TaxTMI Updates e-Newsletter
Jun 14,2022

Refund of unutilized input tax credit of compensation cess - adjusted total turnover under Rule 89(4) of the CGST Rules - exempt supply as defined in Section 2(47) of the CGST Act - mutatis mutandis application of CGST provisions to the Compensation Cess Act - writ jurisdiction under Article 226 - limited scope and not to act as an appellate authority

Adjusted total turnover under Rule 89(4) of the CGST Rules - exempt supply as defined in Section 2(47) of the CGST Act - mutatis mutandis application of CGST provisions to the Compensation Cess Act - Domestic supplies of finished goods attracting nil rate of compensation cess are to be treated as exempt supplies and excluded from adjusted total turnover for computing refund of unutilized ITC of compensation cess under the Rule 89(4) formula as applied to the Cess Act. - HELD THAT: - The Compensation Cess regime incorporates the provisions of the CGST and IGST Acts mutatis mutandis for levy, collection and refund. Rule 89(4) prescribes the formula for refund of ITC in zero-rated supplies and expressly excludes the value of exempt supplies (other than zero-rated supplies) while calculating adjusted total turnover. Section 2(47) of the CGST Act defines "exempt supply" to include supplies attracting nil rate of tax and non taxable supplies. Goods subject to nil rate of compensation cess therefore fall within that definition and must be treated as exempt supplies for the purpose of the refund computation under the Cess Act, and accordingly excluded from adjusted total turnover when applying Rule 89(4). The appellate authority applied this legal position and the court found no error in that conclusion.

Nil rated domestic supplies are exempt supplies for refund computation and must be excluded from adjusted total turnover under Rule 89(4) as applied to the Cess Act.

Refund of unutilized input tax credit of compensation cess - writ jurisdiction under Article 226 - limited scope and not to act as an appellate authority - The High Court will not interfere with the Appellate Authority's order allowing the refund where no jurisdictional error or procedural irregularity is shown, and the CGST authority's withholding of the refund contrary to that order was arbitrary and must be remedied by directing payment with interest. - HELD THAT: - Having examined the impugned appellate order, the court concluded that the appellate authority gave cogent, speaking reasons, did not commit jurisdictional error or breach principles of natural justice, and correctly applied the relevant legal provisions. In exercise of Article 226 jurisdiction the High Court will not substitute its view for that of the appellate body on findings of fact and proper application of law. Simultaneously, the court found the respondent CGST authority's action in withholding payment despite the appellate order to be arbitrary and unjustified; accordingly the authority was directed to refund the amount as per the appellate order along with applicable interest within the time stipulated.

Writ petition challenging the appellate order dismissed; writ petition seeking enforcement of the appellate order allowed and respondent directed to pay the refund with interest within eight weeks.

Final Conclusion: The Appellate Authority correctly held that domestic supplies of finished goods attracting nil rate of compensation cess are to be treated as exempt supplies and excluded from adjusted total turnover for refund computation; the High Court declined to disturb that order and directed the CGST authorities to refund the amount as ordered by the Appellate Authority, with interest, within eight weeks.

Reconsideration on receipt of subsequent evidence - order of refund - revisional authority's adjudication of tax liability - reasonable opportunity to place evidence - interference under Article 226

Reconsideration on receipt of subsequent evidence - order of refund - reasonable opportunity to place evidence - Whether the assessee could be permitted to place a document received after the revisional order before the revisional authority for reconsideration of the refund/assessment. - HELD THAT: - The revisional authority had passed an order assessing the tax liability on May 3, 2021. The appellant thereafter received a document dated August 25, 2021 which, on the material before the Court, affects the tax liability and was not omitted through any fault of the appellant. The Court observed that where an assessee is unable, for reasons beyond its control, to place evidence before the authority because the evidence was not yet in its possession, tax authorities should afford a reasonable opportunity to produce such evidence so that liability is adjudicated in accordance with law. Accordingly, rather than treating the adjudication as final and immune from reconsideration, the Court granted the appellant liberty to approach the revisional authority within a limited time to place the subsequent document. The revisional authority was directed, if so approached, to reconsider its order on refund in light of the document dated August 25, 2021 and to decide the matter in accordance with law.

Liberty granted to the appellant to approach the revisional authority within a fortnight to place the document dated August 25, 2021, and the revisional authority directed to reconsider its refund order taking that document into account in accordance with law.

Final Conclusion: The writ petition was disposed by permitting the assessee to seek reconsideration from the revisional authority within a fortnight; the revisional authority is directed to re-examine the refund/assessment order of May 3, 2021 in light of the document dated August 25, 2021 and decide in accordance with law.

Remand for fresh consideration - right to personal hearing - requirement to consider documentary evidence - notice under Section 148A of the Income Tax Act - proposal to issue notice under Section 148 - effect of erroneous PAN recorded for HUF bank account

Remand for fresh consideration - requirement to consider documentary evidence - right to personal hearing - notice under Section 148A of the Income Tax Act - effect of erroneous PAN recorded for HUF bank account - Impugned order under Section 148A(d) setting out that income had escaped assessment was set aside and the matter remitted to the assessing authority for fresh consideration after affording opportunity to the petitioner to produce documentary evidence and be heard. - HELD THAT: - The Court found that the petitioner, an HUF, had filed the return for AY 2015-16 and had explained that cash deposits related to the HUF and were disclosed in the HUF accounts, and that the HUF current account was opened with an incorrect individual PAN. The assessing authority recorded that documentary evidence had not been furnished and proceeded to record satisfaction for issuance of notice under Section 148. The High Court observed that the petitioner had sought time and had proffered an explanation and documents but the authority nonetheless proceeded without adequately considering those materials or granting a personal hearing. In view of the above, the Court concluded that the satisfaction recorded under Section 148A(d) could not stand without fresh consideration of the documents and explanation regarding the purported misclassification of the HUF account due to the wrong PAN entry. The Court therefore set aside the impugned order and remitted the matter to the respondent authority with directions that the petitioner shall appear with documentary evidence, that a personal hearing be granted, and that the specific contention about the individual PAN used while opening the HUF account be considered. The authority was directed to complete the exercise and pass a fresh order within twelve weeks from receipt of the Court's order.

Impugned order set aside; matter remitted for fresh consideration and personal hearing, with directions to consider the documentary evidence and the contention regarding erroneous PAN entry; fresh order to be passed within twelve weeks.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 19.04.2022 is set aside and the matter is remitted to the assessing authority for fresh consideration after affording the petitioner a personal hearing and opportunity to produce documentary evidence, with a direction to pass a fresh order within twelve weeks; no costs.

Section 148A procedure - Reopening of assessment - Show cause notice requirement under Section 148A(b) - Prior approval for enquiry under Section 148A(a) - one time dispensation - Applicability of Union of India v. Ashish Agarwal order PAN INDIA

Section 148A procedure - Reopening of assessment - Show cause notice requirement under Section 148A(b) - Validity of the communication rejecting the assessee's objections to reopening for non compliance with the procedural requirements introduced by Section 148A. - HELD THAT: - The Court proceeded on the basis that the amended procedure under Section 148A must be observed and that the recent decision of the Supreme Court in Union of India v. Ashish Agarwal governs the procedure to be followed. Applying that decision, the impugned communication - which rejected the petitioner's objections to reopening without complying with the Section 148A regime as interpreted in Ashish Agarwal - could not stand. The High Court therefore quashed the communication and directed further proceedings in conformity with the procedure laid down by the Supreme Court, including provision of information/material relied upon and subsequent actions specified in paragraphs 26 and 27 of Ashish Agarwal. [Paras 3]

The impugned communication is quashed and set aside.

Prior approval for enquiry under Section 148A(a) - one time dispensation - Applicability of Union of India v. Ashish Agarwal order PAN INDIA - Whether the matter should be remitted for compliance with the procedure prescribed in Union of India v. Ashish Agarwal and the scope of any dispensation regarding prior approval for enquiry. - HELD THAT: - Relying on paragraphs 26 and 27 of the Supreme Court's decision, the High Court held that the Ashish Agarwal directions apply and that the assessing officer must follow the procedure there laid down. The Court noted that the Supreme Court dispensed, as a one time measure, with the requirement of obtaining prior approval for enquiry under Section 148A(a) in respect of notices issued under unamended Section 148 from 01.04.2021 till date, but otherwise preserved the obligation on the assessing officer to provide information/material and to follow the steps prescribed under Section 148A before proceeding. In consequence, the matter was remanded for further proceedings in accordance with paragraphs 26 and 27 of Ashish Agarwal. [Paras 2, 3]

Matter remanded for further proceedings in accordance with paragraphs 26 and 27 of Union of India v. Ashish Agarwal.

Final Conclusion: The writ petition is disposed of by quashing the impugned communication and remanding the matter to the assessing officer to proceed in accordance with the procedure and directions stated in paragraphs 26 and 27 of Union of India v. Ashish Agarwal; connected miscellaneous petitions are closed. No costs.

Income from house property - incidental services ancillary to letting - classification of receipts between house property and other sources - deduction of interest - appropriation to head of income - allocation of vehicle expenses between business and personal use - reliance on TDS certificate versus bank records for interest income - cash credit under section 68 - burden of explanation and confirmations - forfeiture of advance and capital account treatment

Income from house property - incidental services ancillary to letting - classification of receipts between house property and other sources - Whether the amount of Rs. 18,98,100 received as service charges is assessable as income from house property or as income from other sources. - HELD THAT: - On conjoint reading of the leave and licence agreements and the service agreements the tribunal found the predominant intention to be letting of premises with provision of incidental facilities (renovation, repairs, electricity, DG set, water supply etc.). The agreements must be read together and the facilities are ancillary to the letting. Reliance was placed on coordinate precedents holding that minor additional services incidental to occupation do not change the character of income from house property. Applying that principle, the tribunal held that the service charges form part of income from house property and not income from other sources, and followed the tribunal's earlier view in the assessee's own case. [Paras 5]

Amount of Rs. 18,98,100 is to be assessed under the head income from house property; grounds on this issue allowed.

Deduction of interest - appropriation to head of income - Whether interest of Rs. 1,36,407 paid to Saraswat Co-operative Bank is allowable under income from house property or under profits and gains of business or profession. - HELD THAT: - No demonstrative evidence established that the loan was applied to repayment of earlier housing loan, so the interest cannot be allowed against income from house property. However, it was undisputed that the assessee had incurred the interest liability for business purposes. On that basis the tribunal directed that the interest be allowed while computing income under the head profits and gains of business and profession. [Paras 9]

Interest of Rs. 1,36,407 not allowable under income from house property but to be allowed under profits and gains of business and profession; ground allowed to that extent.

