TaxTMI Updates e-Newsletter
Jun 10,2022

Reverse Charge Mechanism - inclusion of interest in the value of supply under Section 15(2)(d) of the CGST Act read with Section 20 of the IGST Act - contractual shifting of indirect tax liability - Notification No.10 of 2017 - RCM for services supplied by persons located in non taxable territory - Input Tax Credit and unjust enrichment - satisfaction of Arbitral Award on payment into specified account

Reverse Charge Mechanism - Notification No.10 of 2017 - RCM for services supplied by persons located in non taxable territory - inclusion of interest in the value of supply under Section 15(2)(d) of the CGST Act read with Section 20 of the IGST Act - contractual shifting of indirect tax liability - Whether MCGM was entitled to withhold from the award payment the amount deducted towards alleged GST liability of the applicant - HELD THAT: - The Court held that Notification No.10 of 2017 (issued under Section 5(3) of the IGST Act) makes the recipient in the taxable territory liable to pay integrated tax on services supplied by a person located in a non taxable territory on a reverse charge basis; the applicant (supplier) is located in a non taxable territory and MCGM (recipient) is in the taxable territory, and the notification therefore casts liability on MCGM. The Court accepted that Section 15(2)(d) of the CGST Act read with Section 20 of the IGST Act brings interest/late fees into the value of supply and that interest awarded after introduction of the GST regime is taxable. Although the law permits parties to contractually shift indirect tax liabilities (Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran), the Court examined Clause 3 of the contract and concluded that the clause - which required rates to include taxes and duties - did not contemplate taxes arising on account of interest awarded later due to delayed payment and protracted disputes culminating in an arbitral award. Clause 3 and 4 read together indicate the parties did not foresee a contingency where interest awarded post award would attract GST and hence did not operate to transfer the statutory RCM obligation to the applicant. Consequently, MCGM could not legitimately deduct the GST amount from the award payable to the applicant; the statutory liability under the Notification and the IGST Act remained on MCGM. [Paras 18, 21, 22, 23]

MCGM was not entitled to withhold the sum deducted towards GST; it was directed to credit the specified bank account with the withheld amount by the date directed, after which the Arbitral Award would be marked fully satisfied.

Final Conclusion: The Court directed MCGM to credit the withheld amount in the specified bank account by the date ordered, holding that the reverse charge notification and IGST provisions cast the GST liability on MCGM and that the contractual clause relied upon did not transfer the RCM liability to the applicant; upon that crediting the arbitral award shall stand satisfied and the execution petition is disposed.

Enlargement on bail - no criminal antecedents - absence of finalized tax determination - non-establishment of beneficiary link to alleged illicit transactions - conditions of bail: personal bond and sureties - standard prohibitory conditions (tampering with evidence, influencing witnesses)

Enlargement on bail - no criminal antecedents - non-establishment of beneficiary link to alleged illicit transactions - absence of finalized tax determination - Application for bail by the applicant detained in Case Crime No. 01 of 2021 at Police Station New Mandi District Muzaffar Nagar under the CGST Act was allowed. - HELD THAT: - The Court found that the applicant had been in custody since 29.09.2021 and that the Sessions Court had earlier rejected bail. On the record before the Court there was no satisfactory material to connect the applicant as a beneficiary of the alleged illicit transactions and the names/statements of the persons in whose names the firms were said to be created were not placed on record. It was noted that the applicant does not have any criminal history apart from the present case and that the tax liability vis-a -vis the applicant had not been finally determined. The State and the informant did not satisfactorily dispute these points. On these foundations, and without adjudicating the merits of the underlying allegations, the Court exercised its discretion in favour of bail while imposing standard conditions to secure the trial process.

Bail granted to the applicant on furnishing a personal bond and two sureties to the satisfaction of the trial court, subject to conditions prohibiting tampering with evidence, influencing witnesses, inducement or threats, and requiring appearance at trial; prosecution may move for cancellation on breach.

Final Conclusion: The bail application was allowed and the applicant was directed to be released on bail on furnishing the requisite bond and sureties, subject to standard protective conditions; no opinion was expressed on the merits of the prosecution's case.

Suspension of registration during pendency of proceedings - drastic power - proviso to Sub-Section 1 of Section 29 of the Central Goods and Services Tax Act, 2017 - decision within a reasonable time - speaking order

Suspension of registration during pendency of proceedings - drastic power - decision within a reasonable time - speaking order - Authority exercising power to suspend registration during pendency of cancellation proceedings must decide the matter within a reasonable and time bound period and pass a speaking order. - HELD THAT: - The Court recognised that the proviso permitting suspension of registration during the pendency of cancellation proceedings confers a drastic power which can bring a running business to a halt. Where the authority resorts to such suspension, it is required to take the proceedings to a logical conclusion within a reasonable time and not leave the affected person to suffer indefinite suspension merely because the statute prescribes no specific limitation. Having noted that the petitioner filed a reply on 07-08/04/2022 and that no decision had been taken thereafter, the Court directed the authority to conclude the proceedings and pass a speaking order taking into account the petitioner's reply. The Court further provided that failure to decide within the stipulated outer limit would cause the suspension order to stand automatically vacated.

Respondent No.3 shall conclude the proceedings and pass a speaking order within 15 days from receipt of the order; if no decision is taken within that period the suspension shall automatically end.

Proviso to Sub-Section 1 of Section 29 of the Central Goods and Services Tax Act, 2017 - suspension of registration during pendency of proceedings - Whether the proviso to Sub Section 1 of Section 29 is attracted in the facts of the present case is to be considered afresh by the authority. - HELD THAT: - The Court observed that the question of applicability of the proviso to Sub Section 1 of Section 29 in the petitioner's case required consideration and that the authority must examine this aspect while passing the speaking order. The matter was not decided on merits by the Court; instead the authority was directed to address this specific legal contention in light of the petitioner's reply and the factual matrix of the proceedings initiated by the authority.

The question of attraction of the proviso to Sub Section 1 of Section 29 is remitted to the authority for fresh consideration and decision while passing the speaking order.

Final Conclusion: Petition disposed by directing the authority to decide the suspension/cancellation proceedings and the applicability of the proviso to Sub Section 1 of Section 29 by a speaking order within 15 days, failing which the suspension shall cease automatically; liberty to challenge any adverse order retained.

Opportunity of hearing under Section 75(4) of the A.P.G.S.T. Act, 2017 - violation of principles of natural justice - remand for fresh consideration after personal hearing - notice for personal hearing

Opportunity of hearing under Section 75(4) of the A.P.G.S.T. Act, 2017 - notice for personal hearing - violation of principles of natural justice - Whether the impugned order was passed in violation of Section 75(4) by not affording the petitioner a personal hearing as contemplated by law. - HELD THAT: - The Court examined Section 75(4), which mandates that an opportunity of hearing be granted where a written request is received from the person chargeable with tax or penalty, or where any adverse decision is contemplated. Although a notice for personal hearing dated 13.10.2020 was issued, the Assistant Commissioner asked the petitioner to produce documents for verification and did not fix a date for hearing. An adverse order was subsequently passed without affording the petitioner the personal hearing contemplated by the provision. The Court held that on these facts the requirement of Section 75(4) was not complied with and that this amounted to a breach of the principles of natural justice, rendering the impugned order unsustainable on that ground alone. [Paras 8, 9]

Impugned order set aside as passed in violation of Section 75(4) and principles of natural justice.

Remand for fresh consideration after personal hearing - opportunity of hearing under Section 75(4) of the A.P.G.S.T. Act, 2017 - Whether the matter should be remanded for fresh consideration after affording the petitioner a personal hearing. - HELD THAT: - Having found non-compliance with the statutory mandate to afford a personal hearing, the Court did not adjudicate other contentions and directed that the matter be remitted to respondent No.1 for reconsideration. The remand is limited to fresh consideration of the assessment after giving the petitioner notice of a personal hearing so that the requirements of Section 75(4) are met before any adverse decision is taken. [Paras 9, 10]

Matter remanded to respondent No.1 for reconsideration after serving notice of personal hearing to the petitioner.

Final Conclusion: Writ petition allowed; the order in Form GST DRC-07 dated 14.12.2020 (relating to tax periods 04/2018 to 03/2019) is set aside for violation of Section 75(4) and principles of natural justice, and the matter is remanded for fresh consideration after affording a personal hearing.

Migration to GST - Circular dated 03-8-2018 as guiding administrative direction - direction to decide pending application - writ of mandamus - well-reasoned order

Migration to GST - Circular dated 03-8-2018 as guiding administrative direction - direction to decide pending application - Application dated 29-8-2018 for migration in GST was directed to be considered and decided by the respondents in light of the Circular dated 03-8-2018 within a specified time frame. - HELD THAT: - The petitioner had filed an application for migration to GST on 29-8-2018 pursuant to the opportunity afforded by the Circular dated 03-8-2018, which allowed certain dealers who could not migrate earlier on the portal to seek migration. The respondents did not deny receipt of the application but had not passed any order thereon. The High Court declined to express any opinion on the merits of the claim for migration and instead directed the respondents to consider and decide the pending application promptly and in accordance with the Circular, by passing a reasoned order. The direction was framed as administrative mandamus to secure expeditious disposal, without adjudicating substantive entitlement.

Respondents directed to consider and decide the migration application dated 29-8-2018 in the light of the Circular dated 03-8-2018 and to pass a well-reasoned order within sixty days of receipt of the certified copy of the order.

Final Conclusion: Writ petition disposed by directing the respondents to decide the petitioner's migration application of 29-8-2018 in accordance with Circular dated 03-8-2018 by a reasoned order within sixty days; no opinion expressed on merits.

Mining lease is an interest in immovable property - profit a prendre - lease of land for mining does not constitute leasing or renting of goods - licensing services for the right to use minerals including its exploration and evaluation - tariff item 997337 - leasing or renting of goods (heading 9973) - classification of royalty as consideration for right to use minerals - taxability of contributions to District Mineral Foundation and National Mineral Exploration Trust

Mining lease is an interest in immovable property - lease of land for mining does not constitute leasing or renting of goods - leasing or renting of goods (heading 9973) - tariff item 997337 - licensing services for the right to use minerals including its exploration and evaluation - Classification of royalty paid under a mining lease for GST purposes - HELD THAT: - The Authority held that a mining lease confers an interest in immovable property and the right to extract minerals is a profit a prendre, following the reasoning of the Supreme Court. Consequently, a contract for a mining lease cannot be treated as a lease of goods and cannot be classified as 'leasing or renting of goods' under the heading 9973 entry relied upon by the applicant. The annexure to Notification No.11/2017 contains a distinct tariff structure in which services relating to the right to use minerals, including exploration and evaluation, are recorded under tariff item 997337. Therefore royalty payable under a mining lease falls within the service description of licensing the right to use minerals (tariff item 997337) and is not covered by the entry for leasing or renting of goods at Serial No.17(viia). [Paras 7, 8]

Royalty under a mining lease is not 'leasing or renting of goods' and is classifiable under tariff item 997337 as licensing services for the right to use minerals.

Classification of royalty as consideration for right to use minerals - taxability of contributions to District Mineral Foundation and National Mineral Exploration Trust - tariff item 997337 - GST liability on contributions to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) - HELD THAT: - The Authority found that the statutory contributions payable to DMF and NMET under the MMDR Act are paid in addition to royalty and are proportionate to the royalty payable for extraction of minerals. These contributions are thus in substance consideration connected to the service of granting the right to use minerals (including exploration and evaluation) and are therefore classifiable under the same tariff item, 997337. Accordingly, the same rate applicable to that tariff item applies to the DMF and NMET contributions. [Paras 7, 8]

Contributions to DMF and NMET are taxable as part of the service under tariff item 997337 and attract the same rate applicable to that entry.

Final Conclusion: The Authority ruled that royalty under mining leases is not leasing of goods but is classifiable as licensing the right to use minerals under tariff item 997337, and that statutory contributions to DMF and NMET are similarly classifiable; these entries attract the rate prescribed for 997337 (9% CGST and 9% SGST).

Service by way of agreeing to tolerate an act (Schedule II entry 5(e)) - consideration includes monetary value of an act of forbearance (Section 2(31)(b) of the CGST Act) - reverse charge liability under the specified services notification - scope of Notification No. 11/2017 heading 9973 (leasing or rental services without operator) not attracted - regulatory/transit fee as consideration

Service by way of agreeing to tolerate an act (Schedule II entry 5(e)) - consideration includes monetary value of an act of forbearance (Section 2(31)(b) of the CGST Act) - regulatory/transit fee as consideration - Whether the forest transit/permit fee collected by the Forest Department for allowing movement of coal through forest area constitutes a taxable service - HELD THAT: - The Authority found that the transit fee is collected to permit or tolerate the transit of vehicles carrying coal through forest area and is regulatory in nature. Relying on the principle that regulatory fees need not have a strict quid pro quo, the Authority treated the act of allowing transit as an act of forbearance or toleration. Entry 5(e) of Schedule II to the CGST Act treats agreeing to refrain from an act or to tolerate an act as a supply of service, and Section 2(31)(b) includes monetary value of an act of forbearance within consideration. Applying these provisions to the facts, the fee charged by the Forest Department is consideration for a service (tolerating/allowing transit) and therefore constitutes a taxable service. [Paras 7]

The forest permit/transit fee is a taxable service falling under entry 5(e) of Schedule II and is consideration as defined under Section 2(31)(b).

Reverse charge liability under the specified services notification - scope of Notification No. 11/2017 heading 9973 (leasing or rental services without operator) not attracted - Whether GST on the forest permit fee is payable by the applicant under the reverse charge mechanism and whether the service can be classified under heading 9973 for a lower rate prior to 01-01-2019 - HELD THAT: - The Authority examined the nature of the supply and held that the service provided by the Forest Department is not leasing or rental without operator (heading 9973) but is toleration/forbearance under Schedule II entry 5(e). Consequently, the supply is governed by the service-entry attracting reverse charge as per the relevant notification (Serial No. 5 of Notification No.13/2017 dated 28.06.2017). Since the service is not classifiable under heading 9973, the contention that a lower rate under that heading applied prior to 01-01-2019 was rejected. The Authority thus imposed reverse charge liability on the applicant for the forest permit fee. [Paras 7, 8]

GST on the forest permit fee is payable by the applicant on reverse charge basis and the service is not classifiable under heading 9973 for a lower rate prior to 01-01-2019.

Final Conclusion: The Advance Ruling holds that the forest transit/permit fee is a taxable service (agreement to tolerate an act) and that GST on such fee is payable by the applicant under reverse charge; the service is not classifiable under heading 9973 for a lower rate prior to 01-01-2019.

