TaxTMI Updates e-Newsletter
Jun 09,2022

Provisional attachment - expiry of provisional attachment period under Section 83 of the CGST Act - freezing and defreezing of bank accounts - blocking of Electronic Credit Ledger - jurisdictional commissionerate for GST enforcement action

Provisional attachment - expiry of provisional attachment period under Section 83 of the CGST Act - freezing and defreezing of bank accounts - Validity of provisional attachment/order freezing the petitioner's bank accounts and entitlement to defreeze them on expiry of the attachment period. - HELD THAT: - The Court noted that the provisional attachment order in question was issued on 09.03.2020 and, unless renewed, its validity is limited to one year by operation of the statutory provision governing provisional attachment. Respondent counsel accepted that the provisional attachment had expired and therefore the reliefs seeking setting aside and defreezing of the two specified bank accounts could be granted without further adjudication. On that basis the Court allowed the petition insofar as prayers (a) to (d) were concerned and directed that the accounts be defrozen. The banks were permitted to act on the digitally signed copy of the order. [Paras 3, 4, 8]

Reliefs in prayer clauses (a) to (d) granted; the bank accounts frozen by the provisional attachment order dated 09.03.2020 are to be defrozen.

Blocking of Electronic Credit Ledger - jurisdictional commissionerate for GST enforcement action - Claim for de-blocking of the Electronic Credit Ledger and the question of proper respondent and forum for that relief. - HELD THAT: - The Court observed that the respondents presently arrayed in the writ petition were not the authorities concerned with the blocking of the Electronic Credit Ledger. Consequently, the Court did not adjudicate the merits of prayers (e) and (f). Leave was granted to the petitioner to move an appropriate application to bring on record the jurisdictional commissionerate that is competent to deal with the Electronic Credit Ledger and related reliefs. The matter was listed for further consideration on the given date. [Paras 5, 6, 7]

Prayers (e) and (f) not decided on merits; petitioner granted leave to implead the jurisdictional commissionerate and matter adjourned.

Final Conclusion: The petition is allowed insofar as the provisional attachment freezing the two bank accounts (dated 09.03.2020) has expired and those accounts are to be defrozen; the claim challenging the blocking of the Electronic Credit Ledger is not finally adjudicated and the petitioner is permitted to bring on record the jurisdictional commissionerate for fresh consideration, matter listed for further hearing.

Provisional attachment under Section 83 of the Goods and Services Tax - attachment purportedly issued under Section 79 - effect of mis-quotation or non-quotation of statutory provision on validity of proceedings - reassessment pursuant to court's conditional order - interference with writ court order

Provisional attachment under Section 83 of the Goods and Services Tax - attachment purportedly issued under Section 79 - effect of mis-quotation or non-quotation of statutory provision on validity of proceedings - Characterisation and validity of the impugned Form GST DRC-16 attachment order and whether mis-quoting the statutory provision vitiates the order. - HELD THAT: - The Court construed the Form GST DRC-16, though described as issued under Section 79, as a provisional attachment falling within the scope of Section 83, which empowers the revenue to make provisional attachments to protect revenue and which remains valid for one year pending completion of assessment. The Court held that mere wrong quoting or non-quoting of the relevant statutory provision does not, by itself, vitiate the attachment proceedings where the substance of the order falls within the statutory power to provisionally attach. Consequently, the impugned order could not be set aside on the ground that an incorrect provision was cited. [Paras 9, 10, 11]

The attachment in Form GST DRC-16 is to be treated as a provisional attachment under Section 83 and is not rendered invalid merely because the order wrongly referred to Section 79.

Reassessment pursuant to court's conditional order - interference with writ court order - provisional attachment under Section 83 of the Goods and Services Tax - Whether the writ appeal should be interfered with pending completion of reassessment directed by earlier orders, and the consequence of completing reassessment on the provisional attachment. - HELD THAT: - The Court recorded that the appellant had earlier been directed by the writ court (as confirmed by the Division Bench) to make deposits and that those deposits were ultimately made and taken on record. The natural consequence is that the Assessing Authority must complete the reassessment for the three assessment years and pass final orders. The High Court declined to interfere with the learned Single Judge's order dismissing the writ petition, observing that the appellant remains free to have the reassessment completed in accordance with law and that, once reassessment is concluded and final orders are passed, further action pursuant to the provisional attachment can be considered depending on the outcome. The Court therefore dismissed the appeal without prejudicing the appellant's rights during or after reassessment. [Paras 6, 7, 11, 12]

Writ appeal dismissed; no interference with the earlier order. Reassessment to be completed and, depending on its outcome, actions pursuant to the provisional attachment may be decided thereafter.

Final Conclusion: Writ appeal dismissed. The impugned Form GST DRC-16 is to be construed as a provisional attachment under Section 83 and is not vitiated by incorrect citation of a provision; the Assessing Authority shall complete the reassessment as directed earlier and, upon conclusion of that process and passing of final orders, further action in relation to the provisional attachment may be taken in accordance with law.

Provisional attachment of property including bank accounts - formation of opinion based on tangible material - draconian nature of attachment power - duty to pass a reasoned order and deal with objections - protecting the interest of Government Revenue

Provisional attachment of property including bank accounts - formation of opinion based on tangible material - duty to pass a reasoned order and deal with objections - Validity of the impugned orders of provisional attachment under Section 83 of the CGST Act which stated only that the attachment was made "in order to protect the interests of the Revenue" without recording the tangible material or reasons on which the opinion was formed. - HELD THAT: - The Court applied the principles laid down by the Hon'ble Supreme Court in M/s. Radha Krishnan and the subsequent exposition in M/s. Sree Meenashi Industries. Section 83 confers a potent power to provisionally attach property including bank accounts and must be exercised with strict adherence to the statutory conditions. The exercise of that power must be preceded by the formation of an opinion by the competent authority that attachment is necessary to protect Government revenue, and such opinion must be founded on tangible material indicating that the assessee is likely to defeat the demand. The authority must indicate, at least to a limited extent in the attachment order, the basis or tangible material on which the opinion was formed so that the assessee has a prima facie satisfaction that the statutory requirements have been met. Further, the authority is duty bound to deal with objections to the attachment by passing a reasoned order. A cryptic one-line attachment order merely stating that it is made "in order to protect the interests of the Revenue" without disclosing the tangible material or reasons, or without satisfying the requirement to deal with objections, fails to meet the mandatory guidelines and cannot be sustained. [Paras 12, 13, 15, 16, 18]

The impugned provisional attachment orders are set aside as they do not disclose the tangible material or reasons forming the basis of the opinion under Section 83 and do not comply with the duty to pass a reasoned order; however, the Revenue is permitted to invoke Section 83 afresh if tangible material exists and the procedure indicated by the courts is followed.

Final Conclusion: The writ petitions are allowed by setting aside the provisional attachment orders for non-compliance with the requirements framed by the Supreme Court in M/s. Radha Krishnan and applied in M/s. Sree Meenashi Industries; the Revenue remains free to re-invoke Section 83 after recording reasons based on tangible material and following the mandated procedure.

Procedural compliance of Section 74 under the Tamil Nadu Goods and Services Tax Act - requirement of notice under Section 74(5) before initiating proceedings under Section 74(1) - right to personal hearing - quashing of order for failure to follow mandatory procedure and remand for fresh consideration

Procedural compliance of Section 74 under the Tamil Nadu Goods and Services Tax Act - requirement of notice under Section 74(5) before initiating proceedings under Section 74(1) - right to personal hearing - quashing of order for failure to follow mandatory procedure and remand for fresh consideration - Whether the order passed under Section 74(1) was vitiated for failure to first issue the notice/option contemplated by Section 74(5) and for not affording the petitioner the opportunity of personal hearing, thereby warranting quashing and remand. - HELD THAT: - The Court found that the notice dated 01.11.2021 was in Form GST ASMT-10 and was replied to by the petitioner on 24.11.2021, but notwithstanding that, an order under Section 74(1) was passed on 09.12.2021. The statutory scheme under Section 74 requires that the dealer be given the notice/option under sub section (5) and that only thereafter, if the option is not availed or further steps are necessary, proceedings under sub section (1) should be proceeded with after considering replies and after affording personal hearing. The impugned order proceeded straightaway under Section 74(1) without complying with the procedure contemplated under Section 74(5), including giving the petitioner an opportunity of personal hearing. For these reasons the order was held to be vitiated by failure to follow the mandatory procedure and the matter was remanded to the respondents to reconsider after strictly following the procedure under Section 74(5) and Section 74(1), including granting personal hearing and deciding on merits in accordance with law. [Paras 2, 3, 4, 6]

Impugned order set aside and matter remanded to respondents with direction to follow the procedure under Section 74(5) and Section 74(1), afford personal hearing, and decide on merits in accordance with law.

Final Conclusion: The Writ Petition is allowed in part: the order dated 09.12.2021 under Section 74(1) is quashed for failure to comply with the procedure under Section 74(5); the matter is remitted to the respondents to reconsider after strictly following the statutory procedure, including personal hearing, and thereafter pass orders on merits. No costs.

Payment of assessed tax - claim of input tax credit - continuity of registration despite change of GST registration number - scrutiny under Section 61 of the GST Act - challenge to assessment notice withdrawn

Payment of assessed tax - scrutiny under Section 61 of the GST Act - challenge to assessment notice withdrawn - Whether the petitioner must pay the remaining tax demand for the period November 2017 to April 2019 in view of the petitioner's concession - HELD THAT: - The petitioner, having initially paid tax at the rate of 5% from November 2017 to April 2019 and later accepting the State's position that the applicable rate was 12%, has, through counsel, given up the challenge to the notice dated 07.10.2021 issued after scrutiny under Section 61. The Court refrained from adjudicating the validity of the impugned notice since the petitioner conceded to pay the differential tax. In that circumstance the writ petitions do not decide the legality of the notice; instead the Court directed the petitioner to pay the remaining 7% for the specified period within two weeks of receipt of the order. [Paras 13, 14, 17]

Petitioner to pay the remaining 7% tax for November 2017 to April 2019 within two weeks; validity of the impugned notice not decided.

Claim of input tax credit - continuity of registration despite change of GST registration number - Whether the petitioner may claim input tax credit from the jurisdictional GST authority at its Head Office after payment of the differential tax, and whether change of GST registration number prevents such claim - HELD THAT: - The Court held that upon payment of the differential tax the petitioner is entitled to present its claim for input tax credit to the competent GST authority where its Head Office is located (State of Kerala). The Kerala authority is directed to consider and decide any such claim strictly in accordance with the eligibility criteria prescribed in the GST law, notably Section 16. The Court further recorded that the change in GST registration number consequent to conversion from a partnership to a private limited company shall not be permitted to stand in the way of the petitioner making such an ITC claim; the question of entitlement, however, remains for the jurisdictional authority to decide on merits. [Paras 7, 15, 16, 17]

Petitioner may apply to the Kerala jurisdictional GST office for ITC after payment of the differential tax; change of GST registration number shall not bar consideration of the ITC claim, which will be decided by the Kerala authority as per law.

Final Conclusion: Writ petitions disposed: petitioner to pay the remaining differential tax for November 2017 to April 2019 within two weeks; petitioner may seek ITC from the Kerala jurisdictional GST authority which shall adjudicate eligibility under the GST law; challenge to the impugned Section 61 notice is not decided as it was effectively withdrawn.

Economic offences - goods-less invoices - fraudulent Input Tax Credit - bail in economic offences - liability for causing issuance of invoices under Section 132 of CGST Act

Goods-less invoices - fraudulent Input Tax Credit - bail in economic offences - liability for causing issuance of invoices under Section 132 of CGST Act - Application for grant of bail of the accused in a prosecution arising from alleged multi-crore GST fraud involving goods-less invoices and fraudulent ITC. - HELD THAT: - The Court considered the material on record including statements of witnesses and investigating officers which, prima facie, linked the accused with issuance of goods-less invoices and passing/availing of fraudulent Input Tax Credit for a trading concern. The accused's plea that he had no connection with the trading concern and that there were no outstanding dues was examined against investigative material including recovered documents, witness statements alleging complicity, and a provisional 'no dues' certificate which the prosecution said was issued without prejudice to recovery on filing of final returns. The Court held that economic offences of this nature warrant stern treatment and that Section 132 of the CGST Act extends liability not only to issuers of goods-less invoices but also to those who cause their issuance. The accused's contention regarding differential treatment of other alleged offenders was noted, but the Court observed that alleged lapses by the investigating agency in dealing with other parties did not absolve the accused of his individual liability. The Court also recorded concerns about apparent inconsistencies in investigation and directed that the order be sent to the Principal Director General of DGGI for scrutiny and remedial action to ensure fair investigation. Having regard to the seriousness of the allegations, the prima facie material, and the stage of investigation, the Court found no merits in the bail application.

Bail application dismissed.

Final Conclusion: Bail was refused in view of prima facie material linking the accused to a multi-crore GST fraud through goods-less invoices and fraudulent ITC, the accused's individual liability under the CGST regime, and the seriousness of the allegations; the court also directed that its observations about the investigation be forwarded to the Principal Director General of DGGI for appropriate remedial action.

Grant of bail under Section 439 Cr.P.C. - bailable nature of abetment under the Central Goods and Services Tax regime - risk of tampering with evidence - imposition of conditional bail including periodic attendance and travel restraint

Grant of bail under Section 439 Cr.P.C. - bailable nature of abetment under the Central Goods and Services Tax regime - risk of tampering with evidence - Application for bail of the applicant accused of offences under the CGST Act was allowed subject to conditions. - HELD THAT: - The Court examined the prosecution case that the applicant, proprietor of two firms, allegedly availed ineligible Input Tax Credit and that investigations link the activities to certain third parties (the Mewanis) who are said to have run multiple firms. The applicant maintained that he provided personal details to enable registration of firms at the instance of another person and received a monthly payment while all business activities and documents were controlled by that person. The Court noted the prosecution's contention but observed that nothing was shown to indicate that release of the applicant on bail would create a real risk of tampering with evidence. The Court also observed that, on the prosecution case, the role attributed to the applicant is at best that of an abettor, and abetment under the CGST scheme is a bailable offence. Balancing these factors and the ongoing investigation, the Court concluded that bail could be granted on suitable terms and conditions, including furnishing of bonds, cash surety, provision of contact details, periodic attendance pending filing of the charge-sheet, prohibition on influencing witnesses, and restriction on leaving the country without permission.

Bail application allowed; applicant released on bail on furnishing PR bond and sureties, depositing cash surety, providing contact details, attending the investigating office weekly until chargesheet is filed, and subject to conditions prohibiting witness tampering and foreign travel without court permission.

Final Conclusion: Bail granted to the applicant accused under the CGST Act on conditions, the Court finding no demonstrated risk of tampering with evidence and noting the bailable character of abetment under the statutory scheme.

Bail under Section 439 of the Code of Criminal Procedure - offences under Section 132 of the Central Goods and Services Tax Act, 2017 - fraudulent availing and passing of Input Tax Credit - fake or non-existent suppliers and bogus invoices - economic offence - ongoing investigation and risk of tampering with evidence - loss to the public exchequer

Bail under Section 439 of the Code of Criminal Procedure - economic offence - fraudulent availing and passing of Input Tax Credit - fake or non-existent suppliers and bogus invoices - ongoing investigation and risk of tampering with evidence - Whether the applicant should be released on bail in proceedings under Section 132(1)(b) and (c) r/w. Section 132(5) of the CGST Act, 2017. - HELD THAT: - The court found that the offence is an economic, well-planned fraud involving the availing of ineligible Input Tax Credit on the basis of fake invoices and transactions with non-existent suppliers. Investigation disclosed a network of entities, with a substantial number of suppliers alleged to be fictitious, and documentary evidence links the applicant to the commission of the crime. The probe is still in progress and there is a real risk that, if released, the applicant may alert co-accused or tamper with evidence. Having regard to the gravity of the allegations, the scale of loss to the exchequer, the ongoing nature of the investigation, and the documentary material against the applicant, the court concluded that the case is not fit for grant of bail.

Bail application rejected.

Final Conclusion: The application for bail under Section 439 Cr.P.C. is refused; the court declined to enlarge the applicant on bail given the serious, organised economic offence involving fraudulent ITC, presence of alleged fictitious suppliers, documentary evidence against the applicant and the ongoing investigation with risk of tampering.

Bail under Section 439 Cr.P.C. - Offences under the Central Goods and Services Tax Act involving availment of ineligible Input Tax Credit based on fake invoices - Economic offence and risk of tampering with evidence - Ongoing investigation as ground for denial of bail - Application of Arnesh Kumar guidelines on arrest

Bail under Section 439 Cr.P.C. - Offences under the Central Goods and Services Tax Act involving availment of ineligible Input Tax Credit based on fake invoices - Economic offence and risk of tampering with evidence - Ongoing investigation as ground for denial of bail - Application of Arnesh Kumar guidelines on arrest - Whether the applicant is entitled to bail in respect of alleged offences under the CGST Act involving availment and utilisation of ineligible Input Tax Credit based on fake/non-existent suppliers - HELD THAT: - The court found that the alleged offences are economic in nature and appear to be well planned, with the departmental investigation uncovering fake and non-existent suppliers and documentary evidence implicating the applicant. The applicant had been present at the revenue office and his statement was recorded, indicating awareness of the investigation; there was no breach of the Arnesh Kumar arrest guidelines. Investigation is ongoing and the possibility of further fake suppliers being traced exists. The court accepted the prosecution's concern that release on bail could enable tampering with evidence or alerting co-conspirators, and observed that the applicant had not cooperated by furnishing the identity of the broker through whom invoices were allegedly received. On these grounds the court held that the facts do not favour grant of bail. [Paras 6, 7]

Bail is refused; the bail application is rejected and disposed of.

Final Conclusion: The application for bail under Section 439 Cr.P.C. was rejected: having found the offences to be economic and well planned, documentary evidence against the applicant, ongoing investigation with risk of tampering, and lack of cooperation by the applicant, the court declined to enlarge him on bail.

Anticipatory bail under Cr.P.C. - illegal availment of Input Tax Credit - tampering with evidence - distinctness of assessment proceedings and offences under CGST Chapters XII and XIX - maintainability of anticipatory bail where offence is bailable

Anticipatory bail under Cr.P.C. - tampering with evidence - illegal availment of Input Tax Credit - Application for anticipatory bail of the applicant was rejected. - HELD THAT: - The Court found the matter to be at the investigation stage and recorded prosecutorial allegations that the applicant's firm availed large inadmissible ITC while many alleged suppliers were non-existent on physical verification and business premises were used only as addresses. Those factual findings give rise to a real possibility of tampering with evidence and interference in the investigation. In such circumstances, and having regard to the nature of the alleged offence, the Court concluded that it is not a fit case for grant of anticipatory bail and refused to grant protection from arrest. [Paras 3, 6]

Application for anticipatory bail rejected; liberty to arrest preserved.

Distinctness of assessment proceedings and offences under CGST Chapters XII and XIX - maintainability of anticipatory bail where offence is bailable - Submission that year-wise calculation of tax would render the offence bailable and thus the anticipatory bail application maintainable was rejected. - HELD THAT: - The Court considered the argument that, if the alleged tax default is calculated year-wise, the offence would fall within a bailable category and the anticipatory bail application would be incompetent. Relying on the reasoning in the cited High Court decision (Ashok Kumar (supra)), the Court held that assessment proceedings under Chapter XII and the offences and penalties under Chapter XIX operate independently; assessment under Chapter XII does not render the provisions of Chapter XIX inapplicable. Consequently, the contention that year-wise tax computation converts the alleged offence into a bailable one for the purposes of maintainability of anticipatory bail was held to be without substance. [Paras 6, 7]

Argument based on year-wise tax computation and bailability of offence rejected; maintainability of the anticipatory bail application not sustained on that ground.

Final Conclusion: The anticipatory bail application was dismissed: the Court declined pre-arrest relief in view of the ongoing investigation, the prosecution's factual findings suggesting fraudulent availment of ITC and non-existent suppliers, the risk of tampering with evidence, and the legal view that assessment proceedings under Chapter XII do not negate the applicability of offences and penalties under Chapter XIX of the CGST Act.

