TaxTMI Updates e-Newsletter
Jun 06,2022

Interim release of detained vehicle and goods on payment of penalty - penalty for detention under amended Section 129(1) of the West Bengal Goods and Service Tax Act, 2017 - simultaneous applicability of Central and State GST laws - jurisdiction to grant interim relief in writ proceedings - scope of interference in an intra-court appeal against an interlocutory order

Scope of interference in an intra-court appeal against an interlocutory order - jurisdiction to grant interim relief in writ proceedings - Whether this Court should interfere with the learned single Judge's interlocutory order refusing the appellants' prayer for interim release of the detained vehicle and goods - HELD THAT: - The Court declined to interfere with the impugned interlocutory order. The High Court observed that factual disputes relating to ownership and legal questions about the applicability of Central and State GST laws had been raised and that adjudication of those disputes falls within the competence of the learned single Judge in the writ petition. The Bench refused to usurp the first Court's jurisdiction by deciding merits in an intra-court appeal preferred against an interlocutory order and found no error warranting interference at this stage. The Court therefore dismissed the intra-court appeal without entering into the merits of the contentions.

Intra-court appeal dismissed; no interference with the learned single Judge's interlocutory order.

Penalty for detention under amended Section 129(1) of the West Bengal Goods and Service Tax Act, 2017 - simultaneous applicability of Central and State GST laws - interim release of detained vehicle and goods on payment of penalty - Whether questions regarding the quantum of penalty, ownership authenticity and the applicability of Central and State GST laws should be adjudicated by the learned single Judge - HELD THAT: - The Court recorded that the petitioners had raised a prima facie case on ownership and challenged the respondent-authority's insistence on payment of 100% of the value of goods, while counsel for the State contended that penalties under both Central and State laws could be aggregated. Rather than resolving these contested factual and legal questions at the interlocutory stage, the Court directed that such issues be adjudicated by the learned single Judge hearing the writ petition. The Bench expressly declined to determine the merits and remitted consideration of authenticity of ownership and the legal question of whether Central and State Acts operate concurrently or exclusively to the first Court for full hearing and decision.

Ownership, penalty-quantum and applicability of Central versus State GST laws remitted to the learned single Judge for fresh and expeditious consideration on merits.

Final Conclusion: The intra-court appeal is dismissed; the High Court declined to interfere with the learned single Judge's interlocutory order and remitted contested issues of ownership, penalty computation and the applicability of Central and State GST laws to the learned single Judge for expeditious adjudication on merits.

Release of goods in transit against surety bond and bank guarantee - order under section 129(3) of the CGST Act, 2017 - remedy under Section 107 of the CGST Act - deposit of 25% of the penalty as precondition for invoking remedy - return of surety bond and bank guarantee upon compliance

Order under section 129(3) of the CGST Act, 2017 - remedy under Section 107 of the CGST Act - deposit of 25% of the penalty as precondition for invoking remedy - Availability of statutory remedy and the quantum required to be deposited to avail that remedy after release of the vehicle. - HELD THAT: - The Court recorded that an order pursuant to section 129(3) of the CGST Act was passed and the conveyance had been released against a surety bond and a bank guarantee for the full penalty. The petitioner, if aggrieved by that statutory order, must avail the remedy provided under Section 107 of the CGST Act. The proviso to Section 107 contemplates deposit of 25% of the penalty as the condition for invoking the appellate remedy; therefore the petitioner need not be compelled to pay the full amount for pursuing the remedy and is required only to make the deposit of 25% as prescribed before invoking Section 107 relief.

Petitioner may challenge the order under Section 107 of the CGST Act upon deposit of 25% of the penalty.

Release of goods in transit against surety bond and bank guarantee - return of surety bond and bank guarantee upon compliance - Entitlement and procedure for return of the surety bond and bank guarantee furnished for release of the conveyance. - HELD THAT: - The Court directed that, having obtained release of the vehicle upon furnishing a surety bond and a bank guarantee, the petitioner shall be entitled to the return of those instruments. If the petitioner files an appeal under Section 107 with the required deposit and furnishes to the first respondent the details of the appeal and of the deposit made, the first respondent is directed to return the bank guarantee and surety bond. The stipulated timeline for such return is within ten working days from receipt of the appeal details and deposit information by the first respondent. All other contentions were left open for adjudication in the appeal process.

On filing the appeal with the requisite deposit and notifying the first respondent of the appeal and deposit, the first respondent shall return the bank guarantee and surety bond within ten working days.

Final Conclusion: Writ petition disposed of with liberty to the petitioner to prefer an appeal under Section 107 of the CGST Act upon deposit of 25% of the penalty; on filing the appeal and providing details of the deposit, the surety bond and bank guarantee furnished for release of the vehicle shall be returned by the first respondent within ten working days; other contentions reserved.

Works Contract - Original works - Inter-State supply - Applicability of Notification 8/2017-IT(R) Sr. No. 3(vi)(a) - 12% IGST for works contract provided to a local authority - SAC 995468 - Other installation services n.e.c.

Works Contract - Inter-State supply - Applicability of Notification 8/2017-IT(R) Sr. No. 3(vi)(a) - 12% IGST for works contract provided to a local authority - Rate of GST applicable on the services supplied by M/s Amnex to Shahjahanpur Nagar Nigam - HELD THAT: - The agreement for implementation of the Intelligent Traffic Management System (ITMS) is a works contract involving supply of goods and services for erection, commissioning and installation of the project. Under Schedule II(6)(a) of the CGST Act such works contract is to be treated as supply of service. The recipient is a local authority (Shahjahanpur Nagar Nigam) and the supply is an inter-state supply. Notification 8/2017-Integrated Tax (Rate) (Sr. No. 3(vi)(a)) covers composite supply of works contract provided to a local authority for original works and prescribes the applicable tariff at 9954 with the rate of 12%. Consequently Notification 24/2017-CT(R), which pertains to intra-state supplies, is not applicable to the subject inter-state supply. On this basis the AAR holds that the subject supply is leviable to 12% IGST. [Paras 14]

Supply is leviable to 12% IGST under Sr. No. 3(vi)(a) of Notification 8/2017-IT(R).

SAC 995468 - Other installation services n.e.c. - Tariff 9954 - Correct SAC/HSN classification for the subject supply - HELD THAT: - The ITMS project constitutes original works involving installation, commissioning and maintenance. The tariff heading referenced in the applicable notification is 9954. SAC 995468 (Other installation services n.e.c.) describes installation services of the nature involved in the subject project and appears within the tariff subheading 9954. Given the nature of the contract as original works and the positioning of SAC 995468 within the relevant tariff, the AAR identifies SAC 995468 as the appropriate classification for the subject works contract for the purposes of this ruling. The AAR clarifies that this classification is rendered on the facts of the present case and is not a universal formula for all cases. [Paras 15]

SAC for the subject supply is 995468 (Other installation services n.e.c.).

Final Conclusion: The Authority rules that the ITMS works contract executed by M/s Amnex for Shahjahanpur Nagar Nigam is a works-contract service classified under SAC 995468 and is leviable to 12% IGST under Sr. No. 3(vi)(a) of Notification 8/2017-IT(R) as an inter state supply to a local authority.

Exemption from tax on renting of residential dwelling for use as residence - rental or leasing services involving own or leased residential property - real estate services (SAC 997211) - classification of supply as service - nature of end use determining GST liability

Exemption from tax on renting of residential dwelling for use as residence - rental or leasing services involving own or leased residential property - nature of end use determining GST liability - Applicant is eligible for exemption under Sr. No.12 of Notification No.12/2017-CT(Rate) (and corresponding entry under MGST Act) on monthly license fee received for letting out residential flats to LIC for use as staff quarters. - HELD THAT: - The Authority held that the activity is a supply of service falling within Real Estate Services and, specifically, rental/leasing services involving own residential property (SAC 997211). The exemption at Sr. No.12 applies to services by way of renting of residential dwelling for use as a residence and is focused on the nature and end use of the property rather than on the identity or status of the recipient. The applicant produced the lease terms (including a contractual restriction against commercial use) and an allotment letter from LIC confirming residential use by employees. The jurisdictional officer's contention that leasing to a commercial entity (LIC) converts the use into commercial supply was rejected as lacking legal or logical basis. Reliance on a prior AAR (M/s Borbheta Estate Pvt Ltd.) with similar facts supported the conclusion that renting to a commercial entity for bona fide residential use by its employees remains exempt. Accordingly, where the property is let and actually used as residence, the supply is covered by the exemption; if used for commercial purposes it would be taxable, but that is not the case here. [Paras 5]

Exemption affirmed; the monthly license fee for the flats let to LIC for residential use is not subject to GST under Sr. No.12 of Notification No.12/2017-CT(Rate) (and corresponding MGST entry).

Final Conclusion: The Advance Ruling answers the question in the affirmative: the license fees received by the applicant for letting the specified flats to LIC for bona fide residential use by its staff are exempt from GST under Sr. No.12 of Notification No.12/2017-CT(Rate) (and the corresponding entry under the MGST Act).

Scope of supply under Section 7(1) of the CGST Act - services as supply under Section 2(102) of the CGST Act - definition of consideration under Section 2(31) of the CGST Act - definition of business under Section 2(17) of the CGST Act - in the course or furtherance of business - exemption under Notification No. 12/2017-CTR

Scope of supply under Section 7(1) of the CGST Act - services as supply under Section 2(102) of the CGST Act - definition of consideration under Section 2(31) of the CGST Act - definition of business under Section 2(17) of the CGST Act - in the course or furtherance of business - Whether the activities of ECOI and the 17 Insurance Ombudsman Offices constitute a taxable supply of services and whether amounts received constitute consideration in the course or furtherance of business. - HELD THAT: - The Authority found that the applicant entertains and decides complaints brought by aggrieved persons against insurers, which amounts to rendering services and therefore falls within the inclusive expression 'supply' under the GST law. Applying the statutory definitions, the services fall within the meaning of 'services' under Section 2(102). Although complainants do not pay fees, the funds received from the Life Insurance Council and the General Insurance Council satisfy the definition of 'consideration' under Section 2(31) since consideration may be provided 'by any other person'. The inclusive definition of 'business' under Section 2(17), which covers activities whether or not for pecuniary benefit, brings the applicant's activities within 'business' and hence within the scope of taxable supply made in the course or furtherance of business. Consequently, the amounts received by the applicant for managing salaries and administrative expenses are taxable. [Paras 5]

The activities of ECOI and the 17 Ombudsman Offices are a supply of services; payments received from the Life Insurance Council and General Insurance Council constitute consideration and the activities are in the course or furtherance of business, making them liable to GST.

Exemption under Notification No. 12/2017-CTR - Whether the services rendered by the applicant are exempt under Notification No. 12/2017-CTR dated 28.06.2017. - HELD THAT: - The Authority examined the exemption Notification and observed that the services rendered by the applicant do not specifically appear in the Table of services exempted by the Notification. Given the characterization of the applicant's activities as taxable supplies of services and the absence of an express exemption entry, the services and the receipts are not covered by Notification No. 12/2017-CTR. [Paras 5]

The services provided by the applicant are not exempt under Notification No. 12/2017-CTR and the amounts received are therefore not exempt from GST.

Final Conclusion: The Advance Ruling holds that the Executive Council of Insurers and the 17 Insurance Ombudsman Offices render taxable services; amounts received from the Life Insurance Council and General Insurance Council constitute consideration and are not exempt under the cited notification. One question regarding payments received by the Councils 'on behalf of' the Executive Council was not answered as outside the scope of the reference.

Supply in course or furtherance of business - consideration in relation to supply - voluntary/gratuitous payment treated as consideration - deposit versus advance: taxability and time of supply - prohibition in model bye laws on extracting donations from transferor - dominant position of society and compulsion camouflaged as voluntary payments

Voluntary/gratuitous payment treated as consideration - supply in course or furtherance of business - consideration in relation to supply - prohibition in model bye laws on extracting donations from transferor - deposit versus advance: taxability and time of supply - Receipt of gratuitous payment from an outgoing member is taxable under the CGST Act, 2017. - HELD THAT: - The Authority found that the society's bye laws (Model Bye Laws Nos. 7(e) and 38(e)(ix)) forbid recovery of additional donations or contributions from a transferor/transferee, and societies occupy a dominant position that can render purportedly voluntary payments effectively compelled. The payments received from outgoing members were held to be made by persons who had received services from the society during their membership and, being payments in respect of or for inducement of such services (and in some cases expressly earmarked for future repairs), fall within the definition of "consideration". Accordingly, such receipts constitute a "supply" in the course or furtherance of business and are taxable under the CGST Act. The Authority also treated amounts collected for major repairs (as per admissions on record) as advances for future repair services and noted the distinction between deposits and advances for time-of-supply purposes, observing that advances for services are taxable at the time of receipt. The Authority found the affidavits produced to be incomplete and noted that one affidavit postdated directions to produce evidence, supporting the conclusion that the society's receipts were not bona fide gratuitous donations but payments linked to services or future service provision. [Paras 5, 6]

Affirmative - such gratuitous payments from outgoing members are consideration for services (including advances for future repairs) and are taxable under the CGST Act, 2017.

Final Conclusion: The Authority answered Question No. 2 in the affirmative: contributions received from outgoing members are taxable as consideration for supply (including as advances for future services). Questions No. 1 and No. 3 were not answered as they were withdrawn by the applicant.