Reopening of assessment - Notice under Section 148A(b) and order under Section 148A(d) - Interference by writ court at preliminary stage - Prima facie material for reopening - Jurisdictional error versus error within jurisdiction - Availability of statutory remedy of reassessment

Notice under Section 148A(b) and order under Section 148A(d) - Interference by writ court at preliminary stage - Availability of statutory remedy of reassessment - Whether the High Court should entertain writ jurisdiction to quash the order passed under Section 148A(d) and the notice issued under Section 148 when assessment/re assessment proceedings have not yet been concluded by the assessing officer. - HELD THAT: - The Court applied the settled principle that where reassessment proceedings are at a preliminary stage and the assessing authority has not concluded the assessment, the writ jurisdiction should not ordinarily be exercised to interfere with the decision to reopen. The court relied on earlier authorities which recognize that the statutory machinery for assessment/reassessment is the appropriate forum to determine disputed facts and legal issues and that an assessee must ordinarily pursue remedies available under the Act rather than invoke extraordinary writ relief at the interlocutory stage. Reference was made to prior decisions of this Court and other High Courts [Lachhman Das Nayar and others vs. Hans Raj Puri, Income-Tax Officer, Amritsar and others] and [Rasulji Buxji Kathawala vs. Income Tax Commissioner, Delhi and another], as well as to later pronouncements emphasizing that the sufficiency or correctness of material relied upon for reopening is not to be finally tested by a writ court at that stage, and that the assessee has opportunity to contest the matter before the assessing authority and appellate fora. The Court observed the well known distinction between a true jurisdictional error (which may warrant early interference) and an error of fact or law committed within jurisdiction (which is remediable under the statutory scheme), and found no basis on the record to treat the impugned order as an instance of the former. Consequently, interference under Article 226/227 was not warranted when the proceedings were pending and the jurisdictional predicate for reopening was not shown to be wholly lacking.

Writ petition dismissed; no interference with the order under Section 148A(d) or the notice under Section 148 at the interlocutory stage, leaving the assessee to pursue statutory remedies.

Final Conclusion: The High Court dismissed the petition and declined to quash the order under Section 148A(d) and the concomitant notice under Section 148, holding that interlocutory interference is inappropriate where reassessment proceedings have not been concluded and where statutory remedies remain available.

Refund of tax - interest on delayed refund - public money - officer accountability for delayed refunds - judicial directions for compliance

Refund of tax - interest on delayed refund - judicial directions for compliance - Respondents directed to complete calculation and issue the balance refund and interest to the assessee within one week. - HELD THAT: - The Court recorded an internal Revenue communication indicating that a refund had been issued but that balance interest remained to be calculated and paid. Observing that the assessee is entitled to the refund and interest, the Court nevertheless emphasised that undue delay results in payment of interest from public funds and is unacceptable. In consequence, the respondents were directed to complete the calculation and issue the balance refund within one week from the date of the order to avoid further waste of public money. The directive proceeds from the Court's concern to ensure timely compliance where entitlement is not disputed. [Paras 1, 2, 3]

Calculation to be completed and refund issued within one week.

Public money - officer accountability for delayed refunds - Principal Chief Commissioner to file an affidavit explaining the reasons for delay in payment of refund and why interest paid should not be collected from the officers responsible for the delay. - HELD THAT: - Given that delay in issuing refunds causes interest payments from public funds, the Court required the Principal Chief Commissioner of Income Tax, Mumbai to file an affidavit addressing (a) the reasons for the delay in payment of the refund and (b) why the interest paid to the assessee should not be recovered from the officers who caused the delay. The Court expressed that such accountability should be explored because the payment of interest implicates public money and earlier similar orders had warned of possible action against responsible officers. The affidavit was ordered to be filed within four weeks. [Paras 4, 5]

Affidavit to be filed within four weeks explaining delay and accountability; Court to consider action if refund/interest not promptly credited.

Judicial directions for compliance - Order to circulate the Court's direction to senior governmental authorities and to list the petition for further directions on a specified date. - HELD THAT: - Expressing concern over waste of judicial time and legal costs caused by the respondents' conduct, the Court directed that a copy of the order be placed before senior authorities including the Central Board of Direct Taxes, the Finance Minister, Principal Secretary in the Prime Minister's Office, the Law Minister and the Attorney General for India, signalling the seriousness of the matter. The petition was listed for further directions on the date specified in the order. [Paras 6, 7, 8]

Order to be placed before specified senior authorities; petition listed for further directions on the specified date.

Final Conclusion: The Court directed immediate compliance by the Revenue to calculate and pay the outstanding refund and interest within one week, required an explanatory affidavit from the Principal Chief Commissioner within four weeks addressing delay and potential officer accountability, transmitted the order to senior government authorities, and listed the matter for further directions.

Presumptive taxation under section 44AD - inclusion of indirect taxes in turnover - application of Section 145A for valuation including tax component - accounting method: inclusive method versus separate tax account - estimation of taxable income where presumptive rate is not applicable

Inclusion of indirect taxes in turnover - application of Section 145A for valuation including tax component - accounting method: inclusive method versus separate tax account - presumptive taxation under section 44AD - Whether sales tax/VAT/CST and service tax collected and shown in receipts are to be included in turnover for determining applicability of Section 44AD for AY.2017-18. - HELD THAT: - The Tribunal found that phrase 'turnover' for the purpose of Section 44AD must be understood in the context of accounting practice and Section 145A, which requires valuation of sales to be adjusted to include taxes actually paid or incurred to bring goods/services to their location and condition. Where assessee follows an inclusive method (sales recorded inclusive of tax) turnover will include the tax component unless the assessee maintains a separate tax account showing collection and payment of the tax. In the present case the assessee did not produce audited accounts for AY.2017-18 and there is no material on record to demonstrate that a separate tax-accounting practice (credit on collection and debit on payment) was followed. Decisions relied upon by the assessee where taxes were excluded were cases in which the books showed reimbursements or separate treatment of tax. Absent such evidence here, the Tribunal held that sales tax/VAT/CST/service tax cannot be excluded from turnover for computing applicability of Section 44AD and upheld the conclusion of the Ld. CIT(A) that the turnover exceeded the threshold when tax components were included. [Paras 10, 11, 12]

Sales tax/VAT/CST and service tax are includable in turnover for determining applicability of Section 44AD in AY.2017-18 where assessee has not shown a separate tax account or accounting treatment excluding such taxes.

Estimation of taxable income where presumptive rate is not applicable - presumptive taxation under section 44AD - What percentage of gross receipts/turnover should be adopted to estimate taxable income where presumptive scheme under Section 44AD is not applicable. - HELD THAT: - Having concluded that the turnover for AY.2017-18 includes tax components and exceeds the threshold for the presumptive rate claimed, the Tribunal examined historical net profit percentages furnished by the assessee for earlier years (showing net profits of 12.82%, 12.54% and 5.52% for preceding years). The Tribunal found the 25% estimate adopted by the Ld. CIT(A) to be excessive in the factual matrix of this assessees' business and financials. Applying a pragmatic approach and relying on the past profit percentages placed on record, the Tribunal directed computation of income at 12.5% of gross receipts/turnover for assessment purposes, and remitted the matter to the Assessing Officer for recomputation on that basis. [Paras 13]

Taxable income to be computed at 12.5% of gross receipts/turnover for AY.2017-18; matter remitted to Assessing Officer for recomputation accordingly.

Final Conclusion: The appeal is allowed in part: indirect tax components (sales tax/VAT/CST/service tax) are includable in turnover for determining applicability of Section 44AD for AY.2017-18 where no separate tax accounting is shown; consequentially, taxable income is to be recomputed at 12.5% of gross receipts/turnover and the Assessing Officer is directed to effect recomputation.

Levy of fee under section 234E - Intimation under section 200A - Prospective effect of statutory amendment - Processing of TDS statements and returns - Validity of demand raised by charging late filing fees

Levy of fee under section 234E - Intimation under section 200A - Prospective effect of statutory amendment - Processing of TDS statements and returns - Assessing Officer was not empowered to charge late filing fees under section 234E by issuing intimation under section 200A for periods prior to 01.06.2015. - HELD THAT: - The Tribunal applied its earlier decisions and the reasoning of the Hon'ble High Court of Karnataka that the amendment to section 200A w.e.f. 01.06.2015 is prospective and cannot be read as conferring power to compute or demand fees under section 234E for periods of tax deduction prior to 01.06.2015. Consequently, intimation issued under section 200A for computation and payment of fees under section 234E relating to periods before 01.06.2015 was held to be beyond the Assessing Officer's power and invalid. The Tribunal further clarified that this conclusion applies even where the TDS returns for those prior periods were processed or filed belatedly after 01.06.2015; such post-amendment processing does not render the retrospective charging of section 234E permissible. Reliance was placed on earlier Tribunal orders and the Karnataka High Court decision noted in the record; contrary decisions were considered and distinguished. On this basis the demand raised by charging late filing fees under section 234E was deleted. [Paras 3, 4]

Intimations issued under section 200A for levying fees under section 234E for periods prior to 01.06.2015 are invalid; the late filing fees charged are deleted and the appeals are allowed.

Final Conclusion: The appeals are allowed: late filing fees levied under section 234E by intimation under section 200A for the stated quarters (periods prior to 01.06.2015) are deleted as the amendment to section 200A has prospective effect and did not empower such demands for those prior periods.

Treatment of partners' capital contributions under section 68 - treatment of unsecured loans as unexplained cash credits under section 68 - confirmation by partner and discharge of assessee's primary onus - identity, creditworthiness and genuineness of lenders - effect of pending Settlement Commission proceedings on explainability of credits

Treatment of partners' capital contributions under section 68 - confirmation by partner and discharge of assessee's primary onus - effect of pending Settlement Commission proceedings on explainability of credits - Addition of partners' capital contribution of Rs.1.98 crore as unexplained cash credit under section 68 - HELD THAT: - The Tribunal found that the partners who introduced the capital were close family members whose identity was not in dispute and that the partners had not denied the capital contributions. The partners had also filed petitions before the Income Tax Settlement Commission and those proceedings had not been finally negatived. Relying on the legal position that where the assessee furnishes details of capital introduced and the contributing partner confirms the contribution, the assessee discharges its primary onus, the Tribunal held that the Assessing Officer should have examined the creditworthiness of the contributing partner rather than treat the firm's receipts as unexplained. Consequently the addition under section 68 in respect of the capital contribution was set aside and the ground was allowed. [Paras 13]

Addition of Rs.1.98 crore as unexplained capital contribution under section 68 set aside; ground allowed.

Treatment of unsecured loans as unexplained cash credits under section 68 - identity, creditworthiness and genuineness of lenders - confirmation and admissibility of documents to prove lender particulars - consequentials of ownership of transactions by another person on double taxation - Addition of unsecured loans (aggregate Rs.84 lakhs) as unexplained cash credits under section 68 - divisibility of transactions, admission of evidence for one lender, and remand for verification of ownership in Settlement Commission petition - HELD THAT: - The Tribunal analysed the unsecured loans as comprising two categories: (a) a loan of Rs.10 lakhs from Kaushik Granites Pvt. Ltd. for which the assessee produced confirmation, PAN, name and address; and (b) other loans (including Rs.15 lakhs from M D International and amounts alleged to be owned by M D Patel) which the assessee contended were included in M D Patel's disclosures and Settlement Commission petition. The Tribunal admitted the documents relating to Kaushik Granites Pvt. Ltd. as additional evidence and directed the Assessing Officer to consider them and pass a speaking order. As to transactions allegedly owned by M D Patel, the Tribunal restored the issue to the Assessing Officer to verify whether those loans were shown as owned by M D Patel in his Settlement Commission petition, in which case the Assessing Officer was directed to delete the additions to avoid double taxation. The Tribunal emphasised that the Assessing Officer should decide after granting due opportunity and verify relevant evidence; the matter was remanded for fresh consideration. [Paras 15, 16]

Part of the addition (loan from Kaushik Granites Pvt. Ltd.) admitted for consideration and documents admitted; remaining disputed unsecured loans remanded to Assessing Officer for verification in light of Settlement Commission petition and to decide afresh after giving opportunity to the assessee; ground allowed for statistical purpose (partly remanded).

Final Conclusion: The appeal is partly allowed: the addition of partners' capital (Rs.1.98 crore) under section 68 is set aside; additions in respect of unsecured loans are partly admitted for consideration (loan from Kaushik Granites Pvt. Ltd.) and the balance is remanded to the Assessing Officer to verify ownership in the Settlement Commission petition and to decide afresh after affording opportunity to the assessee.

Bogus purchases - unverifiable purchases - export verification by customs - admission of additional evidence on restoration - 25% disallowance principle - unexplained cash credit u/s 68 - onus of proof in relation to creditors' identity and creditworthiness

Bogus purchases - unverifiable purchases - export verification by customs - admission of additional evidence on restoration - 25% disallowance principle - Validity of additions made by the Assessing Officer on account of alleged bogus/unverifiable purchases - HELD THAT: - The Assessing Officer had disallowed the entire purchases initially and, on reconsideration, restricted disallowance to 25%. The assessee produced additional documents (ARE-1 forms, Customs certificates and DEPB related records) after the Tribunal admitted additional evidence and remanded the matter. The Tribunal and CIT(A) found that the exports/sales were not disputed, DEPB benefits reflecting in the assessee's bank account and customs certificates evidenced that goods were exported. The Assessing Officer relied on an inspector's report that parties were not found at given addresses but did not supply that report to the assessee; the Tribunal observed that evidence used against a party must be disclosed. The assessee explained loss of books due to floods and produced supporting material from customs and excise authorities. On these facts the Tribunal held the Vijay Proteins ratio relied upon by the AO (a manufacturing case) inapplicable to the assessee (a trader) and that the CIT(A) rightly appreciated the additional evidence and deleted the impugned additions. The Tribunal affirmed deletion, concluding that no contrary law or facts warranted interference. [Paras 14]

The addition on account of alleged bogus/unverifiable purchases is deleted and the order of the CIT(A) is affirmed.