Disallowance under Section 14A and its import into computation of book profit - Computation of book profit under Section 115JB (Explanation 1(f)) - Application of Rule 8D in computing disallowance and book profits - Capital expenditure versus revenue expenditure on replacement of machinery parts - Deduction under Section 80IA - meaning of initial assessment year and set-off of losses - Depreciation on building used partly as residence-cum-office - Deduction under Section 43B and allowability timing - Charitable contributions and requirement of 80G certificate

Disallowance under Section 14A and its import into computation of book profit - Computation of book profit under Section 115JB (Explanation 1(f)) - Application of Rule 8D in computing book profits - Addition made by the Assessing Officer of the disallowance under Section 14A to the book profit computed under Section 115JB was not sustainable and was deleted. - HELD THAT: - The Tribunal considered precedent of coordinate benches (including Alembic Ltd. ITAT Ahmedabad) and authorities holding that clause (f) of Explanation 1 to section 115JB applies to amounts actually debited to the profit and loss account and that sub-sections of section 14A or Rule 8D cannot be mechanically imported into clause (f) for adding back a Section 14A disallowance to book profits. Following those decisions, and noting that the AO invoked Section 14A read with Rule 8D to add Rs.72,96,816 to book profit, the Tribunal upheld the CIT(A)'s deletion of that addition and rejected the Revenue's ground on this point. [Paras 7]

Deletion of the addition of Rs.72,96,816 made by the AO to book profits under section 115JB is confirmed and the Revenue's ground is dismissed.

Disallowance under Section 14A - Application of Rule 8D (prospective operation) - Disallowance under Section 14A made by the AO was deleted by the Tribunal on the facts and law applicable to the relevant years. - HELD THAT: - Relying on Supreme Court authority that Rule 8D is prospective and on jurisdictional High Court guidance (as applied by the Tribunal), the Bench held that where the assessee had surplus own funds and no administrative expenses in relation to exempt income, no disallowance under Section 14A was warranted. The Tribunal therefore found the CIT(A)'s direction to apply Rule 8D improper for the years in question and deleted the Section 14A addition. [Paras 8]

Cross-objection on Section 14A succeeds; the disallowance under Section 14A is deleted.

Capital expenditure versus revenue expenditure on replacement of machinery parts - Expenditure on replacement/repair of gas-turbine parts (buckets, nozzles, shrouds etc.) was revenue in nature and not capital; additions made by AO were deleted. - HELD THAT: - The Tribunal accepted the assessee's material (technical write-up, OEM maintenance prescriptions and history of regular recurring claims) and the view taken in coordinate decisions that such high-value spares are consumable parts with prescribed operating life, whose periodic replacement does not increase capacity, life or efficiency of the plant nor bring into existence an enduring new asset. Applying the principle in Saravana Spinning Mills and related authorities and following prior ITAT treatment, the Tribunal held the replacement expenditure to be revenue in nature and confirmed deletion of the additions. [Paras 8]

Addition on account of replacement/repair of spares is deleted and treated as revenue expenditure.

Deduction under Section 80IA - initial assessment year and set-off - Assessee's claim of deduction under Section 80IA is to be allowed in accordance with CBDT Circular No.1/2016, treating the first year opted by the assessee as the initial assessment year for the ten-year deduction period. - HELD THAT: - The Tribunal applied CBDT Circular No.1/2016 which clarifies that 'initial assessment year' means the first year opted by the assessee for claiming the Section 80IA deduction and confirmed that set-off and carry-forward consequences follow that choice. Following the Circular and the consequent dismissal of departmental challenge, the Tribunal allowed the assessee's claim under Section 80IA as per the clarified position. [Paras 8]

Claim for deduction under Section 80IA is allowed in accordance with CBDT Circular No.1/2016; Revenue grounds on this issue are rejected.

Depreciation on building used partly for residence-cum-office - Depreciation at the higher rate (10%) was allowable on the building used as residence-cum-office by the Managing Director. - HELD THAT: - Having considered that the building was used for official-cum-residential purposes with office facilities and that the claim was supported by the tax audit schedule, the Tribunal directed the AO to allow depreciation at 10% on the building used by the Managing Director. [Paras 8]

Depreciation at 10% on the MD's residence-cum-office building is allowed.

Deduction under Section 43B - timing of allowability - Charitable contributions and 80G certificate - Reliefs granted by the CIT(A) in respect of contributions (where 80G certificates were produced) and in respect of certain Section 43B timing adjustments were upheld; consequential directions to the AO were affirmed. - HELD THAT: - The Tribunal found that the CIT(A) had granted appropriate reliefs after considering certificates and timing of payments; where the CIT(A) directed allowability in an appropriate year (or accepted production of 80G certificates), those directions were sustained and did not call for further interference. [Paras 8]

CIT(A)'s reliefs on charitable contributions and on Section 43B-related timing issues are sustained; related departmental grounds are dismissed.

Final Conclusion: For the assessment years under appeal (2009-10 to 2012-13) the Tribunal allowed the assessee's appeals on the principal substantive issues: deletions of Section 14A additions (including the addition to book profit under Section 115JB), treatment of replacement/repair of gas-turbine parts as revenue expenditure, allowance of deduction under Section 80IA in accordance with CBDT Circular No.1/2016, grant of depreciation on the MD's residence-cum-office, and confirmation of CIT(A)'s reliefs on charitable contributions and Section 43B timing; the Revenue's appeals on these points are dismissed as indicated in the result table.

Waiver of interest in insolvency proceedings - recomputation of interest at a reduced statutory/analogue rate - liability for capital gains tax arising from sale of insolvent's estate - status and liability of Official Assignee under income tax law - disallowance of compound interest, penalty and interest for non payment of advance tax

Waiver of interest in insolvency proceedings - recomputation of interest at a reduced statutory/analogue rate - disallowance of compound interest, penalty and interest for non payment of advance tax - Whether interest demanded by the Income Tax Department should be waived or reduced and on what basis interest liability ought to be recomputed. - HELD THAT: - The Court found that although the Income Tax Department had a reasonable basis to claim interest because tax liability on capital gains arose on sale in 2011 and the department was deprived of the sums until payment, the Department's computation was partially unreasonable (interest was erroneously computed from 2008). The ex insolvent had taken reasonable steps to ensure tax was discharged: she informed the Official Assignee in January 2007 and obtained a court direction that 20% of sale proceeds be deposited in an interest bearing fixed deposit. There is uncertainty as to the Official Assignee's tax status, PAN usage and the legal position of liability of an insolvent's estate, which further weighs in favour of relief. Applying an analogue from the II Schedule Rule 23 to the Insolvency Act and having regard to the interest earned on the deposited 20% and the equities of insolvency, the Court held that interest on capital gains tax (AY 2011-2012) should run at 6% per annum from the date of sale (29.07.2011) to the date of remittance (29.03.2016). For other assessment years (2008-09 to 2016-17) interest is to be computed from the last date for payment of tax in the relevant assessment year up to the date of payment at 6% per annum. The Court directed that compound interest, penalty, and interest or penalty for non payment of advance tax or for delayed filing of returns shall not be levied, and directed the Income Tax Department to recompute the demand on that basis and issue a revised demand to the Official Assignee, who shall pay within 30 days, with any surplus to be paid to the ex insolvent. [Paras 16, 18, 19]

Interest liability shall be recomputed at 6% per annum (capital gains AY 2011-2012 from 29.07.2011 to 29.03.2016; other relevant years from last date for payment to date of payment), without compound interest or penalties; revised demand to be issued and paid by the Official Assignee within 30 days, surplus to be returned to the ex insolvent.

Liability for capital gains tax arising from sale of insolvent's estate - status and liability of Official Assignee under income tax law - Whether the Applicant is entitled to immediate refund of an excess tax remittance and whether such refund application should be granted. - HELD THAT: - The Court observed that assessment orders for the relevant years were passed and were not challenged by either the Official Assignee or the ex insolvent. Given that the assessment orders stand uncontested, the tax liability established thereby cannot be interfered with in these proceedings. Consequently, the separate application seeking refund of the alleged excess remittance cannot be sustained and is rejected. [Paras 14, 20]

The application for refund is dismissed and not allowed; Application No.36 of 2021 is dismissed.

Final Conclusion: The Court allowed the application for limited relief by directing recomputation of interest at 6% per annum (with no compound interest, penalties or interest/penalty for non payment of advance tax or delayed filing), directed the Official Assignee to pay the revised demand within 30 days and to remit any surplus to the ex insolvent; the separate refund claim was dismissed.

Entitlement to deduction under section 80IB(11A) - Treatment of export incentives and duty drawback as business income under section 28(iiib) and section 28(iiid) - Validity of exercise of revisional power under section 263 where there is a possible change of opinion

Entitlement to deduction under section 80IB(11A) - Treatment of export incentives and duty drawback as business income under section 28(iiib) and section 28(iiid) - Whether export incentives (MEIS), duty drawback and profit on sale/transfer of licences/duty remission benefits form part of 'profits and gains of business' and therefore are includible for computing deduction under section 80IB(11A). - HELD THAT: - The Tribunal examined the authorities and legislative provisions and applied the subsequent decision of the Supreme Court in Meghalaya Steels Ltd which construed that cash assistance or subsidies referable to export-related schemes are to be treated as income under the head 'profits and gains of business or profession' in terms of section 28(iiib), and that profit on transfer of DEPB/ duty remission schemes falls within section 28(iiid). The Tribunal held that Meghalaya Steels overruled the earlier Liberty India view and that the export entitlements (MEIS) and duty drawback of promotion schemes are assessable as business income. Consequently these receipts cannot be treated as falling outside the eligible business income for computation of deduction under section 80IB(11A). The Tribunal allowed Ground No.8 accordingly, relying on paras 28-29 of Meghalaya Steels and the embedded statutory scheme. [Paras 10]

Export incentives, duty drawback and related profits are business income under sections 28(iiib)/(iiid) and are includible for computing deduction under section 80IB(11A); Ground No.8 allowed.

Validity of exercise of revisional power under section 263 where there is a possible change of opinion - Whether the Principal Commissioner of Income Tax validly exercised jurisdiction under section 263 to revise the assessment when the Assessing Officer had taken a view which, in light of subsequent Supreme Court authority, could be considered correct. - HELD THAT: - The Tribunal found that the Pr. CIT had invoked section 263 relying on the Liberty India decision to treat export incentives as not forming part of the eligible industrial undertaking. However, the Supreme Court in Meghalaya Steels subsequently overruled that approach. Because the Assessing Officer had taken a view consistent with the later authoritative pronouncement and there was no demonstrable error prejudicial to revenue requiring revision, the exercise of revisional powers by the Pr. CIT was held to be not sustainable. The Tribunal therefore allowed Grounds Nos.2, 3, 4, 5, 6, 7 and 9, concluding that the Pr. CIT's action amounted to impermissible change of opinion rather than correction of a prejudicial error. [Paras 11]

Pr. CIT's invocation of section 263 was not valid in the circumstances and the revision is quashed; Grounds Nos.2,3,4,5,6,7 & 9 allowed.

Final Conclusion: Following the Supreme Court decision in Meghalaya Steels Ltd, the Tribunal held that export incentives and duty-drawback receipts are assessable as business income under section 28 and therefore are includible for computing deduction under section 80IB(11A); consequently, the revisional order passed by the Principal CIT under section 263 was quashed and the assessee's appeal is allowed for AY 2017-18.

Reassessment jurisdiction under section 147 - reopening of assessment - reasons to believe - reasons recorded - non-application of mind - reasons must be standalone and linked to material - admission of additional grounds of appeal

Reassessment jurisdiction under section 147 - reopening of assessment - reasons to believe - reasons recorded - non-application of mind - reasons must be standalone and linked to material - Validity of reassessment proceedings initiated by recording of reasons for reopening assessment for AY 2007-08 - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer for issuance of notice under section 148 and found them legally deficient. The AO's reasons relied solely on the fact that in earlier years (AY 2005-06 and AY 2006-07) the assessee allegedly did not fulfill conditions for deduction under section 80IB, and on that basis conjectured that income had escaped assessment for AY 2007-08. This amounted to possibility/guess work and a reliance on prior years rather than on any tangible material specific to AY 2007-08. The reasons were therefore not recorded on a standalone basis, showed non-application of mind and lacked nexus with material forming a bona fide belief that income chargeable to tax had escaped assessment. The Tribunal applied the established legal standard that the statutory ''reason to believe'' must be based on material and not mere suspicion, and held that the reasons did not meet that threshold. Relying on the principle in earlier Supreme Court decisions cited in the order and , the Tribunal concluded that the assumption of jurisdiction under section 147 was vitiated, rendering the reopening coram non judice and the subsequent reassessment null and void. As the reassessment was quashed, the Tribunal declined to adjudicate merits of the additions as academic. [Paras 10, 11, 12, 13, 14]

Reasons recorded for reopening assessment for AY 2007-08 were legally invalid; assumption of jurisdiction under section 147 failed and the reassessment order is quashed.

Admission of additional grounds of appeal - Admissibility of additional grounds challenging validity of reopening raised before the Tribunal - HELD THAT: - The Tribunal admitted the additional grounds challenging the validity of the reopening because they raised a pure question of law that went to the root of the matter and all relevant facts were on record; no further inquiry was necessary. The admission was consistent with the principle that appellate fora may allow additional grounds of law where factual matrix is already available and the issue is determinative. [Paras 3, 4, 5, 6]

Additional grounds challenging validity of reopening were admitted.

Final Conclusion: The Tribunal allowed the assessee's appeal: additional grounds challenging reopening were admitted; the reasons recorded for reopening assessment for AY 2007-08 were held invalid, the reassessment was quashed, and consequential additions were not adjudicated as they became academic.

Income deemed to accrue or arise in India through a business connection - reasonably attributable to operations carried out in India - permanent establishment and taxation of business profits under DTAA Article 7 - offshore distribution commission income - fees for technical services and the make available test - applicability of lower domestic withholding rate for interest when investments fall under section 115AD

Offshore distribution commission income - Income deemed to accrue or arise in India through a business connection - reasonably attributable to operations carried out in India - Whether offshore distribution commission income received by the non-resident assessee from HDFC Asset Management Co. Ltd. is taxable in India as income deemed to accrue or arise in India under section 9(1)(i) of the Act / DTAA. - HELD THAT: - The Tribunal found as fact that the assessee, a Singapore resident and SEBI-registered FII/FPI, carried out all distribution operations outside India and procured subscriptions from investors outside India. Section 9(1)(i) read with Explanation 1(a) limits taxation to that part of business income reasonably attributable to operations carried out in India. Applying that principle and following the Supreme Court decision in CIT v. Toshoku Ltd., the Tribunal held that where no operations are carried out in India the income earned for services rendered abroad cannot be deemed to accrue or arise in India. The Assessing Officer's contention that regulation and control of the Mutual Fund in India by SEBI/RBI created a sufficient nexus was rejected because the revenue invoked section 9(1)(i) and did not establish that any part of the distribution operations were carried out in India. The Tribunal therefore upheld the CIT(A)'s conclusion that the offshore distribution commission was business income of the assessee but, in the absence of a permanent establishment or operations in India, was not taxable in India. [Paras 10, 11, 12, 13]

Addition of offshore distribution commission income was deleted; the income is not taxable in India under section 9(1)(i) / relevant DTAA provisions.

Offshore distribution commission income - permanent establishment and taxation of business profits under DTAA Article 7 - Whether the findings in assessment year 2014-15 apply to the same commission income issue for assessment year 2015-16. - HELD THAT: - The Tribunal applied the reasoning and conclusion reached for 2014-15 mutatis mutandis to assessment year 2015-16 because the facts and the nature of the disputed income were the same. Consequently, the grounds of appeal attacking the deletion of the addition in respect of commission income were dismissed for 2015-16 on the same basis. [Paras 16]

Grounds challenging the deletion of the commission addition for 2015-16 dismissed; the CIT(A)'s order upheld.

Applicability of lower domestic withholding rate for interest when investments fall under section 115AD - Whether the Assessing Officer correctly applied 15% tax under DTAA Article 11(2) on interest income from rupee denominated bonds/government securities instead of the lower domestic rate claimed by the assessee under section 115AD/read with section 194LD. - HELD THAT: - The Tribunal noted that the Assessing Officer applied the higher treaty rate without recording reasons and without examining the nature of the investments. The Tribunal remanded the matter to the Assessing Officer for de novo adjudication, directing the assessee to furnish details of the investments and stating that if the investments are in eligible instruments within section 115AD the lower domestic rate (and corresponding withholding treatment) is to be granted. The Tribunal endorsed the CIT(A)'s direction to verify the claim and left the substantive determination to the Assessing Officer on the basis of factual examination. [Paras 17, 18, 19]

Issue remanded to the Assessing Officer for fresh adjudication and verification of investment particulars; grant of lower rate under section 115AD, if eligible, to be considered.

Education cess subsumed within treaty tax rate - Whether the CIT(A) erred in directing the Assessing Officer to follow precedents holding that education cess and higher education cess are subsumed within the tax rate under the DTAA. - HELD THAT: - The Tribunal observed that the CIT(A) merely directed the Assessing Officer to follow judicial precedents on the point and found no infirmity in that approach. The Tribunal therefore did not interfere with the CIT(A)'s direction that, in the event income is charged under the DTAA, the question of cess being subsumed within the treaty rate be addressed in accordance with the precedents cited by the CIT(A). [Paras 20]

CIT(A)'s direction on education cess upheld; no interference.

Final Conclusion: Revenue appeals for assessment years 2014-15 and 2015-16 are dismissed insofar as they seek to tax the offshore distribution commission income; the rate of tax issue on interest for 2015-16 is remanded to the Assessing Officer for de novo adjudication with directions to verify investment particulars and apply the lower domestic rate if the instruments qualify under section 115AD.

Re-opening of assessment under section 147 for escapement of income - Change of opinion doctrine in re-opening assessments - Capitalization of borrowing costs and disallowance under section 36(1)(iii) of the Income Tax Act - Abandonment of project and revenue treatment of expenditure

Re-opening of assessment under section 147 for escapement of income - Change of opinion doctrine in re-opening assessments - Validity of reassessment initiated by issue of notice under section 148 after completion of assessment u/s.143(3). - HELD THAT: - The Tribunal examined whether the Assessing Officer possessed fresh tangible material after completion of assessment to form a reasonable belief of escapement of income. The assessee contended that reassessment was merely a change of opinion because the AO relied on the same material that was available at the time of original assessment. The Tribunal noted that the assessee conceded escapement of income on the issue of exceptional items and held that once an element of escapement of income is established, the AO is entitled to examine other issues discovered during the reassessment proceedings. Consequently, the reassessment could validly extend to those additional issues which came to the AO's knowledge in the course of reopening. The assessee's objection that reassessment amounted to impermissible change of opinion was rejected on these facts. [Paras 7]

Reopening of assessment under section 147/148 was held valid and the challenge to reassessment as change of opinion was rejected.

Capitalization of borrowing costs and disallowance under section 36(1)(iii) of the Income Tax Act - Abandonment of project and revenue treatment of expenditure - Whether interest and other borrowing costs capitalized to Capital Work-in-Progress (CWIP) should be disallowed under section 36(1)(iii) when the project is abandoned, or treated as allowable revenue expenditure. - HELD THAT: - The Tribunal accepted the assessee's evidence (including board resolution) that the project was abandoned and therefore ceased to be a qualifying asset for capitalization of borrowing costs under accounting principles. Relying on precedent holding that expenditure related to an abandoned project (without creation of a new asset) is revenue in nature, and on authorities that incidental expenditure on expansion of existing business may be revenue expenditure, the Tribunal found that interest attributable to the abandoned project should be treated as revenue expenditure and allowed as deduction. The AO's disallowance of proportionate interest by capitalizing it to CWIP was held to be incorrect, and the CIT(A)'s sustainment of that disallowance was reversed. [Paras 8]

Additions disallowing proportionate interest under section 36(1)(iii) were deleted; interest related to the abandoned project held to be revenue expenditure and allowable.

Final Conclusion: The appeal is partly allowed: the reassessment under section 147/148 is upheld, but the disallowance of proportionate interest under section 36(1)(iii) is deleted and such interest related to the abandoned project is held to be revenue expenditure and allowable.

Allowability of deduction under Section 36(1)(va) for employees' PF/ESI contributions - application of Section 43B to employees' contribution - prospective effect of Finance Act, 2021 amendments to Section 36(1)(va) and Section 43B - precedential effect of jurisdictional High Court decisions and principle of judicial discipline

Allowability of deduction under Section 36(1)(va) for employees' PF/ESI contributions - application of Section 43B to employees' contribution - precedential effect of jurisdictional High Court decisions and principle of judicial discipline - Deduction under Section 36(1)(va) was allowable for employee-share PF/ESI contributions deposited by the employer to the credit of employees before the due date for filing return under Section 139(1) for AY 2018-19. - HELD THAT: - The Tribunal reviewed conflicting High Court and tribunal decisions and the legislative amendments effected by Finance Act, 2021. Having regard to binding decisions of the jurisdictional High Court and consistent tribunal precedents, the Division Bench followed the view that where employee contributions (which are income under Section 2(24)(x)) are deposited to employees' accounts before the Section 139(1) return due date, the employer is entitled to deduction under Section 36(1)(va). The Bench noted that Finance Act, 2021 inserted clarificatory Explanations but the Memorandum to the Finance Bill expressly made those amendments operative from 1 April 2021 (AY 2021-22) and therefore prospective; absent a contrary decision of the jurisdictional High Court or Supreme Court, judicial discipline required following the earlier binding precedents in favour of the assessee for assessment years prior to AY 2021-22. The Tribunal accordingly allowed the assessee's claim subject to verification of payment evidence.

