HELD THAT: - The Court exercised its discretionary jurisdiction to grant a stay of recovery of tax determined for the assessment year 2013-2014 notwithstanding the petitioner's non-compliance with the earlier condition imposed in the appellate stay order (Ext.P4). Having regard to the importance of the statutory appeal and after considering submissions, the Court imposed a fresh, time bound condition for continuation of the stay: the petitioner must deposit 10% of the tax demanded within six weeks and a further 10% within the following six weeks. The stay will continue only so long as these conditions are complied with; in default the stay shall be deemed vacated without further reference to the Court.

Stay of recovery granted subject to deposits of 10% within six weeks and a further 10% within the next six weeks; default results in automatic vacatur of stay.

Statutory appeal as an important legal remedy - direction to dispose of appeal expeditiously - Whether the Court could direct the Commissioner of Income Tax (Appeals) to dispose of the pending appeal and, if so, within what timeframe. - HELD THAT: - While noting that the earlier appellate order (Ext.P4) was not directly challenged, the Court nonetheless exercised its discretion to direct the 2nd respondent to consider and dispose of the petitioner's appeal (Ext.P3). The Court directed that the 2nd respondent should deal with the appeal as expeditiously as possible and preferably within six months from receipt of a copy of this order, thereby emphasising timely adjudication of the statutory appellate remedy.

The 2nd respondent directed to consider and dispose of the appeal preferably within six months from receipt of this order.

Final Conclusion: Writ petition disposed by granting a conditional stay of recovery for assessment year 2013-2014 on deposit of 10% within six weeks and a further 10% within the next six weeks, and by directing the Commissioner of Income Tax (Appeals) to consider and dispose of the appeal preferably within six months; stay to lapse automatically on default.

Writ of mandamus - exercise of discretion in writ jurisdiction - extension of time for payment of instalment - disposal of representation - bona fides

Disposal of representation - extension of time for payment of instalment - exercise of discretion in writ jurisdiction - bona fides - First respondent to consider and dispose of Ext. P3 to the limited extent of deciding the petitioner's request for extension of time to pay the last instalment. - HELD THAT: - The petitioner sought writs directing grant of two months to pay dues and restoration of account operations but curtailed his relief to a request that Ext. P3 be disposed of. The revenue opposed relief on account of the petitioner's alleged complacency in complying with instalment conditions but offered that, if the petitioner cooperated, the representation seeking extension could be considered. Appreciating the petitioner's stated bona fides and the objective of enabling payment of the last instalment without further litigation, the Court exercised its discretionary writ jurisdiction to direct the first respondent to consider and dispose of Ext. P3 limited to the question of extension of time for payment. The Court required expeditious disposal, preferably within two weeks from receipt of the judgment, thereby directing procedural action rather than finally adjudicating entitlement to an extension. [Paras 6]

The first respondent is directed to consider and dispose of Ext. P3 insofar as it seeks extension of time for payment of the last instalment, expeditiously and preferably within two weeks from receipt of a copy of this judgment.

Final Conclusion: Petitions disposed by directing the first respondent to consider and decide the petitioner's representation (Ext. P3) limited to the grant of time for payment of the last instalment, expeditiously and preferably within two weeks from receipt of the judgment.

Registration under Section 12AA - grant of registration - charitable purpose - remand versus direction to register - assessment of genuineness of activities - perversity of administrative order

Remand versus direction to register - registration under Section 12AA - Validity of the Tribunal's direction to the Commissioner to grant registration under Section 12AA instead of remitting the matter for fresh consideration - HELD THAT: - The Tribunal examined the material on record and found evidence of charitable activity (lists of patients and visiting-fee payments for free consultations) and concluded that the CIT(E)'s refusal lacked logical reasoning. The High Court held that no error was shown in the Tribunal directing grant of registration rather than ordering remand, endorsing the Tribunal's view that the objects were not in controversy, that the trust was nascent with limited funds used for charitable purposes, and that the CIT(E)'s requirement for further confirmations was unwarranted. The Court therefore found no ground to interfere with the Tribunal's direction that registration be granted, subject to any lawful conditions the CIT(E.) may impose. [Paras 4, 5]

Tribunal's direction to grant registration was upheld; no remand required.

Assessment of genuineness of activities - charitable purpose - perversity of administrative order - Whether the CIT(E) was justified in holding that the trust's objects were not pursued and that its activities were not corroborated, including contentions about linkage with a commercially run hospital and self-generated evidence - HELD THAT: - The Tribunal recorded that records showed treatment of poor patients and payment of visiting fees for free consultations, facts not controverted by the revenue. The High Court found the CIT(E)'s conclusion-that objects were not pursued and activities uncorroborated-illogical given the nascent stage of the trust and the limited donations which were utilized for charitable purposes. The Court accepted the Tribunal's assessment that the materials on record supported pursuit of some stated objects and that the CIT(E)'s adverse inference concerning intricate commercial linkage and reliance on handwritten/self-generated documents did not justify rejection of registration. Consequently, the order of the CIT(E) was held not to be perverse. [Paras 4, 5]

Findings of the Tribunal that the trust pursued charitable objects and that the CIT(E)'s rejection was unreasonable were maintained; the CIT(E)'s order was set aside as not sustainable.

Final Conclusion: The revenue's appeal is dismissed. The Tribunal's order directing grant of registration under Section 12AA is upheld; the revenue remains free to initiate proceedings under sub section (3) of Section 12AA for withdrawal or cancellation of registration if later evidence establishes that the trust's activities are not genuine or not in accordance with its objects.

Disallowance under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules - Deletion of expenditure disallowance relating to exempt income - Application of binding judicial precedent

Disallowance under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules - Deletion of expenditure disallowance relating to exempt income - Application of binding judicial precedent - Validity of the deletion by the Tribunal of the addition made under Section 14A read with Rule 8D for AY 2013-14. - HELD THAT: - The revenue challenged the Tribunal's order deleting the disallowance quantified by the Assessing Officer under Section 14A read with Rule 8D. The High Court examined the matter and observed that the controversy in the present appeal was covered by an earlier decision of this Court in ITA-322-2016 (Principal Commissioner of Income Tax-I, Chandigarh v. M/s Vardhman Chemtech Private Limited) dated 28.8.2018, which had dismissed a revenue appeal against deletion of an identical disallowance under Section 14A read with Rule 8D. In view of that binding precedent operating between the parties and on the point involved, the Court found no ground to interfere with the Tribunal's deletion of the disallowance for the assessment year 2013-14 and dismissed the appeal. [Paras 4, 5]

The Tribunal's deletion of the disallowance under Section 14A read with Rule 8D for AY 2013-14 is upheld and the revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed; Tribunal order deleting the Section 14A/Rule 8D disallowance for assessment year 2013-14 is sustained in view of this Court's earlier decision in ITA-322-2016.

Stay of demand under the provisos to Section 254(2A) of the Income Tax Act, 1961 - vacation of statutory stay after expiry of 365 days - validity of appellate order where combined period of stay exceeds 365 days - substantial question of law

Validity of appellate order where combined period of stay exceeds 365 days - stay of demand under the provisos to Section 254(2A) of the Income Tax Act, 1961 - The contention that the Income Tax Appellate Tribunal acted in contravention of the Second Proviso to Section 254(2A) because the combined period of stay exceeded 365 days was not a substantial question of law sustaining the appeal. - HELD THAT: - The High Court recorded that the question raised was not res integra and that an earlier decision of this Court in ITA-5-2016 had dealt with an identical contention and held it not to be a substantial question of law. In view of that precedent, the present appeal could not be entertained on that ground and no separate adjudication on the merits of the alleged contravention of the Second Proviso was undertaken.

Contention rejected as not constituting a substantial question of law; appeal dismissed on the basis of earlier decision.

Vacation of statutory stay after expiry of 365 days - substantial question of law - The submission that the ITAT's order should be treated as void ab initio in light of the Third Proviso to Section 254(2A), which provides that stay of demand stands vacated after 365 days, was not a substantial question of law for the purposes of this appeal. - HELD THAT: - The Court observed that the matter had already been concluded by its earlier ruling in ITA-5-2016 which addressed an identical contention and determined that it did not constitute a substantial question of law. Accordingly, the present appeal could not be sustained on the basis that the stay was rendered void by operation of the Third Proviso, and no fresh determination on the point was made.

Submission held not to raise a substantial question of law; appeal dismissed following precedent.

Final Conclusion: Appeal dismissed: the questions raised regarding the effect of the provisos to Section 254(2A) were held not to be substantial questions of law in view of this Court's prior decision in ITA-5-2016, and the present appeal was dismissed on that basis.

Summary order. Appeal dismissed as withdrawn by the revenue in view of internal instructions/circular; liberty granted to seek revival and withdrawal not to be treated as affirmation on merits; legal issues left open for adjudication in an appropriate case.

Condonation of delay - restoration of appeal - rejection under Rule 986 of the Bombay High Court (Original Side) Rules, 1980 - onus of numbering and registration lies on Registry - technical delay

Condonation of delay - technical delay - Delay of 2,386 days in filing the notice of motion was condoned. - HELD THAT: - The Court accepted the explanation furnished in the additional affidavit for the long delay and treated the delay as only technical because the delay calculation was taken from the date of original rejection rather than from the later order. The Court observed that objections had been removed within the stipulated time and found the explanation for the intervening period sufficient to justify condonation. Having regard to these facts, the application for condonation of delay was allowed. [Paras 4, 5, 7]

Delay of 2,386 days is condoned and the notice of motion is made absolute in respect of condonation.

Restoration of appeal - rejection under Rule 986 of the Bombay High Court (Original Side) Rules, 1980 - The appeal, which stood rejected for want of numbering under Rule 986, was restored. - HELD THAT: - The Court noted that the appeal had been rejected under Rule 986 because, despite removal of office objections, the matter was not numbered and registered. Since the objections were removed within time and the delay in securing numbering was not attributable to the appellant, the Court held that a case was made out for restoration. Consequently, the order rejecting the appeal was set aside and the appeal was ordered to be restored. [Paras 2, 5, 7, 8]

The order rejecting the appeal under Rule 986 is set aside and the appeal is restored.

Onus of numbering and registration lies on Registry - conditional order - A conditional order requiring removal of office objections cannot impose the obligation on the party to secure numbering and registration; that duty is that of the Registry. - HELD THAT: - The Court observed that while a conditional order may properly require a party to remove office objections within a stipulated period, the subsequent act of numbering and registering the matter lies within the control of the Registry and not the filing party. Accordingly, the Court recorded that the onus of getting the matter numbered and registered cannot be cast on the party and suggested that the Prothonotary and Senior Master take note of this position. The Court directed that the Registry should number and register the restored appeal and place it before the Court under the fresh admission caption. [Paras 6, 8]

Registry is directed to number and register the appeal; a party shall not be disadvantaged under Rule 986 solely for failure to secure numbering and registration.