Allocation of vehicle expenses between business and personal use - Whether the disallowance of 15% of vehicle-related expenses as personal is justified. - HELD THAT: - It was admitted that the vehicle had personal use. The assessing officer determined 15% of total vehicle expenses (including depreciation, insurance and interest) as personal and non-business; the tribunal found this allocation reasonable and within AO's discretion and saw no basis to interfere with the CIT(A)'s confirmation of that determination. [Paras 12]

Disallowance of 15% of vehicle-related expenditure confirmed; ground dismissed.

Reliance on TDS certificate versus bank records for interest income - Whether the addition of Rs. 15,476 made on the basis of TDS certificate (interest shown higher than declared) is sustainable. - HELD THAT: - The assessee claimed the TDS certificate was incorrect and that lower interest was received as reflected in bank statement and books, but no bank statement or documentary evidence quantifying deposit, tenure or rate of interest was produced to support the contention. In absence of supporting evidence the tribunal upheld the AO/CIT(A) finding that the assessee's assertion was not substantiated. [Paras 15]

Addition based on TDS certificate confirmed; ground dismissed.

Forfeiture of advance and capital account treatment - Whether the amount of Rs. 90,000 received as advance (allegedly forfeited on cancellation of sale) should be reduced from cost of asset or assessed as income. - HELD THAT: - The assessee did not furnish any supporting evidence or documentation during assessment or appellate proceedings to substantiate that the amount was forfeiture on cancellation of sale and credited to capital account. In absence of such material the tribunal found no infirmity in AO/CIT(A) treating the receipt as taxable and declined to interfere. [Paras 18]

Addition of Rs. 90,000 sustained; ground dismissed.

Cash credit under section 68 - burden of explanation and confirmations - Whether additions made under section 68 (total Rs. 1,35,000) are sustainable where some lenders furnished confirmations. - HELD THAT: - For transactions where the assessee furnished confirmations from Umesh Gupta and Dilip Thakre and these were not disputed, the tribunal directed deletion of the addition. For other transactions the assessee failed to discharge the initial onus of satisfactorily explaining the receipts with appropriate documentation; those additions were therefore sustained. The tribunal quantified the result accordingly. [Paras 21]

Additions of Rs. 35,000 deleted in respect of confirmed loans; remaining additions of Rs. 1,00,000 under section 68 sustained; appeal partly allowed on this issue.

Cash credit under section 68 - burden of explanation and confirmations - Whether addition of Rs. 1,00,000 received from mother (Smt. Shyamadevi Gupta) under section 68 is sustainable in assessee's hands where the mother has confirmed the loan and substantive addition in her hands was made and set aside for reassessment. - HELD THAT: - Record shows the mother confirmed before the same Assessing Officer that she had given the amount to the assessee, and substantive addition in her hands had been made and is presently set aside for further adjudication. Given these circumstances the tribunal accepted that addition cannot be sustained in the assessee's hands while the matter in the mother's case remains pending and directed deletion of the addition in the assessee's assessment. [Paras 24]

Addition of Rs. 1,00,000 under section 68 in assessee's hands deleted; ground allowed.

Final Conclusion: The tribunal partly allowed the appeal for assessment year 2005-06: service charges of Rs. 18,98,100 are assessable as income from house property; interest of Rs. 1,36,407 is disallowed under house property but allowed under business income; vehicle-expense disallowance, TDS-based interest addition and forfeited advance addition were sustained; certain section 68 additions were deleted as specified and Rs. 1,00,000 received from the assessee's mother was deleted.

Dismissal in limine - remand for fresh adjudication - principles of natural justice - opportunity of being heard - first appellate authority to decide on merits - ex-parte adjudication - statistical disposal

Dismissal in limine - principles of natural justice - opportunity of being heard - first appellate authority to decide on merits - Validity of the CIT(A)'s dismissal of the assessee's appeals for non-appearance without deciding the matters on merits - HELD THAT: - The Tribunal examined the fact that the CIT(A) had posted the appeals on several occasions but proceeded to dismiss them in limine when there was no representation. The Tribunal held that even where the assessee does not appear, the First Appellate Authority ought to decide the issues on merits and in accordance with law rather than merely dismissing the appeal without adjudication. Applying the principles of natural justice, the Tribunal found that remand for fresh consideration was warranted so that the CIT(A) may afford one more opportunity to the assessee to be heard and decide the appeal on merits. The Tribunal cautioned the assessee to cooperate promptly before the CIT(A), failing which the CIT(A) may pass an appropriate order based on the record. [Paras 5, 6]

Appeals remitted to the file of the CIT(A) for fresh adjudication on merits after affording the assessee one more opportunity to be heard; caution to assessee to cooperate.

Remand for fresh adjudication - ex-parte adjudication - statistical disposal - Applicability of the Tribunal's remand and resultant ordering across multiple appeals and assessment years of the same assessees - HELD THAT: - The Tribunal applied the same reasoning to the other appeals filed by each assessee where the facts and circumstances were akin. Consequently, the Tribunal remitted each of the companion appeals to the CIT(A) for fresh consideration on merits and directed that the appeals be allowed for statistical purposes. The remand was ordered so that the CIT(A) may hear and decide those appeals in accordance with law on the materials on record and any submissions the assessee may make on re-listing. [Paras 7, 13, 14, 15]

All companion appeals similarly remitted to the CIT(A) for fresh adjudication and allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s orders of dismissal in limine and remitted all six appeals to the CIT(A) for fresh adjudication on merits after affording the assessees one more opportunity of being heard; the appeals are allowed for statistical purposes and the assessees are cautioned to cooperate in the proceedings.

Educational activity - application of receipts from sponsorship against related expenditure - disallowance of expenditure not incurred for objects of the trust - approval under section 10(23C)(vi)

Educational activity - approval under section 10(23C)(vi) - Whether organising the golf tournament constituted an educational activity of the Trust - HELD THAT: - The Tribunal found that the assessee is a management institute established and approved for educational purposes. The golf tournament, although organized by the institute and involving students and corporates, was held to be separate from the core educational activity for which the Trust was established. The event was not considered part of the Trust's educational objects and therefore could not be treated as an educational activity qualifying as expenditure incurred for the objects of the Trust. [Paras 11]

The golf tournament was not an educational activity of the Trust and therefore the related expenditure cannot be fully treated as spent for the Trust's objects.

Application of receipts from sponsorship against related expenditure - disallowance of expenditure not incurred for objects of the trust - Extent of disallowance of golf tournament expenses in view of sponsorship receipts - HELD THAT: - The Tribunal noted that the Trust received sponsorship of Rs. 30,17,250 which was reflected in its income and expenditure account. The total expenditure on the tournament was Rs. 34,31,858. Treating the tournament as a separate activity, the Tribunal applied the sponsorship receipts against the related expenditure and held that only the excess expenditure over sponsorship-i.e., the amount not covered by sponsorship-constituted expenditure not spent for the objects of the Trust. Accordingly, only that excess was sustained as disallowance. [Paras 12]

Disallowance sustained only to the extent of the excess expenditure over sponsorship (the amount not covered by the sponsorship receipts).

Final Conclusion: The appeal is partly allowed: the Tribunal holds that the golf tournament was not an educational activity of the Trust, but limits the disallowance to the excess of tournament expenditure over sponsorship receipts, allowing the appeal in part.

Section 50C - deemed full value of consideration for transfer of land - Section 2(47)(v) - transfer including possession under section 53A - Section 53A of the Transfer of Property Act - part performance and effect of possession - Admissibility of additional ground and remand to Assessing Officer - Nullity of transaction / void ab initio

Admissibility of additional ground and remand to Assessing Officer - Nullity of transaction / void ab initio - Admission of an additional ground alleging absence of legal title on account of prior cancellation of auction and consequential remand to the Assessing Officer for fresh decision in light of subsequent District Judge order - HELD THAT: - The Tribunal admitted the additional ground raised by the assessee that, by virtue of the Collector's order canceling the auction and the later District Judge order dated 29.02.2020 setting aside the Collector's order and directing fresh decision, the assessee did not have a valid legal title as on the date of the conveyance deed executed on 31.03.2005 and the transaction was void ab initio. The Tribunal found this issue fundamental to the assessment challenged in the appeal and noted that the District Judge's order was passed after the impugned appellate order. In the interest of substantial justice the Tribunal set aside this ground to the file of the Assessing Officer for fresh adjudication, directing the AO to consider the District Judge's order dated 29.02.2020, proceedings before the Collector and any other relevant documents or information, and to afford reasonable opportunity to the assessee before deciding. [Paras 7]

Additional ground admitted and remitted to the Assessing Officer for fresh consideration in light of the District Judge's order dated 29.02.2020, after giving the assessee reasonable opportunity.

Section 50C - deemed full value of consideration for transfer of land - Section 2(47)(v) - transfer including possession under section 53A - Section 53A of the Transfer of Property Act - part performance and effect of possession - Other contentions (including applicability of section 50C and contention of transfer earlier by possession under section 53A) left open and remanded to the Assessing Officer - HELD THAT: - Because the Tribunal set aside the additional ground as fundamental and remitted it to the AO for fresh decision, the Tribunal did not adjudicate other contentions raised by the assessee concerning the applicability of section 50C, the appellant's claim of transfer by part performance under section 53A and clause (v) of section 2(47). Those contentions were therefore left open and also set aside to the file of the AO to be examined afresh in accordance with law after affording the assessee an opportunity to be heard. The assessee is at liberty to raise the submissions earlier made before the AO during fresh consideration. [Paras 8]

Other grounds of appeal left open and remitted to the Assessing Officer for fresh examination and decision after providing reasonable opportunity to the assessee.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by admitting the additional ground and remitting that ground to the Assessing Officer for fresh adjudication in light of the District Judge's order dated 29.02.2020; all other grounds were left open and also remitted to the Assessing Officer to be decided afresh after giving the assessee reasonable opportunity.