Appeal allowed on the ground that employee-share PF/ESI deposits made to employees' accounts before the due date for filing the return under Section 139(1) qualify for deduction under Section 36(1)(va) for AY 2018-19.

Verification of challans and documentary proof for deduction under Section 36(1)(va) - Whether the amounts claimed as employee-share PF/ESI were in fact deposited before the Section 139(1) return due date; directed verification by the Assessing Officer. - HELD THAT: - Although the legal position was resolved in favour of the assessee for AY 2018-19, the Tribunal made the allowance conditional upon evidentiary verification. The assessee was directed to file complete bifurcation of the employee-share amounts and the paid challans; the AO was directed to verify those challans to ensure the deposits were made before the return due date under Section 139(1) before granting the deduction under Section 36(1)(va). This is an order for limited remand for factual verification and quantification only.

Matter remanded to the AO for verification of paid challans and deposit dates; assessee to furnish bifurcation and challans for verification before the deduction is allowed.

Final Conclusion: For AY 2018-19 the Tribunal allowed the deduction under Section 36(1)(va) in respect of employee-share PF/ESI contributions deposited to employees' accounts before the Section 139(1) return due date, subject to verification of the relevant paid challans by the Assessing Officer; the Finance Act, 2021 amendments were held prospective (effective from AY 2021-22) and did not affect the assessment year in question.

Royalty under Article 12(3) of India-USA DTAA - taxability of sale of perpetual software licences - interpretation of 'royalty' vis a vis computer software supplied under EULA - application of Supreme Court precedent in Engineering Analysis Centre of Excellence Pvt. Ltd.

Royalty under Article 12(3) of India-USA DTAA - taxability of sale of perpetual software licences - interpretation of 'royalty' vis a vis computer software supplied under EULA - application of Supreme Court precedent in Engineering Analysis Centre of Excellence Pvt. Ltd. - Receipts from sale of a perpetual licence for standard computer software to an end user without transfer of source code are not taxable as 'royalty' under Article 12(3) of the India-USA DTAA. - HELD THAT: - The assessee sold a perpetual licence for standard software (KMAP) to SBI, where the end user had no access to source code and was prohibited from reverse engineering, and the licence was described as standard software. The AO characterised the receipts as royalty under domestic law and Article 12(3) of the DTAA. The Tribunal, noting that the factual matrix is identical to that considered by the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd., applied that precedent which held that consideration for resale or distribution of computer software under an EULA/distribution agreement does not constitute payment of royalty for use of copyright in computer software and does not give rise to income taxable in India. The Revenue did not dispute the factual similarity. On that basis the Tribunal set aside the revenue authorities' order and decided the issue in favour of the assessee. [Paras 6, 8]

The assessment treating the receipts as royalty is set aside and the appeal is allowed.

Final Conclusion: Following the Supreme Court precedent in Engineering Analysis Centre of Excellence Pvt. Ltd., the Tribunal held that the amount received on sale of the perpetual licence for standard software to SBI is not taxable as royalty under the India-USA DTAA and allowed the appeal.

Reopening of assessment - notice under section 148 - recording of reasons for belief - sanction by Commissioner - condition precedent to assumption of jurisdiction - change of opinion

Reopening of assessment - notice under section 148 - recording of reasons for belief - sanction by Commissioner - condition precedent to assumption of jurisdiction - Validity of reassessment proceedings initiated by issuing notice under section 148 read with section 147 where reasons for belief were recorded after obtaining sanction. - HELD THAT: - The Tribunal examined the chronology and documents for initiation of reassessment and found that the approval for issuing the notice was obtained on 29.03.2010 while the reasons for belief were recorded only on 30.03.2010. Relying on authoritative precedents emphasising that the Assessing Officer must record final reasons before the Commissioner grants sanction and that recording of reasons is a condition precedent to assuming jurisdiction, the Tribunal held that the procedure adopted was flawed. Recording reasons after obtaining approval defeats the statutory safeguard and amounts to a mechanical or retrospective justification, rendering the notice under section 148 invalid. In consequence, the reassessment proceedings founded on that notice could not be sustained. Having quashed the initiation of proceedings under section 147/148 on this procedural ground, the Tribunal declined to adjudicate the other substantive grounds raised by the assessee as they became academic. [Paras 5]

Notice issued under section 148 quashed and reassessment proceedings under section 147 set aside for A.Ys. 2003-04, 2004-05 and 2005-06.

Final Conclusion: The appeals were allowed: the notices issued under section 148 were held invalid because reasons were recorded after obtaining sanction, reassessment under section 147 was quashed for the stated assessment years, and the other grounds were not adjudicated as proceedings were set aside.

Royalty under section 9(1)(vi) of the Income-tax Act and Article 13 of India-UK DTAA - access to database versus right to use copyright - payment for information concerning industrial, commercial or scientific experience - permanent establishment (agency PE) under Article 5 of India-UK DTAA - business profits under Article 7 of India-UK DTAA

Royalty under section 9(1)(vi) of the Income-tax Act and Article 13 of India-UK DTAA - access to database versus right to use copyright - payment for information concerning industrial, commercial or scientific experience - Whether the amount received by the assessee from DJCIPL for distribution of the Factiva product is taxable as 'royalty'. - HELD THAT: - The Tribunal examined whether the receipts were consideration for the use of, or the right to use, a copyright or for information concerning industrial, commercial or scientific experience. It held that the arrangement merely granted access to a database compiled from publicly available sources; legal title in underlying news/articles remained with original publishers/authors and no right to reproduce, adapt or exploit the copyright was transferred. Payments for access to the product itself, without conferring any right to use the underlying copyright or any exclusive/undivulged proprietary information, do not fall within the definition of 'royalty'. Reliance was placed on decisions of co-ordinate benches and the Authority for Advance Rulings which distinguish between a copyrighted article (access to which may be like a sale of a book) and a copyright/right to use the copyright. Applying that principle, the Tribunal concluded the receipts are not 'royalty' under the statute or Article 13 of the India UK DTAA and set aside the addition made by the assessing officer. [Paras 11, 16, 18, 20]

The amount of Rs.2,82,15,036 received by the assessee is not 'royalty' and the addition under section 9(1)(vi) read with Article 13 is deleted.

Permanent establishment (agency PE) under Article 5 of India-UK DTAA - business profits under Article 7 of India-UK DTAA - Whether Dow Jones Consulting India Pvt. Ltd. (DJCIPL) constituted an agency permanent establishment of the assessee, rendering the receipts taxable as business profits in India. - HELD THAT: - The assessing officer made a brief alternative observation that DJCIPL could constitute an agency PE, but the Tribunal found no material on record to substantiate that DJCIPL acted as an agent creating a PE for the assessee. The Revenue failed to establish the factual prerequisites for agency PE under Article 5 and consequently could not bring the receipts to tax as business profits attributable to a PE in India. In the absence of evidence proving an agency relationship that would give rise to PE, the contention that the sums were taxable under Article 7 was rejected. [Paras 22, 23]

Revenue has failed to prove an agency PE; the payment is not taxable in India as business profits attributable to a PE.

Final Conclusion: The appeal is allowed: the Tribunal holds that the amounts received for distribution/access to the Factiva database are not 'royalty' under section 9(1)(vi) or Article 13 of the India UK DTAA, and the Revenue has not proved an agency permanent establishment in India; the impugned addition is deleted and the assessment is set aside.

Replacement of machinery parts as revenue expenditure - disallowance under section 14A - computation of book profits under section 115JB - treatment of Corporate Debt Restructuring (CDR) expenses - tax deducted at source and inclusion in book profits - upgradation/maintenance of software as revenue expenditure - interest under section 234B on book profits - foreign exchange loss on forward contracts - depreciation on building used as residence-cum-office - deduction under section 43B

Replacement of machinery parts as revenue expenditure - Replacement of parts of gas turbines treated as revenue expenditure and not capital expenditure. - HELD THAT: - The Tribunal applied the principles in Saravana Spinning Mills and subsequent decisions, examined the manufacturer's prescribed operating life, the technical nature of the parts (buckets, nozzles, shrouds etc.), their periodic replacement as per OEM maintenance schedules, and the fact that replacement did not enhance capacity, efficiency or life of the plant. Relying on precedent including a coordinate Benches' decision in DCIT v. AP Gas Power Corporation Ltd., the Tribunal held that such high-cost spares, consumed regularly in the course of power generation, are consumable/repair items and do not result in creation of an enduring asset. Accordingly the assessing officer's additions on this account were deleted. [Paras 14, 15]

Addition on account of replacement of parts is deleted; expenditure is revenue in nature.

Disallowance under section 14A - Disallowance under section 14A deleted where exempt income arose from investments made out of surplus/own funds and no administrative expenses were incurred. - HELD THAT: - Applying Supreme Court and High Court authorities (including Maxopp and the jurisdictional Sintex decision), the Tribunal held Rule 8D not applicable retrospectively for assessment years prior to its insertion and that where surplus funds were used and no administrative expenses were incurred, no disallowance under section 14A is warranted. The CIT(A)'s direction to apply Rule 8D was held improper and the addition under section 14A was deleted. [Paras 20, 22]

Addition under section 14A deleted in favour of the assessee.

Depreciation on building used as residence-cum-office - Depreciation at 10% allowable on building used as residence-cum-office by the Managing Director. - HELD THAT: - On the materials, the Tribunal accepted that the building was used for official-cum-residential purposes with office facilities and that the 10% rate of depreciation was appropriate. [Paras 23, 24]

Depreciation at 10% to be allowed; cross-objection on this ground allowed.

Deduction under section 43B - Claim under section 43B to be allowed in appropriate assessment year as directed by CIT(A). - HELD THAT: - The CIT(A) directed that interest disallowed under section 43B for the year in issue be allowed in the year of actual payment (AY 2008-09 or corresponding years), and that interest payments disallowed in earlier years which were actually paid in the relevant previous year should be allowed in that year. The Tribunal found no reason to interfere with this treatment. [Paras 27, 28]

CIT(A)'s directions on allowance under section 43B upheld; cross-objection dismissed otherwise.

Treatment of Corporate Debt Restructuring (CDR) expenses - Corporate Debt Restructuring expenses are revenue in nature and allowable; additions deleted. - HELD THAT: - Relying on the Supreme Court decision in India Cements Ltd. and other authority, the Tribunal held that loans are not assets of enduring nature and expenses incurred to obtain or restructure loans do not create capital assets. It was noted that a substantial portion of the resetting premium was recovered and credited to sales accounts in subsequent years, indicating revenue treatment. The assessing officer's contention that the expenditure yielded an enduring benefit was rejected. [Paras 9, 10]

CDR expenses treated as revenue expenditure; addition deleted in favour of the assessee.

Tax deducted at source and inclusion in book profits - computation of book profits under section 115JB - Only the TDS-recovered portion of delayed payment charges (Rs.16.01 crore) was to be included in book profits for AY 2004-05; balance excluded for that year; proportions of TDS credit to be given in corresponding years. - HELD THAT: - The Tribunal upheld the CIT(A)'s detailed reasoning that under the accounting policy revenue recognition for delayed payment charges was on recovery, and that only the amount actually recovered (on which TDS was deposited) should have been recognized in the accounts presented to the AGM for AY 2004-05. Consequently, for section 115JB only Rs.16.01 crore was added to book profits for AY 2004-05; the remaining amounts were to be considered in years in which they were actually recovered. Proportionate TDS credit was directed to be allowed across the relevant assessment years in accordance with section 199. [Paras 11, 12, 13]

CIT(A)'s order upheld: include Rs.16.01 crore in book profits for AY 2004-05 and allow TDS credit proportionately in relevant years.

Upgradation/maintenance of software as revenue expenditure - Expenditure on upgradation/maintenance of software for internal operations is revenue in nature and allowable. - HELD THAT: - Following the jurisdictional High Court decision in N.J. India Invest (P.) Ltd., the Tribunal held that expenditure on maintenance, support and back-up to existing software/hardware is revenue expenditure. The AO's addition characterising the upgradation expense as capital was deleted and depreciation allowed where appropriate. [Paras 14, 15]

Addition deleted; software upgradation expenditure treated as revenue expenditure in favour of the assessee.

Interest under section 234B on book profits - Interest under section 234B charged on additions to book profits was sustained. - HELD THAT: - Relying on the Karnataka High Court decision in CIT v. JSW Steel Ltd. and the reasoning that levy of interest under section 234B in the circumstances was permissible, the Tribunal rejected the assessee's contention and confirmed the charging of interest under section 234B on the addition made by the AO. [Paras 16, 17]

Interest under section 234B confirmed; ground rejected and allowed in favour of the Revenue.

Foreign exchange loss on forward contracts - Loss on account of foreign exchange difference arising from forward contracts is an allowable business loss in the year of entering into the contract. - HELD THAT: - The Tribunal followed the Delhi High Court authority in CIT v. Industrial Financial Corporation of India Ltd., holding that where the assessee entered into a forward contract fixing future foreign exchange rates, the difference between the forward rate and the prevailing exchange rate is ascertainable and is to be recognized as business income or expense in the year of entering into the contract. The actual (not notional) forex loss incurred on forward contracts was therefore allowed. [Paras 19, 20]

Foreign exchange loss allowed in favour of the assessee.

Final Conclusion: The Tribunal partly allowed the appeals and the cross-objection: several deductions/disallowances in favour of the assessee were upheld (replacement parts, CDR expenses, software upgradation, section 14A deletion, forex loss, depreciation on MD's residence and related directions on section 43B), the CIT(A)'s treatment of delayed payment charges under section 115JB was upheld subject to inclusion of only the recovered/TDS portion in AY 2004-05 and proportionate TDS credit in later years, while the assessee's challenge to interest under section 234B was rejected and confirmed in favour of the Revenue.

Transfer pricing comparability - arm's length principle - transactional net margin method (TNMM) - working capital adjustment - deemed loan on outstanding receivables - binding precedent in assessee's own case

Transfer pricing comparability - binding precedent in assessee's own case - Infosys BPM Ltd. excluded from the final set of comparables for determination of arm's-length price. - HELD THAT: - The Tribunal, following the coordinate-bench decisions in the assessee's own earlier proceedings, held that Infosys BPM Ltd. is not a comparable for the assessee's international transactions in the year under appeal. The Tribunal observed that where a comparable has been excluded in the assessee's own prior years and those decisions have not been overturned by a higher forum, judicial discipline requires following those precedents unless the revenue demonstrates a change in functional analysis or other distinguishing features. Applying that principle, the Tribunal excluded Infosys BPM Ltd. from the comparable set. [Paras 8]

Infosys BPM Ltd. excluded from the comparable set.

Arm's length principle - transactional net margin method (TNMM) - With exclusion of Infosys BPM Ltd., the assessee's international transactions satisfy the arm's-length principle. - HELD THAT: - On exclusion of Infosys BPM Ltd. from the comparable list, the Tribunal accepted the assessee's submission that the comparable margins would fall within the accepted interquartile/acceptable range (within plus or minus 5%), resulting in the assessee's margin being at arm's length. The Revenue did not dispute the post-exclusion margin position, and therefore the Tribunal concluded that the addition made by the assessing authorities on account of transfer pricing could not be sustained. [Paras 9]

Assessee's international transactions held to be at arm's length; the transfer pricing addition set aside.

Working capital adjustment - deemed loan on outstanding receivables - No additional adjustment for interest on outstanding receivables after allowing working capital adjustment. - HELD THAT: - The Tribunal held that once the effect of receivables on working capital and consequently on pricing/profitability has been evaluated and factored into the working-capital adjusted comparable margins (as allowed by the DRP), any further adjustment by treating continuing receivable balances as a deemed loan and imputing notional interest would distort the comparability analysis. Relying on the principle that double adjustment is impermissible, the Tribunal disallowed the revenue's imputation of notional interest on outstanding receivables. [Paras 10]

Adjustment on account of deemed loan/interest on outstanding receivables disallowed.

Final Conclusion: Appeal allowed for AY 2017-18: Infosys BPM Ltd. excluded from comparables; on that basis the assessee's international transactions are at arm's length and the transfer-pricing addition set aside; no separate imputation of interest on outstanding receivables is sustained.

Percentage completion method - recognition of revenue by construction contractors - application of Accounting Standard-7 - estimation of total project cost - reliance on architect certificate

Percentage completion method - recognition of revenue by construction contractors - estimation of total project cost - reliance on architect certificate - Whether revenue should have been recognised for AY 2014-15 by applying the percentage completion method on the basis of AO's estimate of total project cost, resulting in project completion exceeding 25% - HELD THAT: - The dispute concerned the appropriate estimate of total construction cost for the assessee's real-estate project and consequently the percentage completion as on 31.03.2014. AO computed total project cost at a lower figure (as reflected in certain earlier disclosures) and, relying also on a figure shown in the assessee's public compliance report, concluded that completion was 28.63% and so revenue should be recognised under the percentage completion method. The assessee produced an architect's certificate revising the estimated project cost upward to Rs.138 crores on account of an increase in saleable area (from 251,634 sq.ft. to 264,580 sq.ft.), escalation in material costs and change in customer specifications. CIT(A) examined these materials, held that the architect's head-wise, item-wise certificate was credible, noted that AO had earlier accepted the architect's estimate for the prior year and found no material to show the certificate was bogus, and further observed that the lower figure of Rs.120 crores in the compliance report excluded certain items (such as government fees and project overheads) in accordance with statutory returns under environmental statutes. Applying the architect's certified revised cost, the percentage completion worked out to 24.89%, which is below the 25% threshold in the Guidance Note for revenue recognition. The Tribunal found no error in CIT(A)'s factual and evidential conclusions and observed that Revenue had not pointed out any fallacy in those findings. On that basis the Tribunal declined to interfere with CIT(A)'s deletion of the addition. [Paras 4, 7, 8]

Addition made by AO on account of recognising revenue under percentage completion method is deleted and Revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)'s finding accepting the architect's revised project cost and calculation of 24.89% completion as on 31.03.2014, held it was below the 25% threshold for revenue recognition, and dismissed the Revenue's appeal for AY 2014-15.

International transaction - advertising, marketing and promotion (AMP) expenditure - action in concert / arrangement or understanding - intensity based comparability adjustment - bright line test - arm's length price (ALP) / transfer pricing adjustment - TNMM benchmarking - netting of receivables / imputing interest on outstanding receivables

International transaction - advertising, marketing and promotion (AMP) expenditure - action in concert / arrangement or understanding - AMP expenditure incurred by the assessee is not an "international transaction" for transfer pricing purposes. - HELD THAT: - The TPO treated the assessee's AMP spending as an international transaction on the basis that the brands were owned by associated enterprises, that the AMP created marketing intangibles benefiting the AEs, and that the high intensity of AMP indicated an arrangement or control by AEs. The assessee contended that AMP outlays were payments to independent domestic third party vendors, incurred for its own commercial needs, and were not backed by any agreement, understanding or action in concert with AEs. The CIT(A) accepted that Sections 92B-92F require the existence of an international transaction and that mere quantum or intensity of AMP cannot substitute for evidence of an arrangement or shared objective between associated enterprises. Applying settled judicial principles, including the need to show an agreement/arrangement or persons "acting in concert", the CIT(A) found no sufficient evidence of such an arrangement in the manufacturing segment and concluded the TPO's characterization was unsustainable. The Tribunal has affirmed that treating the AMP expenditure as an international transaction in the absence of demonstrable arrangement or action in concert was not justified.

AMP expenditure was not an international transaction; the TP adjustment on that basis was not justified.

Intensity based comparability adjustment - bright line test - TNMM benchmarking - arm's length price (ALP) / transfer pricing adjustment - The "bright line test" is not mandated by statute; intensity based comparability adjustment may be considered in TNMM benchmarking but the bright line approach cannot be upheld as a statutory requirement. - HELD THAT: - The TPO applied a bright line limit (a fixed percentage) and a mark up to quantify excess AMP and derive a TP adjustment. The CIT(A) held that while AMP intensity may be a factor to be considered when equating functional profit with comparables under TNMM, the mirror image bright line test has no statutory backing and therefore cannot be mechanically applied. The Tribunal endorsed the view that intensity adjustments can serve as a rationale in benchmarking comparables under TNMM, but rejected the bright line limit as a statutory yardstick and disapproved reliance on such a fixed threshold absent proper statutory or evidentiary foundation.