Final Conclusion: The High Court condoned the delay of 2,386 days, set aside the order rejecting the appeal under Rule 986, restored the appeal, and recorded the legal principle that numbering and registration after removal of office objections is the duty of the Registry, directing the Registry to number and place the restored appeal for fresh admission.

Requirement of WPC licence for import of wireless equipment - retrospective effect of post event DGFT/WPC clarifications - remand for technical verification and re adjudication

Requirement of WPC licence for import of wireless equipment - retrospective effect of post event DGFT/WPC clarifications - Whether the Fortinet Secured Indoor Wireless access point required a Wireless Planning and Coordination (WPC) licence at the relevant time and whether post event DGFT/WPC clarifications operate retrospectively to negate that requirement. - HELD THAT: - The Tribunal recorded that the product admitted to be a wireless equipment and that at the relevant time the import policy and DGFT communications carried riders indicating that WPC permission or compliance with WPC rules could be required. Although later DGFT clarification of 16 April 2019 suggested no separate WPC licence was necessary for similar items, that clarification is post event and cannot be given retrospective effect to prejudice the then applicable requirement. The Tribunal further observed it was not in a position to undertake technical appreciation of product specifications vis a vis WPC requirements and that the notifications and DGFT letters relied upon contained explicit riders about WPC compliance. In the interest of justice and to resolve the factual/technical question, the Tribunal directed a technical examination by WPC to determine whether a WPC licence was necessary for the impugned item at the relevant time; the outcome of that technical report would form the basis for re adjudication by the original Adjudicating Authority. [Paras 4, 5]

Matter remitted to the Original Adjudicating Authority for fresh adjudication after the WPC technical report; samples to be sent to WPC and the report shared with the appellant, who shall be given an opportunity of being heard.

Remand for technical verification and re adjudication - Procedure and timeline for technical verification and consequent re adjudication. - HELD THAT: - The Tribunal directed the department to send four random samples from the consignment to the WPC within 15 days. WPC was directed to furnish a technical report within 15 days of receipt of samples stating whether WPC licence was necessary for import of the items at the relevant time. The Original Adjudicating Authority was directed to re adjudge the issue on the basis of that report within one month of receiving it and to provide the report to the appellant and afford a hearing before passing its decision. The Tribunal accepted that remand was permissible under Section 128A of the Customs Act to enable necessary enquiry and re adjudication. [Paras 5]

Appeal allowed by way of remand on specified timelines and directions for sample submission, technical reporting by WPC, and re adjudication with opportunity to the appellant.

Final Conclusion: The Tribunal allowed the appeal only to the extent of remanding the matter for technical verification by WPC and fresh adjudication by the Original Adjudicating Authority in accordance with specified timelines, holding that post event clarifications could not be given retrospective effect and that the technical question must be resolved before final disposal.

Refund of customs duty - limitation period for refund claims - communication/dispatch of appellate order for computing limitation - deposit under protest - unjust enrichment - burden of proof to establish duty not passed on - remand for fresh consideration of evidence

Limitation period for refund claims - communication/dispatch of appellate order for computing limitation - Whether the refund claim was barred by limitation - HELD THAT: - The Tribunal found that the dispatch/communication date of its order is the relevant date for computing the six-month period for filing a refund claim. The Tribunal's order dated 01/04/2005 was dispatched to the appellant on 05/04/2005 and the refund claim was filed on 04/10/2005. On this basis the claim was held to be within time and the finding of the authorities below that the claim was barred by limitation was set aside. [Paras 7]

Refund claim held within the statutory six-month period; rejection on limitation ground set aside.

Unjust enrichment - deposit under protest - burden of proof to establish duty not passed on - remand for fresh consideration of evidence - Whether the refund must be denied on the ground of unjust enrichment or whether the claim requires further adjudication - HELD THAT: - The Tribunal recorded that the authorities below rejected the refund on unjust enrichment grounds because they were not satisfied that the appellant had proved that the incidence of duty was borne by it and not passed on. The appellant produced Chartered Accountant certificates and undertook to produce balance sheets and other supporting documents. Given these materials and the appellant's offer to place the relevant records before the adjudicating authority, the Tribunal did not decide the unjust enrichment issue on merits but remanded the matter to the adjudicating authority for fresh consideration of the certificates and all supporting evidence, with a direction to afford the appellant a reasonable opportunity. [Paras 7]

Issue of unjust enrichment remanded to the adjudicating authority for fresh consideration of the certificates and supporting documents, with an opportunity to the appellant.

Final Conclusion: Appeal allowed in part: the refund claim is held to be within time; the question of unjust enrichment is remanded to the adjudicating authority for fresh consideration of the evidence produced by the appellant, with a direction to provide a reasonable opportunity.

Eligibility for FTA benefit - origin criteria - special origin criteria under the Schedule to the FTA notification - country of origin certificate - non-contracting country content limit for origin - least developed contracting states exception - DGFT jurisdiction under Section 5 of the FTDR Act

Eligibility for FTA benefit - origin criteria - country of origin certificate - Imported betel nuts were not eligible for benefit of Notification No.105/99-Cus. because the Country of Origin Certificate recorded Origin Criteria as "B" 65.83% instead of the required entry for Special Origin Criteria. - HELD THAT: - The Tribunal upheld the finding that entitlement to the FTA notification turns on fulfillment of the prescribed Origin Criteria in the Schedule. Where an importer claims Special Origin Criteria under the Schedule (para 10), the Country of Origin Certificate must record the appropriate code (letter "D") in the specified box. The COO produced by the appellant showed Origin Criteria as "B" with 65.83%, and therefore did not conform to the Schedule's requirement for claiming the Special Origin Criteria. The Tribunal found no infirmity in the earlier authority's conclusion that the goods did not fulfil the prescribed Origin Criteria and thus were not eligible for the notification's benefit. [Paras 4, 5]

Appeal dismissed on merits; goods held not eligible for FTA benefit due to incorrect Origin Criteria entry in the COO.

Non-contracting country content limit for origin - least developed contracting states exception - The increase of the permissible non-contracting origin content to 70% for products originating in least developed contracting States does not cure the defect of an incorrect Origin Criteria entry in the COO; the goods still failed to satisfy the Schedule's origin requirement. - HELD THAT: - The appellant contended that the percentage limit for non-contracting country material was raised to 70% by a subsequent notification applicable to least developed contracting States (such as Bangladesh). The Tribunal recorded the earlier authority's analysis that, while the amendment raises the percentage limit for products from least developed contracting States, the Schedule separately prescribes the procedural requirement of recording Special Origin Criteria (letter "D") in the COO when para 10 is invoked. Since the COO showed criteria "B", the documentary non-compliance meant the goods did not meet the prescribed origin regime despite the amended percentage threshold. [Paras 4, 5]

The 70% exception for least developed contracting States does not validate a COO that fails to record the Special Origin Criteria; the goods remain ineligible.

DGFT jurisdiction under Section 5 of the FTDR Act - interpretation of notifications under FTDR Act - Reliance on the decision in M/s. S. Mira Commodities Pvt. Ltd. was rejected; subsequent High Court precedent and authorities establish the DGFT's competence and the non-applicability of that earlier ratio to the present claim. - HELD THAT: - The appellant sought to rely on a jurisdictional High Court decision attacking tariff fixing under the Foreign Trade Development & Regulation framework. The Tribunal noted that the jurisdictional High Court itself distinguished that earlier ratio in a later decision (M/s. HRB Boarding & Lodging Pvt. Ltd. v. Union of India), which recognized the Central Government's and DGFT's roles in issuing notifications under the FTDR Act. The Tribunal also referred to a Division Bench decision of the Kerala High Court reaffirming DGFT's jurisdiction. On that basis the Tribunal held that reliance on the earlier ratio would not assist the appellant. [Paras 4]

The appellant's reliance on M/s. S. Mira Commodities Pvt. Ltd. is unavailing in view of subsequent authoritative decisions recognizing the DGFT's competence; that line of argument does not affect the outcome.

Final Conclusion: The appeal is dismissed: the imported goods were not entitled to benefit under Notification No.105/99-Cus. because the Country of Origin Certificate did not record the required Special Origin Criteria (letter "D"), and related arguments regarding tariff fixation and the 70% exception for least developed contracting States did not alter that conclusion.

Applicability of Apex Court precedents on additional duty and excise parity - Levy of additional duty under Section 3(1) of the Tariff Act - presumption of domestic manufacture for quantification - Concessional Countervailing Duty entitlement on imported goods - Recall and reassessment of bills of entry to give retrospective concessional benefit

Applicability of Apex Court precedents on additional duty and excise parity - Levy of additional duty under Section 3(1) of the Tariff Act - presumption of domestic manufacture for quantification - Ratio of the Apex Court in Thermax, SRF, Aidek and Hyderabad Industries applies to the facts and entitles the importer to the concessional additional duty rate. - HELD THAT: - The Tribunal held that the principles laid down by the Apex Court in M/s. Thermax Pvt. Ltd., M/s. SRF Ltd., M/s. Aidek Tourism Services Pvt. Ltd., and M/s. Hyderabad Industries Ltd. govern the present controversy. Those decisions establish that for the purpose of levy and quantification of additional duty under Section 3(1) of the Tariff Act the imported article is to be treated as though a like article can be manufactured in India and the excise duty leviable on such imagined domestic manufacture is the reference for quantification; actual domestic manufacture is not a precondition for attraction of the additional duty. Applying that ratio to the present facts, the Tribunal found that the respondents were entitled to the concessional rate of Countervailing Duty as claimed under the relevant notification and that the legal principle in the cited Apex Court decisions applies on all fours.

The Apex Court ratio applies and entitles the importer to the concessional additional duty treatment.

Concessional Countervailing Duty entitlement on imported goods - Recall and reassessment of bills of entry to give retrospective concessional benefit - The Commissioner (Appeals) was correct in directing recall and reassessment of the bills of entry to grant the concessional CVD; Revenue's appeal against that direction is without merit and is dismissed. - HELD THAT: - The Tribunal observed that the impugned order of the Commissioner (Appeals) simply directed the original assessing authority to recall and reassess the bills of entry and apply the ratio of the Apex Court decisions (noted above). The jurisdictional High Court decision relied on by Revenue related to the ultra vires challenge to a specific notification and did not displace the governing Apex Court principles. Given that the Commissioner (Appeals) directed reassessment in accordance with settled law as interpreted by the Apex Court, there was no infirmity warranting interference. Consequently, the departmental appeal was found to lack merit.

The direction to recall and reassess the bills to apply the concessional CVD is upheld; Revenue's appeal is dismissed.

Final Conclusion: The departmental appeal is dismissed; the Tribunal upholds the Commissioner (Appeals) direction to recall and reassess the bills of entry and to apply the concessional Countervailing Duty in accordance with the ratio of the cited Apex Court decisions.

