TaxTMI Updates e-Newsletter
Jun 12,2021

Tax deduction at source under Section 51 - interpretation of "a contract" - "supply under a contract" - continuous supply - tax invoice as contract - value of supply excluding tax for TDS

Interpretation of "a contract" - "supply under a contract" - continuous supply - Meaning of "a contract" for the purpose of determining the liability to deduct tax under Section 51 and whether an invoice by itself constitutes a contract. - HELD THAT: - Section 51 attracts TDS where the total value of such supply, under a contract, exceeds the prescribed threshold. The statutory text refers to "supply under a contract" and not to the standalone value of an invoice; therefore the decisive criterion is the total value of the supply under the agreement between supplier and recipient rather than each invoice in isolation. A contract may be written, verbal or implied and is governed by the Contract Act; sale of goods arrangements are a subset of "supply" under the GST law. Where there is a contract for continuous supply, part supplies invoiced periodically are components of the same contract and the aggregate of those part supplies constitutes the value of supply under that contract. By contrast, an invoice may represent a complete contract, a part of a contract, or merely evidence of a transaction; only when the invoice corresponds to a standalone transaction (i.e., not a part of a continuous contract) would the invoice amount be treated as the value of supply under that contract. The Authority therefore holds that the existence and terms of the underlying agreement determine whether multiple invoices aggregate as a single "supply under a contract" for TDS purposes. [Paras 9, 10, 11, 12]

For Section 51, "a contract" means the agreement (written, verbal or implied) under which supply is made; continuous supplies invoiced periodically form part of the same contract and their aggregate value is relevant for TDS.

Tax deduction at source under Section 51 - tax invoice as contract - value of supply excluding tax for TDS - Application of the TDS threshold to the four factual scenarios presented by the applicant. - HELD THAT: - Applying the legal principle that the total value of supply under the contract determines TDS liability: (i) Scenario 1 - where a single invoice exceeds the threshold, that invoice represents a supply under a contract for that transaction and TDS is applicable. (ii) Scenario 2 - where each invoice is below the threshold and the transaction is a single standalone supply (not part of a contract of continuous supply), TDS is not applicable on that invoice; however, if that invoice is a part-supply under a purchase order or other contract for continuous supply whose aggregate exceeds the threshold, TDS becomes applicable. (iii) Scenarios 3 and 4 - where supplies are on a call-off / continuous supply basis under an agreement, the contract is the relevant unit; if the aggregate value of supplies under that contract exceeds the threshold, TDS must be deducted irrespective of individual invoice amounts. The exclusion of GST/cess from the value for computing the threshold, as explained under the Explanation to Section 51, remains applicable. [Paras 11, 13, 14]

Scenario 1: TDS applies (single invoice > threshold). Scenario 2: no TDS on a standalone invoice below threshold unless it is part of a contract whose aggregate exceeds the threshold. Scenarios 3 and 4: where supplies arise under a continuous contract, the aggregate contract value governs TDS liability.

Final Conclusion: The Authority rules that for TDS under Section 51 the relevant measure is the total value of supply "under a contract" (written, verbal or implied); invoices form part of the contract where supplies are under a continuous or call-off arrangement and their aggregate value must be considered for the Rs.2,50,000 threshold, while a standalone invoice not part of such a contract is assessed on its own value.

Classification of goods - HSN 8433 - machines for cleaning, sorting or grading eggs, fruit or other agricultural produce - HSN 8437 - machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables; milling industry machinery - HSN 8423 - weighing machinery - applicability of GST rate on supply to farmers or farmer cooperatives

Classification of goods - HSN 8433 - machines for cleaning, sorting or grading eggs, fruit or other agricultural produce - HSN 8437 - machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables; milling industry machinery - applicability of GST rate on supply to farmers or farmer cooperatives - Classification and GST rate applicable to Automatic Feeder with Breaker, Drying Machine, Cleaning and Grading Machine, and Pre-stem Remover manufactured and sold by the applicant. - HELD THAT: - The machines are used in post-harvest processing of raisins and grapes - activities of cleaning, grading, drying and packing of fruit. HSN 8437 pertains to machines for seed, grain or dried leguminous vegetables and milling-industry machinery and therefore does not cover machines used for fruits. HSN 8433 specifically covers machines for cleaning, sorting or grading eggs, fruit or other agricultural produce and excludes machinery of heading 8437. Given the machines' use for raisins/grapes (fruits), they fall within HSN 8433 rather than HSN 8437. The Notification entries place the relevant HSN 8433 items in the Schedule attracting the CGST/KGST rate specified for that entry. There is no notification or exemption reducing the rate when such machinery is supplied to farmers or farmer co-operatives, and no material was produced to justify a reduced rate. Consequently the specified machines are taxable under HSN 8433 at the rate indicated in the relevant Notification. [Paras 12, 13, 14, 17]

Automatic Feeder with Breaker, Drying Machine, Cleaning and Grading Machine and Pre-stem Remover are classifiable under HSN 8433 and taxable at 6% CGST and 6% KGST.

Classification of goods - HSN 8423 - weighing machinery - applicability of GST rate on supply to farmers or farmer cooperatives - Classification and GST rate applicable to the Automatic Weighing Machine manufactured and sold by the applicant. - HELD THAT: - Weighing machinery falls under HSN 8423 which covers weighing machinery (excluding highly sensitive balances), including electric or electronic weighing machinery. The Notification contains distinct entries for non-electric and electric/electronic weighing machinery attracting different CGST rates. The Automatic Weighing Machine being electric/electronic is covered by the entry for electric or electronic weighing machinery under HSN 8423 and is thus taxable at the rate applicable to that entry. No exemption or reduced rate for supply to farmers or farmer co-operatives was shown to apply. [Paras 15, 16, 17]

The Automatic Weighing Machine is classifiable under HSN 8423 (electric/electronic weighing machinery) and taxable at 9% CGST and 9% KGST.

Final Conclusion: The Authority rules that the applicant's machines used for processing raisins/grapes (Automatic Feeder with Breaker, Drying Machine, Cleaning and Grading Machine, Pre-stem Remover) are classifiable under HSN 8433 and taxable at 6% CGST and 6% KGST, and the Automatic Weighing Machine is classifiable under HSN 8423 (electric/electronic) and taxable at 9% CGST and 9% KGST; no reduced rate or exemption for supply to farmers/farmer co-operatives was found to apply.

Supply of service by a Government Entity to Central/State Government, Union territory, local authority or specified person against consideration received as grants - exemption under Notification entry - Definition of "Government Entity" - body set up by statute or established by Government with over 90% participation by way of equity or control to carry out a function entrusted by Government - Government control alone does not convert a society/association into a Government Entity - Consideration received in the form of grants - condition precedent for exemption

Definition of "Government Entity" - body set up by statute or established by Government with over 90% participation by way of equity or control to carry out a function entrusted by Government - Government control alone does not convert a society/association into a Government Entity - Whether the applicant (Bellary Nirmiti Kendra) is a "Government Entity" within the meaning of the notification - HELD THAT: - The notification defines "Government Entity" to mean an authority, board or other body including a society or trust which is either set up by an Act of Parliament or State Legislature or established by any Government, and has 90% or more participation by way of equity or control to carry out a function entrusted by the Government or local authority. The applicant is a society registered under the Societies Registration Act and has not established that it was set up by statute or established by the Government. The factual material does not show establishment by Government or requisite government participation/ownership. Consequently, the applicant does not satisfy the definition of "Government Entity" in the notification and cannot be covered by that definition. [Paras 11]

Bellary Nirmiti Kendra is not a "Government Entity" as defined in the notification.

Supply of service by a Government Entity to Central/State Government, Union territory, local authority or specified person against consideration received as grants - exemption under Notification entry - Consideration received in the form of grants - condition precedent for exemption - Government control alone does not convert a society/association into a Government Entity - Whether supply of service by a government-controlled association to Government/local authority against consideration received as grants is exempt from GST - HELD THAT: - The exemption in the notification applies only where (i) the supplier qualifies as a "Government Entity" as defined, (ii) the supply is of service, (iii) the recipient is Central/State Government, Union territory, local authority or specified person, and (iv) the consideration is received in the form of grants from the Government/local authority. Mere government control over an association does not satisfy the statutory definition of "Government Entity." Further, the condition that consideration must be received as grants from the Government/local authority is an essential requirement for claiming the exemption. Therefore, the supply will be exempt only if the supplying association meets the definition of "Government Entity" and the consideration is in the form of grants; if either condition is not fulfilled, the supply is liable to tax. [Paras 9, 11, 12, 13, 14]

Such supplies are exempt from GST only if the supplying association qualifies as a "Government Entity" under the notification and the consideration is received as grants; otherwise the supplies are taxable.

Final Conclusion: The Authority rules that Bellary Nirmiti Kendra does not qualify as a "Government Entity" under the notification and therefore cannot claim the grant-based exemption; generally, supplies by a government-controlled association are exempt only if the supplier meets the notification's definition of "Government Entity" and the consideration is received as grants, failing which the supplies are liable to GST.

Validity of section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 - Ultra vires and constitutionality - Declaratory relief under Article 226 of the Constitution of India

Validity of section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 - Ultra vires and constitutionality - Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 is illegal, null and void, ultra vires and unconstitutional. - HELD THAT: - The petition sought a declaration under Article 226 challenging the vires of section 13(8)(b) of the IGST Act. That challenge was identical to the one raised in writ petition No.2031 of 2018 which the Court allowed by declaring section 13(8)(b) ultra vires and unconstitutional. Having applied the outcome of the related and earlier-declared judgment, the Court found no further adjudication necessary in the present petition and disposed of it accordingly. The Court therefore granted the declaratory relief in terms of the judgment in the related petition and did not record any separate contrary finding in this proceeding. [Paras 4, 6]

Petition disposed of in view of the Court's earlier declaration that section 13(8)(b) of the IGST Act is ultra vires and unconstitutional; no further order.

Final Conclusion: The writ petition under Article 226 is disposed of by applying the Court's contemporaneous declaration in writ petition No.2031 of 2018 that section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 is ultra vires and unconstitutional; no costs.

Constitutionality of section 13(8)(b) of the IGST Act - place of supply of intermediary services - export of services - deeming fiction treating exports as local supply - destination based consumption tax - legislative competence under Article 246A and Article 269A - restriction under Article 286(1)(b) - extra-territorial operation and Article 245 - incompatibility with charging sections and scheme of CGST/IGST Acts

Constitutionality of section 13(8)(b) of the IGST Act - place of supply of intermediary services - deeming fiction treating exports as local supply - destination based consumption tax - legislative competence under Article 246A and Article 269A - restriction under Article 286(1)(b) - incompatibility with charging sections and scheme of CGST/IGST Acts - Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 read with section 8(2) is ultra vires the IGST Act and unconstitutional. - HELD THAT: - The court examined the statutory scheme of the CGST, IGST and MGST Acts and the constitutional framework introduced by the Constitution (101st Amendment) - in particular Article 246A and Article 269A which confine Parliament's power to legislate for GST in the course of inter state trade or commerce and empower Parliament to formulate principles for determining place of supply. GST is a destination based consumption tax and, by the scheme of the Acts, export/import supplies are treated as inter state supplies. Section 13(8)(b) creates an artificial deeming fiction by treating intermediary services supplied from India to recipients outside India as having the place of supply at the Indian intermediary's location, thereby converting an export of services into a local (intra state) supply. That device gives the impugned provision extraterritorial effect without a real nexus to the Indian taxing regime, runs counter to the destination based principle, and conflicts with the charging sections and overall scheme of the CGST and IGST Acts. Further, Article 286(1)(b) bars state law from imposing tax where the supply takes place in the course of export out of India; the deeming in section 13(8)(b) is an artificial device to bring exports within local taxation and therefore offends Articles 245, 246A, 269A and 286(1)(b). Applying these principles, the court held that the provision cannot be sustained and must be struck down. [Paras 65, 66]

Section 13(8)(b) of the IGST Act is ultra vires the Act and unconstitutional.

Final Conclusion: The writ petition is allowed to the extent declared: section 13(8)(b) of the IGST Act (read with section 8(2) insofar as it operates to treat intermediary exports as intra state supplies) is ultra vires and unconstitutional; no order as to costs.

Bail in economic offences - prima facie case - larger public interest - risk of tampering with evidence - investigation and arrest as part of the process of investigation - role of statements of co-accused in forming prima facie opinion - non-bailable and cognizable offences

Bail in economic offences - prima facie case - risk of tampering with evidence - role of statements of co-accused in forming prima facie opinion - larger public interest - Whether the petitioner should be released on bail in respect of offences alleged under the OGST Act, 2017. - HELD THAT: - The petitioner is accused of participating in a scheme involving creation and operation of multiple fictitious firms to avail and pass on bogus input tax credit, causing substantial loss to the State exchequer, and offences under the OGST Act are non-bailable and cognizable (paras. 2-6). Material seized during search and statements, including that of a co-accused, prima facie indicate the petitioner's involvement in handling GST credentials and accounting for several dummy entities; the petitioner's inconsistent statements further weaken his position (paras. 5-6, 11-12). In economic offence cases the court must consider nature of accusations, nature of evidence, severity of punishment, character of accused, likelihood of securing presence at trial, and reasonable apprehension of tampering with witnesses or evidence; economic offences affect public interest and require a stricter approach to bail (paras. 10-11). Given the ongoing investigation, the prima facie evidence against the petitioner, the potential for tampering with evidence or derailing investigation, and the larger interest of society, the court is not inclined to grant bail (paras. 9, 11-13). The observations are confined to the bail application and do not influence trial court proceedings (para. 15). [Paras 10, 11, 12, 13, 15]

Bail application rejected; petitioner not released on bail.

Final Conclusion: In view of the prima facie evidence of involvement in an organized scheme to defraud the revenue, the ongoing investigation, inconsistent statements, and the risk of tampering with evidence, the High Court declined to enlarge the petitioner on bail and dismissed the bail application, leaving the trial court to proceed unaffected by these observations.

Implementation of GST in works contract - works contract as a composite supply of services - revision of Schedule of Rates to exclude embedded pre-GST taxes - transitional adjustment of contract value on migration to GST - methodology prescribed by Office Memorandum for calculation of GST-inclusive work value - recovery of excess payment from contractor - input tax credit and its bearing on contractor's tax incidence - appealability of a demand notice issued under Section 61 of the OGST Act

Revision of Schedule of Rates to exclude embedded pre-GST taxes - transitional adjustment of contract value on migration to GST - Validity and legality of the revised SoR-2014 issued to arrive at GST-exclusive work values and the consequent reduction in estimated contract values. - HELD THAT: - The Court held that the earlier SoR-2014 rates were inclusive of pre-GST taxes (VAT, entry tax, etc.) and that revision of SoR-2014 after introduction of GST was necessitated to arrive at tax-exclusive basic values so that GST could be added separately. The revised schedule was prepared following recommendations of the Code Revision Committee and after verification of embedded tax components; uniformity of rates across the State was appropriate and differences between scheduled and local market rates, if any, could be raised with the employer. No material was placed before the Court to show that the revised rates reflected anything other than removal of embedded taxes, and the petitioner's challenge to the revision was rejected. [Paras 12, 13, 14, 15, 16]

The revision of SoR-2014 to exclude embedded pre-GST tax components and thereby reduce the estimated work value was lawful and not liable to be quashed.

Methodology prescribed by Office Memorandum for calculation of GST-inclusive work value - transitional adjustment of contract value on migration to GST - Legality and conformity of the Office Memorandum dated 10.12.2018 prescribing the procedure to determine GST-inclusive work value for contracts invited before 01.07.2017 but executed or paid after that date. - HELD THAT: - The Court found that the OM prescribed a clear stepwise procedure: ascertain item-wise quantity of balance work, determine revised estimated work value as per Revised SoR (or by removing embedded taxes where necessary), adjust for tender premium/discount, and then add applicable GST to arrive at GST-inclusive work value, with provision for supplementary agreement and reimbursement or recovery depending on whether revised value exceeded or fell short of original agreement value. On comparison with the NRIDA/Ministry of Rural Development notification, the Court observed substantial conformity between the documents. The OM was characterised as a procedural guideline for transitional calculation and the Court held that the petitioner had not demonstrated any legal infirmity in the OM. [Paras 17, 18, 19, 28]

The Office Memorandum dated 10.12.2018 was not illegal or arbitrary and its challenge was dismissed.