Unexplained cash credit treated under section 68 - proof of source of funds - genuineness of transaction and creditworthiness of creditors - share premium not taxable as income where source is proved - excess consideration on issue of shares attractability under section 56(2) and not section 68 - valuation and pricing of shares in start-up funding

Unexplained cash credit treated under section 68 - proof of source of funds - genuineness of transaction and creditworthiness of creditors - share premium not taxable as income where source is proved - excess consideration on issue of shares attractability under section 56(2) and not section 68 - valuation and pricing of shares in start-up funding - Whether the addition of share capital and share premium as unexplained cash credit under section 68 could be sustained where the Assessing Officer did not doubt the source, genuineness or creditworthiness of the payers and the receipts arose in the context of start up funding. - HELD THAT: - The Tribunal examined the assessment record and the appellate finding that the Assessing Officer, while questioning the high premium, had recorded that the source of funds was not doubted and did not dispute the genuineness of transactions or the identity/creditworthiness of the non resident payers. The CIT(A) found, on facts, that the receipts were from identifiable non resident investors, inward remittance formalities were complied with, and the premium was subscribed in a start up context where shares are often priced on future prospects. In these circumstances the Tribunal accepted the CIT(A)'s reasoning that section 68 cannot be invoked to treat the amounts as unexplained cash credits when source and genuineness are not impugned by the AO. The Tribunal further noted that any issue of excess price on issue of shares, as distinct from unexplained credits, would fall for consideration under the provision dealing with receipt of property/amounts in excess of fair market value (section 56(2)) and not under section 68. Reliance on precedents turning on different facts (where genuineness or creditworthiness were not proved) does not assist the Revenue when the AO himself accepted source and identity of the subscribers. For these reasons the Tribunal found no error in the CIT(A)'s deletion of the addition. [Paras 4, 7, 8]

The addition made under section 68 was deleted; the CIT(A)'s order upholding deletion is affirmed and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition treating the share capital and share premium as unexplained credit under section 68, holding that where the AO did not doubt the source, genuineness or creditworthiness of the subscribers (non residents) and the receipts were in a start up funding context, section 68 was not attracted and any issue of excess price would be governed by the provision dealing with excess consideration on issue of shares.

Ex-parte disposal - non-appearance of the assessee - presumption of notice from service of hearing notice - treatment of long term capital gain as unexplained cash credit under section 68 of the Act - addition on account of bogus commission under section 69C of the Act - onus on the assessee to rebut departmental investigative material

Ex-parte disposal - non-appearance of the assessee - presumption of notice from service of hearing notice - Whether the appeal could be disposed of ex-parte for non-appearance of the assessee after service of hearing notice and repeated default. - HELD THAT: - The Tribunal observed that the appeal had been repeatedly fixed on several dates without appearance or any adjournment application from the assessee. The hearing notice sent to the communication address in Form 36 was served as evidenced by postal acknowledgment and prior orders were uploaded on the official website. On these facts the Tribunal concluded that the assessee had sufficient notice of the proceedings and, having afforded ample opportunity, was not entitled to further adjournment. The matter was therefore heard ex-parte and disposed of on merits after hearing the Departmental Representative and on the materials on record. [Paras 2]

Appeal disposed of ex-parte for non-appearance after service of notice and repeated defaults; no further opportunity granted.

Treatment of long term capital gain as unexplained cash credit under section 68 of the Act - addition on account of bogus commission under section 69C of the Act - onus on the assessee to rebut departmental investigative material - Whether the additions made treating the long term capital gain as unexplained cash credit and the commission as bogus under section 69C were sustainable. - HELD THAT: - The Assessing Officer treated the long term capital gain arising from sale of shares as unexplained cash credit after departmental investigation indicated the shares belonged to a penny stock company whose price had been subject to manipulation, producing an astronomical rise. The assessee's explanations before the departmental authorities were not found persuasive and no contrary evidence was placed before the Tribunal because of non-appearance. The Tribunal accepted the departmental findings of price manipulation and the absence of cogent evidence from the assessee to rebut the adverse material. Consequently, the additions made under the impugned provisions were held to be justified. [Paras 5, 6]

Additions treating the long term capital gain as unexplained cash credit and the commission as bogus were upheld for lack of satisfactory rebuttal of departmental investigative material.

Final Conclusion: The appeal filed by the assessee for Assessment Year 2015-16 is dismissed; the appeal was disposed of ex-parte and the additions under the impugned provisions were sustained for want of rebuttal.

On-money/premium - addition of undisclosed income - estimation of net profit on unaccounted receipts - proceedings under Section 153C - use of seized/impounded material and settlement commission application in assessment - onus on assessee to rebut departmental computations and presumptions

Addition of undisclosed income - on-money/premium - use of seized/impounded material and settlement commission application in assessment - Whether the assessee's receipt of on-money as computed by the AO for the relevant assessment years is supported by seized material and other evidence and therefore properly taken into account for assessment. - HELD THAT: - The Tribunal examined the impounded documents, price lists, Tally backup and statements recorded during search/survey which showed a disparity between prices in impounded schedules and sales consideration recorded in books. The assessee failed to discharge its onus to rebut the departmental working or to furnish particulars or computations showing that the on-money was not charged or received. The Tribunal noted that the AO did not rely solely on the settlement application but examined incriminating materials and worked out unaccounted receipts; the Settlement Commission's rejection corroborated the departmental view. In these circumstances the computation of the aggregate on-money receipt for the project under consideration was found to be supported by material on record and the assessee did not demonstrate any defect in that computation. [Paras 16, 17]

Computation of on-money receipt by the AO upheld; no interference with the figure of Rs.3,67,95,791/- as the on-money received for the assessment year under consideration.

Estimation of net profit on unaccounted receipts - on-money/premium - onus on assessee to rebut departmental computations and presumptions - Whether the whole gross on-money receipt should be added as undisclosed income or only an estimated profit element ought to be taxed. - HELD THAT: - Relying on precedent and reasoning that developers who collect cash over and above cheque consideration ordinarily incur unaccounted project-related expenses, the Tribunal accepted the established principle that the entire on-money/premium should not be taxed as income but only the profit element. The First Appellate Authority applied this principle and estimated profit at 30% on the gross on-money receipt. The Tribunal found no infirmity in that approach because the assessee had not produced any working to justify a lower profit estimate (such as 15%) or otherwise rebut the departmental computation. Given the absence of acceptable contrary material, applying an estimated profit percentage to determine taxable undisclosed income was held to be just and consistent with jurisdictional decisions. [Paras 16, 18]

Only the profit element on on-money is taxable; the restriction of the addition to 30% of the gross on-money by the CIT(A) is upheld.

Final Conclusion: The Tribunal dismissed the Revenue's appeals. It upheld the AO's computation of the aggregate on-money receipts as supported by seized material and accepted the First Appellate Authority's approach of taxing only an estimated profit on such receipts, endorsing the restriction of the addition to 30% of the gross on-money for the relevant assessment years.

Penalty under section 271AAA - Search and seizure under section 132 - Statement under section 132(4) - Exception in section 271AAA(2): admission, specification of manner and payment of tax with interest - Voluntary disclosure/offer of income - Deletion of addition of unexplained jewellery - Compassionate/liberal view in case of deceased assessee

Penalty under section 271AAA - Statement under section 132(4) - Exception in section 271AAA(2): admission, specification of manner and payment of tax with interest - Voluntary disclosure/offer of income - Deletion of addition of unexplained jewellery - Whether penalty under section 271AAA could be imposed in respect of cash found when the assessee offered the amount as undisclosed income in the statement under section 132(4) and paid tax thereon, despite not specifying the manner in which the income was derived. - HELD THAT: - The Tribunal observed that the assessee, in the course of search, offered the cash found as additional income in a statement under section 132(4) and subsequently disclosed the same amount in the return and paid tax thereon. Section 271AAA(2) displaces levy of penalty where, in the course of search, the assessee (i) admits the undisclosed income and specifies the manner of derivation, (ii) substantiates that manner, and (iii) pays tax with interest. The Assessing Officer had imposed penalty having regard to both cash and unexplained jewellery; however, the addition in respect of jewellery was deleted by the Tribunal, leaving only the cash amount in issue. The Tribunal found that the recording authority did not put specific queries to elicit the mode or manner of derivation and that the assessee had made a clear offer of the cash as income and paid tax. Given these facts, the Tribunal held that the assessee was entitled to the benefit of the exception under section 271AAA(2). The Tribunal also noted that the assessee was deceased and considered it appropriate to adopt a liberal and compassionate approach in deleting the penalty. Grounds of appeal were allowed and the penalty deleted. [Paras 7, 8]

Penalty under section 271AAA imposed in respect of the cash found is deleted as the assessee had offered the amount in the statement under section 132(4), paid tax thereon and the manner of derivation was not specifically elicited; additionally the unexplained jewellery addition (which formed part of the basis for penalty) had been deleted.

Final Conclusion: Appeal allowed; penalty under section 271AAA deleted in respect of the cash offered and taxed for AY 2012-13, the Tribunal granting the benefit of the statutory exception and taking a liberal view in light of the circumstances.

Deduction under Section 80P(2)(a)(iii) - marketing of agricultural produce - remand for de novo adjudication - conflicting findings of fact between assessing officer and appellate authority - principles of natural justice and opportunity of hearing

Deduction under Section 80P(2)(a)(iii) - marketing of agricultural produce - conflicting findings of fact between assessing officer and appellate authority - remand for de novo adjudication - principles of natural justice and opportunity of hearing - Whether the question of entitlement to deduction under Section 80P(2)(a)(iii) in respect of commission receipts should be adjudicated afresh by the CIT(A) in view of conflicting factual findings. - HELD THAT: - The Tribunal found that the assessing officer recorded material factual findings that the farmers sold sugarcane directly to sugar mills and that the assessee received commission payments, whereas the CIT(A) reached contrary factual conclusions (for example, that payments to farmers were made by the society and that the society supplied cane and realized price). Those contrary findings of fact were not supported by evidential references in the appellate order. Because these are factual matters going to the root of entitlement to exemption, the Tribunal held that correct findings based on evidence are required before deciding the claim under Section 80P(2)(a)(iii). The Tribunal therefore set aside the CIT(A)'s order and restored the issue to the file of the CIT(A) for fresh adjudication on merits. The CIT(A) was directed to record complete and correct facts with reference to the full chain of activities and processes undertaken by the assessee, farmers and sugar mills, admit all evidence and explanations filed by the assessee, and grant proper and adequate opportunity of being heard in accordance with principles of natural justice. The Tribunal clarified that it did not express any view on the merits and kept all contentions open; it also noted that the powers of the CIT(A) are co-terminus with those of the assessing officer. [Paras 6, 7]

The issue is restored to the file of the CIT(A) for de novo adjudication with directions to record complete facts, admit evidence and grant opportunity of hearing; all contentions kept open.

Final Conclusion: The Revenue appeal is allowed for statistical purposes and the question of entitlement to deduction under Section 80P(2)(a)(iii) for AY 2013-14 is remanded to the CIT(A) for fresh adjudication on merits with full opportunity to the assessee; no opinion expressed on the substantive entitlement.