Capitalisation of interest earned during construction - interest on earmarked funds/FDRs inextricably linked with setting up of plant - capital receipt reducing cost of asset - no substantial question of law where binding precedents apply

Capitalisation of interest earned during construction - interest on earmarked funds/FDRs inextricably linked with setting up of plant - capital receipt reducing cost of asset - Whether interest earned on fixed deposits during the period of construction is exigible to tax as income or is capital in nature and to be capitalised with the cost of the asset. - HELD THAT: - The Court considered the ITAT's allowance of capitalisation of interest on FDRs earned during construction and the Revenue's challenge that RBI guidelines were not followed in utilising ECB funds. Having regard to binding authorities, including the Apex Court's exposition that receipts inextricably linked to the process of setting up plant and machinery are capital in nature and reduce the cost of assets, and subsequent pronouncements applying that principle, the court held that the questions raised were squarely covered by those decisions. The Court noted its earlier disposal of a similar challenge in ITA 70/2022 (relating to the assessee's own earlier assessment year), where the same principle was applied, and concluded that no substantial question of law arises for consideration in the present appeal. The Revenue's reliance on procedural non-compliance with RBI guidelines did not furnish a legal principle sufficient to distinguish the precedents relied upon by the assessee or to displace the rule that interest inextricably linked to asset construction is capital in nature.

Appeal dismissed; no substantial question of law arises and the ITAT's allowance of capitalisation of the interest is sustained under the cited precedents.

Final Conclusion: The High Court dismissed the Revenue's appeal against the ITAT order for Assessment Year 2013-14, holding that the contention on taxability of interest earned during construction is covered by binding precedents and does not raise any substantial question of law.

Mandatory requirement of filing audit report under Section 80IA(7) - directory nature of filing audit report pre-amendment - filing of audit report before framing of assessment satisfies Section 80IA(7) - prospective operation of taxing statute - claim of deduction under Section 80IA

Mandatory requirement of filing audit report under Section 80IA(7) - directory nature of filing audit report pre-amendment - filing of audit report before framing of assessment satisfies Section 80IA(7) - claim of deduction under Section 80IA - Whether, for assessment year 2009-2010, the requirement in Section 80IA(7) to furnish the audit report along with the return of income was mandatory or directory, and whether the assessee complied by filing the audit report during the course of assessment so as to claim deduction under Section 80IA. - HELD THAT: - The Court noted that the statutory text of Section 80IA(7) was amended by the Finance Act, 2020 to require furnishing the audit report by the specified date referred to in section 44AB, substituting the earlier phrase that required the report to be furnished "along with his return of income". Applying the principle that taxing statutes and such amendments operate prospectively, the Court held that prior to the 2020 amendment the requirement to file the audit report "along with the return" was not a mandatory precondition in the sense of barring relief where the report was furnished before completion of assessment. The Court accepted that filing the audit report at any time before framing of assessment meets the requirement of Section 80IA(7) as it stood for the assessment year 2009-2010. On the admitted facts that the assessee furnished the mandated audit report during the course of assessment for AY 2009-2010, the Court held that the assessee complied with Section 80IA(7) and was therefore entitled to the deduction under Section 80IA. The appellate orders (CIT(A) and ITAT) allowing the deduction were accordingly affirmed. [Paras 6, 8, 10]

Section 80IA(7) as applicable to assessment year 2009-2010 was directory regarding timing of filing the audit report; filing the report during the assessment satisfied the requirement and the assessee's claim of deduction under Section 80IA was rightly allowed.

Final Conclusion: The substantial question of law is answered in favour of the assessee; the CIT(A) and ITAT orders allowing the Section 80IA deduction for assessment year 2009-2010 are upheld and the Revenue's appeal is dismissed.

Revision under section 263 - Explanation 2 to section 263 - Erroneous and prejudicial to the interests of revenue - Assessing Officer's enquiry/verifications - Standard of a reasonable and prudent Assessing Officer - Reassessment abatement under section 153A - Non speaking assessment order

Revision under section 263 - Explanation 2 to section 263 - Erroneous and prejudicial to the interests of revenue - Assessing Officer's enquiry/verifications - Standard of a reasonable and prudent Assessing Officer - Whether the Principal Commissioner of Income Tax was justified in invoking powers under section 263 by holding that the assessment order was erroneous and prejudicial to the interests of revenue on the ground that the Assessing Officer had not made enquiries or verifications which should have been made (Explanation 2 clauses (a) and (b)). - HELD THAT: - The Tribunal examined the material on record and observed that the reassessment and subsequent assessment under section 143(3) r.w.s. 153A were prompted by information from the Investigation Wing alleging bogus purchases. The record shows that the Assessing Officer had issued notices and the assessee furnished extensive documentary material-ledger confirmations, affidavits, bank statements, stock registers, export and purchase invoices and other supporting documents-and attended hearings. The Tribunal applied the recognizable standard that clause (a) of Explanation 2 is attracted only if enquiries or verifications which a reasonable and prudent Assessing Officer ought to have carried out were not made; mere disagreement with the course adopted by the Assessing Officer is insufficient. Relying on the principle that an Assessing Officer in scrutiny proceedings need only make reasonable prima facie enquiries and need not probe every claim to the hilt, the Tribunal found that the Assessing Officer had before him the material filed during reassessment as well as during proceedings under section 153A, and that there was no specific identification in the revision order of any enquiry which was omitted and which a prudent officer would have conducted. Consequently, Explanation 2 clauses (a) and (b) were held inapplicable and the exercise of revisionary power was unjustified. [Paras 15, 20, 21, 22, 23]

The revision order under section 263 was not sustainable; clauses (a) and (b) of Explanation 2 to section 263 do not apply and the revision order is set aside.

Revision under section 263 - Reassessment abatement under section 153A - Erroneous and prejudicial to the interests of revenue - Whether the conclusion in respect of assessment year 2010-11 applies to assessment year 2011-12. - HELD THAT: - The Tribunal noted that facts and proceedings for assessment year 2011-12 were identical to those for 2010-11 except for variance in figures. Since the Tribunal set aside the revision order for AY 2010-11 on the ground that Explanation 2 to section 263 was not attracted and the Assessing Officer had the requisite material and had made enquiries, the same reasoning was applied mutatis mutandis to AY 2011-12. [Paras 2, 24]

The revision order under section 263 for assessment year 2011-12 is also set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeals, set aside the revisionary orders passed under section 263 for assessment years 2010-11 and 2011-12, and held that Explanation 2 to section 263 (clauses (a) and (b)) was not attracted on the facts since the Assessing Officer had before him the enquiries and material that a reasonable and prudent officer would require.

Reopening assessment under section 147 - jurisdiction under section 153C - unexplained investments under section 69 - attribution of income/asset to transferee versus transferor

Reopening assessment under section 147 - jurisdiction under section 153C - Validity of reopening assessment proceedings under section 147 when incriminating material was found during search of a third party (Marvel Group) and whether section 153C alone was the appropriate provision. - HELD THAT: - The Tribunal found that the appellant did not establish the existence of the conditions precedent for invoking section 153C. In consequence, the mere fact that incriminating material originated from a search of a third party did not oust the Assessing Officer's power to initiate reassessment proceedings under section 147. The Tribunal therefore upheld the Assessing Officer's opinion that income had escaped assessment and held that proceedings under section 147 were justified. [Paras 7]

Grounds 1 and 2 dismissed; reopening under section 147 was valid as the conditions for section 153C were not proved.

Unexplained investments under section 69 - attribution of income/asset to transferee versus transferor - Whether the addition of the alleged on money of Rs. 10,00,000 as unexplained investment in the hands of the appellant was warranted. - HELD THAT: - The Tribunal accepted that the flat was booked and the sale deed executed in the name of the appellant's wife. While the Assessing Officer relied on seized documents to contend that on money was paid at booking, the Tribunal observed that even if such payment were assumed, the tax consequence of unexplained investment would lie in the hands of the person in whose name the property was booked/acquired. Therefore the addition in the appellant's hands was not warranted and had to be deleted. The Tribunal did not decide the sufficiency of the evidence for payment of on money but treated the attribution of the alleged payment as decisive for tax incidence. [Paras 9]

Ground 3 allowed; the addition of the sum as unexplained investment in the appellant's hands deleted.

Final Conclusion: Appeal partly allowed: reopening under section 147 upheld (grounds 1 and 2 dismissed); addition of the alleged on money treated as not chargeable in the appellant's hands and deleted (ground 3 allowed).

Reopening of assessment under Section 147 - tangible material to justify reassessment - genuineness of trading losses and burden of proof - Client Code Modification misuse in F&O segment as basis for disallowance

Reopening of assessment under Section 147 - tangible material to justify reassessment - processing under Section 143(1) and subsequent initiation of reassessment - Validity of reopening the assessment - HELD THAT: - The Tribunal recorded that the return had been processed under Section 143(1) and not subjected to scrutiny. The Assessing Officer received specific information from the Director of Income Tax (Intell. CR. Inv.), Mumbai, alleging misuse of Client Code Modification to credit fictitious profit and loss. The presence of that specific information amounted to tangible material enabling the Assessing Officer to initiate reassessment proceedings. The assessee's objection to reopening was considered and disposed of by the Assessing Officer. On these facts the Tribunal found no infirmity in the exercise of power to reopen the assessment. [Paras 8, 9]

Reopening of assessment was valid and the grounds challenging it are dismissed.

Genuineness of trading losses and burden of proof - Client Code Modification misuse in F&O segment as basis for disallowance - use of inquiries under Section 133(6) to verify transactions - Validity of disallowance of the loss from F&O trading as non genuine - HELD THAT: - The Assessing Officer conducted inquiries, including issuing a notice under Section 133(6) to the broker, but the broker's response was general and did not furnish the requested information. The assessment record did not establish the genuineness of the trading loss and the assessee failed to produce conclusive evidence before the departmental authorities or before the Tribunal to rebut the factual findings. In those circumstances the departmental conclusion treating the loss as non genuine stood on the material on record and the Tribunal saw no reason to interfere with the Commissioner (Appeals)'s confirmation of the disallowance. [Paras 10, 11]

Disallowance of the claimed F&O trading loss as non genuine is upheld.

Final Conclusion: Appeal dismissed; the reassessment was valid and the disallowance of the trading loss as non genuine is sustained, the appeal being decided ex parte after the assessee failed to appear.

Addition under Section 68 - opening balance of loans - proof of identity, genuineness and creditworthiness of creditors - remand report admission by Assessing Officer - low tax effect/maintainability of Revenue appeal under CBDT circular

Addition under Section 68 - opening balance of loans - remand report admission by Assessing Officer - proof of identity, genuineness and creditworthiness of creditors - Validity of addition and interest disallowance made under Section 68 in respect of loans for A.Y. 2010-11 - HELD THAT: - The Assessing Officer had made an addition of loans and corresponding disallowance of interest. On remand the Assessing Officer admitted that fresh loans in the year were only a specified lesser sum and that the remainder were opening balances. The Commissioner (Appeals) relied on the remand report and found that for loans received during the year the assessee had proved the three essentials under Section 68 - identity of creditors, genuineness of transactions and creditworthiness - and deleted the additions and interest disallowance. The Tribunal holds that additions cannot be sustained in respect of opening balances of loans and, having regard to the Assessing Officer's remand admission and the appellate findings on merits which were not controverted by Revenue, the deletion by the Commissioner (Appeals) is upheld; further, the tax effect falls within the low tax effect threshold such that the Revenue's appeal is not maintainable. [Paras 3]

Revenue's appeal for A.Y. 2010-11 dismissed; addition under Section 68 and corresponding disallowance of interest deleted.

Addition under Section 68 - opening balance of loans - proof of identity, genuineness and creditworthiness of creditors - low tax effect/maintainability of Revenue appeal under CBDT circular - Validity of addition and interest disallowance made under Section 68 in respect of loans for A.Y. 2011-12 - HELD THAT: - Facts are identical to the earlier year: no fresh loans were received in the year and the disallowance relates to opening balances. The Commissioner (Appeals) deleted the addition and disallowance both on the basis of the remand report and on merits, finding that the requirements of Section 68 were satisfied for loans received in the year and that opening balances could not sustain addition. Those findings were not challenged by Revenue before the Tribunal. The quantum of tax effect falls within the CBDT low tax effect threshold, rendering the appeal not maintainable on that ground as well. [Paras 4]

Revenue's appeal for A.Y. 2011-12 dismissed; addition under Section 68 and corresponding disallowance of interest deleted.

Addition under Section 68 - low tax effect/maintainability of Revenue appeal under CBDT circular - authorization memo/authority to appeal - Maintainability of Revenue's appeal for A.Y. 2013-14 in view of low tax effect and correctness of the addition challenged - HELD THAT: - The Assessing Officer filed a letter confirming that the total addition disputed in the assessment is a specified amount which places the case within the CBDT low tax effect circular. Although the Revenue's grounds mentioned a higher figure, the authorization memo signed by the Principal Commissioner correctly recorded the addition and shows the disputed tax effect to be within the low threshold. On that basis the Tribunal holds the appeal falls within the low tax effect circular and is not maintainable and accordingly dismisses the appeal. [Paras 5]

Revenue's appeal for A.Y. 2013-14 dismissed on the ground of low tax effect/maintainability.

Final Conclusion: All three appeals filed by Revenue for A.Y. 2010-11, 2011-12 and 2013-14 are dismissed: in A.Y. 2010-11 and 2011-12 the additions under Section 68 and corresponding interest disallowances are deleted (opening balances cannot be treated as fresh loans and the Commissioner (Appeals)'s deletions on remand and on merits are upheld); in A.Y. 2013-14 the appeal is dismissed as falling within the CBDT low tax effect threshold. Liberty granted to Revenue to seek restoration if it can show the matters do not fall within the low tax effect circular.

Validity of revision under section 263 of the Income Tax Act - Authorization and quantification of partners' remuneration under section 40(b) of the Income Tax Act - Erroneousness and prejudice to the interest of revenue

Validity of revision under section 263 of the Income Tax Act - Erroneousness and prejudice to the interest of revenue - Whether the order passed by the Pr. CIT under section 263 holding the assessment to be erroneous and prejudicial to the revenue is sustainable. - HELD THAT: - The Tribunal examined whether the assessing officer's view amounted to an erroneous order prejudicial to the revenue. The record shows that the partnership deed was on file and the assessing officer allowed partners' remuneration in computation of income; two plausible views existed between the AO and the Pr. CIT regarding the interpretation of the deed. Applying the principle that a view taken by the AO which is plausible cannot be characterised as erroneous or prejudicial to the revenue, the Tribunal held that the AO's conclusion did not suffer from such legal infirmity as would justify exercise of revisional jurisdiction under section 263. The Pr. CIT failed to demonstrate that the AO's view was perverse or outside the bounds of reasonable opinion, and therefore the preconditions for invoking section 263 were not satisfied. [Paras 9, 10]

The section 263 order is unsustainable; the assessing officer's order is not erroneous or prejudicial to the revenue and the revision under section 263 is set aside.