Unexplained cash credit u/s 68 - onus of proof in relation to creditors' identity and creditworthiness - admission of additional evidence on restoration - Sustentation of additions made as unexplained cash credits in respect of unsecured loans shown by the assessee - HELD THAT: - The Assessing Officer treated the entire unsecured loans as unexplained after summons under section 131 produced denials by two persons and absence of verification for others. Before the CIT(A) and on remand the assessee produced confirmations, PAN, bank evidences, copies of IT returns and ledger particulars for several creditors; the CIT(A) found that the assessee discharged the primary onus with respect to four creditors, but upheld additions only qua amounts in respect of two persons (Amit Kumar Modi and Suresh Kumar Modi (HUF)) who had denied transactions. The Tribunal noted that the Assessing Officer did not controvert the documentary evidence for the four creditors and that the CIT(A)'s appreciation of the available evidence was correct. Consequently the Tribunal affirmed the CIT(A)'s approach of deleting additions except insofar as the two specific denials had been sustained at earlier stages. [Paras 17]

The additions as unexplained cash credits were deleted insofar as the assessee proved identity, creditworthiness and genuineness for four creditors; the limited additions relating to two creditors were maintained below, and the CIT(A)'s order is affirmed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal affirms the CIT(A)'s deletion of additions for alleged bogus purchases and, on the evidence, upholds the CIT(A)'s treatment of unsecured loans (deleting most additions while leaving limited earlier findings in respect of two creditors intact).

Penalty under section 271B - mandate to get accounts audited under section 44AB - reasonable cause for delay - limitation on initiation of penalty proceedings / proceedings barred by limitation - assessment order silence on default and its bearing on subsequent penalty proceedings

Penalty under section 271B - limitation on initiation of penalty proceedings / proceedings barred by limitation - assessment order silence on default and its bearing on subsequent penalty proceedings - reasonable cause for delay - Whether the penalty imposed under section 271B for failure to get accounts audited under section 44AB is sustainable where the assessing officer issued a show-cause notice about 30 months after completion of assessment and the assessment order is silent on any default. - HELD THAT: - The Tribunal found as an undisputed fact that the assessment was completed on 31.12.2011 and that no finding or mention of default under section 271B appeared in that assessment order. The assessing officer issued the show-cause notice for penalty only on 16.06.2014, some 30 months after the completion of assessment. Applying the principle that penalty proceedings initiated after an abnormal delay following completion of assessment - particularly where the original assessment order is silent about the default - are barred as unreasonable and by limitation, the Tribunal held that the proceedings were time-barred. The Tribunal relied on precedent and reasoning that, although no express statutory time-bar may be specified for initiating a section 271B penalty, initiation after an inordinate delay (measured against the limitation principles underlying section 275 and established judicial dicta) renders the proceedings invalid. The consequence was that the assessee's contention of absence of any recorded default in the assessment order, together with the long delay before initiating penalty proceedings, justified deleting the penalty. The Tribunal therefore did not adjudicate the merits of 'reasonable cause' advanced for delay in audit because the limitation objection was decisive. [Paras 14, 15]

Penalty under section 271B deleted as proceedings were barred by limitation in view of issuance of notice some 30 months after completion of assessment and the assessment order being silent on the alleged default.

Final Conclusion: The appeal is allowed; the penalty of Rs. 1,00,000 imposed under section 271B for AY 2009-10 is deleted on the ground that initiation of penalty proceedings after an abnormal delay, with the assessment order silent on the default, renders the proceedings barred by limitation.

Disallowance under section 14A read with Rule 8D - no disallowance in absence of exempt income - application of section 43B to expenses paid after due date

Disallowance under section 14A read with Rule 8D - no disallowance in absence of exempt income - Validity of addition of Rs. 21,99,136 as disallowance under section 14A r.w.r. 8D where no exempt dividend income was received in the year. - HELD THAT: - The Tribunal found that the assessee had made investments yielding exempt income but had not received any exempt dividend income in the year under consideration. Relying on the settled position of law, including precedents cited by the assessee, the Tribunal held that in the absence of any exempt income in the relevant year no disallowance under section 14A read with Rule 8D was warranted. On this basis the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was vacated. [Paras 7, 8]

Disallowance of Rs. 21,99,136 under section 14A r.w.r. 8D vacated; ground allowed.

Application of section 43B to expenses paid after due date - Sustainment of addition of Rs. 16,800 under section 43B for professional tax paid after the due date. - HELD THAT: - The Tribunal noted that no submissions or arguments were advanced by the assessee opposing the finding of the lower authorities that professional tax was paid beyond the due date. The Commissioner (Appeals) had upheld the Assessing Officer's disallowance under section 43B. In the absence of any contrary material or argument, the Tribunal found no reason to interfere with the concurrent finding of the lower authorities. [Paras 9]

Addition of Rs. 16,800 under section 43B sustained; ground dismissed.

Final Conclusion: The appeal is partly allowed: the disallowance under section 14A r.w.r. 8D of Rs. 21,99,136 is vacated, while the disallowance under section 43B of Rs. 16,800 is upheld.

Condonation of delay - substantial justice over technicalities - revisionary jurisdiction under section 263 - treatment of receipt as loan versus unexplained cash credit under section 68 - penalty under section 271D for contravention of section 269SS - prejudice to the interest of revenue

Condonation of delay - substantial justice over technicalities - Whether the delay of 486 days in filing the appeal should be condoned and the appeal admitted. - HELD THAT: - The Tribunal examined the reasons for delay and accepted that the delay was not intentional or to derive undue benefit but arose from a mistaken understanding and change of representation. Noting that the issue in the appeal had prima facie merit and applying the principle that substantial justice prevails over technicalities, the Tribunal found that dismissal on procedural grounds would defeat justice. Reliance was placed on settled law favouring adjudication on merits where technicalities conflict with substantial justice, and therefore the delay was held to constitute a sufficient cause for condonation. [Paras 2, 4]

Delay of 486 days condoned and the appeal admitted for hearing.

Revisionary jurisdiction under section 263 - treatment of receipt as loan versus unexplained cash credit under section 68 - penalty under section 271D for contravention of section 269SS - prejudice to the interest of revenue - Whether the Principal Commissioner (PCIT) was justified in revising the assessment under section 263 by directing examination of unsecured loans under section 68 when the Assessing Officer had treated the receipts as loans and imposed penalty under section 271D for contravention of section 269SS. - HELD THAT: - The Tribunal found that the AO had considered the unsecured receipts from friends and relatives during assessment and had accepted them as loans, concurrently levying penalty under section 271D for breach of section 269SS; thus the AO had already adjudicated the nature of the receipts. The PCIT's revision sought to re-examine the same receipts under section 68 as unexplained credits, which amounted to reopening an issue already considered and accepted by the AO. Since section 263 empowers revision only where the assessment is erroneous and prejudicial to revenue, and here the Department had already treated the amounts as loans and recovered tax and penalty (including settlement under Vivad se Vishwas), the Tribunal held there was no material showing error or prejudice warranting revision. The principle that an authority cannot 'blow hot and cold' was applied to conclude that the PCIT erred in exercising revisionary jurisdiction on the same issue. [Paras 5, 8, 9]

Revision under section 263 quashed as the assessment was not erroneous nor prejudicial to the revenue on the stated issue.

Final Conclusion: Delay in filing the appeal was condoned and, on merits, the Tribunal quashed the PCIT's revision order under section 263 insofar as it sought re-examination of unsecured loans treated by the AO, allowing the appeal.

Extrapolation of undisclosed income in block/search proceedings - Estimation of escaped turnover on the basis of incriminating material - Adventure in the nature of trade versus capital gains - Unexplained expenditure and proof of payment under section 69C - Disallowance for cash payments in excess of prescribed limit under section 40A(3) - Disallowance for non-deduction of tax at source under section 40(a)(ia) where payee declares income

Extrapolation of undisclosed income in block/search proceedings - Estimation of escaped turnover on the basis of incriminating material - Validity of AO's extrapolation of sale price discovered for some plots to other plots/entire block period to estimate undisclosed income - HELD THAT: - The Tribunal examined whether the Assessing Officer was justified in adopting the higher rate evidenced by a seized sale agreement (Rs.1,458 per sq.ft.) and extrapolating that rate to other plots sold at materially lower documented rates for the block period. Noting consistent authority from High Courts (including Bombay, Gujarat and Karnataka) that additions based on extrapolation from limited instances in search/block proceedings are impermissible, the Tribunal held that the AO's estimate based on a single agreement and without other credible supporting material amounted to guesswork. The Tribunal observed that the assessee had produced registered sale deeds and offered explanations for differential pricing (time gap, buyer profile, plot location and sizes), and that the AO lacked credible evidence to substitute documented sale prices with the seized agreement rate for the entire block period. On this basis the Tribunal found the estimation not in consonance with settled legal principles and sustained the CIT(A)'s deletion of the additions. [Paras 8, 9]

AO's extrapolation to estimate sales revenue for the block period is not sustainable; Revenue appeals dismissed and additions deleted.

Adventure in the nature of trade versus capital gains - Whether surplus from sale of developed residential plots is taxable as income from business/profession or as capital gains - HELD THAT: - Having considered the facts that the assessee and his family had, over decades, acquired multiple landed properties, obtained necessary conversions and approvals, developed the land into a plotted layout with infrastructure and marketed and sold plots over a period, the Tribunal agreed with the authorities below that the activities constituted concerted commercial exploitation. Reliance was placed on established jurisprudence that acquisition and subsequent plotting/development with a view to sale amounts to an adventure in the nature of trade. The Tribunal held that the nature and intent of the activities, and the acts of conversion and development, demonstrated a business venture rather than mere investment, and therefore profits from such sales are assessable under the head 'income from business or profession'. [Paras 12, 13]

Findings of AO and CIT(A) treating the surplus as business income are upheld; assessee's grounds on this issue dismissed for the relevant years.

Unexplained expenditure and proof of payment under section 69C - Treatment of alleged payments to film director and whether the sum stands explained under section 69C - HELD THAT: - Records show a seized agreement evidencing a contractual arrangement for film production with annotated payments. There is a factual dispute between the AO's view that Rs.24 lakhs was paid and unexplained and the assessee's claim that only Rs.4 lakhs was actually paid. The Tribunal found that the conflicting accounts required fresh examination of evidence and factual inquiry by the AO before any final conclusion under section 69C could be reached. [Paras 17]

Issue remitted to the Assessing Officer for fresh examination and decision in accordance with law.

Disallowance for cash payments in excess of prescribed limit under section 40A(3) - Whether cash payments in excess of the statutory limit are deductible having regard to claimed business exigency and exceptions - HELD THAT: - The assessee admitted making cash payments in excess of the statutory ceiling. The defence that payments were necessitated by film shooting in locations without banking facilities (relying on rule-based exceptions) was not supported by evidence showing lack of banking facilities or other corroboration. In absence of proof to establish applicability of the claimed exception, the Tribunal found no error in the authorities' disallowance under section 40A(3) and upheld the addition. [Paras 19]

Disallowance under section 40A(3) for cash payments is confirmed; assessee's ground on this point rejected.

Disallowance for non-deduction of tax at source under section 40(a)(ia) where payee declares income - Whether expenditure paid without deduction of TDS can be disallowed under section 40(a)(ia) when the payee has included the receipts in its return and paid tax - HELD THAT: - The assessee contended that the payee had returned the receipts and paid tax, which, if proved, would preclude disallowance under section 40(a)(ia). The Tribunal noted that the contention was raised for the first time before it and that the records before the Tribunal did not contain the requisite evidence from the payee. Given the factual nature of the verification required, the Tribunal directed that the AO re-examine the claim and verify whether the payee had indeed included the amounts in its return and discharged tax, and decide the issue in accordance with law. [Paras 21]

Issue remitted to the Assessing Officer for verification and fresh decision on the claim under section 40(a)(ia).

Final Conclusion: For AYs 2008-09 to 2011-12, Revenue's extrapolation-based additions were deleted and Revenue appeals dismissed; the Tribunal upheld characterization of profits from the plotted land sales as business income; additions under section 69C and the claim under section 40(a)(ia) were remitted to the Assessing Officer for fresh factual examination, while the disallowance under section 40A(3) was upheld.

Condonation of delay - levy of late fee under Section 234E and prospective operation due to amendment by Section 200A - substantive versus regulatory character of statutory amendment - preferment of substantial justice over technical bar of limitation

Condonation of delay - levy of late fee under Section 234E and prospective operation due to amendment by Section 200A - preferment of substantial justice over technical bar of limitation - Whether the delay in filing the appeals before the CIT(A) should have been condoned and whether late fee under Section 234E could be levied for periods prior to 01.06.2015. - HELD THAT: - The Tribunal held that the late fee under Section 234E, though inserted w.e.f. 01.06.2012, became enforceable by the mechanism of computation and intimation only upon the amendment to Section 200A which came into effect on 01.06.2015. Applying the ratio of the decision of the Karnataka High Court (Fatheraj Singhvi) and subsequent Coordinate Bench decisions, the Tribunal concluded that demands/intimations under Section 200A for computation and payment of fee under Section 234E relating to tax deducted prior to 01.06.2015 were issued without authority and therefore could not sustain. In view of that legal conclusion on merits, the Tribunal applied established principles favouring substantial justice over technical rejection of appeals for delay (including the Supreme Court and High Court authorities cited) and observed that the CIT(A) ought to have condoned the delay. Because the primary legal question was decided in favour of the assessee (that fee could not be levied for periods prior to 01.06.2015), the Tribunal directed deletion of the late fee and proceeded to allow the appeals on merits rather than remit the matter. The Tribunal also noted that constitutional challenges to Section 234E became academic once the intimation under Section 200A was held unauthorized for the pre-01.06.2015 period. [Paras 12, 13, 14, 15]

Delay ought to have been condoned; late fee levied under Section 234E for periods prior to 01.06.2015 is not leviable by intimation under Section 200A and is deleted; appeals allowed.

Final Conclusion: The Tribunal allowed the seventeen appeals, directed deletion of late fee charged under Section 234E insofar as it related to tax deducted prior to 01.06.2015, and held that the CIT(A) ought to have condoned the delay and decided the appeals on merits for A.Ys. 2013-14, 2014-15 and 2015-16.

Deduction under section 80P(2) - filing return within the due date specified under section 139(1) as condition for claiming chapter VI-A deduction - effect of amendment to section 80AC by Finance Act, 2018 on time bar for claiming deduction - attributability of delay caused by statutory audit completion outside assessee's control - disallowance by CPC on processing under section 143(1)

Deduction under section 80P(2) - filing return within the due date specified under section 139(1) as condition for claiming chapter VI-A deduction - attributability of delay caused by statutory audit completion outside assessee's control - Assessee entitled to deduction under section 80P(2) for AY 2019-20 despite return being filed after the due date because delay was caused by completion of statutory audit by the Co operative Audit Department and was not attributable to the assessee. - HELD THAT: - The Tribunal found that the assessee, a registered Co operative Society, satisfied the substantive conditions for deduction under section 80P(2). The only ground for disallowance was that the return for AY 2019-20 was not filed on or before the due date specified under section 139(1), in light of the amendment to section 80AC. The assessee established that the statutory audit conducted by the Co operative Audit Department was completed on 08.10.2019 and that the return was filed on 14.11.2019 immediately after receipt of the audit report. The Tribunal accepted that completion of the audit by the Department was not within the control of the assessee and therefore the short delay in filing was not attributable to the assessee. Having regard to these facts and the absence of any other justification for disallowance, the Tribunal concluded that the CPC/Assessing Officer erred in denying the deduction solely on the ground of delayed filing and directed that the deduction claimed under section 80P(2) be allowed and the additions deleted. [Paras 7, 8]

Allow deduction under section 80P(2) for AY 2019-20; direct AO to grant the claimed deduction and delete the addition.