Deduction under section 80P for co-operative societies engaged in banking or providing credit facilities - Exclusion of co-operative banks from section 80P by insertion of subsection (4) - Meaning of "co-operative bank" and "primary agricultural credit society" as per Part V of the Banking Regulation Act, 1949 - Characterisation as co-operative bank on grant of Reserve Bank of India licence

Deduction under section 80P for co-operative societies engaged in banking or providing credit facilities - Exclusion of co-operative banks from section 80P by insertion of subsection (4) - Meaning of "co-operative bank" and "primary agricultural credit society" as per Part V of the Banking Regulation Act, 1949 - Characterisation as co-operative bank on grant of Reserve Bank of India licence - Whether the assessee, being a Multi State Primary Co operative Bank licensed by the Reserve Bank of India, was eligible for deduction under section 80P for the assessment years in question - HELD THAT: - The Tribunal held that after insertion of sub section (4) to section 80P by the Finance Act, 2006, the provisions of section 80P do not apply to any "co operative bank" other than a primary agricultural credit society or a primary co operative agricultural and rural development bank. The definition of "co operative bank" and "primary agricultural credit society" is adopted from Part V of the Banking Regulation Act, 1949. The assessee is a Multi State Primary Co operative Bank registered under the Multi State Co operative Societies Act and had been granted licence by the Reserve Bank of India to carry on banking business; its bye laws and objects show transaction of banking and deposit/advance activities rather than activities of a primary agricultural credit society. CBDT clarifications and the legislative intent that co operative banks functioning at par with commercial banks are excluded from section 80P were noted. Since the assessee falls within the definition of a co operative bank as per Part V of the Banking Regulation Act, 1949 and is neither a primary agricultural credit society nor a primary co operative agricultural and rural development bank, the exclusion in sub section (4) applies and the deduction under section 80P was not available. The Tribunal therefore upheld the disallowance confirmed by the CIT(A). [Paras 11, 12, 13]

Assessee being a Multi State Primary Co operative Bank licensed by the RBI is not eligible for deduction under section 80P; the disallowance is upheld.

Final Conclusion: Appeals dismissed; the Tribunal affirmed that a co operative society which, by its objects and RBI licence, falls within the definition of a co operative bank under Part V of the Banking Regulation Act, 1949 is excluded from deduction under section 80P(1)/(2) by virtue of sub section (4), and the CIT(A)'s orders disallowing the claimed deduction for AYs 2009 10, 2013 14 and 2014 15 are upheld.

Deduction under Section 36(1)(va) - employee's contribution to PF/ESI - applicability of Section 43B to employee contribution - retrospective/curative effect of Finance Act, 2003 amendment - Tribunal's discretion to decide appeals on merits without remand - delay in filing appeals due to pendency of section 154 application and COVID-19

Deduction under Section 36(1)(va) - employee's contribution to PF/ESI - applicability of Section 43B to employee contribution - Allowability of deduction for employees' contributions to PF/ESI deposited after the statutory due date under PF/ESI statutes but before filing the return for the relevant assessment year - HELD THAT: - The Tribunal held that where employees' contributions to provident fund/ESI were deposited after the due date prescribed under the labour statutes but before filing the return of income for the relevant assessment year, the deduction cannot be disallowed. The Bench followed earlier decisions of this Tribunal and High Courts which, after examining the Supreme Court decision in Alom Extrusions and subsequent judicial divergence, concluded that Section 43B operates to permit deduction where payment is made on or before the due date for furnishing return under Section 139(1); consequently, courts and the Tribunal have applied Section 43B to both employer and employee contributions for this purpose. The Bench noted the later statutory clarifications by Finance Act, 2021 and the legislative memorandum but observed that for the assessment years before AY 2021-22 the judicial view favouring the assessee applied. On the materials before it, and in conformity with the Lucknow Bench precedents, the Tribunal allowed the appeals on this issue. [Paras 4, 5]

The disallowance of employees' PF/ESI contributions deposited after the statutory due date but before filing the return is set aside and the deduction allowed.

Tribunal's discretion to decide appeals on merits without remand - delay in filing appeals due to pendency of section 154 application and COVID-19 - Whether the Tribunal should remit the appeals to CIT(A) for fresh adjudication or decide them on merits at Tribunal level - HELD THAT: - Relying on the principle in Commissioner of Wealth-Tax v. M.K.S. Vanavarayar, the Tribunal observed that remand is a discretionary step and need not be made where necessary facts and materials are already on record to decide the appeals on merits. Although the Revenue urged remand because CIT(A) had not adjudicated the substantive issue, the Bench found the record sufficient to decide the controversy and proceeded to decide the appeals without remand. The submissions regarding delay (pendency of rectification under section 154 and COVID-19 period) were noted but the Tribunal disposed of the appeals on merits in view of the available materials and relevant precedents. [Paras 4]

The Tribunal exercised its discretion to decide the appeals on merits without remitting them to the CIT(A).

Final Conclusion: Following Tribunal and High Court precedents and on the materials before it, the Tribunal allowed the appeals: the disallowance of employees' PF/ESI contributions deposited after the statute-due date but before filing the return is set aside, and the Tribunal declined to remit the matters to the CIT(A) because it could satisfactorily decide the appeals on merits.

Deduction of interest on borrowed capital under Section 36(1)(iii) - Commercial expediency - Nexus between borrowed funds and business purpose - Weighted average cost of borrowing

Deduction of interest on borrowed capital under Section 36(1)(iii) - Commercial expediency - Nexus between borrowed funds and business purpose - Weighted average cost of borrowing - Disallowance of interest expense under Section 36(1)(iii) deleted and deduction allowed. - HELD THAT: - The Tribunal accepted the assessee's case that loans were borrowed and re advanced to sister concerns for business purposes in the ordinary course of the assessee's real estate development business and that the test for allowability under Section 36(1)(iii) is satisfied where there is commercial expediency and a nexus between the borrowed funds and business purposes. The Tribunal found that the Assessing Officer and the CIT(A) erred in disallowing interest merely because some borrowings carried a higher contractual rate while advances to group concerns bore a marginally lower rate. The assessee's explanation of borrowing and on lending for project requirements, supported by audited accounts, board resolutions and the weighted average cost of funds, established that the funds were used for business purposes and that the commercial expediency test (as applied in the authorities relied upon by the assessee) was met. Accordingly, the Tribunal set aside the CIT(A)'s finding on this point and directed deletion of the addition. The Tribunal referred to and relied upon the line of judicial authorities cited in the assessee's submissions, including Hero Cycles (P) Ltd , S.A. Builders Ltd , and other tribunal and High Court decisions noted in the record, as illustrating the guiding principle that revenue should not substitute its commercial judgment where prima facie commercial expediency and nexus are established. The Tribunal applied that principle to the facts and allowed the claim. [Paras 12, 13, 14]

The disallowance of interest made by AO and confirmed by CIT(A) is set aside; the Assessing Officer is directed to delete the addition and allow the deduction.

Final Conclusion: Both appeals allowed: the Tribunal deleted the disallowance of interest under Section 36(1)(iii) for the assessment years in dispute and directed the Assessing Officer to give effect to this decision.

Principles of natural justice - right to personal hearing - faceless assessment procedure - remand for fresh adjudication - opportunity of hearing through video conferencing

Principles of natural justice - right to personal hearing - Assessment passed without granting the petitioner a personal hearing despite a timely request violated principles of natural justice and the assessment order must be set aside. - HELD THAT: - The petitioner received a show cause notice dated 22.04.2021 calling for response by 25.04.2021 and on 23.04.2021 made a timely request for personal hearing. The National Faceless Assessment Center proceeded to pass the assessment order on 19.06.2021 without granting any personal hearing and without recording any reason for refusal despite the request having been received. The court found that failing to afford the requested opportunity of personal hearing caused prejudice to the petitioner and amounted to a breach of the principles of natural justice. Consequently the impugned assessment order was set aside and the matter remanded for fresh consideration. [Paras 6, 7]

Impugned assessment order dated 19.06.2021 set aside for breach of natural justice; matter remanded for fresh consideration.

Remand for fresh adjudication - opportunity of hearing through video conferencing - faceless assessment procedure - On remand the respondent must grant personal hearing by video conferencing and pass a fresh assessment order within a specified timeframe; merits were left open. - HELD THAT: - Considering the faceless assessment procedure and the petitioner's timely request for hearing, the court directed that respondent no.3 shall afford the petitioner an opportunity of personal hearing through video conferencing before proceeding further in terms of the show cause notice dated 22.04.2021. The court left all points on merits open for fresh adjudication and required that a fresh assessment order be passed within four months from the date of the order. [Paras 7]

Respondent to grant personal hearing via video conferencing and pass fresh assessment order within four months; all merit issues are kept open.

Final Conclusion: The assessment order dated 19.06.2021 is quashed for breach of natural justice; the matter is remitted for fresh adjudication with a direction to afford personal hearing by video conferencing and to pass a fresh assessment order within four months, with merits kept open.

Chargeability of interest on subsequently recovered duty - absence of statutory or contractual authority for levy of interest - regularisation of import by recovery of duty - confiscation under Section 111(o) of Customs Act, 1962 - penalty under Section 112 of Customs Act, 1962 - relevance of Foreign Trade Policy / Handbook of Procedures to levy of interest

Chargeability of interest on subsequently recovered duty - absence of statutory or contractual authority for levy of interest - relevance of Foreign Trade Policy / Handbook of Procedures to levy of interest - Charging of interest on duty recovered in respect of non fulfilment of export obligation was not sustainable in the absence of statutory empowerment or a contractual undertaking binding the importer to pay interest. - HELD THAT: - The Tribunal examined whether interest could be levied where the relevant statutory provision (for charging interest) was not in force at the time the import obligation arose and neither the licence nor the exemption notification expressly provided for interest. Paragraph 128 of the Handbook of Procedures, relied upon by lower authorities, was held to be an internal administrative provision of the Foreign Trade (Development & Regulation) Act machinery and not a statutory prescription capable of authorising recovery of interest under the Customs Act. In the absence of a direct or remote authorising provision attributable to an empowering statute, and having regard to the licence and notification being silent on interest and to the absence of a binding contractual undertaking to pay interest, the charge of interest could not be sustained. The Tribunal therefore set aside the charge of interest. [Paras 7, 9]

Charge of interest set aside for want of statutory or contractual authority.

Regularisation of import by recovery of duty - confiscation under Section 111(o) of Customs Act, 1962 - penalty under Section 112 of Customs Act, 1962 - Confiscation of goods and penalty imposed under Section 112 could not be sustained where recovery of duty regularised the post importation condition, rendering Section 111(o) inapplicable in the circumstances of this case. - HELD THAT: - The Tribunal considered the effect of recovery of duty on the applicability of confiscation under Section 111(o). Where failure to fulfil the export obligation is remedied by recovery of the duty exigible under the notification, the post importation condition stands regularised and the statutory basis for confiscation under Section 111(o) falls away. Once Section 111(o) is inapplicable, the consequential penalty under Section 112 cannot be sustained. Applying this principle to the facts before it, the Tribunal found that confiscation and the penalty were not justified and set them aside. [Paras 8, 9]

Confiscation and penalty set aside as recovery of duty regularised the condition and removed basis for Section 111(o) and Section 112 consequences.