Authorization and quantification of partners' remuneration under section 40(b) of the Income Tax Act - Erroneousness and prejudice to the interest of revenue - Whether the partners' remuneration was properly authorised and quantified so as to be allowable under section 40(b). - HELD THAT: - The partnership deed contained a clause permitting each working partner to draw salary 'to the maximum of' a specified amount and provided for reduction where book profit was insufficient. The assessing officer considered the partnership deed and allowed remuneration of Rs.12,00,000 to each partner in the assessment, which fell within the limits authorised by the deed. Given that the deed was on record and the AO's computation reflected the deed's limits, the Tribunal found no valid basis to conclude that the remuneration was unquantified or unauthorised so as to attract disallowance. The Tribunal also observed that section 40(b) controls allowable remuneration by reference to book profit, and that the AO's approach was a tenable view. [Paras 2, 3, 9]

The partners' remuneration was treated in accordance with the partnership deed and section 40(b); the assessing officer's allowance was a plausible view and does not warrant disallowance.

Final Conclusion: The appeal is allowed. The order passed by the Pr. CIT under section 263 is set aside as the assessing officer's view on partners' remuneration (allowed within the limits of the partnership deed and subject to book-profit limitations under section 40(b)) was a plausible view and not erroneous or prejudicial to the revenue.

Reopening of assessment - jurisdiction of Assessing Officer - assessments initiated by non-jurisdictional officer - disposal of objections to reopening - mandatory procedure under G.K.N. Driveshafts - reassessment invalid for jurisdictional defect

Reopening of assessment - jurisdiction of Assessing Officer - assessments initiated by non-jurisdictional officer - reassessment invalid for jurisdictional defect - Validity of reopening initiated by an Assessing Officer who was not the jurisdictional AO for the assessee. - HELD THAT: - The Tribunal found on the material on record that the assessee was habitually assessed and had filed returns in Range-1, Ghaziabad, whereas the notice under section 148 was issued by ITO, Ward 70(3), New Delhi. Applying the principle that an assessment initiated by a non-jurisdictional Assessing Officer is without jurisdiction and therefore invalid, and having regard to precedent cited (including M.I. Builders and decisions emphasising that initiation by a non-jurisdictional officer cannot validate the reassessment), the Tribunal held that initiation of reassessment by the non jurisdictional officer rendered the subsequent reassessment order invalid. The Tribunal therefore concluded that the reassessment could not stand on that ground. [Paras 5, 6, 7]

Reopening initiated by a non-jurisdictional Assessing Officer was invalid and the reassessment could not be sustained on that ground.

Disposal of objections to reopening - mandatory procedure under G.K.N. Driveshafts - reassessment invalid for jurisdictional defect - Whether the AO complied with the mandatory requirement to dispose of the assessee's objections to reopening in terms of G.K.N. Driveshafts, and consequence of any failure. - HELD THAT: - The Tribunal noted that the assessee had filed written objections to the reopening, which were extracted in the assessment order, but the Assessing Officer did not dispose of those objections by a reasoned/speaking order as mandated by the Supreme Court in G.K.N. Driveshafts. Having regard to the failure to follow the mandatory procedure and mindful that such procedural defect undermines the validity of the reassessment, the Tribunal held that the reassessment was vitiated on this preliminary ground as well. Since the reassessment was quashed on these preliminary and jurisdictional grounds, the Tribunal did not adjudicate the remaining substantive grounds which thus became academic. [Paras 11, 12, 13]

Failure of the AO to dispose of the objections as required by G.K.N. Driveshafts rendered the reassessment bad in law and warranted quashing of the reassessment order.

Final Conclusion: The appeal is allowed: the reassessment framed pursuant to the notice issued by the non jurisdictional Assessing Officer and without disposal of the assessee's objections as required by law is quashed; other grounds were not adjudicated as academic.

Apportionment of income between spouses governed by the Portuguese system of community of property - domicile and applicability of the Portuguese Civil Code to claim benefit under section 5A - distinguishing precedent: applicability of Goa Salaries Taxpayers Association v. Union of India

Apportionment of income between spouses governed by the Portuguese system of community of property - domicile and applicability of the Portuguese Civil Code to claim benefit under section 5A - Whether the appellant could claim apportionment of income between spouses under section 5A on the ground of being governed by the Portuguese Civil Code. - HELD THAT: - The Tribunal found that the appellant, though a resident of Goa, originally belonged to Kerala and migrated to Goa in 1979; neither he nor his parents were born in Goa. On the material before it, the domicile certificate established residency but did not establish that the appellant was governed by the Portuguese Civil Code. The Tribunal accepted the finding that the appellant's spouse, although Goan, ceased to be a member of the Portuguese territory by marrying the appellant who was not a member of the Portuguese territory. In that factual matrix the appellant could not invoke the communal property regime to claim equal apportionment of income under section 5A. The decision of the Bombay High Court in Goa Salaries Taxpayers Association v. Union of India was held to be distinguishable on facts and did not assist the appellant. Accordingly the addition made by the Assessing Officer and confirmed by the CIT(A) was sustained. [Paras 7, 8]

The claim under section 5A was rejected and the addition confirmed; the appeal is dismissed.

Final Conclusion: On the facts, the appellant was not governed by the Portuguese Civil Code and therefore could not claim equal apportionment of income between spouses under section 5A; the addition confirmed by the CIT(A) is sustained and the appeal is dismissed.

Unexplained investment - explanation of source of investment - bank records as evidence of receipt and application of funds - search and seizure under the Income-tax Act

Unexplained investment - explanation of source of investment - bank records as evidence of receipt and application of funds - Whether the addition of Rs. 9 lakhs as unexplained investment for the assessment year 2012-13 was justified. - HELD THAT: - The Tribunal examined the material on record including the assessment order, the assessee's explanations and bank statements. The Assessing Officer had treated five share transactions as investments totalling Rs. 9 lakhs. The assessee proved that shares of Quality Synthetics Industries Ltd. (purchased in 2000) and GL Estates Pvt. Ltd. (purchased in 2004) were sold during the year and sale proceeds of Rs. 2 lakhs each were credited to the assessee's bank account, thereby showing that the amounts treated as investments in those two concerns were in fact receipts from earlier purchases. Consequently Rs. 4 lakhs was excluded from the impugned investment. Of the remaining Rs. 5 lakhs, Rs. 4 lakhs related to shares of SSKS Estates Pvt. Ltd., but documentary evidence showed that Rs. 2 lakhs of that amount was invested on 09.04.2012 which falls in the next financial year (corresponding to AY 2013-14) and thus could not be treated as investment for AY 2012-13. That left Rs. 3 lakhs as the appropriate investment for the year; of this, Rs. 2 lakhs was traced to the sale proceeds of GL Estates shares and was therefore explained by bank credits, while the remaining Rs. 1 lakh was shown to be out of past savings/drawings from the bank account. Having regard to the bank evidence, the timing of transactions and the assessee's length of service (capacity to have savings), the Tribunal concluded that the source of the investments was satisfactorily explained and the addition could not be sustained. [Paras 8, 9]

The addition of Rs. 9 lakhs treated as unexplained investment is deleted and the appeal is allowed.

Final Conclusion: On the facts and bank records, the Tribunal found that only Rs. 3 lakhs pertained to investment in AY 2012-13 and that the source of those investments was adequately explained; accordingly the addition of Rs. 9 lakhs was deleted and the appeal allowed.

Permanent Establishment - Taxability of income from personal activities of entertainers/athletes - Application of DTAA Article 16/17 (artists and athletes) - Adverse inference for non-furnishing of information - Remand for factual examination

Permanent Establishment - Remand for factual examination - Remand to the Assessing Officer for factual examination of the duration and nature of the assessee's presence in India and related facts relevant to determination of Permanent Establishment. - HELD THAT: - The Tribunal observed that the duration of the drivers' stay in India, time taken for preparation, finalisation and conclusion of the event, and documentary proof of arrival and departure are material factual aspects which were not examined by the revenue authorities and which the assessee could not presently furnish before the Tribunal. These factual matters are crucial to the question of whether the assessee had a Permanent Establishment in India. Given the absence of factual findings and that the assessee sought an opportunity to produce particulars, the Tribunal found it appropriate to remit the file to the AO for examination of these facts and for taking such evidence as may be necessary. [Paras 14]

File remitted to the AO to examine and verify factual aspects relating to presence in India and duration of activities for determination of PE.

Application of DTAA Article 16/17 (artists and athletes) - Taxability of income from personal activities of entertainers/athletes - Remand for factual examination - Remand for fresh consideration of the applicability of Article 16/17 of the India-Switzerland DTAA to receipts claimed to be derived from personal activities of racing drivers, with an opportunity to the assessee to make submissions. - HELD THAT: - The DRP treated the receipts as income from personal activities of athletes under the provision dealing with artists and athletes (referred to under Article 16/17 in the proceedings). The Tribunal noted that the assessee disputes the DRP's observation that it had not responded and that material aspects relevant to this determination were not placed before the AO. The Tribunal held that the assessee should be granted an opportunity to submit its contentions and relevant documents and that the AO should reconsider the taxability under the said DTAA provision after such factual and legal examination. [Paras 15]

Matter remitted to the AO for fresh consideration of the applicability of Article 16/17 of the DTAA after permitting the assessee to file submissions and evidence.

Adverse inference for non-furnishing of information - Remand for factual examination - Remand for reconsideration of adverse inferences drawn and of the AO's reliance on payments to drivers as a proxy for the assessee's receipts, permitting the assessee to furnish missing information. - HELD THAT: - The DRP and AO drew an adverse inference from the assessee's non-furnishing of details of receipts and used available information (payments to drivers) to estimate income. The Tribunal found that other aspects connected to non-production of information require examination and that the assessee must be given an opportunity to comply and explain before such adverse conclusions are finalised. Consequently, the Tribunal directed that the AO re-examine these adverse inferences in the light of any information the assessee may produce on remand. [Paras 16]

AO to re-examine and reconsider any adverse inferences and the use of payments to drivers as income proxy after affording the assessee opportunity to produce the required information.

Final Conclusion: Both appeals are allowed for statistical purposes and the matters are remitted to the Assessing Officer for fresh examination on the identified factual and disclosure issues (duration and nature of presence in India, applicability of the DTAA provision relating to artists/athletes, and adverse inferences relating to non-furnishing of information), with the assessee being granted an opportunity to file submissions and evidence; the order applies equally to the subsequent assessment year.

Validity of reference to Transfer Pricing Officer after omission of clause (i) of section 92BA - Effect of omission of a statutory provision and saving clause under section 6 of the General Clauses Act - Re adjudication of expenditure claims under section 40A(2)(b)

Validity of reference to Transfer Pricing Officer after omission of clause (i) of section 92BA - Effect of omission of a statutory provision and saving clause under section 6 of the General Clauses Act - Reference by the Assessing Officer to the TPO and consequent transfer pricing adjustments based on clause (i) of section 92BA - HELD THAT: - The Tribunal held that clause (i) of section 92BA - which treated certain payments to persons specified in clause (b) of sub section (2) of section 40A as specified domestic transactions - has been omitted by subsequent amendment and, in the absence of any saving provision, must be treated as never having been on the statute. Applying the principle in Kolhapur Canesugar Works Ltd. and subsequent decisions cited in the judgment, omission (as distinct from repeal with a saving) removes the provision retrospectively unless the statute provides otherwise. Because no saving clause was introduced when clause (i) was omitted, proceedings and actions taken solely under that clause do not survive; consequently the AO's reference to the TPO under section 92CA based on clause (i) of section 92BA was invalid and the TPO/DRP orders founded on that reference are unsustainable. The Tribunal therefore directed deletion of additions made under the impugned reference and allowed the appeal on that ground. [Paras 10, 11, 13]

The reference to the TPO under section 92CA in respect of specified domestic transactions falling under omitted clause (i) of section 92BA is invalid; TPO and DRP orders based on that reference are not sustainable and the additions made thereunder are to be deleted.

Re adjudication of expenditure claims under section 40A(2)(b) - Whether the Assessing Officer should re examine the claim of expenditure otherwise falling within the deleted clause (i) of section 92BA under the provisions of section 40A(2)(b) - HELD THAT: - Having held that proceedings under clause (i) of section 92BA do not survive, the Tribunal observed that the AO must nevertheless examine the assessee's claim of expenditure in the ordinary course under the applicable provisions of law, specifically section 40A(2)(b). The Tribunal followed the approach of the coordinate bench in Texport Overseas Pvt. Ltd., restoring the matter to the AO with directions to re adjudicate the claim of expenditure in accordance with law and after affording the assessee a reasonable opportunity of being heard. In view of this remand the Tribunal declined to decide other issues on merit. [Paras 11, 14, 15]

The matter is restored to the Assessing Officer to re adjudicate the claim of expenditure under section 40A(2)(b) after giving the assessee a reasonable opportunity of being heard.

Final Conclusion: Following the binding decision of the Karnataka High Court and the coordinate Tribunal bench, the appeal is allowed: the transfer pricing adjustment founded on the now omitted clause (i) of section 92BA is set aside and the matter is remitted to the Assessing Officer to re examine the expenditure claims under section 40A(2)(b) with an opportunity to the assessee.