Waiver of requirement under Section 244(1)(a) - status of member for limited purpose of section 244 - oppression and mismanagement - manipulation, fabrication and forgery of records - inadmissibility of non-production of company records as justification to defeat waiver - application of precedent where applicant must be a member

Waiver of requirement under Section 244(1)(a) - status of member for limited purpose of section 244 - manipulation, fabrication and forgery of records - Legitimacy of granting waiver under Section 244(1)(a) to a person whose shareholding is alleged to have been reduced to nominal/zero by clandestine transfer and fabrication of records - HELD THAT: - The Tribunal permissibly exercised its power to waive the eligibility condition in the factual matrix of this case. The applicant was admittedly a founding shareholder and director holding 25% at incorporation; the appellants failed to produce documents of allotment/transfer and their explanation for non-production was not found convincing. The pleaded substantial reduction of the applicant's shareholding to a nominal percentage was alleged to be the result of manipulation, fabrication and clandestine transfers. In those circumstances, and having regard to the parties being members of one family and the absence of convincing documentary proof to show the applicant ceased to be a member, refusal of waiver would amount to non suiting a party alleging oppression where the core Company Petition requires investigation of whether the transfers were with or without the applicant's consent. The cited authority requiring the applicant to be a member does not squarely apply on the proved facts; the Tribunal was entitled to hold that the applicant could not be treated as divested of membership for the limited purpose of considering waiver under Section 244(1)(a). The appellate court found no infirmity in the Tribunal's reasoning and declined to interfere.

Tribunal's grant of waiver under Section 244(1)(a) affirmed and appeal dismissed

Final Conclusion: The Appellate Tribunal dismissed the appeal and upheld the Tribunal's order granting waiver of the Section 244(1)(a) eligibility requirement, holding that in the absence of convincing documentary proof and on allegations of clandestine manipulation and fabrication, the applicant could not be held to have ceased to be a member for the limited purpose of waiver.

Restoration of struck-off company - Just ground for restoration - Effect of pending litigation on restoration - Statutory non-compliance and discretion to restore - Power of Tribunal under Section 252(3)

Restoration of struck-off company - Just ground for restoration - Effect of pending litigation on restoration - Statutory non-compliance and discretion to restore - Power of Tribunal under Section 252(3) - Whether the Tribunal erred in refusing to restore a company struck off the Register of Companies where the company, though non-compliant with statutory filings, remained a live entity and its operations were arrested by pending litigation. - HELD THAT: - The Appellant company had not filed annual returns and balance sheets since incorporation, leading to action under Section 248 and striking off. The Appellant, however, produced evidence (some not before the Tribunal) showing continued existence, ownership of land, payment of municipal taxes and interruption of commercial operations due to pending litigation and an order of stay by the High Court. Judicial precedent recognises pending litigation as a just ground for restoration where a company is contesting proceedings and its ability to defend the suit would be prejudiced by removal. The Tribunal confined itself to statutory non-compliance and declined restoration without adequately considering cogent reasons advanced for restoration, including that the company was not a shell and was prevented from functioning by litigation. Given these materials and the admitted existence of the company, it was within the Tribunal's power under Section 252(3) to order restoration on a just ground notwithstanding past non-compliance. The Registrar's report that filings must be made online and the publication of notice did not negate the justness of restoration. In light of the foregoing, refusal to restore would frustrate the company's ability to defend the pending litigation and extinguish its existence, and therefore restoration is warranted subject to compliance conditions. [Paras 5, 6, 7]

The appeal is allowed; the impugned order is set aside and the struck-off company is restored to the Register of Companies, subject to filing all statutory compliances, fees and penalties within the time directed.

Final Conclusion: Appeal allowed. The order refusing restoration is set aside and the Company is restored to its original status; the Company is directed to file all statutory returns, compliances and pay prescribed fees and penalties within thirty days (unless extended by the Registrar).

Compounding of offences under Section 621A of the Companies Act, 1956 - power of Tribunal to compound offences under Section 441 of the Companies Act, 2013 - compoundable offence - technical/procedural lapse - absence of mala fide intention - conditional compounding subject to deposit of compounding fees

Compounding of offences under Section 621A of the Companies Act, 1956 - power of Tribunal to compound offences under Section 441 of the Companies Act, 2013 - compoundable offence - Whether this Tribunal has jurisdiction and power to compound the alleged contravention of Section 217(1) of the Companies Act, 1956 relating to the company's balance sheet for the financial year 2010-2011. - HELD THAT: - The Tribunal examined the statutory scheme and transitional notifications and held that the present matter, though the alleged breach relates to the financial year 2010-2011, is amenable to compounding. The Tribunal observed that offences punishable under the Companies Act, 1956 which are made compoundable under Section 621A of the Companies Act, 1956 fall within its power to compound. The Central Government's notification transferring matters to the Tribunal requires disposal in accordance with the Companies Act, 2013 or the Companies Act, 1956; further Section 441 of the Companies Act, 2013 confers compounding power on the Tribunal with effect from 01.06.2016. Having regard to these provisions and the nature of the offence, the Tribunal concluded it possessed authority to consider and compound the alleged contravention. [Paras 6, 7, 10]

The Tribunal has jurisdiction and power to compound the alleged contravention of Section 217(1) of the Companies Act, 1956 relating to FY 2010-2011.

Technical/procedural lapse - absence of mala fide intention - remedial compliance - conditional compounding subject to deposit of compounding fees - Whether compounding should be allowed on the facts of this case and on what conditions. - HELD THAT: - On the facts, the Tribunal found the omission to attach the Board's Report to the balance sheet for the year 2010-2011 to be a technical and procedural lapse. The applicants had prepared, approved and circulated the Board's Report at the relevant times and subsequently attached the Board's Report to the compounding application; they admitted the default and explained the non attachment as inadvertent and without mala fide intent. Having regard to the compoundable nature of the offence, the remedial steps taken by the applicants, and the admission of default, the Tribunal exercised its discretion to allow compounding. The allowance was made conditionally upon each applicant depositing the specified compounding amount with the Registrar of Companies within the time directed, failing which the ROC was authorised to proceed with appropriate action including prosecution. [Paras 9, 10, 11, 12, 13]

Compounding allowed on facts: Petitioners 1 and 2 permitted to compound the offence subject to depositing the directed compounding fees within the stipulated period; failure to comply will invite action by the Registrar of Companies.

Final Conclusion: The Company Petition is conditionally allowed: the Tribunal, being empowered to compound the compoundable contravention of Section 217(1) of the Companies Act, 1956 relating to the 2010 11 balance sheet, permitted compounding on the applicants' admission and remedial compliance, subject to payment of the directed compounding fees within the time fixed, failing which the Registrar of Companies may take appropriate action.

Preferential transactions - Avoidance of undervalued transactions - Relevant period for avoidable transactions - Extortionate credit transactions - Fraudulent trading / wrongful trading - Ordinary course of business - Related party - Insolvency commencement date

Preferential transactions - Ordinary course of business - Related party - Insolvency commencement date - Whether the transactions challenged by the Resolution Professional constitute preferential transactions under Section 43 of the I&B Code. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the Resolution Professional did not plead or demonstrate a transfer made for the benefit of a creditor which put that creditor in a better position than it would have been under distribution in accordance with Section 53. The transactions dated 2009-10 were held to have been made in the ordinary course of business of a real estate developer and the purchasers were not alleged to be related parties nor were the transactions within two years preceding the insolvency commencement date (12th February, 2018). On these bases the application under Section 43 was correctly rejected. [Paras 10, 11]

Application under Section 43 dismissed for failure to establish a preferential transfer.

Avoidance of undervalued transactions - Relevant period for avoidable transactions - Related party - Insolvency commencement date - Whether the transactions are avoidable as undervalued transactions under Sections 45 and 46 of the I&B Code. - HELD THAT: - The Tribunal agreed with the Adjudicating Authority that the transactions occurred in 2009-10 and therefore fall outside the statutory relevant period: they were not with related parties within two years nor with any person within one year preceding the insolvency commencement date. The Adjudicating Authority's conclusion that the application under Section 45 read with Section 46 was uncalled for is affirmed. [Paras 14]

Application under Sections 45 and 46 dismissed as the transactions fall outside the relevant period for avoidable undervalued transactions.

Extortionate credit transactions - Insolvency commencement date - Whether the transactions constitute extortionate credit transactions under Section 50 of the I&B Code. - HELD THAT: - The Tribunal noted that no case was made that the Corporate Debtor had been party to an extortionate credit transaction involving receipt of financial or operational debt within the two years preceding the insolvency commencement date. Absent any allegation or evidence of exorbitant payment terms or qualifying debt receipt in the relevant period, Section 50 could not be invoked. [Paras 17]

Application under Section 50 rejected for lack of applicable facts within the statutory period and absence of extortionate credit transaction.

Fraudulent trading / wrongful trading - Preferential transactions - Avoidance of undervalued transactions - Whether the transactions amounted to fraudulent or wrongful trading under Section 66 of the I&B Code. - HELD THAT: - The Tribunal held that the Resolution Professional failed to establish that the business was carried on with intent to defraud creditors or for any fraudulent purpose. Alleged contraventions of Sections 43, 45 or 46, standing alone, were not held to establish fraudulent trading. The Adjudicating Authority's findings that the agreements were registered, consideration was shown, and purchasers had taken possession were noted and relied upon in rejecting the Section 66 claim. [Paras 19, 20]

Application under Section 66 dismissed for failure to demonstrate intent to defraud or carry on business fraudulently.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's rejection of the applications under Sections 43, 45/46, 50 and 66 of the I&B Code relating to transactions of 2009-10, concluding that the statutory tests and relevant periods were not satisfied and that no fraudulent intent was established; the appeals are dismissed with no costs.

Pre-existing dispute - Demand notice under Section 8(1) of the Insolvency and Bankruptcy Code - Maintainability of application under Section 9 of the Insolvency and Bankruptcy Code - Role of the Adjudicating Authority in prima facie examination of disputes - Effect of pendency of suit prior to issuance of demand notice - Mobilox principle of plausible contention and rejection of spurious defences

Demand notice under Section 8(1) of the Insolvency and Bankruptcy Code - Effect of pendency of suit prior to issuance of demand notice - Whether a pre-existing dispute existed because the corporate debtor had filed a suit prior to issuance of the demand notice relied upon by the operational creditor. - HELD THAT: - The Tribunal examined the notice dated 5th October, 2018 and held it to be a general settlement/arbitration notice and not a demand notice under Section 8(1). The Demand Notice in terms of Section 8(1) was in fact issued only subsequently on 30th October, 2018. The corporate debtor had filed a suit on 16th October, 2018 which pre-dated the demand notice. Applying the principle that the existence of a dispute or the record of pendency of a suit prior to receipt of the demand notice removes the matter from the Code's purview, the Tribunal concluded that a pre-existing dispute existed between the parties.