Final Conclusion: The appeals are allowed: both the charge of interest and the imposition of penalty/confiscation are set aside for lack of statutory or contractual authority to levy interest and because recovery of duty regularised the post importation condition, negating the basis for confiscation and penalty.

Import in violation of notified import policy - port of import versus port of discharge - customs frontier and filing of bill of entry as determination of import - confiscation under Section 111(d) - penalty under Section 112(a) - waiver of show cause notice and consent to adjudication - effect of subsequent change of law on pre-existing commercial contracts

Port of import versus port of discharge - customs frontier and filing of bill of entry as determination of import - import in violation of notified import policy - Whether the goods were imported in violation of the DGFT notification restricting import through specified ports, having regard to the port where bill of entry was filed (ICD Garhi Harsaru) as the port of import. - HELD THAT: - The Tribunal found on the facts that the DGFT notification of 20.01.2016 restricting imports to specified seaports came into force before the commercial invoice and shipment; the goods were discharged and subsequently cleared through ICD Garhi Harsaru after the notification. The import is complete only when goods cross the customs frontiers and the port of import is the place where the bill of entry is filed to clear the goods; discharge at Nhava Sheva does not convert the port of discharge into the port of import where customs clearance occurs at an ICD. Therefore the goods were imported through ICD Garhi Harsaru in breach of the DGFT restriction and the import was contrary to the notified import policy. [Paras 9, 10, 13]

The import violated the DGFT notification because the goods were cleared at ICD Garhi Harsaru (the port of import) after the notification came into force.

Effect of subsequent change of law on pre-existing commercial contracts - import in violation of notified import policy - Whether the appellant could rely on a contract signed before the notification (transitional arrangement) to escape applicability of the DGFT restriction. - HELD THAT: - The Tribunal held that private contracts are subject to public law: a change in law governing imports applies from its date of publication irrespective of earlier commercial contracts. Although the contract was signed before the notification, subsequent acts in furtherance of the contract (commercial invoice and shipment) took place after the notification; parties could have modified or cancelled the contract to comply with the law. Consequently, the contract did not afford a defence to import in breach of the notification. [Paras 9, 12, 13]

The prior contract did not exempt the appellant from the DGFT restriction; the notification applied and the defence of transitional arrangement failed.

Waiver of show cause notice and consent to adjudication - Whether adjudication could be sustained notwithstanding the appellant's contention that no show cause notice was issued. - HELD THAT: - The Tribunal recorded that the appellant itself submitted a written waiver of the show cause notice and sought personal hearing, which was granted and attended. Having waived the notice to expedite clearance, the appellant could not later contend that adjudication without issuance of a show cause notice was impermissible. The waiver and subsequent participation in adjudication estopped the appellant from raising non-issuance of notice as a ground for overturning the order. [Paras 11]

Appellant's contention about absence of show cause notice is rejected because it had waived the notice and participated in the adjudication.

Confiscation under Section 111(d) - penalty under Section 112(a) - import in violation of notified import policy - Whether confiscation under Section 111(d) and penalty under Section 112(a) were sustainable for goods imported contrary to the DGFT notification. - HELD THAT: - Applying the finding that the goods were imported through ICD Garhi Harsaru in breach of the DGFT import restriction, the Tribunal concluded such import fell within the statutory mischief addressed by Section 111(d) as goods imported contrary to prohibition imposed by law and thus were liable for confiscation. Consequentially, imposition of penalty under Section 112(a) was also appropriate. The Tribunal rejected appellant's plea of bona fide ignorance, noting the notification pre-dated the invoice and shipment and that ignorance of law is no defence. [Paras 14, 15, 16]

Confiscation under Section 111(d) and penalty under Section 112(a) were correctly imposed as the import contravened the notified import policy.

Final Conclusion: The Tribunal upheld the orders below: the goods were held to have been imported in violation of the DGFT notification (being cleared at ICD Garhi Harsaru), the appellant's waiver of the show cause notice precluded the challenge on that ground, the prior contract did not exempt the appellant from the notification, and confiscation and penalty under Sections 111(d) and 112(a) were sustained; the appeal is dismissed and the impugned order is affirmed.

Contempt for non-compliance - Willful disobedience of Tribunal orders - Section 425 of the Companies Act, 2013 - Contempt of Court Act, 1971 - Section 424(3) of the Companies Act, 2013 - Enforcement of Tribunal orders

Contempt for non-compliance - Willful disobedience of Tribunal orders - Section 425 of the Companies Act, 2013 - Contempt of Court Act, 1971 - Respondent Nos. 2 to 5 guilty of contempt for non-compliance with the Tribunal's recorded compromise and subsequent directions and liable to sanction under Section 425 and Contempt of Court Act, 1971. - HELD THAT: - The Tribunal recorded the joint memo of compromise and subsequently passed directions requiring payment to ARCIL to prevent auction of the petitioners' personal property. Despite successive orders including an interim direction to remit the upset price, Respondent Nos. 2 to 5 failed to make payment and allowed auctions to proceed. The respondents' contention that sales-tax liabilities or alleged non-disclosure by the petitioners excused non-compliance was examined and rejected: the Sale Tax Department had not lodged claims for the earlier period relied upon by respondents and, in any event, clause 6 of the compromise only afforded respondents a right to discharge such earlier sales-tax claims and recover them as a charge on petitioners' property, but did not permit non-performance of the undertaking to pay ARCIL or disobedience of Tribunal orders. The Tribunal therefore found deliberate and willful disobedience of its orders and, exercising powers under Section 425 and by reference to the Contempt of Court Act, 1971, imposed monetary payment with interest and stipulated criminal consequences for non-payment within the stipulated period. [Paras 12, 13, 14, 15]

Respondent Nos. 2 to 5 directed to pay jointly Rs. 5.5 Crore with 18% p.a. interest within 30 days; failing which they shall jointly undergo simple imprisonment for three months and pay a fine of Rs. 2,000 each.

Section 424(3) of the Companies Act, 2013 - Enforcement of Tribunal orders - Section 424(3) was not relied upon to enforce the Tribunal's orders; enforcement and punitive measures were imposed under Section 425 and the Contempt of Court Act, 1971. - HELD THAT: - The respondents argued that Section 424(3) was inapplicable to the present application. The Tribunal noted this contention and proceeded to exercise its powers under Section 425 and applicable contempt law to address the non-compliance, thereby not placing reliance on Section 424(3) as the basis for the remedial measures ordered. [Paras 11, 15]

Relief was granted under Section 425 and the Contempt of Court Act, 1971 rather than under Section 424(3).

Final Conclusion: The contempt application is allowed: Respondent Nos. 2 to 5 are ordered to pay Rs. 5.5 Crore with 18% p.a. interest within 30 days; failure to pay will attract three months' simple imprisonment and a fine of Rs. 2,000 each. The application is disposed of.

Personal guarantor - Adjudicating Authority for corporate persons under Section 60 - maintainability of proceedings against personal guarantors - definition of "personal guarantor" - definition of "firm" as body of individuals - partnership firm not covered as personal guarantor

Personal guarantor - definition of "personal guarantor" - definition of "firm" as body of individuals - Adjudicating Authority for corporate persons under Section 60 - Maintainability of an application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 against a partnership firm which stood as guarantor to a corporate debtor. - HELD THAT: - The Tribunal held that the statutory scheme requires a 'personal guarantor' to be an individual. A combined reading of the provisions identifies the Adjudicating Authority for corporate persons and their personal guarantors and the definition of 'personal guarantor' as an individual. The definition of 'firm' as a body of individuals indicates that the expression 'individual' does not include a partnership firm. The guarantee deeds in the record were executed by a partnership firm, Nathella Sampath Chetty & Co. Consequently, proceedings under Section 95(1) IBC against a partnership firm do not fall within the jurisdictional and definitional contours of the Code as they presently stand. The Tribunal further noted that provisions relating to partnership firms are not yet in force, rendering the present application misconceived and not maintainable before this Adjudicating Authority. [Paras 6, 7, 8, 9]

Application dismissed as not maintainable before the Adjudicating Authority because the guarantor is a partnership firm and not an individual 'personal guarantor' within the meaning of the Code; provisions extending the regime to partnership firms are not yet in force.

Final Conclusion: The petition under Section 95(1) IBC was dismissed as misconceived and not maintainable before the National Company Law Tribunal because the guarantor was a partnership firm, which does not qualify as a 'personal guarantor' under the existing provisions of the Code.

Ex parte order - forum shopping - natural justice / audi alteram partem - remand for fresh adjudication - IBC not a substitute for recovery forum

Ex parte order - natural justice / audi alteram partem - Impugned order dated 04.10.2019 was passed ex parte and required to be set aside for want of a patient hearing to the corporate debtor. - HELD THAT: - The Tribunal recorded that the Adjudicating Authority admitted the Section 7 petition by an ex parte order. Given the ex parte nature of the admission and the surrounding facts where the corporate debtor had raised disputes (including replies to the SARFAESI demand notice and pending proceedings before other fora), the Tribunal found that the principles of natural justice required that the corporate debtor be given an opportunity of a patient and genuine hearing. The Tribunal therefore concluded that the impugned ex parte admission could not stand without hearing the corporate debtor and considering its contentions and records.

Impugned order admitting the petition was set aside on account of being ex parte; matter required rehearing.

Forum shopping - IBC not a substitute for recovery forum - remand for fresh adjudication - Whether the matter should be remanded to the Adjudicating Authority for fresh consideration taking into account allegations of forum shopping, existence of real disputes and related proceedings. - HELD THAT: - The Tribunal noted the multiplicity of proceedings initiated by the bank in different fora and observed that such conduct, if amounting to forum shopping, is an abuse of process. It reiterated the settled principle that the Code is not intended to serve as a substitute recovery forum where real disputes exist. In view of these aspects and the ex parte admission, the Tribunal found it appropriate to remit the matter to the Adjudicating Authority with directions to afford a patient hearing to the corporate debtor, consider the factual matrix (including payments alleged to have been made, pending proceedings before other fora such as DRT and High Court, and the bank's actions), apply the applicable law, and pass a fresh reasoned order.

Matter remanded to the Adjudicating Authority for fresh hearing and adjudication in accordance with law; appeal allowed.

Final Conclusion: The appeal is allowed: the ex parte admission order dated 04.10.2019 is set aside and the matter is remitted to the Adjudicating Authority to conduct a fresh, patient hearing of the parties (including the RP), consider the disputes and related proceedings, and pass a reasoned order in accordance with law; interim orders, if any, are vacated and pending applications disposed of.