Final Conclusion: Appeal allowed: deduction claimed under section 80P(2) for AY 2019-20 upheld because the delay in filing the return was caused by completion of statutory audit by the Co operative Audit Department and was not attributable to the assessee; AO directed to allow the deduction and delete the addition.

Disallowance under section 36(1)(iii) - interest-bearing funds - interest-free loans and advances - capitalisation of interest - onus of proof for invoking section 36(1)(iii)

Disallowance under section 36(1)(iii) - interest-bearing funds - interest-free loans and advances - onus of proof for invoking section 36(1)(iii) - capitalisation of interest - Validity of the Assessing Officer's disallowance of interest under section 36(1)(iii) in respect of alleged diversion of interest-bearing funds for interest-free loans and advances. - HELD THAT: - The Tribunal examined the schedules to the balance sheet and found that loans and advances increased marginally by Rs. 6.69 crores while unsecured interest-free funds rose by Rs. 26.93 crores and term loans were reduced, with a repayment and substitution of export packing credit by a cash credit facility. The Assessing Officer did not controvert the assessee's contention that term-loan interest was capitalised and not charged to profit and loss account, nor did he produce material to show that interest-bearing funds were actually applied to make interest-free advances. The Assessing Officer's disallowance was therefore based on an ad hoc computation (applying a percentage of total funds) without evidence of diversion. On these facts the Tribunal held that the Revenue failed to discharge the onus required to invoke section 36(1)(iii) and that the learned CIT(A) was justified in deleting the disallowance. [Paras 9, 10, 11, 12, 13]

The disallowance under section 36(1)(iii) was rightly deleted; the Assessing Officer's addition was unsupported by evidence and is set aside.

Final Conclusion: Appeal dismissed; the deletion of the disallowance of interest under section 36(1)(iii) was upheld because the Revenue failed to establish that interest-bearing funds were used to make interest-free advances and the interest on secured term loans was capitalised.

Treatment of bogus purchases - estimation of profit element embedded in purchases - application of section 69C - judicial estimation of gross profit based on past trading history

Treatment of bogus purchases - estimation of profit element embedded in purchases - application of section 69C - Whether the addition in respect of alleged bogus purchases should be the entire/peak purchase amount or only the profit element embedded in such purchases, and if the latter, at what rate the profit ought to be estimated. - HELD THAT: - The Assessing Officer made an addition by taking peak balances of alleged bogus purchases without a discrete enquiry into books or verification, invoking section 69C. The Commissioner (Appeals) restricted the addition to 12.5% of the identified bogus purchases, following the Gujarat High Court decision in Simit P. Sheth and related authorities which treat the profit element embedded in non genuine purchases as the taxable component rather than the entire purchase value. The Tribunal accepted that approach as a plausible view but held that the rate for estimating the gross profit must be based on the assessee's own trading history where available. The assessee's actual gross profit on genuine purchases for the year under consideration was shown to be 6.41%; in view of the authorities permitting judicial estimation of profit element and the absence of a focused enquiry by the AO, the Tribunal directed the AO to compute the addition by applying 6.41% as the reasonable gross profit on the identified bogus purchases. [Paras 11, 12, 13]

Addition shall be restricted to the profit element embedded in the identified bogus purchases and computed by the Assessing Officer at 6.41% of the said bogus purchases.

Final Conclusion: Both the Revenue's appeal and the assessee's cross objection are partly allowed and the Assessing Officer is directed to compute the addition by applying 6.41% as the gross profit on the identified bogus purchases.

Revisional jurisdiction under Section 263 - erroneous and prejudicial to the interests of the revenue - twin conditions for exercise of revisional jurisdiction - development agreement vs purchase of immovable property - application of mind by the assessing officer - scope of interference under Section 263

Revisional jurisdiction under Section 263 - erroneous and prejudicial to the interests of the revenue - twin conditions for exercise of revisional jurisdiction - scope of interference under Section 263 - Assumption of revisional jurisdiction by the Principal Commissioner of Income-tax under Section 263 was not justified and the revisionary proceedings were quashed. - HELD THAT: - The Tribunal applied the established test that both limbs - that the assessing officer's order is erroneous and that it is prejudicial to the interests of the Revenue - must coexist before Section 263 can be invoked. Where an assessing officer has conducted enquiry, examined material, applied his mind and adopted a view that is permissible in law, mere disagreement by the Principal CIT does not render the order erroneous or prejudicial. On the record the AO had examined the development agreement, verified bank transactions and treated the amount as advance in the balance sheet; thus he had applied his mind and taken a possible view. The Principal CIT's conclusion that the transaction was a purchase and that the AO failed to enquire was not sustained on facts; accordingly there was no valid foundation for exercise of revisional jurisdiction. The Tribunal therefore set aside the Section 263 proceedings and restored the assessment order. [Paras 9, 10, 11, 12]

Section 263 proceedings quashed; assessment order dated 24.12.2018 passed under Section 143(3) restored.

Development agreement vs purchase of immovable property - application of mind by the assessing officer - The agreement between the landowners and the assessee with two others was a development agreement and not a purchase of immovable property; the advance paid was treated and accepted by the AO as an advance for development (refundable) and not as consideration for purchase. - HELD THAT: - On examination of the development agreement dated 28.08.2015 and the surrounding facts, the Tribunal found the contract envisaged joint development with sharing of constructed areas between landlords and developers, with no assignment or conveyance of title to developers. The AO had recorded the nature of the transaction in the assessment order, noted payment of advances by account payee drafts, and reflected the amount as 'advance for land' in current assets after verification of bank records. It is also an undisputed fact that no construction proceeded and the advances were subsequently refunded. These findings support the conclusion that the transaction was not a purchase attracting provisions relating to receipt of immovable property; the AO's treatment was a tenable view. [Paras 5, 10, 11]

Transaction held to be a development agreement and not a purchase; AO's factual conclusion accepted as a possible view.

Final Conclusion: The Tribunal allowed the appeal: the Principal CIT's exercise of revisional jurisdiction under Section 263 was quashed and the assessment order under Section 143(3) for AY 2016-17 restored, the transaction being held to be a development agreement (not a purchase) and the AO having applied his mind in reaching a tenable conclusion.

Invocation of extended period of limitation - show cause notice barred where same facts previously adjudicated - interest under Section 28 AA of the Customs Act - prohibition on re-initiating demand for same cause where earlier adjudication is pending

Invocation of extended period of limitation - show cause notice barred where same facts previously adjudicated - interest under Section 28 AA of the Customs Act - Second show cause notice dated 12.01.2018 invoking extended limitation and demanding interest on the same facts and period already subject of earlier proceedings is barred and unsustainable. - HELD THAT: - The Tribunal found that the second show cause notice was issued on the identical facts and period as an earlier show cause notice dated 02.02.2016 which had already sought interest under Section 28 AA and was adjudicated (and is presently sub judice before the Rajasthan High Court). Having regard to that prior adjudication and the fact that the interest demand on the same amount and period had already been raised and confirmed, the issuance of a fresh show cause notice invoking the extended period for the same cause was held to be bad. The Tribunal relied on the principle that a duplicate proceeding on the same facts and for the same demand, particularly where earlier adjudication is in process of appellate scrutiny, cannot sustain invocation of extended limitation to reopen the same liability. Applying that principle to the present facts, the Tribunal set aside the impugned order confirming demand and interest under the second show cause notice and allowed the appeal with consequential reliefs. [Paras 15]

Appeal allowed; impugned order set aside and appellant entitled to consequential benefits.

Final Conclusion: The Tribunal held that the second show cause notice (12.01.2018), mainly seeking interest under Section 28 AA and a minor shortfall for November 2014, was issued on the same facts as earlier proceedings and was therefore barred; the impugned order was set aside and the appeal allowed with consequential relief.

Review jurisdiction under Order 47 Rule 1 CPC - error apparent on the face of the record - treatment of foreign inward remittance certificates as evidence of equity FDI - maintainability of company petitions for rectification and oppression/mismanagement - availability of alternative remedy by arbitration and forum competence - obligation of company to allot shares after receipt of FDI under automatic route

Review jurisdiction under Order 47 Rule 1 CPC - error apparent on the face of the record - Whether the review applicants established a ground for review by showing errors apparent on the face of the record in the order dated 18.03.2013. - HELD THAT: - The Court examined the scope of review under Order 47 Rule 1 CPC and the principles in Kamlesh Verma, concluding that review is confined to patent errors and not a reappreciation of evidence. It found that the orders of the Company Law Board and this Court had materially disregarded or failed to assign any cogent weight to vital documents - communications from the company to the RBI and FIRCs issued by the authorised dealer - which directly evidenced that remittances were towards equity subscription under the automatic FDI route. The Court held that the lower orders contained findings (notably that an investment without a formal agreement must be treated only as an investment and that rights would accrue only after allotment initiated by the company) which were legally and factually erroneous because (i) investments in equity need not be preceded by a formal written agreement, (ii) Clause 1 of the SSA permitted investment through nominees, and (iii) the obligation to increase authorised capital and allot shares lay on the company. These were held to be patent errors on the face of the record justifying review and interference rather than matters requiring a fishing expedition or reappreciation of evidence. [Paras 13, 18, 19, 20, 24]

The review application is maintainable and succeeds on the ground of errors apparent on the face of the record; the impugned order dated 18.03.2013 is set aside to the extent indicated.

Treatment of foreign inward remittance certificates as evidence of equity FDI - obligation of company to allot shares after receipt of FDI under automatic route - maintainability of company petitions for rectification and oppression/mismanagement - Whether dismissal of the composite company petition at the threshold for want of maintainability was justified where remittances were evidenced by FIRCs and company communications to the RBI and no allotment of shares had been made. - HELD THAT: - The Court held that the CLB and this Court erred in rejecting the petition at the threshold on maintainability grounds without adequately dealing with the FIRCs and the company's communications to the RBI that recorded receipt of remittances towards equity. The Court explained the legal distinction between debt and equity and observed that a company cannot be permitted to defeat statutory remedies by accepting remittances under the automatic FDI route and then refusing to allot shares; the obligation to increase authorised capital and to offer and allot shares rests on the company and its management and cannot be used to non-suit complainants who have made remittances. The Court further noted that sub-section (7) of Section 111 empowers the tribunal to decide title to shares and related questions and that remedies under the Companies Act, including rectification and reliefs for oppression and mismanagement, are within the statutory forum's competence and are not necessarily triable only in civil courts or exclusively via arbitration. [Paras 13, 21, 22, 25, 26]

The threshold rejection for want of maintainability was incorrect; the matter requires adjudication by the statutory forum and the impugned orders are set aside on this ground.

Availability of alternative remedy by arbitration and forum competence - maintainability of company petitions for rectification and oppression/mismanagement - Whether the existence of an arbitration clause in the Share Subscription Agreement and asserted complexity of issues required dismissal of the company petition in favour of arbitration or civil court proceedings. - HELD THAT: - The Court rejected the view that the dispute was necessarily so complex as to preclude adjudication by the statutory forum or to compel referral exclusively to arbitration or a civil court. It observed that the SSA permits investments through nominees and that the documents on record emanated from the company or the authorised dealer and were not controverted, making it unclear why a trial or arbitration was inevitable on preliminary maintainability. The Court also emphasised that certain statutory remedies (rectification, oppression and mismanagement, surcharge of directors) fall within the exclusive competence of the company tribunal and may not be amenable to arbitration. Consequently, mere existence of an arbitration clause does not automatically bar the statutory forum from entertaining the petition when statutory reliefs are claimed. [Paras 24, 25, 26]

The contention that arbitration or a civil court is the only forum is unsustainable on the facts; the petition should be adjudicated by the statutory forum of first instance and not be summarily dismissed on that ground.

Remand to statutory forum (NCLT) - What interim/orderly relief should follow after allowing the review on maintainability grounds. - HELD THAT: - Having found errors apparent and that the petition ought not to have been dismissed at the threshold, the Court did not decide the merits of rectification or oppression/mismanagement. Instead, it set aside the CLB order and this Court's appeal order and directed that the applicants may re-present the petition under provisions of the Companies Act, 2013 analogous to Sections 111, 397 and 398 of the 1956 Act. The Court gave a limited procedural direction: the petition may be re-presented within three weeks and upon such re-presentation the National Company Law Tribunal, Chennai, shall consider and dispose of the petition on merits. [Paras 27, 28]

Order dated 18.03.2013 and the CLB order dated 02.03.2011 are set aside; applicants may re-present the petition under the Companies Act, 2013 and the NCLT, Chennai, shall adjudicate the petition on merits.

Final Conclusion: The review application is allowed: the orders of the Company Law Board and this Court dismissing the composite company petition were set aside because of errors apparent on the face of the record (notably failure to deal with FIRCs and company communications evidencing equity remittances and legal mischaracterisations); no merits determination was made, and the applicants are permitted to re-present the petition under the Companies Act, 2013 before the National Company Law Tribunal, Chennai, which shall consider it on merits.

Audit of cost records - applicability of Companies (Cost Records and Audit) Rules - turnover threshold for cost audit - prosecution under Section 148 of the Companies Act, 2013 - interpretation of amended Rule 4(2)

Audit of cost records - turnover threshold for cost audit - interpretation of amended Rule 4(2) - prosecution under Section 148 of the Companies Act, 2013 - Whether initiation of criminal proceedings under Section 148 was maintainable where the company's turnovers for the relevant years were below the thresholds prescribed by the amended Companies (Cost Records and Audit) Rules, 2014. - HELD THAT: - The Court examined the amended Companies (Cost Records and Audit) Rules, 2014 and noted that Rule 3 identifies classes of companies for cost records and Rule 4(2) prescribes the applicability thresholds for cost audit in respect of item (B) of Rule 3. Rule 4(2) requires that the aggregate turnover of the individual product(s) or service(s) for which cost records are required must be Rs.35 crore or more for cost audit to be mandated. The materials on record, including the statements for the financial years 2014-2018 supplied by the petitioners and not disputed by the respondent, showed turnovers below the Rs.35 crore threshold. On this basis the Court held that the prosecution under Section 148, launched without regard to the amended Rules and despite the turnovers being below the prescribed threshold, was contrary to the amended Rules and unsustainable. [Paras 10, 11, 12, 13]

Criminal proceedings initiated under Section 148 against the petitioners were quashed as the cost audit threshold prescribed by the amended Rules was not met.