Cancellation of registration under section 12A/12AA - adventure in the nature of trade - value of benefit or perquisite arising from business - section 28(iv) - fair market value (FMV) of business properties - reference to expert valuer under section 142A - unexplained cash credit - section 68 - unexplained expenditure - section 69C - deductibility of expenditure incurred for acquisition of business asset - remand for further factual enquiry and verification

Cancellation of registration under section 12A/12AA - Validity of retrospective cancellation of registration granted under section 12A/12AA and availability of exemption under sections 11 and 12 - HELD THAT: - The Tribunal upheld the Commissioner (Exemptions) in cancelling the registration granted to Young Indian from AY 2011-12. It accepted that (i) registration was obtained while material facts and transactions were concealed and (ii) no genuine charitable activities in furtherance of the stated objects were carried out from inception until surrender/cancellation. The Tribunal applied the principle that the Commissioner may cancel registration from the date when breach of conditions or non-genuine activities are found and, on the facts, concluded the conditions were violated from the outset. Consequent claim to exemption under section 11 for the relevant period was held to be unavailable.

Cancellation of registration under section 12A/12AA from AY 2011-12 is upheld and exemption under section 11/12 is not available for the claimed period.

Adventure in the nature of trade - value of benefit or perquisite arising from business - section 28(iv) - Whether the acquisition of AJL (through assignment of receivables and allotment of shares) resulted in a taxable benefit to Young Indian under section 28(iv) - HELD THAT: - The Tribunal found on the facts that the scheme of transactions was an 'adventure in the nature of trade' designed to obtain control and the commercial benefits of AJL's immovable properties. Piercing the corporate veil (as also reflected in the Delhi High Court findings on the same transactions) showed that the substance of the transaction was acquisition of benefit in the form of underlying immovable properties and their pecuniary potential. Section 28(iv) taxes the value of any benefit or perquisite arising from business; the Tribunal held that the benefit to Young Indian arose in the relevant year and could be brought to tax under section 28(iv). The Tribunal rejected the assessee's submission that valuation should proceed under Rule 11UA (applicable to certain sections of 56) because here the taxable benefit arose from business/adventure and not as a mere share valuation under section 56.

The Department was right to tax the benefit under section 28(iv); the addition under section 28(iv) is sustained on the facts.

Fair market value (FMV) of business properties - reference to expert valuer under section 142A - Computation of the FMV of the immovable properties of AJL for the purpose of assessing the benefit under section 28(iv) - HELD THAT: - The AO referred valuation to the DVO under section 142A. The Tribunal reviewed the DVO reports, the objections filed by the assessee and the AO's own recomputation. On the facts: (a) the Delhi property (5A Herald House) valuation by DVO was accepted and the FMV as determined by the AO/DVO was upheld; (b) the Mumbai plot's DVO valuation was rejected as plainly inadequate for the locality and AO's recomputation was accepted subject to a reduction to account for the appropriate construction-cost component - the Tribunal adopted a final FMV for the Mumbai property lower than the AO's figure but materially above the DVO's original figure; (c) the Patna property valuation was reduced (15% deduction allowed to reflect encroachment/limitations) and the Tribunal gave the revised FMV; (d) the Panchkula valuation by the DVO was sustained; and (e) valuation of the Lucknow properties required adjustments (shops sold, higher discount for incomplete structure and correct depreciation year) and was remitted to the AO for recomputation in accordance with directions. The Tribunal emphasised that valuation is an estimate based on location, usage and market potential and that DVO reports are advisory to the AO under section 142A.

FMV for Delhi, Patna (after reduction), Panchkula and Mumbai (after AO adjustments) upheld as directed; Lucknow valuation remitted to AO for recomputation in accordance with Tribunal's directions.

Unexplained cash credit - section 68 - Genuineness, identity and creditworthiness of the lender (Dotex) and whether the Rs.1 crore received is taxable as unexplained cash credit under section 68 - HELD THAT: - The Assessing Officer doubted the transaction in the light of material and enquiries (including reports from the Investigation Wing) suggesting that Dotex and associated entities were used for accommodation/entry transactions. Although the assessee produced documentary material (confirmation letters, bank entries, TDS forms, financial statements of Dotex and further documents before the appellate authorities), the Tribunal recorded that the AO must make proper and effective enquiries of the lender (Dotex) and confront the assessee with the Investigation Wing material before drawing an adverse inference. The Tribunal therefore did not finally adjudicate the s.68 addition on merit but remitted the matter to the AO with specific directions to examine the documents, summon/obtain direct explanations from the lender, confront the assessee with the Investigation Wing/STR material and then decide after giving the assessee opportunity to be heard.

Issue remanded to the AO for fresh enquiry and verification of Dotex transaction and for fresh adjudication in accordance with law.

Unexplained expenditure - section 69C - Validity of a notional addition of alleged commission of Rs.1,00,000 under section 69C for raising the Dotex loan - HELD THAT: - The Tribunal found that the addition was purely hypothetical and not based on any material on record; there was no basis to make a notional addition of commission under section 69C when no evidence supported such expenditure. The notional addition was therefore unsustainable.

The notional addition under section 69C is deleted.

Deductibility of expenditure incurred for acquisition of business asset - Allowability of the Rs.50,00,000 paid to AICC for assignment of loan (consideration for acquiring asset/right) as deduction/adjustment against the assessed benefit - HELD THAT: - The Tribunal accepted the submission that the Rs.50,00,000 paid for assignment of the receivable/loan (which resulted in acquisition of AJL shares/benefit) should be treated as expenditure incurred for acquiring the business asset and allowed the sum as deduction from the amount held taxable under section 28(iv). The AO was directed to give effect accordingly.

Rs.50,00,000 paid for assignment is to be allowed as deduction against the benefit taxed under section 28(iv).

Remand for further factual enquiry and verification - Extent of remand and consequential directions to the Assessing Officer - HELD THAT: - The Tribunal directed remand on two principal factual matters: (i) enquiry into genuineness/creditworthiness of the Dotex loan (s.68 issue) - AO to obtain and confront Investigation Wing/STR material, summon Dotex principals and verify source of funds and other documents and afford the assessee full opportunity; and (ii) recomputation of valuation of Lucknow property - AO to allow proportionate deduction for shops already sold, apply larger discount for the incomplete/dilapidated structure (directed increase of discount to 30% from 22%), and compute depreciation from the correct year (1986-87) before finalising FMV. The Tribunal emphasised cooperation by the assessee in the remand enquiries.

Matter remitted to the AO with specific directions for enquiry and recomputation; fresh adjudication to follow on those issues.

Interest under section 234B - Levy of interest under section 234B - HELD THAT: - The Tribunal treated the point as consequential upon the substantive additions and disallowances. No independent favourable order on the appellant's challenge to interest under section 234B was needed; consequential relief (if any) will follow after final computation post-remand and adjustments.

Challenge to interest under section 234B dismissed as consequential.

Final Conclusion: The Tribunal upheld cancellation of Young Indian's registration under section 12A/12AA from AY 2011-12 and sustained taxation of the benefit arising from the AJL takeover under section 28(iv). The FMV of AJL properties was largely sustained (Delhi; Panchkula), adjusted (Mumbai; Patna), and Lucknow valuation was remitted for recomputation with specific directions. The addition treating the Dotex loan as unexplained (section 68) was not finally sustained but remitted to the AO for thorough enquiry of Dotex and confrontation with Investigation Wing/STR material; the notional section 69C addition was deleted; the Rs.50,00,000 payment for assignment was allowed as deduction; interest under section 234B was treated as consequential. The matter was partly restored to the AO for factual verification and recomputation in accordance with the Tribunal's directions.

Rejection of transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Sequential re determination of assessable value under Rule 5 (value of similar goods) - Authority to call for contemporaneous import data and manufacturer's price list to establish reasonable doubt as to declared value - Demand of differential customs duty under Section 28 and interest under Section 28AA of the Customs Act, 1962 - Imposition of penalty for mis declaration under Section 114A of the Customs Act, 1962 - Penalty for knowingly furnishing false or incorrect declaration under Section 114AA of the Customs Act, 1962 - Requirement of documentary proof for assertions of inferior quality or short shelf life (FSSAI licensing/no objection requirement)

Rejection of transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Authority to call for contemporaneous import data and manufacturer's price list to establish reasonable doubt as to declared value - Declared transaction value was rightly rejected under Rule 12 - HELD THAT: - The proper officer may raise initial doubts and, after calling for information, must have a reasonable doubt before rejecting the declared transaction value; the grounds for doubt include significantly higher values for identical or similar goods in contemporaneous imports or manufacturer's price lists. In the present case the declared prices were substantially lower than contemporaneous NIDB imports and manufacturer's price lists (in some items less than half), the owner was questioned and no documentary evidence was produced to substantiate the appellant's explanation of inferior quality or short shelf life. Further, import of such allegedly inferior/near expiry food supplements required FSSAI authorization which was not produced. On these facts, the Tribunal found the proper officer had reason and, after enquiry, reasonable doubt to reject the transaction value under Rule 12. [Paras 23, 24, 25, 26]

Transaction value was correctly rejected under Rule 12.

Sequential re determination of assessable value under Rule 5 (value of similar goods) - Re determination of value based on contemporaneous imports and manufacturer's price list - Assessable value was correctly re determined under Rule 5 - HELD THAT: - Once the transaction value was rejected under Rule 12, valuation must proceed sequentially under Rules 4-9. Rule 5 permits determination by reference to the value of similar goods. The original authority applied Rule 5 using contemporaneous NIDB import data and the manufacturer's price list for identical/similar items imported by others. Given the availability of such comparable data and the large discrepancy with the declared value, the Tribunal found no error in re determination of value under Rule 5 and the consequent demand. [Paras 19, 21, 27]

Re determination of assessable value under Rule 5 was justified.

Demand of differential customs duty under Section 28 and interest under Section 28AA of the Customs Act, 1962 - Demand of differential duty and interest was maintainable - HELD THAT: - Having found the declared transaction value liable to rejection and the assessable value re determined under Rule 5, the levy of differential customs duty follows under Section 28(8) with applicable interest under Section 28AA. The Tribunal accepted the original authority's exercise of valuation and upheld the demand for short levied duty and interest. [Paras 3, 27]

Demand of differential duty under Section 28 and interest under Section 28AA upheld.

Imposition of penalty for mis declaration under Section 114A of the Customs Act, 1962 - Penalty for knowingly furnishing false or incorrect declaration under Section 114AA of the Customs Act, 1962 - Penalties under Sections 114A and 114AA were rightly imposed - HELD THAT: - Section 114A penalises suppression or mis declaration leading to evasion of duty; Section 114AA penalises knowingly signing or using false or incorrect declarations. The Tribunal found the appellant had mis declared values that were a fraction of contemporaneous and manufacturer's prices and failed to substantiate assertions of inferior quality or short shelf life with documentary proof. On these facts the imposition of penalty under Section 114A and the mens rea linked penalty under Section 114AA were sustained as legally justified. [Paras 27, 28]

Penalties under Sections 114A and 114AA sustained.

Non confiscation where goods not physically available due to prior clearance without bond or bank guarantee - Goods were not confiscated because they were not physically available - HELD THAT: - The original order recorded that, although goods were liable to confiscation under Section 111(m) after re determination of value, they were not physically available as they had been cleared without securing bond or bank guarantee; accordingly no confiscation was ordered. The Tribunal noted there was no appeal by the Revenue against non confiscation and did not disturb this aspect. [Paras 4, 5]

No confiscation ordered because goods were not physically available; Tribunal did not interfere.

Final Conclusion: The appeal is rejected. The Tribunal upheld the rejection of the declared transaction value under Rule 12, the re determination of value under Rule 5, the demand of differential duty with interest under Sections 28 and 28AA, and the penalties under Sections 114A and 114AA; no confiscation was ordered because the goods were not physically available and that aspect was not challenged by the Revenue.

Limitation - condonation of delay - continuing offence - cognizance and issuance of summons - application of mind by the trial court - Section 211(7) of the Companies Act, 1956

Limitation - condonation of delay - application of mind by the trial court - cognizance and issuance of summons - Whether the learned Trial Court applied its mind to the question of limitation and to the applications for condonation of delay before taking cognizance and issuing summons. - HELD THAT: - The High Court found that in one complaint the Trial Court expressly recorded that the complaint was within limitation, but that observation was contrary to the record; in the other complaint the Trial Court did not address limitation at all. Both complaints were accompanied by applications for condonation of delay which the Trial Court overlooked. The court emphasised that while taking cognizance the Trial Court must consider whether the complaint falls within the period of limitation and, if not, whether sufficient grounds exist to condone the delay. Because the Trial Court did not apply its mind either to limitation or to the condonation applications, its orders taking cognizance and issuing summons cannot stand and require reconsideration by the Trial Court with proper application of mind to those aspects. [Paras 8, 9, 10]

Impugned orders dated 12th July, 2019 set aside and matters remanded to the learned Trial Court to consider the applications for condonation of delay and the question of limitation with requisite application of mind.

Continuing offence - Section 211(7) of the Companies Act, 1956 - Whether the Court would decide if the offence under Section 211(7) is a continuing offence. - HELD THAT: - The High Court expressly refrained from deciding the legal question whether the offence under Section 211(7) of the Companies Act, 1956 is a continuing offence. The court noted that this question would be urged before the Trial Court and therefore abstained from addressing it in the present petitions. [Paras 10]

Question left undecided by this Court and to be considered by the Trial Court on remand.

Final Conclusion: The writ petitions are allowed; the impugned orders of 12th July, 2019 are set aside and the matters are remanded to the learned Trial Court to consider, with reasoned application of mind, the applications for condonation of delay and the question of limitation (and any contention as to whether the offence is continuing) before proceeding further. Pending applications disposed of; directions given to send copy of this judgment to the Trial Court and upload it on the website.