The bright line test as applied by the TPO is not sustainable; intensity based adjustments may be used but not as a statutory bright line mandate.

Netting of receivables / imputing interest on outstanding receivables - arm's length price (ALP) / transfer pricing adjustment - Netting of interest on receivables as contended by the assessee may be accorded and the benefit of brought forward losses shall be allowed in accordance with the provisions of the Income Tax Act. - HELD THAT: - The appellate order records that the assessee's contention on netting of receivables and related interest was acceptable and that the benefit of brought forward losses should be allowed as per statutory provisions. The Tribunal directed that netting as sought by the assessee may be given effect to and that the brought forward losses be allowed consistent with the Act's provisions, thereby negating the TPO/AO's imputation of interest on outstanding receivables as a separate unfavorable transfer pricing adjustment in the circumstances of this case.

Netting of receivables to the extent claimed by the assessee to be accorded; brought forward losses to be allowed as per law.

Final Conclusion: The Revenue appeals are dismissed and the assessee's appeals are allowed: AMP expenditure is not an international transaction in the facts of this case; the TPO's bright line approach to AMP benchmarking is not statutorily warranted though intensity adjustments may be considered in TNMM; and netting of receivables and allowance of brought forward losses are to be given effect as directed.

Disallowance of professional/consultancy expenses - production of original confirmation evidence - verification of TDS deduction via departmental portal - remand for verification

Disallowance of professional/consultancy expenses - production of original confirmation evidence - verification of TDS deduction via departmental portal - remand for verification - Addition of Rs.28,86,607/- made by AO and sustained by CIT(A) in respect of consultancy/professional charges where original confirmations and proof of TDS were not produced. - HELD THAT: - AO made the addition because the assessee did not furnish satisfactory replies from five parties in response to notices and confirmations were not produced; CIT(A) sustained the addition observing that copies of confirmations were submitted but originals were not produced for verification and that proof of TDS deducted was not explained or shown for some parties (paragraph 8). The assessee produced photocopies of confirmations and relied on TDS records available on the Income Tax Department portal and later produced originals before the CIT(A) according to its submissions (paragraphs 6 and 8). Having regard to these contentions and the record, the Tribunal found that the sustained addition turned on absence of requisite evidence and therefore directed that the matter be restored to the file of the CIT(A) for verification of the assessee's claim regarding payment of professional charges and deduction of tax. The assessee is to produce original confirmations from the four specified parties and proof of TDS; if the CIT(A) is satisfied that tax was deducted and originals are genuine, the addition shall be deleted (paragraph 9). [Paras 8, 9]

Addition sustained by CIT(A) is set aside and the issue is remanded to the CIT(A) to verify original confirmations and proof of TDS; if verified, the addition shall be deleted; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remanded the issue of disallowance of consultancy charges to the CIT(A) for verification of original confirmation letters and deduction of tax (TDS) through departmental records and directed deletion of the addition if the CIT(A) is satisfied; the appeal is allowed for statistical purposes.

Prohibition of the right to recover property held benami under Section 4(1) - Exception for fiduciary or trustee holding under Section 4(3)(b) - Presumption of purchase in name of wife or unmarried daughter and rebuttal by pleading and evidence - Burden of pleading and proof to rebut statutory presumption - Benami Prohibition Act amendment of 2016 not retrospective - Bona fide purchaser for value and estoppel - Findings of fact on joint family funds and failure to challenge appellate relief

Benami Prohibition Act amendment of 2016 not retrospective - Whether the 2016 amendment operates retrospectively or the un-amended provisions govern the case. - HELD THAT: - The Court observed that the 2016 amendment (which omitted sub-section (3) of Section 4) is not retrospective and therefore the dispute must be decided with reference to the un-amended statute. The Court relied on the established principle that an amendment which is not expressly made retrospective does not govern transactions or proceedings prior to its commencement. Accordingly the un-amended Section 4 provisions were applied to the facts of this suit.

2016 amendment not retrospective; case to be determined under the un-amended provisions.

Findings of fact on joint family funds and failure to challenge appellate relief - Burden of pleading and proof to rebut statutory presumption - Whether the trial court's finding that the suit property was purchased out of joint family funds is binding and whether the appellant's failure to challenge that finding affects the result. - HELD THAT: - The trial court found that the purchase was made out of joint family funds created by the joint efforts of the father and sons. The High Court noted that this factual finding was not challenged by the appellant by way of cross-objection or under Order 41 Rule 33 CPC before the first Appellate Court. The Court held that the absence of a challenge to the adverse finding confirms the availability of joint family funds and supports the conclusion that the purchase was made from those funds. This factual conclusion informed the application of the Benami Act to the transaction.

Finding of purchase from joint family funds is binding on the appellant and answers related contentions against her.

Bona fide purchaser for value and estoppel - Whether the plaintiff is estopped from claiming the property against the appellant who is a bonafide purchaser for value. - HELD THAT: - The Court held that estoppel does not apply to the plaintiff because the plaintiff filed the suit before the first alienation took place and the appellant purchased from an intermediate alienee (the 4th defendant), not directly from the plaintiff's mother. Given that sequence, the appellant can be regarded as a bonafide purchaser for value without notice of any conduct by the plaintiff that would invoke estoppel.

No estoppel operates against the plaintiff; appellant may be a bonafide purchaser but this does not advance the appellant's estoppel plea.

Exception for fiduciary or trustee holding under Section 4(3)(b) - Presumption of purchase in name of wife or unmarried daughter and rebuttal by pleading and evidence - Prohibition of the right to recover property held benami under Section 4(1) - Whether the suit transaction falls within the exception in Section 4(3)(b) (property held by a trustee or person in fiduciary capacity) or is barred by Section 4(1), and whether pleadings/evidence suffice to rebut statutory presumptions. - HELD THAT: - The Court examined whether the named purchaser (the plaintiff's mother) stood in a fiduciary capacity so as to attract the exception in Section 4(3)(b). It emphasised that the statutory presumption that purchases in the name of certain persons are for their benefit is rebuttable only by adequate pleadings and evidence. The plaint did not allege that the mother held the property for the benefit of the joint family; the mother, who was examined, was not suggested to be holding as trustee; and there was no firm foundation in pleadings or proof to show a fiduciary relation. On balance the Court concluded that the purchase was for the benefit of the named holder (the mother) and not a benami holding claimed by the plaintiff. Applying the un-amended Section 4 scheme and the evidentiary record, the Court found that the statutory exception did not have to be invoked to defeat the plaintiff's claim because the title was properly vested in the named holder and her transferee.

Pleadin gs and evidence insufficient to establish a fiduciary/ trust holding; the purchase stood for the benefit of the named holder and the appellant acquired valid title.

Final Conclusion: The appeal is allowed. The High Court held that the 2016 amendment is not retrospective and the un-amended Section 4 applies; the trial court's unchallenged finding that the property was purchased from joint family funds was binding; the plaintiff was not estopped; pleadings and evidence failed to establish that the named owner held the property as a trustee or in fiduciary capacity; on the totality of evidence the purchase was for the benefit of the named holder and the appellant acquired valid title. The impugned first appellate decree is set aside and the trial court decree is restored; the appellant directed to deposit the undertaking amount as ordered.

Right to make representation under Article 22(5) - supply of relied upon documents and electronic evidence - preventive detention and subjective satisfaction of detaining authority - distinct roles of sponsoring authority and detaining authority - treatment of confessional statements and subsequent retractions - constitution and competence of Advisory Board under COFEPOSA - validity of appearance before magistrate by video conferencing

Right to make representation under Article 22(5) - supply of relied upon documents and electronic evidence - Detention order quashed for failure to furnish electronic material relied upon in the grounds, thereby infringing the detenus' right to make an effective representation under Article 22(5). - HELD THAT: - The court found that the detention orders expressly relied on screen shots and whatsapp/mobile contents and that specific requests (Ext.P12) for the underlying electronic data were not complied with. Relying on the principle that furnishing grounds carries an obligation to provide such materials when they are necessary to enable an effective representation, the court held that non supply of the relied upon electronic evidence vitally affected the detenus' Article 22(5) right. Decisions cited by respondents were held distinguishable on facts; precedents establishing the duty to furnish relevant electronic information in usable form were applied. For these reasons the detention orders were found bad on this ground. [Paras 15, 16, 17, 18, 19]

Detention orders set aside for non supply of electronic documents relied upon, as this impaired the detenus' right under Article 22(5).

Preventive detention and subjective satisfaction of detaining authority - distinct roles of sponsoring authority and detaining authority - The absence of opposition to bail by the sponsoring authority at an earlier stage does not preclude independent preventive detention by the detaining authority, which must form its own subjective satisfaction. - HELD THAT: - The court reiterated that sponsoring and detaining authorities perform distinct and independent functions. The Central Screening Committee and detaining authority separately examine the proposal and the detaining authority must independently assess propensity to indulge in prejudicial activities in future. Preventive detention is qualitatively different from punitive proceedings and may coexist with prosecution or bail processes; therefore non opposition to bail earlier does not invalidate a subsequent detention order when the detaining authority forms subjective satisfaction. [Paras 12, 14]

Contention that sponsoring authority's conduct at bail stage negatived the need for preventive detention rejected; detaining authority's independent subjective satisfaction remains determinative.

Treatment of confessional statements and subsequent retractions - Retractions of confessional statements did not vitiate the detention orders because the detaining authority had considered the confessions, the retractions and the sponsoring authority's rebuttal; further, fresh statements reaffirming earlier admissions were recorded. - HELD THAT: - The detaining authority had before it the confessional statements, the later retractions and the sponsoring authority's rebuttal letters. The court noted that after retractions, a further statement was given reaffirming previous admissions including prior smuggling, and that the detaining authority's consideration of these materials sufficed. Consequently no additional procedural step beyond consideration of confession, retraction and rebuttal was required of the detaining authority. [Paras 13]

Challenge based on retractions rejected; detaining authority properly considered confessions, retractions and rebuttals.

Validity of appearance before magistrate by video conferencing - Appearance of the accused before the magistrate by video conferencing/WhatsApp call under prevailing Covid guidelines was valid and did not vitiate subsequent proceedings. - HELD THAT: - Medical examination and Covid testing were conducted and production via video conferencing complied with court directions and pandemic protocols. The court found no illegality in the procedure of arrest or production before the jurisdictional magistrate and rejected challenges to the contrary as irrelevant to the preventive detention proceedings. [Paras 11]

Challenge to validity of appearance by video conferencing dismissed; procedure upheld.

Constitution and competence of Advisory Board under COFEPOSA - Change in composition of the Advisory Board after notification (owing to retirements) did not render the confirmation of detention void; no illegality or prejudice was shown from the Board that furnished the opinion. - HELD THAT: - The court observed that the statutory requirement is for a duly constituted Advisory Board and there was no allegation that members who answered the reference lacked qualification or competence. Given that high constitutional functionaries comprised the Board and that the Board's consideration was objective and fair, mere change in personnel due to retirement did not imply invalidity. The detenus failed to establish any actual prejudice from the Board's composition or its opinion. [Paras 20, 21]

Contention that confirmation was illegal for want of proper Board composition rejected; Advisory Board's opinion treated as valid.

Final Conclusion: The detention orders were quashed and the detenus ordered released forthwith for the reason that relied upon electronic materials were not furnished, thereby impairing their Article 22(5) right; other challenges (sponsoring authority's conduct at bail stage, retractions, video conference production, and Advisory Board composition) were rejected.

Provisional release of seized export consignment - conditions for provisional release (bond and bank guarantee) - right to contest a laboratory report - lifting of bank account hold during ongoing investigation - liberty to seek statutory remedy against seizure memo

Provisional release of seized export consignment - conditions for provisional release (bond and bank guarantee) - right to contest a laboratory report - Permissibility and scope of conditions imposed for provisional release of the export consignment - HELD THAT: - The Court found that the first two conditions in the provisional release order (furnishing of a bond equal to FOB value together with a bank guarantee of 18% of FOB value; and non-disputation of identity of goods) are appropriate. However, the third condition in the provisional release order, which sought to bind the petitioner to the contents of the CRCL report and to treat the sample tested as covering the entire consignment, is nebulous and cannot form the basis for provisional release. The petitioner must retain the right to contest the findings of the CRCL report on composition. Accordingly, the Court directed that export be permitted on fulfillment of the bond/bank guarantee condition alone, noting that the identity condition was already satisfied. [Paras 3, 4, 5, 9]

Export permitted upon compliance with the bond and bank guarantee condition; the nebulous condition binding the petitioner to CRCL findings held inapplicable and the petitioner may contest those findings.

Lifting of bank account hold during ongoing investigation - proportionality in restraining access to bank funds - Whether the hold on the petitioner's bank account should continue given the ongoing investigation and the low balances reported - HELD THAT: - The respondents contended there was a history of overvaluation in past exports and a risk that the account would be used for receipt of remittances or to avail export incentives; however, the Court observed that the petitioner's relevant bank account contained only a small balance and that the investigation is continuing. The Court held that, given the present factual position and subject to the respondents acting in accordance with law in future, continuation of the hold was not warranted. The respondents are not precluded from taking lawful steps later, and the petitioner remains free to pursue remedies against any such steps. [Paras 6, 7, 8, 9]

Hold lifted qua the petitioner's bank account maintained with Jammu & Kashmir Bank, Connaught Place Branch; respondents may take further lawful steps in future, subject to legal challenge by the petitioner.

Liberty to seek statutory remedy against seizure memo - Remedy available to the petitioner in respect of the seizure memo issued under the Customs Act - HELD THAT: - The challenge to the seizure memo was introduced mid-way by amendment and the goods have been provisionally released. The Court did not adjudicate the validity of the seizure memo on merits; instead it granted the petitioner liberty to assail the seizure memo before the appropriate statutory authority and to contend that the seizure memo was void ab initio. The direction leaves the matter for adjudication through the prescribed statutory channels. [Paras 9]

Petitioner given liberty to challenge the seizure memo via the appropriate statutory remedy; no adjudication on the merits of the seizure memo was made by the Court.

Final Conclusion: The writ petition is disposed of by permitting export of the subject consignment on fulfilment of the bond and bank guarantee condition (identity not disputed), directing lifting of the hold on the petitioner's specified bank account maintained with Jammu & Kashmir Bank, Connaught Place Branch, and granting liberty to the petitioner to challenge the seizure memo through statutory remedies while preserving the respondents' right to take future lawful action.

Statutory limitation for appeal against phytosanitary orders - remedy under the Plant Quarantine (Regulation of Import into India) Order, 2003 - estoppel by concession - maintainability of writ petition in face of prescribed short appeal period - jurisdiction to order destruction in absence of detected pests

Statutory limitation for appeal against phytosanitary orders - remedy under the Plant Quarantine (Regulation of Import into India) Order, 2003 - maintainability of writ petition in face of prescribed short appeal period - Delay in approaching High Court under Article 226 in place of the statutory appeal period precludes relief. - HELD THAT: - Ext.P7, directing destruction, was issued on 29.12.2021 while the writ petition was filed on 04.03.2022. The Plant Quarantine (Regulation of Import into India) Order, 2003 prescribes a seven day period for appeal against such orders. The limited statutory period serves the purpose of enabling prompt challenge to orders of destruction and other adverse measures. Having failed to prefer the statutory appeal within the prescribed seven days, the petitioner cannot invoke Article 226 to bypass the statutory time bar. The delay in approaching the Court disables the petitioner from pursuing the writ petition and renders the challenge to Ext.P7 untenable on grounds of limitation. [Paras 5]

Writ petition dismissed insofar as challenge to Ext.P7 is concerned for want of prosecution within the statutory appeal period.

Estoppel by concession - Petitioner's prior concession to destroy the cargo precludes challenge to the order issued pursuant to that concession. - HELD THAT: - The petitioner, before the 3rd respondent, expressly offered to destroy the cargo and represented that re export was not possible. Ext.P8 was issued on that basis. A party cannot accept or procure a statutory authority's action by its own concession and thereafter challenge the action in court. Having made the concession, the petitioner is estopped from assailing Ext.P8 which was issued in reliance upon that submission. [Paras 6]

Challenge to Ext.P8 is barred by the petitioner's own concession; petitioner is estopped from contesting the order.

Jurisdiction to order destruction in absence of detected pests - Jurisdictional question left open; administrative reconsideration permitted on application showing changed circumstances enabling re export. - HELD THAT: - The Court expressly did not decide the jurisdiction of the 2nd respondent to order destruction where pests or diseases are not detected, leaving that legal question open. Separately, the Court granted a limited administrative remedy: if the petitioner, within ten days of receipt of this judgment, satisfies the 3rd respondent that re export is possible due to any change in circumstances, the 3rd respondent may consider permitting re export in accordance with law and must decide any such application within ten days. This is a direction for fresh administrative consideration and not an adjudication on the jurisdictional issue itself. [Paras 7]

Jurisdictional issue left undecided; petitioner may apply to the 3rd respondent to demonstrate possibility of re export and, if such application is made, the 3rd respondent shall decide it within ten days.

Final Conclusion: Writ petition dismissed: challenge to the destruction order (Ext.P7) is barred by failure to avail the seven day statutory appeal; challenge to the confiscation/destruction order (Ext.P8) is estopped by the petitioner's own concession; the question whether the authority may order destruction absent detected pests is left open, subject to limited administrative reconsideration on proof of changed circumstances enabling re export.

Provisional attachment of bank accounts - Dissolution of provisional attachment on expiry of statutory period - Right to operate bank accounts after dissolution

Provisional attachment of bank accounts - Dissolution of provisional attachment on expiry of statutory period - Right to operate bank accounts after dissolution - Provisional attachment of the petitioner's bank accounts stood dissolved as the statutory period had expired and the petitioner was entitled to operate the accounts. - HELD THAT: - The respondent orally stated before the Court that the statutory period applicable to the provisional attachment orders dated 09.03.2020 had lapsed. In consequence of that statement the respondent conceded that the provisional attachment had ceased to operate and that the petitioner would be free to operate the attached bank accounts. The Court recorded the respondent's statement and, on that basis, accepted that the attachment had dissolved and that the petitioner's right to operate the accounts was restored. The petition was disposed of on the basis of this recorded statement. [Paras 3, 5]

Recorded statement that statutory period had expired; provisional attachment dissolved and petitioner permitted to operate its bank accounts; writ petition disposed on that basis.

Final Conclusion: The Court disposed of the writ petition on the respondent's recorded statement that the statutory period for the provisional attachment dated 09.03.2020 had expired; the provisional attachment stood dissolved and the petitioner was permitted to operate its bank accounts.

Acceptance of enhanced assessment value - right to challenge assessment after acceptance - requirement of speaking order - principles of natural justice - reliance on contemporaneous import price data - remand for fresh adjudication

Acceptance of enhanced assessment value - right to challenge assessment after acceptance - Whether the letters submitted by the appellant amounted to acceptance of the enhanced value and whether, after such acceptance, the appellant was precluded from challenging the assessment by filing an appeal. - HELD THAT: - The Tribunal observed that there are conflicting precedents on whether an assessee who has given a letter of acceptance of an enhanced value is barred from challenging the assessment. The Adjudicating Authority had not addressed these precedents in a speaking order. In view of the contrary judgments and the absence of adjudicative reasoning on this question, the Tribunal did not decide the controversy on merits but held that it requires fresh consideration by the assessing officer after hearing the appellant and examining the authorities cited by the appellant.

Issue remitted to the assessing officer for fresh consideration and a speaking order on whether the acceptance letter constitutes an effective bar to challenge, after considering the conflicting judgments relied upon by the parties.

Requirement of speaking order - principles of natural justice - reliance on contemporaneous import price data - remand for fresh adjudication - Whether the assessing authority complied with principles of natural justice and whether the enhancement of value was supported by contemporaneous import price data and adequate reasoning in a speaking order. - HELD THAT: - The Tribunal noted that the Adjudicating Authority did not pass a speaking order addressing the appellant's representations and it was not clear whether the assessing authority had relied upon any contemporaneous import price data in enhancing value. The absence of a speaking order and lack of contemporaneous data amounted to a failure to observe principles of natural justice and adequate adjudication. Consequently, the Tribunal directed that the matter be examined afresh by the assessing officer who must consider the appellant's representation, the need for contemporaneous data if relied upon, and give reasons in a detailed speaking order.