Recovery of excess payment from contractor - appealability of a demand notice issued under Section 61 of the OGST Act - Lawfulness of the demand for recovery issued to the petitioner pursuant to calculation under the revised methodology and whether recovery sought pertains to GST or decreased contract value. - HELD THAT: - The Court recorded that where the revised GST-inclusive work value for the balance work is less than the original agreement value, the employer is to reduce payments and recover any excess already paid. The impugned demand notice under Annexure-9 was held to arise from such an excess payment situation; the amount sought to be recovered represented the decreased value of the contract after adjustment and not the GST element. The Court found no illegality in recovery of excess payment on that basis. However, since the notice was issued under Section 61 of the OGST Act and is subject to statutory appeal, the Court refrained from expressing any final opinion on the merits of the particular demand and left all contentions open to be urged in the appropriate proceedings under the Act. [Paras 20, 21, 22, 29]

Recovery of excess payment calculated under the prescribed methodology was lawful; the specific demand notice is open to challenge in the statutory appeal forum and the Court declined to decide its merits in the writ.

Final Conclusion: The writ petition is dismissed. The Court upheld the revision of SoR-2014 and the Office Memorandum dated 10.12.2018 as lawful procedural measures for transitional adjustment on migration to GST, found no illegality in recovery of excess payment calculated thereunder but left the petitioner free to urge all contentions in the statutory proceedings and appeals available against the Section 61 notice; no order as to costs.

Violation of principles of natural justice - ex parte order - quashing of assessment order - opportunity of hearing - bank account attachment/de-freezing - deposit as pre-condition for appeal - fresh adjudication on merits

Violation of principles of natural justice - ex parte order - quashing of assessment order - Impugned ex parte assessment order dated 5th March 2020 under Section 73 and the summary order in Form GST DRC-07 are liable to be set aside. - HELD THAT: - The Court found that the order impugned was passed ex parte and did not afford the petitioner sufficient time or a fair opportunity to represent his case. The order also failed to assign decipherable reasons as to how the officer determined the amount due and payable. In view of these defects constituting a breach of the principles of natural justice and producing civil consequences, the Court concluded that the order was bad in law and therefore quashed and set aside.

Impugned order dated 5th March 2020 and the Form GST DRC-07 summary were quashed and set aside.

Bank account attachment/de-freezing - Direction to de-freeze / de-attach the petitioner's bank account(s) linked to the impugned proceedings. - HELD THAT: - The Court noted that the petitioner's bank account(s) had been attached pursuant to the impugned order. Given that the order was set aside on grounds of procedural infirmity, the Court directed immediate de-freezing/de-attachment of those bank accounts in reference to the proceedings subject matter of the petition.

Bank account(s) attached in reference to the impugned proceedings shall be de-frozen/de-attached immediately.

Deposit as pre-condition for appeal - Permission and terms regarding deposit of the demand as a condition precedent for proceeding with appeal/assessment proceedings. - HELD THAT: - The Court accepted the petitioner's statement that ten per cent of the total amount (a condition prerequisite for hearing of the appeal) had already been deposited. The petitioner undertook to deposit an additional ten per cent of the amount of demand before the Assessing Officer within four weeks. The Court made this deposit condition subject to the rights and contentions of the parties and subject to the order to be passed by the Assessing Officer, with a refund directed if the deposit is ultimately found to be in excess.

Petitioner to deposit an additional ten per cent of the demand within four weeks; existing deposit accepted; any excess deposit to be refunded if so found.

Opportunity of hearing - fresh adjudication on merits - Matter remanded to the Assessing Officer for fresh consideration on merits after affording adequate opportunity of hearing. - HELD THAT: - The Court directed that the Assessing Officer shall afford adequate opportunity to all concerned, including the petitioner, to place on record essential documents and materials. The petitioner undertook to appear before the Assessing Officer on the specified date (21st July 2021) and to cooperate. The Assessing Officer was directed to pass a fresh order only after such hearing and to decide the matter on merits expeditiously, preferably within two months from the date of appearance. The Court expressly refrained from expressing any opinion on merits, leaving all substantive issues open for adjudication by the Assessing Officer.

Proceedings remitted for fresh hearing and adjudication on merits by the Assessing Officer after affording adequate opportunity; decision to be rendered expeditiously, preferably within two months of petitioner's appearance.

Final Conclusion: The High Court quashed the impugned ex parte assessment order dated 5 March 2020 and its summary in Form GST DRC-07 for breach of natural justice, directed immediate de-freezing of the petitioner's bank accounts, accepted the deposit position and imposed an additional deposit condition, and remitted the matter to the Assessing Officer for fresh hearing and merits determination with liberty to the petitioner to avail other remedies; no opinion expressed on merits.

Detention of goods and levy of tax and penalty for expiry of e-way bill - extension of e-way bill validity under Rule 138 - requirement to consider representations before confiscation and demand - unlawful taking of physical custody and storage at private premises - arbitrariness and violation of Article 14 of the Constitution - refund with interest for unlawful collection

Detention of goods and levy of tax and penalty for expiry of e-way bill - extension of e-way bill validity under Rule 138 - Whether detention of the petitioner's goods and levy of tax and penalty solely because the e-way bill was not extended amounted to lawful exercise of power. - HELD THAT: - The Court found that the petitioner dispatched goods with a tax invoice and an e-way bill for a 36 km movement but delivery was delayed due to an acknowledged political rally and resulting traffic blockage. The checking officer detained the vehicle on 06.01.2020 alleging expiry of the e-way bill and evasion of tax. The officer did not record any material showing an attempt to sell goods elsewhere or other evidence of tax evasion, nor did he adequately consider the petitioner's explanations that the delay was caused by the rally and non-working day. The mere lapse in e-way bill validity, without evidence of evasion or dishonest intent, did not suffice to justify treating the incident as evasion of tax. Reliance on non-extension under Rule 138 without assessing the bona fides of the delay rendered the detention and demand arbitrary. The Court therefore held the levy of tax and penalty in the circumstances to be unlawful. [Paras 36, 41, 42, 45]

Detention and levy of tax and penalty on the ground of expired e-way bill were unlawful in the absence of evidence of evasion and without proper consideration of the petitioner's explanations.

Requirement to consider representations before confiscation and demand - arbitrariness and violation of Article 14 of the Constitution - Whether the 2nd respondent complied with the obligation to consider the petitioner's representations before passing the release/demand order. - HELD THAT: - The petitioner submitted representations explaining the disruption caused by the rally and sought release; these representations were not addressed in the impugned order. The order treated the petitioner as having admitted liability, contrary to the record. The counter-affidavit failed to explain why the explanations were not considered and merely asserted evasion without material. The failure to consider the submissions and to record reasons amounted to arbitrary action and infringement of Article 14. [Paras 40, 41, 45]

The authority failed to consider the petitioner's representations and thereby acted arbitrarily; the order based on such failure is unsustainable.

Unlawful taking of physical custody and storage at private premises - Whether keeping the detained goods in a private premises (relative's house of the officer) for an extended period was permissible. - HELD THAT: - The record shows goods were kept at a private premises in Marredpally for sixteen days. The Court expressed inability to understand why the goods were stored at a relative's house rather than in any designated public or official custody and observed this conduct as irregular. Such storage in a private premises without satisfactory explanation contributes to the conclusion of abuse of power. [Paras 18, 43]

Storage of goods at the officer's relative's private premises for an extended period was improper and indicative of abuse of authority.

Refund with interest for unlawful collection - Relief to be granted for unlawful collection of tax and penalty. - HELD THAT: - Having held the detention, demand and storage to be unlawful and arbitrary, the Court directed setting aside of the Form GST MOV-09 order and ordered refund of the amounts collected with interest from the date of collection until repayment. The Court also awarded costs to the petitioner for the consequences of the unlawful action. [Paras 44, 46]

The impugned order is set aside; respondents directed to refund the amounts collected with interest and to pay costs to the petitioner.

Final Conclusion: Writ petition allowed. The order dated 22.01.2020 passed in Form GST MOV-09 and the demand of tax and penalty collected from the petitioner were set aside as arbitrary and unlawful; respondents directed to refund the collected amount with interest from the date of collection and to pay costs to the petitioner.

Parole/interim bail - compliance with administrative directions issued by High Power Committee - quashing of impugned judicial order for non-compliance with superior directions - remand for fresh consideration and passing of reasoned order - deletion of party from array of respondents

Deletion of party from array of respondents - Respondent No.3 (Special Chief Judicial Magistrate, Meerut) was ordered to be deleted from the array of respondents. - HELD THAT: - On oral request of learned counsel for the petitioner, which was not objected to by the learned Additional Advocate General, the Court allowed deletion of the Special Chief Judicial Magistrate, Meerut from the array of respondents. The prayer for deletion was recorded and granted at the outset of the hearing.

Respondent No.3 is deleted from the array of respondents.

Parole/interim bail - compliance with administrative directions issued by High Power Committee - quashing of impugned judicial order for non-compliance with superior directions - remand for fresh consideration and passing of reasoned order - Impugned order dated 10.5.2021 rejecting petitioner's release on parole/interim bail was quashed and the matter was remanded for fresh consideration in accordance with the HPC directions dated 30.4.2021. - HELD THAT: - The Court examined the HPC letter dated 30.4.2021 and found no condition therein which justified the rejection recorded in the Magistrate's order dated 10.5.2021. As the impugned order did not properly appreciate or follow the directions issued by the High Power Committee and thus lacked merit, the Court exercised supervisory jurisdiction to quash that order. Rather than directing immediate release, the Court remanded the matter to the Special Chief Judicial Magistrate, Meerut with a mandate to reconsider the petitioner's application and to pass a fresh, reasoned order within one week from production of a computer-generated copy of this order, strictly in accordance with the HPC directions of 30.4.2021.

Order dated 10.5.2021 is quashed; matter remitted to the Special Chief Judicial Magistrate, Meerut to reconsider and pass a reasoned order within one week strictly in accordance with the HPC directions dated 30.4.2021.

Final Conclusion: Petition allowed: Respondent No.3 deleted from array; impugned order dated 10.5.2021 quashed and matter remanded to the Special Chief Judicial Magistrate, Meerut to reconsider the petitioner's application and pass a reasoned order within one week in conformity with the HPC directions dated 30.4.2021.

Bail conditions imposed under Section 167(2) Cr.P.C. - Inherent powers of High Court under Section 482 Cr.P.C. - Review of judicial discretion on bail conditions - Stringent or onerous conditions - Serious economic offence, risk of absconding and tampering with evidence

Bail conditions imposed under Section 167(2) Cr.P.C. - Inherent powers of High Court under Section 482 Cr.P.C. - Stringent or onerous conditions - Challenge to the bail conditions (heavy surety and bank guarantee/FDR) imposed on the petitioner on release under Section 167(2) Cr.P.C. - HELD THAT: - The High Court declined to exercise its inherent jurisdiction under Section 482 Cr.P.C. to strike down the bail conditions. The court observed that Section 482 Cr.P.C. is not a substitute for the statutory and proper remedies available to a litigant and should not be used to obtain an expedited decision in place of those remedies. On the merits, the conditions - including substantial security and a bank guarantee/FDR - were held not to be arbitrary, onerous or unreasonable in the facts of the case. The petitioner is implicated along with co-accused in a serious economic offence involving fraudulent input tax credit and substantial loss to the exchequer; conditions were imposed to ensure attendance, prevent absconding and guard against tampering with prosecution evidence. The court noted that a co-ordinate bench had earlier dismissed a similar challenge by a co-accused, and that the petitioner had earlier withdrawn a revision remedy, but that in any event no interference was warranted with the well-reasoned order of the trial court imposing the terms for bail.

Petition under Section 482 Cr.P.C. challenging the bail conditions is dismissed; the bail conditions are upheld.

Final Conclusion: The petition seeking deletion/relaxation of heavy surety and bank guarantee/FDR imposed as conditions of bail is dismissed; the High Court declines to interfere with the trial court's detailed and reasoned order and upholds the conditions.

Maintainability of writ petition in presence of alternative and efficacious remedy - appeal remedy under Section 107 of the Central Goods and Services Tax Act, 2017 - tax and penalty demand under Section 129 - limitation prescribed for filing appeal and appellate authority deciding on merits without going into limitation

Maintainability of writ petition in presence of alternative and efficacious remedy - appeal remedy under Section 107 of the Central Goods and Services Tax Act, 2017 - Writ petition is not maintainable because the petitioner has an alternative and efficacious remedy by way of appeal before the Appellate Authority. - HELD THAT: - The Court noted that the impugned order of demand of tax and penalty under the Act gives rise to an alternative remedy of appeal under the statutory appellate mechanism. Reliance was placed on the availability of the appeal under Section 107 of the Central Goods and Services Tax Act, 2017 and earlier Division Bench precedent treating the statutory appeal as efficacious. In consequence, the High Court concluded that the present writ petition cannot be entertained in view of the existence of that statutory remedy and dismissed the petition on maintainability grounds. [Paras 4]

Writ petition dismissed as not maintainable for want of an alternative and efficacious remedy by appeal.

Limitation prescribed for filing appeal and appellate authority deciding on merits without going into limitation - tax and penalty demand under Section 129 - If the petitioner files the statutory appeal within six weeks, the Appellate Authority shall decide the appeal on merits without going into the limitation aspect. - HELD THAT: - Although the writ was held not maintainable, the Court recognised that the impugned order was passed on a specified date and that Section 107 prescribes a three-month limitation for filing an appeal. The petitioner had filed the writ within three months; therefore, the Court exercised its supervisory power to afford an opportunity to litigate the matter before the specialized appellate forum. The Court directed that if the petitioner institutes the appeal before the Appellate Authority within six weeks from the date of the order, the Appellate Authority must consider and decide the appeal on merits and refrain from rejecting it solely on the ground of limitation. [Paras 5, 6]

Direction issued that an appeal filed within six weeks shall be decided on merits by the Appellate Authority without going into limitation.

Final Conclusion: The writ petition was dismissed as not maintainable because an effective statutory appeal is available; nevertheless the Court granted relief by directing that if the petitioner files the appeal within six weeks the Appellate Authority shall decide the appeal on merits without invoking the limitation bar.

Writ jurisdiction under Article 226 - alternate remedy not a bar to entertain writ - discretion of High Court to entertain writ despite alternate remedy - writ maintainable despite disputed questions of fact - application of binding precedent to dispose of petition

Alternate remedy not a bar to entertain writ - discretion of High Court to entertain writ despite alternate remedy - Whether the availability of an alternate remedy precludes exercise of writ jurisdiction in the present petition. - HELD THAT: - The Court held that the existence of an alternate remedy does not automatically oust the High Court's jurisdiction under Article 226. An alternative remedy is a self imposed limitation on the Court and does not operate as a complete bar where the Court, in the exercise of its discretion, chooses to entertain the petition. The Court relied on established principles that an alternative remedy will not preclude writ relief in appropriate cases, and noted authorities recognising that disputed facts or availability of alternate fora are not absolute bars to entertaining writ petitions. Given that the revenue's only defence advanced was the availability of an alternate remedy, the Court declined to reject the petition on that ground and exercised its discretion to proceed. [Paras 3]

Availability of an alternate remedy did not preclude the High Court from entertaining the writ petition; the Court exercised its discretion to proceed.

Application of binding precedent to dispose of petition - writ maintainable despite disputed questions of fact - Whether the petition should be disposed of in view of the Court's earlier decision in Concentrix and the absence of disputed facts warranting relegation to an alternate forum. - HELD THAT: - The Court observed that the issue raised in the petition was squarely covered by its earlier judgment in the Concentrix case and that there was no dispute as to the facts in the present matter. In these circumstances, and having regard to the principle that even where factual disputes exist a writ Court may entertain a petition, the Court found no purpose in relegating the petitioner to the alternate forum. Consequently, the impugned orders were set aside and the writ petition disposed of in accordance with the applicable precedent. [Paras 2, 3, 4]

Impugned orders dated 12.03.2021 and 31.01.2021 were set aside and the writ petition disposed of in view of the Concentrix precedent and absence of disputed facts.

Final Conclusion: The High Court exercised its Article 226 jurisdiction despite the existence of an alternate remedy, applied its earlier decision in Concentrix to the facts of the case, set aside the impugned orders and disposed of the writ petition.