Final Conclusion: The petition is allowed; the criminal prosecution in C.C.No.163 of 2018 under Section 148 of the Companies Act, 2013 is quashed.

Punishment for false statement - Fraud and suppression of material facts - Requirement of material evidence before criminal prosecution - Abuse of process of law

Punishment for false statement - Fraud and suppression of material facts - Whether prosecution under Sections 448 read with 447 of the Companies Act is maintainable in the absence of a finding of fraud or suppression of material facts. - HELD THAT: - The Court analysed the statutory scheme and held that initiation of prosecution under Section 448 (and consequentially Section 447) requires material evidence demonstrating that a statement was false in any material particular knowing it to be false, or that there was an omission of a material fact with knowledge of its materiality. A combined reading of Sections 447 and 448 shows that criminal liability for false statements or omissions is predicated on a clear finding of fraud or suppression. Absent such findings or material unearthed by investigation establishing fraud or suppression, prosecution ought not to be permitted to proceed as of right. [Paras 9, 10, 11, 12]

Prosecution under Sections 448/447 is not maintainable without material evidence or a finding of fraud or suppression of material facts.

Requirement of material evidence before criminal prosecution - Abuse of process of law - Whether a private complaint based solely on dissatisfaction with the assessee's reply to a showcause notice can sustain criminal proceedings under the Companies Act. - HELD THAT: - The Court found that the present complaint was founded principally on the defacto complainant's dissatisfaction with the petitioner's reply to the showcause notice, without recording particulars showing suppression or fraudulent omission. The Court emphasised that whether statements are false is a matter for evidence, but mere dissatisfaction by the complainant cannot substitute for material findings required to attract criminal liability. Launching criminal prosecution on such a slender basis amounts to a futile exercise and an abuse of process. [Paras 6, 11, 12]

A complaint based only on an unsatisfactory reply to a showcause notice, without material findings of suppression or fraud, cannot sustain criminal proceedings and amounts to abuse of process.

Fraud and suppression of material facts - Whether the fact that the bad debts were reflected in accounts since 2003 affects the viability of the prosecution based on their write-off in the year ended 31.03.2011. - HELD THAT: - The Court noted material on record indicating that the amounts written off in the accounts for the year ended 31.03.2011 had in fact been shown as bad debts from 2003 and had earlier been noticed by the Registrar of Companies. The projection of the complaint as if the write-off appeared for the first time in 2011 was therefore improper. In the absence of any finding that there was a deliberate omission or suppression in the year 2011 distinct from the prior disclosures, the allegation of false statement was not sustainable. [Paras 3, 12]

The prior disclosure of the bad debts from 2003 undermines the premise of a fresh false statement in the year ended 31.03.2011 and negates the foundation for prosecution in the absence of a finding of suppression.

Final Conclusion: The Criminal Original Petition is allowed; the proceedings in E.O.C.C.No.197 of 2017 are quashed as the complaint lacks material findings of fraud or suppression necessary to sustain prosecution under Sections 448/447 and is an abuse of process.

Deprivation of reasonable opportunity of hearing - Remand for fresh consideration - Pre-existing dispute - Service of notice by advocate - Interim stay of proceedings

Deprivation of reasonable opportunity of hearing - Impugned order of the Appellate Tribunal passed after remand was invalid as the appellant was deprived of a reasonable opportunity of hearing. - HELD THAT: - The Appellate Tribunal proceeded to decide the matter after remand by this Court although the appellant did not appear and, on the material on record, notice to the appellant could not be shown to have been effectively served. The Court held that the appellant could not be fairly imputed with knowledge of the earlier order passed by this Court without notice and of the revival of proceedings before the Appellate Tribunal. For these reasons the impugned order could not be sustained.

Impugned order dated 09.07.2018 is set aside on the ground that the appellant was deprived of a reasonable opportunity of hearing.

Remand for fresh consideration - Pre-existing dispute - Service of notice by advocate - Matter restored to the Appellate Tribunal for fresh decision on merits, including consideration of pre-existing dispute and the validity of service of the demand notice. - HELD THAT: - In view of this Court's earlier remand in light of the decision in Macquarie Bank Limited concerning notice by a lawyer, the Appellate Tribunal is required to reconsider the appeal on merits. The Court did not decide the merits, including the contention of a pre-existing dispute, but directed that all relevant facts and contentions be given due and adequate consideration by the Appellate Tribunal on fresh hearing.

Appeal restored to the Appellate Tribunal for reconsideration afresh and on merits; issues such as pre-existing dispute to be adjudicated by the Appellate Tribunal.

Interim stay of proceedings - Interim position as to stay of proceedings before the Tribunal until final decision of the appeal by the Appellate Tribunal, without affecting other creditors' independent proceedings. - HELD THAT: - This Court noted prior orders including a stay and a subsequent clarification that other creditors may proceed subject to objections. The Court provided that further proceedings before the Tribunal shall remain stayed until the Appellate Tribunal finally decides the restored appeal, but made clear that neither the pendency of the appeal nor observations in these proceedings will affect other creditors who may pursue their claims, which are to be dealt with on their own merits.

Proceedings before the Tribunal stayed until final decision by the Appellate Tribunal; other creditors are free to proceed independently subject to objections.

Final Conclusion: The appeal is allowed to the extent indicated: the Appellate Tribunal's order dated 09.07.2018 is set aside for want of a reasonable opportunity to the appellant; the appeal is restored for fresh and expeditious consideration on merits (including any pre-existing dispute); proceedings before the Tribunal are stayed until the Appellate Tribunal's final decision, without affecting the rights of other creditors to proceed independently.

Amendment of resolution plan - level playing field between resolution applicants - permission to other resolution applicants to modify plans - disclosure of resolution plan before the Adjudicating Authority - entertainment of appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016

Amendment of resolution plan - level playing field between resolution applicants - permission to other resolution applicants to modify plans - disclosure of resolution plan before the Adjudicating Authority - Validity of the Adjudicating Authority's order permitting the appellant to place amendments to its resolution plan and simultaneously permitting the other resolution applicant to place modifications for consideration of the Committee of Creditors, and whether the Appellate Tribunal erred in declining interference. - HELD THAT: - The Court held that the Adjudicating Authority's order of 13.12.2021, which allowed the appellant to place proposed amendments to its resolution plan and, to preserve a level playing field, permitted the other resolution applicant to place corresponding modifications before the Committee of Creditors, was reasonable. The admitted effect of the appellant's communications (including the affidavit of 17.11.2021 and the proposed reduction of the plan term from 180 to 90 days) showed that key features of the appellant's plan were to be altered; whether such amendments arose from CoC requirements or otherwise, they amounted to modification of terms. In that context the Adjudicating Authority was entitled to balance competing interests by granting reciprocal opportunity to the other resolution applicant. The appellant's contention that disclosure of its terms before the Adjudicating Authority prejudiced it did not establish fault by the resolution professional, the CoC or the other applicant when the appellant itself chose to place those matters before the Adjudicating Authority. Having found the Adjudicating Authority's approach to maintain fairness unimpeachable, the Appellate Tribunal correctly declined to interfere.

The appellate challenge to the NCLT order was dismissed; the Appellate Tribunal's refusal to interfere in the Adjudicating Authority's order was upheld.

Entertainment of appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 - Whether this Court should entertain the appeal under Section 62 of the Code filed by one of the resolution applicants. - HELD THAT: - The Court considered the materials and submissions and declined to exercise jurisdiction to entertain the appeal under Section 62 by the resolution applicant. The appeal did not disclose a basis for interference with the concurrent view taken by the Adjudicating Authority and the Appellate Tribunal on the relief sought and the balancing exercise undertaken to preserve a level playing field between competing resolution applicants.

The appeal under Section 62 was not entertained and is dismissed.

Permission to other resolution applicants to modify plans - level playing field between resolution applicants - Further processing and scope of examination by the Adjudicating Authority after CoC approval. - HELD THAT: - The Court noted two practical constraints: the successful resolution applicant was not impleaded and no order prejudicial to its interests should be made; and further processing of the matter remained to be undertaken by the Adjudicating Authority. Consequently, while declining interference with the impugned orders, the Court left all relevant aspects open for examination by the Adjudicating Authority and directed that such further processing be strictly in accordance with law.

Matter remitted for further processing and examination by the Adjudicating Authority in accordance with law; no relief prejudicial to the successful resolution applicant to be granted by this Court.

Final Conclusion: The Supreme Court declined to interfere with the NCLT order permitting the appellant to place amendments to its resolution plan and the NCLT's contemporaneous allowance for the other resolution applicant to place modifications so as to maintain a level playing field; the NCLAT rightly refused to disturb that order, the appeal under Section 62 is dismissed, and further aspects are left open for the Adjudicating Authority to examine in accordance with law.

Admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of financial debt and default - threshold debt requirement for initiation of CIRP - appointment of Interim Resolution Professional - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and invitation of claims - provision for interim expenses to be deposited with IRP

Admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - threshold debt requirement for initiation of CIRP - The section 7 application filed by the financial creditor for initiation of CIRP against the corporate debtor is admitted. - HELD THAT: - The Tribunal found that the financial creditor had sanctioned and disbursed credit facilities to the corporate debtor and that the corporate debtor did not dispute the disbursement. The records, including account statements and acknowledgements, established that a financial debt in excess of Rupees One Crore is due and payable and that default has occurred. On this basis the application under section 7 meets the statutory threshold and is complete in form and substance and therefore deserves to be admitted. [Paras 11, 12, 16]

Application under section 7 is admitted and CIRP is initiated.

Existence of financial debt and default - The corporate debtor had acknowledged liability and default in repayment of the financial debt claimed by the financial creditor. - HELD THAT: - The Tribunal noted multiple acknowledgements by the corporate debtor of amounts due and relied on account statements and correspondence filed by the financial creditor. The corporate debtor did not dispute the disbursement of facilities and had on occasions admitted specific sums as due, which supported the finding of default. [Paras 12, 14, 15]

Existence of financial debt and default by the corporate debtor is established.

Appointment of Interim Resolution Professional - provision for interim expenses to be deposited with IRP - public announcement and invitation of claims - A named insolvency professional is appointed as Interim Resolution Professional and directions issued for public announcement and interim expense deposit. - HELD THAT: - The financial creditor proposed a registered insolvency resolution professional and provided the required declaration. The Tribunal appointed the proposed professional as Interim Resolution Professional to perform functions under the Code. The financial creditor was directed to deposit a specified sum with the IRP to meet expenses of public notice and invitation of claims, and the IRP's fee and expenses are to comply with applicable IBBI regulations. The Tribunal also directed immediate public announcement of the CIRP as required. [Paras 17, 18]

Mr. Santanu T Ray is appointed as IRP; public announcement to be made and interim expenses to be deposited with the IRP.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium is declared with specified consequential prohibitions and exceptions. - HELD THAT: - Upon admission of the section 7 petition, the Tribunal declared the moratorium under section 14, prohibiting institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security interest, and recovery of property occupied by the corporate debtor. The order preserved continuing supply of essential goods and services and recorded statutory exceptions to the scope of the moratorium. The moratorium is directed to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation as applicable. [Paras 18]

Moratorium under section 14 is imposed with the consequential directions set out in the order.

Final Conclusion: The Tribunal admitted the section 7 petition, initiated CIRP against the corporate debtor, declared the moratorium under section 14, appointed the named Interim Resolution Professional, directed immediate public announcement and deposit of interim expenses with the IRP, and issued consequential administrative directions.

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Existence of financial debt and default - Threshold of financial debt exceeding one crore - Tribunal's jurisdiction to adjudicate a company petition and limitation - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional and his functions - Financial creditor's obligation to deposit expenses for public announcement

Existence of financial debt and default - Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Corporate Debtor owed a financial debt which was due and payable and had defaulted, warranting initiation of CIRP. - HELD THAT: - The Tribunal found from the correspondence and documents on record that the Corporate Debtor repeatedly acknowledged the debt and demonstrated willingness to settle, and that default in repayment had occurred. The Corporate Debtor's own letters and admissions in its reply were held to establish liability. On the materials before it the Tribunal concluded that a financial debt was due and payable by the Corporate Debtor to the Financial Creditor and that default existed, making the case fit for initiation of the CIRP. [Paras 8, 9, 10]

Default by the Corporate Debtor is established and a financial debt is due and payable.

Threshold of financial debt exceeding one crore - Tribunal's jurisdiction to adjudicate a company petition and limitation - The claim exceeds the statutory monetary threshold and the petition was filed within limitation and before the appropriate forum. - HELD THAT: - The Tribunal examined the amounts claimed and recorded that the financial debt in question exceeded Rupees One Crore. It also noted that the petition was filed within the limitation period and that the National Company Law Tribunal has jurisdiction to entertain the Company Petition filed by the Financial Creditor. On these bases the Tribunal held the statutory threshold and forum requirements satisfied. [Paras 10, 11]

Monetary threshold met, limitation satisfied, and the Tribunal has jurisdiction.

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - The Section 7 petition is admitted and a moratorium is declared with the consequential prohibitions and protections specified by the Code. - HELD THAT: - Having found that a financial debt existed, default was established, the threshold and jurisdictional requirements were met, and the petition was complete in form, the Tribunal admitted the Company Petition under Section 7. Consequentially, the Tribunal declared the moratorium under Section 14, prohibiting institution or continuation of suits or proceedings, transfer or disposal of assets by the corporate debtor, actions to enforce security interests (including under SARFAESI), and recovery of property in possession of the corporate debtor; it further directed continuity of supply of essential goods and services during the moratorium and recorded exceptions prescribed by the Code. [Paras 11, 13]

The petition under Section 7 is admitted and moratorium under Section 14 is imposed with the stated consequential directions.

Appointment of Interim Resolution Professional and his functions - Financial creditor's obligation to deposit expenses for public announcement - An Interim Resolution Professional is appointed and the Financial Creditor is directed to deposit specified funds to meet public notice and claims invitation expenses. - HELD THAT: - The Financial Creditor proposed a registered insolvency professional and furnished his declaration that no disciplinary proceedings were pending. The Tribunal appointed the proposed professional as Interim Resolution Professional to perform functions under the Code and directed that the Financial Creditor deposit a sum to meet expenses of issuing the public notice and inviting claims, subject to Committee of Creditors' approval, and ordered immediate public announcement as required under the Code. [Paras 12, 13]

Mr. Sunil Gajanan Nanal is appointed as Interim Resolution Professional and the Financial Creditor must deposit funds for public announcement expenses.