Matter remitted to the assessing officer to consider the appellant's representation, examine any contemporaneous data relied upon, and pass a detailed speaking order within the specified time.

Final Conclusion: Appeals allowed to the extent of remanding the matters to the assessing officer/Adjudicating Authority for fresh consideration of the appellant's representations, consideration of the conflicting precedents and any contemporaneous import price data, and for passing a detailed speaking order within two months from the date of the order.

Penalty under Section 114(i) of the Customs Act, 1962 for mis-declaration and abetment of smuggling - Review under Section 129D(1)-(3) of the Customs Act, 1962 - time limit for review orders and condonation - Personal hearing and procedural fairness in virtual hearings - Customs House Agents' obligations and liability under Customs House Agents' Licensing Regulations (CBLR) / CHALR and concurrent proceedings under the Customs Act

Review under Section 129D(1)-(3) of the Customs Act, 1962 - time limit for review orders and condonation - Validity of the review order dated 03.09.2019 and timeliness of the appeal filed by the Department under Section 129D(3). - HELD THAT: - Sub-section (3) of Section 129D requires that an order under sub-section (1) or (2) be made within three months from the date of communication of the adjudicating authority's order, with a further thirty day extension on sufficient cause. The adjudicating authority's order is dated 31.05.2019 (dispatch 03.06.2019). The Department averred receipt on 17.06.2019 and produced an affidavit from the Review Cell confirming receipt on that date. There is no evidence contradicting that affidavit. Calculated from the date of receipt as stated by the Review Cell, the review order dated 03.09.2019 falls within the permitted period; even if there were a short delay, it was within the thirty day extension provided by the proviso. Accordingly the review order is timely and the appeal before the Commissioner (Appeals) is within time. [Paras 6, 7]

Review order dated 03.09.2019 and the Department's appeal are within the prescribed time; no interference warranted.

Personal hearing and procedural fairness in virtual hearings - Whether the manner of personal/virtual hearing before the Commissioner (Appeals) caused prejudice to the appellant and vitiated the impugned order. - HELD THAT: - Although the conduct of a hearing where both parties are not present at the same time is irregular, the Department had filed a letter stating that the grounds of appeal were to be taken on record and that it did not wish to make further submissions. The record shows that no new grounds were taken at the hearing beyond those in the grounds of appeal. The Tribunal found no demonstrable prejudice to the appellant arising from the sequence of appearances in the virtual hearing and treated the objection as hyper-technical. [Paras 8]

No prejudice caused by the conduct of the virtual hearing; procedural challenge to the hearing is rejected.

Penalty under Section 114(i) of the Customs Act, 1962 for mis-declaration and abetment of smuggling - Customs House Agents' obligations and liability under Customs House Agents' Licensing Regulations (CBLR) / CHALR and concurrent proceedings under the Customs Act - Whether the Commissioner (Appeals) was justified in setting aside the adjudicating authority's finding as to non-imposition of penalty on the Customs Broker and remanding the matter for reconsideration of penalty under Section 114(i). - HELD THAT: - The adjudicating authority found that the Customs Broker failed to verify complete KYC and discharged certain duties under the Customs Brokers' Licensing Regulations, but concluded there was no evidence of abetment of the smuggling plan and held that penalty under Section 114 was not warranted. The Tribunal examined the broker's admissions that complete antecedent verification and KYC were not obtained, and treated the attempted illicit export of prohibited red sanders as a serious violation. The Tribunal noted authority holding that a Customs House Agent's liability is not confined to regulatory sanctions under the CHALR/CBLR and that in grave cases mis-declaration and attempts to export prohibited goods may attract penalty under Section 114 of the Customs Act. Given these considerations, the Commissioner (Appeals) was justified in remanding the matter for fresh consideration of imposition of penalty under Section 114(i). The Tribunal found no reason to interfere with the remand. [Paras 10, 11, 12, 13, 14]

Impugned order setting aside the adjudicating authority's non-imposition of penalty and remanding the issue of penalty under Section 114(i) is upheld; appeal dismissed.

Final Conclusion: The Tribunal finds the Department's review and appeal to be time barred; the review order and appeal are within time; the virtual hearing did not prejudice the appellant; and the Commissioner (Appeals) was justified in remanding the matter for reconsideration of penalty under Section 114(i) given the Customs Broker's admitted failure to obtain complete KYC and verify antecedents. The impugned order is upheld and the appeal is dismissed.

Classification of imported goods - distinction between "inkjet printer" and "ink jet printing machine" - capable of connecting to an automatic data processing machine or to a network - HSN Explanatory Notes on connectability - Central Board of Excise and Customs Circular No. 11/2008-Cus

Classification of imported goods - distinction between "inkjet printer" and "ink jet printing machine" - capable of connecting to an automatic data processing machine or to a network - Imported goods described as digital inkjet printer SCODIX S75 are classifiable under tariff item 8443 32 50 and not under tariff item 8443 39 10. - HELD THAT: - The Tribunal examined the descriptive difference between the rival tariff items and held that the determinative distinction is whether the apparatus is a stand alone printer "capable of connecting to an automatic data processing machine or to a network". The capacity to accept external connection (connectability) is a distinct criterion from the presence of internal controls or embedded computing. Applying the HSN Explanatory Notes' test that an apparatus must comprise all components necessary for connection to a network such that connection is effected simply by attaching a cable, the Tribunal found that the imported goods met the connectability criterion and therefore fall within the category of "other printers... whether or not combined" under 8443 32 50 rather than the broader description used for classification under 8443 39 10. The Tribunal further rejected the Revenue's attempt to equate internal fitment of controls with external connectability, observing that the two descriptions differ on capability of external connection which is central to tariff differentiation (paragraphs 7 and 8). [Paras 7, 8]

The reclassification to tariff item 8443 39 10 is erroneous; the goods are classifiable under 8443 32 50.

HSN Explanatory Notes on connectability - Central Board of Excise and Customs Circular No. 11/2008-Cus - The Tribunal's prior decision in Monotech Systems Ltd., applying the HSN Explanatory Notes and Board Circular No. 11/2008-Cus, is binding on the present dispute and supports classification under 8443 32 50. - HELD THAT: - The prior Tribunal decision involved identical goods imported from the same supplier and applied the HSN Explanatory Notes' explanation of "capable of connecting to an automatic data processing machine or to a network". The Board's Circular No. 11/2008-Cus was held to clarify that large format printers satisfying the connectability conditions are classifiable under 8443 32 50. The present Bench found those findings to be sufficiently clear and binding, and held that even excluding parts of the prior reasoning directed against Revenue's arguments would not alter the determinative application of the tariff description to the goods under import (paragraphs 5 and 6). [Paras 5, 6]

The earlier Tribunal decision and the Board's circular apply and compel classification under 8443 32 50; the impugned order is set aside.

Final Conclusion: The appeal is allowed: the impugned order reclassifying the imported goods under tariff item 8443 39 10 is set aside and the goods are held classifiable under tariff item 8443 32 50, in view of the HSN Explanatory Notes and Circular No. 11/2008 Cus and the Tribunal's prior decision on identical goods.

Rectification of mistake apparent on record - recall of order for lapse of time - incorporation of omitted appeals in the enumeration - recording and consideration of submissions in the note of proceedings - finality of findings as respects imports leading to limitation of challenge - rectification application vs review of order - passing observation not determinative of appellate finding

Recall of order for lapse of time - rectification of mistake apparent on record - Whether the Tribunal's final order could be recalled on the ground that it was pronounced after a lapse of time. - HELD THAT: - The Tribunal held that a delay in passing the final order (being nearly four months after hearing) did not warrant recall in the present multi-appellant, inter-linked proceedings. Recalling the order for one appellant would produce consequences for other appellants not before the Tribunal, and therefore the plea of lapse of time did not establish a mistake apparent on record justifying rectification or recall. [Paras 3]

Application to recall the order for lapse of time dismissed.

Incorporation of omitted appeals in the enumeration - rectification of mistake apparent on record - Whether omission of the appellant's appeal numbers from the preamble/enumeration of the final order required rectification. - HELD THAT: - On review of records the Tribunal found that appeal nos. C/353/2008, C/357/2008 and C/361/2008 were absent from the enumeration and directed that the specified entries (setting out each appeal arising out of the respective orders-in-original and the parties) be incorporated into the enumeration of appeals disposed of by the order. This limited rectification was allowed. [Paras 4]

Omission of the appellant's appeal numbers ordered to be incorporated in the enumeration of appeals.

Recording and consideration of submissions in the note of proceedings - rectification of mistake apparent on record - Whether the Tribunal failed to deal with the submissions and case law relied upon by the appellant. - HELD THAT: - The Tribunal observed that the submissions and the Revenue's responses were recorded in the note of proceedings incorporated as paragraph 35 of the order and that those submissions had been considered when determining the outcome. Consequently, the contention that submissions were not dealt with did not establish an apparent mistake requiring rectification. [Paras 5]

Contention that submissions were not dealt with rejected; no rectification on that ground.

Finality of findings as respects imports leading to limitation of challenge - rectification application vs review of order - Whether the appellant could seek reconsideration of merits concerning imports and whether technical jurisdictional/contention issues amounted to a permissible rectification rather than review. - HELD THAT: - The Tribunal noted that the importer M/s Hindustan Engineering Corporation's appeal had been dismissed in limine and therefore findings on imports had attained finality; the Tribunal's consideration of the appellant's appeals was confined to alleged acts of omission and commission contributing to breach. Attempts to re-open or re-argue the merits of findings on confiscation or to raise technical jurisdictional issues were characterised as seeking review of the order, which is beyond the scope of a rectification application and is the prerogative of appellate courts. [Paras 6, 7]

Applications raising merits or jurisdictional issues treated as attempts at review and not maintainable as rectification.

Passing observation not determinative of appellate finding - rectification of mistake apparent on record - Whether the use of the expression 'presumptive heir' in paragraph 47 amounted to an apparent mistake sufficient to set aside the penalty. - HELD THAT: - The Tribunal held that the phrase 'presumptive heir' in paragraph 47 was a passing observation and mere phrasing; it was not the sole or determinative ground on which the findings against the appellant were upheld. Therefore the expression did not constitute an apparent error warranting rectification of the penalty findings. [Paras 8]

Challenge based on the phrase 'presumptive heir' rejected; no rectification on that basis.

Final Conclusion: Applications for rectification were dismissed as lacking merit except insofar as the Tribunal ordered incorporation of the appellant's appeal entries into the enumeration of appeals; all other pleas for recall, reconsideration of merits, or correction based on phrasing were rejected as impermissible attempts at review or not amounting to a mistake apparent on record.

Rectification of mistake apparent on record - standing of a non-party to seek rectification - statutory limitation on rectification applications under section 129B(2) of the Customs Act, 1962 - ex parte disposal and remedy by further appeal

Rectification of mistake apparent on record - standing of a non-party to seek rectification - statutory limitation on rectification applications under section 129B(2) of the Customs Act, 1962 - Application for rectification filed by a person claiming to be the deceased appellant's spouse was not maintainable before the Tribunal. - HELD THAT: - The Tribunal recorded that the present applications were filed by a person claiming to be the wife of the original appellant who had died, and that the appeals had been disposed of ex parte on merit while remedies lay by way of further appeal. The Tribunal held that there is no provision permitting any person other than the Commissioner of Customs or the other party to the appeal to seek rectification under the statutory scheme; consequently the applicant lacked locus standi to make an application for rectification of an apparent mistake in the Tribunal's final order. Having reached that legal conclusion, the Tribunal dismissed the rectification applications. [Paras 3, 4, 5]

Applications for rectification filed by the deceased appellant's purported wife were dismissed for want of locus and because section 129B(2) does not permit such an application by a third person.

Final Conclusion: The rectification applications filed by a person claiming to be the appellant's spouse were dismissed for lack of standing and absence of statutory authority to entertain rectification by a third party; the Tribunal declined to amend its earlier order.

Jurisdiction to issue show cause notice by DRI officers - proper officer under Section 28 of the Customs Act - entrustment of customs functions to DRI under Section 6 - validation of past DRI actions by Finance Act, 2022 (non obstante clause) - waiver and delay/laches in raising jurisdictional objection after participating in proceedings - effect of Canon India (Supreme Court) on issuance of show cause notices by DRI officers

Waiver and delay/laches in raising jurisdictional objection after participating in proceedings - jurisdiction to issue show cause notice by DRI officers - Permissibility of admitting an additional ground challenging the jurisdiction of DRI officers to issue the show cause notice when that plea was not raised before the original authority and was sought to be taken for the first time before the Tribunal. - HELD THAT: - The Tribunal held that the applicants had participated in the original proceedings since issuance of the show cause notice in 2009 and never raised the jurisdictional plea earlier. Reliance was placed on Supreme Court authorities (including Mamata Mohanty and Remington Rand) establishing that a litigant who submits to the jurisdiction of an authority and participates in proceedings cannot later raise for the first time a plea of lack of jurisdiction without providing a proper explanation for delay and laches. The Tribunal concluded that, absent a satisfactory explanation for the long delay in advancing the jurisdictional ground, the applicants could not be permitted to take that additional ground at this stage. [Paras 3]

Application to take the additional ground challenging jurisdiction was refused on the ground of delay, laches and prior submission to jurisdiction.

Validation of past DRI actions by Finance Act, 2022 (non obstante clause) - effect of Canon India (Supreme Court) on issuance of show cause notices by DRI officers - entrustment of customs functions to DRI under Section 6 - Whether the applicants' jurisdictional challenge based on Canon India remains tenable in view of statutory amendments in the Finance Act, 2022 validating actions and notifications relating to DRI officers. - HELD THAT: - The Tribunal noted that Parliament, by the Finance Act, 2022, amended relevant provisions and introduced a validating non obstante provision which deems actions taken by DRI officers under specified Chapters of the Customs Act to have been validly done, and treats notifications assigning functions as valid. In view of Section 97 of the Finance Act, 2022, which ousts contrary judicial decisions insofar as actions under specified Chapters are concerned, the Tribunal held that the plea founded on the Canon India decision cannot be allowed. The Tribunal also observed that the Supreme Court itself had taken cognisance of related questions (including reference to Section 28(11)) and that a review/consideration was pending before the Apex Court; given these developments and the legislative validation, the Tribunal declined to admit the additional ground. [Paras 3]

The jurisdictional ground based on Canon India was held to be rendered untenable by the Finance Act, 2022 validation and by ongoing proceedings before the Supreme Court; the additional ground was therefore not allowed.

Final Conclusion: The miscellaneous applications for permission to take an additional ground challenging the jurisdiction of DRI officers to issue the show cause notice were dismissed: the applicants had waived the objection by participating in earlier proceedings and failed to explain the delay, and the Finance Act, 2022 validates prior DRI actions (with related questions pending before the Supreme Court), rendering the proposed ground untenable.

Voluntary deposit - authority of law for acceptance of payment - summons to a senior citizen - restraint on coercive measures pending adjudication - recording of statement in accordance with Paramvir Singh Saini

Summons to a senior citizen - No further summons shall be issued to the father of the proprietor, who is a senior citizen, for the present. - HELD THAT: - The petition drew attention to a summons issued to the proprietor's father, identified as a senior citizen residing in Surat. Having regard to his age and the representation made on behalf of the petitioner, the Court directed that, for the moment, no further summons would be issued to him. This is an interim protective measure taken in the present proceedings and does not amount to a final determination on the merits of any investigative requirement against him. [Paras 6]

No further summons to the senior citizen for the moment.

Restraint on coercive measures pending adjudication - No coercive measures shall be taken against the proprietor of the petitioner concern until the next date of hearing, and the proprietor shall join the investigation if fresh summons are issued. - HELD THAT: - The Court accepted the assurance that the proprietor will cooperate with the investigation if fresh summons are issued, and accordingly restrained the respondents from taking any coercive action against him until the matter next comes up for hearing. This interim direction preserves the investigatory process while protecting the proprietor from immediate compulsion. [Paras 7]

Respondents restrained from taking coercive measures against the proprietor until the next date of hearing.

Voluntary deposit - authority of law for acceptance of payment - The question whether the respondents were legally entitled to accept the deposit of Rs.79 lakhs is directed to be answered by the respondents; the Court has issued notice and has called for a counter-affidavit explaining under which legal provision the sum was accepted. - HELD THAT: - The petitioner contended that the respondents had compelled or forced a deposit of Rs.79 lakhs without lawful authority. The respondents, through their counsel, asserted that the deposit was voluntary. The Court therefore issued notice to the respondents and directed them to file a counter-affidavit within three weeks addressing the legal basis for acceptance of the sum and the circumstances of the deposit. The matter has not been finally adjudicated on merits; instead the Court has required the respondents to explain and justify the acceptance of the payment before further orders are made. [Paras 1, 2, 3, 4, 5]

Notice issued to respondents; respondents directed to file counter-affidavit explaining the legal basis for acceptance of the deposit.

Recording of statement in accordance with Paramvir Singh Saini - When recording the statement of the proprietor, the respondents must follow the principles laid down in Paramvir Singh Saini v. Baljit Singh & Ors. - HELD THAT: - The Court mandated adherence to the Supreme Court's guidance in Paramvir Singh Saini while recording the proprietor's statement, thereby directing that the procedural safeguards and principles articulated in that decision be observed during the investigatory process. This direction is prospective and intended to ensure that the recording of statements complies with established constitutional and procedural standards. [Paras 8]

Respondents to follow the principles in Paramvir Singh Saini when recording the proprietor's statement.

Final Conclusion: Interim directions issued: notice to respondents to explain the legal basis for the Rs.79 lakhs deposit and to file a counter-affidavit; no further summons to the proprietor's father (a senior citizen) for the moment; no coercive measures against the proprietor until the next hearing; and respondents directed to follow the principles in Paramvir Singh Saini while recording the proprietor's statement.

Application of Section 110A of Customs Act, 1962 - direction to comply with Tribunal order - decision after giving due opportunity of hearing - relief under Rule 41 of the CESTAT (Procedure) Rules, 1982 - compliance of High Court directions

Compliance of High Court directions - direction to comply with Tribunal order - Whether the Commissioner of Customs had complied with the Bombay High Court and Tribunal directions to decide the application under Section 110A of the Customs Act, 1962 after affording opportunity of hearing. - HELD THAT: - The Tribunal's final order set aside the impugned order and directed the Commissioner to apply the law in Section 110A of the Customs Act, 1962 in light of test reports and the interim order. The Bombay High Court had directed that the petition be treated as an application under Section 110A and be decided in accordance with law after giving due opportunity of hearing, preferably within two weeks. The Bench recorded that the Department's representative produced instructions indicating that the Joint Commissioner took a decision on 25.04.2022 under Section 110A. The application under Rule 41 was therefore not decided on merits; instead the Tribunal granted the Commissioner an opportunity to explain why the prescribed order had not been passed earlier and whether he would now pass an order to ensure compliance with the High Court and Tribunal directions. The matter was listed for further hearing to enable the Commissioner to respond and to facilitate compliance. [Paras 1, 2, 3, 4, 5]

Opportunity granted to the Commissioner to explain the non-compliance and to indicate whether he will pass an order to comply with the High Court and Tribunal directions; matter listed for hearing on May 02, 2022.

Final Conclusion: Application under Rule 41 left pending for the Commissioner to explain non-compliance with the Bombay High Court and Tribunal directions and to indicate compliance; matter adjourned to enable issuance of the required decision in accordance with law.

Show cause notice - natural justice - quashing of criminal proceedings as abuse of process - cognizance by Magistrate - continuing offence - officers in default - statutory prosecution for failure to file annual return/financial statements and to hold AGM

Show cause notice - natural justice - quashing of criminal proceedings as abuse of process - Whether criminal proceedings can be quashed on the ground that no show cause notice was issued before launching prosecution. - HELD THAT: - The complaint expressly averred that show cause notices were issued on specified dates and listed those notices among the documents relied upon by the prosecution. Although proof of service was not produced at the stage of quash petitions, the question of service or non service is a matter for trial and proof by the prosecution. Where clear averments in the complaint state that a notice was issued, the contention that no notice was given does not justify quashing the prosecution as an abuse of process; factual disputes about issuance or service must be decided in the trial.

Criminal proceedings cannot be quashed at this stage merely because proof of service of the show cause notice is not on record; the issue is triable and the quash petitions on this ground are rejected.

Officers in default - statutory prosecution for failure to file annual return/financial statements and to hold AGM - Whether the complaint sufficiently averred that the directors are responsible as "officers in default" so as to sustain prosecution against them. - HELD THAT: - The complaint pleaded that the company was represented by its directors and that the directors are officers in default within the statutory definition. Those averments constitute allegations that the directors were the officers in default under the Act. A challenge that the complaint lacks specific averments as to the directors' roles is unsustainable at the quash stage where the complaint does make the statutory allegation; particulars and proof can be tested during trial.