Validity of assessment under Section 153C read with Section 153A - Computation of six assessment years for person other than the searched person - Prospective operation of Finance Act, 2017 amendment to Section 153C - Recording of satisfaction by AO of searched person as triggering date for Section 153C - Limitation bar to reassessment under Section 153C

Validity of assessment under Section 153C read with Section 153A - Computation of six assessment years for person other than the searched person - Prospective operation of Finance Act, 2017 amendment to Section 153C - Recording of satisfaction by AO of searched person as triggering date for Section 153C - Limitation bar to reassessment under Section 153C - Assessment framed for Assessment Year 2012-13 under Section 153C r.w.s. 144 is barred by limitation and therefore void. - HELD THAT: - The Tribunal examined dates of search (07.04.2016) and the dates on which satisfaction notes were recorded and documents handed over. The recording of satisfaction by the AO of the searched person and the consequent handing over/recording for the other person determine the starting point for reckoning the six assessment years under Section 153C. Relying on the decisions of the jurisdictional High Court (including Pr. CIT v Sarwar Agency, CIT v RRJ Securities Ltd., ARN Infrastructure India Ltd.) and consistent Tribunal precedents, the Tribunal held that the amendment made by the Finance Act, 2017 (which aligns the block period for the other person with that of the searched person) is prospective and not applicable to searches carried out before 01.04.2017. Applying the pre-amendment rule, and reckoning the six-year block with reference to the date of recording of satisfaction/handing over, AY 2012-13 fell outside the permissible six-year period from the relevant satisfaction/handing-over dates in this case. Consequently the assessment for AY 2012-13 under Section 153C r.w.s. 144 was time-barred and therefore invalid. Having found the assessment itself bad on limitation grounds, the Tribunal declined to adjudicate other grounds as academic. [Paras 11, 12, 13, 14, 15]

Assessment dated 31.12.2019 under Section 153C r.w.s. 144 for Assessment Year 2012-13 is quashed as barred by limitation.

Final Conclusion: The appeal is allowed: the reassessment framed under Section 153C r.w.s. 144 for Assessment Year 2012-13 is quashed as time-barred because the Finance Act, 2017 amendment is prospective and, applying pre-amendment law and the date of recording of satisfaction, AY 2012-13 falls outside the six-year block.

Depreciation on intangible asset - right to collect toll - Applicability of CBDT Circular No.09/2014 and retrospective effect - Option to amortise does not preclude depreciation (Taparia Tools principle) - Deductibility of provision for periodic maintenance - matching and mercantile system - Allowance of provision where liability is contractual/ascertained - Section 43B - payment versus conversion into Funded Interest Term Loan (FITL) - Constructive payment by conversion into FITL and tax treatment

Depreciation on intangible asset - right to collect toll - Applicability of CBDT Circular No.09/2014 and retrospective effect - Option to amortise does not preclude depreciation (Taparia Tools principle) - Depreciation claimed on the capitalised cost of the BOT road project as an intangible asset (right to collect toll) is allowable; CBDT Circular No.09/2014 does not operate to deny the assessee's claim. - HELD THAT: - The Tribunal affirmed the CIT(A)'s finding that the assessee's capitalised expenditure in constructing the road resulted in an intangible asset in the nature of a licence/right to collect toll and is eligible for depreciation under section 32(1)(ii). The Special Bench precedent in M/s. Progressive Construction Ltd. and an array of coordinate decisions support characterisation of the licence/right as an intangible asset. The Revenue's reliance on CBDT Circular No.09/2014 to mandate amortisation did not override the assessee's right to claim depreciation; the court applied the principle in Taparia Tools that the mere availability of amortisation as an option does not preclude a claimant from claiming depreciation where the law otherwise permits. On these bases the Tribunal rejected the Revenue's grounds and upheld deletion of the addition disallowing depreciation. [Paras 3]

Assessee's claim for depreciation on the right to collect toll upheld; Revenue's grounds on CBDT Circular applicability rejected.

Deductibility of provision for periodic maintenance - matching and mercantile system - Allowance of provision where liability is contractual/ascertained - Provision for periodic maintenance made by the assessee in accordance with the concession agreement and commercial/mercantile accounting is deductible. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the provision represented foreseeable, contractually-rooted expenditure arising from the concession agreement clause requiring periodic overlay once every five years. Applying the mercantile/ matching principle, the Tribunal accepted that an accrued, ascertainable liability grounded in the contract could be recognised on accrual basis and deducted; section 43B was not attracted. Reliance on the concession agreement, project report estimates and supplier contracts supported treating the provision as a proper business expenditure which would be adjusted against actual expenditure when incurred. Accordingly the addition disallowing the provision was deleted. [Paras 5]

Provision for periodic maintenance allowed; addition deleted.

Section 43B - payment versus conversion into Funded Interest Term Loan (FITL) - Constructive payment by conversion into FITL and tax treatment - Interest amounts converted into Funded Interest Term Loans before year end, pursuant to restructuring agreements with creditors, were not disallowable under section 43B and the deletion of the addition was sustained. - HELD THAT: - The Tribunal agreed with the CIT(A) that the FITL entries arose from restructuring agreements with lenders whereby outstanding interest was funded/converted into term loans before the financial year end. The facts established that the creditors agreed to fund the interest and the amounts were transferred to FITL, leaving no outstanding liability; the conversion was not a sham loan transaction in the appellate record. On this factual matrix the Tribunal held section 43B (which disallows interest not actually paid) did not mandate disallowance, and the CIT(A)'s deletion of the addition was affirmed. [Paras 6]

Addition for interest converted into FITL deleted; disallowance under section 43B rejected.

Final Conclusion: All Revenue appeals dismissed: the Tribunal upheld the CIT(A)'s allowance of depreciation on the right to collect toll as an intangible asset, sustained the deduction of provision for periodic maintenance grounded in the concession agreement and mercantile accounting, and confirmed deletion of the addition relating to interest converted into FITL, thereby rejecting the Revenue's grounds in their entirety.

Limited scrutiny under CASS - conversion of limited scrutiny into complete scrutiny and requirement of Pr. CIT approval - rejection of books of account and estimation of income - estimation of income as percentage of turnover - nexus between interest on fixed deposits and business income

Limited scrutiny under CASS - conversion of limited scrutiny into complete scrutiny and requirement of Pr. CIT approval - Whether the Assessing Officer exceeded the scope of limited scrutiny selected under CASS and required prior approval of the Principal CIT before completing assessment u/s. 143(3). - HELD THAT: - The Tribunal examined the points for which the return was selected for limited scrutiny - correctness of sales turnover/receipts and correctness of contract receipts offered to tax. The Assessing Officer verified I.T. data, accepted the contract receipts figure, and examined the P&L and balance sheet to determine whether the net profit declared related to business receipts after excluding indirect incomes. Finding that the assessee failed to produce books of account, the Assessing Officer estimated income at a percentage of turnover. The Tribunal held that these actions remained confined to the selected points of limited scrutiny and did not amount to a conversion into complete scrutiny requiring Pr. CIT approval. Consequently, the case law cited by the assessee on conversion of scrutiny was held inapplicable. [Paras 7, 8]

Assessing Officer did not exceed limited scrutiny; no Pr. CIT approval was required and Grounds 1, 2 and 3 are rejected.

Nexus between interest on fixed deposits and business income - business income vs. incidental/investment income - Whether interest earned on fixed deposits held by the assessee is business income connected to the construction contracts or is non-business/incidental income. - HELD THAT: - The assessee contended that FDs were made for business purposes (to furnish bank guarantees/performance security) and interest thereon is business income. The CIT(A) and the Tribunal applied the established test requiring a direct nexus between the interest and the core business. Reliance was placed on judicial authority establishing that interest from FDs used as security or to give bank guarantees lacks a direct nexus with business operations and cannot be treated as trading receipts. The assessee did not produce evidence to rebut this conclusion. Accordingly, the interest was not treated as business receipts for computing net profit from construction activity. [Paras 9, 11]

Interest on fixed deposits held as security/performance guarantee is not business income; Ground No.4 is rejected.

Rejection of books of account and estimation of income - estimation of income as percentage of turnover - Whether the Assessing Officer's rejection of books of account and estimation of profit at a specified percentage of turnover was justified, and if so, the appropriate percentage to be applied for the relevant year. - HELD THAT: - The Assessing Officer observed unusually low net profit relative to turnover and noted that many vouchers were self-made; the assessee failed to produce books of account, leading the AO to estimate profits. The CIT(A) reduced the AO's estimate and applied 6% of turnover. Considering the range of net profit in earlier assessment years (2.5% to 5.8%), the Tribunal exercised its discretion to moderate the estimate and fixed net profit at 5% of gross total turnover for the relevant assessment year as a fairer determination. [Paras 8, 12, 14]

Estimation of income by rejecting books was sustained as justified on the facts; net profit is restricted to 5% of gross total turnover (appeal partly allowed).

Final Conclusion: The Tribunal upheld that the Assessing Officer acted within the scope of limited scrutiny and did not require Pr. CIT approval, rejected the claim that interest on fixed deposits was business income, sustained estimation of profits on justified grounds but reduced the estimated net profit to 5% of turnover; the appeal is partly allowed.

Treatment as unexplained credit under section 68 - inward foreign remittances and their taxability in India - residential status - resident but not ordinarily resident - onus of proof for genuineness and source of credits - scope of inquiry into source of funds located outside India

Treatment as unexplained credit under section 68 - onus of proof for genuineness and source of credits - Whether the Assessing Officer was justified in treating the credits received into the assessee's bank account as unexplained cash credit and bringing the same to tax under section 68. - HELD THAT: - The Tribunal examined the material on record and the earlier ITAT findings in the assessee's own case for earlier assessment years. The assessee had produced bank transcripts, inward remittance certificates and evidence that the funds were transferred from his overseas bank accounts in Mauritius. The Assessing Officer's disbelief rested on the contention that the Mauritius entity was an alter ego and on perceived deficiencies in documentary forms, without conducting independent enquiries through appropriate channels. The Tribunal held that where remittances into the NRI account are shown to originate from the assessee's overseas account and are supported by banking records and confirmations, the AO cannot treat such receipts as unexplained merely on conjecture; the Revenue failed to discharge the burden of proving that the amounts were unexplained income. Applying the determinative reasoning in the earlier ITAT order, the Tribunal upheld the view that the assessee discharged his onus and that the AO's addition under section 68 was unwarranted. [Paras 3, 4]

Addition treating the credits as unexplained under section 68 deleted; the AO's invocation of section 68 is rejected.

Residential status - resident but not ordinarily resident - inward foreign remittances and their taxability in India - Whether the assessee's claim of being a 'resident but not ordinarily resident' and consequent tax treatment of receipts from outside India was correctly accepted. - HELD THAT: - The Tribunal noted that the CIT(A) accepted the assessee's residential status in line with the Tribunal's earlier findings for preceding years and that the Revenue produced no contrary material for the year under consideration. Given that the funds originated from the assessee's account abroad and were brought into India through banking channels with requisite approvals, the provisions which would tax receipts arising abroad were not attracted. The Tribunal therefore upheld the acceptance of the assessee's residential status and consequent non-taxability of receipts brought from outside India in the circumstances of the case. [Paras 3, 4]

The CIT(A)'s conclusion on the assessee being 'resident but not ordinarily resident' and the resulting tax treatment of the foreign receipts is upheld.

Final Conclusion: The order of the Commissioner of Income Tax (Appeals) deleting the addition and accepting the assessee's position is affirmed; Revenue's appeal for AY 2013-14 is dismissed.

Unexplained cash credit under section 68 - burden of proof to establish identity, genuineness and creditworthiness - sham or accommodation entries - payment by account-payee cheque not conclusive of genuineness - shifting of burden to Revenue after assessee discharges initial burden

Unexplained cash credit under section 68 - burden of proof to establish identity, genuineness and creditworthiness - sham or accommodation entries - shifting of burden to Revenue after assessee discharges initial burden - Whether additions treating unsecured loans from three related concerns as unexplained credits under section 68 were justified or whether the assessee had proved identity, genuineness and creditworthiness of the creditors thereby discharging the initial burden - HELD THAT: - The Tribunal examined whether the assessee discharged the initial onus under section 68 by proving identity of the creditors, genuineness of the loan transactions and the creditworthiness of the parties. The assessee produced ledger copies, bank statements, confirmation letters and tracing of funds showing that amounts were routed through banking channels and ultimately derived from commission receipts recognised in the records of group entities and findings of the Settlement Commission. The authorities below relied on admissions made in a survey that some group transactions were accommodation entries and on the principle that payment by account-payee cheque alone is not decisive. The Tribunal held that payment by cheque is not determinative but the statutory test under section 68 requires proof of the three ingredients; once the assessee satisfactorily established identity, genuineness and creditworthiness, the burden shifted to Revenue to prove that the credits were the assessee's undisclosed income. The Assessing Officer did not bring forward independent evidence rebutting the documentary material and explanations furnished by the assessee. Consequently, the Tribunal found the additions to be made merely on suspicion and not supported by evidence, and concluded that the Assessing Officer and the CIT(A) erred in upholding the disallowance. [Paras 8, 9, 10, 11]

Additions under section 68 in respect of unsecured loans from M/s. C.K. Exports, M/s. Mehta Motors & General Finance Company and M/s. Swastic Trading Corporation deleted; appeal allowed.

Final Conclusion: The Tribunal held that the assessee had discharged the initial burden under section 68 by proving identity, genuineness and creditworthiness of the creditors; in absence of rebuttal evidence by the Revenue the additions treating the unsecured loans as unexplained income were unwarranted and were accordingly deleted, and the appeal was allowed.

Unabated assessment - incriminating material found and seized during the course of search - jurisdictional defect in assessment under section 153A where additions are not based on seized incriminating material - addition under section 68 treated as unexplained cash credit - claim of long term capital gain exempt under section 10(38) - consequential deletion of addition under section 69 on account of accommodation entry charges

Unabated assessment - incriminating material found and seized during the course of search - jurisdictional defect in assessment under section 153A where additions are not based on seized incriminating material - Addition in an assessment year which was unabated on the date of search cannot be sustained under section 153A unless based on incriminating material seized during the search. - HELD THAT: - The Tribunal found as an undisputed fact that the assessment for A.Y. 2012-13 had attained finality and was unabated on the date of search. It held that, in such unabated assessments, the Assessing Officer's jurisdiction to make additions under section 153A is confined to matters evidenced by incriminating material seized during the search. The authorities below relied on general investigation, post-search analysis and survey material rather than any incriminating seized records linking the transactions to the search. Following the coordinate-bench precedents and the jurisdictional High Court decisions relied upon, the Tribunal concluded that additions made in absence of seized incriminating material suffer from a jurisdictional defect and therefore must be deleted. [Paras 7, 8]

Additions made in the unabated assessment years were held to be without jurisdiction and directed to be deleted.

Addition under section 68 treated as unexplained cash credit - claim of long term capital gain exempt under section 10(38) - Long term capital gains claimed on sale of specified shares were not to be treated as bogus where the assessee produced contract notes, demat records and bank payments and the AO relied only on general investigation/survey reports without independent verification. - HELD THAT: - On merits the Tribunal examined the documentary evidences filed by the assessee - contract notes, demat statements and bank channels for payments - and observed that the Assessing Officer relied solely on general investigation and survey information without bringing seized incriminating material to contradict the documentary record. The Tribunal followed the reasoning of a coordinate bench which had held that where the assessee furnishes complete documentary evidence of exchange-traded transactions and the AO fails to make independent enquiry or produce corroborative seized material, additions treating the gains as bogus cannot be sustained. Applying that principle to the transactions in M/s. Blue Circle Services Ltd. and M/s. Gemstone Investment Ltd., the Tribunal held the claimed exempt long term capital gains genuine and deleted the additions. [Paras 10, 11, 12, 13]

The additions made by treating the long term capital gains as bogus were deleted and the assessee's claim under section 10(38) accepted.

Consequential deletion of addition under section 69 on account of accommodation entry charges - Addition on account of alleged accommodation entry charges (commission) confirmed by the AO and CIT(A) was deleted consequentially after the principal additions were set aside. - HELD THAT: - The addition under section 69 was made as consequential to the disallowances and findings sustaining bogus transactions. Having decided both jurisdictional and merits issues in favour of the assessee and directed deletion of the principal additions, the Tribunal held that the addition relating to commission paid as alleged accommodation entry charges falls away and must be deleted as consequential relief. [Paras 14]

The addition under section 69 was deleted consequentially.