There was a pre-existing dispute because the suit was pending before issuance of the demand notice; the demand notice under Section 8(1) was not the letter dated 5th October, 2018.

Pre-existing dispute - Maintainability of application under Section 9 of the Insolvency and Bankruptcy Code - Role of the Adjudicating Authority in prima facie examination of disputes - Mobilox principle of plausible contention and rejection of spurious defences - Whether the application under Section 9 was maintainable in view of the pre-existing dispute and what scope the Adjudicating Authority has to examine the dispute. - HELD THAT: - Relying on the Supreme Court's exposition in Innoventive and Mobilox, the Tribunal reiterated that once there is a pre-existing dispute or a record of pendency of suit prior to the demand notice, the Operational Creditor is 'out of the clutches of the Code' and the Adjudicating Authority must reject the Section 9 application. The Tribunal observed that it does not have jurisdiction under Section 9 to decide maintainability of the suit or to probe whether the suit or the defence is sham; its task at the stage is limited to determining whether a plausible dispute exists and to separate spurious defences from genuine ones. Since a suit predated the demand notice, the Tribunal held the Section 9 petition not maintainable and refused to examine merits of the suit.

The Section 9 application was not maintainable in view of the pre-existing dispute/suit pending prior to issuance of the demand notice; the Adjudicating Authority cannot decide the merit or maintainability of that suit while adjudicating a Section 9 application.

Final Conclusion: The appeal is dismissed: the Adjudicating Authority correctly held that a pre-existing dispute (a suit filed before issuance of the demand notice) existed and therefore the Section 9 application was not maintainable; no costs.

Operational debt under the Insolvency and Bankruptcy Code - existence of default and debt as prerequisite for Section 9 admission - service of demand notice and effect of deliberate refusal to accept notice - admission of application and initiation of corporate insolvency resolution process under Section 9 - appointment of Interim Insolvency Resolution Professional and requirement of public announcement - moratorium under the Code and its prohibitions during the CIRP

Service of demand notice and effect of deliberate refusal to accept notice - Service of the demand notice upon the corporate debtor was complete despite endorsement of 'refused' and failure of the corporate debtor to accept notice. - HELD THAT: - The record shows that the demand notice and the hearing notice were sent to the corporate debtor and returned with endorsement 'refused'. The applicant filed an affidavit of service and, during pendency, the corporate debtor made part payments by RTGS, demonstrating knowledge of the proceedings. The Tribunal treated the returned endorsement and subsequent part payments as establishing effective service and awareness, and noted that the corporate debtor neither settled nor appeared despite opportunities. [Paras 6, 8, 10]

Notice was held to be complete and the corporate debtor had knowledge of the proceedings.

Operational debt under the Insolvency and Bankruptcy Code - existence of default and debt as prerequisite for Section 9 admission - The amounts claimed arose from supply of goods and qualified as operational debt and there was a default, entitling the applicant to be an operational creditor under the Code. - HELD THAT: - On the material on record, the Tribunal found that the debt arose from supply of goods to the corporate debtor and thus fell within the definition of operational debt. The applicant produced account statements, invoices and related documents and established both the existence of the debt and occurrence of default. The corporate debtor's part payments during pendency did not negate default for the remaining claimed debt. [Paras 5, 9]

The claimed amount was held to be an operational debt and default was established; the applicant is an operational creditor.

Appointment of Interim Insolvency Resolution Professional and requirement of public announcement - The proposed nominee was appointed as Interim Insolvency Resolution Professional (IRP) and directed to make the public announcement and call for claims. - HELD THAT: - The proposed IRP submitted the requisite declaration that no disciplinary proceedings were pending and furnished registration credentials. The Tribunal appointed the nominee as Interim Insolvency Resolution Professional and directed compliance with the statutory obligation to make the public announcement and invite claims immediately after appointment as mandated by the Code. [Paras 11, 12, 13, 14]

Nominee appointed as IRP and directed to make the public announcement and call for submission of claims.

Moratorium under the Code and its prohibitions during the CIRP - A moratorium was declared from the date of receipt of the authenticated copy of the order until completion of the corporate insolvency resolution process, with enumerated prohibitions and protection for continued supply of essential goods and services. - HELD THAT: - After admitting the Section 9 application, the Tribunal exercised its discretion to declare the moratorium. The order enumerated the statutory prohibitions on institution or continuation of suits, transfer or encumbrance of assets, enforcement of security interests, and recovery of property occupied by the corporate debtor. The Tribunal also directed that supply of goods and essential services, if continuing, shall not be terminated, and clarified the moratorium's temporal effect until approval of a resolution plan or liquidation as per the Code. [Paras 15, 16, 17, 18]

Moratorium declared with stated prohibitions and exceptions; moratorium effective from receipt of authenticated copy until completion of CIRP or earlier orders as per the Code.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that the claim constituted an operational debt and default was established; service of notice was effective despite refusal to accept; the nominated professional was appointed as Interim Insolvency Resolution Professional and directed to make the public announcement; a moratorium was declared in terms of the Code. The petition is disposed of with no order as to costs.

Existence of debt and default - admissibility of petition under Section 7 of Insolvency & Bankruptcy Code, 2016 - moratorium under Section 14 of Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - validity and admissibility of documents and stamping objections - Form CHG-1 and certificate of registration of charge

Existence of debt and default - The Petitioner has proved existence of debt and default by the Corporate Debtor. - HELD THAT: - The Tribunal found that the Corporate Debtor had repeatedly acknowledged the debt in its letter dated 14.05.2016 and in its affidavit filed in the Bombay High Court. The Petitioner produced sanction and security documents, bank statements certified under the Bankers Books of Evidence Act and a computation of dues as on 10.05.2018. The Corporate Debtor did not deny the existence of the debt or the occurrence of default, raising only technical objections. On this material the Tribunal concluded that the Petitioner proved both the financial debt and the default. [Paras 22, 23, 24, 28, 29]

Existence of debt and default established; the Petitioner has proved financial debt and default.

Validity and admissibility of documents and stamping objections - Form CHG-1 and certificate of registration of charge - The objections based on alleged insufficiency of stamp and on Form 1/Form CHG-1 infirmities are unsustainable and do not defeat the petition. - HELD THAT: - The Tribunal addressed two technical defences: (a) alleged incompleteness of the Section 7 application for non-production of Certificate of Registration of Charge and Form CHG 1, and (b) alleged insufficient stamping of certain agreements. The Petitioner produced Form CHG 1 and a Certificate of Registration for modification of charge dated 26.02.2015, negating the first objection. As to stamping, the Tribunal noted that the Corporate Debtor had itself repeatedly relied upon and acted on the agreements in proceedings before the High Court and in its financial statements; accordingly, even if the agreements were deficiently stamped, there remained independent admissions and documents (the letter of 14.05.2016, affidavit of 06.02.2018, bank records) proving the debt. For these reasons the technical objections were rejected. [Paras 25, 26, 27]

Technical objections regarding Form 1/CHG 1 and stamping are not sustainable and do not preclude admission of the petition.

Admissibility of petition under Section 7 of Insolvency & Bankruptcy Code, 2016 - The Petition under Section 7 is complete and is liable to be admitted. - HELD THAT: - Having concluded that the Petitioner had produced requisite documents establishing sanction, security and the existence of debt and default, and having addressed the Corporate Debtor's procedural and stamping objections, the Tribunal held that the application under Section 7(2) of the IBC was complete. The Tribunal noted proper authorisation to file the petition and payment of the requisite fee. In view of the proved debt and default and completeness of the application, admission under Section 7 was warranted. [Paras 20, 21, 31]

Petition under Section 7 admitted; corporate insolvency resolution process initiated.

Appointment of Interim Resolution Professional - moratorium under Section 14 of Insolvency & Bankruptcy Code, 2016 - Interim Resolution Professional appointed and moratorium declared with consequential directions. - HELD THAT: - The Petitioner proposed a candidate for Interim Resolution Professional and provided his declaration; the Tribunal accepted the proposal and appointed him to carry out statutory functions. Consequential to admission, the Tribunal declared the moratorium under Section 14 of the IBC with the usual prohibitions on institution or continuation of suits, transfer or encumbrance of assets, enforcement of security interests and recovery of property, directed protection of essential supplies and fixed the moratorium effective from 13.02.2019 until completion of the CIRP or further order. The Registry was directed to communicate the order immediately. [Paras 30, 31, 32]

Shri Rajendra Kumar Girdhar appointed as Interim Resolution Professional; moratorium under Section 14 declared with consequential directions effective from 13.02.2019.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by the financial creditor against the corporate debtor, having found the financial debt and default proved and having rejected the Corporate Debtor's technical objections; the moratorium under Section 14 was declared and an Interim Resolution Professional was appointed to oversee the corporate insolvency resolution process.

Existence of financial debt and default - effect of a DRT decree as evidence of debt - limitation and exclusion of time spent in other fora - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 and initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Existence of financial debt and default - effect of a DRT decree as evidence of debt - The Financial Creditor has established the existence of financial debt and that the Corporate Debtor committed default; the DRT decree is admissible evidence supporting the claim. - HELD THAT: - The Tribunal found on the documentary record that the Corporate Debtor availed multiple loans, executed the requisite loan and hypothecation documents, and failed to repay the dues. The explanation that the Corporate Debtor could not operate due to prior attachments was insufficient to rebut the claim of default. The DRT-II Chennai decree dated 10.05.2018, awarding liability in favour of the Financial Creditor and permitting amendment of the claim amount, corroborates the existence of the debt and default. On this basis the Tribunal held the Financial Creditor had proved both financial debt and default. [Paras 16, 19]

Debt and default established; the DRT decree supports the Financial Creditor's claim.

Limitation and exclusion of time spent in other fora - The petition is not barred by limitation because the period during which recovery proceedings were prosecuted before other fora (notably the DRT and proceedings before BIFR/AAIFR) is to be excluded from the computation. - HELD THAT: - The Tribunal accepted the Financial Creditor's contention that proceedings were pending before DRT-II Chennai and other authorities prior to filing the Section 7 petition, and that time spent in pursuing those proceedings is to be excluded for computing limitation. The DRT decree obtained while the IBC petition was pending was noted, and earlier prosecution before other fora was relied upon to demonstrate that the petition awaited the outcome of parallel/preceding recovery processes. The Tribunal therefore treated the petition as within limitation. [Paras 17, 18]

Period spent in other pending proceedings is excluded; the Section 7 petition is within limitation.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 and initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - The Section 7 petition is admitted; CIRP is initiated, moratorium declared, and an Interim Resolution Professional is appointed with directions as set out in the order. - HELD THAT: - Having concluded that the Financial Creditor proved existence of debt and default and that the petition was within limitation, the Tribunal found the petition complete and compliant with statutory requirements including consent of the proposed IRP and absence of disciplinary proceedings against him. Consequently, the Tribunal admitted the petition under Section 7, declared moratorium with the statutory prohibitions and protections, directed publication of the public announcement, and appointed the named Interim Resolution Professional to perform the functions under the Code from the stated effective date. [Paras 19, 20]

Petition admitted; moratorium declared; Interim Resolution Professional appointed and directions issued.