The prosecution against the directors was not liable to be quashed for want of averment as to their status as officers in default.

Cognizance by Magistrate - quashing of criminal proceedings as abuse of process - Whether the Magistrate erred in taking cognizance of the complaints without a speaking order or without applying mind. - HELD THAT: - Record inspection by the Magistrate showed that cognizance was taken after perusal of the complaint and supporting materials. The Additional Chief Metropolitan Magistrate examined the materials before taking the cases on file. There is therefore no basis to hold that cognizance was taken mechanically or without application of mind; absence of an elaborate speaking order does not, by itself, invalidate the cognizance where the Magistrate has considered the complaint and documents.

Cognizance by the Magistrate was valid and does not warrant quashing of the proceedings.

Final Conclusion: The petitions seeking quashing of the criminal proceedings were dismissed: the allegations that no show cause notice was issued, that directors were not alleged to be officers in default, and that cognizance was improperly taken were rejected; factual disputes about service and proof remain for trial and the proceedings are not an abuse of process.

Initiation of corporate insolvency resolution process under Section 7 - Financial creditor's entitlement to file under a consortium with a lead bank - Existence of debt and default for triggering CIRP - Effect of parallel SARFAESI/DRT proceedings on initiation of CIRP - Completeness and defectiveness of Form 1 and supporting affidavit - Appointment of Interim Resolution Professional and operation of moratorium

Initiation of corporate insolvency resolution process under Section 7 - Existence of debt and default for triggering CIRP - Admission of the Section 7 petition on the ground of debt and default - HELD THAT: - The Tribunal found that credit facilities were sanctioned and disbursed by the Financial Creditor and that the account of the Corporate Debtor was classified as NPA on 11.12.2019. Recall and SARFAESI notices were issued and the Corporate Debtor failed to regularise the account or pay outstanding sums. On these facts the Bench concluded that a debt exists and a default has been committed, satisfying the threshold for admission under Section 7. The petition was therefore held to meet the statutory requirement for initiation of CIRP and to be within limitation. [Paras 11, 15, 16]

The Section 7 petition is admitted as debt and default are established and procedural thresholds are met.

Financial creditor's entitlement to file under a consortium with a lead bank - Effect of parallel SARFAESI/DRT proceedings on initiation of CIRP - Whether the Financial Creditor was entitled to file the petition despite a consortium arrangement and pending recovery proceedings by the lead bank - HELD THAT: - The Corporate Debtor's contention that only the lead bank (SBI) could initiate proceedings was rejected. The Tribunal observed that the Financial Creditor had independently sanctioned and disbursed loans and is therefore entitled to proceed under Section 7(1). Further, the existence of SARFAESI action by the lead bank or a pending OA before the DRT did not bar initiation of CIRP; no stay or prohibitory order from the High Court was shown. Hence parallel proceedings under SARFAESI/DRT do not preclude admission of a Section 7 petition by a financial creditor in these circumstances. [Paras 11, 12, 13]

The Financial Creditor is entitled to file the Section 7 petition despite consortium/lead bank status and ongoing SARFAESI/DRT proceedings do not preclude admission.

Completeness and defectiveness of Form 1 and supporting affidavit - Allegation of defect in the petition under Form 1 and affidavit compliance - HELD THAT: - The Corporate Debtor alleged non-disclosure of estimated value of securities in Part IV of Form 1 and non-compliance of the supporting affidavit with the prescribed form. The Tribunal examined the material on record and concluded that the petition was duly supported by the affidavit of the authorised person and that all requisite information for initiating CIRP had been disclosed. Accordingly, the contention that the petition was defective was held to be without merit. [Paras 10, 14]

The petition is not defective; Form 1 and the supporting affidavit satisfy the requirements for admission.

Appointment of Interim Resolution Professional and operation of moratorium - Appointment of the proposed Interim Resolution Professional and imposition of moratorium - HELD THAT: - The Financial Creditor proposed an Insolvency Professional for appointment as IRP and the Tribunal noted no disciplinary proceedings were pending against him. The Tribunal appointed the proposed IRP under the Code, directed him to make the public announcement and call for claims, and declared the moratorium under Section 14 to operate from the date of the order until completion of CIRP or earlier orders under Sections 31/33. Ancillary directions were issued regarding protection of assets, duties of personnel to cooperate, and continuation of essential supplies. [Paras 17]

The nominated Insolvency Professional is appointed as Interim Resolution Professional and the moratorium is declared to be in effect from the date of the order.

Final Conclusion: The Company Petition under Section 7 is allowed: the Corporate Debtor is admitted into CIRP, the nominated Interim Resolution Professional is appointed, and the statutory moratorium and ancillary directions are imposed.

Maintainability of an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional under Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 - right to audience and principles of natural justice prior to appointment of IRP - service of a copy of the application under Section 95(5) and Rule-based modes of service - replacement of Resolution Professional under Section 98 and its stage-neutral operation - interim moratorium commencing on filing under Section 96

Right to audience and principles of natural justice prior to appointment of IRP - appointment of Interim Resolution Professional under Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 - Whether the personal guarantor/respondent is entitled to notice or a right of audience before appointment of the Interim Resolution Professional (IRP). - HELD THAT: - The Tribunal held that the scheme of Sections 95 to 100 does not grant a right of audience to the debtor or guarantor at the stage prior to appointment of the Resolution Professional. The statutory sequence requires the Board to be directed to confirm or nominate a resolution professional and for the Board to nominate and the Adjudicating Authority to appoint the RP; the report of the RP is the trigger for the Adjudicating Authority to admit or reject the application. While earlier decisions and the Bombay High Court observed that principles of natural justice argue for hearing before final admission, those observations do not translate into a statutory mandate for notice prior to appointment of the IRP. Section 99 provides for furnishing a copy of the RP's report to the debtor and contains provisions enabling the debtor to furnish explanations and for the RP to seek information; Section 98 enables replacement of the RP but is not confined to the pre-appointment stage and thus does not establish a right to pre-appointment hearing. Consequently, absence of a pre-appointment notice does not amount to violation of natural justice in the statutory scheme as it stands. [Paras 4, 5]

No notice or right of audience is required to be afforded to the personal guarantor before appointment of the IRP.

Maintainability of an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 - service of a copy of the application under Section 95(5) and Rule-based modes of service - Whether the petition under Section 95 was maintainable and could be entertained, and whether the Tribunal should appoint the proposed IRP. - HELD THAT: - The Tribunal found the application under Section 95 to be complete and amenable to adjudication. The contention that the financial creditor lacked locus because the guarantee was to a consortium did not preclude entertaining the petition at the preliminary stage. The statutory provisions require service of the submitted application to the debtor under Section 95(5) and the Rules prescribe modes for such service; however, serving an advance copy prior to submission is not contemplated. On this basis the Tribunal proceeded to appoint the debtor's proposed Insolvency Resolution Professional and directed requisite compliance including filing of consent and submission of the RP's report within the stipulated period. [Paras 7]

The application under Section 95 is entertained as complete and Mr. Chillale Rajesh is appointed as Interim Resolution Professional with directions to file consent and submit his report.

Final Conclusion: The Tribunal held that no statutory right of pre-appointment hearing is available to the personal guarantor and, finding the Section 95 application complete, appointed the proposed Interim Resolution Professional and directed him to submit his report for the Adjudicating Authority's consideration.

Performance guarantee under an approved resolution plan - forfeiture of EMD and partial performance security for non-compliance - obligation of a successful resolution applicant to perform its original bid - power of Committee of Creditors to negotiate with next highest bidder on failure of H 1 - withdrawal of approval application where successful applicant defaults

Performance guarantee under an approved resolution plan - forfeiture of EMD and partial performance security for non-compliance - Whether the H 1 resolution applicant must deposit the performance guarantee as per the approved resolution plan and consequences of failure to do so. - HELD THAT: - The Tribunal found that the approved resolution plan obliged the resolution applicant to furnish performance security (cash deposit and pledged property) within the stipulated period and that despite multiple accommodations and repeated opportunities the applicant defaulted in completing the balance security. The bench emphasised that the failure to furnish the performance guarantee within the extended time undermines the time bound CIRP process and amounts to a serious default. Consequently, the Tribunal directed the resolution applicant to deposit the performance guarantee within one month to the satisfaction of the CoC and held that if the applicant fails to comply, the earlier deposit (EMD and partial performance security) shall be forfeited and appropriate steps (including allowing CoC to negotiate with the next bidder) shall follow.

Directed deposit of performance guarantee within one month; on failure, Rs. 10 lakhs (EMD) and the earlier partial security to be forfeited and further consequences to follow.

Obligation of a successful resolution applicant to perform its original bid - Whether the H 1 bidder can be directed to match a subsequently revised higher offer made by the H 2 bidder. - HELD THAT: - The Tribunal held that requiring the H 1 bidder to match a revised offer of the H 2 bidder would be contrary to basic principles of contract performance. The successful applicant is bound to perform the contract according to its original bid; the original bid cannot be reopened to force matching of a later higher offer. Therefore, there was no requirement to direct the H 1 bidder to match the H 2 revised bid of Rs. 75.50 crores.

No direction can be given to the H 1 bidder to match the revised higher bid; H 1 must perform the original bid or face consequences for default.

Power of Committee of Creditors to negotiate with next highest bidder on failure of H 1 - withdrawal of approval application where successful applicant defaults - What interim course of action should follow if the H 1 bidder fails to furnish the performance guarantee. - HELD THAT: - The Tribunal directed that upon failure of the H 1 bidder to comply with the performance guarantee conditions, the CoC should first negotiate with the H 2 bidder in a time bound manner to explore resolution. The Resolution Professional was also permitted to withdraw the pending applications for approval of the H 1 resolution plan (IA Nos. 615/2020 and 616/2020) if the H 1 fails to comply. The bench emphasised protecting the CIRP's time bound nature and ensuring that the CoC can move to the next feasible resolution option without undue delay.

CoC to negotiate with H 2 in a time bound manner on H 1's failure; RP may withdraw approval applications if H 1 defaults.

Rendering of related application infructuous - Whether the IA filed by the H 2 bidder seeking rejection of the H 1 plan and consideration of its own plan remains maintainable after directions issued in IA No. 716/2020. - HELD THAT: - Given the directions in IA No. 716/2020 that the H 2 bidder's offer would be considered by the CoC if the H 1 bidder failed to furnish the performance security, the Tribunal found the separate IA filed by the H 2 bidder seeking rejection of the H 1 plan and consideration of its plan to be rendered infructuous. The bench accordingly disposed of the H 2 bidder's IA while reiterating that the H 2 offer stands to be considered upon H 1's default.

IA No. 2/2021 is rendered infructuous and disposed of, with the H 2 offer to be considered if H 1 defaults.

Final Conclusion: IA No. 716/2020 is partly allowed: the H 1 resolution applicant is directed to furnish the performance guarantee within one month to the satisfaction of the CoC, failing which the EMD and earlier partial security shall be forfeited, the CoC shall negotiate with the H 2 bidder in a time bound manner and the RP may withdraw approval applications; IA No. 2/2021 is disposed of as infructuous.

No prima facie case - registration of First Information Report - mechanism under Section 217 and 218 of the Insolvency and Bankruptcy Code, 2016 - conduct of liquidator within terms of appointment - interplay between criminal complaint and statutory remedy under the IBC

No prima facie case - registration of First Information Report - conduct of liquidator within terms of appointment - There is no prima facie case warranting registration of a criminal complaint/FIR against the appointed liquidator. - HELD THAT: - The petitioner alleged that the liquidator refused to accept no-dues certificates, received pecuniary advantage for settling claims, and sold scrap/stock at undervalue without producing sale documents. The material placed before the Court and the parties' submissions show that the third respondent was appointed and acted pursuant to the NCLT order dated 23.12.2020, conducted valuation by two registered valuers under the applicable IBBI regulations, and proceeded within the terms of his appointment. The banks (Deutsche Bank and HDFC Bank) did not participate in the meetings regarding the petitioner's settlement proposal, and the stakeholders said to have paid gratification did not press any allegation of illegal payment to the third respondent; one alleged stakeholder did not participate at all. The petitioner, a suspended director, had not cooperated in the resolution process and had been recorded as such before the NCLT. In these circumstances the Court found no prima facie material to justify criminal registration against the liquidator and observed that the petitioner has a statutory remedy under the procedure provided in Section 217 and 218 of the Insolvency and Bankruptcy Code, 2016.

Criminal Original Petition dismissed for lack of prima facie case; no FIR to be ordered against the liquidator.

Final Conclusion: The petition seeking direction to register a criminal complaint against the liquidator is dismissed for want of prima facie material; the petitioner is left to pursue remedies available under Sections 217 and 218 of the Insolvency and Bankruptcy Code, 2016.

Treatment of dues as part of CIRP cost - related party - compensation for loss of office under Section 202 of the Companies Act, 2013 - prohibition on payment under sub rule (3) of Rule 17 of the Companies (Meetings of Board and its Powers) Rules, 2014 where company is in default - priority of CIRP costs under the Insolvency and Bankruptcy Code - contractual termination and compliance with agreed notice period

Treatment of dues as part of CIRP cost - related party - priority of CIRP costs under the Insolvency and Bankruptcy Code - Leave encashment payable to the appellant is to be treated as part of CIRP cost and will be considered in accordance with law upon approval of the resolution plan. - HELD THAT: - The Tribunal recorded that the admitted leave encashment was payable to the appellant and, because the appellant continued to act as a director and fell within the definition of a related party, the amount was correctly treated by the Adjudicating Authority as part of the CIRP cost. The Resolution Professional placed the computed leave encashment before the Committee of Creditors, which did not approve it; the Tribunal upheld the Adjudicating Authority's direction that the amount shall be treated as part of CIRP cost and, once the Resolution Plan is approved by the Adjudicating Authority, the claim will be considered in accordance with law and the priorities established under the IBC.

Leave encashment of Rs. 5,67,100/- admitted as payable is to be treated as part of CIRP cost and will be considered when the resolution plan is approved.

Compensation for loss of office under Section 202 of the Companies Act, 2013 - prohibition on payment under sub rule (3) of Rule 17 of the Companies (Meetings of Board and its Powers) Rules, 2014 where company is in default - contractual termination and compliance with agreed notice period - The appellant's claim for compensation for loss of office is not payable; the termination complied with the contract and payments due under the contract were made, so no further compensation or interest is due. - HELD THAT: - The Tribunal held that there was no provision in the appointment agreement of 13.02.2019 entitling the appellant to the claimed compensation. It relied on the statutory framework applicable to compensation claims under Section 202 and on sub rule (3) of Rule 17 which disallows such payments where the company is in default on certain obligations; the Corporate Debtor was under insolvency proceedings with admitted defaults, and therefore Rule 17(3) precludes payment of the claimed compensation. Independently, the contractual one month notice requirement was complied with and salary for April 2020 was paid; gratuity was paid during proceedings. Given these findings, the Tribunal held that the appellant was not entitled to the claimed compensation or to interest.

The claim for compensation of Rs. 25,68,000/- is not payable; contractual termination and statutory preclusions were satisfied, and no additional interest or compensation is due.

Final Conclusion: The appeal is dismissed. The admitted leave encashment stands treated as part of CIRP cost and will be considered upon approval of the resolution plan; the claim for compensation for loss of office is rejected and no further interest is payable.

Extinguishment of pre-CIRP claims not included in approved resolution plan - Binding effect of an approved resolution plan on statutory authorities and other claimants - Survivability of proceedings for non-monetary statutory breaches after approval of resolution plan - Distinction between recovery/claim of dues and non-financial statutory enforcement actions during/after CIRP

Extinguishment of pre-CIRP claims not included in approved resolution plan - Binding effect of an approved resolution plan on statutory authorities and other claimants - Pre CIRP monetary claims and demands not filed in the CIRP and not included in the approved resolution plan do not survive approval of the resolution plan and cannot be pressed thereafter. - HELD THAT: - The Tribunal applied the law laid down by the Supreme Court in Ghanshyam Mishra and in Ruchi Soya Industries Ltd., holding that once a resolution plan is duly approved by the Adjudicating Authority under Section 31, claims not part of the approved plan stand frozen and extinguished. The record shows the statutory respondents did not file their claims in the CIRP; therefore their demands and notices for amounts alleged to relate to periods prior to the CIRP commencement date cannot be pursued after approval of the resolution plan. On those grounds the Tribunal allowed the IAs challenging such demands and set aside the impugned actions insofar as they sought to recover pre CIRP dues not admitted in the CIRP. [Paras 17, 18, 19, 20, 21]

I.As 1418/2021, 2562/2021 and 2577/2021 allowed; pre CIRP monetary claims not filed in the CIRP and not part of the approved resolution plan are extinguished and cannot be pressed against the corporate debtor after plan approval.

Survivability of proceedings for non-monetary statutory breaches after approval of resolution plan - Distinction between recovery/claim of dues and non-financial statutory enforcement actions during/after CIRP - Proceedings under Section 63(1 A) of the Maharashtra Tenancy and Agricultural Land Act alleging breach of non financial statutory conditions are not barred by the insolvency process and may be continued despite approval of the resolution plan. - HELD THAT: - The Tribunal examined the nature of proceedings initiated under Section 63(1 A) and concluded they concern alleged non compliance with statutory conditions (not a monetary claim extinguished by approval of the resolution plan). Relying on the principle in Embassy Property Developments (as applied by the Supreme Court), the Tribunal held such enforcement or non monetary proceedings can be proceeded with and are not necessarily subsumed by the insolvency process. Accordingly the I.A seeking to quash the notices and stay proceedings under Section 63(1 A) was rejected. [Paras 16, 22, 23]

I.A. 111/2021 rejected; proceedings under Section 63(1 A) alleging breach of statutory land use conditions may continue and are not extinguished by approval of the resolution plan.

Final Conclusion: The Appeals were allowed in part: IAs challenging monetary demands for pre CIRP periods (not filed in the CIRP) were allowed and such claims declared extinguished after approval of the resolution plan; the IA seeking relief against non monetary tenancy/land enforcement proceedings was rejected and those proceedings may continue.

Financial debt - advance payment versus loan - Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - assignment of debt - corporate guarantee - accounting treatment and duty under Section 129 of the Companies Act, 2013 - discouraging fraudulent or malicious initiation of CIRP

Financial debt - advance payment versus loan - Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - maintainability of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - assignment of debt - accounting treatment and duty under Section 129 of the Companies Act, 2013 - corporate guarantee - Whether the amounts disbursed by IFIN (and assigned to the applicant) constitute a 'financial debt' within the meaning of Section 5(8) of the IBC and whether the Section 7 petition by Vejas Power Projects Limited is maintainable. - HELD THAT: - The Tribunal examined the commercial background, contemporaneous correspondence and accounting records and concluded that the disbursements by IFIN to WWIL and its subsidiaries were project-related advance/payments for supply, commissioning and handover of wind-energy projects, albeit documented as loans. The arrangements were made to enable continued project performance where SPVs could not immediately pay; earlier tranches were squared off against project payments. The Corporate Debtor was only a corporate guarantor. The applicant had itself reflected the assigned amounts as 'capital advance' in audited financial statements, invoking the obligation under Section 129 of the Companies Act, 2013 to present a true and fair view. Having regard to the nature and purpose of the transactions, the emails and reconciliation documents, and the manner of adjustment against project milestones, the Tribunal held that the payments do not fall within the statutory conception of a financial debt under Section 5(8) but are project advances. On that legal characterisation the applicant could not be treated as a financial creditor entitled to invoke Section 7 for initiating CIRP. The Tribunal also noted the need to guard against use of the Code for mere recovery rather than for resolution, referring to the principle of discouraging fraudulent or malicious initiation of CIRP. The assignment/transfer to the applicant did not alter the substantive nature of the underlying transaction as established by the documentary matrix and accounting treatment. [Paras 13, 15, 16, 17]

The payments do not constitute a 'financial debt' under Section 5(8); the applicant is not a financial creditor for the purposes of Section 7 and the Section 7 petition is dismissed as not maintainable.

