TaxTMI Updates e-Newsletter
Jun 15,2023

Violation of principle of natural justice (audi alteram partem) - vagueness of show cause notice - opportunity of being heard as a pre-condition to cancellation of registration - cancellation of registration under the State Goods and Services Tax Act - requirement of a speaking order enabling effective exercise of appeal rights

Vagueness of show cause notice - violation of principle of natural justice (audi alteram partem) - The impugned show cause notice was vague and failed to furnish reasons and supporting material, resulting in denial of the opportunity of being heard and vitiating the cancellation of registration. - HELD THAT: - The court held that the statutory power to cancel registration is subject to the proviso that the proper officer shall not cancel registration without giving the person an opportunity of being heard. A valid opportunity requires provision of reasons and supporting material on which cancellation is proposed, sufficient time and scope to reply, and consideration of any written reply by passing a reasoned order. The show cause notice here merely recited that registration was obtained by fraud/wilful misstatement/suppression of facts without explaining why or on what material that conclusion was reached. No fundamental supporting material was supplied and the petitioner's written response was not treated or considered appropriately. Consequently, the notice did not afford the statutory opportunity of being heard and was held to be vitiated for want of adequate reasons and material. [Paras 9, 10, 11]

The show cause notice dated 28.01.2022 and the consequential order of cancellation dated 11.02.2022 are quashed for being vague and violative of audi alteram partem.

Requirement of a speaking order - opportunity of being heard as a pre-condition to cancellation of registration - The order of cancellation and subsequent orders were non-speaking and failed to state reasons enabling effective exercise of the statutory appellate remedy, and therefore are legally infirm. - HELD THAT: - The court emphasised that when an assessee submits a reply to a show cause notice, the competent authority must pass an appropriate speaking order containing sufficient reasons to enable the assessee to avail the remedy of appeal. The cancellation order in the present case was bereft of reasons and did not record consideration of the petitioner's reply, thereby disabling meaningful appellate review. The rejection of the revocation application similarly relied on inadequate and carelessly recorded reasons, and the appellate authority ignored the fundamental contention of breach of natural justice. [Paras 11]

The cancellation order, the order rejecting revocation and the appellate order are quashed for being non-speaking and for failing to afford or record a proper opportunity of hearing.

Cancellation of registration under the State Goods and Services Tax Act - The Revenue is permitted to issue a fresh, proper and lawful show cause notice if so advised; the orders quashed do not preclude fresh proceedings conducted in accordance with law. - HELD THAT: - Having quashed the impugned orders for procedural infirmity, the court made clear that the respondents retain the statutory power to initiate fresh proceedings but must ensure that any new show cause notice and consequent action comply with the requirements of adequacy of reasons, supply of supporting material, opportunity to be heard and issuance of a reasoned order. The decision thus restores procedural regularity while not foreclosing lawful investigation or action if undertaken properly. [Paras 13, 14]

The Revenue is at liberty to initiate fresh proceedings by issuing a proper and lawful show cause notice in accordance with law.

Final Conclusion: Both writ petitions are allowed: the cancellation orders, the orders rejecting revocation and the appellate order are quashed for vagueness and violation of audi alteram partem; the Revenue may, if so advised, proceed afresh by issuing a proper show cause notice and following statutory safeguards.

Movement of goods for reasons other than supply - Exigibility of GST on goods in transit - Requirement to furnish pre movement information / e way bill under Rule 138(1)(ii) - Detention, seizure and release of goods under Section 129 - Non furnishing of prescribed information renders goods exigible to tax

Movement of goods for reasons other than supply - Requirement to furnish pre movement information / e way bill under Rule 138(1)(ii) - Non furnishing of prescribed information renders goods exigible to tax - Whether movement of a demo vehicle into the State for reasons other than supply is exigible to GST where the supplier did not furnish the information required by Rule 138(1)(ii). - HELD THAT: - The Court examined Rule 138(1)(ii) which obliges a registered person causing movement of goods of consignment value exceeding Rs.50,000, even for reasons other than supply, to furnish information electronically in Form GST EWB 01 before commencement of movement. It was not disputed that the petitioner did not furnish the mandatory information under Rule 138(1). Applying the statutory scheme, the Court held that absence of the prescribed pre movement information brings the movement within the exigibility framework and, accordingly, the demo vehicle's entry into Madhya Pradesh rendered it exigible to GST. The Court found no jurisdictional error in the appellate authority's application of Section 129 and Rule 138 in arriving at the tax and penalty determination and in setting aside the cess and corresponding penalty as recorded in the impugned order.

Movement of the demo vehicle without furnishing the information mandated by Rule 138(1)(ii) rendered it exigible to GST; the appellate authority's order sustaining tax/penalty in that view was upheld.

Final Conclusion: Writ petition dismissed; no fault found in the appellate authority's order dated 23.12.2019 upholding exigibility of GST for the demo vehicle entry into Madhya Pradesh for non supply movement without the mandated pre movement information.

Reimbursement of expenses - arm's length price - transfer pricing adjustment - foreign exchange loss - section 43AA - remand for fresh examination - penalty under section 270A

Reimbursement of expenses - arm's length price - transfer pricing adjustment - remand for fresh examination - Adjustment made by TPO/AO determining the ALP of reimbursement of expenses at nil - HELD THAT: - The Tribunal found that the assessee produced only three sample debit notes (partly in a foreign language) and did not furnish back-to-back invoices, complete breakup of expenditure, agreements or clear narration demonstrating how the expenditures were incurred, cross charged and how the assessee benefited. The debit memos' descriptions were inconsistent with the transfer pricing study report and the matter was not sufficiently substantiated before the TPO/DRP. In view of these evidentiary gaps and the failure to explain the nature and benefit of the expenses, the Tribunal did not decide the ALP on merits but set aside the issue and remanded it to the transfer pricing officer with a direction to the assessee to substantiate the nature of such expenditure and to enable the TPO to examine and decide the issue afresh in accordance with law. [Paras 13]

Remitted to the learned Transfer Pricing Officer for fresh examination and decision after the assessee substantiates the expenditure.

Foreign exchange loss - section 43AA - remand for fresh examination - Disallowance under section 43AA of foreign exchange loss on remittances - HELD THAT: - The Tribunal noted that the assessee had provided a detailed bifurcation and reconciliatory information (description of expenditure, currency, amounts, booking and payment dates, exchange rates, invoice and bank references) as additional evidence before the DRP, and that the AO had not furnished a remand report before the DRP's directions. The DRP upheld the disallowance without stating whether the additional evidence was admitted and with an apparently inadequate time allowed to the assessee to furnish details. Given that the additional material, if examined, could demonstrate that the losses arose in the course of business, the Tribunal set aside the matter to the assessing officer and directed the AO to examine the claim afresh after allowing the assessee to demonstrate that the loss was incurred for the purposes of business and how it is accounted for. [Paras 14]

Remitted to the learned Assessing Officer for fresh examination and decision on the foreign exchange loss claim.

Penalty under section 270A - Challenge to initiation of penalty proceedings under section 270A - HELD THAT: - The Tribunal held that the ground challenging initiation of penalty proceedings was premature and did not require adjudication at this stage. [Paras 3]

Ground dismissed as premature.

Final Conclusion: Appeal allowed for statistical purposes; transfer pricing adjustment relating to reimbursement of expenses and the AO's disallowance of foreign exchange loss under section 43AA are set aside and remitted for fresh examination in accordance with law; challenge to initiation of penalty proceedings dismissed as premature.

Time charter - provision of vessel with crew versus hiring of equipment - Explanation 2 to section 9(1)(vi) - definition of 'royalty' - Article 12(3)(b) of the India-Singapore DTAA - royalties definition - dominion or control test for 'use' or 'right to use' of equipment - Section 44BB - special deeming provisions / exclusion - Permanent Establishment and applicability of Section 44BB - remand for de novo adjudication of interest under section 234A - prematurity of initiation of penalty proceedings under section 270A

Time charter - provision of vessel with crew versus hiring of equipment - Explanation 2 to section 9(1)(vi) - definition of 'royalty' - Article 12(3)(b) of the India-Singapore DTAA - royalties definition - dominion or control test for 'use' or 'right to use' of equipment - Section 44BB - special deeming provisions / exclusion - Permanent Establishment and applicability of Section 44BB - Whether receipts from time charter of the vessel Smit Borneo are taxable as 'royalty' under Explanation 2 to Section 9(1)(vi) of the Act and Article 12(3)(b) of the India-Singapore DTAA. - HELD THAT: - The Tribunal held that the receipts from time charter of Smit Borneo are not 'royalty'. Applying the dominion/control test, the Tribunal found that the vessel throughout remained under the control and exclusive operation of the owner (the assessee), and the charterer was concerned only with the results of services; the arrangement was therefore a time charter (provision of vessel with crew) and not a letting of the use or right to use industrial, commercial or scientific equipment. The Tribunal rejected the Revenue's reliance on Poompuhar Shipping as distinguishable on facts and followed coordinate-bench decisions in the assessee's own case and relevant precedents (including Technip/Asia Satellite line of authority) which treat time-charter services where control remains with the owner as not constituting 'use' or 'right to use' covered by the royalty definition. The Tribunal further observed that the assessee could not invoke the exclusion under Section 44BB because, in the absence of a PE in India and no taxation under Section 44BB, that deeming could not be relied upon to exclude the receipts from the royalty definition. On these grounds the addition treating time charter receipts as royalty was vacated and deleted. [Paras 11, 13]

Time charter receipts from Smit Borneo are not 'royalty' under Explanation 2 to Section 9(1)(vi) or Article 12(3)(b) of the India-Singapore DTAA; addition deleted.

Reimbursement of expenses - nexus to main chartering receipt - Explanation 2 to section 9(1)(vi) - definition of 'royalty' - time charter - provision of vessel with crew versus hiring of equipment - Whether the reimbursements of expenses received in connection with the time charter are taxable as 'royalty'. - HELD THAT: - The Tribunal held that the reimbursements cannot be taxed as royalty once the primary charter receipts were held not to be royalty. The Assessing Officer had treated reimbursements as intrinsically linked to the chartering income; having vacated the characterization of the main receipts as royalty, the Tribunal concluded that the linked reimbursements likewise cannot be treated as royalty and deleted the addition in respect of those reimbursements. [Paras 17]

Reimbursements of expenses linked to the time charter are not taxable as royalty; addition deleted.

Remand for de novo adjudication of interest under section 234A - Adjudication of interest under section 234A of the Act in respect of the return filing timeliness. - HELD THAT: - The Tribunal did not decide the liability for interest under section 234A on the merits. Instead, it remanded the matter to the Assessing Officer for fresh consideration and de novo adjudication of whether the return was filed within the prescribed time and whether interest under section 234A is chargeable. [Paras 19]

Issue remanded to the Assessing Officer for de novo adjudication regarding interest under section 234A.

Interest under section 234B - consequential nature - Chargeability of interest under section 234B consequential to other findings. - HELD THAT: - The Tribunal treated the question of interest under section 234B as consequential in nature to the tax assessment and the remand/adjustments and did not decide it on merits; it allowed the ground for statistical purposes. [Paras 20]

Interest under section 234B left consequential/allowed for statistical purposes.

Prematurity of initiation of penalty proceedings under section 270A - Whether initiation of penalty proceedings under section 270A should be sustained at this stage. - HELD THAT: - The Tribunal found the initiation of penalty proceedings to be premature and dismissed the challenge to the initiation of such proceedings without entering into penalty merits. [Paras 21]

Initiation of penalty proceedings under section 270A dismissed as premature.

Final Conclusion: The appeal is partly allowed: the Tribunal deleted the additions treating time charter receipts and related reimbursements as 'royalty' for AY 2020-21, remanded the issue of interest under section 234A to the AO for de novo adjudication, treated interest under section 234B as consequential/for statistical purposes, and dismissed as premature the initiation of penalty proceedings under section 270A.