Final Conclusion: The Section 7 petition filed by the Financial Creditor is admitted: the Tribunal held the financial debt and default proved (supported by a DRT decree), treated the petition as within limitation by excluding time spent in other proceedings, declared moratorium under the Code and appointed the nominated Interim Resolution Professional to commence the CIRP.

Appeal under Section 26 of PMLA - Notice under Section 8(1) of PMLA - Reason to believe - Seizure and inventory requirements under PMLA Rules - Section 68 - curable defects - Exceptional circumstances test for entertaining pre-emptive appeals - Exclusion of period under Section 5

Appeal under Section 26 of PMLA - Notice under Section 8(1) of PMLA - Exceptional circumstances test for entertaining pre-emptive appeals - Maintainability of an appeal under Section 26 against issuance of a show cause notice under Section 8(1). - HELD THAT: - The Tribunal considered whether an appeal under Section 26 lies against interlocutory or procedural acts taken under Sections 8(1)-8(3) (specifically issuance of a show cause notice under Section 8(1)). While Section 26 permits an aggrieved person to prefer an appeal against an order of the Adjudicating Authority, the Tribunal held that entertaining an appeal against issuance of notice under Section 8(1) is not ordinarily permissible and is allowable only in exceptional circumstances - where great hardship, abuse of process, injustice, irreparable loss or manifest prejudice is shown on the face of the record. The Tribunal examined the facts and concluded that appellants had not demonstrated such an exception on the record before it; the defects and discrepancies relied upon were not of the character to warrant bypassing the Adjudicating Authority, particularly where the appellants could raise those objections in their reply and before the Authority, and could later challenge any adverse retention order under Section 17(4). The Tribunal therefore declined to entertain the appeals on maintainability grounds.

Appeals under Section 26 against the issuance of notices under Section 8(1) are not ordinarily maintainable; they are permissible only in exceptional circumstances, which were not shown here, and the appeals are not entertained on that ground.

Reason to believe - Seizure and inventory requirements under PMLA Rules - Section 68 - curable defects - Whether defects alleged in the recorded reasons to believe, service of reasons/copies and seizure inventory justify quashing the notice or require fresh adjudication. - HELD THAT: - The Tribunal noted prima facie substance in some objections concerning the recorded reasons to believe, alleged non-compliance with seizure/inventory formalities and shortcomings in service and the 30 day notice requirement. However, the Tribunal found these contentions more appropriately adjudicated by the Adjudicating Authority on reply rather than being disposed of at this interlocutory appellate stage. The Tribunal accepted the respondent's position that certain defects might be curable under Section 68 but did not decide that question on merits. In order to ensure impartial adjudication of these objections, the Tribunal directed that after the appellants file their reply, the hearing before the Adjudicating Authority shall be conducted by a different Member (Member (Law)), who shall consider and decide all contentions on merit. The Tribunal clarified that if the Adjudicating Authority fails to decide these objections as per law, the appellants retain the remedy of appeal after the retention/attachment order under Section 17(4) is passed.

Objections as to defective reasons to believe, seizure formalities and notice service are to be decided by the Adjudicating Authority on merits; hearing is directed to be conducted by a different Member (Member (Law)) and the matter remanded for fresh consideration.

Exclusion of period under Section 5 - Whether the time spent in filing and disposing these appeals is to be excluded from the 180 day period stipulated under Section 5. - HELD THAT: - The Tribunal ordered that the period consumed in filing and disposing of the present appeals shall be excluded when computing the 180 days under Section 5, thereby removing any prejudice to the proceeding timelines caused by these interlocutory proceedings.

Period spent in filing and disposing of these appeals is excluded from the 180 days under Section 5.

Final Conclusion: The appeals against issuance of notices under Section 8(1) were not entertained because no exceptional circumstances were shown; appellants' objections regarding reasons to believe, seizure formalities and service are remitted to the Adjudicating Authority to be decided on merit by a different Member (Member (Law)); the time consumed in these appeals is excluded from the 180 day period under Section 5.

De-freezing of frozen bank accounts - presumption of money-laundering - absence of money-trail / proceeds of crime - restraint on dealing with funds pending adjudication - Adjudicating Authority retention application

De-freezing of frozen bank accounts - presumption of money-laundering - absence of money-trail / proceeds of crime - restraint on dealing with funds pending adjudication - All four bank accounts frozen by the respondent were ordered to be de-frozen, subject to a restriction on dealing with the balances. - HELD THAT: - The Tribunal examined the respondent's case that the accounts might have been used for money-laundering and found that such a case was presumptive and conjectural. The appellants had replied to the show cause notice denying any linkage or credit from the other accounts and pointed out that the application lacked any averment of a money trail or proceeds of crime. The Tribunal noted earlier orders in related appeals in which accounts were de-frozen and accepted the appellants' undertaking that they would not deal with the amounts in the accounts. In view of these factors, the Tribunal modified the impugned order and directed that the four specified accounts be de-frozen, subject only to the appellants not dealing with the balances pending further adjudication. [Paras 8, 9, 11, 12]

The four frozen bank accounts are de-frozen; appellants are restrained from dealing with the balance amounts.

Final Conclusion: Appeals allowed to the limited extent of directing that all four frozen accounts be de-frozen, with a prohibition on the appellants dealing with the balances; all pending applications disposed of and no costs awarded.

Consulting Engineer - Scientific or Technical Consultancy - classification of taxable services - application of definition in force at relevant time

Consulting Engineer - Scientific or Technical Consultancy - classification of taxable services - Whether the services rendered by the appellant during 1 April, 2000 to 15 July, 2001 were taxable as 'Consulting Engineer' services or fell within 'Scientific or Technical Consultancy'. - HELD THAT: - The Court examined the statutory definitions as they stood prior to 16 July, 2001 and noted that 'Consulting Engineer' then meant any professionally qualified engineer or an engineering firm rendering advice, consultancy or technical assistance in engineering disciplines, whereas 'Scientific or Technical Consultancy' (inserted on 16 July, 2001) covered advice or technical assistance by scientists, technocrats or science/technology institutions. The Show Cause Notice and adjudicating authority proceeded on the incorrect premise that the two services were indistinguishable prior to 16 July, 2001. The appellant, being a National Institute of Technology, did not fall within the pre-16 July, 2001 definition of 'Consulting Engineer' (not being a professionally qualified engineer or an engineering firm). The services rendered by the appellant therefore properly fall under 'Scientific or Technical Consultancy', a category under which the appellant began paying service tax from 16 July, 2001. On this basis the demand framed for the period 1 April, 2000 to 15 July, 2001 as 'Consulting Engineer' services could not be sustained. [Paras 10, 11, 14, 15]

Services rendered by the appellant during 1 April, 2000 to 15 July, 2001 do not constitute 'Consulting Engineer' services as per the definition in force at that time and fall within 'Scientific or Technical Consultancy'.

Application of definition in force at relevant time - retrospective application of amended definition - Whether the Commissioner (Appeals) was justified in applying the post-2006 amended definition of 'Consulting Engineer' to the period under dispute. - HELD THAT: - The Court held that the Commissioner (Appeals) erred in relying upon the 2006 amendment to the definition of 'Consulting Engineer' (which expanded the class to include any body corporate or other firm) when adjudicating a dispute confined to the period before that amendment. The correct legal principle is that the definition applicable is the one in force at the relevant time; the post facto or amended definition cannot be applied retrospectively to change the characterisation of services for earlier periods. Because the Commissioner (Appeals) applied the later amended definition, his conclusion that the appellant rendered 'Consulting Engineer' services was erroneous. [Paras 11, 14, 15]

The Commissioner (Appeals) improperly relied on the 2006 amended definition; the pre 16 July, 2001 definition governs the disputed period and that definition does not cover the appellant.

Final Conclusion: The impugned orders confirming service tax demand, interest and penalty for the period 1 April, 2000 to 15 July, 2001 are set aside: the services fall under 'Scientific or Technical Consultancy' as per the definition applicable at the relevant time and the Commissioner (Appeals) erred in applying the post 2006 amended definition of 'Consulting Engineer'.

Extended period of limitation - recovery of interest under Section 75 - validity of show cause notice - requirement to invoke Section 73(1) with proviso in show cause notice - time-bar for claim of interest

Extended period of limitation - recovery of interest under Section 75 - time-bar for claim of interest - Whether a show cause notice invoking the extended period of limitation could be issued for recovery of interest under Section 75 for the period October, 2011 to March, 2013. - HELD THAT: - The Tribunal examined the impugned show cause notice issued for October, 2011 to March, 2013 which invoked the extended period of limitation while demanding interest under Section 75. The adjudication record showed that the disputed liability related to the manner of deposit (monthly versus quarterly) and the demand was for interest only. The Tribunal found that the show cause notice was bad insofar as it invoked the extended period for recovery of interest, and therefore the extended limitation could not be validly relied upon to sustain the demand made in the notice. [Paras 9]

Show cause notice invoking the extended period of limitation for recovery of interest under Section 75 is invalid; the notice is non-maintainable on this ground.

Validity of show cause notice - requirement to invoke Section 73(1) with proviso in show cause notice - Whether the show cause notice was vitiated for not specifically invoking Section 73(1) read with the proviso, rendering it defective for demanding interest/penalty. - HELD THAT: - The Tribunal considered the contention that the notice failed to mention Section 73(1) read with the proviso and that such omission could not be treated as a mere clerical error. Relying on the necessity that a show cause notice must give meaningful and intelligible particulars enabling the noticee to meet the allegations, the Tribunal concluded that non-mentioning of the proper provision (Section 73(1) with proviso) rendered the notice defective. Consequently, the notice was held non-maintainable on this ground as well. [Paras 9]

Show cause notice is defective and non-maintainable for non-invocation/non-mentioning of Section 73(1) read with the proviso.

Final Conclusion: Both grounds of challenge to the show cause notice were accepted: the notice was held bad for invoking the extended period of limitation and for failing to properly invoke Section 73(1) with the proviso; the impugned order confirming the demand is set aside and the appeal is allowed.