Dispensing with convening and holding of meetings of shareholders and unsecured creditors - Service of notice under Section 230(5) of the Companies Act, 2013 - Form CAA.3 and disclosures under Rule 6 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - Presumption of no objection on expiry of 60 days - Service upon Regional Director, Registrar of Companies, Official Liquidator and Income Tax Authorities - Service upon other sectoral regulators - Compliance report to Registry - Allowance and disposal of first motion under Sections 230-232

Dispensing with convening and holding of meetings of shareholders and unsecured creditors - Whether the meetings of the shareholders and unsecured creditors of the Transferee Company could be dispensed with. - HELD THAT: - The Tribunal, having considered the consent affidavits filed by all shareholders of both companies and the affidavits of the unsecured creditors of the Transferee Company wherein they waived their right to participate in meetings, concluded that convening and holding of the meetings of the shareholders and unsecured creditors of the Transferee Company could be dispensed with. The consent and waiver furnished sufficed for dispensing with the meetings in the first motion petition. [Paras 8]

Meetings of the shareholders and unsecured creditors of the Transferee Company are dispensed with.

Service of notice under Section 230(5) of the Companies Act, 2013 - Form CAA.3 and disclosures under Rule 6 read with Rule 8 - Presumption of no objection on expiry of 60 days - What directions should be issued for service of statutory notices and the timeline for responses under Section 230(5) and the CAA Rules. - HELD THAT: - The Tribunal directed the Applicant Companies to issue notice in Form No. CAA.3 together with the disclosures required under Rule 6, as mandated by Section 230(5) read with Rule 8. Notices are to be sent forthwith to the Central Government through the Regional Director (North East), the Registrar of Companies, the Official Liquidator and the Income Tax Authorities/Assessment Officers concerned. The authorities are permitted 60 days from receipt of the notice to make representations to the Tribunal; failure to do so will be treated as having no objections. The mode of dispatch prescribed (registered post, speed post, courier or hand delivery) follows sub rule (2) of Rule 8. [Paras 9]

Applicant Companies must serve statutory notices in Form CAA.3 with required disclosures to specified authorities and allow 60 days for representations, failing which no objection will be presumed.

Service upon other sectoral regulators - Presumption of no objection on expiry of 60 days - Whether and how other sectoral regulators are to be notified and the consequence of their non response. - HELD THAT: - The Tribunal ordered service of notice upon any other sectoral regulators applicable to the Applicant Companies pursuant to Section 230(5) and Rule 8. It directed that if no response is received from such regulators within 60 days of receipt of notice, it shall be presumed that they have no objection to the proposed scheme. [Paras 10]

Applicant Companies to serve other sectoral regulators; absence of response within 60 days will be deemed as no objection.

Compliance report to Registry - Whether the Applicant Companies are required to file a compliance report and within what time. - HELD THAT: - The Tribunal required the Applicant Companies to file a compliance report with the Registry pursuant to the directions of the order. The compliance report is to be filed within 15 days from the date of the order, ensuring that the prescribed notices and service formalities have been completed. [Paras 11]

Applicant Companies shall file a compliance report with the Registry within 15 days.

Allowance and disposal of first motion under Sections 230-232 - Whether the Company Application (first motion) should be allowed and the consequent disposal. - HELD THAT: - Having dispensed with the meetings and given the directions for statutory notices and compliance, the Tribunal held that the Company Application (first motion petition) satisfies the requirements for admission in terms of its prayer. The Tribunal therefore allowed the application in terms of the prayer clause and disposed of the petition subject to the specified directions. [Paras 9, 12]

The Company Application (first motion) is allowed in terms of its prayer clause and disposed of subject to the directions given.

Final Conclusion: The Tribunal allowed the first motion application under Sections 230-232, dispensed with the meetings of shareholders and unsecured creditors of the Transferee Company on the basis of filed consents, directed service of Form CAA.3 with prescribed disclosures on the Regional Director, ROC, Official Liquidator, Income Tax Authorities and other sectoral regulators with a 60 day period for representations, and required filing of a compliance report within 15 days; the petition is disposed of accordingly.

Restoration of name of company - Power of Registrar to remove name of company under Section 248 - Appeal to Tribunal and restoration under Section 252 - Non-filing of financial statements not decisive if company is otherwise carrying on business - Just grounds for restoration - Registrar to ensure realisation of company's dues before striking off - Conditional restoration subject to compliance with statutory filings and payment of dues

Non-filing of financial statements not decisive if company is otherwise carrying on business - Restoration of name of company - Just grounds for restoration - Validity of striking off the company's name by the RoC where financial statements and returns were not filed for two years but the company showed non-current assets and evidence of ongoing business circumstances. - HELD THAT: - The Tribunal agreed with the NCLT's factual findings that the company filed financial statements up to 31.03.2015 and thereafter had negligible revenue (Rs. 23,500 in 2015-16 and nil in subsequent years) and that bank statements showed absence of transactions for a period; however, it held that mere non-filing of financial statements and returns for two financial years is not, by itself, a conclusive ground for striking off the name where the company is otherwise shown to have non-current assets, liabilities and an ongoing commercial position (notably an advance claimed against MVDA). The Tribunal relied on the statutory scheme under Section 248 (and the appellate remedy under Section 252) and prior precedents of the Tribunal favouring restoration where the company has assets or operations of substance. Applying these principles to the material on record - audited balance sheets showing long term loans/advances and an advance to MVDA, borrowings from directors and others, and the absence of any adverse input from the Income tax authorities - the Tribunal concluded that it is just to restore the company's name despite the filing defaults.

Impugned order striking off the company's name quashed and set aside; the Tribunal ordered restoration of the company's name on the ground that non filing alone did not justify striking off in the factual matrix of this case.

Conditional restoration subject to compliance with statutory filings and payment of dues - Power of Registrar to remove name of company under Section 248 - Appeal to Tribunal and restoration under Section 252 - Whether restoration should be granted unconditionally or subject to specific compliances and consequences. - HELD THAT: - While exercising the remedial power to restore the company's name, the Tribunal imposed specific conditions to balance the interests of regulatory compliance and third parties. The Tribunal directed payment of costs to ROC, deposit/production of proof of any sales tax dues, filing of all annual returns, financial statements and related documents for the period 2015 16 to 2021 22 within stipulated time limits, payment of requisite fees and late fees, and preserved ROC's liberty to take any further punitive or other actions available under the Act for past non filing or late filing. The Tribunal emphasised that the ROC retains statutory powers under Section 248 to act in future if warranted.

Restoration ordered subject to payment of costs, compliance with outstanding statutory filings for 2015 16 to 2021 22, payment of dues/fees and preservation of ROC's rights to take further action under the Act.

Final Conclusion: The Tribunal allowed the appeal, quashed the NCLT order upholding the strike off, and directed restoration of the company's name to the Register of Companies subject to specified conditions including payment of costs, settlement/production of proof of statutory dues and filing of all outstanding annual returns and financial statements for the period 2015 16 to 2021 22, while leaving open the ROC's power to initiate further action under the Companies Act.

Commercial wisdom of the Committee of Creditors - Withdrawal of application under Section 12A of the IBC - 90% voting threshold - Regulation 30A of the 2016 Regulations - Judicial interference in Committee of Creditors' decision - Standard for setting aside CoC decision: wholly capricious, arbitrary, irrational or de hors the statute

Commercial wisdom of the Committee of Creditors - Withdrawal of application under Section 12A of the IBC - 90% voting threshold - Regulation 30A of the 2016 Regulations - Standard for setting aside CoC decision: wholly capricious, arbitrary, irrational or de hors the statute - Whether the adjudicating authority or appellate authority can set aside a CoC decision approving withdrawal under Section 12A when the CoC has approved withdrawal with the requisite 90% voting share. - HELD THAT: - The Court held that where 90% or more of financial creditors approve withdrawal of a CIRP after due deliberation, the adjudicating authority (NCLT) and the appellate authority (NCLAT) may not sit in appeal over the commercial wisdom of the CoC. Section 12A was enacted following the Insolvency Law Committee's recommendations and Regulation 30A prescribes a structured procedure for post-constitution withdrawal, including CoC approval by 90% and submission by the RP to the adjudicating authority. Prior decisions, including Swiss Ribbons, recognise that the CoC's commercial determination is to be given paramount weight but leave room for judicial intervention where a CoC decision is wholly capricious, arbitrary, irrational or de hors the statute or rules. Applying these principles, the Court found that the CoC's approval in the present case (94.23%) followed extensive deliberations, amendments to the settlement proposal and reconvening of the meeting at the NCLT's direction; the decision thus reflected commercial wisdom and was not vitiated by arbitrariness. Consequently, the NCLT and NCLAT were unjustified in disregarding the CoC's decision and rejecting the application for withdrawal of CIRP. [Paras 24, 25, 26, 28]

The appeals are allowed; the impugned NCLAT and NCLT orders are quashed and set aside and the application for withdrawal of the CIRP is allowed.

Final Conclusion: Appeals allowed; orders of the NCLT and NCLAT setting aside the CoC-approved withdrawal are quashed and the RP's application for withdrawal of CIRP is permitted in view of CoC approval exceeding the statutory 90% threshold following due deliberation.

Liquidation - Corporate Insolvency Resolution Process - Schemes of compromise or arrangement under Section 230 - Withdrawal of application for sanction of scheme - Obligation of the liquidator to maintain the corporate debtor as a going concern

Liquidation - Obligation of the liquidator to maintain the corporate debtor as a going concern - Corporate Insolvency Resolution Process - Validity of the Adjudicating Authority's order dated 26.04.2021 directing the liquidator to proceed with liquidation rather than await or revisit a scheme under Section 230. - HELD THAT: - The Adjudicating Authority recorded that a direction of this Tribunal in Company Appeal (AT) (Ins.) No. 585/2019 required the liquidator to follow NCLAT's directions, and noted that efforts to secure a scheme under Section 230 had been pursued but no scheme had been approved. The Adjudicating Authority concluded that it was not empowered to re-open or review the earlier appellate direction and therefore rejected the liquidator's prayer for further directions and directed the liquidator to proceed with liquidation. The Appellants' contention that they could now offer a higher amount and thereby forestall liquidation was held insufficient, since all stakeholders had opportunities during the proceedings before the Adjudicating Authority to submit schemes or proposals and a scheme placed before the Authority had been withdrawn. The Tribunal found no grounds to interfere with the Adjudicating Authority's order directing liquidation where no approved scheme under Section 230 existed to obviate liquidation. [Paras 11, 27, 28, 30]

The Adjudicating Authority's order dated 26.04.2021 directing the liquidator to proceed with liquidation is not interfered with.

Schemes of compromise or arrangement under Section 230 - Withdrawal of application for sanction of scheme - Permissibility of challenging the Adjudicating Authority's order dated 07.03.2022 recording withdrawal/dismissal of I.A. 3770/2020 (application by Mahalaxmi Continental Ltd. to submit a Section 230 scheme). - HELD THAT: - The application for submission and consideration of a scheme under Section 230 was withdrawn by the applicant itself. The Tribunal noted that where an applicant withdraws its own application for presenting a scheme, no exception lies to the order recording such withdrawal. The fact that third parties (Operational Creditors) claim readiness to submit an alternative proposal after withdrawal does not convert the withdrawal order into an illegality requiring interference, especially when stakeholders had prior opportunities to place schemes before the Adjudicating Authority. [Paras 9, 11]

The order dated 07.03.2022 recording withdrawal/dismissal of the Section 230 application stands and is not interfered with.

Final Conclusion: The appeals are dismissed. No interference is warranted with the Adjudicating Authority's order directing the liquidator to proceed with liquidation or with the order recording withdrawal of the Section 230 application; the appellants' challenge to the e auction and invocation of a purported later higher offer do not furnish grounds for setting aside the impugned orders.

Accrual of right to sue / date of default for limitation under IBC - acknowledgement in writing under Section 18 of the Limitation Act - effect of 'without prejudice' communications on acknowledgement - entries in balance sheet as acknowledgment of liability - authorization to initiate CIRP by multi state cooperative society - designation of Chief Executive / Managing Director - interaction between SARFAESI proceedings and initiation of CIRP - operation of overriding provision

Accrual of right to sue / date of default for limitation under IBC - acknowledgement in writing under Section 18 of the Limitation Act - Whether limitation for filing a Section 7 application is triggered from the actual date of default (15/06/2013) or from the date of classification as NPA (31/03/2014), and whether subsequent acknowledgements extended limitation under Section 18. - HELD THAT: - The Tribunal applied the settled principle that the limitation period for a Section 7 application accrues from the date of default (the date the right to sue accrues) and not from the date of classification as NPA. The record showed default prior to 31/03/2014 and specifically evidence of default on 15/06/2013. However, the Tribunal found multiple writings by the corporate debtor - a declaration/confirmation of balance dated 31/03/2014, a letter dated 20/04/2015 offering to verify and immediately pay outstanding dues, an OTS communication of 10/08/2016, and balance sheet entries for FY 2016 17 - which constituted acknowledgements in writing under Section 18 of the Limitation Act. Those acknowledgements operated to create fresh limitation periods, thereby rendering the Section 7 application within time despite the earlier date of default. [Paras 12, 13, 14, 26, 27]

Limitation is measured from date of default but was extended by written acknowledgements (including the 31/03/2014 declaration, 20/04/2015 letter, 10/08/2016 communication and FY 2016 17 balance sheet), and therefore the Section 7 application was within limitation.

Effect of 'without prejudice' communications on acknowledgement - acknowledgement in writing under Section 18 of the Limitation Act - Whether an OTS proposal or letter marked 'without prejudice' can operate as an acknowledgment under Section 18 of the Limitation Act and thereby extend limitation. - HELD THAT: - Relying on precedents and prior decisions of this Tribunal, the court held that the mere insertion of the words 'without prejudice' does not necessarily negate an acknowledgment where the communication, viewed in context, admits liability. The OTS letter dated 10/08/2016, which was appended to an email sent by the appellant and referred to in bank communications, together with other letters, was construed as a mutual/compromising communication that evidenced acknowledgement. The Tribunal rejected the submission that the phrase 'without prejudice' alone rendered the document inadmissible for the purpose of Section 18. [Paras 17, 18, 19, 20, 21]

The OTS communication, despite being marked 'without prejudice', was treated as an acknowledgment in writing under Section 18 and extended the period of limitation.