Final Conclusion: On the documentary record and accounting treatment, the advances made by IFIN to WWIL and its subsidiaries were project-related payments and not financial debt; consequently the Section 7 petition by Vejas Power Projects Limited was held to be not maintainable and dismissed.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - decision of the committee of creditors and non-interference with commercial wisdom - appointment of liquidator - public announcement under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - investigation of antecedent, undervalued and preferential transactions - deemed discharge of officers, employees and workmen on liquidation - cessation of existing moratorium and commencement of fresh moratorium under Section 33(5) of the Code

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - decision of the committee of creditors and non-interference with commercial wisdom - The application under Section 33(2) and 60(5) of the Code for liquidation of the corporate debtor was liable to be allowed and the Committee of Creditors' decision to liquidate would not be interfered with. - HELD THAT: - The Resolution Professional filed the application under Section 33(2) after the Committee of Creditors, holding the requisite voting share, resolved to liquidate the corporate debtor following lack of viable resolution applicants and no continuing business operations. The Tribunal accepted that the decision to liquidate was a commercial decision of the COC and, in the absence of any demonstrable illegality or infirmity in that decision, it should not be interfered with. Accordingly, the application for liquidation in the manner provided in Chapter III of Part II of the Code was allowed.

Application for liquidation allowed and the COC's decision to liquidate upheld without interference.

Appointment of liquidator - Appointment of the existing Resolution Professional as liquidator was approved. - HELD THAT: - The COC had resolved to appoint the then Resolution Professional as liquidator. The Tribunal appointed Mr. Kamal Kishor Gurnani as liquidator in terms of Section 34(1) of the Code on his filing of written consent in Form AA and having the requisite registration, thereby formalising the COC's selection.

Mr. Kamal Kishor Gurnani appointed as liquidator in terms of the Code.

Public announcement under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - investigation of antecedent, undervalued and preferential transactions - preliminary report under liquidation regulations - Directions issued to the liquidator as to the conduct of the liquidation process and ancillary duties were to be complied with. - HELD THAT: - On appointing the liquidator, the Tribunal directed issuance of the public announcement under the Liquidation Process Regulations, compliance with the liquidation process set out in Chapter III of Part II of the Code and applicable rules and regulations, continued investigation into the corporate debtor's financial affairs to uncover undervalued and preferential transactions, and submission of a preliminary report to the Adjudicating Authority within seventy-five days from the liquidation commencement date. These directions implement the statutory responsibilities of a liquidator and ensure orderly progression of the liquidation.

Liquidator directed to make public announcement, conduct liquidation as per law, investigate antecedent transactions and submit a preliminary report within the prescribed time.

Deemed discharge of officers, employees and workmen on liquidation - cessation of existing moratorium and commencement of fresh moratorium under Section 33(5) of the Code - Consequential effects of liquidation on moratorium and employment status were declared. - HELD THAT: - The Tribunal declared that, as a consequence of the liquidation order, the earlier moratorium under Section 14 would cease to have effect and a fresh moratorium under Section 33(5) would commence. The order was also treated as notice of discharge to the officers, employees and workmen of the corporate debtor in accordance with the Code. The Registry was directed to communicate the order to the RP, corporate debtor, liquidator and statutory authorities including IBBI and ROC for compliance and record updation.

Earlier moratorium ceases; fresh moratorium under Section 33(5) commences and the order operates as deemed discharge notice to employees; communications to authorities directed.

Final Conclusion: The Tribunal allowed the Resolution Professional's application under Section 33(2) and 60(5) of the Code, upheld the Committee of Creditors' decision to liquidate, appointed the nominated liquidator with specified statutory directions for conducting the liquidation and investigations, and declared the consequential commencement of the liquidation moratorium and deemed discharge of employees, with directions for communication to statutory authorities.

Bar on bail under PMLA - exception to bail bar for offences involving amount less than Rs.1 crore - receipt of proceeds of crime - consideration of custodial period, age and antecedents in bail

Bar on bail under PMLA - exception to bail bar for offences involving amount less than Rs.1 crore - Whether the statutory bar on grant of bail under Section 45 of the Prevention of Money Laundering Act, 2002 prevents grant of regular bail to the petitioner in the present complaint. - HELD THAT: - The Court observed that Section 45 of the PMLA, though stringent, was amended with effect from 19.4.2018 to carve out an exception where the amount involved is less than Rs.1 crore. The complaint in the present case was instituted in December 2018, i.e., after the amendment became effective. Given that the amount alleged to have been received by the petitioner falls below the threshold, the statutory bar in Section 45 cannot be treated as an absolute impediment to grant of bail in this matter. The Court therefore treated the bail-bar as subject to the statutory exception applicable post-amendment.

Section 45 bar does not preclude grant of bail in the present case because the complaint was filed after the 19.4.2018 amendment and the amount involved is below Rs.1 crore.

Receipt of proceeds of crime - consideration of custodial period, age and antecedents in bail - Whether the petitioner should be released on regular bail having regard to the amount credited to his account, his personal circumstances and the period of custody. - HELD THAT: - The respondent's pleadings show that the amount transferred into the petitioner's account is Rs.2.56557 lakhs. The Court noted it remains debatable whether the petitioner received that amount with knowledge that it constituted proceeds of crime. Balancing the factors relevant to bail, the Court took into account the relatively small amount alleged to have been received by the petitioner, his age (63 years), and that he had been in custody for about eight months. Although the State referred to the petitioner's antecedents and other cases, the Court found that continued detention was not justified on the material before it and that the equities favoured release on bail.

Petitioner granted regular bail subject to furnishing bail/surety bonds to the satisfaction of the trial court/competent magistrate.

Final Conclusion: Petition allowed; petitioner Vinod Kumar Garg directed to be released on regular bail on furnishing bail/surety bonds to the satisfaction of the learned trial Court/Chief Judicial Magistrate/Duty Magistrate, the Court having held that the post 2018 amendment to the PMLA excludes an absolute bail bar where amounts involved are below Rs.1 crore and that, on the facts and circumstances (small amount credited, age and period of custody), continued detention was not warranted.

Section 267 Cr.P.C. - production of a detained person by P.T. warrant - Section 167 Cr.P.C. - remand to judicial or police custody - Section 19 PMLA - power and procedure of arrest - formal arrest made in prison - interaction between production under Section 267 Cr.P.C. and remand under Section 167 Cr.P.C. - PMLA as a self-contained code requiring procedural compliance for arrest

Section 267 Cr.P.C. - production of a detained person by P.T. warrant - Section 167 Cr.P.C. - remand to judicial or police custody - formal arrest made in prison - interaction between production under Section 267 Cr.P.C. and remand under Section 167 Cr.P.C. - Validity of remanding a person to judicial custody under Section 167 Cr.P.C. after production before a court pursuant to a P.T. warrant issued under Section 267 Cr.P.C. - HELD THAT: - The Court held that a person already in judicial custody in one case may be produced before another court under Section 267 Cr.P.C. A remand to custody under Section 167 Cr.P.C. in the second case is permissible only where the investigating agency has effected a formal arrest in that second case while the person remains in prison and has informed the person of the grounds of arrest. The petition filed under Section 167 must state the details of such formal arrest; the trial court may, after perusing the material and being satisfied that a formal arrest has been effected and custody is required for investigation, remand the accused to judicial (or police) custody. The Court applied this principle to the facts and found no illegality in the lower court remanding the petitioner after his production on the P.T. warrant because the formal prerequisites for remand were shown to have been complied with.

Remand under Section 167 Cr.P.C. following production under Section 267 Cr.P.C. is lawful where a formal arrest in the second case is effected in prison and the court is satisfied of that arrest; the impugned remand orders were valid.

Section 19 PMLA - power and procedure of arrest - PMLA as a self-contained code requiring procedural compliance for arrest - Whether the requirements of Section 19 of the PMLA were complied with before remanding the petitioner. - HELD THAT: - The Court examined the material served on the petitioner in prison and the petition filed by the Enforcement Directorate and found that the petition recorded reasons to believe, identified the material in the authority's possession, informed the petitioner of the grounds of arrest and stated that the arrest order and material were forwarded to the Adjudicating Authority. On that basis the Court concluded that the procedural requirements of Section 19 PMLA - including recording reasons in writing, possession of material forming the basis of belief and informing the arrested person of the grounds - were satisfied, constituting a formal arrest for the purposes of seeking remand.

Section 19 PMLA was complied with on the material placed before the court; the formal arrest requirements were met and did not vitiate the remand.

Abuse of process - stay of investigation - Whether pendency of other writ petitions or alleged delay/abuse of process precluded further proceedings and remand in ECIR/HZO/08/2012. - HELD THAT: - The Court reviewed the orders in the other proceedings relied upon by the petitioner and observed that no order had been passed staying the investigation or further proceedings in ECIR/HZO/08/2012. The grounds of alleged abuse of process and delay in issuance of summons were identical to grounds raised in an earlier writ seeking to quash the proceedings, and in the absence of any stay the trial court was not precluded from considering the investigating agency's applications for custody. Consequently, those contentions did not invalidate the remand orders.

Pending writ petitions and allegations of abuse or delay did not bar the remand; there was no stay of investigation and no illegality in continuing proceedings.

Final Conclusion: The High Court held that the order dated 11.02.2022 remanding the petitioner and the subsequent extensions of remand were legal and valid: the procedural requirements for a formal arrest under Section 19 PMLA were satisfied, production under Section 267 Cr.P.C. followed by remand under Section 167 Cr.P.C. was permissible where a formal arrest in prison was effected and the court was satisfied of the same, and no pending orders stayed the investigation; the criminal petition was dismissed.

Maintainability of writ petition - Alternate remedy and exhaustion of statutory remedies - Judicial restraint where disputed questions of fact arise - Validity of show-cause notice and jurisdiction of adjudicating authority - Remand for adjudication by the Adjudicating Authority - Exercise of writ jurisdiction under Article 226

Maintainability of writ petition - Alternate remedy and exhaustion of statutory remedies - Exercise of writ jurisdiction under Article 226 - Writ petition challenging the show-cause notice is not maintainable and is to be dismissed in view of availability of an alternate efficacious remedy and the presence of disputed questions of fact. - HELD THAT: - The Court declined to exercise writ jurisdiction where the petitioner was served with a show-cause notice and an adjudicatory remedy exists. Applying settled principles that High Courts ordinarily decline to entertain writ petitions when an effective statutory remedy is available, and having regard to the presence of mixed questions of law and fact that require primary adjudication, the petition was held not to be an appropriate exercise of Article 226. The Court relied on the principle that exhaustion of statutory remedies is a rule of policy and discretion, and that writ relief is generally withheld where disputed factual issues require adjudication by the designated authority. The Court therefore refrained from deciding the merits of levy or exemption claimed by the petitioner.

Writ petition dismissed on maintainability grounds; petitioner must pursue statutory remedy before the Adjudicating Authority.

Validity of show-cause notice and jurisdiction of adjudicating authority - Remand for adjudication by the Adjudicating Authority - Judicial restraint where disputed questions of fact arise - The show-cause notice does not suffer from want of jurisdiction and the questions of exemption and liability are to be adjudicated afresh by the Adjudicating Authority. - HELD THAT: - The Court refrained from expressing any view on the substantive contention as to levy of service tax or exemption claimed by the petitioner, holding that those contentions involve examination of the contracts, MoUs and the applicability of exemption notifications and payment of stamp duty - issues of mixed law and fact. The notice was held to be within jurisdiction and the proper course is adjudication by the statutory authority. The petitioner was permitted to file a detailed response with supporting documents before the Adjudicating Officer, who was directed to consider the same in accordance with law and procedure within a time frame.

Show-cause notice upheld as intra vires for adjudication; matter remitted to the Adjudicating Authority for fresh consideration of merits.

Final Conclusion: Writ petition dismissed; the petitioner is permitted to reply to the show-cause notice and the Adjudicating Authority shall consider the petitioner's response and decide the issues of liability and exemption in accordance with law within a specified time frame.

Admissibility and probative value of Chartered Accountant's certificate - Obligation on adjudicating authority to record reasons for rejecting documentary evidence - Reconciliation statement as supporting evidence for tax payment - Duty to requisition or examine ledger/records before confirming demand

Admissibility and probative value of Chartered Accountant's certificate - Reconciliation statement as supporting evidence for tax payment - Duty to requisition or examine ledger/records before confirming demand - Obligation on adjudicating authority to record reasons for rejecting documentary evidence - Whether the demand of service tax, interest and penalty of Rs.5,17,406/- arising from adjustments for 2010-11 could be sustained despite submission of reconciliation statement and Chartered Accountant's certificate and in absence of ledger copies before the Commissioner - HELD THAT: - The Tribunal found that the appellant had placed before the adjudicating authority a reconciliation statement and a Chartered Accountant's certificate showing that the disputed brokerage income (invoices of 2009-10 adjusted in 2010-11) was included for service tax payment in Financial Year 2012-13. The Commissioner confirmed the demand on the ground that the appellant had not produced the ledger of stock broking services for 2012-13 nor documents evidencing receipt of the impugned amount in 2012-13. The Tribunal noted that the Commissioner did not dispute the content of the CA certificate and that authorities cannot reject a CA certificate without stating reasons why it is not acceptable. Further, the Tribunal observed that the audit which led to proceedings involved examination of books and returns and that ledger copies were in fact available in the appeal record. In these circumstances, having regard to the reconciliation and the unchallenged CA certificate and the absence of stated reasons to discredit them, the confirmation of demand was held to be legally untenable.

Demand of service tax of Rs.5,17,406/-, interest thereon and equivalent penalty set aside; appeal allowed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal insofar as the disputed demand of Rs.5,17,406/- (pertaining to 2010-11) and the related interest and penalty were set aside because the adjudicating authority could not sustain the demand after the appellant produced a reconciliation statement and an unchallenged Chartered Accountant's certificate and had not given reasons for rejecting that evidence.

Export of service - distinct person - Clause (f) of Rule 6A(1) of Service Tax Rules, 1994 - associate company - companies as independent legal entities - precedent of Linde Engineering India Pvt. Ltd.

Export of service - distinct person - Clause (f) of Rule 6A(1) of Service Tax Rules, 1994 - companies as independent legal entities - associate company - Whether the appellant and the service recipient are distinct persons for the purpose of Clause (f) of Rule 6A(1) so as to qualify the supply as export of service. - HELD THAT: - The Tribunal examined corporate status and records and noted that the appellant is registered in India as a separate company and the service recipient is registered in the USA as a separate company. Although two directors are common, other directors and shareholders differ and the note in the appellant's balance sheet describing the foreign entity as an associate does not alter their independent legal status under the Companies Act. Relying on the holding in Linde Engineering India Pvt. Ltd., where the High Court recognised separate corporate identity even in the case of a 100% subsidiary, the Tribunal concluded that the appellant and the service recipient are legally distinct persons. Since Clause (f) requires that the supplier and recipient be distinct persons, that condition is satisfied on the facts of this case. The Tribunal therefore held that the supply qualifies as export of service on this ground and set aside the demand confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

Clause (f) of Rule 6A(1) is complied with as the two companies are distinct legal entities; the service qualifies as export and the demand is set aside.

Final Conclusion: The appeal is allowed: on the finding that the appellant and the foreign service recipient are distinct legal entities, the supply qualifies as export of service and the demand confirmed by the authorities is set aside.

Double taxation - refund of tax paid under reverse charge - refund under Section 142(8) of the CGST Act, 2017 - entitlement to refund where input credit not available due to GST transition - ocean freight included in customs value leading to double levy - interest under Section 11BB of the Central Excise Act

Double taxation - refund of tax paid under reverse charge - entitlement to refund where input credit not available due to GST transition - interest under Section 11BB of the Central Excise Act - Refund claim of service tax (including interest and penalty) paid on ocean freight under reverse charge for April 2017 to June 2017 is allowable as it resulted in double taxation and the amounts are refundable with interest. - HELD THAT: - The Tribunal found that the transaction value on which customs duty and CVD were paid included the ocean freight for imported inputs. The subsequent payment of service tax on the same ocean freight under the reverse charge mechanism therefore resulted in double taxation. Although the appellant had deposited the tax, interest and penalty and could not claim CENVAT credit due to the GST transition, the admitted payment did not preclude a refund where double levy occurred. The adjudicating authority's reliance on the absence of supporting documents and on the appellant's admission of liability did not outweigh the factual and legal conclusion that the freight formed part of the customs value and that re imposition of service tax on that freight amounted to double taxation. On this basis the Tribunal allowed the refund claim and directed repayment of the tax, interest and penalty with interest as provided under Section 11BB of the Central Excise Act.

Appeal allowed; refund of service tax, interest and penalty paid on ocean freight for April 2017 to June 2017 ordered with interest under Section 11BB of the Central Excise Act.

Final Conclusion: The Tribunal allowed the appeal, holding that service tax paid under reverse charge on ocean freight for April 2017 to June 2017 resulted in double taxation because freight was included in the customs value; directed refund of the tax, interest and penalty with interest under Section 11BB to be paid within 45 days.

Works Contract (Composition Scheme for Payment of Service Tax) - Applicability of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - Classification of ongoing works contracts entered into prior to 01-06-2007 - CBIC Circular No. 128/10/2010 on ongoing works contracts and composition scheme - Effect of prior payment of service tax under other taxable service heads on eligibility for composition scheme - Relevance of Larsen & Toubro decision to composition scheme eligibility - Simultaneous imposition of penalty under Section 76 and Section 78

Applicability of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - Effect of prior payment of service tax under other taxable service heads on eligibility for composition scheme - CBIC Circular No. 128/10/2010 on ongoing works contracts and composition scheme - Benefit of the Works Contract composition scheme is not available for ongoing contracts in respect of which service tax had been paid earlier under other taxable service heads before 01-06-2007. - HELD THAT: - The Tribunal applied the Board's clarification in Circular No. 128/10/2010 which explains that Rule 3(3) requires exercise of the option for the composition scheme prior to payment of service tax in respect of the particular works contract. Where provision of service under a contract commenced prior to 01-06-2007 and any payment of service tax was made under the then-applicable taxable service (for example, Commercial or Industrial Construction Service or Construction of Complex Service) before 01-06-2007, that condition in Rule 3(3) is not satisfied and no portion of that contract is eligible for the composition scheme. The Tribunal noted that it is an admitted fact in these appeals that service tax had been paid on the ongoing projects under those taxable heads prior to 01-06-2007 and therefore the option under Rule 3(3) could not be validly exercised for those contracts after 01-06-2007. The Tribunal further relied on the decision in Nagarjuna Construction Co. Ltd. upheld by the Supreme Court and on earlier orders of the Gujarat High Court in the appellant's own case as consistent with this interpretation. [Paras 4]

The adjudicating authority's confirmation of service-tax demand for the ongoing contracts was upheld; the appellant is not entitled to the composition scheme for the contracts on which tax had been paid before 01-06-2007.

Relevance of Larsen & Toubro decision to composition scheme eligibility - Classification of ongoing works contracts entered into prior to 01-06-2007 - The Supreme Court decision in Larsen & Toubro is not determinative of entitlement to the composition scheme for ongoing contracts where tax had been paid under other heads before 01-06-2007. - HELD THAT: - The Tribunal observed that Larsen & Toubro addressed whether activities in the nature of works contracts were taxable prior to 01-06-2007 and held that works-contract activity per se was not a distinct taxable category before that date. That question is distinct from whether an assessee who had paid service tax under other taxable heads prior to 01-06-2007 could thereafter opt for the composition scheme under Rule 3(3). Larsen therefore does not assist the appellant on the specific statutory condition and Board circular governing eligibility for the composition scheme for ongoing contracts. [Paras 4]

Larsen & Toubro is of no assistance to the appellant on the composition-scheme eligibility issue.

Simultaneous imposition of penalty under Section 76 and Section 78 - Whether penalty under Section 76 can be imposed simultaneously with penalty under Section 78. - HELD THAT: - The Tribunal applied settled legal position that penalty under Section 76 is not tenable where penalty under Section 78 has been imposed for the same defaults. The Tribunal found this point no longer res integra and accordingly held that simultaneous imposition of penalties under both provisions is not permissible. [Paras 4]

The simultaneous penalty imposed under Section 76 is set aside; penalty under Section 78 (as confirmed) and interest are otherwise upheld.

Final Conclusion: The Tribunal upheld the adjudicating authority's confirmation of service-tax demands and interest for the stated periods, rejecting the appellant's claim to the Works Contract composition scheme for ongoing contracts where service tax had been paid before 01-06-2007; however, the Tribunal set aside the simultaneous penalty under Section 76 while leaving the penalty under Section 78 intact. Appeals disposed accordingly.