Final Conclusion: Appeals allowed: additions made in the unabated assessment years were held to be without jurisdiction absent incriminating seized material and were deleted; the claimed long term capital gains were accepted on the evidence produced; the consequential addition under section 69 was likewise deleted for A.Y. 2012-13 and equivalent findings applied mutatis mutandis to A.Y. 2013-14.

Validity of reopening under section 147/issue of notice under section 148 - Reference to Valuation Officer under section 142A without rejection of books of account - Admissibility of DVO's report as tangible material / change of opinion doctrine - Estimation of undisclosed investment and additions under section 69B - First proviso to section 147 - failure to disclose material facts fully and truly (limitation)

Validity of reopening under section 147/issue of notice under section 148 - Admissibility of DVO's report as tangible material / change of opinion doctrine - Reopening of assessment under section 147/notice under section 148 (lead year AY 2010-11) was invalid. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s conclusion that reopening was without jurisdiction. The Assessing Officer had completed the original assessment after making a late reference to the Valuation Officer and the office note showed no rejection or demonstrable dissatisfaction with the books; the DVO report received thereafter could not, by itself, constitute the tangible material required to form a 'reason to believe' under section 147. The Tribunal observed that invoking reassessment on the basis of a post assessment valuation report amounted to impermissible review or change of opinion where the AO had earlier examined the books and recorded no substantive defect. The timing of the reference (at the fag end of limitation) and the practical impossibility of completing a proper quasi judicial valuation and confronting the assessee within one month reinforced that the AO had effectively finalized assessment provisionally with an implicit plan to reopen, which is impermissible; accordingly the assumption of jurisdiction under section 147 was quashed. [Paras 16, 17, 18, 19]

Assumption of jurisdiction under section 147/notice under section 148 in AY 2010-11 was invalid and the reopening was quashed.

Reference to Valuation Officer under section 142A without rejection of books of account - Admissibility of DVO's report as tangible material / change of opinion doctrine - Reference made to the DVO under section 142A without rejecting the books of account was invalid and the DVO report could not be the sole basis for additions. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that the AO had not rejected the assessee's books before making the reference; the office note and assessment record demonstrated that the books, vouchers and records had been produced and examined and no adverse inference was drawn. Reliance on precedents (including the Supreme Court and jurisdictional High Court decisions cited by the CIT(A)) supported the principle that a DVO's valuation, being an opinion/estimation, cannot by itself furnish the tangible material necessary to reopen assessment or to sustain additions where books were not rejected and no other defect was pointed out. The substituted section 142A (and CBDT circular) did not permit the DVO report to be treated as a freestanding ground to reject accounts or to reopen assessments in the absence of any recorded dissatisfaction with accounts. [Paras 10, 11, 19]

Reference to the Valuation Officer under section 142A without rejection of books was invalid; the DVO report could not, standing alone, form the basis for reassessment or additions.

Estimation of undisclosed investment and additions under section 69B - Admissibility of DVO's report as tangible material / change of opinion doctrine - Additions under section 69B based solely on the DVO report were deleted on merits because the books of account showed higher costs than the DVO estimates and Revenue did not rebut that factual showing. - HELD THAT: - On the merits the Tribunal agreed with the CIT(A) that the assessee's audited books and tabulated construction costs exceeded the estimates in the DVO's report. The first appellate record demonstrated that total construction cost as per books was higher than the DVO determination, and Revenue did not controvert or displace those factual findings. Where the factual position established that investments shown in books exceeded the valuation estimates, the rationale for additions based on the DVO report fell away. Given that the reassessment itself was also held invalid, the deletions on merit were sustained. [Paras 20, 21]

Additions under section 69B based solely on the DVO's estimation were deleted; the CIT(A)'s relief on merits was upheld.

First proviso to section 147 - failure to disclose material facts fully and truly (limitation) - Validity of reopening under section 147/issue of notice under section 148 - Reopening for AY 2009-10 (notice issued after four years) was time barred because the first proviso to section 147 (failure to disclose material facts fully and truly) was not pleaded or established. - HELD THAT: - For notices issued after four years the first proviso to section 147 imposes an additional condition that the escapement must be attributable to failure by the assessee to disclose material facts fully and truly. The Tribunal found the reasons recorded for AY 2009 10 silent on any allegation of such failure; no factual averment or material was produced to satisfy the proviso's exceptional requirement. In absence of that specific allegation and supporting material, the AO could not validly issue a notice beyond the four year period and the reopening was vitiated by limitation. The CIT(A)'s quashing of the notice for AY 2009 10 on this ground was therefore upheld. [Paras 26, 27, 28]

Notice under section 148 for AY 2009-10 was time barred under the first proviso to section 147 and the reassessment was quashed.

Final Conclusion: All three appeals filed by the Revenue (AY 2009-10, 2010-11 and 2011-12) are dismissed: reassessments premised solely on the DVO report and/or effected after expiry of the proviso period without alleging failure to disclose material facts were held invalid, and additions based solely on the DVO's valuation were deleted on the merits.

Allowability of prior period expenses under mercantile system - deduction for provision for bad and doubtful debts under section 36(1)(vii) - treatment of provisions for computing book profit under section 115JB explanation - deduction under section 35ABB for license fees following telecom policy migration - revenue nature of revenue-sharing license fees under section 37(1) - allowability of foreign exchange loss as revenue pursuant to accounting policy

Allowability of prior period expenses under mercantile system - Deletion of disallowance of advertisement and publicity expenses of Rs. 21,78,491/- treated as prior period expenditure. - HELD THAT: - Both authorities below treated the expenditure as repair and maintenance and disallowed it as prior period expense on the ground that the assessee follows mercantile system. The Tribunal found that the expenses were in fact advertisement and publicity items and that the invoices were received and the liability crystallised during the relevant year; relying on precedents such as CIT v. Nagri Mills Co. Ltd., the Tribunal held that such expenses are allowable in the year of crystallisation. The Tribunal also observed that the addition was tax neutral and directed deletion of the disallowance. [Paras 6]

Disallowance of Rs. 21,78,491/- deleted and AO directed to delete the addition.

Deduction for provision for bad and doubtful debts under section 36(1)(vii) - Allowability of provisions for bad and doubtful debts of Rs. 1,97,50,000/- though claimed as an additional ground in appeal. - HELD THAT: - The Tribunal noted that the assessee had debited the profit and loss account and reduced sundry debtors by the provision amount in the financial statements. Applying the ratio of the Apex Court in Vijay Bank v. CIT, which permits deduction under section 36(1)(vii) when the profit and loss account is debited and debtors correspondingly reduced without requiring individual account closure, the Tribunal allowed the deduction and set aside the CIT(A)'s rejection of the additional ground. [Paras 12]

Deduction of Rs. 1,97,50,000/- under section 36(1)(vii) allowed and AO directed to allow the deduction.

Treatment of provisions for computing book profit under section 115JB explanation - Treatment of provisions for bad and doubtful debts and doubtful advances for computation of book profit under section 115JB. - HELD THAT: - The AO had added back provisions to book profit treating them as provisions for unascertained liability under clause (c) of the Explanation to section 115JB. Having already allowed the provisions for bad and doubtful debts for regular income-tax purposes (ground decided earlier), the Tribunal held that the consequential ground must also be decided in favour of the assessee and directed that the provisions be allowed while computing book profit under section 115JB. [Paras 17]

Provisions for bad and doubtful debts and advances are to be allowed for computing book profit; addition deleted.

Deduction under section 35ABB for license fees following telecom policy migration - Allowability of the assessee's claimed amortisation/deduction under section 35ABB in respect of license fees after change in telecom policy. - HELD THAT: - The Tribunal followed the coordinate bench's decision in the assessee's own case for AY 2004-05 which recognised that, following a change in telecom policy extending licence period on payment of migration fee, deduction has to be recalculated on the revised basis. The Tribunal directed the AO to determine the eligible amount for AY 2005-06 in accordance with the earlier directions applicable to prior years, allowing the assessee's claim for statistical purposes. [Paras 24]

AO directed to determine eligible deduction under section 35ABB for the year following the coordinate bench's decision; ground allowed for statistical purposes.

Revenue nature of revenue-sharing license fees under section 37(1) - Allowability of revenue-sharing license fees under section 37(1) as revenue expenditure rather than capital. - HELD THAT: - The Tribunal found the issue identical to the assessee's earlier matters decided in its favour and to the jurisdictional High Court's decision for a prior year. Relying on those precedents, the Tribunal held that the revenue-sharing license fees claimed by the assessee are allowable under section 37(1) and dismissed the Revenue's ground challenging the CIT(A)'s allowance. [Paras 29]

Claim for revenue-sharing license fees allowed under section 37(1); Revenue's appeal dismissed on this point.

Allowability of foreign exchange loss as revenue pursuant to accounting policy - Allowability of foreign exchange loss of Rs. 96,80,000/- as revenue expenditure. - HELD THAT: - The CIT(A) allowed the foreign exchange loss by applying the Supreme Court's decision in CIT v. Woodward Governor, observing that the assessee's accounting policy charged foreign exchange losses to profit and loss account except those related to fixed assets. The Tribunal agreed with this reasoning and found no reason to interfere with the allowance of the revenue foreign exchange loss. [Paras 33]

Foreign exchange loss of Rs. 96,80,000/- allowed as deduction; Revenue's ground dismissed.

Final Conclusion: For AY 2005-06 the Tribunal allowed the assessee's appeals: deleted the disallowance of advertisement and publicity prior period expenses, allowed the provision for bad and doubtful debts and consequential treatment under section 115JB, directed recalculation/allowance of deduction under section 35ABB per earlier tribunal directions, upheld allowance of revenue-sharing license fees under section 37(1), and upheld the allowance of the foreign exchange loss; the Revenue's appeal was dismissed.

Long term capital gains - addition under section 68 of the Act - rejection of exemption under section 10(38) - accommodation entries - reliance on SEBI and investigation report - evidentiary value of demat statements, contract notes and bank payments - merger/amalgamation affecting shareholding - addition under section 69C of the Act

Long term capital gains - addition under section 68 of the Act - rejection of exemption under section 10(38) - accommodation entries - evidentiary value of demat statements, contract notes and bank payments - reliance on SEBI and investigation report - merger/amalgamation affecting shareholding - Validity of addition treating long term capital gains on sale of listed shares as unexplained income and rejecting exemption under section 10(38) on the basis of SEBI/investigation reports. - HELD THAT: - The Tribunal found that the assessee furnished contemporaneous evidence - contract notes, purchase bills, demat/transaction statements, bank payment and receipt entries, broker ledger and court order approving amalgamation - to establish purchase, holding period and sale of the shares. The authorities below relied solely on reports of the investigation wing and SEBI without producing any material implicating the assessee or the broker as beneficiaries of alleged accommodation entries. The Tribunal applied the principle that adverse inferences or rejection of transactions cannot be based on surmise or third party statements which have not been tested and where primary documents on record remain uncontroverted. The Tribunal observed that SEBI's orders did not name the assessee or its broker among beneficiaries and that the amalgamation approved by the High Court could not be lightly disregarded. In these circumstances the AO/CIT(A) were not justified in treating the genuine sale proceeds as unexplained income under the impugned provision and in rejecting exemption under section 10(38).

Addition treating the long term capital gain as unexplained income is set aside and the claim of exemption is accepted; the AO directed to delete the addition.

Addition under section 69C of the Act - accommodation entries - Validity of addition made under section 69C as commission on alleged accommodation entries consequential to the disallowed capital gain. - HELD THAT: - The Tribunal held that the addition under section 69C was consequential to the primary addition on capital gains. Having quashed the primary addition on merits for want of any adverse material against the assessee, the consequential addition under section 69C must also fall. The AO was directed to delete this addition accordingly.

Addition under section 69C deleted as consequential to the reversal of the primary addition.

Final Conclusion: The appeal is allowed: the additions made by the AO and upheld by the CIT(A) in respect of long term capital gains and the consequential addition under section 69C are set aside and the AO is directed to delete the additions.

Revisionary jurisdiction under section 263 - Assessment under section 143(3) read with section 153A - Unabated assessment and effect of absence of incriminating material from search - Characterisation of NSEL trading loss as business loss v. speculation loss - Finality of earlier assessment and its bearing on subsequent proceedings under section 153A

Revisionary jurisdiction under section 263 - Assessment under section 143(3) read with section 153A - Unabated assessment and effect of absence of incriminating material from search - Validity of the PCIT's exercise of revisional jurisdiction under section 263 over the assessment framed under section 143(3) r.w.s. 153A for AY 2014-15. - HELD THAT: - The Tribunal held that the assessment framed under section 143(3) r.w.s. 153A had been properly finalized by the AO after examining the materials and that no incriminating material was unearthed during the search. Relying on the principle that in respect of an unabated assessment no addition can be made in the absence of incriminating material discovered in search proceedings, the Tribunal found the assessment order was not 'erroneous' or prejudicial to the revenue. The revenue's reliance on the PCIT's section 263 order was not supported by any contrary material; the PCIT himself recorded that no incriminating material was found. In these circumstances the exercise of revisionary power under section 263 was held to be invalid and the section 263 order was quashed. [Paras 5, 6, 7]

The exercise of jurisdiction under section 263 was invalid; the section 263 order dated 23.12.2020 is quashed and the assessment under section 143(3) r.w.s. 153A is restored.

Characterisation of NSEL trading loss as business loss v. speculation loss - Finality of earlier assessment and its bearing on subsequent proceedings under section 153A - Whether the AO's treatment of NSEL trading loss as business loss (and not speculation loss) was erroneous for AY 2014-15. - HELD THAT: - The Tribunal accepted the assessee's alternative plea that the immediately previous year (relevant to AY 2013-14) had treated income from NSEL trading as business income and that the revenue had not disturbed that treatment. Given the earlier acceptance by revenue, the Tribunal held that the loss in the year under appeal could not be recharacterised as a speculation loss. This conclusion reinforced that the AO's view was within the permissible exercise of assessment powers and therefore not open to being set aside as erroneous under section 263. [Paras 8]

The AO's characterisation of NSEL trading loss as business loss stands and is not erroneous; this supports quashing of the section 263 revision.

Final Conclusion: The appeal is allowed: the Principal Commissioner's order under section 263 (dated 23.12.2020) is quashed and the assessment framed under section 143(3) read with section 153A for AY 2014-15 is restored.

Genuineness of activities - charitable purpose - compliance of requirements of other law material for achieving objects - registration under section 12AA - opportunity of being heard - affiliating authority's satisfaction not to be re-examined by tax authority

Genuineness of activities - charitable purpose - registration under section 12AA - The assessee's objects and activities satisfy the requirement of being charitable and genuine for grant of registration under section 12AA. - HELD THAT: - The Tribunal examined the trust deed, objects and the material placed on record including audited financials, returns claimed under section 10(23C)(iiiad) for earlier years and the school's functioning as a CBSE-affiliated institution. Applying the settled law that at the registration stage the commissioner must be satisfied about the objects and genuineness of proposed/undertaken activities, the Tribunal held that imparting education by the trust falls within the definition of charitable purpose and that the assessee's activities have been proved to be genuine. The Tribunal accordingly concluded that the first statutory requirement for registration under section 12AA has been fulfilled. [Paras 26, 28]

The activities are charitable and genuine; this requirement for registration under section 12AA is satisfied.

Compliance of requirements of other law material for achieving objects - opportunity of being heard - affiliating authority's satisfaction not to be re-examined by tax authority - registration under section 12AA - The Commissioner must specify which other laws/authorities are material and give a reasonable opportunity to the applicant before refusing registration; affiliation by an expert educational authority obviates re examination of matters already considered by that authority. - HELD THAT: - After the September 2019 amendment the registering authority must satisfy itself about compliance with other laws material for achieving objects. However, the Tribunal held that such enquiries must be specific and constrained: the Commissioner should identify the relevant statutory provisions/competent authorities and the reasons why they are material, and must afford the applicant a reasonable opportunity to respond. Vague or general demands for 'approvals/permissions' are insufficient. Further, where an expert affiliating authority (here CBSE) has examined and granted affiliation addressing safety, building, hygiene and related norms, the Commissioner should not re open or sit in appeal over that affiliation. In the present case the CIT(E) recorded a factually incorrect conclusion and failed to make specific enquiries or give an opportunity; subsequently produced affiliation and certificates establish compliance. The Tribunal found the procedural and substantive approach of the CIT(E) unsustainable and directed grant of registration. [Paras 38, 42, 43, 44, 45]

The CIT(E)'s refusal for want of unspecified compliance with other laws and without specific queries or opportunity is unsustainable; the authority must specify relevant laws/authorities and give hearing, and where affiliation by the competent educational authority exists the tax authority should not re examine those matters.