Applicability of Section 10A (suspension of initiation of CIRP during COVID 19) - effect of One Time Settlement (OTS) on existence of debt - principles of audi alteram partem and fair hearing in virtual proceedings - admissibility of application under the IBC where default predates protected period - judicial scrutiny of repeated OTS and its impact on maximization of value under the Code

Applicability of Section 10A (suspension of initiation of CIRP during COVID 19) - admissibility of application under the IBC where default predates protected period - Section 10A is inapplicable and does not bar the initiation of CIRP in the present case - HELD THAT: - The Tribunal found that the Financial Creditor filed the insolvency petition on 13.08.2019, which is antecedent to the period protected by Section 10A (defaults occurring on or after 25.03.2020). Consequently, the non obstante provision and bar contained in Section 10A cannot operate retrospectively to defeat a petition filed prior to the protected period. The record showed earlier defaults, NPA classification and subsequent steps taken by the bank; therefore the petition was not barred by Section 10A and the debt/default remained justiciable before the Adjudicating Authority. The Tribunal accepted the position that the filing date of the petition controls the applicability of Section 10A and that the bank's petition satisfied the legal requirements for admission. [Paras 2, 6, 8, 14]

Section 10A does not apply and the petition filed on 13.08.2019 was maintainable.

Effect of One Time Settlement (OTS) on existence of debt - judicial scrutiny of repeated OTS and its impact on maximization of value under the Code - The OTS did not extinguish the debt for the purposes of the petition as the second OTS stood rescinded for non payment and earlier OTS had been rescinded - HELD THAT: - The Tribunal recorded that while OTS arrangements had been entered into on two occasions and upfront amounts paid, the Corporate Debtor failed to comply with the terms and the Bank rescinded the earlier OTSs (the first rescinded on 17.06.2019 and the second rescinded on 08.07.2020). The Adjudicating Authority was justified in treating the petition as a subsequent, enforceable claim since settlement terms had not been fully complied with and the bank was entitled to pursue its full dues where the OTS expressly provided for cancellation on non payment. The Tribunal also observed that repeated failures to perform OTS terms undermine the purpose of the Code to maximize asset value and that repeated settlements which are not honoured are not a bar to initiation of CIRP. [Paras 3, 4, 8, 14]

The OTS did not prevent admission of the insolvency petition because the settlement was rescinded for non payment and the debt remained recoverable.

Principles of audi alteram partem and fair hearing in virtual proceedings - No denial of natural justice was established by the Appellant; the Adjudicating Authority did not commit infirmity in hearing or in admission - HELD THAT: - The Tribunal considered the Appellant's claim of non hearing due to disconnection from virtual proceedings but found that the record showed hearings took place, the Appellant had opportunities to file replies and raise grounds, and no sworn affidavit demonstrating immediate steps to recall or re open arguments was produced. The Adjudicating Authority's order recorded that parties were heard and the Tribunal accepted that no material suppression or breach of fair hearing principles occurred to vitiate the admission. The Tribunal further noted that the Appellant had not raised the Section 10A plea below and that repeated litigation and failures to comply with settlement terms weighed against the Appellant's contentions. [Paras 3, 10, 13, 14]

Allegations of denial of natural justice were rejected and admission of the petition was not vitiated on that ground.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's admission of the insolvency petition: Section 10A was inapplicable as the petition was filed before the protected period, the OTSs had been rescinded and did not extinguish the debt, and no breach of natural justice in the virtual hearing warranted interference.

Resolution Plan implementation - Removal of attachments, liens and encumbrances - Liability for prior offences and action against property under Section 32A - Correction of typographical error in tribunal order - Interest for delayed payment - determination of applicable rate - Time limit for completion of CIRP under Section 12 - Role of Resolution Professional and Monitoring Committee in implementation

Removal of attachments, liens and encumbrances - Liability for prior offences and action against property under Section 32A - Resolution Plan implementation - Responsibility for removal of pre existing attachments/encumbrances and effect of Section 32A on action against the corporate debtor's property. - HELD THAT: - The Tribunal held that the successful resolution applicant is entitled to take over assets free from attachments, liens and encumbrances as envisaged by the approved Resolution Plan and the scheme of the Code. Liability and action in respect of offences and action against the property prior to CIRP are to be governed by Section 32A, which, subject to its conditions and exceptions, bars action against property covered by an approved resolution plan. The Resolution Professional and members of the Monitoring Committee are expected to assist the Resolution Applicant in facilitating removal of such encumbrances so that the SRA obtains the intended 'clean slate'. The Court emphasized that vesting the burden of prior liabilities on the Resolution Applicant would defeat the objectives of the Code. [Paras 27, 28, 29, 33, 34]

The Resolution Applicant is entitled to assets free from prior encumbrances in accordance with the Resolution Plan and Section 32A; the RP and Monitoring Committee must assist in getting attachments removed.

Correction of typographical error in tribunal order - Resolution Plan implementation - Validity of correction of the Approval Order changing the payment period from '30 months' to '3 months' and whether such correction required prior notice to the Resolution Applicant. - HELD THAT: - The Tribunal held that correction of an apparent clerical or typographical error in the Adjudicating Authority's order is permissible and unexceptionable. Such rectification (noted in the order dated 27.01.2020) amounts to correction of a mistake apparent on the record and can be made by the tribunal under its rules; absence of separate notice in that context was not held to invalidate the correction. [Paras 24]

The correction of the period in the approval order was valid and not a ground to overturn the revised timeline.

Interest for delayed payment - determination of applicable rate - Resolution Plan implementation - Appropriate rate of interest payable by the Resolution Applicant for delay between 27.01.2020 and 15.11.2021. - HELD THAT: - While the Adjudicating Authority had directed interest at 12% p.a., the Tribunal, noting the particular circumstances including the fact that the SRA has now paid the full amount and the period includes the COVID 19 pandemic phase, moderated the rate. The Tribunal fixed the rate of interest for the period 27.01.2020 to 15.11.2021 at the RBI base rate for lending to banks plus 2% margin, subject to an overall cap of 12% p.a., observing that this strikes a balance between the time value of money and the equities of implementation delays. [Paras 31, 32, 34]

Interest is to be computed at RBI base rate for lending to banks + 2% for the period 27.01.2020 to 15.11.2021, subject to a maximum of 12% p.a.

Time limit for completion of CIRP under Section 12 - Role of Resolution Professional and Monitoring Committee in implementation - Observations on CIRP time limits and the functional obligation of stakeholders during implementation. - HELD THAT: - The Tribunal reiterated the statutory mandate that CIRP must be completed within the prescribed timeframe (one hundred and eighty days with limited permissible extension), effectively not exceeding 330 days including extensions and legal proceedings. It recorded concern over protracted litigation and underscored that the Resolution Professional and Monitoring Committee should proactively assist the Resolution Applicant in resolving encumbrances and inter forum issues so as to effectuate the approved plan within the intended time and to preserve the Code's objectives. [Paras 25, 26, 34]

CIRP must conform to statutory time limits; RP and Monitoring Committee have an active role in assisting implementation to avoid defeat of the Code's object.

Final Conclusion: The appeal is partially allowed: the Tribunal affirmed entitlement of the Resolution Applicant to take assets free of prior encumbrances subject to Section 32A and the RP/Monitoring Committee's duty to assist; validated the correction in the approval order; and modified the interest direction by prescribing RBI base rate + 2% (capped at 12% p.a.) for the period 27.01.2020 to 15.11.2021. IA, if any, disposed of; no order as to costs.

Reasons in judicial orders - Natural Justice - Non-speaking order - Remand for de novo hearing - Forensic audit appointment - Restriction on statutory meetings

Non-speaking order - Reasons in judicial orders - Validity of the impugned directions appointing an independent forensic auditor and restraining statutory meetings insofar as they were passed without reasons. - HELD THAT: - The Appellate Tribunal found that the impugned order dated 23.02.2022, insofar as it appointed an independent forensic auditor and directed that the respondent company shall not conduct statutory meetings except in the presence of a Tribunal appointed chairman, was rendered in a non speaking manner without adequate reasons. The Tribunal held that reasons are essential to enable appellate scrutiny and to satisfy principles of fair play and natural justice; absence of qualitative and quantitative reasons constituted a legal infirmity. Without adjudicating the merits of the underlying contentions, the Appellate Tribunal set aside those parts of the impugned order on this ground and allowed the appeal.

Parts of the impugned order relating to appointment of a forensic auditor and restriction on statutory meetings were set aside for want of reasons.

Remand for de novo hearing - Natural Justice - Procedure to be followed on remand and the scope of further proceedings before the National Company Law Tribunal. - HELD THAT: - The Appellate Tribunal remitted the matter to the National Company Law Tribunal, Division Bench II, Chennai for de novo consideration of the aspects set aside. The Tribunal directed that the NCLT shall hear the parties afresh, afford adequate opportunity to both sides to canvass factual and legal pleas, follow the principles of natural justice, and assign reasons for any conclusion reached. The NCLT was directed to pass a reasoned order in respect of the forensic audit appointment and directions concerning statutory meetings within four weeks from receipt of the order. The remand was for fresh adjudication and reasoned determination rather than for limited quantification.

Matter remitted for de novo hearing; NCLT to pass a reasoned order after hearing within four weeks.

Reasons in judicial orders - Status of other reliefs granted by the NCLT and interim application for stay. - HELD THAT: - The Appellate Tribunal expressly left undisturbed the other reliefs granted by the NCLT in CP/82(CHE)/2021 that were not affected by the finding of non speaking order as to the forensic audit and statutory meetings. The connected interim application for stay (IA/318 of 2022) was closed.

Other reliefs of the impugned order were upheld; connected stay application closed.

Final Conclusion: The appeal was allowed in part: the Tribunal set aside the impugned order insofar as it appointed a forensic auditor and restrained statutory meetings for want of reasons, remitted those issues to the NCLT for de novo, reasoned hearing within four weeks, left the remaining reliefs undisturbed, and closed the connected stay application.

Remand does not, by itself, justify immediate recovery - Interim protection against recovery pending fresh adjudication - Duty to examine refund claim afresh on remand

Remand does not, by itself, justify immediate recovery - Remand direction issued by the Appellate Authority cannot be a ground for initiating recovery proceedings before the adjudicatory authority has carried out fresh examination of the refund claim. - HELD THAT: - The Court observed that the Appellate Authority had remitted the matter to the adjudicating authority for fresh examination of the petitioner's refund claim and, prima facie, a remand of that character cannot trigger recovery at that stage. On the earlier date the Court recorded this view and the statement of the revenue's counsel that no recovery would be undertaken until the remand is given effect to was accepted and taken on record. The Court therefore treated initiation of recovery proceedings in the face of a remand as inappropriate absent completion of the adjudicatory process directed by the Appellate Authority. [Paras 4, 5]

Remand must be given effect to and cannot, by itself, justify immediate recovery of the refunded amount prior to fresh adjudication.