Departmental quasi judicial adjudication - other legal proceeding - Rule of ejusdem generis - Protection of action taken under the Act - Maintainability of civil suit for damages despite statutory protection - Limitation period for departmental proceedings (six months) - pre amendment construction - Burden of proof for valuation and damages in tortious claim arising from seizure/retention - Reappreciation of evidence by appellate court

Other legal proceeding - Rule of ejusdem generis - Limitation period for departmental proceedings (six months) - pre amendment construction - Validity of the show cause notice issued after six months from the date of checking - HELD THAT: - The court examined Section 40(2) of the Central Excises and Salt Act as it stood prior to its 1973 amendment and the Apex Court's construction in Assistant Collector v. Ramdev Tobacco Company that the phrase other legal proceeding should be read ejusdem generis with preceding words 'suit' and 'prosecution'. Applying that construction, departmental adjudication and penalty proceedings before the executive authority do not fall within the limitation bar of Section 40(2) as construed pre amendment. The noticed departmental action in the present case constituted quasi judicial adjudication and not a court instituted proceeding; therefore issuance of the show cause notice after six months could not be declared illegal or inherently time barred merely on that ground. The Trial Court's declaration of the notice as illegal and time barred failed to take this distinction into account and was held to be erroneous. [Paras 15, 18]

The Trial Court erred in holding the show cause notice illegal and time barred; departmental adjudication under the Act is not caught by the pre amendment limitation in Section 40(2) in the manner the Trial Court held.

Protection of action taken under the Act - Maintainability of civil suit for damages despite statutory protection - Maintainability of the civil suit for recovery of damages under Section 40 of the Act - HELD THAT: - Section 40(1) protects acts done in good faith in pursuance of the Act, but recognized authorities permit civil suits where official action is alleged to be beyond jurisdiction, mala fide, or in violation of fundamental principles of procedure. Sub section (2) (relating to prior notice and limitation for 'other proceedings') does not preclude a civil suit where the plaintiff has complied with the statutory requirement of prior notice. In this case the plaintiff had issued the requisite notice under Section 80 CPC and filed the suit for damages; consequently the Trial Court was justified in holding the suit to be maintainable and there was no error in that conclusion. [Paras 21, 22, 23]

The suit for damages was maintainable despite the statutory protection; the Trial Court did not err in so holding.

Burden of proof for valuation and damages in tortious claim arising from seizure/retention - Reappreciation of evidence by appellate court - Whether the plaintiff proved entitlement to the decretal amount for damages and whether the Trial Court correctly assessed and awarded damages - HELD THAT: - The High Court reappreciated the oral and documentary evidence. It found no dispute that Excise officers inspected the warehouse and that a fire occurred later; however there was no evidence linking the outbreak of fire to negligence by the officers. Crucially, the plaintiff failed to lead admissible evidence proving the valuation and quantum of loss at the time of the fire: stock valuation particulars relied upon were not placed in evidence, and the Criminal Court's acquittal could not substitute for civil proof of valuation. The court reiterated that a plaintiff must prove actual loss and valuation; absence of such proof precludes recovery even if the defendants did not adduce contrary valuation evidence. The Trial Court's decree awarding damages was therefore based on an inadequate appraisal of the evidence and on impermissible inferences. [Paras 24, 37, 39, 40, 41]

The Trial Court erred in awarding damages; the plaintiff failed to prove valuation and causation attributable to defendants, and the decree for damages was set aside.

Reappreciation of evidence by appellate court - Final outcome of the appeal and order as to the decree and deposited amount - HELD THAT: - Having found that the show cause notice could not be declared illegal on limitation grounds and that the plaintiff failed to prove damages, the High Court concluded that the Trial Court's judgment must be quashed. The appellate court observed that the Trial Court had not properly considered or applied evidentiary principles while assessing oral testimony and documentary proof, resulting in an unsustainable decree. Consequently, the appeal was allowed, the special civil suit was dismissed, and the amount deposited by the Government was ordered to be returned to the Government after expiry of the appeal period; parties were to bear their own costs. [Paras 14, 40, 43]

Appeal allowed; impugned judgment and decree set aside, suit dismissed, deposited amount returned to Government, parties to bear their own costs.

Final Conclusion: The High Court allowed the first appeal, holding that (i) the Trial Court erred in declaring the departmental show cause notice illegal and time barred because pre amendment Section 40(2) does not, by judicial construction, apply to departmental adjudication in the manner the Trial Court held; (ii) the suit for damages was maintainable; but (iii) the plaintiff failed to prove valuation, causation and entitlement to the decretal sum and the Trial Court therefore erred in awarding damages. The Trial Court's judgment and decree were quashed and set aside, the suit dismissed, the deposited amount was ordered returned to the Government, and parties were directed to bear their respective costs.

Power of adjustment as garnishee proceedings under Section 11 of the Central Excise Act - adjustment of refundable amount for claims sub judice - grant of refund with interest under Section 35FF of the Central Excise Act

Power of adjustment as garnishee proceedings under Section 11 of the Central Excise Act - adjustment of refundable amount for claims sub judice - Validity of adjusting from the refundable amount sums representing interest and penalty which were sub judice before the Tribunal - HELD THAT: - The Tribunal recognised that Section 11 confers a special recovery power on Central Excise authorities, akin to garnishee proceedings, permitting adjustment of tax arrears from monies/refunds payable to an assessee and issuance of certificates for recovery. However, the Tribunal held that such adjustment power cannot be exercised in respect of demands for tax, interest or penalty that are sub judice. In the present case the amount of interest and the penalty were the subject of an appeal before the Tribunal and that fact was known to the Adjudicating Authority. Consequently the adjustment of those sub judice amounts from the refund was impermissible. The impugned adjustment was set aside and the Adjudicating Authority was directed to pay the disputed sum in cash along with interest under Section 35FF of the Central Excise Act.

Adjustment of the sub judice interest and penalty from the refundable amount set aside; refund of the disputed sum to be paid in cash with interest under Section 35FF.

Final Conclusion: The appeal is allowed: the adjustment of amounts representing interest and penalty that were sub judice is held invalid and the Adjudicating Authority is directed to refund the contested sum in cash with interest under Section 35FF of the Central Excise Act.

Inter-state sale - opportunity to be heard - adjudicator considering new issues in appeal - remand for de novo hearing

Inter-state sale - opportunity to be heard - adjudicator considering new issues in appeal - Tribunal considered, for the first time in appeal, whether the subject transactions were inter-state sales without giving the appellant an opportunity to establish that fact. - HELD THAT: - The Tribunal entertained the respondents' contention that the appellant must first establish that the transactions were inter-state sales, a point not raised by the Assessing Officer or the OHA. The Court found that no opportunity was afforded to the appellant to adduce evidence or establish the inter-state character of the sales before the Tribunal. As the Tribunal is the final fact-finding authority, fairness required that it either permit the appellant to prove the inter-state nature of the transactions or remit the specific question to the Assessing Officer for determination. The Tribunal did neither and disposed of the appeal and the review application against the appellant on that basis, thereby denying the appellant a fair opportunity to be heard on a pivotal factual issue. [Paras 8, 11]

Impugned aspects of the Tribunal's orders are set aside; matter remanded for de novo hearing with opportunity to the appellant to establish that the transactions were inter-state sales, or alternatively the Tribunal may remit that issue to the Assessing Officer for determination.

Remand for de novo hearing - Relief and procedural direction on remand. - HELD THAT: - The Court directed that the Tribunal hear the matter afresh. If the Tribunal chooses to examine whether the transactions were inter-state sales, it must provide the appellant opportunity to place on record evidence already filed before this Court and to file any additional documents; reciprocal opportunity must be given to the respondents. The Court fixed a date for the appellant to appear before the Tribunal to expedite proceedings. [Paras 12, 13, 14]

The impugned orders dated 25.06.2018 and 29.12.2021 are set aside and the matter is remanded to the Tribunal for a de novo hearing; the appellant to appear before the Tribunal on the date directed.

Final Conclusion: The Tribunal's orders are set aside and the matter remanded for a fresh hearing; the Tribunal must either give the appellant an opportunity to establish the inter-state nature of the sales or remit that specific issue to the Assessing Officer, with liberty to file additional documents and with a date directed for appearance to expedite the proceedings.

Jurisdiction of Micro and Small Enterprises Facilitation Council - maintainability of reference under the MSMED Act in relation to work contracts - reference to arbitration under Section 18 of the MSMED Act - special statute with overriding effect

Jurisdiction of Micro and Small Enterprises Facilitation Council - maintainability of reference under the MSMED Act in relation to work contracts - reference to arbitration under Section 18 of the MSMED Act - Whether the High Court should interfere with the Single Judge's direction that the petitioner participate in arbitration and that the Tribunal decide its jurisdiction under the MSMED Act in respect of work contracts. - HELD THAT: - The Court noted the appellant's primary contention that proceedings before the Facilitation Council under the MSMED Act are not maintainable insofar as 'work contracts' are concerned and that the respondent was not registered as an MSME at the time of award of certain contracts. The Single Judge had directed, without prejudice to the petitioner's contentions, that the petitioner must participate in arbitration and that the arbitral tribunal should decide its jurisdiction on the preliminary objections raised before it. The judgment refers to authorities recognising that a work contract is divided by legal fiction into supply and service components, and to precedents upholding the special statutory machinery and overriding effect of the MSMED Act and the referral mechanism under Section 18. On the facts and submissions, the Division Bench declined to interfere with the Single Judge's order which left the jurisdictional question to be decided by the arbitral forum as part of the arbitration proceedings. [Paras 10, 11]

The Division Bench refused to interfere with the Single Judge's order directing participation in arbitration and remitting the question of the Council's/tribunal's jurisdiction to the arbitral forum; the appeal is dismissed.

Final Conclusion: The Division Bench declined to disturb the Single Judge's direction that the petitioner participate in arbitration and that the tribunal decide the preliminary jurisdictional objections under the MSMED Act; appeal dismissed and connected applications dismissed.

Interim compensation under Section 143A of the Negotiable Instruments Act - judicial discretion in fixing interim compensation - variance in interim award ranging from 0% to 20% - conditional modification of a revisional order

Interim compensation under Section 143A of the Negotiable Instruments Act - judicial discretion in fixing interim compensation - variance in interim award ranging from 0% to 20% - Whether the revisional court erred in allowing the complainant's application under Section 143A and in awarding interim compensation without appropriate application of mind to the permissible variance of the statutory award. - HELD THAT: - The Court observed that the statute contemplates an interim award that may vary between 0% and 20% of the instrument and that the Revisional Court did not note this permissible variance nor apply its discretion to the peculiar facts. In the exercise of supervisory jurisdiction, having considered the record and the parties' cooperation, the Court concluded that the 20% interim award called for moderation in the facts of the case and reduced the interim compensation to 10% of the cheque amount. This reduction was directed as an appropriate exercise of judicial discretion to balance the statutory mandate with the circumstances of the dispute. [Paras 8, 9]

The revisional order was modified by reducing the interim compensation under Section 143A from 20% to 10% of the instrument.

Conditional modification of a revisional order - judicial direction for deposit and consequences of non-cooperation - What procedural directions should follow the modification of the interim award and what consequence should follow non-cooperation by the petitioners in concluding the trial. - HELD THAT: - The Court directed that the petitioners deposit the reduced interim amount (10% of the instrument) before the learned Magistrate within four weeks from receipt of the copy of the order, after which the complainant is permitted to withdraw the sum in accordance with the statute. The Court further provided a conditional stipulation that, should the petitioners fail to cooperate in the conclusion of the proceedings, the original award of 20% made by the Revisional Court would be restored. These directions were framed to secure compliance and to incentivise cooperation for the expeditious disposal of the trial. [Paras 11, 12]

Deposit of 10% within four weeks was ordered, with liberty to the complainant to withdraw in terms of the statute, and restoration of the 20% award was made contingent on non-cooperation by the petitioners.

Final Conclusion: The revisional court's order was modified: the interim compensation under Section 143A was reduced from 20% to 10% of the cheque amount; the petitioners were directed to deposit the reduced amount within four weeks, the complainant may withdraw the sum in terms of the statute, and the original 20% award stands restored if the petitioners fail to cooperate in concluding the proceedings.

Right to fair trial - opportunity to adduce defence evidence - closure of defence evidence - adjournment and discretion of trial court - proceedings under Section 138 of the Negotiable Instruments Act, 1881

Right to fair trial - opportunity to adduce defence evidence - adjournment and discretion of trial court - closure of defence evidence - proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Closing the opportunity to adduce defence evidence on 29.10.2021 and whether that action denied the petitioner a fair trial. - HELD THAT: - The court held that an accused is entitled to adequate opportunity to present defence evidence and that denial of a real opportunity may amount to denial of a fair trial, as recognised in Mrs. Kalyani Baskar. However, in the present case the record shows that the first date for defence evidence was 06.10.2021 when the petitioner, though absent personally, was represented and sought and obtained adjournment and exemption from personal appearance. 29.10.2021 was fixed for defence evidence but the petitioner neither appeared nor adduced evidence nor sought any adjournment on that date; an application for exemption from personal appearance filed on his behalf was allowed. The trial court, therefore, in the absence of any request or reason to adjourn or to permit evidence on that date, exercised its discretion to close the defence evidence and proceed. The court emphasised that adjournments are not to be granted as a matter of course (following the principle explained in Vinod Kumar v. State of Punjab) and that an accused does not enjoy an unfettered right to adduce evidence whenever convenient. The petitioner also failed to furnish reasons for non-production of evidence on 29.10.2021 when later applications were moved and rejected as the opportunity had been closed. In these circumstances the impugned order closing defence evidence was not contrary to law and did not amount to denial of fair trial.

The order closing the opportunity to adduce defence evidence on 29.10.2021 was upheld and the petition challenging that order is dismissed.

Final Conclusion: The writ petition challenging the closure of defence evidence and the subsequent revisional order is dismissed; the trial court did not commit illegality in closing the defence evidence when the accused neither appeared nor sought adjournment on the fixed date.

Recall and re-examination under Section 311 Cr.P.C. - relevance of additional documentary evidence to pleadings - production of originals versus photocopies in evidence - necessity of pleading to establish connection between documents and cause of action

Recall and re-examination under Section 311 Cr.P.C. - relevance of additional documentary evidence to pleadings - production of originals versus photocopies in evidence - necessity of pleading to establish connection between documents and cause of action - Whether the trial court was right in dismissing the application under Section 311 Cr.P.C. seeking to recall and re-examine the complainant for marking additional documents. - HELD THAT: - The High Court upheld the trial court's exercise of discretion in dismissing the application. The trial court found that the additional documents related to bills issued by a firm named Cherupushpam Traders but the complaint did not plead that the complainant conducted business under that name; the complaint merely averred that the complainant carried on business in building materials such as steel and cement and alleged a specific monetary liability. The court observed that the documents appeared to have been produced to fill lacunae exposed during cross-examination and were photocopies not certified by the issuer; no explanation was furnished for non-production of originals. In these circumstances the trial court concluded that the documents were not shown to be relevant to the pleaded transaction and were not essential for a just decision; recalling PW1 to mark them was therefore not warranted. The High Court found no infirmity in that reasoning and declined to interfere.

Application under Section 311 Cr.P.C. to recall PW1 for marking the additional documents was rightly dismissed by the trial court; the High Court dismissed the criminal miscellaneous petition.

Final Conclusion: The High Court dismissed the petition and declined to interfere with the trial court's order refusing to recall and re-examine the complainant to mark the additional documents, holding they were not shown to be relevant to the pleaded case and originals were not produced.

Presumption under Section 139 of the Negotiable Instruments Act - onus to rebut presumption of issuance for discharge of debt - signed blank cheque voluntarily handed over - authorship/denial of writings on cheque and effect on prosecution under Section 138 - sentencing limits under Section 138 of the Negotiable Instruments Act - imprisonment and fine/double compensation - appellate modification of sentence must state reasons

Presumption under Section 139 of the Negotiable Instruments Act - onus to rebut presumption of issuance for discharge of debt - signed blank cheque voluntarily handed over - authorship/denial of writings on cheque and effect on prosecution under Section 138 - Whether the presumption in favour of the complainant under Section 139 (and Section 118(a)) applies where the drawer admits signing the cheque but denies authorship of the writings/entries and claims the cheque was given as security for a different liability - HELD THAT: - The Court found that the accused admitted affixing his signature on the cheque and voluntarily handing it over to the complainant. Expert opinion linked the disputed writings to the accused's wife, but both accused and his wife disowned the writings in part; nevertheless issuance of a duly signed cheque attracts the statutory presumption under Section 139 (and Section 118(a)) that it was issued for discharge of a debt or liability. Once the presumption arises, the onus shifted to the accused to adduce cogent and convincing evidence to rebut it. The oral and documentary evidence produced by the accused (his own testimony and that of his wife, and the claimed transaction for a lesser amount) were held insufficient to discharge the onus. Reliance was placed on the principle that a signed blank cheque voluntarily handed over may be filled in by the payee and, absent cogent evidence of coercion, theft, or that it was not issued in discharge of a debt, the presumption stands. The Court therefore concluded that the accused failed to rebut the presumption and the prosecution under Section 138 was maintainable. [Paras 9, 10, 11, 12, 13]

Presumption under Section 139 attracted; accused failed to rebut it; Criminal Revision No. 19/2019 dismissed.

Sentencing limits under Section 138 of the Negotiable Instruments Act - imprisonment and fine/double compensation - appellate modification of sentence must state reasons - Whether the appellate court's unexplained reduction of the fine should be set aside and the trial court's sentence restored - HELD THAT: - The trial court convicted the accused under Section 138 and imposed substantive imprisonment till rising of court and a fine exceeding the cheque amount (within statutory limits permitting imprisonment up to two years and fine up to twice the cheque amount). The appellate court modified the fine downward without recording reasons and omitted reference to the substantive sentence of imprisonment. The High Court held that unexplained modification by the appellate court warranted interference; accordingly the appellate modification of the fine was set aside and the trial court's sentence (with a specified modified default term) was restored. [Paras 14, 15]

Criminal Revision No. 43/2019 allowed; appellate court's modification of fine set aside; trial court's substantive sentence restored (with modified default term).

Final Conclusion: The conviction under Section 138 N.I. Act was upheld: the presumption under Section 139 applied and was not rebutted by the accused; Criminal Revision No. 19/2019 is dismissed. Criminal Revision No. 43/2019 is allowed to the extent of setting aside the appellate court's unexplained reduction of the fine and restoring the trial court's sentence (with the modified default term).

Offence under section 138 of the Negotiable Instruments Act - presumption under section 139 of the Negotiable Instruments Act - burden of proof in cheque-dishonour cases - cheque issued as collateral security - appellate interference with acquittal

Offence under section 138 of the Negotiable Instruments Act - presumption under section 139 of the Negotiable Instruments Act - burden of proof in cheque-dishonour cases - cheque issued as collateral security - Trial Court's justification for acquitting the accused for the offence punishable under section 138 of the Negotiable Instruments Act. - HELD THAT: - The offence under section 138 requires a sequence of acts including drawing the cheque, its presentation, dishonour by the drawee bank, service of statutory notice and failure to pay within 15 days. Section 139 creates a rebuttable presumption that a holder received the cheque for discharge of any debt or liability, but the initial burden to establish the basic transaction rests on the complainant. Here the complainant admitted that financial dealings between the respondent and the complainant's mother-in-law existed and that the respondent had issued a signed blank cheque as security. The complainant's attempt to prove that he had lent the alleged sum was weakened by doubts about his financial capacity and the provenance of funds relied on through PW.2. The respondent maintained that the cheque was given as collateral to the mother-in-law and that the mother-in-law's death led to alleged misuse of the blank cheque by the complainant. The trial court's conclusion that the appellant failed to discharge the initial burden to attract the presumption under section 139 was supported by the record and the admissions on cross-examination. In that factual matrix the trial court was justified in holding that the presumption under section 139 was rebutted and that the ingredients of section 138 were not established beyond reasonable doubt. [Paras 14, 16]

The trial Court was justified in acquitting the accused of the offence punishable under section 138 of the Negotiable Instruments Act.

Appellate interference with acquittal - appellant's failure to prove financial capacity - Whether the appellant has made out any ground to interfere with the impugned order of acquittal. - HELD THAT: - An appeal against an acquittal requires demonstration of illegality or perversity in the trial court's conclusion. The High Court examined the oral and documentary evidence and found material doubts on the complainant's ability to have made the alleged loan and noted admissions that the respondent transacted with the complainant's mother-in-law and had issued the cheque as security. Given these findings and the absence of proof to attract the statutory presumption under section 139, there was no basis for interference. The High Court therefore declined to disturb the acquittal. [Paras 16, 17]

The appellant has not made out any ground to interfere with the order of acquittal; the appeal is to be dismissed.

Final Conclusion: The appeal is dismissed and the trial Court's judgment and order of acquittal under section 138 of the Negotiable Instruments Act are confirmed, the High Court finding that the appellant failed to discharge the initial burden to invoke the presumption under section 139 and there is no ground to interfere with the acquittal.