Final Conclusion: The Tribunal allowed the appeal and directed the respondent to grant registration under section 12AA to the assessee from the date of its application, holding that the trust's activities are charitable and genuine and that the CIT(E) erred in refusing registration without specific queries and opportunity and in re examining matters already addressed by the affiliating authority.

Deduction of tax at source under section 194H - Principal-to-principal sale versus agency/commission - Assessee in default under section 201(1) - Interest under section 201(1A) - Prepaid voucher discount not taxable as commission

Deduction of tax at source under section 194H - Principal-to-principal sale versus agency/commission - Prepaid voucher discount not taxable as commission - Whether the discount/difference between face value and selling price of prepaid SIM cards and recharge vouchers paid to distributors amounted to 'commission' exigible to deduction of tax at source under section 194H. - HELD THAT: - The Tribunal examined competing High Court precedents and the Co ordinate Bench decisions in the assessee's own cases dealing with identical transactions. It accepted the view of the Co ordinate Bench that the sale of prepaid vouchers to distributors was on a principal to principal basis and that at the point of sale no income accrued or arose to the distributors such as would attract section 194H. The Tribunal therefore held that the difference between face value and selling price constituted a discount in a principal sale and could not be regarded as commission liable to TDS under section 194H, and granted relief to the assessee on parity with earlier coordinate decisions.

Discount on sale of prepaid vouchers to distributors is not commission liable to TDS under section 194H; appeal allowed on this issue.

Assessee in default under section 201(1) - Deduction of tax at source under section 194H - Whether the assessee could be held as an 'assessee in default' under section 201(1) for non deduction of TDS in respect of the disputed payments. - HELD THAT: - Having held that the disputed payments were not commission liable to TDS under section 194H, the Tribunal concluded that the foundational premise for declaring the assessee an 'assessee in default' under section 201(1) did not survive. The Tribunal therefore set aside the finding of default and the consequent demand insofar as it arose from the same characterization of payments as commission.

Assessee cannot be held an 'assessee in default' under section 201(1) in respect of the disputed discounts; the default finding is set aside.

Interest under section 201(1A) - Assessee in default under section 201(1) - Whether interest under section 201(1A) could be levied consequent to the assessment of the assessee as in default. - HELD THAT: - Since the Tribunal quashed the characterization of the payments as taxable commission and the consequent finding of the assessee being in default, the basis for levying interest under section 201(1A) did not subsist. The Tribunal, following its conclusion on the primary issue, allowed relief in respect of interest charged arising out of that finding.

Interest levied under section 201(1A) consequent to the default finding is not sustainable and is deleted to the extent it arose from the disputed characterization.

Final Conclusion: Appeals allowed: the Tribunal, on parity with its coordinate decisions, held that the discount on sale of prepaid SIMs and recharge vouchers to distributors was not commission exigible to TDS under section 194H; the consequential findings of assessee in default and interest under section 201(1A) were set aside/deleted for the assessment years in dispute.

Bogus purchases - estimation of undisclosed income - profit element embedded in accommodation bills - gross profit rate - reopening of assessment on information - estimation where sales turnover is established

Bogus purchases - profit element embedded in accommodation bills - gross profit rate - estimation of undisclosed income - Whether the estimation made by the First Appellate Authority of the profit element at 12.68% in respect of alleged bogus purchases was justified and whether the disallowance by the Assessing Officer was required to be restored. - HELD THAT: - The Assessing Officer reopened the assessment on receipt of information and disallowed purchases claimed from certain suppliers for want of documentary evidence, treating them as alleged bogus purchases. Before the Commissioner (Appeals) the assessee contended procedural defects and on merits that the additions would yield an unrealistically high gross profit rate. The Commissioner (Appeals) found that the assessee had procured accommodation bills and that the actual purchase transactions involved a profit element which ought to be taxed; he accordingly estimated the taxable profit element at 12.68%, being the gross profit rate shown by the assessee for the year, relying on precedents dealing with accommodation entries. The Tribunal, after examining the material, recorded that the sales turnover was not in doubt and, given the nature of the business, sales could not occur without purchases; accordingly, estimation of the profit element was appropriate. The Tribunal held that the 12.68% estimation was reasonable and sufficient to guard against revenue leakage and therefore could not be said to be unjustified. The Tribunal found no infirmity in the appellate authority's allowance of relief by adopting the estimated gross profit rate and declined to restore the AO's disallowance of the entire purchases. [Paras 4, 6, 7]

The Tribunal upheld the Commissioner (Appeals)'s estimation of the taxable profit element at 12.68% in respect of the alleged bogus purchases and dismissed the revenue's appeal.

Final Conclusion: The appeal is dismissed; the Tribunal affirms the appellate authority's estimate of the profit element in respect of the alleged bogus purchases (12.68%) and declines to restore the Assessing Officer's disallowance of the entire purchases.

Interpretation of "assessee" in section 54B - Availability of exemption under section 54B to a Hindu undivided family - Harmonious construction to avoid redundancy and give effect to statutory language - Prospective legislative clarification by Finance Act 2013 regarding section 54B - Benefit of doubt in favour of assessee on exemption provisions

Interpretation of "assessee" in section 54B - Availability of exemption under section 54B to a Hindu undivided family - Whether a Hindu undivided family (HUF) is entitled to claim exemption under section 54B for assessment year 2012-13. - HELD THAT: - The Tribunal held that the word 'assessee' in section 54B, when read with the definitional provisions of the Act (which define 'person' to include a HUF and define 'assessee' to mean a person in respect of whom proceedings are taken), can include a HUF. The Tribunal rejected the proposition that the statutory language necessarily restricts section 54B to natural persons only and observed that a harmonious construction avoids rendering parts of the provision redundant. The Tribunal further noted that Parliament, by the Finance Act 2013, expressly inserted wording to include 'the assessee being an individual or his parent, or a Hindu undivided family', which clarified and extended the provision; this legislative action supports the view that HUFs fall within the ambit of the section. In case of ambiguity, the Tribunal applied the principle of giving benefit of doubt to the assessee. Applying these principles to the facts (sale of agricultural land and reinvestment in agricultural land within two years), the Tribunal found that the HUF satisfied the conditions of section 54B and was entitled to the exemption. [Paras 15, 17, 19]

HUF entitled to exemption under section 54B for assessment year 2012-13; the claim under section 54B is allowed.

Availability of exemption under section 54F - Reliability of construction valuations and timing of investment under section 139 - Whether the assessee's claim of deduction under section 54F should be disallowed by the assessing officer. - HELD THAT: - The Commissioner (Appeals) had examined the materials, including valuation report, contractor agreement and photographs, and applied case law to hold that investment in construction made within the period permitted by law entitled the assessee to the benefit of section 54F even if amounts were not parked in the capital gains account scheme, provided the investment was made within the statutory period. The Tribunal accepted the appellate authority's reasoning that the assessing officer could have verified valuation discrepancies by enquiries but could not treat a sketchy report as conclusive evidence of non-existence of construction. On that basis the disallowance by the AO was held unjustified and deleted. [Paras 5, 19]

Disallowance of deduction under section 54F is deleted; the assessee's claim under section 54F is allowed.

Final Conclusion: The appeal is allowed. The Tribunal held that the HUF is entitled to the exemption under section 54B for assessment year 2012-13 and upheld the deletion of the assessing officer's disallowance under section 54F; all grounds of the assessee are allowed.

Acquiescence - maintainability of writ petition - time-barred - limitation under Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - show cause notice - adjudication afresh by licensing authority

Acquiescence - maintainability of writ petition - show cause notice - Whether the petitioner, having participated in the show cause proceedings, could maintain the present writ petition challenging the notice. - HELD THAT: - The Court found that the petitioner had participated in the adjudicatory process by filing a preliminary objection and additional written submissions, and thereby had partly acquiesced in the proceedings. In view of that participation and acquiescence, it was not open to the petitioner to seek immediate judicial intervention to challenge the jurisdiction of the licensing authority. On that basis the Court declined to entertain the writ and proceeded to dismiss the petition while leaving the substantive adjudication to the licensing authority. [Paras 14, 15, 16, 17]

Petition dismissed on the ground of acquiescence/maintainability; petitioner not permitted to challenge the notice in writ proceedings after participating in the adjudication.

Time-barred - limitation under Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - adjudication afresh by licensing authority - Whether the show cause notice was time-barred and the consequent direction to the licensing authority. - HELD THAT: - The Court observed prima facie that the impugned show cause notice appeared to be time-barred. The respondents, however, asserted that the licensing authority came to know of the alleged offence only upon receipt of a communication in June 2016. As the adjudicatory record and communication were not before the Court for full determination, the Court refrained from finally deciding the limitation question on merits. Instead, the Court directed the first respondent (licensing authority) to pass appropriate orders in accordance with law within 60 days, to hear the petitioner before passing such order, and expressly directed that the authority should not be influenced by the Court's observations regarding limitation. [Paras 12, 13, 16]

Limitation issue not finally adjudicated; matter remanded to the licensing authority to decide the show cause notice afresh in accordance with law within 60 days, after hearing the petitioner.

Final Conclusion: Writ petition dismissed on the ground of the petitioner's participation and acquiescence in the adjudicatory proceedings; the licensing authority is directed to consider and decide the impugned show cause notice afresh in accordance with law within 60 days, affording the petitioner a hearing and without being influenced by this Court's observations on limitation.

Order of settlement to be conclusive - confiscation under Section 111(d), Section 111(m) and Section 111(o) of the Customs Act, 1962 - redemption fine under Section 125 of the Customs Act, 1962 - immunity from prosecution on settlement - approbate and reprobate

Order of settlement to be conclusive - immunity from prosecution on settlement - Whether the Settlement Commission's order could be reopened or modified by the High Court in exercise of writ jurisdiction - HELD THAT: - The Court held that an order of the Settlement Commission is, by statutory mandate, conclusive as to the matters stated therein and ordinarily not open to be reopened in proceedings under the Act. Reliance was placed on the principle that interference is permissible only if the settlement order is contrary to any provision of the Act; findings of fact recorded by the Commission are not ordinarily examinable in writ jurisdiction. The decision in Ind Swift (as cited in the judgment) was noted to the effect that challenge is limited and that settlement orders are final subject to narrow exceptions such as fraud or contravention of statutory provisions. Applying these principles to the present petition, the Court found no infirmity in the Settlement Commission's exercise of its statutory power to settle and grant immunities and therefore declined to reopen or modify the settlement order. [Paras 9, 11, 12, 19]

The challenge to the Settlement Commission's final order was rejected and the order was held not amenable to re-opening in the present writ petition.

Confiscation under Section 111(d), Section 111(m) and Section 111(o) of the Customs Act, 1962 - redemption fine under Section 125 of the Customs Act, 1962 - approbate and reprobate - Whether the absolute confiscation of seized goods (including goods alleged to have been destroyed in a fire) and related treatment in the settlement order was liable to be set aside or modified - HELD THAT: - The Court examined the facts that seized consignments included refurbished goods and other goods, some of which were alleged to have been destroyed in a fire after seizure, while others were no longer available for confiscation. It observed that the Settlement Commission, after recording the payments of duty and interest by the petitioner, exercised its power to order absolute confiscation of the seized goods and to impose fines/penalties in lieu of confiscation for certain consignments. The Court emphasized that by opting for settlement the petitioner accepted the package order and cannot selectively accept favorable portions while rejecting adverse portions (approbate and reprobate). The Commission had also refrained from ordering confiscation of goods not available for seizure. On these bases the Court found no irregularity in the Commission's treatment of the seized (and alleged destroyed) goods or in its exercise of discretion to impose redemption fines in certain cases and absolute confiscation in others. [Paras 5, 6, 16, 17, 18]

The petition seeking to set aside or modify the Commission's confiscation and related directions was dismissed; the Settlement Commission's orders as to confiscation and fines were upheld.

Final Conclusion: The writ petition seeking modification or reopening of the Settlement Commission's order was dismissed; the Settlement Commission's package order - including settlement of duty and interest, confiscation/fines in relation to seized consignments, and grant of immunity as provided in the order - was upheld.

Investigation into affairs of a company - locus standi under Section 213 - prima facie case for investigation - abuse of process and forum shopping - freezing of assets under Section 221 - suo motu power to order investigation - escheat property

Locus standi under Section 213 - abuse of process and forum shopping - The petitioner lacks locus standi to maintain the application under Section 213 and its conduct amounts to abuse of process/forum shopping disentitling it to relief. - HELD THAT: - The Tribunal found that the petitioner is neither a member, creditor nor depositor of the R-1 company and repeatedly pursued the same cause of action across multiple fora despite adverse final orders, including detailed findings and costs imposed by the High Court. The petitioner's pattern of filings - withdrawal of a PIL, multiple writ petitions dismissed with costs, rejection of recall applications and appellate dismissal - demonstrates forum shopping and speculative litigation. On this basis the petitioner was held not to have come with clean hands and therefore lacks the requisite standing to invoke Section 213(b). The Tribunal relied on the chronology of prior orders and their findings that the petitioner's conduct constituted abuse of process, and treated those findings as determinative of maintainability. [Paras 12, 13, 14, 15, 16]

Petition dismissed as not maintainable for want of locus standi and on account of abuse of process/forum shopping.

Prima facie case for investigation - investigation into affairs of a company - The petitioner failed to establish a prima facie case warranting an investigation into the affairs of the R 1 company under Section 213. - HELD THAT: - The Tribunal observed that Section 213 authorises investigation only where the Tribunal is satisfied that circumstances suggest conduct of business with intent to defraud or for fraudulent or unlawful purposes. Having examined the pleadings and the record of prior proceedings, including orders by statutory authorities and the High Court which found no substance in the petitioner's contentions, the Tribunal held there was no prima facie material to justify ordering an investigation. The Tribunal noted that regulatory mechanisms and earlier orders had addressed the matters complained of and that the petitioner had not produced credible prima facie evidence to require a roving or exploratory inquiry. [Paras 9, 15, 16]

No prima facie case made out; investigation not ordered.

Freezing of assets under Section 221 - Application for freezing the assets of the R 1 company under Section 221 does not arise. - HELD THAT: - Because the Tribunal concluded that the petition was not maintainable and that no prima facie case for investigation had been made out, the ancillary relief of freezing assets under Section 221 could not be entertained. The Tribunal recorded that, absent a jurisdictional and evidentiary foundation for investigation, temporary restraint on assets would be inappropriate. [Paras 16, 17]

Prayer for freezing assets rejected as not arising.

Final Conclusion: The Company Petition is dismissed for want of locus standi and on account of abuse of process; no prima facie case for investigation was found and the ancillary prayer for freezing assets under Section 221 is accordingly not entertained.

Nominee director exceeding authority - validity of share transfer prima-facie - allegation of fraud simpliciter not defeating arbitration clause - reference of disputes to arbitration under Section 8 of Arbitration and Conciliation Act, 1996 - sale of rights issue pending interim adjudication - maintenance of status-quo in shareholding

Nominee director exceeding authority - validity of share transfer prima-facie - Transfer of some of the petitioner's shares in R1 Company by its nominee directors to R2 is prima-facie legal and not shown to be fraudulent. - HELD THAT: - The Tribunal found that R3 and R4 were nominee directors and that the petitioner produced no document restraining them from taking decisions on behalf of the petitioner in R1 Company. The petitioner's allegations of collusion and fraud were held to be vague and unsupported by assertive material. The transfer cannot be declared void or fraudulent at the interlocutory stage for want of sufficient material; whether consideration received was adequate or whether the transfer amounts to oppression requires detailed hearing. Accordingly, the transfer is prima-facie not void and cannot be characterised as a fraudulent transfer at this stage.

The transfer by nominee directors is prima-facie valid and not shown to be fraudulent; no interlocutory declaration of invalidity is recorded.