Disallowance under section 14A for expenditure in relation to exempt income - Computation under rule 8D - Prospective operation of statutory amendment (Finance Act, 2022) to section 14A - Binding effect of High Court decisions on the Tribunal in absence of contrary jurisdictional precedent

Disallowance under section 14A for expenditure in relation to exempt income - Computation under rule 8D - Prospective operation of statutory amendment (Finance Act, 2022) to section 14A - Whether disallowance under section 14A read with rule 8D can be made in assessment year 2017-18 where no exempt income was earned and whether the 2022 amendment applies to that year. - HELD THAT: - The Tribunal noted there were no findings that the assessee earned any exempt income during the year; the Assessing Officer made the addition on the premise that interest-bearing borrowings were used to make investments. The CIT(A) relied on the Finance Act, 2022 insertion to section 14A and on a decision of another bench of the Tribunal to uphold the disallowance. The Tribunal examined the decision of the Hon'ble Delhi High Court in Era Infrastructure (India) Ltd. and Delhi International Airport (P.) Ltd., which held that the Finance Act, 2022 amendment, although framed as for removal of doubt, cannot be given retrospective operation where it alters the law as it previously stood, and therefore disallowance under section 14A cannot be sustained if no exempt income was earned in the year. The Tribunal rejected the Revenue's contention that it need not follow other High Court decisions, holding that in the absence of a contrary decision of the jurisdictional High Court or the Supreme Court, decisions of other High Courts constitute binding precedent for the Tribunal. The Tribunal therefore allowed the appeal, subject to the outcome of the pending Special Leave Petition concerning IL&FS Energy Development Co. Ltd., as directed by the Delhi High Court. [Paras 6, 7, 8, 9, 10]

Addition under section 14A read with rule 8D set aside for assessment year 2017-18 as no exempt income was earned; appeal allowed subject to final decision of the Supreme Court in the related SLP.

Final Conclusion: Appeal allowed; the disallowance made under section 14A read with rule 8D for assessment year 2017-18 is set aside because no exempt income was earned during the year, with the direction that the order shall abide by the final decision of the Supreme Court in the SLP filed in the related matter.

Penalty under section 271B - tax audit under section 44AB - delinking of audit report from return - reasonable cause for default - time limitation for issuance of notice under section 271B/274 - deduction under section 80P(2)(a)(i)

Tax audit under section 44AB - penalty under section 271B - reasonable cause for default - delinking of audit report from return - Validity of levy of penalty under section 271B for non-furnishing of tax audit report in time where the audit report from the Registrar of Co-operative Societies was received by the assessee after the specified date - HELD THAT: - The Tribunal held that the statutory obligation under section 44AB to furnish the tax audit report in the prescribed form by the specified date is distinct from filing the return, following the legislative change that delinked the two obligations. The assessee's plea that the audit report was received late from the Registrar did not absolve it because there is no material on record to substantiate the stated dates of receipt or that the tax audit report in the prescribed form was furnished by the due date. The explanation by the assessee would have been tenable only if the prescribed tax audit report, duly signed and verified, had been furnished by the specified date and the Registrar's report was produced thereafter; that was not done. Delay in making available books to the auditor or delay in receipt from the Registrar, without proof of timely compliance in the prescribed form, cannot be accepted as a reasonable cause. Reliance on High Court authority which rejected a similar plea was noted. The fact that the Assessing Officer had access to the audit report at assessment stage is immaterial to the assessee's statutory duty to furnish the audit report in time and does not vitiate the default under section 44AB. Consequently, penalty under section 271B was held to be rightly imposed. [Paras 3]

Assessee's explanation of delayed receipt of audit report from the Registrar not tenable; penalty under section 271B upheld for both years.

Time limitation for issuance of notice under section 271B/274 - penalty under section 271B - Whether the notice initiating penalty proceedings under section 271B read with section 274 issued after the end of the relevant assessment year was barred by time - HELD THAT: - The Tribunal found there is no statutory restriction barring issuance of a section 271B/274 notice after the end of the assessment year. In the present cases, notices were issued upon conclusion of assessment proceedings (including those under section 147 r.w.s. 143(3)), and thus were issued within a reasonable time of the assessment's conclusion. The legislature has not prescribed a limitation for issuing such notices, and once proceedings are initiated they must be concluded within prescribed times; but the timing of issuing the notice in these facts did not render it invalid. [Paras 3]

No prohibition on the timing of the section 271B/274 notice; notices held valid as issued within a reasonable time of conclusion of assessment proceedings.

Final Conclusion: The appeals by the assessee are dismissed and the penalties under section 271B confirmed; related stay petitions rendered infructuous and dismissed.

Revision under section 263 - assessment under section 143(3) - income from other sources - section 56(2)(vii)(b)(ii) - stamp duty value as presumptive fair market value - requirement of notice and opportunity of hearing under section 263 - setting aside assessment for de novo consideration

Requirement of notice and opportunity of hearing under section 263 - revision under section 263 - Validity of the Pr. CIT's notice under section 263 which did not quote a DIN - HELD THAT: - The Tribunal held that a notice in proceedings under section 263 is not a jurisdictional show-cause notice and that the statutory requirement is satisfied by communicating initiation of revisionary proceedings and by affording an opportunity of hearing. The absence of a Document Identification Number in the Pr. CIT's notice did not invalidate the proceedings where the assessee was put on notice and was afforded and availed an opportunity to be heard. The Tribunal relied on settled precedents that distinguish the requirements of reopening under section 147 from revision under section 263 and observed that the notice need not be a formal show-cause notice confining the Commissioner to its terms. [Paras 3]

The notice without a DIN was not rendered invalid; the section 263 proceedings were maintainable as opportunity of hearing had been given and availed.

Income from other sources - section 56(2)(vii)(b)(ii) - stamp duty value as presumptive fair market value - setting aside assessment for de novo consideration - Whether the Pr. CIT was justified in invoking section 263 to set aside the assessment for failure of the AO to examine applicability of section 56(2)(vii)(b)(ii) in view of stamp duty value exceeding consideration - HELD THAT: - The Tribunal agreed with the Pr. CIT that the assessing officer made no enquiry into valuation despite material on record showing the stamp duty value to be substantially higher than the declared consideration for purchase of land. Section 56(2)(vii)(b)(ii) specifically refers to stamp-duty value where consideration is less than stamp duty value; the stamp duty figure constituted prima facie evidence of higher FMV and the assessee bore the burden of showing otherwise. The failure to inquire into apparent under-valuation rendered the assessment erroneous and prejudicial to revenue, justifying setting aside the assessment for fresh adjudication. The revisionary authority did not decide the matter on merits but directed fresh examination by the AO. [Paras 2, 4, 5, 6]

Impugned order under section 263 upholding set-aside of the assessment was correct; the assessment was set aside for reconsideration on the question of valuation and applicability of section 56(2)(vii)(b)(ii).

Setting aside assessment for de novo consideration - income from other sources - section 56(2)(vii)(b)(ii) - Scope and consequence of the direction to the Assessing Officer after setting aside the assessment under section 263 - HELD THAT: - The Tribunal clarified that the Pr. CIT's order did not adjudicate the question of under-valuation on merits but directed the Assessing Officer to examine the matter afresh and decide in accordance with law. All contentions, including any contention that a 'purchase' is not a 'receipt' or invocation of provisos to section 56(2)(vii)(b)(ii), remain open for consideration before the AO. The Tribunal emphasised that the stamp-duty valuation is prima facie evidence and that the AO must verify and record findings on valuation and applicability of the statutory provisos in a fresh assessment. [Paras 2, 5]

Matter remanded to the Assessing Officer for fresh consideration and decision in accordance with law on valuation and applicability of section 56(2)(vii)(b)(ii); no merits determination made by the revisionary authority.

Final Conclusion: The Tribunal dismissed the appeal, upheld the Pr. CIT's order under section 263 setting aside the assessment for AY 2016-17, and directed that the Assessing Officer shall re-examine the valuation and the applicability of section 56(2)(vii)(b)(ii) and decide the matter afresh in accordance with law.

Deduction under section 54F - Validity of assignment deed and use of stamp paper - Consent of lessor/MIDC for transfer of leasehold/assignment of rights - Addition under section 68 - Remand for verification of VAT returns and purchase reconciliation

Deduction under section 54F - Validity of assignment deed and use of stamp paper - Consent of lessor/MIDC for transfer of leasehold/assignment of rights - Assessee entitled to deduction claimed under section 54F for assessment year 2016-17. - HELD THAT: - The Tribunal examined the Assignment deed dated 10-04-2015 and the application to MIDC dated 18-03-2015 together with the MIDC consent dated 16-04-2015 and concluded that the Assignment was executed in pursuance of the application and anticipated the MIDC consent. Reliance was placed on the Supreme Court decision in Thiruvengada Pillai (construing the Indian Stamp Act) to hold that purchase of stamp paper earlier than six months does not invalidate a document and that section 54 of the Indian Stamp Act does not prescribe expiry for use of stamp paper. The Tribunal found the AO's disbelief of the Assignment as a self-serving document based on stamp paper timing to be untenable in view of MIDC consent and the legal position on stamp papers. Reckoning the Assignment deed (10-04-2015) with the application to MIDC (18-03-2015) placed the transfer within one year prior to the residential bungalow purchase (05-05-2014), satisfying the temporal requirement for section 54F. For these reasons the Tribunal held the assessee entitled to the exemption and set aside the CIT(A)'s confirmation of the AO's denial. [Paras 5, 6]

Allowed - deduction under section 54F granted and the CIT(A)'s order set aside.

Addition under section 68 - Remand for verification of VAT returns and purchase reconciliation - Addition on account of sundry creditors treated as unexplained cash credit was not finally adjudicated and is remanded to the AO for fresh consideration. - HELD THAT: - The Tribunal noted that the AO added an amount as unexplained sundry creditors under section 68 because the assessee could not satisfactorily explain a large creditors entry in the balance sheet. The assessee produced trading accounts, subsequent year profit & loss showing lower stock, and sought to place on record VAT returns and purchase reconciliation which were not before the AO. Having examined the material, the Tribunal observed that the additional evidences (VAT returns and reconciliation) and the subsequent year accounts could materially bear on the correctness of the addition. In the interests of justice and because these documents were not considered by the AO, the Tribunal remitted the matter to the AO to decide afresh after verifying VAT returns and purchase reconciliation and passing an order in accordance with law. [Paras 10]

Remanded to the AO for fresh adjudication of the addition after verification of VAT returns and reconciliation of purchases.

Final Conclusion: Appeal allowed in part: deduction under section 54F for AY 2016-17 upheld; addition on account of sundry creditors remitted to the AO for fresh consideration; appeal disposed of for statistical purposes.

Addition on account of low gross profit - rejection of books under section 145(3) - requirement of coherent link between defect found and quantum of addition - ad hoc addition without basis - commercial variability in export margins as relevant explanation for fall in gross profit

Addition on account of low gross profit - rejection of books under section 145(3) - requirement of coherent link between defect found and quantum of addition - ad hoc addition without basis - commercial variability in export margins as relevant explanation for fall in gross profit - Whether the addition of Rs. 98,66,323/- made by the AO on account of alleged low gross profit and rejection of books was justified. - HELD THAT: - The AO noted two annexures in the tax audit report showing different gross profit figures and, observing a fall in gross profit ratio vis-a -vis the previous year, rejected the books under section 145(3) and made an addition of 2% of turnover. The CIT(A) found that the AO did not consider the circumstances leading to the fall in gross profit, failed to identify any specific defect in the books, and made an unexplained, purely ad hoc addition of 2% of turnover. The Tribunal examined the orders below and agreed that there was no coherent causal connection between the defect noted (two annexures with differing classification of direct/indirect expenses) and the quantum of addition imposed. The Tribunal also accepted that the assessee's business as an exporter of cotton garments involves year to year variation in margins, which the AO failed to take into account. In absence of specific findings pointing to unreliability of books or a reasoned basis for selecting 2% of turnover, the addition was held to be unsustainable and properly deleted by the CIT(A). [Paras 8, 9]

Addition on account of low gross profit and rejection of books set aside; order of the CIT(A) deleting the addition upheld and Revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the gross profit addition for Asst. Year 2013-14, finding the AO's rejection of books and 2% turnover addition to be unconnected to the defect noted and without a reasoned basis; Revenue's appeal dismissed.