Service tax on miscellaneous reimbursements - scope of remand - adjudicating authority's jurisdiction on remand - finality of issues before the appellate tribunal - assessable value-expenses inseparable and internally connected

Service tax on miscellaneous reimbursements - scope of remand - adjudicating authority's jurisdiction on remand - The adjudicating authority exceeded the scope of the remand by quantifying service tax in respect of miscellaneous reimbursement which was not an issue before the Tribunal. - HELD THAT: - The show cause notice originally covered three heads: man power, security and miscellaneous reimbursement. The adjudicating authority initially dropped the demand for miscellaneous reimbursement and confirmed demands for man power and security. On appeal the Commissioner (Appeals) dropped the demands for man power and security. The Department appealed only against the dropping of man power and security before the Tribunal, which held that certain expenses forming part of assessable value were inseparable and remitted the matter to the adjudicating authority to determine the quantum of demand. The Tribunal's remit concerned the two services which were the subject of the Department's appeal. Consequently the adjudicating authority, on remand, was required to re-determine the quantum only for man power and security services. There was no occasion, and no authority vested by the Tribunal's order, for the adjudicating authority to reopen or quantify service tax for miscellaneous reimbursement which had been previously dropped and was not under challenge before the Tribunal. For these reasons the portion of the adjudicating authority's fresh order that quantified service tax for miscellaneous reimbursement exceeded the scope of the remand and is set aside.

The order dated 20 February 2013 is set aside insofar as it quantifies the amount of service tax towards miscellaneous reimbursement; the appeal is allowed to that extent.

Final Conclusion: The adjudicating authority exceeded the scope of the Tribunal's remand by quantifying service tax on miscellaneous reimbursement, and that portion of the order dated 20 February 2013 is set aside; the appeal is allowed to that extent.

Renting of immovable property services - beauty parlour services - classification of services - identity of proprietor and proprietary concern - remand for de novo adjudication - verification of invoices and factual records - medical/cosmetic surgery services versus ordinary beauty parlour services

Renting of immovable property services - identity of proprietor and proprietary concern - remand for de novo adjudication - verification of invoices and factual records - Whether the service tax demand under the head of renting of immovable property services can be sustained against the proprietary concern when the proprietor claims to have already discharged the liability. - HELD THAT: - The Tribunal observed that, in law, the proprietary concern and its proprietor are one and the same. If the proprietor Shri Varun Ratra has already discharged the service tax liability in respect of the rented premises, no separate liability can be fastened on the proprietary unit. However, the record does not establish whether the payment made by the proprietor relates to the very premises for which the adjudication has confirmed service tax against the proprietary concern. Because the identity of the premises and the scope of the earlier payment require factual verification, the Tribunal set aside the impugned order and remanded the matter to the Commissioner for de novo adjudication to verify whether the service tax already deposited by the proprietor pertains to the same premises and to decide the claim accordingly. [Paras 4]

Order set aside and matter remanded to the Commissioner for de novo adjudication to verify whether the proprietor has discharged the service tax liability in respect of the same rented premises.

Beauty parlour services - medical/cosmetic surgery services versus ordinary beauty parlour services - classification of services - verification of invoices and factual records - remand for de novo adjudication - Whether the services rendered by the appellant fall within ordinary beauty parlour services or constitute medically supervised cosmetic/plastic surgery services and whether the demand under beauty parlour services is sustainable. - HELD THAT: - The Tribunal noted that the essential character of the appellant's activities determines their classification. The appellant contends that services are medically supervised, performed under doctors/dermatologists, involve surgical instruments, and therefore fall within cosmetic or plastic surgery services, not ordinary beauty parlour services. The adjudicating authority did not examine invoices or verify the factual matrix, nor was it shown whether service tax was discharged where surgery took place. Given the necessity to inspect invoices, verify whether services are carried out under medical supervision, and apply the Tribunal's earlier declarations on classification, the Tribunal remanded this part of the demand to the adjudicating authority for fresh examination and opportunity to the appellant to place relevant evidence on record. The Tribunal expressly did not decide merits or limitation issues. [Paras 5, 7]

Demand under beauty parlour services remanded to the adjudicating authority for fresh examination of invoices, verification of medical supervision and nature of services, and reclassification if warranted; merits and limitation kept open.

Final Conclusion: The impugned order is set aside in part and the matters relating to renting of immovable property services and beauty parlour services are remanded to the Commissioner for de novo adjudication and factual verification; the Tribunal has not adjudicated merits or limitation, and the appellant shall be afforded opportunity to place evidence before the adjudicating authority.

CENVAT credit entitlement - utilization for business of rendering services - segregation of insurance premium attributable to employees - effect of amendment to definition of inputs under CENVAT Credit Rules, 2004 - remand for fresh consideration

CENVAT credit entitlement - utilization for business of rendering services - Entitlement to CENVAT credit of tax paid on 'club and association service'. - HELD THAT: - The adjudicating authority concluded that the utilization of 'club and association service' could not be said to be related to the appellant's business of rendering services. The Tribunal found no new grounds warranting interference with that conclusion and agreed that the service utilization did not sufficiently connect to the business activity to permit CENVAT credit. [Paras 5]

Claim for CENVAT credit on 'club and association service' denied was upheld.

CENVAT credit entitlement - segregation of insurance premium attributable to employees - remand for fresh consideration - Entitlement to CENVAT credit of tax paid on 'insurance service' as claimed by the appellant, including segregation of premium attributable to employees and families. - HELD THAT: - The appellant had submitted a segregation of the premium attributable to employees and their families. In view of authorities relied on by the appellant, the Tribunal held that the conclusion in the impugned order requires fresh ascertainment rather than a summary rejection. Consequently, the Tribunal set aside the portion of the demand relating to 'insurance service' and remitted the matter to the original authority for fresh decision and verification of the segregated claim. [Paras 6, 7]

Demand relating to 'insurance service' set aside and remitted to original authority for fresh consideration of the segregated premium.

CENVAT credit entitlement - effect of amendment to definition of inputs under CENVAT Credit Rules, 2004 - remand for fresh consideration - Entitlement to CENVAT credit of tax paid on 'rent-a-cab service', including whether payments pertain to period prior to amendment of the definition of 'inputs' under the CENVAT Credit Rules, 2004. - HELD THAT: - The appellant contended that the 'rent-a-cab service' related to periods prior to the amendment in the definition of 'inputs' and that credit had not been availed after the amendment. The original authority had not considered this contention. The Tribunal found this point material and directed that the demand insofar as it concerned 'rent-a-cab service' be set aside and the matter remanded to the original authority for fresh decision taking the appellant's submissions about timing and availment into account. [Paras 6, 7]

Demand relating to 'rent-a-cab service' set aside and remitted to original authority for fresh consideration regarding period and entitlement.

Final Conclusion: The appeal is partly allowed: the denial of credit for 'club and association service' is affirmed; demands in respect of 'insurance service' and 'rent-a-cab service' are set aside and remitted to the original authority for fresh decision.

Permanent transfer of copyright - temporary transfer of copyright - intellectual property right service - bundle of rights - assignment of copyright - relinquishment of copyright - burden under proviso to Section 73 of the Finance Act, 1994 - maintainability of writ against show cause notice/orders-in-original

Maintainability of writ against show cause notice/orders-in-original - Whether the writ petitions attacking the show cause notices/orders-in-original are maintainable at this stage - HELD THAT: - The Court held that exceptional circumstances permit interference with show cause notices/orders where the challenge points to a legal infirmity going to the root of the matter (eg. constitutional validity, limitation, lack of jurisdiction or patent illegality). The Division Bench decision in AGS Entertainment (2013) did not preclude the present petitions because the lis before this Court raised a distinct contention of erroneous interpretation and application of the Service Tax and Copyright statutes. Other authorities relied upon by Revenue were distinguishable. On these premises the High Court entertained the petitions and found them maintainable. [Paras 10, 12, 15, 16]

Writ petitions are maintainable and may be entertained despite being filed at the stage of show cause notices/orders-in-original.

Permanent transfer of copyright - temporary transfer of copyright - intellectual property right service - bundle of rights - assignment of copyright - Whether the assignments of specific broadcast/exhibition rights in cinematograph films amount to taxable 'temporary transfer' of copyright under the Service Tax enactment or fall outside service tax as permanent transfers - HELD THAT: - The Court analysed the Copyright Act scheme (Sections 13, 14, 17, 18, 19 and 56) and accepted that a cinematograph film comprises a 'bundle of rights' and that individual rights within the film carry independent copyrights. The taxable service targets income from 'temporary transfer or permitting the use or enjoyment of any copyright'. Where an owner assigns specific independent rights (eg. satellite broadcast) and the agreement on its face conveys those rights perpetually, that assignment cannot be re-characterised as necessarily temporary merely because other rights in the same film are retained or exploited separately. The Revenue's approach-that transfer is perpetual only if the entire copyright in all modes is transferred and that terms like 'perpetual' are inapplicable to intellectual property-was held to be a misinterpretation and, in parts, perverse. The Court further explained that Section 21 (relinquishment) deals with surrender and not assignment, and reliance on it by Revenue was misconceived. The Assessing Authorities had not discharged the burden of disproving the characterisation placed on the transactions by the assessees; mere suspicion was insufficient to pierce the contractual language of perpetual assignment. [Paras 32, 33, 34, 35, 38]

Impugned classification of the transactions as taxable 'temporary' transfers was erroneous where agreements on their face conveyed perpetual/permanent assignment of specified copyrights; the Department's contrary interpretation was quashed to the extent it ignored the Copyright Act and the 'bundle of rights' concept.

Relinquishment of copyright - assignment of copyright - Whether absence of notice of relinquishment under Section 21 of the Copyright Act converts an express perpetual assignment into a temporary transfer - HELD THAT: - The Court held Section 21 governs relinquishment (surrender) and not assignment. Therefore, non-compliance with the procedure for relinquishment does not automatically render an express assignment temporary. The Revenue's reliance on Section 21 to conclude that assignments are temporary was thus misplaced. [Paras 31, 32, 33]

Reference to Section 21 does not justify treating an express perpetual assignment as a temporary transfer; Section 21 is not a straight substitute for assignment under Sections 18-19.

Burden under proviso to Section 73 of the Finance Act, 1994 - Whether invocation of extended limitation by the Department was permissible without establishing suppression, fraud or collusion as required by the proviso to Section 73 - HELD THAT: - The Court observed that the extended period of limitation under the proviso to Section 73 can be invoked only upon establishing suppression, collusion or fraud. It noted that the Department had been aware of the industry practices and earlier litigation and that mere allegations of camouflage without evidence were insufficient. The Court did not decide the limitation question finally but directed that the aspect of limitation and the burden imposed by Section 73 proviso be gone into afresh by the Department in any further proceedings. [Paras 8, 17, 39]

The question of extended limitation was not finally adjudicated; limitation must be re-examined afresh by the Department with regard to the proviso to Section 73 and the burden it imposes.