Reference of disputes to arbitration under Section 8 of Arbitration and Conciliation Act, 1996 - allegation of fraud simpliciter not defeating arbitration clause - Disputes relating to the joint-venture activities of R1 Company (except the validity of the specific share transfers and the rights-issue) are to be referred to arbitration under the parties' agreement. - HELD THAT: - The parties entered into a MOA and a Shareholding Agreement containing a clause mandating arbitration for disputes concerning joint-venture activities. Applying the principle that mere allegations of fraud simpliciter do not automatically oust an arbitration clause, and noting the absence of material showing serious or pervasive fraud invalidating the arbitration agreement, the Tribunal held that disputes arising out of the joint-venture activities are referable to an arbitral tribunal under Section 8 of the Arbitration and Conciliation Act. The Tribunal, however, carved out disputes specifically concerning the validity of the share transfers by the nominee directors and the challenged rights-issue, which it did not refer to arbitration at this stage.

Except for the issues relating to the specific share transfers and the rights-issue, the parties are directed to refer their disputes about R1 Company's joint-venture activities to arbitration and to nominate arbitrators as per the agreement.

Sale of rights issue pending interim adjudication - maintenance of status-quo in shareholding - The act of respondents in issuing and selling the rights issue, raised to meet pressing financial needs of R1 Company, is prima-facie valid; parties directed to maintain status-quo in shareholding pending further proceedings. - HELD THAT: - Although the Tribunal had reserved interim orders, the respondents declared and sold a rights issue to raise funds allegedly to avoid the company's loan being declared NPA. Considering the bank correspondence indicating urgent financial need, the Tribunal was not satisfied at the interlocutory stage that the action was mala fide or contemptuous; prima-facie it was undertaken in the company's interest. The Tribunal refrained from a final determination and preserved the existing shareholding pattern by directing status-quo to avoid multiplicity of proceedings, reserving the right to examine the conduct further after full hearing.

The sale of the rights issue is prima-facie valid; parties must maintain the current shareholding pattern and the Tribunal may adjudicate the conduct after final hearing.

Final Conclusion: MA Nos. 5/2021 and 21/2021 are allowed; except for disputes concerning the specific share transfers by nominee directors and the rights-issue, all other disputes as to the joint-venture activities of R1 Company are to be referred to arbitration; parties to maintain status-quo in the shareholding and to nominate arbitrators and complete pleadings as directed.

Liquidation cost - contribution to liquidation costs by financial creditors - secured creditor's option to realise security interest - liquidation estate versus liquidation asset - Regulation 21A of IBBI (Liquidation Process) Regulations, 2016 - Regulation 2A of IBBI (Liquidation Process) Regulations, 2016 - Section 52 of the Insolvency and Bankruptcy Code, 2016 - Section 53 of the Insolvency and Bankruptcy Code, 2016 - delegated legislation - power of IBBI under Section 240 of IBC, 2016

Tribunal's power to strike down delegated legislation - Whether this Tribunal could strike down Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 as ultra vires - HELD THAT: - The Tribunal held that it does not possess the power to strike down Rules or Regulations framed under a statute. Reliance on L. Chandra Kumar was distinguished as applicable to tribunals constituted under Articles 323A/323B; precedents including Sterlite Industries and subsequent authority establish that this Tribunal, constituted under statute, lacks a general power akin to High Court jurisdiction to invalidate delegated legislation. Consequently the prayer seeking to strike down Regulation 21A was rejected. Notwithstanding this limitation, the Tribunal retained the limited authority to examine alleged inconsistencies between the Code and delegated regulations for purposes of interpretation and to decide disputes before it. [Paras 35, 36]

Prayer to strike down Regulation 21A rejected; Tribunal has no power to strike down the Regulations but may interpret alleged inconsistencies for the limited purposes of the adjudication.

Regulation 2A of IBBI (Liquidation Process) Regulations, 2016 - contribution to liquidation costs by financial creditors - liquidation cost - Whether a secured financial creditor who opts to realise its security outside the liquidation process must contribute to the liquidation costs under the Regulations - HELD THAT: - The Tribunal analysed Section 5(16) (definition of 'liquidation cost'), Regulation 2(1)(ea) (components of liquidation cost), Regulation 39B of the IRPC Regulations and Regulation 2A of the Liquidation Process Regulations. The regulatory scheme contemplates that where liquid assets are insufficient to meet estimated liquidation costs, financial creditors (including secured financial institutions) may be called upon to contribute proportionately. Although Section 52 permits a secured creditor to realise its security or relinquish it, Section 52(8) expressly deals only with insolvency resolution process costs; it does not bar regulatory measures to ensure liquidation costs are met. The IBBI, exercising powers under Section 240, filled implementation gaps by prescribing contribution mechanisms to protect the collective liquidation process and stakeholders. The Tribunal emphasised that any demand must be justified by the liquidator with adequate proof and that the liquidator cannot claim arbitrary or fanciful sums. [Paras 38, 41, 42, 44, 50]

A secured financial creditor realising security outside the liquidation process is liable to contribute its proportionate share of estimated liquidation costs under the Regulations (including Regulation 2A), subject to the requirement that the liquidator justify the amounts demanded; equitable or fanciful demands by the liquidator are not permissible.

Regulation 21A of IBBI (Liquidation Process) Regulations, 2016 - timelines for enforcement and consequences of non-payment - liquidation estate versus liquidation asset - Whether the liquidator could treat the secured assets as having become part of the liquidation estate under Regulation 21A and proceed with sale for non-payment of the demanded contribution - HELD THAT: - The Tribunal found that the liquidator acted with undue haste in declaring the secured assets part of the liquidation estate and in issuing the public sale notice. Although Regulation 21A prescribes timelines and consequences for non-payment of estimated liquidation costs (including the mechanism by which assets may vest in the liquidation estate), the liquidator's invocation of those consequences must follow the regulatory procedure and reasonable timelines. Given the pending challenge and conduct of the parties, the Tribunal concluded that the impugned sale action was unjustified and set it aside. The Tribunal also ordered that any contribution paid pursuant to its directions be held in a special escrow account pending realization of the security interest. [Paras 49, 51]

The Liquidator's action declaring the secured assets part of the liquidation estate and issuing the sale notice was set aside; sale notice quashed and any claimed contributions to be placed in a special escrow pending realization.

Section 52 of the Insolvency and Bankruptcy Code, 2016 - realisation of security interest by secured creditor - Section 53 of the Insolvency and Bankruptcy Code, 2016 - Reliefs and directions as between the secured creditor (applicant) and the liquidator regarding payment, realization period and consequent proceedings - HELD THAT: - Balancing the parties' positions and having found the liquidator's sale action premature while also finding the secured creditor's refusal to contribute to estimated liquidation costs unreasonable, the Tribunal issued directed reliefs: (i) the applicant was directed to pay its proportionate share of the liquidation cost demanded (specified amount in the order) within 30 days, failing which consequences under Regulation 21A would follow; (ii) the amount paid by the applicant shall be kept in a special escrow account and not appropriated immediately by the liquidator; (iii) the applicant was granted three months from the order to complete sale of the secured assets (in terms of Section 52(6)), to realize the security for not less than the sum it had earlier indicated; (iv) upon realization, the applicant must act in accordance with Section 52 and other applicable provisions; and (v) the liquidator's application (IA/39/2021) was dismissed. [Paras 50, 51]

Applicant directed to contribute its share of liquidation costs within 30 days (to be held in escrow); given three months to realise security; on realization, applicant to act under Section 52; IA/1205/2020 ordered accordingly and IA/39/2021 dismissed.

Final Conclusion: The Tribunal declined to strike down Regulation 21A but interpreted the regulatory scheme to uphold that financial creditors, including secured creditors realising security outside liquidation, may be required to contribute proportionately to estimated liquidation costs under the Regulations; the liquidator's premature sale notice was set aside, the secured creditor was directed to pay its share into escrow and was granted a limited period to realise its security, and the liquidator's application challenging the secured creditor's auction was dismissed.

Admission under Section 9(5) of the I&B Code, 2016 - moratorium under Section 14 of the I&B Code, 2016 - Interim Resolution Professional appointment - compliance with Section 8 demand notice - pre-existing dispute as defence to insolvency petition - pecuniary jurisdiction and threshold limit - limitation and running account

Admission under Section 9(5) of the I&B Code, 2016 - compliance with Section 8 demand notice - pre-existing dispute as defence to insolvency petition - The petition filed by the Operational Creditor under Section 9 is admissible and is required to be admitted under Section 9(5) of the IBC, 2016. - HELD THAT: - The Tribunal found that the Operational Creditor issued the statutory demand notice and it was delivered; the Corporate Debtor did not reply within the statutory period. The documents, including the statement of account and minutes of the meeting dated 25.05.2017 wherein the Corporate Debtor promised to pay, establish default. The Corporate Debtor asserted a defence of defective goods but failed to place on record any contemporaneous correspondence or evidence showing that the quality dispute was raised prior to the demand notice. The Tribunal treated that defence as a spurious, after-the-event contention lacking supporting documents. The Tribunal also observed that the default arose prior to the COVID-19 period and the Corporate Debtor could not seek protection under Section 10A. Applying these findings, the Tribunal concluded that default is established and the Section 9 petition is to be admitted. [Paras 11, 12, 13, 16]

Petition admitted under Section 9(5) of the IBC, 2016.

Interim Resolution Professional appointment - disclosures under IBBI regulations - An Interim Resolution Professional is to be appointed and shall make required disclosures and not have pending disciplinary proceedings. - HELD THAT: - As the Operational Creditor did not propose an IRP, the Tribunal appointed an IRP from the list furnished by the IBBI for the applicable period, subject to the condition that no disciplinary proceedings are pending against the appointee and that the requisite disclosures under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are furnished within one week from the date of the order. The appointment is therefore conditional upon compliance with statutory/regulatory disclosure and disciplinary prerequisites. [Paras 16, 19]

Interim Resolution Professional appointed subject to required disclosures and absence of pending disciplinary proceedings.

Moratorium under Section 14 of the I&B Code, 2016 - scope and duration of moratorium - Moratorium under Section 14 is declared with the scope and duration as provided by the Code. - HELD THAT: - Upon admission of the Section 9 petition, the Tribunal ordered the moratorium envisaged under Section 14(1) and reproduced its prohibitions (institution or continuation of suits, transfer or disposal of assets, enforcement of security, recovery of property occupied by the corporate debtor). The Tribunal also set out the non-application and exceptions under Sections 14(2), 14(2A) and 14(3) concerning supply of essential goods/services and transactions excluded by notification, and recorded that the moratorium shall operate from the date of the order until completion of the CIRP or earlier cessations prescribed under Section 14(4). [Paras 16, 17, 18, 20]

Moratorium declared in terms of Section 14; operative from the date of the order until completion of the CIRP or earlier cessation in terms of the Code.

Pecuniary jurisdiction and threshold limit - The Tribunal has pecuniary jurisdiction to entertain the Section 9 petition as the default arose prior to the increase in the threshold limit. - HELD THAT: - The Tribunal noted that the statutory threshold for filing insolvency applications was increased by notification effective 24.03.2020. Since the default in this case occurred well before that date and the petition was filed on 26.09.2019, the Tribunal held that it has pecuniary jurisdiction to entertain the petition under the earlier threshold regime. [Paras 14]

Tribunal has pecuniary jurisdiction to entertain the petition.

Limitation and running account - The Section 9 application is within the period of limitation having regard to the invoices and the running account maintained. - HELD THAT: - The Tribunal observed that invoices were raised from 31.03.2016 to 09.12.2017 and, considering the account was maintained on a running basis, the petition filed on 26.09.2019 falls within the period of limitation. On that basis, the Tribunal held that the petition is not time-barred. [Paras 15]

Application is within limitation and not time-barred.

Final Conclusion: The Section 9 petition filed by the Operational Creditor is admitted; an Interim Resolution Professional is appointed subject to required disclosures and absence of disciplinary proceedings; moratorium under Section 14 is declared with its statutory scope and duration; the Tribunal has pecuniary jurisdiction and the petition is within limitation; the Operational Creditor is directed to make the deposit as ordered to meet IRP expenses and the Registry/IBBI and Registrar of Companies are to be informed of the CIRP initiation.

Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - Breach of joint memo of compromise as ground for restoration and subsequent admission - Appointment of Interim Resolution Professional - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Payment of interim expenses to the Interim Resolution Professional

Admission of application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - Breach of joint memo of compromise as ground for restoration and subsequent admission - The petition filed by the Operational Creditor was required to be admitted under Section 9(5) of the IBC, 2016 on account of the Corporate Debtor's default in complying with the terms of the joint memo of compromise. - HELD THAT: - The Tribunal found that the corporate debtor failed to adhere to the time schedule and payment obligations set out in the joint memo of compromise, which had earlier induced disposal of the petition. After restoration of the petition on account of alleged default and in the absence of the corporate debtor's representation at the subsequent hearing, the Tribunal concluded that the default established the operational debt and justified admission of the Section 9 petition. The admission was therefore ordered under the statutory framework applicable to operational creditor petitions. [Paras 5, 6]

CP/748/IB/2018 is admitted under Section 9(5) of the IBC, 2016.

Appointment of Interim Resolution Professional - Withdrawal of consent by proposed IRP and selection from IBBI list - Payment of interim expenses to the Interim Resolution Professional - An Interim Resolution Professional was appointed from the IBBI list and the Operational Creditor was directed to pay interim expenses to the IRP. - HELD THAT: - The proposed IRP originally specified by the Operational Creditor withdrew his consent and declined to apply for authorization for assignment. Having regard to the IBBI roster for the relevant period, the Tribunal appointed another named insolvency professional as Interim Resolution Professional, subject to disclosures and absence of pending disciplinary proceedings. The Tribunal also directed the Operational Creditor to pay a specified sum to the IRP to meet expenses for performing statutory functions and to await the IRP's filing of requisite declaration under the Code. [Paras 6, 7, 10]

An IRP from the IBBI list is appointed on stated conditions and the Operational Creditor must pay the directed interim expenses to the IRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Scope and duration of moratorium during CIRP - The moratorium, as provided under Section 14 of the IBC, 2016, would come into effect from the date of the admission order and operate for the duration of the Corporate Insolvency Resolution Process subject to the statutory exceptions. - HELD THAT: - On admitting the application and appointing an IRP, the Tribunal applied the statutory moratorium provisions, restraining institution or continuation of suits, transfers or disposal of assets, enforcement of security interests, and recovery of property in possession, while also recognising specified exceptions in Sections 14(2), 14(2A) and 14(3). The Tribunal reproduced the statutory scope and duration and directed communication of the initiation of CIRP to relevant authorities. [Paras 7, 8, 9, 11]

The moratorium under Section 14 is declared to be in effect from the date of this order until completion of the CIRP, subject to the statutory exceptions.

Final Conclusion: The Tribunal admitted the Operational Creditor's Section 9 petition on finding default under the parties' compromise, appointed an Interim Resolution Professional from the IBBI list (with directed interim payment by the Operational Creditor), and declared the statutory moratorium to operate from the date of the order for the duration of the CIRP.

Operational debt and default - existence of pre existing dispute - Mobilox test - admission of Section 9 application under IBC, 2016 - jurisdiction of Adjudicating Authority based on registered office - limitation and date of default - appointment of Interim Resolution Professional - security for IRP expenses - deposit by Operational Creditor - moratorium under Section 14 of the IBC

Operational debt and default - admission of Section 9 application under IBC, 2016 - The operational debt was due and default occurred and the Section 9 application is complete and liable to be admitted. - HELD THAT: - The Tribunal found on the material on record, including correspondence and invoices, that the Corporate Debtor had acknowledged its liability in multiple emails and had not raised any pre existing dispute prior to receipt of the Section 8 notice. On that basis the adjudicating authority concluded that default in payment of an operational debt had occurred and the application under Section 9 was complete and required admission. The Tribunal applied the standard that a patently feeble or spurious defence does not preclude admission and determined that the defence asserted by the Corporate Debtor constituted an afterthought. [Paras 10, 13]

Operational debt established, default found and the Section 9 application admitted.

Existence of pre existing dispute - Mobilox test - The alleged dispute raised by the Corporate Debtor is not a pre existing dispute warranting rejection of the Section 9 application. - HELD THAT: - Relying on the principle in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Ltd., the Tribunal examined whether the Corporate Debtor had a plausible pre existing dispute requiring further investigation. The Tribunal observed absence of evidence of any dispute prior to the demand notice, noted admissions and assurances to pay in earlier emails, and held that the contention of defective supply was a spurious defence raised only after service of the Section 8 notice; hence it failed the Mobilox threshold and did not prevent admission. [Paras 10]

Alleged dispute held to be patently feeble and not a bar to admission under Section 9.