Validity of reassessment proceedings initiated by issuance of notice under section 148 - requirement for issuance of notice under section 143(2) upon valid return filed in response to notice under section 148 - non-filing of return on the electronic portal and effect of manual return - reopening based on information as trigger for inquiry into unexplained credits - opportunity of being heard and remand for verification of asserted business receipts - addition on account of unexplained credits in bank accounts

Requirement for issuance of notice under section 143(2) upon valid return filed in response to notice under section 148 - non-filing of return on the electronic portal and effect of manual return - Whether absence of notice under section 143(2) vitiates the reassessment when the assessee filed a manual return instead of filing online as required in response to notice under section 148. - HELD THAT: - The Tribunal upheld the finding that the statutory obligation to issue notice under section 143(2) arises only where the assessee has filed a return in compliance with the notice under section 148. In the present case the assessee was required to file the return online but filed a manual return which, in terms of the Income-tax Rules, was not a valid return on the electronic system; the authorities communicated the defect and the assessee did not rectify it. Consequently, the Assessing Officer was not obliged to issue a notice under section 143(2) where no valid return existed on the portal and the manual submission could not be replicated on the system. The ground challenging validity of assessment on this basis was therefore dismissed. [Paras 7]

Ground No.1 dismissed; absence of notice under section 143(2) did not vitiate reassessment because no valid online return was filed in response to the section 148 notice.

Validity of reassessment proceedings initiated by issuance of notice under section 148 - reopening based on information as trigger for inquiry into unexplained credits - Whether the initiation of proceedings under section 147 was without application of mind and based on mere acceptance of information. - HELD THAT: - The Tribunal agreed with the CIT(A) that reopening was based on credible information from the investigation unit about substantial credits in bank accounts of the assessee's proprietorship concerns. The reasons for reopening were issued and the assessee was given opportunity to establish sources of the credits. Given the inability of authorities to verify from records whether such credits were reflected in books, the reopening was held to have been made with proper application of mind. The reassessment proceedings were therefore held valid and the ground alleging mechanical or non-application of mind was rejected. [Paras 8]

Ground No.2 dismissed; reassessment proceedings under section 147 were initiated with application of mind and are valid.

Opportunity of being heard and remand for verification of asserted business receipts - addition on account of unexplained credits in bank accounts - Whether the additions made on account of credits in two proprietorship bank accounts should be sustained or whether the matter requires fresh consideration on merits with production of books and supporting documents. - HELD THAT: - Although the Assessing Officer and the CIT(A) confirmed additions under the assessment because the assessee failed to furnish financial statements, details of business, or evidence showing that the credited amounts were regular business receipts and reflected in books, the Tribunal found it appropriate in the interest of justice to restore the merits to the CIT(A). The assessee was directed to file all supporting documents, including regular books of account, nature of business, explanations for other bank entries and evidence of profit element, so that the CIT(A) may, if necessary, obtain a remand report from the Assessing Officer and decide in accordance with law and judicial precedents. Accordingly the grounds challenging lack of reasonable opportunity, mechanical estimation of income and on merits were allowed for statistical purposes and remitted for fresh consideration. [Paras 9, 10]

Grounds Nos.3, 4 and 5 allowed for statistical purposes and the merits remitted to the CIT(A) for fresh consideration after the assessee furnishes the required documents.

Final Conclusion: Appeal partly allowed for statistical purposes: legal challenges to reopening and to absence of notice under section 143(2) rejected, while the merits relating to additions on account of bank credits are remitted to the CIT(A) for fresh consideration upon production of supporting documents.

Admission of additional evidence - reference to Assessing Officer under Rule 46A - treatment of share transactions as capital gain or capital loss - explanation of source of investment - condonation of delay due to COVID-19 limitation extension

Admission of additional evidence - reference to Assessing Officer under Rule 46A - Ld. CIT(Appeals) erred in refusing to admit/additionally refer the ICICI Direct statements and related material to the AO under Rule 46A and in not allowing the assessee opportunity to place on record relevant information. - HELD THAT: - The assessee sought to furnish statements from ICICI Direct showing the transactions and short-term capital loss, which were not produced before the AO during assessment. The CIT(A) treated those printouts as additional evidence and declined to send them to the AO under Rule 46A, observing that doing so 'may not serve any fruitful purpose'. The Tribunal found that the CIT(A) thereby denied the assessee an opportunity to place relevant facts and information on record. Given that the material tendered before the Tribunal included transaction statements and a certificate evidencing employment (bearing on source of funds), the appellate authority ought to have followed the procedure of referring the additional evidence to the AO for his comments instead of summarily rejecting it. The Tribunal concluded that the appellate proceedings should have permitted consideration of the material which could affect the correctness of the addition. [Paras 8]

CIT(A)'s refusal to admit/refer the additional evidence was erroneous; opportunity to place the material on record should have been afforded.

Treatment of share transactions as capital gain or capital loss - explanation of source of investment - Addition of unexplained credit/investment and determination of total income was not warranted once the assessee explained source of funds and demonstrated short-term capital loss on sale of shares. - HELD THAT: - The AO recorded credits in the assessee's bank account and, absent details, treated the investment as unexplained and assessed income. Before the Tribunal, the assessee produced a certificate from his employer showing employment abroad during the relevant period and furnished particulars and working showing a short-term capital loss on sale of Infosys shares. The Tribunal accepted that the purchases were funded by salary earned abroad and that the assessee had incurred a short-term capital loss. In view of the explained source of investment and the capital loss evidence, the Tribunal held that there was no basis for the impugned addition and that the assessment should not stand. [Paras 6, 8]

Addition confirmed by AO and sustained by CIT(A) set aside; no addition called for and appeal allowed.

Final Conclusion: Delay in filing the appeal was condoned by reference to the COVID-19 extension of limitation. On merits the Tribunal found that the CIT(A) wrongly declined to admit or refer additional evidence and, having accepted the explained source of funds and the claim of short-term capital loss, set aside the impugned addition and allowed the appeal.

Treatment of agricultural income as income from other sources - taxability of transaction evidenced by memorandum of understanding found on search - scope of assessment under search and seizure proceedings - remand for verification of declared partnership income - determination of net commission income after allowance for expenses - treatment of cash and jewellery found on search and attribution of ownership

Treatment of agricultural income as income from other sources - Deletion of addition treating agricultural income as income from other sources for A.Y. 2007-08. - HELD THAT: - The Tribunal noted that in the assessee's own case for subsequent assessment years (A.Y. 2008-09, 2009-10, 2010-11) the addition treating agricultural income as income from other sources was deleted by a prior order dated 17.03.2022. Finding no change in the factual matrix for A.Y. 2007-08, the Tribunal followed the earlier conclusion and deleted the addition made by the Assessing Officer. [Paras 7]

Addition deleted; appeal on this ground allowed.

Taxability of transaction evidenced by memorandum of understanding found on search - scope of assessment under search and seizure proceedings - Deletion of addition based on MOU relating to purchase of property for A.Y. 2007-08. - HELD THAT: - The MOU dated 07.03.2006 related to A.Y. 2006-07 and not to A.Y. 2007-08; A.Y. 2006-07 was outside the six-year block covered by the search dated 12.02.2013. The MOU was never completed due to dispute, proceedings were instituted in the civil forum and the MOU was cancelled by the court, with the property not being acquired. In view of these facts, the Tribunal held that no amount could be taxed in A.Y. 2007-08 on the basis of that MOU. [Paras 9, 10]

Addition deleted; no tax on the basis of the MOU.

Remand for verification of declared partnership income - Directed verification by Assessing Officer whether income from partnership firm had already been declared in regular return for A.Y. 2007-08. - HELD THAT: - Rather than adjudicating the claim on the record before it, the Tribunal directed the Assessing Officer to examine whether the partnership income alleged by the revenue had already been declared in the assessee's regular return of income, thereby leaving factual verification and consequent tax treatment to be completed by the AO. [Paras 11]

Matter remitted to Assessing Officer for verification.

Determination of net commission income after allowance for expenses - Reduction of commission addition for A.Y. 2012-13 from 1.4% (gross) to 1% (net) of receipts. - HELD THAT: - The Tribunal accepted that expenses are incurred in earning commission income and that the Assessing Officer had not allowed any provision for such expenses when making the addition on a gross basis at 1.4%. Having regard to sub-commission payments and other expenses, the Tribunal determined 1% as the net commission income, thereby giving the assessee relief of 0.4% on the commission determined by the lower authorities. [Paras 12]

Net commission income fixed at 1%; relief granted by reducing the addition accordingly.

Treatment of cash and jewellery found on search and attribution of ownership - Deletion of additions in respect of unexplained cash and jewellery for A.Y. 2013-14. - HELD THAT: - Regarding cash, the Tribunal relied on the absence of any statement of the assessee under section 132(4) and on the contemporaneous statement of the assessee's father recorded on the date of search asserting that the cash belonged to him and other family members; coupled with demarcation of the father's dwelling and his agricultural income, the Tribunal concluded that addition in the assessee's hands was not warranted. As to jewellery, the valuation and panchnama recorded ownership of jewellery in the names of various family members; on that basis the Tribunal found the addition in the assessee's hands unsustainable and deleted it. [Paras 15, 16]

Additions in respect of cash and jewellery deleted.

Final Conclusion: All appeals of the assessee allowed; specific deletions and adjustments were directed as above, and one matter (partnership income) was remitted to the Assessing Officer for verification whether the income had already been declared.

Revisionary jurisdiction under Section 263 - Prejudice to revenue requirement for exercise of revisionary jurisdiction - Entitlement to DTAA benefits - "liable to tax" criterion and tax residency - Tax Residency Certificate (TRC) as conclusive evidence of residence for DTAA - Treaty shopping, conduit/beneficial ownership and collective investment vehicles

Revisionary jurisdiction under Section 263 - Prejudice to revenue requirement for exercise of revisionary jurisdiction - Validity of the PCIT's exercise of revisionary jurisdiction under Section 263 to cancel the assessment. - HELD THAT: - The Tribunal held that the revisional jurisdiction under Section 263 was incorrectly exercised because the cancelled assessment did not contain an error prejudicial to the revenue. The taxability of the receipts was examined and, on facts, the receipts (gains on exchange-traded derivatives and interest on bonds) were held not taxable in India; accordingly no prejudice to revenue was made out to justify revisional action. The Tribunal accepted the assessment officer's enquiries and factual material showing management, decision-making, books of account and substantive functions were situated outside India, and that the assessment had been completed after enquiries. In the absence of a demonstrable error in the assessment order and because the income was held not taxable in India, the PCIT's order under Section 263 was obliterated and the appeal allowed. [Paras 23, 40, 41]

Order passed by the PCIT under Section 263 cancelling the assessment is quashed; the assessment stands.

Entitlement to DTAA benefits - "liable to tax" criterion and tax residency - Tax Residency Certificate (TRC) as conclusive evidence of residence for DTAA - Whether the assessee (Sapien Funds Ltd.) is a tax resident of Mauritius and entitled to benefits of the India-Mauritius DTAA under the "liable to tax" criterion and on the basis of TRC. - HELD THAT: - On the facts, the Tribunal found the assessee to be a tax resident of Mauritius and accepted the Tax Residency Certificate as establishing residence for DTAA purposes. The Tribunal observed that domestic tax exemptions in the resident state do not automatically justify disregarding residence for treaty purposes; the amended definition of "liable to tax" (effective for later years) cannot be retroactively applied to negate the TRC for the year under consideration. The Tribunal relied on the longstanding administrative position reflected in Circular No. 789 and the Finance Ministry's clarifications that a TRC issued by Mauritian authorities constitutes sufficient evidence of residence and that Indian authorities should not go behind such a certificate. In view of these conclusions, the assessee was entitled to treaty benefits and the receipts were not taxable in India. [Paras 22, 23, 36, 37, 38]

Assessee is a tax resident of Mauritius and entitled to India-Mauritius DTAA benefits on the basis of the TRC; the income in question is not taxable in India.