Interim protection against recovery pending fresh adjudication - Whether interim protection should be afforded to the petitioner against recovery pending fresh examination and, if an adverse decision is later rendered, whether any limited protection period should be granted. - HELD THAT: - The revenue, through its counsel, undertook that no recovery would be effected until the refund claim is examined pursuant to the remand. Relying on that statement, the Court disposed of the writ petition and recorded the undertaking. Additionally, the Court directed that if the eventual decision of the concerned authority is adverse to the petitioner, no steps for recovery shall be initiated for ten days from the date of service of that adverse order, thereby granting the petitioner a limited protective window to seek appropriate remedies. [Paras 5, 6]

Petitioner granted interim protection: no recovery until the remand is acted upon, and if the final decision is adverse, recovery steps stay for ten days from service of that order.

Final Conclusion: The writ petition was disposed of on the basis of the revenue's undertaking that no recovery would be made until the refund claim is examined in accordance with the remand; the Court further directed that, if the adjudicatory outcome is adverse to the petitioner, recovery shall not be initiated for ten days from service of that adverse order.

CENVAT Credit - input service - eligibility of credit for Service Tax on deposit insurance service - precedential effect of a Larger Bench decision

CENVAT Credit - input service - Deposit Insurance and Credit Guarantee Corporation (DICGC) service - precedential effect of a Larger Bench decision - Credit of Service Tax paid on premium to DICGC for deposit insurance is eligible as CENVAT Credit. - HELD THAT: - The Tribunal considered whether Service Tax paid by the bank on premiums to DICGC for insuring deposits qualifies as an input service so as to avail CENVAT Credit. The question had been previously decided by the Larger Bench in M/s. South Indian Bank, which held that the insurance service provided by DICGC to banks is an input service and the credit of Service Tax is eligible. The Tribunal's earlier decision in the appellant's own case for a different period had followed that Larger Bench view. Applying the binding precedent of the Larger Bench and the Tribunal's prior ruling, the Tribunal held that the credit claimed by the appellant-bank on Service Tax paid to DICGC is eligible, and therefore the assessment order disallowing the credit and confirming demand, interest and penalty could not be sustained. [Paras 6, 7, 8]

Credit of Service Tax paid on premiums to DICGC held eligible; impugned order disallowing credit and confirming demand, interest and penalty set aside.

Final Conclusion: Appeals allowed; impugned order set aside and CENVAT Credit of Service Tax paid on deposit insurance premium to DICGC held admissible, with consequential reliefs as per law.

Adjustment of excess duty paid against subsequent duty liability - suo moto availment/adjustment of Cenvat credit - invocation of extended period of limitation for suppression - requirement of positive, conscious and deliberate action for invocation of extended period - unjust enrichment (absence of pleading/finding)

Adjustment of excess duty paid against subsequent duty liability - suo moto availment/adjustment of Cenvat credit - Whether the appellant was justified in adjusting excess duty paid in the previous month against duty liability of the subsequent month under the Cenvat regime. - HELD THAT: - The Tribunal found that the appellant paid duty in March as a precautionary measure on total raw material cleared to its service agent and, upon receipt of the service-agent's month end report by the 5th of the following month, debited the duty attributable to out warranty consumption and adjusted the excess payment. The practice, though described as improper in procedure, was not specifically prohibited by statute and the excess payment itself was not controverted. The Tribunal relied on earlier Coordinate Bench precedents recognising that excess duty payment can be adjusted against tax liability and held that such adjustment cannot be characterised as illegal per se. The appellant discontinued the practice w.e.f. May 2016. Applying these principles, the Tribunal accepted that the excess payment could legitimately be adjusted against subsequent liabilities and allowed the appeal on merits. [Paras 6, 8]

Adjustment of excess duty paid in a previous month against subsequent duty liability was permissible in the facts of the case; appeal allowed on merits.

Invocation of extended period of limitation for suppression - requirement of positive, conscious and deliberate action for invocation of extended period - Whether the extended period of limitation could be invoked against the appellant on the ground of suppression or concealment. - HELD THAT: - The Tribunal noted that the procedure adopted by the appellant had been within the knowledge of the Revenue since 2011, with earlier adjudications and periodic ER 1 filings, and that three earlier show cause notices on the identical issue had been adjudicated in 2015. Relying on the settled principle that invocation of the extended period requires something positive beyond mere short payment or inaction-namely conscious, deliberate withholding of information or fraudulent motive-the Tribunal held that mere short payment was insufficient to attract extended limitation. In the absence of any finding or pleading of deliberate suppression or mens rea, the extended period was not invocable and the demand barred by limitation. [Paras 6, 8]

Extended period of limitation could not be invoked; demand set aside on limitation grounds.

Final Conclusion: The Tribunal allowed the appeal: on merits the suo moto adjustment of excess duty paid in earlier month against subsequent liabilities was held permissible in the facts; on limitation the extended period was not attracted for lack of deliberate suppression, and consequential relief was granted to the appellant.

Cenvat credit - Pollution control equipment as capital goods - Obligation of manufacturer of dutiable and exempted goods under Rule 6 of Cenvat Credit Rules - user test - by product/inevitable emergence doctrine - requirement to reverse proportionate credit for exempted output

Cenvat credit - Pollution control equipment as capital goods - user test - Availability of Cenvat credit on the Waste Heat Recovery Boiler and its parts and accessories used as pollution control equipment. - HELD THAT: - The Tribunal applied the user test and accepted that the steel/metal items and associated parts used in fabrication and installation of the Waste Heat Recovery Boiler are capital goods/accessories employed for pollution control and are integrally connected with the manufacturing activity. The Boiler cools hot flue gases and generates steam as a consequence of the manufacturing process; it is not shown that these items were procured for any activity outside manufacture. In view of authoritative precedent treating equipment used for mandatory pollution control as capital goods, the appellants were entitled to Cenvat credit on the pollution control equipment and its parts and accessories. [Paras 6]

Cenvat credit on the Waste Heat Recovery Boiler and its parts and accessories allowed.

Obligation of manufacturer of dutiable and exempted goods under Rule 6 of Cenvat Credit Rules - by product/inevitable emergence doctrine - requirement to reverse proportionate credit for exempted output - Whether appellants were required to reverse 10% of Cenvat credit or otherwise reverse credit on account of sale of steam alleged to be an exempted product. - HELD THAT: - The Tribunal held that steam generated in cooling hot flue gases during manufacture is an incidental/inevitable by product of the manufacturing process and not a separately manufactured exempted product such that Rule 6 would apply to deny or compel reversal of credit. Relying on binding and persuasive authorities which hold that where a by product necessarily emerges in the technological process and the entire input is used for the dutiable product, the mere existence or sale of the by product does not invoke the provisions for separate accounts or proportionate reversal under Rule 6. On the facts, steam was generated as a technological necessity and used/sold, but that does not convert it into an exempt final product attracting the 10% reversal or other obligations under Rule 6. [Paras 7, 8, 9]

No requirement to reverse 10% of Cenvat credit or to deny credit on account of sale of steam; the impugned demand is set aside.

Final Conclusion: The appeal is allowed: the Cenvat credit availed on the Waste Heat Recovery Boiler and its accessories is admissible as capital goods used for pollution control, and no reversal or denial of credit is warranted on account of generation and sale of steam which is an incidental/inevitable by product of the manufacturing process; the impugned order is set aside with consequential relief as per law.

Interest on delayed refunds - commencement of interest from expiry of three months from date of receipt of refund application - deeming provision in explanation to Section 11BB not postponing commencement date of interest - original refund application date governs entitlement, not subsequent communication

Interest on delayed refunds - commencement of interest from expiry of three months from date of receipt of refund application - Appellant's entitlement to statutory interest on the sanctioned refund and the date from which such interest is payable. - HELD THAT: - The Tribunal held that Section 11BB mandates payment of interest where a refund ordered under Section 11B is not paid within three months from the date of receipt of the refund application; interest runs from the day immediately after the expiry of that three-month period until the date of actual payment. The court applied the statutory provision and precedent, observing that where an application was filed on 19.05.2005 and the refund was paid on 04.04.2016, interest is payable from 20.08.2005 (i.e., the day after three months from the original application) till 04.04.2016. The reasoning was reinforced by the Supreme Court's interpretation in Ranbaxy Laboratories Ltd. that the Explanation to Section 11BB does not postpone the date from which interest becomes payable; it only deems certain appellate orders to be orders under Section 11B for the purpose of the section. The Tribunal therefore concluded that the statutory interest must be computed from the cessation of the three-month period following the original filing date, not from the date of the appellate or sanction order. [Paras 6, 7, 8, 9, 10]

Appellant entitled to statutory interest from the day after expiry of three months from the original refund application date (20-08-2005) up to the date of payment (04-04-2016).

Original refund application date governs entitlement, not subsequent communication - Whether the letter dated 23.11.2015 constituted a fresh refund claim or only notified the department of the Tribunal's order. - HELD THAT: - The Tribunal examined the record and found that the communication of 23.11.2015 merely informed the Jurisdictional Deputy Commissioner that CESTAT had passed an order in favour of the appellant and requested sanction; it was not the original refund application. The refund claim had been originally filed on 19.05.2005. Consequently, the date for computing the three-month period under Section 11BB is the original filing date and not the later communication. [Paras 6, 8]

Letter dated 23.11.2015 did not operate as the refund application; the original filing date (19.05.2005) governs entitlement and computation of interest.

Final Conclusion: Impugned order rejecting interest on delayed sanction is set aside; appeals allowed and appellant granted consequential relief, with interest to be paid from the day after three months from the original refund application date until actual payment.

Valuation of goods for Central Excise - assessable value and inclusions - treatment of scrap arising during manufacture - job work valuation principles - precedent reliance on M/s. P.R. Rolling Mills Pvt. Ltd.

Treatment of scrap arising during manufacture - job work valuation principles - assessable value and inclusions - valuation of goods for Central Excise - The value of scrap generated during the process of manufacture and retained by the job worker is not includible in the assessable value of the goods cleared by the job worker to the principal manufacturer. - HELD THAT: - The Tribunal examined whether scrap generated in the course of manufacture by a job worker must be included in the value of goods cleared to the principal manufacturer. The appellant had adopted CAS-4 valuation on a cost-construction basis taking the landed cost of cast articles received from the principal, and had separately cleared the scrap on payment of appropriate duty. The scrap is generated after the process of manufacture and was separately sold on which duty was discharged. The Tribunal followed the reasoning in M/s. P.R. Rolling Mills Pvt. Ltd. where the issue was decided in favour of the assessee, and noted that in the appellant's own earlier orders for corresponding periods the demand had been set aside on the same principle. Applying that precedent and the factual finding that duty on scrap had already been paid and that scrap arises post-manufacture, the Tribunal concluded that the value of such scrap is not to be included in the assessable value of the goods cleared by the job worker to the principal manufacturer. [Paras 6, 8, 9, 10]

Demand on account of non-inclusion of scrap value cannot be sustained; impugned orders set aside and appeals allowed.