Jurisdiction of Adjudicating Authority based on registered office - The Tribunal has jurisdiction to entertain the Section 9 application. - HELD THAT: - The Tribunal recorded that the registered office of the Corporate Debtor is situated in Delhi and on that basis concluded that the National Company Law Tribunal, New Delhi has jurisdiction to try the application. [Paras 11]

Application is within the territorial jurisdiction of this Tribunal.

Limitation and date of default - The application is within limitation as the date of default is 16.05.2019 and the application was filed on 06.12.2019. - HELD THAT: - The Tribunal identified the date of default and compared it with the filing date of the application, concluding that the claim was not time barred and the Section 9 petition was filed within the period of limitation. [Paras 12]

Application is not time barred.

Appointment of Interim Resolution Professional - An Interim Resolution Professional (IRP) is appointed and directed to make disclosures and give consent. - HELD THAT: - As the Applicant had not proposed an IRP, the Tribunal appointed a named IRP from the IBBI list subject to the IRP filing the required consent in Form 2 and disclosures under the Regulations within one week. The appointment is conditional upon absence of pending disciplinary proceedings against the IRP. [Paras 14]

IRP appointed conditionally; required consent and disclosures to be filed within one week.

Security for IRP expenses - deposit by Operational Creditor - The Operational Creditor is directed to deposit an amount with the IRP to meet initial expenses of the CIRP. - HELD THAT: - To enable the IRP to perform functions under the Regulations, the Tribunal directed the Operational Creditor to deposit a specified sum with the IRP within one week of receipt of the order; the amount is subject to adjustment by the Committee of Creditors and refundable as accounted by the IRP. [Paras 15]

Operational Creditor directed to deposit the prescribed amount with the IRP within one week; subject to later adjustment.

Moratorium under Section 14 of the IBC - On admission under Section 9(5), moratorium under Section 14(1) is attracted and shall operate with applicable exceptions. - HELD THAT: - Consequent to admission of the Section 9 application, the Tribunal directed that the moratorium under Section 14(1) follows in relation to the Corporate Debtor, with the provisos (a) to (d) and the other statutory exceptions continued to apply as per Sections 14(2) to 14(4). [Paras 16]

Moratorium imposed in accordance with Section 14 of the IBC.

Final Conclusion: The Section 9 application under the Insolvency and Bankruptcy Code, 2016 is admitted on the finding of operational debt and default; the Tribunal exercised jurisdiction, held the alleged dispute to be spurious under the Mobilox test, appointed an Interim Resolution Professional subject to disclosures and consent, directed an initial deposit by the Operational Creditor for IRP expenses, and ordered the statutory moratorium to follow.

Corporate insolvency application under section 9 of IBC, 2016 - Existence of operational debt and default - Pre existing dispute and plausibility test (Mobilox test) - Jurisdiction by registered office - Limitation and time bar - Appointment of Interim Resolution Professional - Moratorium under section 14 of IBC, 2016 - Interim funding by Operational Creditor for IRP functions - Communication to IBBI and ROC

Existence of operational debt and default - Corporate insolvency application under section 9 of IBC, 2016 - Default in payment of operational debt and admissibility of section 9 application - HELD THAT: - The Tribunal found that goods were supplied and invoices raised between 29.02.2016 and 09.08.2016 and that part payment left an outstanding operational debt. On the material before it the adjudicating authority concluded that default in payment to the applicant had occurred and that the application under section 9 of the IBC, 2016 was otherwise complete. The Tribunal rejected the corporate debtor's contentions as insufficient to rebut the established default and proceeded to admit the application. [Paras 10, 13]

Section 9 application admitted on the ground of established default in payment of operational debt.

Pre existing dispute and plausibility test (Mobilox test) - Whether a pre existing genuine dispute precluded admission - HELD THAT: - Applying the test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (as relied upon), the Tribunal examined whether the corporate debtor had placed credible evidence of a pre existing dispute which required further investigation. The Tribunal held that the quality complaints were an afterthought, noting the corporate debtor's earlier email dated 04.05.2016 describing the goods as of 'superior quality' and 'technical advantage of high tensile'. The corporate debtor failed to show that a dispute was raised and communicated prior to the section 8 notice; communications with its own customers were not treated as disputes negating the claim. [Paras 6, 10]

No pre existing genuine dispute was found; the defence held to be patently feeble and did not bar admission.

Jurisdiction by registered office - Tribunal's jurisdiction to entertain the application - HELD THAT: - The Tribunal recorded that the registered office of the corporate debtor is situated in Delhi and consequently the National Company Law Tribunal, New Delhi Bench, has jurisdiction to entertain and try the application. [Paras 11]

Tribunal has jurisdiction to entertain the section 9 application.

Limitation and time bar - Whether the application was filed within limitation - HELD THAT: - Noting that the last invoice was dated 09.08.2016 and the application filed on 24.04.2018, the Tribunal held that the debt was not time barred and the application lay within the period of limitation. [Paras 12]

Application is not barred by limitation.

Appointment of Interim Resolution Professional - Appointment and conditions for the Interim Resolution Professional - HELD THAT: - The Tribunal recorded that the applicant's proposed change of proposed IRP to Mr. Mukesh Gupta was allowed and took Form 2 on record. Mr. Mukesh Gupta was appointed as Interim Resolution Professional subject to the condition that no disciplinary proceedings are pending against him and that he file the requisite consent in Form 2 and make required disclosures under the IBBI regulations within one week. [Paras 14]

Mr. Mukesh Gupta appointed as Interim Resolution Professional subject to specified conditions and filings.

Interim funding by Operational Creditor for IRP functions - Direction for interim deposit by Operational Creditor to meet IRP expenses - HELD THAT: - The Tribunal directed the Operational Creditor to deposit an amount with the Interim Resolution Professional to meet expenses for performing IRP functions in accordance with regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The deposit was ordered to be made within one week and to be subject to adjustment by the Committee of Creditors and returnable as accounted for by the IRP. [Paras 15]

Operational Creditor directed to deposit interim funds with the IRP within one week, subject to adjustment by the Committee of Creditors.

Moratorium under section 14 of IBC, 2016 - Imposition of moratorium consequent to admission - HELD THAT: - Upon admission under section 9(5) the Tribunal ordered that the moratorium under section 14(1) of the IBC, 2016 shall follow in relation to the corporate debtor, with the provisos and the operation of sections 14(2) to 14(4) to apply during the moratorium period. [Paras 16]

Statutory moratorium under section 14 has been imposed on the corporate debtor consequent to admission.

Communication to IBBI and ROC - Directions for communication of the order and ancillary compliance - HELD THAT: - The Tribunal directed service of the order on the applicant, corporate debtor and the IRP, and further ordered that a copy be forwarded to the IBBI for its records. The applicant was directed to provide the IRP with the complete paper book. A copy was also to be sent to the Registrar of Companies for updating Master Data, with ROC to send a compliance report to the Registrar, NCLT. [Paras 17]

Registry to communicate the order to parties and forward copies to IBBI and ROC with compliance reporting as directed.

Final Conclusion: The Tribunal admitted the section 9 petition finding established default and absence of a pre existing genuine dispute, held the application to be within limitation and jurisdiction, appointed Mr. Mukesh Gupta as Interim Resolution Professional subject to filings and conditions, directed interim funding by the Operational Creditor, imposed the moratorium under section 14, and directed communication of the order to the parties, IBBI and ROC.

Admission under section 9 of IBC, 2016 - Corporate Insolvency Resolution Process - Moratorium under section 14 of IBC, 2016 - Appointment of Interim Resolution Professional - Service of notice by email under Rule 38 of NCLT Rules, 2016 - Limitation and date of default - Effect of prior dismissal and res judicata - Settlement, breach and revival of application - Operational creditor's deposit for IRP expenses

Admission under section 9 of IBC, 2016 - Corporate Insolvency Resolution Process - Application under section 9 of the IBC, 2016 by the operational creditor was maintainable and admitted, initiating CIRP against the corporate debtor. - HELD THAT: - The Tribunal found that the applicant furnished the demand notice under section 8 and filed the section 9 application with supporting material, including a banker's certificate as a precautionary measure after a prior technical dismissal. The corporate debtor's recorded admission of part payment in the settlement and subsequent default on the agreed instalment supported existence of a debt and default. On these foundations the Tribunal applied section 9(5) and admitted the application and directed initiation of the corporate insolvency resolution process. [Paras 16, 17, 20, 22, 23]

The section 9 application is admitted and CIRP is initiated against the corporate debtor.

Service of notice by email under Rule 38 of NCLT Rules, 2016 - Service of the section 8 notice and the section 9 application on the corporate debtor by email/post as per Rule 38 was sufficient evidence of delivery. - HELD THAT: - The Tribunal accepted the applicant's proof of service for the section 8 demand notice and the section 9 application, including tracking reports and affidavit of service. Reliance was placed on precedent holding that service in accordance with Rule 38 of the NCLT Rules, 2016 constitutes sufficient evidence of delivery, and the e-mail service which did not bounce back was treated as effective service. [Paras 11, 13]

Service in accordance with Rule 38 was treated as valid and delivery proved.

Limitation and date of default - The application was not barred by limitation as the date of default and subsequent admission during settlement revived the claim. - HELD THAT: - The Tribunal noted the original date of default as per invoices in 2014, the earlier technical dismissal in 2017, and the fresh application filed in 2018. Crucially, the corporate debtor's admission of a payment obligation while entering the settlement on 02.09.2019, and the subsequent dishonour of the cheque for the final instalment, meant the debt was not time-barred and the present application fell within limitation. [Paras 16, 22]

The application is within limitation and not time-barred.

Effect of prior dismissal and res judicata - Prior dismissal of an earlier section 9 application on technical non-compliance did not operate as res judicata to bar the present application on merits. - HELD THAT: - The Tribunal observed that the earlier proceeding was dismissed for non-compliance with section 9(3)(c) and that the adjudicating authority had not examined the merits of the claim. Consequently, the prior technical dismissal did not preclude the present adjudication, and the applicant was permitted to file afresh with requisite documentation. [Paras 10, 15]

Prior technical dismissal does not bar the present application on grounds of res judicata.

Settlement, breach and revival of application - The application, withdrawn on record pursuant to the parties' settlement, was revived on the applicant's interim application after breach of the settlement, and the matter proceeded ex parte when the corporate debtor failed to appear. - HELD THAT: - Record shows that the parties entered a settlement on 02.09.2019 with a payment schedule and the applicant withdrew the application with liberty to revive on default. The first two instalments were realised but the final instalment cheque was dishonoured. On filing an interim application the Tribunal allowed revival of the matter on 06.01.2021; the corporate debtor failed to appear thereafter and was proceeded ex parte. These facts supported reinstatement and continuation of the adjudication. [Paras 16, 17, 18]

The application was validly revived after breach of settlement and proceeded ex parte for non-appearance of the corporate debtor.

Appointment of Interim Resolution Professional - Operational creditor's deposit for IRP expenses - An IRP was appointed and the operational creditor was directed to deposit a specified sum with the IRP to meet interim expenses, subject to later adjustment by the Committee of Creditors. - HELD THAT: - Pursuant to admission under section 9(5), the Tribunal named and appointed the proposed Insolvency Resolution Professional subject to usual conditions regarding consent and disclosures. The Tribunal directed the operational creditor to deposit an amount to meet expenses of the IRP within one week, and clarified that such deposit would be subject to adjustment by the Committee of Creditors as accounted by the IRP. [Paras 23, 24]

The proposed IRP is appointed subject to compliance and the operational creditor must deposit the directed sum to meet IRP expenses.

Moratorium under section 14 of IBC, 2016 - Admission of the section 9 application triggers moratorium under section 14(1) of the IBC, 2016, with applicable provisos and related provisions during the moratorium. - HELD THAT: - The Tribunal directed that on admission the moratorium envisaged under section 14(1) shall follow in relation to the corporate debtor, prohibiting actions as specified by the Code, while also noting that provisions of sections 14(2) to 14(4) shall operate during the pendency of the moratorium. [Paras 25]

Moratorium under section 14(1) is in effect on admission, subject to the Code's provisos and related subsections.

Final Conclusion: The section 9 application filed by the operational creditor was admitted, CIRP was initiated, an IRP was appointed subject to compliance, the operational creditor was directed to deposit interim expenses, the moratorium under section 14 was imposed, service and limitation objections were rejected, the prior technical dismissal was held not to operate as res judicata, and the application was revived following breach of settlement.

Extension of time for consideration of offer - effect of model code of conduct on executive decision-making - cabinet approval and public funds for acquisition of shares - liquidator's liberty to proceed where offer not accepted within fixed time

Extension of time for consideration of offer - effect of model code of conduct on executive decision-making - cabinet approval and public funds for acquisition of shares - Grant of additional time to the Applicant to consider the liquidator's offer for acquisition of shares and the legal basis for such extension. - HELD THAT: - The adjudicating authority accepted that the announcement of the schedule of general elections activated the model code of conduct, during which the State Government was precluded from taking major policy decisions. Acquisition of the shares would materially increase the State's shareholding and involve appropriation of public funds, requiring cabinet-level approval and consultation with the Finance Department. Those circumstances, together with the intervening election period and the changed administrative priorities during the pandemic, justified allowing a limited further period for decision-making. The Applicant's conduct in seeking time at the end of the prescribed period and its earlier delays were noted, but the authority balanced that against the need to afford the State a fair opportunity to obtain necessary approvals. Considering the overall situation and that the liquidation process had already extended over three years, the Tribunal granted a final extension of eight weeks from the date of the order, expressly prohibiting any further extension. [Paras 10, 11, 19, 20, 21]

Application for additional time is allowed and eight weeks' further time is granted to the Applicant to complete its decision-making process; no further extension will be permitted.

Liquidator's liberty to proceed where offer not accepted within fixed time - Consequences if the Applicant fails to complete the decision within the granted period. - HELD THAT: - The Tribunal clarified that the extension is final and, if the Applicant does not complete the decision-making process within the stipulated eight weeks, the liquidator shall be at liberty to proceed with the sale of the shares by alternate means permitted under law. This direction was given to prevent further delay in the liquidation process and to preserve the object and timelines of the insolvency/liquidation regime. [Paras 21]

If the process is not completed within eight weeks, the Liquidator is free to proceed with the sale of the shares through alternate means as envisaged under law.

Final Conclusion: IA (IB) No. 470/KB/2021 is disposed of by granting the Applicant a final extension of eight weeks from the date of the order to consider the liquidator's offer; failing which the liquidator may proceed with sale by alternate lawful means and no further extension will be allowed.

Invocation and encashment of bank guarantees during CIRP - independent nature of bank guarantees - moratorium under Section 14 of the IBC and exclusion of surety by Section 14(3) - advance bank guarantees versus performance bank guarantees - requirement of fraud to restrain encashment of bank guarantees

Invocation and encashment of bank guarantees during CIRP - moratorium under Section 14 of the IBC and exclusion of surety by Section 14(3) - independent nature of bank guarantees - requirement of fraud to restrain encashment of bank guarantees - advance bank guarantees versus performance bank guarantees - Whether IOCL could invoke and encash the bank guarantees furnished by the Corporate Debtor during the Corporate Insolvency Resolution Process and whether such invocation is barred by the moratorium under the Code. - HELD THAT: - The Tribunal held that bank guarantees issued by third party banks in favour of a creditor constitute independent contracts enforceable against the banks and are not security interests created by the corporate debtor within the meaning of the moratorium provision. The amendment which inserted sub section (3) to Section 14 excludes sureties in a contract of guarantee to the corporate debtor from the operation of the moratorium; consequently Section 14(1)(c) does not apply to third party guarantees. Invocation and encashment of such guarantees during CIRP is therefore not automatically barred. The Court reiterated the settled proposition that interference with enforcement of a bank guarantee is permissible only if the guarantee is vitiated by fraud or where relief is otherwise warranted on narrowly limited grounds; no such fraud or illegality was found on the record. The Tribunal further observed that an advance bank guarantee given to secure mobilization advance is not to be treated differently from a performance bank guarantee for purposes of enforcement; additional commercial arrangements between the corporate debtor and the contracting party (such as undertakings to keep guarantees alive or to provide further financial support) do not absolve the issuing banks of their unconditional obligation under the guarantees nor preclude the beneficiary from encashing the guarantees. Any grievance of the banks against the corporate debtor arising from those arrangements must be prosecuted against the corporate debtor and does not restrain the beneficiary from encashing the guarantees absent fraud. [Paras 20, 21, 22, 23, 24]

IA 2184/2020 dismissed; IOCL permitted to encash the bank guarantees already invoked; IA 2458/2020 and IA 1002/2021 also dismissed.