Treaty shopping, conduit/beneficial ownership and collective investment vehicles - Whether the arrangement amounted to treaty shopping or the assessee was a conduit/not beneficial owner such that DTAA benefits should be denied. - HELD THAT: - The Tribunal examined the structure and activities of the collective investment scheme and found that the Revenue's allegations of treaty shopping and conduit status were not established on the record. The assessee maintained books, had management and directors resident in Mauritius, engaged in substantive exchange-traded transactions (including derivatives) and investments beyond the limited transactions asserted by the revisional authority. The fact that investors hailed from multiple jurisdictions did not, by itself, convert the fund into a conduit or deprive it of beneficial ownership; the Tribunal rejected the conclusion that the fund lacked commercial rationale or was merely a back-to-back vehicle on the facts of this case. [Paras 5, 6, 31, 39]

Assessee's arrangement does not amount to treaty shopping or conduit operation on the facts; beneficial ownership and commercial substance were found in favour of the assessee.

Final Conclusion: The Tribunal allowed the assessee's appeal, held that the assessee is a tax resident of Mauritius entitled to DTAA benefits on the basis of the TRC, found no treaty-shopping/conduit on the facts, concluded that no prejudice to revenue existed to justify exercise of Section 263, and set aside the revisional order of the PCIT.

Turnover of kachha arahtiya - commission to be treated as turnover for kachha arahtiyas - CBDT Circular No. 452 dated 17-3-1986 - estimation of net profit rate on rejected or unexplained receipts - application of net profit rate of 1.5% in place of 5% - discretionary nature of penalty under section 271(1)(b) - reasonable cause under section 273B

Turnover of kachha arahtiya - commission to be treated as turnover for kachha arahtiyas - CBDT Circular No. 452 dated 17-3-1986 - estimation of net profit rate on rejected or unexplained receipts - application of net profit rate of 1.5% in place of 5% - Whether the assessing officer correctly treated total cash deposits as the assessee's turnover and applied net profit @5% instead of considering only commission turnover and an appropriate estimated net profit rate. - HELD THAT: - The Tribunal found on the material on record that the assessee admittedly acted as a kachha arahtiya (broker/commission agent) and therefore the receipts from sales effected on behalf of principals do not constitute the agent's turnover; only the gross commission is to be treated as turnover for the agent. This position is supported by CBDT Circular No. 452 dated 17-3-1986 and earlier Tribunal pronouncements applying that circular. The AO's treatment of the entire bank deposits as the assessee's turnover and application of a notional net profit rate of 5% was therefore contrary to the legal position applicable to kachha arahtiyas. The Tribunal accepted that while the addition cannot simply be deleted without quantification, the correct approach is to estimate net profit having regard to the character of the business, the Board's guidance and comparative/past history. Applying those principles and considering the peculiar facts of the case, the Tribunal held that a net profit rate of 1.5% (instead of 5%) on the total amount estimated as turnover should be applied and directed recomputation accordingly. [Paras 6, 7, 10, 11]

The AO's treatment of bank deposits as full turnover and application of 5% net profit was set aside; the AO is directed to apply a net profit rate of 1.5% (in lieu of 5%) on the estimated turnover and recompute the tax accordingly.

Discretionary nature of penalty under section 271(1)(b) - reasonable cause under section 273B - Whether the penalty under section 271(1)(b) for non-compliance with notices should be sustained where the assessee did not respond to notices issued under section 142(1). - HELD THAT: - The Tribunal observed that imposition of penalty under section 271(1)(b) is discretionary (the statute uses 'may') and is subject to the safeguard in section 273B that no penalty shall be imposed where the assessee proves reasonable cause. On the facts, notices were sent to an email address of the deceased accountant and the assessee was unaware of the proceedings; further, the period included the COVID pandemic. These circumstances were held to constitute reasonable cause for non-compliance. Reliance on Tribunal decisions recognizing bona fide reasons and the discretionary scope of section 271(1)(b) supported deletion. The Tribunal also noted that penalty cannot be mechanically imposed for each default where reasonable cause exists. [Paras 16, 17, 18, 20, 21]

The penalty of Rs. 30,000 in each appeal imposed under section 271(1)(b) is deleted.

Final Conclusion: The Tribunal partly allowed the quantum appeals by setting aside the AO/CIT(A) treatment and directing recomputation of income applying a net profit rate of 1.5% instead of 5% on the estimated turnover; independently, the Tribunal allowed the penalty appeals and deleted the penalties imposed under section 271(1)(b) on the ground of reasonable cause, and disposed of the appeals accordingly.

Reopening of assessment and validity of notice under section 148 - borrowed satisfaction and requirement of independent application of mind - genuineness of transactions and burden to prove purchases - addition on account of bogus/accommodation entries restricted to 25% as profit margin

Reopening of assessment and validity of notice under section 148 - borrowed satisfaction and requirement of independent application of mind - Reopening of assessment for AY 2010-11 by issuance of notice under section 148 is valid. - HELD THAT: - The Tribunal upheld the reassessment initiation after noting that the Assessing Officer recorded detailed reasons, examined the information received from DCIT Central Circle 4 (Surat) and the assessee's ITR, and applied his mind before forming belief that income had escaped assessment. The Assessing Officer disposed of the assessee's objections by a speaking order in accordance with the law, and the CIT(A) found no merit in the contention that the notice was issued on mere borrowed satisfaction. The appellate record shows independent consideration of the information and procedurally compliant approval, justifying the issuance of notice under section 148. [Paras 13]

Reopening upheld; issuance of notice under section 148 sustained.

Genuineness of transactions and burden to prove purchases - addition on account of bogus/accommodation entries restricted to 25% as profit margin - Addition made on account of alleged bogus purchases was correctly restricted to 25% of the impugned purchases. - HELD THAT: - On the question of addition, the Tribunal accepted the concurrent finding of the AO and CIT(A) that while the genuineness of the identified bill providers was doubtful, the assessee had sold goods and received payments, and therefore purchases in some form had occurred (including purchases from the grey market). Applying precedents which treat only the profit margin embedded in accommodation-entry transactions as taxable, the CIT(A) restricted the addition to 25% of the allegedly bogus purchase value. The Tribunal found these conclusions uncontroverted and without infirmity and sustained the restricted addition. [Paras 14]

Addition confirmed to the extent of 25% of the impugned purchases; balance deletion sustained.

Final Conclusion: The appeal is dismissed: the reassessment notice under section 148 was validly issued after independent application of mind, and the addition on account of alleged bogus purchases is sustained but limited to 25% of the impugned purchase value.

Interest under section 28 of the Land Acquisition Act is part of compensation - interest on enhanced compensation not taxable as income from other sources - TDS under section 194A not attracted on compensation-element interest - exemption under section 10(37) for capital gains on compulsory acquisition - reliance on Jagmal Singh and Ghanshyam (HUF)

Interest under section 28 of the Land Acquisition Act is part of compensation - TDS under section 194A not attracted on compensation-element interest - Whether the assessee was required to deduct TDS under section 194A on interest paid to land owners as enhanced compensation under section 28 of the Land Acquisition Act. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case on identical facts and the authorities relied upon by the assessee. Applying the principle that interest awarded under section 28 of the Land Acquisition Act is an accretion to the compensation itself (and not conventional interest liable as income from other sources), the Tribunal held that such receipts in the hands of land owners do not constitute 'income from other sources' under section 56. Consequently, the statutory obligation to deduct tax at source under section 194A does not arise. The Tribunal therefore allowed the grounds challenging the addition and demand raised under sections 201(1) and 201(1A) to the extent they were premised on non-deduction of TDS on section 28 payments. [Paras 6, 7, 8]

The Tribunal held that interest paid under section 28 forms part of compensation and is not taxable as income from other sources; hence no TDS under section 194A was exigible and the addition/demand under sections 201(1)/201(1A) was set aside on that ground.

Exemption under section 10(37) for capital gains on compulsory acquisition - interest on enhanced compensation not taxable as capital gain when covered by section 10(37) - Whether interest on enhanced compensation paid under section 28 of the Land Acquisition Act forms part of compensation that is exempt under section 10(37) from capital gains tax. - HELD THAT: - Relying on the legal exposition in the earlier Tribunal order, the Tribunal accepted that compulsory acquisition of agricultural land in specified areas constitutes a transfer and that capital gains arising therefrom are exempt under section 10(37). The Tribunal observed that the interest element ingrained in the enhanced compensation is an integral part of the compensation/consideration and, therefore, falls within the scope of exemption under section 10(37) as regards capital gains. This reasoning reinforced the conclusion that such receipts are not taxable as income from other sources for the purpose of TDS liability. [Paras 7, 8]

The Tribunal held that the interest element in enhanced compensation is part of the compensatory receipt and is covered by the exemption in section 10(37) for compulsory acquisition, supporting the conclusion that no TDS under section 194A was required.

Final Conclusion: Appeal allowed: following the Tribunal's earlier decision on identical facts and the relevant precedents, interest paid under section 28 of the Land Acquisition Act is part of compensation (and, where applicable, covered by section 10(37)); it is not income from other sources and therefore the assessee was not obliged to deduct TDS under section 194A for AY 2015-16.

Valuation evidence for cost of construction and admissibility of valuer's report - rejection of books of account and estimation of excessive construction cost - household withdrawals as proxy for family expenditure and assessment of personal expenses - disallowance under 40A(3) for cash payment to vendor - unexplained cash deposits and verification from cash book and bank statements - remand for verification and obtaining remand report

Valuation evidence for cost of construction and admissibility of valuer's report - rejection of books of account and estimation of excessive construction cost - remand for verification and obtaining remand report - Addition on account of excessive cost of construction sustained by AO and confirmed by CIT(A) but remanded for fresh consideration - HELD THAT: - The CIT(A) had not admitted the Government Approved Valuer's report because no application under Rule 46A was filed. The Tribunal held that when the appellate authority has powers co-terminus with the AO and had found some substance in the evidence produced, the matter required examination rather than outright rejection. The Tribunal therefore restored the issue to the file of the CIT(A) to permit the assessee to bring relevant evidence in accordance with law and to obtain a remand report from the AO so that the claim for construction cost can be decided afresh. [Paras 7]

Ground remanded to CIT(A) for fresh adjudication after verification and remand report

Household withdrawals as proxy for family expenditure and assessment of personal expenses - Addition made on account of alleged low household withdrawals deleted - HELD THAT: - The AO based the estimate of annual household expenditure on assumptions regarding family status, assets and responsibilities, treating the assessee's withdrawals in isolation. The Tribunal accepted the assessee's contention that he resided in a house owned and maintained by his father, and that his wife was an income-tax payer who had withdrawals from her capital account. Household expenditure must be assessed in light of the family as a unit and not by presuming expenditure solely from the assessee's withdrawals. The Tribunal found no justification for the addition and deleted it in full, noting that the CIT(A) failed to give complete relief. [Paras 8]

Addition on account of low household withdrawals deleted in favour of the assessee

Disallowance under 40A(3) for cash payment to vendor - Addition under section 40A(3) in respect of alleged cash payment of Rs. 2,80,000 to vendor upheld - HELD THAT: - The sale deed and ledger entries showed payments by cheque on various dates and a cash entry of the disputed amount; however the ledger indicated the cash payment occurred on a later date and the sequence of cheque payments undermined the assessee's account that the cash was an urgent earlier advance. Given the assessee was acquiring the plot as part of his business activity, there was no sufficient reason to make a cash payment to a new vendor when banking channels were available. The Tribunal found the AO's disallowance sustainable and declined to interfere with the tax authorities' finding. [Paras 9]

Addition under section 40A(3) sustained against the assessee

Unexplained cash deposits and verification from cash book and bank statements - remand for verification and obtaining remand report - Addition on account of unexplained cash deposits set aside and remanded to CIT(A) for verification - HELD THAT: - The AO made additions on the basis that the assessee failed to satisfactorily explain certain cash deposits. The CIT(A) confirmed the addition, observing incomplete books and questioned authenticity of extracts. The Tribunal observed that the assessee had produced the cash book covering the relevant period and that the CIT(A) did not seek verification or a remand report from the AO despite material being on record. The Tribunal found the CIT(A)'s conclusion unsustainable and restored the matter to the CIT(A) to verify whether the contested deposits were from prior withdrawals as claimed and to afford the assessee benefit if verified. [Paras 10]

Addition on account of unexplained cash deposits remanded to CIT(A) for verification and appropriate decision

Final Conclusion: The appeal is partly allowed: the addition for low household withdrawals is deleted; the disallowance under section 40A(3) is sustained; the issue of excessive construction cost and the additions for unexplained cash deposits are restored to the CIT(A) for fresh consideration and verification.