Final Conclusion: Following the Tribunal's application of the precedent in M/s. P.R. Rolling Mills Pvt. Ltd. and the appellant's own earlier favorable orders, the demand for excise duty by including the value of scrap in the assessable value of goods cleared to the principal manufacturer was held unsustainable; the impugned orders are set aside and the appeals are allowed.

Applicability of Rule 6 of the Cenvat Credit Rules, 2004 to manufacture of exempted goods - whether electrical energy is an excisable or exempted good - proportionate reversal of Cenvat credit under Rule 6(3A) - assessee's option among sub rules of Rule 6 and non compellability by department - invocation of extended period of limitation and allegation of suppression - consequences for imposition of penalty where suppression is not established

Whether electrical energy is an excisable or exempted good - applicability of Rule 6 of the Cenvat Credit Rules, 2004 to electricity - Electricity generated by the assessee is not an excisable/exempted good for the purposes of Rule 6 of the Cenvat Credit Rules, 2004, and therefore Rule 6 is not attracted to compel reversal on that ground. - HELD THAT: - The Tribunal followed settled law that for Rule 6 to apply the manufacturer must manufacture both dutiable final products and excisable exempted goods. The court noted the three conditions for a good to be excisable (manufactured, specified in the Tariff Schedules, and subjected to tariff) and accepted authorities holding that electrical energy of the kind generated in question does not meet those conditions. Applying that principle, electrical energy produced (including from waste) in the appellant's plant was held not to be an exempted excisable good within the meaning of the Rules; consequently, the obligations under Rule 6 to reverse credit do not arise as a matter of law in this case. [Paras 5, 6]

Rule 6 CCR, 2004 is not attracted because the electricity in question is not an excisable/exempted good.

Proportionate reversal of Cenvat credit under Rule 6(3A) - assessee's option among sub rules of Rule 6 and non compellability by department - The assessee's suo moto proportionate reversal under Rule 6(3A) is a valid exercise of the option available under Rule 6, and the department cannot compel a different mode of reversal or add further demand on that basis. - HELD THAT: - The Tribunal observed that Rule 6 provides alternative methods (sub rules (1), (2) and (3)/(3A)) for reversal and that the choice among these alternatives is the assessee's prerogative. With effect from 01.04.2008, Rule 6(3A) permits proportionate reversal on inputs and input services; the assessee admits having reversed proportionately an amount in respect of the electricity sold out. Since the assessee had already effected the proportionate reversal under the permissible provision, the Department's confirmation of additional demand by including values (such as from scrap items) for further reversal was unsustainable in law. [Paras 6]

The assessee's proportionate reversal under Rule 6(3A) is valid and the Department erred in confirming additional demand on that ground.

Invocation of extended period of limitation and allegation of suppression - consequences for imposition of penalty where suppression is not established - Extended period of limitation and penalty were not tenable because suppression was not established where similar earlier show cause notices existed and relevant facts were in authorities' knowledge. - HELD THAT: - The Tribunal relied on governing authority that if the relevant facts were known to authorities at the time of the first show cause notice, subsequent proceedings cannot be grounded on 'suppression' by the assessee. The record showed prior similar show cause notices had been issued for earlier years; therefore suppression could not be alleged in the facts of this case. In consequence, the invocation of the extended period of limitation was held to be wrongly confirmed and the question of imposing penalty did not arise. [Paras 7]

Invocation of extended limitation and imposition of penalty set aside for want of suppression.

Final Conclusion: The appeal is allowed: the demand confirmed under Rule 6 was set aside because electricity in the facts was not an excisable/exempted good and the assessee had validly effected proportionate reversal under Rule 6(3A); invocation of extended limitation and penalty were also negated for lack of suppression.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Quashing of conviction and sentence under inherent power of High Court under Section 482 Cr.P.C. - Guidelines in Narinder Singh for acceptance of settlement and exercise of Section 482 power - Distinction between compounding under Section 320 Cr.P.C. and quashing under Section 482 Cr.P.C. - Power to compound after recording of conviction - Consideration of nature and gravity of offence and its social impact when accepting compromise

Compounding of offence under Section 147 of the Negotiable Instruments Act - Power to compound after recording of conviction - The offence under Section 138 of the Negotiable Instruments Act was ordered to be compounded and the convictions and sentences recorded by the trial and appellate courts were quashed and set aside following the compromise and full payment of the awarded compensation. - HELD THAT: - The High Court accepted the parties' compromise, recorded on affidavit and supported by the complainant's endorsement that he had received the compensation, and proceeded to compound the offence under Section 147 of the Negotiable Instruments Act. The Court noted authoritative precedent that a court may compound offences under the Act even after conviction and that compounding is permissible where the parties have completely settled their dispute. Having regard to the amicable settlement and payment of compensation, the Court exercised its power to give effect to the compromise by quashing the judgments of conviction and sentence and acquitting the accused.

Petition allowed; matter compounded; impugned convictions and sentences quashed and set aside; accused acquitted.

Quashing of conviction and sentence under inherent power of High Court under Section 482 Cr.P.C. - Guidelines in Narinder Singh for acceptance of settlement and exercise of Section 482 power - Consideration of nature and gravity of offence and its social impact when accepting compromise - The High Court applied the Narinder Singh principles in exercising inherent jurisdiction, considered the nature of the offence and surrounding circumstances, and found exercise of power appropriate in this case. - HELD THAT: - The Court distinguished the inherent power under Section 482 Cr.P.C. from compounding under Section 320 Cr.P.C., and applied the Narinder Singh guidelines which require the High Court to form an opinion aimed at securing ends of justice or preventing abuse of process before accepting a settlement. The Court observed that offences of a heinous or serious nature or those affecting public interest are ordinarily not amenable to quashing on compromise; however, where the dispute is predominantly civil/commercial and the parties have completely settled (with full payment), the continuation of criminal proceedings would be oppressive and the chances of conviction remote. Having evaluated these factors and the fact of full compensation, the Court concluded that quashing and compounding were justified.

Narinder Singh guidelines applied; inherent jurisdiction invoked and exercised to accept the settlement and quash the criminal proceedings.

Final Conclusion: The High Court accepted the inter se compromise supported by payment of the awarded compensation, compounded the offence under Section 147 of the Negotiable Instruments Act, invoked its inherent power consistent with Narinder Singh and related precedents, quashed and set aside the convictions and sentences recorded by the courts below, and acquitted the petitioner.

Maintainability of complaint by partnership firm/partner - partner as agent of the firm - rebuttable presumption under Section 139 of the Negotiable Instruments Act - onus on the drawer to rebut the presumption - presumption of service of notice sent by registered post

Maintainability of complaint by partnership firm/partner - partner as agent of the firm - Whether a complaint under Section 138 of the Negotiable Instruments Act is maintainable by a partnership firm or by one of its partners and whether consent of co-partners is required. - HELD THAT: - The Court found on the record that the firm was registered and in any event held that Section 69 of the Partnership Act does not operate to bar a criminal prosecution under Section 138 of the NI Act; a partner acts as agent of the firm for the business of the firm and is competent to file a complaint on behalf of the firm. The trial court's failure to treat a partner's complaint as maintainable was incorrect; the absence of prior consent of another partner did not vitiate the complaint where partners are jointly and severally liable and a partner may initiate prosecution on behalf of the firm. [Paras 12, 13, 14]

Complaint is maintainable in the name of the firm or by a partner; prior consent of co-partners is not a prerequisite to maintain a Section 138 complaint in the circumstances of this case.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - onus on the drawer to rebut the presumption - Whether the presumption under Section 139 includes existence of a legally enforceable debt and whether the accused rebutted that presumption. - HELD THAT: - Relying on the exposition in Rangappa and the settled principle that Section 139 raises a rebuttable presumption in favour of the cheque-holder (including as to existence of legally enforceable debt), the Court held that the complainant's documentary evidence established transactions and an outstanding liability which shifted the initial burden to the accused to raise a probable defence. The accused did not produce documents or credible evidence to rebut the presumption; assertions in cross-examination and statements under Section 313 Cr.P.C. denying knowledge of the cheques were not sufficient to discharge the onus. [Paras 15, 16, 18, 22]

The presumption under Section 139 extends to existence of a legally enforceable debt; the accused failed to rebut the presumption and therefore the finding of no existing liability by the trial court was erroneous.

Presumption of service of notice sent by registered post - Whether the demand notices sent to the drawer were properly served so as to satisfy the proviso to Section 138 of the NI Act. - HELD THAT: - The Court examined the postal endorsements and correspondence with the postal authorities, noting that notices were dispatched to multiple addresses and that for one complaint the Director, G.P.O. furnished a report confirming delivery. The Court applied the principle that 'giving notice' by properly addressed registered post attracts a presumption of service and that the onus lies on the addressee to prove non-service. Having regard to the postal records and related materials on the record, the Court held that service was effected for the complaint arising from CS-0082901/2016 and that notices were dispatched correctly for the other complaint. [Paras 24, 31, 32]

Service of demand notice by registered post to the correct addresses is to be presumed; on the record the notice was duly served (including by postal confirmation) and the statutory notice requirement was satisfied.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Whether the trial court's acquittal was sustainable in view of the evidence and presumptions under the NI Act. - HELD THAT: - The Court held that the learned Magistrate erred in disbelieving documentary evidence of existing liability and in recording acquittal solely on the basis of selective testimony. Given the documentary proof of advances and partial repayments, the presumption under Section 139 stood unrebutted; the trial court's assessment failed to give due weight to the materials on record and to the applicable standard by which a defence must be proved on preponderance of probabilities. [Paras 19, 20, 22, 23]

The acquittal recorded by the trial court was unsustainable and required interference.

Maintainability of complaint by partnership firm/partner - Relief to be granted in consequence of the errors found in the trial court's judgment. - HELD THAT: - Having found the trial court's conclusions on maintainability, on the existence of liability and on service to be erroneous, the High Court set aside the order of acquittal. The Court did not remit for a retrial on facts but remanded the matters to the trial court for the ministerial act of recording conviction and sentencing the respondent in accordance with law. [Paras 33, 35, 36]

Judgment and order of acquittal set aside; both cases remanded to the trial court for recording conviction and sentence against the respondent.

Final Conclusion: Both appeals are allowed; the High Court set aside the trial court's acquittals, held that the complaints were maintainable, that the presumption under Section 139 was not rebutted, and that demand notices were duly dispatched (with postal confirmation in one case), and remanded both matters to the trial court for recording conviction and sentence against the respondent.