Entries in balance sheet as acknowledgment of liability - acknowledgement in writing under Section 18 of the Limitation Act - Whether the Balance Sheet for FY 2016 17 and the notes thereto constituted an unequivocal acknowledgment of debt for the purposes of Section 18 and thus extended limitation. - HELD THAT: - The Tribunal noted that balance sheet entries may amount to an acknowledgment depending on their unequivocal nature and absence of caveats. The FY 2016 17 balance sheet, signed by directors (including the appellant) and the auditor, was found to reflect the outstanding loan/borrowings and to be an unequivocal acknowledgement of liability. The Tribunal followed the Supreme Court's reasoning that such entries, where clear and unqualified, attract Section 18 and extend limitation. [Paras 21, 22, 23, 24, 25]

The FY 2016 17 balance sheet and accompanying notes constituted an acknowledgment of liability under Section 18 and furnished a fresh limitation period.

Authorization to initiate CIRP by multi state cooperative society - designation of Chief Executive / Managing Director - Whether the Section 7 application filed by the financial creditor was invalid for want of proper authorization because the authorizing person was a Managing Director and not designated as 'Chief Executive' under the MSCS Act, 2002 or not a board member. - HELD THAT: - The Tribunal construed Section 51(1) of the MSCS Act which requires a Chief Executive 'by whatever designation called' and observed that where a society uses the designation 'Managing Director' in place of 'Chief Executive' the statutory requirement is satisfied. Further, the Managing Director was a member of the board as contemplated by Section 51(2). The Tribunal also observed that the impugned Section 7 application was filed prior to the MCA circular of 27/02/2019 and therefore that circular could not be applied retrospectively to defeat the claim of authorization. [Paras 28, 29]

The application was not rendered invalid for lack of authorization: the Managing Director satisfied the requirement of 'Chief Executive' under the MSCS Act and the prior circular could not be applied retrospectively.

Interaction between SARFAESI proceedings and initiation of CIRP - operation of overriding provision - Whether prior proceedings or recovery under the SARFAESI Act precluded the financial creditor from initiating CIRP under the IBC. - HELD THAT: - The Tribunal examined the record relating to SARFAESI steps and noted orders dismissing certain SARFAESI applications and absence of material showing sale of assets or realization of proceeds. It further relied on the overriding effect of Section 238 of the IBC to hold that SARFAESI actions do not ipso facto bar initiation of CIRP where circumstances permit. The Tribunal also regarded selective excerpts from the bank's affidavit as insufficient to establish preclusion. [Paras 30]

SARFAESI proceedings did not preclude initiation of CIRP in the present case and did not render the Section 7 application non maintainable.

Final Conclusion: The Tribunal dismissed the appeals, holding that (i) limitation is measured from the date of default but was extended by multiple written acknowledgements (including the 31/03/2014 declaration, 20/04/2015 letter, the 10/08/2016 OTS communication and FY 2016 17 balance sheet) so the Section 7 application was within time; (ii) the 'without prejudice' OTS communication could be treated as an acknowledgement in context; (iii) the Managing Director satisfied the MSCS Act requirement for a Chief Executive and the challenge to authorization failed; and (iv) SARFAESI steps did not bar initiation of CIRP. Appeal dismissed with no order as to costs.

Admissibility under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - pre-existing dispute - limitation and pecuniary jurisdiction - initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional - deposit for Interim Resolution Professional's expenses

Admissibility under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - pre-existing dispute - limitation and pecuniary jurisdiction - Application under Section 9 was admissible as there was an undisputed operational debt in default, no pre-existing dispute, and the petition was within limitation and the pecuniary jurisdiction of the Tribunal. - HELD THAT: - The Tribunal found that the operational creditor supplied goods and raised invoices which the corporate debtor did not deny. The respondent's written synopsis admitted continuing business relations and payment transactions, and did not controvert the amount of default. The last invoice date and the filing date placed the application within the limitation period; the application was filed before the notification increasing the minimum threshold, and therefore fell within the pecuniary jurisdiction of the Bench. The Tribunal noted absence of any notice of dispute or pending suit/arbitration in relation to the claimed operational debt and observed that the application otherwise complied with requirements of Section 9(5)(i). On these bases the Tribunal concluded that the petition was complete and maintainable under Section 9. [Paras 11, 12, 13, 14]

Application under Section 9 admitted for initiation of CIRP.

Initiation of Corporate Insolvency Resolution Process - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional - deposit for Interim Resolution Professional's expenses - CIRP was initiated, moratorium declared, an Interim Resolution Professional was appointed, and the operational creditor was directed to deposit funds to meet immediate IRP expenses. - HELD THAT: - After admitting the petition, the Tribunal formally initiated the Corporate Insolvency Resolution Process and declared the moratorium with the statutory prohibitions specified. The Bench appointed the proposed Interim Resolution Professional whose written consent and disclosures were on record, and directed him to perform duties under the Code. The operational creditor was ordered to deposit a specified sum with the IRP to meet immediate expenses, subject to adjustment by the Committee of Creditors, and communication of the order to the parties and IBBI was directed. [Paras 15, 16, 17, 18]

CIRP initiated; moratorium imposed; IRP appointed; deposit directed.

Final Conclusion: The petition under Section 9 was admitted: Corporate Insolvency Resolution Process is initiated, moratorium under Section 14 declared, the nominated Interim Resolution Professional appointed, and the operational creditor directed to deposit funds for immediate IRP expenses.

Admission of insolvency application of a personal guarantor under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - Debtor in default arising from invocation of a personal guarantee - Interim moratorium on filing under Section 96(1) commencing from date of filing - Eligibility and non bar under Section 94(4) - Excluded debts under Section 79(15)(e) - Service of application on financial creditors and related corporate debtor as required by Rule 6(2) of the 2019 Rules - Appointment and duties of Resolution Professional under Section 99

Admission of insolvency application of a personal guarantor under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - Debtor in default arising from invocation of a personal guarantee - The petition filed under Section 94(1) IBC by the personal guarantor was admitted on the ground that the applicant was a debtor in default after invocation of the personal guarantee. - HELD THAT: - The Adjudicating Authority found that the applicant received a notice under section 13(2) of the SARFAESI Act following default of the corporate debtor and failed to meet obligations under the personal guarantee within sixty days of that notice, thereby becoming a debtor in default. The Application was examined and found to comply prima facie with the statutory requirements for initiation under Section 94 read with the applicable Rules, including that the debts in question were not excluded under the cited provision and that no bar under Section 94(4) applied. In view of these findings the Authority admitted the petition and directed initiation of the insolvency resolution process for the personal guarantor. [Paras 1, 2, 4, 6, 13]

CP No. (IB) 01/94/JPR/2022 under Section 94(1) of the IBC is admitted.

Interim moratorium on filing under Section 96(1) commencing from date of filing - Interim moratorium under Section 96(1) commences from the date of filing of the Section 94 application. - HELD THAT: - The Authority applied Section 96(1) to hold that the interim moratorium begins from the date of filing of the application (04.01.2022 in this matter) and will remain in effect until the date of admission of the application. During the interim moratorium pending legal action or proceedings in respect of any debt are stayed and creditors are restrained from initiating proceedings, subject to exceptions notified under Section 96(3). This temporal commencement and its legal consequences were recorded as operative in the order. [Paras 7]

Interim moratorium commences from 04.01.2022 and will cease on admission of the application.

Service of application on financial creditors and related corporate debtor as required by Rule 6(2) of the 2019 Rules - The applicant complied with the service requirements by serving the application on financial creditors and the related corporate debtor and filing proof of service. - HELD THAT: - The Authority noted that the guarantor had annexed postal slips and subsequently filed an affidavit of service along with a tracking report as directed. This satisfied the Rule 6(2) requirement that a copy of the application be served on every financial creditor and the corporate debtor for whom the guarantor stands as personal guarantor, thereby validating the service component of the application process. [Paras 8]

Proof of service on creditors and the corporate debtor is on record and accepted.

Appointment and duties of Resolution Professional under Section 99 - A Resolution Professional was appointed and directed to perform the functions and file the report required under Section 99 of the IBC. - HELD THAT: - As the applicant had not nominated any Resolution Professional, the Authority appointed an RP and required him to exercise the powers under Section 99, to recheck availability of requisite information under the Rules and Forms, and to make written recommendations with reasons for acceptance or rejection of the application within the time envisaged by Section 99. The RP was also directed to furnish copies of the report to the applicant, all financial creditors and related corporate debtors, and the applicant was directed to provide the application to the IBBI for its records. [Paras 9, 10, 11, 12]

Mr. Vishnu Upadhyay is appointed as Resolution Professional and shall perform duties and file reports as mandated under Section 99.

Final Conclusion: The Adjudicating Authority admitted the application under Section 94(1) IBC against the personal guarantor, directed that interim moratorium operate from the date of filing, accepted proof of service on creditors and the corporate debtor, appointed a Resolution Professional to carry out functions under Section 99, and ordered usual consequential communications and compliances.

Section 9 of the Insolvency and Bankruptcy Code, 2016 - minimum amount of default - pecuniary jurisdiction - retrospective application of notification - threshold limit for initiation of CIRP

Section 9 of the Insolvency and Bankruptcy Code, 2016 - minimum amount of default - threshold limit for initiation of CIRP - retrospective application of notification - Maintainability of the Section 9 application in view of the notification of 24.03.2020 specifying Rs. 1 crore as the minimum amount of default for initiation of CIRP. - HELD THAT: - The Tribunal examined whether the application under Section 9 could be maintained where the debt claimed was below the minimum amount of default specified by the Central Government's notification dated 24.03.2020. The notification sets Rs. 1 crore as the minimum amount of default for the purposes of section 4 of the Code, and the Tribunal followed the reasoning in the NCLAT decision reproduced in the order that the threshold applies to applications filed on or after 24.03.2020 even if the debt arose earlier. The application before the Tribunal was filed on 14.02.2021 and the claimed default was below Rs. 1 crore. In these circumstances the Tribunal concluded that the application did not meet the specified minimum default threshold and therefore was not maintainable under Section 9. Although the record notes a delay between issuance of the demand notice and filing, the determinative ground for dismissal was non-fulfilment of the minimum amount of default prescribed by the notification. [Paras 4, 5, 6, 7]

Application under Section 9 is not maintainable and is dismissed for failing to meet the minimum amount of default specified by the notification dated 24.03.2020.

Final Conclusion: The Section 9 application filed on 14.02.2021 is dismissed as not maintainable because the claimed default is below the Rs. 1 crore threshold specified by the Central Government's notification of 24.03.2020, which applies to applications filed on or after that date.

Verification and classification of creditor claims - duty of resolution professional to verify and present claims to the Committee of Creditors - classification as financial creditor - reconsideration of employee remuneration claims strictly as per terms of employment - adjudicatory limits of the Tribunal in commercial disputes and recovery suits - interim protection of personal property during CIRP

Verification and classification of creditor claims - duty of resolution professional to verify and present claims to the Committee of Creditors - classification as financial creditor - Whether the Resolution Professional properly verified and adjudicated the applicant Vardhman Industries' claim and whether the claim ought to be reconsidered and classified as a financial creditor for inclusion in the CoC. - HELD THAT: - The Tribunal found that the RP did not make a serious effort to classify the applicant's claims into operational or financial debt and failed to justify the summary rejection of a claim filed within the prescribed period. Documents submitted (audited accounts and correspondence) were not shown to be non-compliant with RP queries, and no evidence was produced by the RP to demonstrate grounds for treating the transactions as sham or otherwise displace their genuineness. The RP was held to have failed in his duty to analyse and present the evidence and legal position before the CoC instead of rejecting the claim summarily. Accordingly, the RP was directed to reconsider the claim with reference to the evidence already before him, call for additional evidence if necessary, evaluate classification as a financial creditor, and reconstitute the CoC with the applicant as a member if warranted. [Paras 10, 11, 12]

CA No.568/2019 allowed: RP directed to reconsider, verify and classify the claim and, if justified on evidence, include the applicant in the list of financial creditors and reconstitute the CoC.

Reconsideration of employee remuneration claims strictly as per terms of employment - duty of resolution professional to obtain and present information to the CoC - adjudicatory limits regarding genuineness of documents - Whether the Resolution Professional should reconsider and make provision for the applicants' claims for salary, gratuity and other dues filed as Form D and place findings before the CoC. - HELD THAT: - The Tribunal noted disputed facts and counter-allegations about termination, resignation and genuineness of documents but emphasised that it is not the forum to decide authenticity of documents. It observed that the RP may appoint professionals to assist and that terms and conditions of employment govern entitlement. The RP was directed to reconsider the applicants' claims strictly in accordance with the terms and conditions laid down at the time of their employment, compute amounts due accordingly, and place his findings before the CoC. The Bench declined to adjudicate on the genuineness of documents, leaving such issues to competent judicial fora. [Paras 8, 10, 11]

IA No.548/2020 partly allowed: RP directed to reconsider claims for salary, gratuity and other dues as per employment terms and place findings before the CoC; disputes as to genuineness to be pursued before competent judicial authorities.

Interim protection of personal property during CIRP - adjudicatory limits of the Tribunal in commercial disputes - Whether the Resolution Professional should be restrained from interfering with the applicant's continued private use of specified mobile numbers. - HELD THAT: - On the facts presented, and having considered the submissions, the Tribunal directed that the RP shall not interfere with the applicant's use of the specified SIM/mobile numbers and allowed the applicant to continue using them in his private capacity. The order grants protection of the applicant's personal use of those numbers during the CIRP process, without resolving the broader allegations between the parties. [Paras 7]

IA No.550/2020 allowed: RP restrained from interfering with the applicant's use of the listed mobile numbers.