Cross-examination of witnesses - statements under Section 108 - adjudication based on preponderance of probabilities - remand for de novo adjudication - treatment of prior judicial order as non-precedential

Cross-examination of witnesses - statements under Section 108 - Extent to which third party statements recorded under Section 108 can be relied upon without affording the noticee an opportunity of cross examination. - HELD THAT: - The Court observed that although adjudication proceedings are decided on a preponderance of probabilities, the adjudicating authority in the present cases had simultaneously relied upon third party statements recorded under Section 108 and refused the noticees' request for cross examination. Given the factual position - including the adjudicating authority's own view that there was other material evidence sufficient to sustain the adjudication - the Court directed that the adjudication order be treated as a show cause notice and that respondents be permitted to file an additional reply challenging reliance on Section 108 statements. The Court further directed that the adjudicating authority shall not rely upon or refer to any Section 108 statements from third parties identifying the respondents unless, after fresh adjudication, it considers such statements indispensable, in which event the respondents shall be entitled to full opportunity to cross examine those persons.

Adjudication remitted for fresh consideration; Section 108 statements from third parties shall not be relied upon unless the authority, on fresh adjudication, elects to do so and then only after affording the respondents full opportunity to cross examine.

Remand for de novo adjudication - Whether the Tribunal erred by not deciding the appeals on merits and instead remitting for fresh adjudication. - HELD THAT: - The Court acknowledged the revenue's substantial questions of law but, in view of the peculiar facts and the existence of independent material apart from the Section 108 statements, proceeded to fashion a pragmatic remedy rather than adjudicate the legal questions. The appeals were disposed by treating the impugned adjudication order as a show cause notice, directing additional replies and ordering a personal hearing followed by fresh adjudication. The Court expressly left the substantial legal questions raised by the revenue open for future adjudication.

The appeals were remitted for de novo adjudication after specified procedural steps; the Court did not decide the substantial questions of law and left them open.

Treatment of prior judicial order as non-precedential - binding precedent - Whether the High Court's order relied upon by the Tribunal operates as a binding precedent in the present matters. - HELD THAT: - The Court clarified that the observations and findings rendered by the learned Writ Court, which the Tribunal had followed, are not to be treated as precedent for determining the legal questions in these appeals. The Court recorded that the impugned decision of the Writ Court is not to be regarded as binding in other matters and that the legal questions remain open; the directions issued are confined to the parties before the Court.

Observations of the learned Writ Court are not to be treated as precedent and the legal questions raised by the revenue are left open; the order operates only in favour of those respondents who are before the Court.

Final Conclusion: The Court remitted the matters for fresh adjudication: the adjudication order of 6.9.2018 is to be treated as a show cause notice, respondents to file additional replies contesting reliance on Section 108 statements, the adjudicating authority to afford personal hearing and adjudicate afresh without relying on third party Section 108 statements unless it chooses to do so after which respondents shall be entitled to cross examine; substantial legal questions raised by the revenue are left open and the Writ Court's observations are not to be treated as precedent.

Communication of order - limitation for filing appeal under Section 128, Customs Act, 1962 - service by speed post not sufficient proof of communication - condonation of delay beyond 30 days barred - remand for fresh decision on merits after compliance with natural justice

Communication of order - limitation for filing appeal under Section 128, Customs Act, 1962 - service by speed post not sufficient proof of communication - Whether the appeal was time-barred for the purposes of Section 128 of the Customs Act, 1962. - HELD THAT: - The Tribunal held that the determinative date for computing the period of limitation under Section 128 is the date of communication of the adjudicating order to the appellant and not the date of the order itself. The Revenue failed to produce evidence, such as postal tracking or any proof of earlier delivery, to establish that the Order in Original was communicated to the appellant immediately after its passing. Merely dispatching the order by speed post does not ipso facto establish communication or service; actual communication to the appellant must be shown. The record established that the appellant received the certified copy of the Order in Original on 13.9.2019 and filed the appeal on 24.10.2019, which falls within the prescribed period. Consequently the Commissioner (Appeals) erred in rejecting the appeal as barred by time. [Paras 5]

Appeal was not time barred because communication occurred on 13.9.2019 and the appeal filed on 24.10.2019 was within the prescribed period; order rejecting appeal on limitation set aside.

Remand for fresh decision on merits after compliance with natural justice - condonation of delay beyond 30 days barred - Remedial direction as to further adjudication of the appeal. - HELD THAT: - Having set aside the rejection on limitation, the Tribunal remanded the matter to the Commissioner (Appeals) to decide the appeal on merits. The Commissioner (Appeals) is directed to follow the principles of natural justice in hearing and deciding the appeal and to conclude the proceedings within three months from receipt of the Tribunal's order. The Tribunal's direction preserves statutory limits on condonation of delay under Section 128 by addressing the communication date and does not itself condone any delay beyond the statutory bar. [Paras 6]

Impugned order set aside and matter remanded to Commissioner (Appeals) for fresh adjudication on merits after following natural justice within three months.

Final Conclusion: The appeal is allowed by way of remand: the order dismissing the appeal as time barred is set aside because communication of the adjudicating order was on 13.9.2019 and the appeal was filed within the prescribed period; the matter is remitted to the Commissioner (Appeals) to decide the appeal on merits after observing natural justice within three months.

Merchandize Exports from India Scheme (MEIS) - Let Export Order (LEO) date versus actual export date - Administrative relief under para 2.58 of the Foreign Trade Policy - Effect of COVID-19 on electronic data entry and entitlement

Merchandize Exports from India Scheme (MEIS) - Let Export Order (LEO) date versus actual export date - Effect of COVID-19 on electronic data entry and entitlement - Administrative relief under para 2.58 of the Foreign Trade Policy - Whether the petitioner's exports made during July 2020 to August 2020, which were manually recorded and uploaded later, should be considered for grant of MEIS benefit or require consideration by the competent authority under para 2.58 of the Foreign Trade Policy. - HELD THAT: - The Court recorded that the exports were in fact effected during July and August 2020 and that Let Export Orders were made manually because electronic functioning was disrupted during the COVID-19 pandemic. The Customs/SEZ officer certified that the manual LEOs related to exports in July-August 2020, even though online entry into the DGFT portal took place in September-October 2020. The respondents did not dispute the petitioner's entitlement to MEIS benefits on the facts but pointed to the electronic LEO dates and the cap introduced by Notification dated 01.09.2020. The affidavit of the respondents acknowledged that relief in genuine hardship cases may be granted under para 2.58 of the Foreign Trade Policy and indicated that resolution of such technical discrepancies requires consideration by the DGFT in coordination with CBIC. Given these factual findings and the admitted availability of administrative relief under para 2.58, the Court declined to adjudicate the merits itself and directed the petitioner to make a representation to the competent authority for a decision on the grievance. The Court further recorded that the petitioner's inability to upload entries timely was not attributable to any fault of the petitioner and that the competent authority should keep the stated facts and the certification by Customs in mind while deciding the representation. [Paras 5, 6]

Petitioner permitted to make a representation within three weeks; Director General of Foreign Trade directed to decide the representation under para 2.58 within four weeks, keeping in view that exports were made in July-August 2020 and that manual LEOs were due to the COVID-19 disruption.

Final Conclusion: The petition is disposed of by directing the petitioner to file a representation within three weeks and directing the Director General of Foreign Trade to decide the representation under para 2.58 of the Foreign Trade Policy within four weeks, taking into account the certification that the exports were made in July-August 2020 and the exceptional COVID-19 related disruption to electronic entry.

Valuation with reference to retail sale price - MRP based valuation under Section 4A of the Central Excise Act - declaration of retail sale price on the package under Legal Metrology - applicability of Notification No. 49/2008-C.E.(N.T.) - classification under CTH 3506 1000 - transaction value versus retail sale price valuation

Applicability of Notification No. 49/2008-C.E.(N.T.) - classification under CTH 3506 1000 - MRP based valuation under Section 4A of the Central Excise Act - declaration of retail sale price on the package under Legal Metrology - Whether Notification No. 49/2008-C.E.(N.T.) applies to adhesives classified under CTH 3506 1000 and therefore whether such imports are liable to CVD assessed on retail sale price (MRP) rather than on transaction value. - HELD THAT: - The notification specifies in Column (3) the goods to which sub-section (2) of Section 4A applies and links them to the Chapter/heading in Column (2). Chapter heading 3506, as printed in the Tariff, comprises both "prepared glues and other prepared adhesives, not elsewhere specified or included" and "products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg." The imported adhesives are classifiable under CTH 3506 1000 and are put up for retail sale in packages not exceeding 1 kg. A combined reading of the Chapter Heading and Notification No. 49/2008 shows that the notification covers all prepared glues and other prepared adhesives falling under heading 3506, which necessarily includes products put up for retail sale not exceeding 1 kg. The Legal Metrology provisions (requiring declaration of retail sale price on packaged goods) apply generally to goods put up for retail sale, and where so specified by notification under Section 4A, MRP-based valuation (retail sale price less abatement) applies notwithstanding section 4. Consequently, treating the notification as excluding products put up for retail sale not exceeding 1 kg would be legally incorrect; the notification applies to the imported adhesives classified under 3506 1000, and they are liable to CVD on retail sale price as per the notification and Section 4A. [Paras 13, 14, 15, 16, 17]

Notification No. 49/2008-C.E.(N.T.) applies to adhesives classified under CTH 3506 1000; such imports are liable to CVD assessed on retail sale price (MRP) pursuant to Section 4A, and the lower appellate authority's order is affirmed.

Final Conclusion: The Tribunal upholds the lower appellate authority's decision that the imported adhesives classified under CTH 3506 1000 are covered by Notification No. 49/2008-C.E.(N.T.) and are liable to countervailing duty on the basis of retail sale price; the appeal is dismissed.

Determination of value of export goods under Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - Application of residual Rule 6 versus sequential application of Rule 4 and Rule 5 - Admissibility and evidentiary value of a Valuation Committee report and observance of principles of natural justice - Restriction of duty drawback to re-determined FOB value - Confiscation of export goods and imposition of redemption fine and penalty under the Customs Act - Judicial power to modify/reduce redemption fines and penalties

Determination of value of export goods under Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - Application of residual Rule 6 versus sequential application of Rule 4 and Rule 5 - Admissibility and evidentiary value of a Valuation Committee report and observance of principles of natural justice - Restriction of duty drawback to re-determined FOB value - Validity of re-determination of FOB value on the basis of the Valuation Committee report and consequent restriction of duty drawback - HELD THAT: - The Tribunal held that the adjudicating authority proceeded to re-determine the FOB value by adopting prices fixed by a departmental Valuation Committee but did not disclose the basis, composition or methodology of the Committee's fixation to the appellant nor accorded an opportunity to rebut that basis, thereby violating principles of natural justice. The Valuation Rules require that Rule 4 and Rule 5 be sequentially considered before invoking the residual Rule 6; Rule 5 (computed value/cost of production) was available where cost construction statements certified by a Chartered Accountant were on record and the provisional release had been allowed on the basis that those revised values were reasonable. The Tribunal followed earlier precedents holding that adoption of Valuation Committee figures without disclosing methodology or expert credentials, or providing a chance to the exporter to meet that material, is not sustainable. Consequently the Tribunal declined to uphold the re-determination that rested solely on the undisclosed Committee fixation and fixed the payable drawback to the stated re-determined FOB values as set out in the order. [Paras 9, 10, 11]

The Valuation Committee report could not be the sole basis for rejecting declared values without disclosure and opportunity to rebut; drawback is payable on the re-determined FOB values specified by the Tribunal in respect of the cited shipping bills.