Final Conclusion: The applications by the Resolution Professional seeking restraint on encashment of invoked bank guarantees were dismissed; the Tribunal held that third party bank guarantees are independent of the moratorium under Section 14 (by reason of Section 14(3)), are enforceable during CIRP in the absence of fraud, and advance bank guarantees are not to be treated differently from performance guarantees for the purpose of enforcement.

Admission of Section 10 application - Corporate Insolvency Resolution Process - Moratorium under Section 14 - Appointment of Interim Resolution Professional - Deposit for IRP expenses - Jurisdiction of Adjudicating Authority

Admission of Section 10 application - Corporate Insolvency Resolution Process - The corporate insolvency application under Section 10 of the IBC, 2016 filed by the corporate applicant was admitted. - HELD THAT: - The Tribunal examined the application filed by the corporate applicant in the prescribed form and the documents on record, including board and members' resolutions and audited/provisional financial statements. The Registrar of Companies and Income Tax Department raised no objections. The Tribunal found that the corporate applicant had defaulted in making payment of its debts to creditors and that the application was complete under the relevant rules. On that basis the application under Section 10 was admitted and the corporate insolvency resolution process initiated. [Paras 8, 9, 10, 12, 13]

Application under Section 10 of the IBC, 2016 admitted and CIRP initiated against the corporate debtor.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed to manage the corporate insolvency resolution process. - HELD THAT: - The corporate applicant proposed a person for appointment as IRP. The Tribunal recorded receipt of the IRP's consent in the prescribed form and required disclosures under the IBBI Regulations. Having examined the proposal and the filed consent and disclosures, the Tribunal appointed the proposed person as IRP for the corporate debtor. [Paras 14]

Mr. Nishant Gaurav Gupta appointed as Interim Resolution Professional.

Moratorium under Section 14 - The statutory moratorium under Section 14 of the IBC, 2016 applies consequent to admission of the application. - HELD THAT: - Upon admission of the Section 10 application, the Tribunal directed that the moratorium envisaged under Section 14(1) shall follow in relation to the corporate debtor, with the protections and prohibitions specified in the provisos to Section 14(1) and the operation of Sections 14(2) to 14(4) during the moratorium period. This declaration followed as a direct consequence of admission. [Paras 15]

Moratorium under Section 14 of the IBC, 2016 declared operative upon admission.

Deposit for IRP expenses - The corporate applicant was directed to deposit an amount to meet the interim expenses of the IRP. - HELD THAT: - The Tribunal directed the corporate applicant to deposit a specified sum with the Interim Resolution Professional to enable him to meet expenses and perform functions under the IBBI Regulations. The direction included a timeline for payment and provided that the amount would be subject to adjustment by the Committee of Creditors and repayable as accounted for by the IRP. [Paras 16]

Corporate applicant directed to deposit the stated amount with the IRP within one week; amount subject to subsequent adjustment by the Committee of Creditors.

Jurisdiction of Adjudicating Authority - The Tribunal has jurisdiction to entertain the Section 10 application. - HELD THAT: - The Tribunal noted that the registered office of the corporate applicant is situated within its territorial jurisdiction and accordingly recorded that it has jurisdiction to entertain and try the application. [Paras 11]

Application entertained by this Bench as it has territorial jurisdiction over the corporate applicant.

Final Conclusion: The Section 10 application by the corporate applicant was admitted, the statutory moratorium under Section 14 was declared, the proposed IRP was appointed, the applicant was directed to deposit funds to meet IRP expenses, and the Tribunal recorded its territorial jurisdiction to hear the petition.

Binding effect of approved resolution plan - Immunity under Section 32A of the Insolvency and Bankruptcy Code - Extinguishment of pre-CIRP claims against the corporate debtor and its property - Recovery of unpaid electricity charges by a distribution licensee as a charge on the premises - Right of distribution licensee to disconnect/reconnect supply and condition reconnection on payment of arrears - Refund/credit of amounts paid under protest and issuance of fresh No Objection/No Dues Certificate

Binding effect of approved resolution plan - Immunity under Section 32A of the Insolvency and Bankruptcy Code - Extinguishment of pre-CIRP claims against the corporate debtor and its property - Whether the distribution licensee could raise and recover pre-CIRP arrears against the corporate debtor / successful resolution applicant after approval and implementation of the resolution plan - HELD THAT: - The Tribunal held that once the resolution plan was approved by the Committee of Creditors and sanctioned by the Adjudicating Authority, the approved plan has binding effect and Section 32A of the Code operates to bar fresh proceedings or claims in respect of offences and liabilities arising prior to the commencement of CIRP so as to enable the resolution applicant to take over and revive the business. The Tribunal relied on the object of Section 32A and on authoritative discussion of the provision's purpose (including reference to judicial pronouncements recognising the need to protect successful resolution applicants from being faced with unexpected pre-plan claims). While acknowledging the statutory scheme under the Electricity Supply Code and the licensee's right to recover arrears as a charge on the premises and to condition reconnection on payment, the Tribunal concluded that those rights could not be exercised to the detriment of the binding effect of the approved resolution plan and the immunity conferred by Section 32A in the facts of this case. The Tribunal therefore held that the distribution licensee was barred from raising the impugned pre-CIRP arrears against the corporate debtor/successful resolution applicant after approval of the plan. [Paras 31]

R1 was barred by the operation of the approved resolution plan and Section 32A from raising the pre-CIRP arrear claim against the corporate debtor/successful resolution applicant.

Refund/credit of amounts paid under protest and issuance of fresh No Objection/No Dues Certificate - Right of distribution licensee to disconnect/reconnect supply and condition reconnection on payment of arrears - Whether the amount paid under protest should be refunded/credited and whether fresh No Objection Certificate/No Dues Certificate should be issued in favour of the corporate debtor - HELD THAT: - Having held that the distribution licensee could not sustain the post-plan claim, the Tribunal directed remedial relief. The Tribunal accepted the applicant's payment made under protest and directed the distribution licensee to credit the amount paid under protest into the bank account of the successful resolution applicant or alternatively adjust the amount against future bills. The Tribunal also directed issuance of a fresh No Objection Certificate and No Dues Certificate in favour of the corporate debtor. The order recognised the distribution licensee's procedural powers to disconnect/reconnect supply and condition reconnection on payment, but treated the payment made under protest as having been made in circumstances where the claim itself was barred by the approved plan and Section 32A, thereby justifying refund/credit and issuance of clearances. [Paras 33, 34]

R1 was directed to credit/refund the amount paid under protest to the successful resolution applicant or adjust it against future bills and to issue fresh No Objection Certificate and No Dues Certificate in favour of the corporate debtor; the IA was allowed.

Final Conclusion: The application was allowed: the Tribunal held that the approved resolution plan and Section 32A prevented the distribution licensee from enforcing the impugned pre-CIRP arrear claim against the corporate debtor/successful resolution applicant, directed refund/credit of the amount paid under protest and ordered issuance of fresh No Objection/No Dues Certificates.

No coercive recovery during pendency of appeal on pre-deposit pursuant to Board Circular para 4.2 - Binding nature of Board Circulars on department - Attachment under Section 87(c) of the Finance Act, 1994 - Maintainability of writ petition against an appealable recovery order where departmental coercive action is stayed

No coercive recovery during pendency of appeal on pre-deposit pursuant to Board Circular para 4.2 - Attachment under Section 87(c) of the Finance Act, 1994 - Binding nature of Board Circulars on department - Validity of attachment of the petitioner's bank account in light of an appeal filed with the mandatory pre-deposit and the Board Circular prohibiting coercive recovery during pendency of such appeal. - HELD THAT: - The petitioner challenged an order of attachment under Section 87(c) of the Finance Act, 1994 executed to recover a service-tax demand for the period 2014-15 to 2016-17. It was undisputed that the petitioner had filed an appeal against the assessment order and had made the mandatory pre-deposit. Para 4.2 of the Board Circular dated 16.09.2014 prohibits coercive recovery of the balance amount during the pendency of an appeal where proof of the stipulated pre-deposit and a copy of the appeal memo are shown to the jurisdictional authorities. The Court accepted that Board Circulars are binding on the department and observed that, in consistent precedent, attachment in such circumstances has been set aside. The respondent's contention that the petitioner should have filed an appeal against the recovery action was rejected as untenable and overly technical because the appeal against the assessment order with the required pre-deposit effectively stayed the recovery; therefore there was no justification for coercive measures. Applying these principles, the Court found the attachment improper and directed that the petitioner be permitted to operate its bank account. [Paras 6, 8, 9]

Attachment of the petitioner's bank account under the impugned order dated 23.03.2021 is set aside and the petitioner is permitted to operate its bank account.

Maintainability of writ petition against an appealable recovery order where departmental coercive action is stayed - Maintainability of the writ petition challenging the recovery order despite availability of appellate remedy. - HELD THAT: - Although the respondent contended that the impugned order was appealable and therefore the writ petition was not maintainable, the Court held that the petitioner had already filed an appeal against the assessment order with the mandatory pre-deposit and that the Board Circular stayed coercive recovery. Given that the recovery action stood stayed by operation of the Circular and relevant precedent, the Court found the respondent's technical objection unsustainable and entertained the writ petition to quash the attachment. [Paras 5, 8]

Writ petition is maintainable and is allowed to the extent of quashing the impugned attachment order.

Final Conclusion: The petition is allowed: the order of attachment dated 23.03.2021 is set aside and the respondents are directed to permit the petitioner to operate its bank account, the Court relying on the binding Board Circular preventing coercive recovery during the pendency of an appeal accompanied by the mandatory pre-deposit.

Classification of concrete mix as ready mix concrete (RMC) v. concrete mix (CM) - jurisdictional challenge to assessment/order - entertainment of writ petition after expiry of statutory appeal period and self imposed restraint - distinction based on plant, process, properties and manner of delivery - exemption for concrete mix manufactured at the site of construction

Entertainment of writ petition after expiry of statutory appeal period and self imposed restraint - jurisdictional challenge to assessment/order - Whether the writ petition filed after the statutory period for appeal can be entertained and whether the petition must be rejected as not maintainable solely for non availing of the statutory appeal remedy. - HELD THAT: - The Court held that the Supreme Court's decision in M/s Glaxo Smith Kline Consumer Healthcare Ltd. does not lay down an absolute rule of rejection of a writ petition filed after expiry of the statutory appeal period; rather, it mandates that High Courts exercise self imposed restraint and have due regard to the legislative intent behind limitation for statutory appeals. Accordingly, mere non availing of the statutory remedy does not ipso facto render a writ incompetent. However, the Court examined the petitioners' explanation for delay and found it inadequately supported by particulars (such as dates, consultant details and steps taken), describing the explanation as superfluous. On that basis the unexplained delay was held unreasonable and the writ was found to fail at the threshold for want of adequate justification for not pursuing the statutory remedy. Thus, although a writ after the appeal period is not categorically barred, it may be dismissed where the petitioner fails to provide a satisfactory explanation for not availing the statutory remedy. [Paras 21, 22]

The writ petition cannot be rejected merely because the statutory appeal was not filed, but the petitioners' unexplained and unreasonable delay in availing the statutory remedy warranted dismissal on that ground.

Classification of concrete mix as ready mix concrete (RMC) v. concrete mix (CM) - distinction based on plant, process, properties and manner of delivery - exemption for concrete mix manufactured at the site of construction - Whether the concrete mix produced at the project site by the petitioners was RMC (excisable) or CM manufactured at site for captive use (exempt), and whether the Order in original was without jurisdiction for treating it as RMC. - HELD THAT: - Applying the test articulated by the Supreme Court in Larsen & Toubro, the Court considered the plant and machinery installed, the manufacturing process, the properties/grades of the product and the manner of delivery. The material findings were that the petitioners had installed an automatic batching plant with silos, control panel, conveyors/screw feeders, dosing of admixtures and testing for grades; the on site product matched third party supplied RMC in quality; and the production process enabled manufacture of precise grades. These factors satisfy the indicia of RMC rather than conventional site mixed CM. The Court therefore concluded that classification of the product as RMC was correct and that the Order in original did not suffer from lack of jurisdiction. The fact that the product was for captive use or that some raw inputs were procured from third parties did not alter the classification in light of the exemption's text and authoritative guidance distinguishing CM from RMC. [Paras 23, 24]

The concrete mix produced at the site was correctly classified as RMC; the Order in original was not without jurisdiction.

Final Conclusion: The writ petition is rejected: the Court held that a writ after the statutory appeal period is not per se barred but the petitioners' unexplained delay justified dismissal, and on merits the concrete mix produced at site was rightly classified as RMC so the impugned Order in original did not lack jurisdiction.

Reopening of assessment - re-determination of taxable turnover based on departmental web-data - burden of proof for reopening assessment - admission as basis for revisional determination - opportunity of personal hearing before finalizing assessment - centralised mechanism to address mismatch in returns and web-portal data - statutory appellate remedy and pre-deposit requirement

Reopening of assessment - re-determination of taxable turnover based on departmental web-data - burden of proof for reopening assessment - admission as basis for revisional determination - Validity of the impugned revisional order under the Tamil Nadu Value Added Tax Act which re-determined taxable turnover on the basis of departmental web-data and admissions made during personal hearing. - HELD THAT: - The Court confined itself to reviewing the decision-making process and not the correctness of the tax computation. Although the reassessment arose from data gathered from the Department's web-portal, the petitioner's partner admitted suppression/omission in turnover during personal hearing and undertook to pay the differential tax. In view of that admission, and in the absence of any procedural defect in conducting the personal hearing, there was no ground for interfering with the revisional order. The Court noted earlier judicial exhortations for a centralised departmental mechanism to examine mismatches between returns and web-portal figures, but absence of an implemented mechanism did not, on the facts of this case where there was an admission of liability, justify quashing the revisional determination. The Court left questions as to the precise computation and other merits to the statutory appellate process.

Writ petition dismissed; impugned revisional order not interfered with on account of the petitioner's admission of suppression during personal hearing.

Opportunity of personal hearing before finalizing assessment - centralised mechanism to address mismatch in returns and web-portal data - statutory appellate remedy and pre-deposit requirement - Procedural directions regarding further remedy and consideration to be given to departmental centralisation while entertaining any statutory appeal. - HELD THAT: - The Court observed that it is not acting as an Appellate Commissioner and has granted the petitioner the statutory avenue of appeal. The petitioner was permitted to file an appeal within thirty days; if filed, the Appellate Authority was directed to decide the appeal on merits within ninety days, subject to statutory requirements including pre-deposit. The Appellate Authority was also required to consider whether the Department's centralised mechanism for handling mismatches applies to the petitioner's case and to ensure that procedural fairness, including personal hearing, is observed.

Petitioner permitted to file statutory appeal within thirty days; appellate authority to decide within ninety days and to consider applicability of the Department's centralised mechanism.

Final Conclusion: Writ petition dismissed for lack of merits in view of the petitioner's admission of suppressed turnover; petitioner granted liberty to pursue statutory appeal within stipulated time and the Appellate Authority directed to decide the appeal expeditiously and to consider the Department's centralised mechanism where relevant.

Principles of natural justice - right to personal hearing - video conferencing as mode of hearing - ex parte decision - interim stay of impugned order

Principles of natural justice - right to personal hearing - video conferencing as mode of hearing - ex parte decision - Impugned cancellation order was prima facie passed without affording the petitioner a personal hearing and therefore suffered from breach of principles of natural justice. - HELD THAT: - The show cause notice directed the taxpayer to furnish a reply within seven working days and warned that failure to reply or to appear for personal hearing would result in an ex parte decision. Although the petitioner did not file a reply, the respondent, before passing the impugned order, was required to afford a personal hearing - either in person or by video conferencing. The absence of any prima facie personal hearing renders the impugned order susceptible to interference on natural justice grounds. On that basis the Court was satisfied to grant interim relief pending further consideration and to issue notice to the respondent.

Interim stay of the impugned order granted for four weeks; notice issued to the respondent with liberty for private notice; matter posted after four weeks.

Final Conclusion: The writ petition succeeds to the extent of interim relief: the cancellation order is stayed for four weeks for compliance with principles of natural justice and further adjudication after service of notice.