Final Conclusion: The Company Petition under Section 7 is admitted: the Tribunal found that the Corporate Debtor owed and had defaulted on a financial debt exceeding the statutory threshold, the petition was within limitation and filed before the proper forum; moratorium under the Code is declared; an Interim Resolution Professional is appointed; and the Financial Creditor is directed to deposit funds for public announcement and claims invitation.

Initiation of Corporate Insolvency Resolution Process under Section 9 - service of demand notice in Form 3 - date of default by written acknowledgement and limitation - undisputed operational debt - moratorium under Section 14 - appointment of Interim Resolution Professional and suspension of board powers

Service of demand notice in Form 3 - The demand notice in Form 3 dated 29.08.2019 was validly served on the corporate debtor. - HELD THAT: - The petitioner produced the postal tracking report evidencing delivery of the speed post containing the demand notice. The Tribunal examined the tracking evidence and recorded that the speed post was delivered to the corporate debtor. On this basis the Tribunal was satisfied that the statutory demand notice had been properly served before filing the Section 9 petition. [Paras 9]

Demand notice was properly served and service requirement under the Code is satisfied.

Undisputed operational debt - The operational debt claimed by the petitioner was not disputed by the corporate debtor and the liability stood admitted. - HELD THAT: - The corporate debtor, in its reply, admitted its liability and inability to pay the debt. The petitioner also filed an affidavit under Section 9(3)(b) affirming that no dispute had been raised by the corporate debtor in respect of the claimed debt. Having regard to these admissions and the affidavit, the Tribunal concluded that there was no bona fide dispute on the claimed operational debt. [Paras 10, 13]

The Tribunal found the operational debt to be undisputed and the requirement of absence of a bona fide dispute is met.

Date of default by written acknowledgement and limitation - The petition was filed within limitation based on the date of default being the date of written acknowledgement, 07.03.2017. - HELD THAT: - The petitioner relied on a written communication dated 07.03.2017 in which the corporate debtor acknowledged the debt; the Tribunal treated that date as the date of default for limitation purposes. The Section 9 petition filed on 19.09.2019 was held to be within the permissible limitation period having regard to the acknowledged date of default. [Paras 4, 11]

The petition is within limitation as the date of default is 07.03.2017 and the petition was filed thereafter within the allowable period.

Initiation of Corporate Insolvency Resolution Process under Section 9 - moratorium under Section 14 - appointment of Interim Resolution Professional and suspension of board powers - The petition under Section 9 was admitted; CIRP was initiated, moratorium imposed and an Interim Resolution Professional appointed with attendant directions. - HELD THAT: - The Tribunal found that the Form 5 was complete, the operational debt exceeded the statutory monetary threshold applicable at the time, default was proved, and the corporate debtor had not discharged the debt. Consequently, the conditions of Section 9(5)(i) were satisfied. The Tribunal admitted the petition, directed the moratorium in terms of Section 14 to operate from the date of the order until completion of the CIRP or earlier relief, and appointed Mr. Pawan Sharma as Interim Resolution Professional. The Tribunal further directed filing of consent in Form-2, vesting of management with the Interim Resolution Professional under Section 17, compliance with duties under Section 18, public announcement, constitution of the Committee of Creditors, fortnightly progress reports, and deposit by the petitioner to meet immediate CIRP expenses. [Paras 14, 15, 16, 17, 18]

Section 9 petition admitted; moratorium imposed and Interim Resolution Professional appointed with specified statutory and administrative directions.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the operational creditor, holding that the demand notice was duly served, the debt was undisputed and the petition was within limitation; it accordingly initiated the CIRP, imposed the statutory moratorium and appointed an Interim Resolution Professional with consequential directions.

Verification and admission of claims by the liquidator under the Insolvency and Bankruptcy Code - Overriding effect of the Insolvency and Bankruptcy Code over other laws - Timelines in liquidation proceedings and the model time-line under Regulation 47 - Return of monies received in distribution under Regulation 43 - Liquidator's duty to verify claims under Sections 38 and 39 and Regulations 16, 18 and 30 - Distribution priority and non-obstante effect under Section 53 - Power to institute or defend proceedings on behalf of the corporate debtor under Section 35(k)

Verification and admission of claims by the liquidator under the Insolvency and Bankruptcy Code - Liquidator's duty to verify claims under Sections 38 and 39 and Regulations 16, 18 and 30 - Timelines in liquidation proceedings and the model time-line under Regulation 47 - Return of monies received in distribution under Regulation 43 - Admission by the liquidator of the claims of financial creditors despite parallel proceedings before other fora and whether the liquidator must await adjudication before admitting claims or distributing proceeds. - HELD THAT: - The Adjudicating Authority held that the liquidator is mandated to verify and admit or reject claims strictly under the Code and the Liquidation Process Regulations by reference to the liquidation commencement date and the proofs on record, and is not required to await the outcome of parallel proceedings before DRT or other courts where the debt had not crystallized into a decree as on the liquidation commencement date. Timelines in liquidation are sacrosanct and the Code contemplates verification and admission within prescribed timeframes; Section 238 gives the Code overriding effect and Section 53 contains a non-obstante clause governing distribution. The Authority observed that the liquidator here verified claims on the basis of Form D and supporting records, admitted only part of some claims, sought legal opinion on contentious points and placed matters before the Stakeholders Consultation Committee. Regulation 43 provides the post-distribution remedy to recover any amounts wrongly distributed. On these bases the prayer that the liquidator be directed to await final adjudication before admitting claims or disbursing funds was rejected. [Paras 16, 17, 18, 19, 20]

The liquidator was properly entitled to verify and admit the claims presented and need not await final adjudication of parallel proceedings before admitting claims or commencing distribution; Regulation 43 affords a remedy for any undue distribution.

Verification and admission of claims by the liquidator under the Insolvency and Bankruptcy Code - Liquidator's duty to verify claims under Sections 38 and 39 and Regulations 16, 18 and 30 - Whether the liquidator had 'adjudicated' the claims of the financial creditors and therefore acted beyond his role under the Code. - HELD THAT: - The Authority found the applicant's allegation that the liquidator had 'adjudicated' claims to be misconceived. The records show the liquidator performed verification under the statutory scheme - receiving Form D submissions, considering supporting documents and statements of account, admitting claims in part, and filing the list of stakeholders. Any use of the term 'adjudicated' in the liquidator's documents was treated as inadvertent or typographical and did not indicate that the liquidator usurped judicial functions. No procedural irregularity warranting interference was pointed out in the present proceedings. [Paras 16]

The allegation of adjudication by the liquidator is rejected; the liquidator's actions constituted verification under the Code and Regulations, not adjudication.

Final Conclusion: IA No.368/2020 is dismissed. The tribunal affirms that the liquidator may verify and admit claims under the Code and Regulations without awaiting outcomes of parallel fora where debts were not crystallized as on the liquidation commencement date, notes Regulation 43 as the remedy for any undue distribution, directs the liquidator to expeditiously pursue pending actions and include results in status reports, and disposes of the application accordingly.

Right to have counsel present during recording of statement under PMLA - presence of counsel at visible but not audible distance - protection against self-incrimination under Article 20(3) - requirement of real and live apprehension of coercion to justify presence of counsel - videographing and audiographing as safeguards against coercion

Right to have counsel present during recording of statement under PMLA - presence of counsel at visible but not audible distance - requirement of real and live apprehension of coercion to justify presence of counsel - videographing and audiographing as safeguards against coercion - Whether the respondent is entitled as of right to have his lawyer remain at a safe distance (able to see but not hear) during recording of his statement under Section 50 of the PMLA. - HELD THAT: - The Court applied precedent including Poolpandi and Ramesh Chandra Mehta to hold that the presence of counsel during statutory enquiries is not an absolute right where there is no formal accusation (FIR) or complaint. Reliance was placed on the principle that enquiries under revenue and related statutes may legitimately exclude third party accompaniment where necessary to prevent non cooperation or undue influence. The Division Bench's approach in Sandeep Jain was followed: permission for counsel to remain at a visible but not audible distance is warranted only where the person adduces credible material showing a real and live apprehension of possible coercion or other misconduct during recording. In the absence of such apprehension, and where recording is being videographed and audiographed, the apprehension of coercion is dispelled and no right to have counsel present at that limited distance arises as of right. Applying these principles, the impugned direction permitting counsel to be present at visible but not audible distance during the respondent's statement was held to be unjustified in the absence of any established apprehension of coercion. [Paras 4, 14]

The direction in para 26 of the trial court order permitting one advocate to remain at a distance where he could see but not hear the accused during recording of statement is stayed; such presence is not a matter of right absent credible evidence of a real apprehension of coercion, particularly where the recording is videographed and audiographed.

Final Conclusion: The High Court stayed the trial court's direction allowing counsel to remain at visible but not audible distance during the recording of the respondent's statement under the PMLA, holding that such presence is not a right in the absence of a real and live apprehension of coercion; Crl.M.A.No.11846/2022 disposed and matter listed on 24.08.2022.

Liquidated damages - penalty - consideration for service - service declared under Section 66E(e) as agreeing to refrain from, to tolerate or to do an act

Liquidated damages - penalty - service declared under Section 66E(e) as agreeing to refrain from, to tolerate or to do an act - consideration for service - Whether the amounts recovered by the appellant from its contractor as liquidated damages are exigible to service tax as consideration for a declared service under Section 66E(e). - HELD THAT: - The Tribunal found on the material before it that there was no contractual obligation between the appellant and the contractor whereby the appellant agreed to refrain from an act, to tolerate an act or situation, or to do an act in favour of the contractor such that any remuneration for such forbearance or tolerance was prescribed. The amounts recovered were levied as liquidated damages and operated as penalty for non-performance. Such recoveries, being in the nature of penalty and not paid as consideration for any service falling within the ambit of Section 66E(e), do not constitute consideration for a declared service. The Tribunal applied its earlier reasoning in Lemon Tree Hotel (Tri. Del.) where forfeiture of advance on cancellation was held to be a penalty and not consideration under Section 66E(e), and reached the same conclusion on the facts of this case.

The liquidated damages collected from the contractor are penalty and not consideration for a declared service under Section 66E(e); accordingly the demand for service tax is not sustainable.

Final Conclusion: Appeal allowed; the impugned order confirming service tax, penalty and interest on the amounts recovered as liquidated damages is set aside and the appellant is entitled to consequential benefits.

Exemption under mega Notification No.25/2012-ST - works contract services for laying of pipeline for water supply - Government Authority as defined in Notification No.25/2012-ST - function entrusted to a municipality under Article 243W - reverse charge liability on recipient under Notification No.30/2012-ST

Exemption under mega Notification No.25/2012-ST - works contract services for laying of pipeline for water supply - Government Authority as defined in Notification No.25/2012-ST - function entrusted to a municipality under Article 243W - reverse charge liability on recipient under Notification No.30/2012-ST - Appellant entitled to exemption under Notification No.25/2012-ST for works contract services received for laying fresh water pipeline and hence not liable under reverse charge for the period July 2012 to March 2015. - HELD THAT: - The Tribunal accepted that the appellant was established by the Government of Rajasthan and is 100% owned and controlled by the State. The exemption at Sr. Nos. 12 and 25 of Notification No.25/2012-ST applies to services by way of construction, erection or installation of pipeline for water supply and to services provided to a Government Authority carrying out functions entrusted to a municipality under Article 243W. Having found that laying of fresh water pipeline is a function entrusted to a municipality under Article 243W and that the appellant is a State-established, wholly owned and controlled company, the Tribunal held that the services received fall within the scope of the Notification and are exempt. Consequent reverse charge demand raised under the impugned order was therefore unsustainable and was set aside. [Paras 13]

Impugned demand, interest and penalties confirmed by the lower authority set aside; appeal allowed and exemption under Notification No.25/2012-ST granted with consequential reliefs for the period July 2012 to March 2015.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant - a company set up, wholly owned and controlled by the Government of Rajasthan - is entitled to exemption under Notification No.25/2012-ST for works contract services relating to laying of fresh water pipeline; the reverse charge demand and related penalties were set aside for the period July 2012 to March 2015.

No CENVAT credit on capital goods used exclusively in manufacture of exempted goods for two years - Computation of two-year period from date of commencement of commercial production or from date of installation (proviso) - Rule 6(4) and Rule 6(6)(v) of the CENVAT Credit Rules, 2004 - interpretation - Exports under bond not to be treated as exempted clearances for denial of credit - CENVAT credit admissible where capital goods are not used exclusively for manufacture of exempted goods

No CENVAT credit on capital goods used exclusively in manufacture of exempted goods for two years - Computation of two-year period from date of installation - Rule 6(6)(v) - exports under bond - Admissibility of CENVAT credit on capital goods installed in 2016-17 where some final products were exempted in 2016-17 but goods were cleared on payment of duty and exported under bond within the two-year period. - HELD THAT: - The court construed the amended Rule 6(4) to mean that CENVAT credit is not allowable only when capital goods are used exclusively for manufacture of exempted goods for a continuous period of two years computed from commencement of commercial production or, where received later, from date of installation (proviso). If capital goods are used for manufacture of dutiable goods or for exports (exports under bond are not to be treated as exempted clearances under Rule 6(6)(v)), credit is not barred. On the facts the assessee installed capital goods in 2016-17 and evidence (ER-1 for June 2017) showed clearances on payment of duty during the two-year window; earlier exports under bond did not convert the capital goods into being 'exclusively' used for exempted goods. Applying Rule 6(4) read with Rule 6(6)(v) and relevant precedents, the Tribunal's conclusion that credit was admissible was a permissible conclusion and the Revenue failed to refute authorities to the contrary. [Paras 10, 11, 12]

CENVAT credit on the capital goods was held admissible because the goods were not used exclusively for manufacture of exempted goods for the two-year period; exports under bond did not operate to deny credit.

Admission of appeals on substantial question of law - Deference to tribunal's possible conclusion - Whether the appeal raised a substantial question of law warranting admission by the High Court. - HELD THAT: - Relying on the principles in Steel Authority of India Ltd., the court observed that an appeal is to be admitted only if it raises a substantial question of law not answered earlier or there is a conflict of decisions, or if the Tribunal's conclusion is not a possible conclusion on the material. The Tribunal had reached a possible conclusion on the interpretation and application of Rule 6(4) and Rule 6(6)(v) to the facts; there was no compelling reason to interfere. Consequently no substantial question of law for admission was found. [Paras 13, 14]

No substantial question of law arises; the Revenue's appeal is not maintainable and is dismissed.

Final Conclusion: The Revenue appeal is dismissed; the Tribunal's allowance of CENVAT credit (on the view that the capital goods were not used exclusively for exempted goods within the two year period and exports under bond do not amount to exempted clearances) is sustained.