Confiscation of export goods and imposition of redemption fine and penalty under the Customs Act - Judicial power to modify/reduce redemption fines and penalties - Whether confiscation and penalties imposed on the exporter were justified and whether the quantum of redemption fine and penalty required interference - HELD THAT: - The Tribunal found that there was mis-declaration of value and description of the export goods in the shipping bills, contravening the Customs Act and Rules, and therefore the original adjudicating authority was justified in holding the goods liable for confiscation under the relevant provisions of the Act and in imposing penalty. However, having regard to the facts and circumstances of these appeals, the Tribunal exercised its corrective power in respect of the quantum of redemption fines and penalties, reducing the earlier amounts to lower sums for each order. The reduction was effected while leaving the finding of liability for confiscation and imposition of penalty otherwise intact. [Paras 9, 12]

Confiscation and imposition of penalty upheld; redemption fines and penalties reduced as specified in the order.

Final Conclusion: Appeals partially allowed: orders of appellate authority set aside; drawback sanctioned on the FOB values fixed by the Tribunal for the specified shipping bills; findings of mis-declaration sustained so confiscation and penalties are affirmed but the redemption fines and penalties are reduced to the revised amounts stated in the order, with consequential relief as available to the appellant.

Abatement of proceedings on death - continuance by successor-in-interest under Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - requirement of application for continuance within sixty days - no proceedings can be continued against a dead person as violative of natural justice

Abatement of proceedings on death - continuance by successor-in-interest under Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 - requirement of application for continuance within sixty days - Whether the appeal could be continued after the death of the sole proprietor-respondent where no application for continuance by successor-in-interest was filed within the period prescribed by Rule 22. - HELD THAT: - The Tribunal found that the respondent, a sole proprietorship, ceased to be alive on 22.08.2019 during the pendency of the appeal. Rule 22 provides that proceedings abate on the death of a party unless an application for continuance is made by the successor-in-interest, executor, administrator or other legal representative within sixty days (subject to extension for sufficient cause). No such application was placed on record in the present case, and more than three and a half years had elapsed since the death. The Tribunal further relied on the principle that proceedings cannot be continued against a dead person as it would violate natural justice, as articulated in the cited Supreme Court decision, holding that taxation or adjudicatory proceedings cannot be prosecuted against a deceased person without the statutory machinery to deal with the estate or legal representative. [Paras 6, 7, 8]

The appeal abated on account of the death of the respondent and absence of any timely application for continuance; the appeal was disposed of.

Final Conclusion: The appeal was held to have abated on the death of the sole proprietor-respondent in the absence of any application for continuance by a successor-in-interest within the period prescribed by Rule 22, and the appeal was disposed of accordingly.

Absolute confiscation - redemption of confiscated goods - exercise of discretion under Section 125 of the Customs Act, 1962 - restricted versus prohibited goods - re-testing of samples - canalisation/canalised agencies restriction - bona fide import - classification under Customs Tariff

Absolute confiscation - redemption of confiscated goods - exercise of discretion under Section 125 of the Customs Act, 1962 - restricted versus prohibited goods - bona fide import - Validity of the adjudicating authority's direction for absolute confiscation and condition that redemption is only for re-export on payment of fine and penalty - HELD THAT: - The Tribunal examined whether absolute confiscation and the imposition of a condition that redemption be allowed solely for re export on payment of fine and penalty was justified in the facts of this case. The goods were declared and imported as industrial composite solvent for captive use in the appellant's paint manufacturing, with earlier imports similarly cleared under the same tariff classification. Retesting by Customs and BPCL suggested the consignment was kerosene, a commodity importable only through canalised agencies. The Tribunal found no material showing the appellants knowingly misdeclared the goods or intended to place them in the domestic market for sale; there was no further investigation or recording of statements to infer mala fide import. Given that, at best, the breach constituted non canalisation - a technical violation making the goods "restricted" rather than constituting a factual matrix where public interest would be harmed by allowing domestic use (contrast where excess imports undermine national interest) - the exercise of discretion under Section 125 must be guided by relevant considerations and not be mechanical. Applying that principle, the Tribunal held that absolute confiscation and a re export only redemption condition were unwarranted; the goods were liable for confiscation but the appellants must be permitted to redeem them for domestic use on payment of the prescribed fine and penalty as determined by the adjudicating authority. [Paras 12, 13, 16, 17, 18]

Set aside the direction of absolute confiscation and the condition of redemption only for re export; goods are liable for confiscation but may be redeemed for domestic use on payment of the determined fine and penalty, and shall be released forthwith upon such payment.

Re-testing of samples - classification under Customs Tariff - bona fide import - Whether the appellant was entitled to copies of test reports and to draw samples for independent re testing, and the effect of the Revenue's initial non compliance with the High Court direction - HELD THAT: - The record shows the High Court directed the Revenue to provide copies of all test reports and permit sample drawal for the petitioner; those directions were not initially complied with. On the Bench's direction during this appeal, the test reports were furnished to the appellant. The appellant, after reviewing the reports, chose not to press for further re testing in a reputed laboratory in view of delay and commercial exigency, and instead sought release of the goods on payment of fine and penalty. The Tribunal treated the earlier non compliance as material background but resolved the controversy on the merits; having received the reports and with the appellant waiving further testing, the Tribunal proceeded to modify the confiscation order consistent with the facts and exercise of discretion. [Paras 10, 11]

Acknowledged the prior non compliance with the High Court direction; test reports were furnished during the appeal and, with the appellant waiving further re testing, the Tribunal adjudicated the appeal on merits and granted the option of domestic redemption on payment of fine and penalty.

Final Conclusion: The Tribunal modified the impugned order by setting aside absolute confiscation and the re export only redemption condition; it held the goods liable for confiscation but directed that, if the appellant elects to redeem, the goods shall be released for domestic use on payment of the adjudicated fine and penalty forthwith. Miscellaneous applications disposed of accordingly.

Admission and collation of claims - disputed claims and pendency of arbitration - keeping claims in abeyance - powers of the resolution professional - administrative not adjudicatory - determination of claim quantum and set off pending counterclaim - participation in the committee of creditors and voting rights - claim for damages versus debt - liability adjudicated by award or decree

Admission and collation of claims - keeping claims in abeyance - powers of the resolution professional - administrative not adjudicatory - Whether the Resolution Professional was justified in keeping the Appellant's submitted claim in abeyance pending determination of arbitration proceedings and the corporate debtor's counterclaim. - HELD THAT: - The Tribunal accepted the Resolution Professional's approach that his duty was to collect and collate claims and that admission of a claim may be kept in abeyance where pending proceedings (here, arbitration and a counterclaim) could affect both liability and quantum. The Tribunal noted that the Resolution Professional complied with the mandate to collect and collate the claim and that, in exigent circumstances, keeping claims in abeyance is permissible; instances of such practice by RPs and precedents were referenced. In the present case the counterclaim could lead to a set off which would directly affect the amount payable to the claimant, and therefore the RP was within his power and limits to defer admission until the arbitral determination enabled certainty as to liability and quantum. On that basis the Tribunal concluded the impugned order dismissing the interlocutory application was free from flaw. [Paras 39, 40]

Resolution Professional was justified in keeping the claim in abeyance pending the arbitration/counterclaim; relief for admission of the claim was refused.

Disputed claims and pendency of arbitration - determination of claim quantum and set off pending counterclaim - participation in the committee of creditors and voting rights - claim for damages versus debt - liability adjudicated by award or decree - Whether the Appellant was entitled to admission of its claim as a financial debt, and consequent inclusion in the Committee of Creditors with voting rights, despite the claim being disputed and subject to pending arbitral proceedings. - HELD THAT: - The Tribunal examined the Appellant's contention that the advance and interest constituted a financial debt and that disputed claims must nevertheless be collated and admitted. It also considered authority on claims for damages not constituting a debt until adjudicated. The Tribunal observed that where a counterclaim is pending and may give rise to set off, admission and fixation of admitted quantum could not be done with requisite certainty. Given that the RP had collated the claim but kept admission in abeyance pending the arbitral outcome which would determine liability/quantum and potential set offs, the Tribunal held that the Appellant's prayer for admission and consequent inclusion in the CoC could not be acceded to at this stage. [Paras 39, 40]

Appellant not entitled to admission of the disputed claim or to be admitted to the CoC with voting rights until the arbitral proceedings and counterclaim are determined.

Final Conclusion: The appeal is dismissed; the National Company Law Appellate Tribunal upheld the impugned order which declined to direct admission of the disputed claim and affirmed the Resolution Professional's decision to keep the claim in abeyance pending resolution of arbitration and counterclaim.

Rebuttable presumption under Section 18(3) of the Foreign Exchange Regulations Act, 1973 - all reasonable steps to receive or recover payment - competence of Indian courts to adjudicate export recovery suits - reasonableness test (fair, practicable and sensible steps)

All reasonable steps to receive or recover payment - rebuttable presumption under Section 18(3) of the Foreign Exchange Regulations Act, 1973 - competence of Indian courts to adjudicate export recovery suits - reasonableness test (fair, practicable and sensible steps) - Whether filing a suit in India and obtaining a decree for recovery of the balance price of exported goods constitutes taking "all reasonable steps to receive or recover the payment" within the meaning of Section 18(3) of the Act of 1973 so as to rebut the statutory presumption. - HELD THAT: - Section 18(3) creates a rebuttable presumption that an exporter who has not received full payment has not taken all reasonable steps to recover payment; the exporter may produce evidence to dislodge that presumption. The statutory phrase "all reasonable steps" requires the exporter to take steps that are fair, practicable and sensible, and whether such steps have been taken is a question of fact. While mere filing and decree may be insufficient in some circumstances, in appropriate facts filing a suit in India and obtaining a decree can constitute "all reasonable steps". The court observed that exports originated in India and Indian courts are competent to adjudicate recovery suits; it is not contended that the decree was without jurisdiction. The appellants filed suit within the extended period, obtained a decree, and explained inability to execute the decree in India because the importer had no assets here and foreign execution was not cost effective. Those explanations were plausible and relevant obstacles (cost, practicability, enforceability abroad) are to be considered in assessing reasonableness. On the facts of the present case the steps taken by the appellants - instituting suit in a competent Indian court and obtaining a decree within the extended period, coupled with the explained infeasibility of foreign execution - adequately rebutted the presumption under Section 18(3). Consequentially the adjudication and appellate orders which held otherwise had to be set aside. [Paras 16, 17, 19, 21, 22]

Filing a suit in India and obtaining a decree, together with the appellants' plausible explanation as to infeasibility or non cost effectiveness of foreign execution, constituted taking "all reasonable steps" under Section 18(3) and rebutted the statutory presumption; the impugned show cause notice, adjudication order and appellate order are set aside.

Final Conclusion: The orders challenged (show cause notice dated May 3, 2002, adjudication order dated August 28, 2003 and the appellate order dated March 2, 2009) were set aside; the listed appeals by the company and its directors are allowed as indicated, and two appeals are to be treated as abated for want of substitution.

Taxability of reimbursement of training expenses to insurance agents - statutory mandate of regulator as excluding consideration for service - inclusion in value where expenditure is incurred in the course of providing taxable service - valuation of taxable services and gross amount charged - treatment of debit adjustments/discounts in computation of taxable value

Taxability of reimbursement of training expenses to insurance agents - statutory mandate of regulator as excluding consideration for service - inclusion in value where expenditure is incurred in the course of providing taxable service - Reimbursements and expenses incurred by the insurer for overseas and inland training of insurance agents are not exigible to service tax under the reverse charge mechanism. - HELD THAT: - The Tribunal held that the payments made by the appellant for training of insurance agents were made to discharge a statutory requirement imposed by the regulator and were not consideration for any taxable service rendered by the agents to the insurer. Rule 5(1) of the Service Tax (Determination of Value) Rules applies only where expenditure is incurred in the course of providing a taxable service; no taxable service was rendered by agents in respect of the training for which reimbursement was made. The mandatory nature of the training under the regulatory framework and its purpose of enabling agents to obtain qualifications/skills distinguishes the payments from consideration for solicitation or procurement of business. Reliance placed on earlier decisions and the appellant's own earlier favourable order was noted. Consequently the demand in respect of foreign and related training reimbursements was negatived. [Paras 5]

Demand of service tax on expenses reimbursed for overseas and inland training of insurance agents set aside.