Adjudicatory limits of the Tribunal in commercial disputes and recovery suits - Tribunal not a forum for settling quality disputes or acting as a recovery mechanism - Whether the applicant K K Spinners' claim for payment for yarn supplied during CIRP (including prayer for CIRP cost and interest) is maintainable before the Tribunal. - HELD THAT: - The Tribunal found an ongoing commercial dispute regarding quality and payment for certain supplies made after initiation of CIRP and observed that the Tribunal is not the appropriate forum to adjudicate contractual quality disputes or to function as a recovery forum. Citing higher authorities and the statutory purpose of the Code, the Bench declined to accede to the prayers and left the applicant free to pursue remedies before competent civil fora. The Tribunal also refrained from expressing any view on the merits. [Paras 8, 9, 10]

IA No.194/2022 dismissed: application not maintainable before the Tribunal; applicant free to pursue remedy before competent judicial authority.

Final Conclusion: The Tribunal allowed CA No.568/2019 directing the RP to reconsider and verify Vardhman Industries' claim, classify it on evidence and, if justified, include it as a financial creditor and reconstitute the CoC; IA No.548/2020 was partly allowed directing the RP to re-evaluate salary/gratuity claims as per employment terms and place findings before the CoC (genuineness disputes to be litigated elsewhere); IA No.550/2020 was allowed restraining the RP from interfering with the applicant's use of specified mobile numbers; and IA No.194/2022 was dismissed as the Tribunal is not the forum for resolving the commercial quality/disputed payment claims, which the applicant may pursue before competent civil authorities.

Reasonable steps under Section 18(3) of the FERA - obligation to secure export proceeds and RBI waiver exception under Section 18(2) - rebuttable presumption on non-repatriation of export proceeds - weight of internal correspondence in proving reasonable steps - penalty for contravention of Section 18 of the FERA

Reasonable steps under Section 18(3) of the FERA - weight of internal correspondence in proving reasonable steps - Whether the appellant had taken all reasonable steps to secure and recover export proceeds so as to rebut the presumption under Section 18(3) of the FERA. - HELD THAT: - The Court held that what constitutes 'reasonable steps' must be judged on the facts of each case. Although the appellant sent communications to the foreign buyer, engaged advocates and sought assistance from the Embassy and the Bank, those measures amounted to intimations and internal correspondence which, in the Court's view, were not sufficient to satisfy the statutory requirement of taking 'all reasonable steps'. The appellant also filed but did not pursue civil remedies abroad; failure to prosecute the civil suit and the non-execution of a decree obtained by a sister concern evidenced a casual approach rather than adequate efforts. Reliance on precedents that treated mere correspondence as insufficient supported the finding that prima facie adequate steps were not taken within the prescribed period, and therefore the rebuttable presumption under Section 18(3) remained unrebutted. [Paras 24, 25, 26, 28]

The appellant had not taken all reasonable steps to secure the export proceeds and thus failed to rebut the presumption under Section 18(3) of the FERA.

Obligation to secure export proceeds and RBI waiver exception under Section 18(2) - penalty for contravention of Section 18 of the FERA - Whether the RBI's write-off/waiver absolved the appellant of liability under Section 18 of the FERA. - HELD THAT: - The Court examined the nature of the RBI write-off and found it was granted on technical grounds (cases below specified thresholds and age of bills) rather than on an assessment that the appellant had taken adequate steps to secure recovery. The Court therefore concluded that the technical write-off by RBI did not ipso facto negate the statutory duty under Section 18 nor preclude imposition of penalty where the statutory presumption remained unrebutted. The Court noted the legislative objective of FERA to conserve foreign exchange resources and observed that a technical write-off could not be used to subvert that purpose. [Paras 22, 27]

The RBI write-off on technical grounds did not absolve the appellant of liability under Section 18 and did not preclude imposition of penalty.

Penalty for contravention of Section 18 of the FERA - rebuttable presumption on non-repatriation of export proceeds - Whether the Appellate Tribunal's reduction of penalty and its finding of contravention warranted interference by this Court. - HELD THAT: - The Court reviewed the Tribunal's order which had affirmed contravention while reducing the penalty. Having considered the material and the Tribunal's conclusions on adequacy of steps taken by the appellant, the High Court found no error warranting interference. The reduction of penalty by the Tribunal was treated as a concessionary relief to the appellant, but the underlying finding of contravention was sustained by the High Court on the basis of the facts and statutory scheme. [Paras 28, 29]

The Appellate Tribunal's order upholding contravention and reducing the penalty was not interfered with; the criminal appeal was dismissed.

Final Conclusion: The High Court dismissed the criminal appeal, holding that the appellant failed to take all reasonable steps to repatriate export proceeds under Section 18(3) of the FERA, that a technical RBI write-off did not absolve liability, and that there was no ground to disturb the Appellate Tribunal's order reducing but affirming the penalty.

Statutory bail under Section 167(2) Cr.P.C. - completion of investigation as trigger for default bail - preliminary/incomplete charge-sheet cannot defeat right to default bail - complaint under Section 44(1)(b) PMLA equated to charge-sheet for cognizance only when investigation is complete - designated court has no power to return remand or bail applications and must pass reasoned orders - protection of personal liberty under Article 21 in context of Section 167(2)

Statutory bail under Section 167(2) Cr.P.C. - completion of investigation as trigger for default bail - protection of personal liberty under Article 21 in context of Section 167(2) - Petitioner is entitled to statutory bail under Section 167(2) Cr.P.C. - HELD THAT: - The Court held that Section 167(2) mandates a time-bound completion of investigation and confers an indefeasible right to default bail if investigation is not completed within the prescribed period. The right accrues where the investigating agency fails to complete the investigation within sixty/ninety days (as applicable) and is linked to the protection of personal liberty under Article 21. The Court applied the principles in Ravindran and consequent authorities to hold that where investigation remained incomplete when the statutory period expired, the accused acquires the right to statutory bail irrespective of the gravity of the offence; consequently the Petitioner, whose sixty-day period expired on 21.03.2022 and where investigation was not complete, is entitled to statutory bail. [Paras 16, 17, 25, 28]

The Petitioner is entitled to statutory bail under Section 167(2) Cr.P.C.

Preliminary/incomplete charge-sheet cannot defeat right to default bail - complaint under Section 44(1)(b) PMLA equated to charge-sheet for cognizance only when investigation is complete - The complaint dated 19.03.2022 was not a final charge-sheet/complaint and cannot be treated as completion of investigation for the purposes of Section 167(2). - HELD THAT: - Relying on authorities including Satya Narain Musadi and Manu Sharma, the Court held that a charge-sheet/complaint can be filed only on completion of investigation. The complaint filed on 19.03.2022 was shown to have been filed without completion of investigation (the Designated Court thereafter extended remand on the ground that investigation was pending), and therefore it was an incomplete or preliminary report which cannot be treated as a final report under Section 173(2) Cr.P.C. or as a final complaint under Section 44(1)(b) PMLA. Filing such an incomplete complaint cannot be used to circumvent the accused's statutory right to default bail. [Paras 20, 21, 22, 23, 25]

The complaint dated 19.03.2022 was an incomplete preliminary report and does not defeat the Petitioner's right to statutory bail under Section 167(2).

Designated court has no power to return remand or bail applications and must pass reasoned orders - Designated Court had no power to return the remand and bail applications; it was obliged to consider and decide them by passing reasoned judicial orders. - HELD THAT: - The Court observed that neither the Cr.P.C. nor the PMLA contemplates returning of remand or bail applications. A court exercising judicial power under Section 167 must apply its mind and pass a judicial order remanding the accused or granting release; returning such applications is impermissible. The impugned order which returned the application dated 31.03.2022 and the bail application dated 01.04.2022 was therefore improper. [Paras 25, 27]

The Designated Court had no power to return the remand or bail applications and was required to decide them with reasons.

Statutory bail under Section 167(2) Cr.P.C. - preclusion of PMLA bail rigours from defeating default bail - Provisions of the PMLA (including Section 45) cannot be relied upon to deny statutory bail conferred by Section 167(2) Cr.P.C. - HELD THAT: - The Court relied on precedent (Ashok Munilal Jain and others) to hold that proceedings under the PMLA do not oust the applicability of Section 167(2) Cr.P.C.; an accused in PMLA proceedings is entitled to statutory bail if the investigation is not completed within the prescribed period. The investigating authority cannot invoke the stricter bail regime of the PMLA to circumvent the statutory right to default bail under the Cr.P.C. [Paras 27]

The PMLA's bail provisions cannot defeat the Petitioner's statutory right to default bail under Section 167(2) Cr.P.C.

Final Conclusion: The High Court allowed the criminal petitions, quashed the remand extension orders dated 31.03.2022 and 13.04.2022, held that the 19.03.2022 complaint was an incomplete report and that the Petitioner is entitled to statutory bail under Section 167(2) Cr.P.C.; the petitioner was permitted to file a fresh bail application which the Designated Court must consider within one week if in order.

Restoration of appeal - condonation of delay / sufficient cause - non-receipt of hearing notices / service of notice and change of address - negligence/non-prosecution - recall of order after Revenue action/recovery - discretionary relief

Restoration of appeal - condonation of delay / sufficient cause - discretionary relief - Application for restoration of appeal filed under Rule 41 after an ex-parte final order dated 09.05.2017. - HELD THAT: - The Tribunal examined the belated application filed on 27.08.2021 and the conduct of the appellant during the pendency of the appeal (2012-2017). Applying the settled principles governing condonation of delay, the Tribunal held that the application was filed after substantial delay and the appellant failed to furnish sufficient cause for non-appearance or for not prosecuting the appeal. The Tribunal observed that liberal, pragmatic discretion must be exercised, but such discretion is circumscribed where gross negligence, lack of bona fides or prolonged inaction is shown. The appellant's prolonged failure to follow up the appeal for about five years and absence of any credible efforts to ascertain the appeal's status were held to be material negatives weighing against restoration. Reliance on general propositions favouring substantial justice was distinguished on the facts, and precedent requiring timely prosecution of appeals was applied to deny the discretionary relief.

Application for restoration of the appeal dismissed for want of sufficient cause and on grounds of prolonged negligence/non-prosecution.

Non-receipt of hearing notices / service of notice and change of address - negligence/non-prosecution - Whether non-receipt of hearing notices due to alleged change/closure of address justified restoration. - HELD THAT: - The Tribunal considered the appellant's plea that the office/address mentioned in the appeal was closed (change of address in 2012-13) and that hearing notices were not received. On perusal of the record the Tribunal found no information supplied by the appellant to show closure of the registered premises or a substantive effort to update/notify the authority. Notices were held to have been issued to available/record addresses and the appellant, being aware of prior proceedings, had a duty to follow up. The Tribunal treated the failure to ensure receipt of communications and the absence of enquiries about the appeal's status as negligence that militated against granting restoration.

Alleged non-receipt of notices due to address change not accepted; conduct held to be negligent and not a sufficient ground for restoration.

Recall of order after Revenue action/recovery - discretionary relief - Whether the final order could be recalled / the appeal restored where the Revenue had already acted upon the final order and issued recovery steps. - HELD THAT: - The Tribunal noted that the Revenue had acted on the final order and issued recovery notices, which, on the facts, reduced the scope for recalling the order. Having found substantial delay and appellant's culpable inaction, the Tribunal held there was no justification or scope to recall the final order after implementation steps by the Revenue. Earlier decisions to the same effect were relied upon to support the refusal to disturb an order already acted upon.

No recall of the final order; restoration refused where Revenue had taken action pursuant to the order and appellant had not shown sufficient cause.

Final Conclusion: Both applications for restoration of the appeal (seeking setting aside of the ex-parte final order dated 09.05.2017) are dismissed: the Tribunal found substantial delay, lack of sufficient cause, negligence/non prosecution by the appellant, and noted that the Revenue had acted on the final order, leaving no justification to recall it.

Drawback when Cenvat facility has not been availed - rebate of duty on exported goods - double benefit - certificate of non-availment of Cenvat facility - definition of 'drawback' under the Drawback Rules

Drawback when Cenvat facility has not been availed - certificate of non-availment of Cenvat facility - definition of 'drawback' under the Drawback Rules - double benefit - Whether the appellants had availed Cenvat credit on inputs or input services (such as to disentitle them from higher/composite drawback and to render rebate of duty on exported goods impermissible as double benefit), and consequent entitlement to the claimed drawback/rebate. - HELD THAT: - The parties disputed the factual question whether Cenvat credit had been availed on inputs or input services used in manufacture of the exported goods. Notification No.68/2011-Cus.(N.T.) distinguishes drawback rates depending on whether Cenvat facility has been availed; paras 6 and 15 require the exporter to declare and, if necessary, establish to the satisfaction of the relevant authority that no Cenvat facility has been availed, and to produce a certificate from the Superintendent in cases of export under bond or rebate claims. The Drawback Rules define 'drawback' as rebate of duty or tax on inputs or taxable services used as inputs. Given the conflicting factual positions advanced by the appellants and the revenue, the Court declined to decide entitlement on merits and concluded that the matter should be remitted for fresh consideration. The authority is directed to re-examine the claims in light of paras 6 and 15(i) & (ii) of Notification No.68/2011-Cus.(N.T.) dated 22.09.2011 and Rule 2(a) of the Drawback Rules, after hearing the parties and on the basis of documentary evidence to be filed by the appellants within three weeks; the authority is to pass a reasoned order within four weeks thereafter. [Paras 12, 13, 14]

The claim of entitlement and the question whether double benefit has been availed are remitted to the authority concerned for fresh adjudication in accordance with the specified provisions and after hearing the parties; appellants to file submissions within three weeks and authority to decide within four weeks thereafter.

Final Conclusion: Writ appeals disposed by remitting the disputed factual and legal question of availment of Cenvat credit and consequent entitlement to drawback/rebate to the authority concerned for fresh consideration in accordance with Notification No.68/2011-Cus.(N.T.) and the Drawback Rules; no costs.