Entitlement to refund of deposit made during investigation - revenue deposit - inapplicability of Section 11B time-bar to revenue deposits - interest under Section 35 FF - treatment of investigation deposits as 'under protest'

Entitlement to refund of deposit made during investigation - revenue deposit - inapplicability of Section 11B time-bar to revenue deposits - interest under Section 35 FF - Whether the amount of Rs. 10 lakhs deposited during investigation is exigible to be treated as duty subject to refund time-bar under Section 11B, or is a refundable revenue deposit entitling the appellant to refund with interest under Section 35 FF. - HELD THAT: - The Tribunal found that the sum deposited by the appellant during the pendency of investigation was not duty, fine or penalty but a revenue deposit made in the course of investigative proceedings. Consequently the statutory refund limitation under Section 11B does not apply to such a revenue deposit. The appellant is therefore entitled to refund of the deposit and to interest under Section 35 FF, for which no limitation period is applicable. In view of this characterisation, the revenue cannot retain the pre-deposit; the original authority is directed to refund the amount along with interest at 12% from the date of deposit until the date of refund. The Tribunal allowed the appeal on this basis. [Paras 9]

Amount deposited during investigation is a revenue deposit, not taxable duty; refund directed with interest under Section 35 FF and Section 11B time-bar held inapplicable.

Final Conclusion: Appeal allowed. The Tribunal directed refund of the pre-deposit (Rs. 10 lakhs) made during investigation together with interest at 12% from the date of deposit until the date of refund, holding the deposit to be a revenue deposit not subject to the time-bar under Section 11B and payable with interest under Section 35 FF.

Refund of service tax paid under reverse charge mechanism governed by Section 11B - limitation for refund claims under Section 11B - mistaken payment of service tax and entitlement to refund - time bar under the statutory refund regime

Refund of service tax paid under reverse charge mechanism governed by Section 11B - limitation for refund claims under Section 11B - mistaken payment of service tax and entitlement to refund - Whether a refund claim for service tax paid (allegedly by mistake) under the reverse charge mechanism is governed by the limitation and procedure of Section 11B and hence time barred when filed after one year. - HELD THAT: - The Tribunal held that irrespective of whether the service tax was ultimately payable by the appellant, the amount was admittedly paid as service tax and therefore the statutory refund mechanism and limitation under Section 11B apply. Accepting the revenue's contention and the precedents relied upon, the Tribunal reasoned that permitting an exception on the ground that the duty/tax was not payable would render Section 11B redundant; consequently there is no alternate provision for refund outside Section 11B. Since the appellant's refund claim was filed after the one year period prescribed under Section 11B, the claim is time barred. [Paras 3, 4]

The refund claim is governed by Section 11B and, having been filed after the one year limitation, is time barred; the impugned order is upheld and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that a payment made as service tax (even if made mistakenly under reverse charge) is subject to refund under Section 11B and that the appellant's delayed claim is barred by the one year limitation.

Remand for de novo adjudication - violation of principles of natural justice - right to cross-examination - right to peruse relied upon documents - opportunity of personal hearing

Remand for de novo adjudication - violation of principles of natural justice - right to cross-examination - right to peruse relied upon documents - opportunity of personal hearing - Whether the appeals should be remanded to the original adjudicating authority for fresh decision in view of deficiencies in the earlier adjudication. - HELD THAT: - The Tribunal observed that a batch of appeals had been remanded by its order dated 29th January, 2013 on the ground that the adjudicating authority had not afforded cross examination to various persons and had not furnished to the notices the documents relied upon before adjudication, thereby infringing principles of natural justice. Because the present appeals arise from the same adjudication and the Tribunal's remand keeps all issues open for reconsideration by the original authority, the appeals could not be properly decided in isolation. The appeals were therefore set aside and remitted to the original authority for de novo adjudication in accordance with the directions contained in the Tribunal's order dated 29th January, 2013. The remand expressly requires that the appellants be granted an opportunity of personal hearing before the issues are decided afresh. [Paras 3, 4]

The impugned orders are set aside and the matters are remanded to the original authority for fresh adjudication in accordance with the Tribunal's directions dated 29th January, 2013, with personal hearing to the appellants.

Final Conclusion: Appeals allowed by way of remand: matters set aside and remitted to the original adjudicating authority for de novo consideration in conformity with the Tribunal's earlier directions, including grant of personal hearing.

Confiscation of goods - redemption fine and penalty - non-accountal in RG-1 register - liability to confiscation where goods not accounted under Rule 25(1)(b) - plausible explanation for non-recording - burden on Department to prove clandestine removal

Non-accountal in RG-1 register - plausible explanation for non-recording - confiscation of goods - redemption fine and penalty - burden on Department to prove clandestine removal - Whether confiscation of goods and imposition of redemption fine and penalty could be sustained where production was not recorded in RG-1 but a plausible explanation was given and there was no evidence of clandestine removal. - HELD THAT: - The adjudication rested solely on the visiting officers' physical stock-taking and the statement of the firm's partner that production was not recorded because the concerned dealing staff was on leave. The Department produced no evidence to rebut this explanation or to establish that the unaccounted goods were kept with an intention for clandestine removal. In the absence of any material showing clandestine removal or other incriminating circumstances, mere non-accountal in the RG-1 register-when satisfactorily explained-cannot sustain confiscation, redemption fine or penalty. The Tribunal found the authorities' reliance on Rule 25(1)(b) inapplicable on the facts because the necessary evidentiary link to clandestine clearing was absent, and observed that the decisions cited by the appellant supported this approach while the decisions relied on by the Department did not correspond to the facts of the case.

Impugned order upholding confiscation, redemption fine and penalty set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the order of confiscation and the imposition of redemption fine and penalty because the non-recording in the RG-1 register was plausibly explained and the Department failed to produce evidence of clandestine removal.

Priority of secured creditors under Section 26-E of SARFAESI Act and Section 31-B of RDB Act - Overriding effect of Central legislation over State law - Inapplicability of State's first charge under Section 26 of HPVAT against SARFAESI/RDB

Priority of secured creditors under Section 26-E of SARFAESI Act and Section 31-B of RDB Act - Inapplicability of State's first charge under Section 26 of HPVAT against SARFAESI/RDB - Overriding effect of Central legislation over State law - Whether entries/charges recorded in revenue in favour of the Electricity Board and Excise & Taxation Department prevail over the secured creditor's rights and the SARFAESI sale, or whether SARFAESI/RDB provisions have priority. - HELD THAT: - The Court held that the SARFAESI Act and the RDB Act, as parliamentary legislation, declare a priority of secured creditors over all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authorities in respect of secured assets. By virtue of Article 246(1) and judicial pronouncements relied upon (including UCO Bank and the later decision in Civil Appeal No. 2196 of 2012), the provisions of the central enactments operate with overriding effect over conflicting State provisions. Consequently, the first charge claimed under Section 26 of the HPVAT Act cannot operate so as to defeat the statutory priority conferred by Section 26-E of the SARFAESI Act and Section 31-B of the RDB Act. The Court concurred with coordinate-bench decisions of this High Court which reached the same conclusion and, on that basis, held that the revenue entries creating charge in favour of respondents No.3 and 4 were not sustainable insofar as they conflict with the secured creditor's statutory priority and the completed SARFAESI sale. [Paras 16, 17, 18, 20, 21]

Entries/notes creating charges in favour of respondents No.3 and 4 (Rapat Nos. 745 and 190) are not sustainable against the SARFAESI sale; respondents No.1 and 2 are directed to remove those entries/notes and permit execution, registration of the sale deed and attestation of mutation in favour of the petitioners by 30th June, 2022.

Final Conclusion: Writ petition allowed; revenue entries creating charge in favour of the Electricity Board and Excise & Taxation Department set aside insofar as inconsistent with SARFAESI/RDB priority, and authorities directed to permit transfer, register the sale deed and attest mutation in favour of the petitioners within the time fixed.

Compromise decree - award of Lok Adalat deemed to be a decree - finality of Lok Adalat awards - fraud vitiating consent - requirement of cogent reasons for judicial and quasi judicial decisions - setting aside consent decree - approbate and reprobate

Award of Lok Adalat deemed to be a decree - finality of Lok Adalat awards - requirement of cogent reasons for judicial and quasi judicial decisions - setting aside consent decree - Validity of the High Court's recall of the Lok Adalat award and compromise without reasoned findings - HELD THAT: - The Court held that an award of a Lok Adalat is equated to a decree of a civil court and imports finality; therefore a writ court may not set aside such an award in a casual or cryptic manner. Recalling a compromise decree requires strong and cogent reasons because consent decrees (including those recorded by Lok Adalats) are final and enforceable. The High Court's order simply recalled the Lok Adalat order without engaging with or reversing the factual findings recorded by the Lok Adalat, and without providing reasons to justify setting aside the compromise. Reliance was placed on the principles that judicial and quasi judicial decisions must record clear and cogent reasons, both as a matter of transparency and to enable meaningful judicial review. For these reasons the High Court's order could not be sustained and the Lok Adalat award restored. [Paras 29, 31, 32, 36, 37]

The High Court's recall of the Lok Adalat award dated 07.07.2012 was unsustainable for want of reasoned findings and is set aside; the Lok Adalat order is restored.

Fraud vitiating consent - setting aside consent decree - approbate and reprobate - Whether the allegations of fraud by Plaintiff Nos. 4-6 were proved so as to invalidate the compromise - HELD THAT: - The Court observed that allegations of fraud to avoid an agreement must be strictly proved. The Lok Adalat had recorded that the parties admitted the compromise when it was read over and explained in Kannada, and that Plaintiff Nos. 4-6 had accepted the monetary consideration mentioned in the compromise. The objectors failed to explain why they did not raise their objections at the Lok Adalat on 07.07.2012, and did not return the consideration received, which weighed against their case. Given the absence of conclusive proof of fraud and the appellants' conduct in accepting the sums (invoking the principle against approbation and reprobation), the High Court erred in setting aside the compromise on the basis of the pleaded fraud. [Paras 32, 33, 34, 35, 36]

The allegations of fraud were not established so as to vitiate the compromise; the High Court should not have set aside the compromise decree on that basis.

Final Conclusion: The appeals are allowed; the High Court judgment recalling the Lok Adalat award dated 07.07.2012 is set aside and the Lok Adalat order recording the compromise is restored. Parties to bear their own costs.

Regular bail under Section 439 Cr.P.C. - proviso to Section 37(1)(b)(II) of the NDPS Act - commercial quantity of narcotic substance - offence against society/public health - parity in grant of bail - material evidence: FSL report and parcel particulars

Regular bail under Section 439 Cr.P.C. - proviso to Section 37(1)(b)(II) of the NDPS Act - commercial quantity of narcotic substance - material evidence: FSL report and parcel particulars - offence against society/public health - Whether the petitioner is entitled to regular bail in view of the quantity of MDMA seized, the parcel particulars and the proviso to Section 37 of the NDPS Act. - HELD THAT: - The court found that the parcel seized at the post office bore the petitioner's name and phone number and the FSL report confirmed 493.5 grams of MDMA, a manufactured drug amounting to about ten times the commercial quantity. The NDPS Act is a special enactment intended to meet offences that threaten society at large; the proviso to Section 37(1)(b)(II) must be satisfied by a person seeking bail. Having regard to the quantum of the contraband, the nature of the offence and that the investigation was pending without a charge sheet, the court concluded it was not a fit case to exercise discretion under Section 439 Cr.P.C. to grant bail. The court emphasized societal harm from organized trafficking and the need to apply the statutory caution embodied in the proviso when commercial quantities are involved. [Paras 8, 10, 11, 12]

Criminal petition for regular bail is rejected on merits; bail not granted in view of the commercial quantity of MDMA, parcel particulars and the proviso to Section 37 of the NDPS Act.

Parity in grant of bail - material evidence: FSL report and parcel particulars - Whether the petitioner could claim parity with accused No.1, who was granted bail by a Coordinate Bench. - HELD THAT: - The court observed that the bail granted to accused No.1 rested on findings specific to that accused (including observations about tracing and documentary recoveries) and that the present petitioner cannot claim parity merely because accused No.1 obtained bail. The court noted that the parcel stood in the petitioner's name and the phone number belonged to him; these facts, together with the FSL report, distinguish the petitioner's case from that of accused No.1 and preclude automatic application of parity. [Paras 4, 9, 11]

Parity with accused No.1's bail was not accepted; the petitioner's factual nexus to the parcel and forensic report justified treating his bail application differently.

Final Conclusion: The petition for regular bail is refused. Liberty is, however, reserved to the petitioner to approach the Court again after filing of the charge sheet.

Trial in absence of accused - evidence to be taken in presence of accused - dispensing with recording under Section 313 Cr.P.C. - service of summons and securing presence by warrant or proclamation - summary trial procedure under Section 143 of the Negotiable Instruments Act - presumption under Sections 118 and 139 of the Negotiable Instruments Act - document-based offence

Trial in absence of accused - service of summons and securing presence by warrant or proclamation - evidence to be taken in presence of accused - Whether the trial under Section 138 of the Negotiable Instruments Act could be lawfully conducted in the absence of the accused where summons were served but the accused did not appear. - HELD THAT: - The High Court held that criminal trials must ordinarily be held in the presence of the accused and evidence cannot be recorded in his absence except where expressly permitted by the Code of Criminal Procedure. Chapter XXIII and Section 273 Cr.P.C. require evidence to be taken in the presence of the accused or his pleader when personal attendance is dispensed with; apart from Section 299 Cr.P.C., there is no provision permitting recording of evidence in the absence of the accused. The court examined the judgments relied upon by the trial court and concluded that the decision in Indian Bank Association does not authorize conducting the trial in the accused's absence after valid service of summons. Where summons are not served or service is defective, the court must take follow-up steps including re-issuance of summons, assistance of police/nearby court, or issuance of warrant and proclamation to secure presence. The trial court failed to make any effort to secure the accused's presence by warrant or proclamation before proceeding, which was a fundamental procedural error. (See paras 9, 11-12, 16.) [Paras 9, 11, 12, 16]

Trial could not lawfully be held in the accused's absence where his personal attendance was not validly dispensed with and the court failed to secure his presence by warrants or follow-up measures; the convictions recorded in such circumstances are unsustainable.