Valuation of taxable services and gross amount charged - treatment of debit adjustments/discounts in computation of taxable value - The 4% debit adjustment from commission paid to insurance agents is a contractual discount and is not to be treated as an amount exigible to service tax; service tax is payable on the actual commission paid. - HELD THAT: - The Tribunal observed that service tax is leviable on the 'gross amount charged' when consideration is in money, but where an adjustment is merely a discount and there is no evidence that agents owed amounts to the insurer requiring set-off, the 4% debit adjustment cannot be treated as part of the taxable consideration. Rule 3 of the Valuation Rules was held inapplicable to convert such contractual discounts into taxable value. The Explanation to Section 67(c) recognising book adjustments and debit/credit notes was considered, but on the facts the adjustment represented a contractual reduction in commission rather than a receipt or payment to be included in value. The Tribunal relied on earlier authorities and its earlier decision in the appellant's own case to conclude that service tax is to be computed on the actual commission disbursed to agents. [Paras 6]

4% debit adjustment from commission is not includible in taxable value; service tax payable only on actual commission paid.

Final Conclusion: The impugned order confirming demands in respect of training reimbursements and the debit-adjustment issue was set aside; the appeal is allowed and the demands under challenge are quashed with consequential relief, if any.

Taxability of non-compete fee - support services of business or commerce as taxable service under the Finance Act, 1994 - temporal scope of taxation / exigibility linked to date of agreement - exigibility under Section 66E(5) from 01.07.2012

Support services of business or commerce as taxable service under the Finance Act, 1994 - taxability of non-compete fee - temporal scope of taxation / exigibility linked to date of agreement - The appellant was not liable to pay service tax on the one-time non-compete fee received under the agreement dated 5 March 2009. - HELD THAT: - The claim to tax the sum received as a 'non-compete fee' was founded on the definition of support services of business or commerce contained in Section 65(104c) of the Finance Act, 1994 as it stood at the time the agreement was executed. The Court noted that, with effect from 01.07.2012, liability could arise under the provision now reflected in Section 66E(5), but that change in law post-dated the agreement. The payment in question was a single, one-time consideration and did not extend beyond 01.07.2012. In those circumstances the Tribunal's affirmation of the Commissioner (Appeals) decision holding the appellant liable to service tax was not tenable in law. The determinative reasoning is that taxation must be judged by the statutory scheme in force on the date and by the character of the receipt at that time; since the later provision rendering such receipts exigible came into effect after the agreement and the payment did not spill over, no service tax was exigible under the law as it stood on 5 March 2009.

The impugned order upholding service tax liability on the one-time non-compete fee is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed. The orders of the Commissioner (Appeals) and CESTAT upholding service tax demand on the one-time non-compete fee received on 5 March 2009 are set aside because the relevant exigibility under the later provision (with effect from 01.07.2012) did not apply to the payment as made.

Refund of accumulated CENVAT credit prior to centralized registration - registration as condition precedent for refund under Rule 5 of the CENVAT Credit Rules, 2004 - inclusive definition of \"input service\" and eligibility of services used in or in relation to business - application of formula prescribed in Notification No. 05/2006-C.E.(N.T.) for sanction of refund

Refund of accumulated CENVAT credit prior to centralized registration - registration as condition precedent for refund under Rule 5 of the CENVAT Credit Rules, 2004 - Refund of accumulated CENVAT credit relating to invoices issued prior to centralized registration of the assessee's branch is not liable to be denied solely on the ground of absence of centralized registration. - HELD THAT: - The Tribunal held that there is no provision in the CENVAT Credit Rules mandating registration or centralized registration as a condition precedent for claiming refund under Rule 5. The decision in M/s. mPortal India Wireless Solutions P. Ltd. was applied as directly applicable, and contrary authority (Sutham Nylocots) was distinguished as predating the CENVAT Credit Rules, 2004. The view of the Madras High Court in BNP Paribas Sundaram and Pay Pal India supporting non mandate of registration for refund was noted. Accordingly, denial of credit merely because invoices related to the Cathedral Road branch were issued prior to centralized registration was not sustainable. [Paras 10]

The lower appellate authority was correct in holding that the assessee is eligible for refund in respect of credits claimed for periods prior to centralized registration.

Inclusive definition of \"input service\" and eligibility of services used in or in relation to business - interpretation of \"input service\" in light of precedent - Disallowance of CENVAT credit in respect of certain input services (Authorized Service Station, Customs House Agent, Advertising Service, Real Estate Agent Service) was not sustainable and such services qualify as input services if used in or in relation to the business. - HELD THAT: - Relying on the inclusive definition of 'input service' and the reasoning in Commissioner of Central Excise, Nagpur v. M/s. Ultratech Cement Ltd., the Tribunal held that the definition covers services used in relation to the business and is not restricted narrowly. Therefore, credits on the disputed services, being used in or in relation to the assessee's business of providing output services, cannot be disallowed on the ground that they are not 'input services'. The Tribunal emphasised that the inclusive limb of the definition captures services integrally connected with the business activity. [Paras 11]

The disallowance of credit on the specified services is set aside and the assessee is eligible to claim those credits.

Final Conclusion: The Revenue's appeals are rejected; the Commissioner of Central Excise (Appeals) was right in allowing the refund claims insofar as credits prior to centralized registration and credits on the disputed input services were concerned, and the refund sanctions under the Notification formula stand affirmed subject to other provisions of law.

Reversal of Cenvat credit under Rule 6(3) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 - Computation using total common Cenvat credit versus total Cenvat credit - Applicability of Rule 6 to common inputs and input services - Binding effect of Board circulars in interpretation of Cenvat Credit Rules - Penalty under Section 76 of the Finance Act, 1994 for short payment of service tax

Reversal of Cenvat credit under Rule 6(3) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 - Computation using total common Cenvat credit versus total Cenvat credit - Applicability of Rule 6 to common inputs and input services - Binding effect of Board circulars in interpretation of Cenvat Credit Rules - Amount to be reversed under Rule 6(3) (as computed by formula in Rule 6(3A)) is to be calculated with reference to total common Cenvat credit on inputs and input services, and not the assessee's total Cenvat credit. - HELD THAT: - The Tribunal considered whether the letter "P" in the formula of Rule 6(3A) denotes the assessee's total Cenvat credit or only the total Cenvat credit attributable to common inputs and input services. Reading Rule 6(1)-(3) harmoniously shows the mechanism is intended to expunge credit attributable to exempted goods/services and not to disallow credit on inputs/input services exclusively used for dutiable goods. Acceptance of the Revenue's interpretation would unrealistically disallow credit legitimately used for dutiable manufacture. The Tribunal relied on consistent precedents holding that "total Cenvat credit" in the formula means total common Cenvat credit and noted that amendments and Board circulars clarifying the scope of Rule 6(3A) are clarificatory and bind the Department. Applying those authorities and circulars, the impugned demand founded on treating "total Cenvat credit" as the assessee's entire credit was incorrect and unsustainable. [Paras 12, 13, 15]

Demand premised on non adoption of the correct formula was set aside; computation must use total common Cenvat credit and not total Cenvat credit.

Penalty under Section 76 of the Finance Act, 1994 for short payment of service tax - Validity of penalty imposed under Section 76 for short payment of service tax under the Business Auxiliary Service category. - HELD THAT: - The appellant did not dispute the liability to pay the service tax or interest and had tendered the service tax when pointed out. The original authority imposed a modest penalty and also afforded the option to pay a reduced penalty at 25% of the demand. Having regard to these facts and the quantum and concession available, the Tribunal found no ground to interfere with the imposition of penalty under Section 76. [Paras 16]

Penalty under Section 76 was upheld.

Final Conclusion: Appeal challenging demand for incorrect application of the Rule 6(3A) formula allowed and demand set aside; appeal against penalty under Section 76 dismissed and penalty upheld; appeals disposed of with consequential relief, if any.

Best judgement assessment - burden to produce records and ST-3 returns - composite scheme for works contract and requirement of prior option - penalty and recovery following assessment under Section 72 read with Section 73 - remand for fresh consideration

Best judgement assessment - burden to produce records and ST-3 returns - Validity of initiating and confirming demand by best judgement assessment under the facts that the Department obtained BALCO's records and the appellant failed to produce ST-3 returns and other documents - HELD THAT: - The Tribunal upheld the Commissioner's decision to invoke best judgement assessment after the Department acquired information from BALCO showing credit claimed for service tax, and after repeated requests and summons the appellant failed to furnish ST-3 returns or evidence that service tax collected from BALCO had been deposited. The Court treated the information supplied by BALCO as a valid basis to issue the show cause notice and to proceed under the best judgement provision when the assessee did not discharge its obligation to produce records. The appellant did not dispute the figures from BALCO and offered only conjecture that some entries might relate to other services; without documentary proof the contention could not succeed. In those circumstances the Commissioner was justified in determining liability on the basis of information available and confirming the demand.

Demand confirmed on the basis of best judgement assessment was valid where the appellant failed to produce ST-3 returns and other relevant documents.

Composite scheme for works contract and requirement of prior option - Whether service tax liability could be assessed at the reduced composite rate applicable to works contracts without evidence that the appellant had opted for that scheme and that the services in question were works contract services - HELD THAT: - The Tribunal accepted the Commissioner's finding that entitlement to the reduced composite rate required (a) demonstration that the services rendered fell within the works contract composite scheme and (b) evidence that the assessee had opted for the scheme prior to payment. The appellant furnished no documentary proof to satisfy either requirement and the jurisdictional officer's verification corroborated absence of any option having been filed. In absence of these vital prerequisites the reduced rate could not be applied and the higher rate assessment was proper.

Claim to levy at composite rate was rejected for lack of proof of both applicability of works contract scheme and prior option; assessment at the higher rate sustained.

Penalty and recovery following assessment under Section 72 read with Section 73 - Whether penalty under the recovery provisions could be imposed where assessment was made by best judgement under Section 72 - HELD THAT: - The Tribunal held that once a best judgement assessment is made under Section 72, the consequence is recovery of the determined amount under Section 73; interest and penalties are recoverable under the provisions governing recovery. Therefore the Commissioner was entitled to impose interest and penalties in the course of recovery under Section 73 even though the assessment exercise had been initiated under Section 72. The appellant's contention that Section 72 precludes imposition of penalty under Section 78 was rejected on this reasoning.

Imposition of penalty and interest incident to recovery under Section 73, following assessment under Section 72, was permissible.

Remand for fresh consideration - Whether the matter should be remanded to the Commissioner to allow the appellant to submit evidence afresh - HELD THAT: - The Tribunal declined to order a remand. It found that the appellant had ample opportunity to produce documentary evidence both in response to the show cause notice and before the Tribunal, but failed to do so and did not place any evidence on record in the appeal. A remand cannot be ordered as a matter of course or merely on request; in the absence of any plausible ground or explanation for non-production earlier, remand was inappropriate.

Request for remand refused; appeal decided on available record without ordering fresh consideration.

Final Conclusion: The Commissioner's order confirming service tax demand (for the stated period), imposing interest and penalties, and refusing benefit of the composite works contract rate is sustained; the appeal is dismissed and no remand is ordered.