Mandatory pre-deposit as pre-condition for entertaining appeal under Section 35F of the Central Excise Act, 1944 - application of Section 83 and Section 85(3A) of the Finance Act to service tax appeals - power to condone delay in filing appeal - obligation of appellate authority to consider alternative modes of compliance where online payment is systemically prevented - requirement and sufficiency of vakalatnama for representation - remand for verification and fresh decision

Mandatory pre-deposit as pre-condition for entertaining appeal under Section 35F of the Central Excise Act, 1944 - obligation of appellate authority to consider alternative modes of compliance where online payment is systemically prevented - Whether the Commissioner (Appeals) could dismiss the appellant's appeal as incomplete solely on the ground that the pre-deposit was not made, without considering the appellant's request to permit payment by bank draft when online payment was allegedly prevented by the system. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) did not address the appellant's specific request to be permitted to make the mandatory pre-deposit through a bank draft when the appellant had stated that the department's online system was not permitting payment. The Commissioner was obliged to consider that prayer before dismissing the appeal on the ground of non-payment. The Tribunal noted that the appellant had represented that the pre-deposit could not be made online and had sought permission to pay by bank draft; this request was not considered in the impugned order. Accordingly, dismissal of the appeal solely because the deposit was not made was unwarranted without first considering the alternative mode of payment and giving the appellant an opportunity to comply. [Paras 6, 9]

The impugned order is set aside insofar as it dismissed the appeal without considering the appellant's request to make the pre-deposit by bank draft; the Commissioner (Appeals) must consider that request.

Power to condone delay in filing appeal - requirement and sufficiency of vakalatnama for representation - remand for verification and fresh decision - How the Commissioner (Appeals) should proceed in relation to the appellant's condonation application, the question of authorization/vakalatnama, and verification of subsequent compliance with the pre-deposit requirement. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) erred in rejecting the condonation application on the ground that it lacked a separate vakalatnama, since a vakalatnama had already been filed with the appeal and any minor defect could have been cured by granting time to rectify it. The Tribunal observed that the appellant subsequently made the pre-deposit on April 12, 2021 (as per the appeal record) and directed the Commissioner (Appeals) to verify whether the deposit has in fact been made. If the deposit is found to have been made, the Commissioner should proceed to decide the condonation application on merits. If the deposit has not been made, the Commissioner may grant one further opportunity to the appellant to make the pre-deposit. The matter is therefore remanded for verification and fresh consideration in accordance with these directions. [Paras 7, 9, 10, 11]

Remand to the Commissioner (Appeals) to verify whether the pre-deposit was made and, accordingly, decide the condonation application on merits; if no deposit is found, afford one further opportunity to make the pre-deposit.

Final Conclusion: The order dated March 02, 2021 of the Commissioner (Appeals) is set aside. The Commissioner (Appeals) shall verify whether the appellant has made the pre-deposit, consider the appellant's request to permit payment by bank draft (if applicable), and decide the condonation application on merits; if no deposit is found, grant one further opportunity to the appellant to make the pre-deposit and then proceed to decide the appeal.

Interest on refund - three months from date of refund application rule - refund arising from appellate order - relevant date for refund under Section 11B(2)(ec) - precedent on interest entitlement after three months

Interest on refund - three months from date of refund application rule - precedent on interest entitlement after three months - Entitlement to interest on the refund from the date of deposit during investigation versus entitlement only after three months from date of refund application. - HELD THAT: - The Tribunal found as a fact that the appellant deposited duty during investigation but did not file a refund claim until the demand was dropped by the Commissioner (Appeals). The court applied the settled principle that interest on a refund is payable only for the period after three months from the date of filing the refund application, as laid down by the Supreme Court in Ranbaxy Laboratories Limited . Since the Adjudicating Authority sanctioned the refund within three months from the date of the refund application, no interest is payable. The appellant's contention for interest from the date of deposit during investigation was therefore rejected. [Paras 4]

No interest payable from date of deposit; interest would arise only after three months from date of refund application, and none accrued because refund was sanctioned within three months.

Refund arising from appellate order - relevant date for refund under Section 11B(2)(ec) - Whether the refund claim could be treated as arising prior to the Commissioner (Appeals) order so as to attract interest from the date of deposit. - HELD THAT: - The Tribunal examined clause (ec) of Section 11B(2) and held that where duty becomes refundable as a consequence of an appellate order, the relevant date for filing the refund application is the date of that order. In the present case the refund arose only after the Commissioner (Appeals) dropped the demand; therefore there was no occasion to grant refund prior to that order. Consequently, the date of entitlement for interest cannot be advanced to the date of deposit during investigation. [Paras 4]

Refund arose only from the Commissioner (Appeals) order; refund could not be treated as arising earlier and interest cannot be claimed from the date of deposit.

Final Conclusion: The impugned order was upheld and the appeal dismissed: the refund was correctly sanctioned and no interest was payable from the date of deposit because the refund arose from the appellate order and was sanctioned within three months of the refund application.

Entitlement to interest on delayed refund - pre-deposit vs voluntary duty payment - relevant date for refund under Section 11B(5)(4)(ec) - interest payable only after three months from refund application

Entitlement to interest on delayed refund - interest payable only after three months from refund application - Whether the appellant was entitled to interest on the sanctioned refund. - HELD THAT: - The Tribunal applied settled law that interest on refund is payable only where there is delay beyond three months from the date of filing the refund application. The refund in this case was sanctioned within two months of the filing of the refund application. Reliance was placed on the principle in Ranbaxy Laboratories Ltd. that the three-month period is the cut-off for payment of interest. Because the refund was sanctioned within the three-month period, no interest was payable to the appellant.

No interest was payable as the refund was sanctioned within three months from the date of filing the refund application; the appeal on this ground is dismissed.

Pre-deposit vs voluntary duty payment - relevant date for refund under Section 11B(5)(4)(ec) - Whether the amount paid by the appellant during proceedings constituted a pre-deposit entitling them to interest from the date of payment, or was a payment of duty with the relevant date for refund being the appellate order. - HELD THAT: - The Tribunal found, following the reasoning of the Gujarat High Court, that payments made in challans without protest during the course of proceedings are payments of duty and do not possess the characteristics of a pre-deposit under the relevant provisions. Clause (ec) of the provision cited indicates that where duty becomes refundable as a consequence of an appellate order, the relevant date for the refund is the date of that order. In the present case the refund arose only after the Commissioner (Appeals) allowed the Cenvat credit; therefore there was no entitlement to treat earlier voluntary payments as pre-deposit that would trigger interest from an earlier date. Consequently, the appellant could not claim interest on the basis that the amounts were pre-deposits.

The payments are to be treated as duty (not pre-deposit); the relevant date for refund is the Commissioner (Appeals) order and the appellant is not entitled to interest on the basis of pre-deposit.

Final Conclusion: The impugned order is affirmed: the refund was sanctioned within the prescribed three-month period and no interest is payable; amounts earlier paid are treated as duty and not as pre-deposits, and the appeal is dismissed.

Cenvat Credit - definition of input - capital goods - used in or in relation to manufacture of final products - inputs used within the factory of production

Cenvat Credit - capital goods - Chapter 85 - Entitlement to Cenvat Credit in respect of goods falling under Chapter 85. - HELD THAT: - The Tribunal found that certain goods on which the appellant claimed Cenvat credit undisputedly fall under Chapter 85 and are encompassed by the definition of capital goods in Rule 2(a) of the Cenvat Credit Rules, 2004. Applying the definition, the goods classified under Chapter 85 qualify as capital goods and therefore the appellant is entitled to take Cenvat credit in respect of those goods. The Tribunal accepted the submissions of the appellant on this point and held that the impugned denial on this ground was unsustainable. [Paras 4]

Goods falling under Chapter 85 are eligible for Cenvat credit as capital goods; the denial by the lower authority is set aside.

Cenvat Credit - definition of input - inputs used within the factory of production - Chapter 94 - Entitlement to Cenvat Credit in respect of goods falling under Chapter 94. - HELD THAT: - The Tribunal examined the amended definition of 'input' effective from 01.04.2011, which covers 'all goods ... used in or in relation to the manufacture of final products ... within the factory of production.' Finding no dispute that the goods under Chapter 94 were used by the manufacturer within the factory, the Tribunal held that such goods are admissible as 'inputs' even if they are not accessories to capital goods. The Tribunal therefore applied the statutory definition to conclude that Chapter 94 goods claimed by the appellant qualify for Cenvat credit. Reliance placed on earlier decisions was regarded as directly applicable. [Paras 4]

Goods falling under Chapter 94 qualify as 'inputs' under the amended definition and are eligible for Cenvat credit; the impugned denial is set aside.

Final Conclusion: The appeal is allowed; the impugned order denying Cenvat credit in respect of goods under Chapter 85 and Chapter 94 is set aside and the appellant is entitled to the claimed Cenvat credit.

Cenvat credit reversal on inputs issued for production but not used - inputs lying on shop floor treated as work in progress - remission of duty in respect of goods in process - distinction between inputs in stock and inputs under process

Cenvat credit reversal on inputs issued for production but not used - inputs lying on shop floor treated as work in progress - Demand for reversal of Cenvat credit in respect of inputs that had been issued for production, were lying on the shop floor but were not actually used and were destroyed by fire. - HELD THAT: - The Tribunal found on the material before it and on the admitted facts that the input had been issued for production and was lying on the shop floor at the time of destruction. Although the input was not physically used in manufacture, once issued for production and placed in the course of processing it must be treated as work in progress rather than as inputs held in stock. The Commissioner had denied remission on the ground that the item remained an unused input; the Tribunal disagreed, following precedent where inputs issued for processing and destroyed in the processing area were held to be inputs under process and not liable for Cenvat reversal. Applying that reasoning, the Tribunal held that no demand for Cenvat credit could be sustained in respect of the destroyed inputs and set aside the impugned order.

The demand for reversal of Cenvat credit in respect of inputs issued for production and lying on the shop floor but destroyed by fire is not sustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed: inputs issued for production and lying on the shop floor at the time of destruction are to be treated as work in progress and do not attract reversal of Cenvat credit; the impugned order demanding Cenvat is set aside.

Remand for de novo examination - original C-Forms and F-Forms as evidence - burden to prove inter-state sale and stock transfer - double taxation claim - lifting of attachment

Remand for de novo examination - original C-Forms and F-Forms as evidence - double taxation claim - burden to prove inter-state sale and stock transfer - Impugned Tribunal orders set aside and matter remanded for fresh consideration in view of discovery of original C-Forms and F-Forms. - HELD THAT: - The Court found that originals of C-Forms and F-Forms relevant to FY 2010-2011 are available on the record of the Objection Hearing Authority and that certain F-Forms require closer scrutiny as to the values indicated. Given the discovery of these originals and the appellant's contention that, when taken into account along with its double taxation plea, the tax liability may largely be negated, the Court held that the proper course is to set aside the impugned orders and remit the matter to the Tribunal for de novo examination. The Tribunal is directed to examine the originals and is at liberty to call for the statutory authority's record; it may also require the appellant to place on record supporting material (for example, books of account, transport documents or other evidence) to satisfy the revenue as to whether the inter-state sales and stock transfers in question actually occurred. The Court emphasised that nothing stated by it prejudges the ultimate determination the Tribunal must make on merits. [Paras 8, 9, 10, 11]

Impugned orders dated 17.12.2021 and 31.03.2022 set aside; matter remanded to the Tribunal for de novo consideration and verification of originals and related evidence.

Lifting of attachment - Order directing respondent/revenue to lift bank-account attachments consequential to the remand. - HELD THAT: - Having remanded the matter for fresh consideration and in view of the developments on record, the Court directed that the respondent/revenue shall lift the attachment affecting the appellant's bank accounts maintained with the specified bank. The direction is incidental to the disposal of the appeal and aims to restore the appellant's banking operations while the matter is re-decided by the Tribunal. [Paras 13, 14]

Respondent/revenue directed to lift the attachment on the appellant's bank accounts; connected application disposed of accordingly.

Final Conclusion: The Tribunal's orders are set aside and the matter remanded for de novo examination in light of the originals of C-Forms and F-Forms found on record; the Tribunal may call for further records and require supporting evidence regarding inter-state sales/stock transfers. Consequentially, the revenue is directed to lift the attachment on the appellant's bank accounts and the appeal is disposed of on these terms.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Effect of court accepting compromise after conviction - Quashing of conviction and sentence on settlement between parties - Reliance on Damodar S. Prabhu regarding compounding post-conviction

Compounding of offence under Section 147 of the Negotiable Instruments Act - Reliance on Damodar S. Prabhu regarding compounding post-conviction - Court's power to compound an offence under Section 147 of the Negotiable Instruments Act even after conviction. - HELD THAT: - The Court considered the parties' compromise and the admitted statements on record that a settlement had been arrived at and part payment made. Applying the law as laid down in Damodar S. Prabhu v. Sayed Babalal H., the Court held that an offence under the Act can be compounded even where the accused stands convicted. In view of the voluntary compromise between the parties and the precedent permitting compounding post-conviction, the Court found no impediment to exercising its power under Section 147 to accept the compromise and compound the offence. [Paras 9]

Power under Section 147 to compound the offence can be exercised notwithstanding that the accused has been convicted; compounding was permissible on the facts and precedent relied upon.

Quashing of conviction and sentence on settlement between parties - Effect of court accepting compromise after conviction - Consequences of accepting the compromise - whether the judgments of conviction and sentence should be quashed and the accused acquitted and released. - HELD THAT: - On recording the complainant's and accused's statements admitting the compromise and partial payment, and on the accused's undertaking to pay the remaining amount within the stipulated period, the Court proceeded to accept the compromise. Having exercised its compounding jurisdiction, the Court quashed and set aside the judgment of the Appellate Court dated 21.03.2022 and the trial Court's conviction and sentence dated 29.11.2021, and ordered the accused's acquittal. The Court also directed discharge of the accused's bail bonds and disposed of the petition and pending applications accordingly. [Paras 10]

Upon acceptance of the compromise, the judgments of conviction and sentence were quashed and set aside; the accused was acquitted and his bail bonds discharged.

Final Conclusion: In view of the parties' voluntary compromise and partial payment, and relying on the law permitting compounding after conviction, the Court compounded the offence under Section 147 of the Negotiable Instruments Act, quashed the judgments of conviction and sentence, acquitted the accused, discharged his bail bonds and disposed of the petition.