Assignment of copyright - piercing contractual characterisation - Whether Assessing Authorities had sufficiently proved that the use of terms like 'perpetual' or 'in perpetuity' was a sham intended to evade tax - HELD THAT: - The Court held that an assessment must be founded on material and not mere suspicion. Although the Department can go behind contractual language, it must discharge the onus of disproving the transaction as portrayed by the assessees. In these matters the officers failed to place material to establish that the perpetual characterisation was a colourable device, and thus the assessments could not stand. [Paras 33, 35]

Assessing Authorities did not discharge the burden of proving the assignments were sham or colourable; therefore the impugned notices/orders could not be sustained on that basis.

Orders-in-original quashed - Relief to be granted and further directions - HELD THAT: - Applying the foregoing conclusions, the Court set aside the impugned show cause notice and orders-in-original in the listed writ petitions. However, the Department was granted liberty to initiate proceedings afresh in accordance with law, bearing in mind the Court's observations, and to re-examine limitation and related burdens under the statute. [Paras 39]

Impugned show cause notice and orders-in-original quashed; Department permitted to proceed afresh subject to the Court's observations and correct application of law, including re-examination of limitation.

Final Conclusion: The writ petitions challenging the show cause notice and orders-in-original were allowed. The High Court held that the Department had misapplied the Service Tax and Copyright statutes by failing to appreciate the 'bundle of rights' concept and by recharacterising express perpetual assignments of specific copyrights as taxable temporary transfers. The impugned notices/orders are set aside, but the Department may initiate fresh proceedings in accordance with law, including a reassessment of limitation and the burden under the proviso to Section 73.

Franchisee Service - Representational right - Management Consultancy Service - Commercial Training and Coaching Service - Management Maintenance and Repair Service - Manpower Recruitment or Supply Agency - CENVAT credit admissibility under Rule 9 of CENVAT Credit Rules, 2004 - Limitation (extended period) - Penalty under Section 78 of the Finance Act, 1994 and Rule 15(3) of the CENVAT Credit Rules, 2004

Franchisee Service - Representational right - Demand confirmed under the category of Franchisee Service is not maintainable on merits. - HELD THAT: - The adjudicating authority confirmed demands under the franchisee category by treating activities of Sub Certifying Authorities/ Registering Authorities as amounting to grant of representational right. The Tribunal found that mere collection of applications and verification for onward submission to the appellant does not transfer the authority to issue Digital Signature Certificates and therefore does not amount to a grant of representational right such that the franchise test is satisfied. The Tribunal relied on the principle that a franchisee must, for practical purposes, represent and subsume the identity of the franchisor; mere use of marks or facilitation without loss of independent identity is not sufficient to establish a franchise. Applying that test to the facts, the agreements did not vest the Sub CAs/ RAs with authority to issue DSCs or to represent TCS as franchisor; hence the franchise classification fails and the demand under that category cannot be sustained. [Paras 4]

Demand under the category of Franchisee Service is held not maintainable on merits.

Management Consultancy Service - Demand confirmed under the category of Management Consultancy Service is upheld on merits. - HELD THAT: - The scope of work under the Honeywell contract involved technical support, consultancy on design of a smart card based access-control solution, project management, integration and stabilization-activities that pertain to logistic/management systems of an organisation. Applying the statutory definition, such services constitute management consultancy because they involve provision of technical assistance and services in connection with management and logistical systems of the customer. The Tribunal examined the precedents relied upon by the appellant and found them distinguishable and not applicable to the facts of project management and technical consultancy provided here. [Paras 4]

Demand under Management Consultancy Service is upheld.

Commercial Training and Coaching Service - Demand in respect of Commercial Training and Coaching Services is upheld. - HELD THAT: - The statutory definition of Commercial Training or Coaching covers training provided by an institute or establishment for imparting skill or knowledge, unless expressly excluded. The Tribunal held that training in software developed by the appellant, when provided separately and billed separately to customers, falls within the definition of taxable commercial training irrespective of whether training is ancillary to the primary supply of software. The fact that the training was provided for commercial consideration and invoiced separately brings it within the taxable category. [Paras 4]

Demand in respect of Commercial Training and Coaching Services is confirmed.

Management Maintenance and Repair Service - Limitation (extended period) - Order of the Commissioner dropping the demand on Management Maintenance and Repair Service on limitation grounds is upheld. - HELD THAT: - The Tribunal accepted the Commissioner's finding that a Board communication dated 14.06.2005 created a bona fide doubt about taxability of software AMC/maintenance, thereby precluding invocation of extended period of limitation. The Tribunal held that such a clarification addressed to the assessee (irrespective of unit) gave rise to genuine doubt and required revenue to proceed, if at all, within the normal limitation period. On that basis the Tribunal sustained the Commissioner's view that the demand was time-barred and upheld the dropping of the demand on limitation grounds. [Paras 4]

Order dropping the demand in respect of Management Maintenance and Repair Service on limitation grounds is upheld.

Manpower Recruitment or Supply Agency - Limitation (extended period) - Penalty under Section 78 of the Finance Act, 1994 - Service tax demand under Manpower Recruitment or Supply Agency is maintainable on merits; matters of limitation and penalty are remanded for fresh consideration. - HELD THAT: - The Tribunal applied the established test that where billing is on basis of time spent by employees and services amount to supply of manpower, such activity falls within the manpower recruitment or supply agency service. Prior tribunal precedents were held to support revenue's position. While concluding that the demand is maintainable on merits, the Tribunal noted outstanding questions on limitation and imposition/quantification of penalty and remitted those aspects to the original authority for reassessment and determination in light of the findings and applicable law. [Paras 4]

Demand maintainable on merits; limitation and penalty issues remanded to Commissioner for fresh consideration.

CENVAT credit admissibility under Rule 9 of CENVAT Credit Rules, 2004 - Matter remanded for fresh adjudication on admissibility of CENVAT credit to permit production and consideration of documents under Rule 9. - HELD THAT: - A substantial quantum of CENVAT credit was disallowed by the Commissioner for alleged non-production of supporting documents. The appellant contended that the documents exist and were or could be produced. The Tribunal held that in the interests of justice the matter should be remanded so that the appellant may produce the documents required under Rule 9 and the Commissioner may decide admissibility after affording an opportunity of hearing. The Tribunal directed remand and specific consideration of the documents and related interest/penalty consequences. [Paras 4]

CENVAT credit disallowance set aside and remanded to Commissioner for adjudication after allowing production of documents.

Penalty under Section 78 of the Finance Act, 1994 and Rule 15(3) of the CENVAT Credit Rules, 2004 - Quantum of penalty is to be re-quantified by the Commissioner after remand proceedings and in light of the Tribunal's findings. - HELD THAT: - Because several matters (classification, limitation, and admissibility of credit) were remitted or altered by the Tribunal, the Tribunal directed the Commissioner to re-determine penalty amounts, if any, in accordance with his findings on remand and after affording opportunity of hearing. The Tribunal made clear that penalty quantification must follow the remand findings and applicable legal tests. [Paras 4]

Penalty quantum remitted to Commissioner for fresh determination after remand proceedings.

Final Conclusion: The Tribunal set aside confirmation of demand under Franchisee Service, upheld demands under Management Consultancy Service and Commercial Training and Coaching Service, upheld the dropping of the demand for Management Maintenance & Repair Service on limitation grounds, held the Manpower Recruitment/Supply Service demand maintainable but remanded limitation and penalty issues, and remanded the question of CENVAT credit admissibility to the Commissioner for fresh adjudication; penalty quantification is also remitted to the Commissioner, who is directed to conclude remand proceedings within four months.

Principles of natural justice - Reasoned decision requirement - Show cause notice as foundation of adjudication - Validity of appellate order in absence of reasons

Principles of natural justice - Reasoned decision requirement - Show cause notice as foundation of adjudication - Impugned order of the Tribunal allowing the appeal without discussing contentions or giving reasons is vitiated for breach of principles of natural justice. - HELD THAT: - The Tribunal allowed the appeal by observing that the show cause notice did not disclose material facts or evidence and by referencing authorities on the necessity of a proper foundation for adjudication, but recorded no discussion of the parties' respective contentions or any application of mind to the adjudication order. The High Court found that the Tribunal's brief conclusion, untested by consideration of submissions, amounted to a failure to give reasons and therefore constituted a breach of natural justice. For these reasons the Tribunal's order cannot stand and requires fresh consideration in compliance with natural justice. [Paras 4, 5, 6]

Impugned CESTAT order set aside; appeal restored to the Tribunal for fresh consideration and passing of an order in compliance with the principles of natural justice.

Final Conclusion: The substantial question of law is answered in favour of the Revenue; the CESTAT order dated 31st August 2017 is set aside and the matter is remitted to the Tribunal for fresh adjudication in accordance with principles of natural justice.

Validity of Notification No. 14/1997-CE (NT) insofar as restricting Cenvat/Modvat credit - Admissibility of Cenvat/Modvat credit where inputs were charged duty at a higher rate - Binding effect of High Court precedent on the Tribunal

Validity of Notification No. 14/1997-CE (NT) insofar as restricting Cenvat/Modvat credit - Admissibility of Cenvat/Modvat credit where inputs were charged duty at a higher rate - Notification No. 14/97-CE (NT) cannot be applied to restrict Modvat/Cenvat credit where inputs have borne duty at the higher rate and is therefore not applicable to deny credit in the present case. - HELD THAT: - The Tribunal examined the decision of the Hon'ble High Court of Gujarat in Gujarat Narmada Valley Fertilizer Company Limited vs. UOI - 2017 (345) ELT 50 (Guj.), which declared illegal the portion of Notification No. 14/97-CE (NT) that limited Modvat credit to an amount calculated at the rate of 10% ad valorem where inputs had borne full excise duty at 15%. Applying that ratio, the Tribunal found that in the present case the goods had suffered duty at 15% and therefore credit could not be restricted under the impugned notification. The Tribunal treated the High Court's reasoning as determinative for cases where inputs were purchased paying the higher duty rate and applied it to set aside the demand. [Paras 5, 6]

The demand premised on restriction of credit under Notification No. 14/97-CE (NT) is set aside and the credit cannot be restricted in the facts of this case.

Binding effect of High Court precedent on the Tribunal - Review of order in light of subsequent binding precedent (ROM) - The Review (ROM) application was maintainable and allowed so that the Tribunal could apply the subsequently brought-to-attention binding High Court decision. - HELD THAT: - The ROM application was filed after the hearing because counsel came to know of the Gujarat High Court decision and submitted it to the Tribunal shortly after the hearing. The Tribunal accepted that the High Court decision was a binding precedent and, although not available at the time of final hearing, warranted reconsideration. Consequently, the Tribunal replaced the earlier reasoning (paras 4 and 5 of its order) with findings consistent with the High Court's decision and allowed the appeal. The Tribunal therefore exercised ROM to give effect to binding judicial precedent that altered the legal position applicable to the matter. [Paras 6, 7]

ROM application allowed; earlier order modified to reflect and apply the binding High Court precedent and the appeal is allowed.