Dispensing with recording under Section 313 Cr.P.C. - presumption under Sections 118 and 139 of the Negotiable Instruments Act - Whether the trial court properly dispensed with recording the accused's statement under Section 313 Cr.P.C. in view of the evidence and presumptions drawn under the Negotiable Instruments Act. - HELD THAT: - The court held that the trial court and appellate court misapplied the precedents relied upon to justify dispensing with examination under Section 313 Cr.P.C. Indian Bank Association does not address dispensing with Section 313, and Basavaraj R. Patil permits relief from personal attendance only in narrow, justified circumstances and does not eliminate the obligation to comply with Section 313 where incriminating evidence appears. The coordinate bench decision relied upon did not decide that Section 313 may be dispensed with. Consequently, the trial court's dispensation of Section 313 examination was improper where incriminating evidence had been recorded, and such dispensation cannot be sustained. (See paras 13-15, 16.) [Paras 13, 14, 15, 16]

Recording of the accused's statement under Section 313 Cr.P.C. cannot be dispensed with routinely; the courts below erred in dispensing with Section 313 in the circumstances of these cases.

Summary trial procedure under Section 143 of the Negotiable Instruments Act - document-based offence - Whether the summary nature or document-based character of offences under the Negotiable Instruments Act justified the lower courts' procedure and the convictions, and what remedial direction should follow. - HELD THAT: - Although offences under Section 138 are document-based and certain presumptions arise under Sections 118 and 139, the court emphasised that procedural safeguards of criminal trial cannot be bypassed in the name of summary trial or the documentary nature of the offence. Speedy disposal does not permit skipping stages of criminal procedure. Given the procedural infirmities-namely failure to secure the accused's presence and improper dispensation of Section 313-the High Court found that justice required setting aside the convictions and remanding the cases for fresh disposal. The court therefore ordered fresh trial, directed the parties to appear before the magistrate on a specified date, granted the accused liberty to apply under Section 145 of the Negotiable Instruments Act for cross-examination and to adduce defence evidence, allowed the complainant to lead further evidence if necessary, imposed costs, and directed expeditious conduct of the trial. (See paras 2-6, 16 and Order.) [Paras 2, 5, 16]

The summary/document-based nature of Section 138 proceedings does not justify the procedural lapses committed; convictions set aside and matters remanded for fresh trial with specified directions.

Final Conclusion: Revision petitions allowed; the Sessions Court judgment dated 31.8.2019 and the Magistrate's convictions in the listed C.C. matters are set aside and all cases remanded to the Magistrate for fresh trial with directions to secure presence as required, to allow the accused to apply under Section 145 for cross-examination and to adduce defence evidence, to permit the complainant to lead further evidence if necessary, to expedite the trial, and to bear the specified costs.

Offence under section 138 of the Negotiable Instruments Act - Quashing petition under Section 482 Cr.P.C. / inherent jurisdiction - Existence of legally enforceable debt or liability at the time of cheque issuance - Factual disputes and improbability as ground for quashment - Direction for expedition of trial

Quashing petition under Section 482 Cr.P.C. / inherent jurisdiction - Factual disputes and improbability as ground for quashment - Whether the criminal original petition seeking quashment of the complaint under the Negotiable Instruments Act should be allowed where there are disputed factual questions between the parties. - HELD THAT: - The High Court examined the pleadings and material placed before it and observed that the dispute between the parties is essentially factual - including strained family relations, prior complaints between the parties and divergent accounts regarding loans and payments. The Court held that such disputed factual aspects cannot be adjudicated in exercise of inherent jurisdiction under Section 482 Cr.P.C. and that questions of probability or improbability arising from the evidence are matters for the trial court to determine. Consequently, no purely legal ground for quashment was made out on the record before the High Court. [Paras 3, 5, 10, 11]

Criminal original petition for quashment dismissed; factual disputes are not a ground for quashment in the present exercise of inherent jurisdiction.

Offence under section 138 of the Negotiable Instruments Act - Existence of legally enforceable debt or liability at the time of cheque issuance - Whether absence of an existing legally enforceable liability on the date of issuance of the cheque defeats prosecution under section 138. - HELD THAT: - The Court acknowledged the legal principle, as stated in earlier authorities, that section 138 may not be attracted if no liability existed on the date of issuance of the cheque. However, it held that the existence or non existence of liability on that date is a question of fact to be determined by the trial court on evidence. The pleaded case of the complainant asserting that the petitioner received the stated sum on the date mentioned prevents the High Court from resolving this factual contention in a quash petition under Section 482 Cr.P.C. [Paras 12, 13]

Question of existence of liability on the cheque date left to trial court; not a ground for quashment at this stage.

Direction for expedition of trial - Whether the trial court should be directed to expedite the trial. - HELD THAT: - Noting the age of the proceedings and that no substantive legal ground for quashment was established, the High Court exercised its supervisory power to direct that the trial be completed within a specified period. This direction is ancillary to the dismissal of the petition and intended to ensure timely adjudication of the disputed factual issues by the trial court. [Paras 15]

Trial court directed to complete trial within five months from receipt of a copy of the order.

Final Conclusion: The petition for quashment is dismissed; factual disputes concerning receipt of money, existence of liability at the time of cheque issuance and related improbabilities must be decided by the trial court, which is directed to conclude the trial within five months.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Presumption under Section 118(a) of the Negotiable Instruments Act - Probabilising the defence / preponderance of probabilities - Conviction cannot rest solely on statutory presumption where defence is probabilised - High Court reappraisal for perversity of concurrent findings

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Probabilising the defence / preponderance of probabilities - Whether the accused rebutted the statutory presumption by probabilising a defence that the cheque and promissory note were delivered in blank as security for a chit subscription and thereby entitled to acquittal. - HELD THAT: - The Court examined the materials and evidence on record and held that the accused had entered the witness box and given a plausible explanation that the signed cheque and promissory note were handed over as unfilled securities in the course of a chit business. The complainant admitted that obtaining unfilled signed cheques was customary in his chit business and that the ink colour of the signature differed from the writings on the cheque. The accused also produced bank-related material and evidence to support his version. Applying the law that the presumption under Section 139 is rebuttable and that the standard to rebut is by a preponderance of probabilities, the Court found that the accused had probabilised his defence. Having probabilised the defence through evidence and testimony, the statutory presumption could not be allowed to operate as an inexorable basis for conviction. The Court therefore concluded that the defence raised was sufficient to displace the presumption and warranted setting aside the conviction and sentence. [Paras 7, 9, 10, 11]

The accused had probabilised his defence and, having rebutted the statutory presumption on the preponderance of probabilities, is entitled to acquittal.

Presumption under Section 118(a) of the Negotiable Instruments Act - Conviction cannot rest solely on statutory presumption where defence is probabilised - High Court reappraisal for perversity of concurrent findings - Whether the courts below erred in convicting the accused by relying primarily on statutory presumptions under Sections 118(a) and 139 without independent appraisal and weighing of the evidence, and whether such approach amounted to perversity permitting interference. - HELD THAT: - The High Court found that both the trial court and the appellate court primarily relied upon the statutory presumption arising from admitted signature and did not adequately consider or weigh the accused's evidence and explanations. The judgment records that the lower courts 'glossed over the other evidence' and convicted mainly on presumption. Applying the principle that an appellate court may interfere where a finding is perverse or against the weight of evidence, the High Court held that the lower courts' mechanical application of the presumptions without analysing the contradictory material and the accused's testimony rendered their conclusion unsustainable. Consequently, the conviction was set aside and the finding treated as perverse in the circumstances disclosed. [Paras 8, 9, 10, 11]

The courts below erred by resting conviction primarily on statutory presumptions without proper appraisal of the defence evidence; their concurrent findings were set aside as unsustainable.

Final Conclusion: The conviction and sentence under Section 138 of the Negotiable Instruments Act were set aside and the accused was acquitted, the High Court finding that the accused had probabilised his defence thereby rebutting the statutory presumption and that the lower courts had erred by relying primarily on that presumption without adequate appraisal of the evidence.

Dishonour of cheque attracting criminal liability under Section 138 of the Negotiable Instruments Act - Cheque issued as security and its effect on maintainability of prosecution - Inherent jurisdiction of the High Court under Section 482 Cr.P.C. to quash criminal proceedings - Availability of factual defences (prior discharge, agreement to defer payment, limitation) in Section 138 proceedings - Direction for expeditious trial

Cheque issued as security and its effect on maintainability of prosecution - Dishonour of cheque attracting criminal liability under Section 138 of the Negotiable Instruments Act - Whether proceedings under Section 138 N.I. Act are unsustainable because the cheque was issued as a security. - HELD THAT: - The petitioner admitted that the cheque was issued as a security. The Court examined binding precedents which establish that merely labelling a cheque as 'security' does not automatically exclude it from maturing into a negotiable instrument in respect of a legally enforceable debt or liability; where the underlying commercial transaction fructifies or repayment does not occur as agreed, presentation and dishonour of a cheque issued as security may attract criminal liability under Section 138. The Court rejected the contention that issuance as security renders the complaint non-maintainable as a matter of law and held that available defences (such as prior discharge, agreement to defer payment, or limitation) are matters for trial rather than for summary quashing. [Paras 17, 18, 19, 20, 21]

The petition to quash on the sole ground that the cheque was issued as security is dismissed; such a plea does not, as a matter of law, preclude prosecution under Section 138.

Availability of factual defences (prior discharge, agreement to defer payment, limitation) in Section 138 proceedings - Inherent jurisdiction of the High Court under Section 482 Cr.P.C. to quash criminal proceedings - Whether disputed factual contentions (date of issuance/presentation, prior notice of account closure, alleged misuse/interpolation, claim of commission, and limitation) could be adjudicated in the present quashing petition under Section 482 Cr.P.C. - HELD THAT: - The Court observed multiple factual disputes between the parties - including the date the cheque was given, whether the drawer had informed the payee of account closure, allegations of misuse/interpolation, and cross-claims for commission - and held that such contested factual matters cannot be resolved in summary proceedings under Section 482. Those contentions constitute matters for evidence and trial before the court of trial, and cannot form a basis for exercise of the High Court's inherent jurisdiction to quash the criminal complaint at this stage. [Paras 11, 13, 14, 15]

Disputed factual defences and rival contentions are not amenable to resolution in this quashing petition and must be adjudicated at trial.

Direction for expeditious trial - Whether a direction should be issued for speedy disposal of the trial pending in S.T.C. No. 1236 of 2018. - HELD THAT: - Noting that the criminal proceedings have been pending since 2018, the Court directed the trial court to complete and dispose of the trial expeditiously. The direction is administrative and intended to ensure timely adjudication of the disputed factual matters left for trial. [Paras 22, 23]

The trial Court (Judicial Magistrate No. II, Kumbakonam) is directed to complete the trial and dispose of S.T.C. No. 1236 of 2018 preferably within three months from receipt of a copy of this order.

Final Conclusion: The Criminal Original Petition under Section 482 Cr.P.C. seeking quashment of proceedings in S.T.C. No. 1236 of 2018 is dismissed on merits; the plea that the cheque was issued as security does not preclude prosecution under Section 138, disputed factual issues are left for trial, and the trial court is directed to conclude the trial preferably within three months.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption as to negotiable instruments - essential ingredients of offence under Section 138 of the Negotiable Instruments Act - implied authority of a company official to institute criminal complaint - territorial jurisdiction where cheque is presented for encashment - arbitration clause cannot oust criminal court's jurisdiction - voidness of agreement clause restricting enforcement of rights (Section 28, Indian Contract Act) - consideration of probation under the Probation of Offenders Act

Implied authority of a company official to institute criminal complaint - Validity of the complaint lodged by the Branch Manager on behalf of the finance company in absence of a written authorization. - HELD THAT: - The Court held that the Negotiable Instruments Act does not mandate written authorization for a company to be represented when lodging a complaint under Section 138. A person connected with the affairs of the company, such as the branch manager, may have implied authority to prefer the complaint. Although documentary authorization was filed later, the absence of a written authorization at the moment of institution did not render the complaint void. The complainant's position as Branch Manager and his connection with the company's affairs supported the conclusion that he had implied authority to file the complaint on behalf of the company. [Paras 15, 16, 17, 42]

Complaint was competent; the Branch Manager had implied authority to institute the complaint on behalf of the finance company.

Territorial jurisdiction where cheque is presented for encashment - arbitration clause cannot oust criminal court's jurisdiction - voidness of agreement clause restricting enforcement of rights (Section 28, Indian Contract Act) - Whether the trial court had territorial jurisdiction and whether the arbitration clause in the agreement ousted criminal jurisdiction. - HELD THAT: - The Court found territorial jurisdiction in Udaipur proper because the cheque was deposited for encashment in the SBI Udaipur Branch; the place of presentation confers jurisdiction on the forum where the cheque was presented. The arbitration clause in the loan agreement, which sought to confine disputes to arbitration at Agartala, could not bar criminal prosecution: parties cannot, by private agreement, oust the jurisdiction of criminal courts. Relying on Section 28 of the Indian Contract Act, the Court held that any clause which extinguishes or restricts enforcement of rights so as to prevent a party from seeking redress is void; accordingly the arbitration clause did not preclude criminal adjudication under Section 138. [Paras 21, 22, 23, 24, 25]

Trial court had territorial jurisdiction; arbitration clause did not oust criminal jurisdiction and is ineffective to bar prosecution under Section 138.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption as to negotiable instruments - essential ingredients of offence under Section 138 of the Negotiable Instruments Act - Whether the ingredients of Section 138 were satisfied and whether the accused rebutted the statutory presumptions. - HELD THAT: - The Court examined the statutory scheme: a cheque drawn for discharge of liability, its presentation, return unpaid, service of demand notice within the prescribed period, and the drawer's failure to make payment within fifteen days are essential ingredients. The prosecution proved the agreement, the cheque bearing the accused's signature, bank endorsement showing return with remark 'Account Closed', presentation within validity, service of demand notice (postal acknowledgment by accused's wife) and non-payment thereafter. The accused asserted misuse of a blank post-dated cheque and claimed non-receipt of notice but failed to produce concrete evidence to rebut the statutory presumptions under Sections 118 and 139. The Court applied the rebuttable presumption doctrine and found the accused did not discharge the heavy onus to rebut that the cheque was issued for discharge of liability. All ingredients of Section 138 were therefore held to be satisfied. [Paras 36, 38, 39, 40, 44]

All ingredients of Section 138 were proved; the accused failed to rebut statutory presumptions and is guilty of the offence.

Consideration of probation under the Probation of Offenders Act - Whether convict should be released on probation or admonition under the Probation of Offenders Act, 1958. - HELD THAT: - While considering sentence, the Court noted the nature of the offence as deliberate breach of financial commitment causing pecuniary loss. The convict was a mature person who acted with knowledge of consequences. On that factual basis, and having regard to the intentional breach and resultant loss, the Court declined to grant the benefit of probation or admonition. [Paras 41, 44]

Convict not entitled to be released on probation; sentence recorded by the trial court sustained.

Final Conclusion: The revision petition is dismissed; the conviction under Section 138 of the Negotiable Instruments Act and the sentence imposed by the trial court are affirmed.