Final Conclusion: ROM application allowed; in view of the binding decision of the Hon'ble High Court of Gujarat holding that the impugned portion of Notification No. 14/97-CE (NT) could not limit Modvat/Cenvat credit where inputs bore duty at the higher rate, the Tribunal set aside the demand and allowed the appeal.

Value of raw material declared by the principal manufacturer not open to challenge in the hands of the job-worker absent allegation of connivance or collusion - CENVAT credit admissibility based on duty paid by supplier - valuation of job-worked goods - requirement of proceedings against supplier for undervaluation

Value of raw material declared by the principal manufacturer not open to challenge in the hands of the job-worker absent allegation of connivance or collusion - CENVAT credit admissibility based on duty paid by supplier - valuation of job-worked goods - Whether the value of copper scrap declared by the raw material supplier could be revisited and a differential duty demanded from the job-worker. - HELD THAT: - The Tribunal held that the determinative principle governing valuation in such cases is that the value declared by the principal manufacturer for the raw material cannot be questioned in the hands of the receiver/job-worker unless there is an allegation and proof of connivance or collusion between the supplier and the receiver. The respondent had availed CENVAT credit of duty paid by the principal manufacturer and no objection had been raised by the Commissionerate to the supplier's declared value. Further, no proceedings were instituted against the principal manufacturer alleging undervaluation. Relying on the Supreme Court authorities cited by the respondent, the Tribunal concluded that, in the absence of any charge of collusion or separate proceedings against the supplier, the value could not be reopened at the instance of the department vis-a -vis the job-worker. Therefore there was no justification to interfere with the adjudicating authority's order which had rejected the demand. [Paras 6]

Demand for differential duty against the job-worker on the ground that the supplier's declared value was understated was unsustainable and the adjudicating authority's order dismissing the demand is upheld.

Final Conclusion: Revenue's appeal is dismissed and the impugned order of the Commissioner of Central Excise, which rejected the demand for differential duty against the job-worker, is upheld.

Prima facie case on merits - application of mind in granting interim relief/pre-deposit stay - overriding effect of the Insolvency and Bankruptcy Code, 2016 - security in lieu of stay (non-cash/bank guarantee) - expeditious adjudication of pending appeal

Prima facie case on merits - application of mind in granting interim relief/pre-deposit stay - Whether the interim orders of the first appellate authority and the Tribunal granting partial stay without assigning reasons were liable to be set aside. - HELD THAT: - The Court found that a pure legal issue was raised before the first appellate authority which had not been considered on merits by either the first appellate authority or the Tribunal. The revisionist had established a prima facie case and had placed before the authorities the contention that the resolution plan under the Insolvency process precluded enforcement of the demand. In the absence of reasoning showing that the appellate authorities applied their mind to the legal contentions urged, the impugned interim orders could not stand. Reliance was placed upon the principle that an authority granting or refusing interim relief must deal with the merits sufficiently to show application of mind and must balance the rights of the revenue and the appellant; where this is not done, the interim orders are liable to be set aside.

The interim orders dated 25.04.2014 and 14.05.2019 (first appellate authority and Tribunal) were set aside for failure to apply mind and for not considering the legal issue on merits.

Overriding effect of the Insolvency and Bankruptcy Code, 2016 - expeditious adjudication of pending appeal - security in lieu of stay (non-cash/bank guarantee) - Remedial directions as to further course of action: whether the first appellate authority should reconsider the appeal and on what terms the stay of recovery should be regulated during pendency. - HELD THAT: - Having set aside the interim orders, the Court directed that the first appellate authority decide the pending appeal on the merits expeditiously, preferably within three months from production of the certified copy of this order. Meanwhile, the Court permitted preservation of status of interim protection subject to the furnishing by the applicant of security equal to 20% of the disputed amount. The security was ordered to be furnished to the satisfaction of the assessing authority and to be other than cash or bank guarantee. The directions balance the need for prompt adjudication of the legal issue, including contentions based on the Insolvency and Bankruptcy Code, 2016, and the interest of the revenue by requiring security.

First appellate authority directed to decide the appeal expeditiously; applicant to furnish non-cash security equivalent to 20% of the disputed amount by the specified date for interim protection.

Final Conclusion: Revision allowed; interim orders of the first appellate authority and the Tribunal set aside for lack of reasons and want of application of mind; first appellate authority directed to decide the appeal expeditiously (preferably within three months) and the applicant directed to furnish non-cash security equal to 20% of the disputed amount in the meantime.

Presumption of service by registered post - burden to rebut presumption of service - tenant's default and arrears - requirement of cogent evidence to prove advance payment and its adjustment from rent - effect of failure to tender rent or deposit under Section 20(4) of U.P. Act No.13 of 1972 - tenancy regulated by U.P. Act No.13 of 1972 - revisional jurisdiction under Section 25 of the Provincial Small Cause Courts Act, 1887 - modification of decree on agreed limitation of tax liability

Tenant's default and arrears - requirement of cogent evidence to prove advance payment and its adjustment from rent - effect of failure to tender rent or deposit under Section 20(4) of U.P. Act No.13 of 1972 - tenancy regulated by U.P. Act No.13 of 1972 - Whether the tenant had defaulted in payment of rent and whether the alleged advance and its adjustment from rent were proved - HELD THAT: - The trial court found the tenancy to be month-to-month from December 2000 and the monthly rent to be Rs. 1,000. The tenant asserted an advance payment and an oral agreement for monthly adjustment from rent, but there was no written agreement, no corroborative witness, no rent receipts for the period up to the notice, and no evidence of tender or deposit under Section 20(4) of U.P. Act No.13 of 1972. The burden to prove payment of the advance and its adjustment lay on the tenant; his solitary testimony (DW1) was held unreliable. On these grounds the trial court's conclusion that the advance and any arrangement for adjustment were not proved and that the tenant was in arrears from December 2000 until the date of notice is supported by the evidence and cannot be faulted. [Paras 8, 9, 17, 18, 19]

Advance payment and its proposed adjustment not proved; tenant held in arrears from December 2000 and found to have defaulted in payment of rent.

Presumption of service by registered post - burden to rebut presumption of service - Whether the notice dated 06.03.2002 demanding arrears and terminating tenancy was duly served on the tenant - HELD THAT: - The landlord produced the registered-post receipts and an acknowledgment receipt bearing the tenant's signature; PW1 testified to dispatch and personal service at the shop address. The tenant denied service and pointed to minor discrepancies in the address and the seal on the acknowledgment. The court applied settled law that a notice sent by registered post gives rise to a presumption of service under the General Clauses Act and Illustration (f) to Section 114 Evidence Act, and that a mere denial is insufficient to rebut such presumption without cogent evidence. On the material before it, the trial court rightly drew the presumption of service and found the notice to be legally served; this finding was not shown to be perverse or unsupported. [Paras 12, 13, 20, 21, 22]

The notice was duly served on the tenant; the presumption of service by registered post was not successfully rebutted.

Tenancy regulated by U.P. Act No.13 of 1972 - modification of decree on agreed limitation of tax liability - Whether the tenant is liable to pay house tax and water tax as awarded by the trial court - HELD THAT: - The trial court had imposed liability for house tax and water tax. The respondent landlord conceded before this Court that he would not dispute the revisionist's contention on tax liability. In view of the respondent's concession, the High Court modified the trial decree to relieve the tenant of liability for house tax and water tax as directed by the trial court, thereby altering that aspect of the relief while affirming other parts of the decree. [Paras 33, 34, 39]

Decree modified to the extent that the tenant is not liable to pay house tax and water tax; otherwise the trial court's award on rents and eviction stands affirmed.

Revisional jurisdiction under Section 25 of the Provincial Small Cause Courts Act, 1887 - Whether interference in exercise of revisional jurisdiction under Section 25 of the 1887 Act was warranted - HELD THAT: - The scope of Section 25 permits interference where there is miscarriage of justice, lack of jurisdiction, reliance on inadmissible evidence, perverse findings, or failure to consider relevant evidence. The revisionist failed to demonstrate any material error, illegality, perversity, or misplacement of burden of proof in the trial court's order. The High Court applied the settled tests and found no ground for interference with the trial court's findings of fact and concurrent determinations, save for the agreed modification on tax liability. [Paras 36, 37, 38]

Revision dismissed; no interference with trial court's order under Section 25 of the 1887 Act except for the agreed modification regarding tax liability.

Final Conclusion: The revision is dismissed. The trial court's decree for eviction and arrears of rent is affirmed on merits: the tenant was found in arrears from December 2000, the alleged advance and its adjustment were not proved, and the notice terminating tenancy was duly served. The decree is modified, by agreement of the landlord, to relieve the tenant of liability for house tax and water tax as directed by the trial court.

Identification in darkness - Benefit of reasonable doubt - Corroboration of recovery of weapons - Ballistic evidence and non-recovery of bullet - Concurrent findings of fact-scope of interference - Motive as corroborative evidence

Identification in darkness - Benefit of reasonable doubt - Corroboration of recovery of weapons - Ballistic evidence and non-recovery of bullet - Whether the prosecution proved the guilt of the appellant beyond reasonable doubt to sustain convictions under Section 302 IPC read with Section 34 IPC, Section 307 IPC read with Section 34 IPC and Section 25(c) of the Arms Act. - HELD THAT: - The Court examined the totality of evidence and found the identification of accused doubtful because the incident occurred at night in darkness with no evidence of electric or moon light to permit reliable visual identification. Eye witness accounts were contradictory as to which accused fired the shots; the primary complainant's statements before police and in court differed regarding who fired the three shots. The post mortem report recorded puncture wounds and entry/exit wounds but did not attribute them to a specific firearm, and the doctor had not seen the recovered weapons. Two panch witnesses to the weapon recovery panchnama turned hostile, undermining independent corroboration of recovery; in those circumstances prudence required corroboration from other sources. The ballistic evidence was of limited import in the face of these other infirmities, and the non recovery of fired bullets compounded the difficulty of attributing the fatal injury to the rifle recovered from the appellant. While motive existed and is relevant, motive alone could not supply the necessary proof of culpability. Viewing the evidence as a whole, the Court concluded that the appreciation of evidence by the courts below was perverse and that the guilt of the appellant was not proved beyond reasonable doubt. [Paras 13, 14, 15, 16, 17]

Convictions under Section 302 IPC read with Section 34 IPC, Section 307 IPC read with Section 34 IPC and Section 25(c) of the Arms Act set aside; appellant entitled to benefit of doubt and ordered to be released forthwith unless required in another case.

Final Conclusion: The Supreme Court interfered with the concurrent convictions, holding that identification and evidentiary infirmities precluded proof beyond reasonable doubt; convictions under Sections 302/34, 307/34 and 25(c) Arms Act were quashed and the appellant ordered to be released unless required elsewhere.