Manner of distribution of Cenvat credit by Input Service Distributor - Optional nature of distribution under Rule 7 prior to 1-4-2016 - Pro rata distribution where distribution is chosen - Revenue neutrality of intra-company credit utilization - Extended period for recovery not invokable in absence of suppression

Manner of distribution of Cenvat credit by Input Service Distributor - Optional nature of distribution under Rule 7 prior to 1-4-2016 - Pro rata distribution where distribution is chosen - Entitlement to Cenvat credit of common input services availed at the head office for use in the Die Lube unit under Rule 7 of the Cenvat Credit Rules, 2004 for the period in issue. - HELD THAT: - The opening wording of Rule 7 is 'may distribute', and therefore during the period in issue the assessee was not obliged to distribute input service credit among its units. The mandatory compliance with subclauses of Rule 7 (including pro rata distribution on the basis of turnover) arises only if the assessee elects to distribute credit. Consequently, an assessee may legitimately avail and utilize Cenvat credit at one unit where the invoices and utilisation pertain to that unit; refusal to permit such availment when distribution was optional would be contrary to the rule as it stood during the period. The Tribunal regards the post-2016 substitution of 'may' by 'shall' as demonstrative that prior thereto distribution was elective, and similar conclusions in co-ordinate decisions support this view. Applying this legal position to the facts, the appellant was entitled to the Cenvat credit attributable to input services used for manufacture at the Die Lube unit when the distribution was not mandatory.

Credit availed and utilized at the Die Lube unit is permissible; the impugned disallowance under Rule 7 is set aside.

Revenue neutrality of intra-company credit utilization - Extended period for recovery not invokable in absence of suppression - Whether the extended period for recovery could be invoked and whether revenue suffered when credit was utilized at one unit instead of being distributed. - HELD THAT: - The Tribunal finds that utilization of available Cenvat credit at one unit of the same entity would be revenue neutral from the exchequer's perspective, since any disallowance at one unit would correspondingly be available to another unit. There was no finding of suppression or intention to evade payment; hence the conditions for invoking the extended period are not satisfied. On these factual and legal bases the demand raised by invoking extended limitation is unsustainable.

Extended period for recovery is not invokable and the demand fails on this ground.

Final Conclusion: The impugned order rejecting the appellant's claim of Cenvat credit is set aside; the appeal is allowed and the disallowance and demand are annulled, with consequential relief if any, in accordance with law.

Eligibility for Modvat credit - requirement of bill of entry in the name of the claimant under Rule 57A/57G of the Central Excise Rules, 1944 - proof of receipt and consumption of inputs as basis for credit - limitation on adjudicatory authority to go beyond the grounds of the show cause notice - precedent: Marmagoa Steel Ltd. (view upheld by the Supreme Court) concerning documentary requirement for credit

Eligibility for Modvat credit - requirement of bill of entry in the name of the claimant under Rule 57A/57G of the Central Excise Rules, 1944 - proof of receipt and consumption of inputs as basis for credit - limitation on adjudicatory authority to go beyond the grounds of the show cause notice - precedent: Marmagoa Steel Ltd. (view upheld by the Supreme Court) concerning documentary requirement for credit - Appellant entitled to Modvat credit despite bills of entry being in the name of another party, upon establishing receipt and consumption of duty paid inputs and where the show cause notice challenged only the name on the bills of entry. - HELD THAT: - The Tribunal applied the principle in Marmagoa Steel Ltd., as upheld by the Supreme Court, that Rule 57G/57A does not mandate that the bill of entry be in the name of the person claiming credit; what must be established is that the goods used as inputs were duty paid and that credit on those goods has not already been taken. The department's challenge in the show cause notices was confined to the absence of the appellant's name on the bills of entry, and the Commissioner (Appeal) was not entitled to travel beyond the grounds set out in the notices. The appellant produced bills of entry with endorsements in their favour together with entries in RG 23A and the gate register, which the Tribunal found sufficient to establish receipt of the goods at the appellant's manufacturing premises and their consumption in manufacture. On that basis the denial of credit solely on the ground of the bills being in another name was unsustainable. [Paras 3, 4]

Impugned order set aside and appeal allowed; appellant held eligible to avail Modvat credit for the period in issue.

Final Conclusion: The appeal is allowed; the order rejecting the appellant's claim is set aside and the appellant is entitled to avail Modvat credit for 1995-96 upon the documentary proof of receipt and consumption of duty paid inputs.

Entitlement to cash refund of pre-deposit made through Cenvat credit when credit cannot be utilized - finality of administrative order upon withdrawal of departmental appeal after remand - revival of original refund sanction where subsequent appellate proceedings are set aside - adjustment of pre-deposit against penalty and refund balance - res integra

Finality of administrative order upon withdrawal of departmental appeal after remand - revival of original refund sanction where subsequent appellate proceedings are set aside - Whether the show cause-cum-demand notice, adjudication and appellate order seeking recovery of the refunded amount survived after the Tribunal's order was set aside by the High Court and the department subsequently withdrew its appeal, and whether the earlier Order-in-Original sanctioning cash refund attained finality. - HELD THAT: - The Tribunal found that the departmental show cause, the adjudication and the appellate order were founded on the Tribunal's order dated 18.11.2016. The High Court set aside that Tribunal order and remanded the matter for fresh hearing, and thereafter the department withdrew its appeal in accordance with its litigation policy. Once the departmental appeal was withdrawn, the basis for the show cause notice and subsequent orders ceased to exist, thereby reviving the earlier Order-in-Original dated 30.11.2006 which had sanctioned the cash refund. The Order-in-Original sanctioning refund in cash was not challenged further by the department and therefore attained finality. For these reasons the Tribunal set aside the impugned order and allowed the appeal with consequential reliefs. [Paras 4, 6]

The show cause, recovery proceedings and appellate order based on the earlier Tribunal order had no subsisting basis after the High Court's remand and the department's withdrawal; the original cash refund order revived and attained finality, warranting allowance of the appeal.

Entitlement to cash refund of pre-deposit made through Cenvat credit when credit cannot be utilized - adjustment of pre-deposit against penalty and refund balance - res integra - Whether the appellant was entitled to refund in cash of the pre-deposit made through Cenvat Credit on the ground that it could not utilize the credit due to operation under an exemption notification. - HELD THAT: - On the merits the Tribunal observed that the question is no longer res integra and relied on existing High Court and Tribunal precedents holding that where the assessee cannot utilize Cenvat credit (for example, due to exemption), the amount paid through credit can be refunded in cash. The appellant had sought adjustment of the pre-deposit against the penalty and cash refund of the balance on the ground of operating under the exemption notification. Applying the settled position, the Tribunal held that the appellant was entitled to the cash refund of the pre-deposit balance. [Paras 5, 6]

The appellant is entitled to cash refund of the pre-deposit made through Cenvat Credit where the credit cannot be utilized; the appeal is allowed on merits.

Final Conclusion: The impugned order is set aside and the appeal is allowed: the original Order-in-Original sanctioning cash refund is revived and attained finality, and on the merits the appellant is entitled to cash refund of the pre-deposit made through Cenvat credit since it could not utilize the credit.

Unjust enrichment - Burden of proof on claimant for refund - Admissibility of Chartered Accountant certificate as proof against unjust enrichment - Effect of showing duty as expenditure in profit and loss account - Recovery of duty through invoice and passing on to buyers - Refund claim under Section 11B of the Central Excise Act, 1944

Unjust enrichment - Burden of proof on claimant for refund - Recovery of duty through invoice and passing on to buyers - Effect of showing duty as expenditure in profit and loss account - Admissibility of Chartered Accountant certificate as proof against unjust enrichment - Whether the refund claimed under Section 11B is barred by the principle of unjust enrichment - HELD THAT: - The Tribunal found that the determinative question was whether the excise duty paid under protest had been passed on to the buyers. The record, including the Range Officer's verification and the sale invoices, showed that excise duty was indicated on invoices and in the majority of cases the invoice value including excise duty was recovered from customers. The appellant's annual accounts for the relevant years reflected the duty as an expenditure in the Profit & Loss account and not as a 'receivable from Government', which indicates that the duty entered into the cost and was borne by customers. The Tribunal held that mere statements on invoices or a Chartered Accountant certificate asserting non-recovery were insufficient where the books and ledgers demonstrated recovery or treatment as expenditure; a C.A. certificate is only acceptable if based on and demonstrably supported by the accounting records and reasoning. Applying settled precedents, including authority treating the showing of the amount as expenditure as evidence that the burden has been passed on, the Tribunal concluded that the appellant failed to discharge the burden of proving non-passing-on of duty and therefore the refund is barred by unjust enrichment. [Paras 5, 6, 7, 8, 9]

Refund claim is barred by the principle of unjust enrichment as the duty was shown in invoices and treated as expenditure in accounts, and the appellant failed to prove that the duty was not passed on to buyers; appeal dismissed.

Final Conclusion: The appeal is dismissed. The Tribunal held that the appellant has not discharged the burden of proving non-passing-on of excise duty; the duty was recovered from buyers and treated as expenditure in accounts, therefore the refund claimed under Section 11B is hit by unjust enrichment.

Transaction value - discount known to buyer and seller not includable in transaction value - assessable value - post-manufacture / after-sale service expenses not includable in assessable value - flow back of consideration - interpretation of Section 4 - transaction value at time and place of removal - invocation of valuation rule for addition (Rule 6 Central Excise Valuation Rules, 2000)

Transaction value - discount known to buyer and seller not includable in transaction value - interpretation of Section 4 - transaction value at time and place of removal - Discounts shown in invoices to distributors are not includable in the assessable value and the transaction value declared by the appellant is the correct assessable value for levy of central excise duty. - HELD THAT: - The Tribunal applied the amended concept of "transaction value" under Section 4, holding that value for excise is to be determined at the time and place of removal and that discounts which are known and declared in the sale agreement/invoice at or prior to the sale reduce the transaction value. Where goods are sold to distributors at an invoiced price reflecting a trade discount, such discounted price is the agreed contractual price forming the transaction value. The department failed to establish any additional consideration flowing back to the manufacturer. In consequence, the quantity/trade discount reflected in the invoice cannot be added back to arrive at a higher assessable value. [Paras 5, 6]

Appeals allowed insofar as addition of invoice discounts to assessable value is set aside.

Post-manufacture / after-sale service expenses not includable in assessable value - flow back of consideration - The department's characterisation of the distributor 'base discount' as consideration for installation and after-sale services (rendered by distributors) and its inclusion in assessable value is incorrect. - HELD THAT: - The Tribunal found that installation and after sale services undertaken by distributors are post removal activities and not liabilities of the manufacturer at the place of removal. The impugned order's presumption that discounts represent reimbursement for such services was unsupported; there was no evidence of any flow back of monetary consideration to the appellant. Reliance was placed on Supreme Court and Tribunal precedents establishing that amounts for after sale services are not includable in assessable value. Accordingly, the discounts cannot be treated as consideration for services that would make them part of the transaction value. [Paras 1, 5]

Departmental contention that discounts were payment for after sale/installation services and therefore includable is rejected.

Invocation of valuation rule for addition (Rule 6 Central Excise Valuation Rules, 2000) - The impugned adjudication relied on Rule 6 in confirming demand although the show cause notices did not invoke Rule 6; however, the primary demand itself was set aside on merits. - HELD THAT: - The appellant pointed out that the show cause notices did not invoke Rule 6, while the order in original confirmed demand under Rule 6. The Tribunal did not uphold the demand on merits (see issues above) and, having set aside the demand, left no basis to sustain any Rule 6 addition. The Tribunal therefore rejected the impugned order as without merit. [Paras 2, 5, 6]

No addition under Rule 6 is sustained because the demand itself is set aside.

Penalty under Section 11AC - Appeal by the department seeking enhancement of penalty under Section 11AC is dismissed as infructuous. - HELD THAT: - The department sought enhancement of penalty after the adjudicating authority had imposed penalty. Because the Tribunal has set aside the demand for duty on merits, there is no basis to enhance or sustain the penalty. Accordingly the departmental appeal for enhancement is rendered moot and dismissed. [Paras 7]

Departmental appeal against penalty enhancement dismissed as infructuous.

Final Conclusion: The Tribunal allowed the appeals of the appellant, set aside the impugned order in original insofar as it required addition of invoice discounts to the assessable value for the periods February 2008 to September 2012 and October 2012 to March 2013, rejected the Revenue's characterisation of the discounts as payment for after sale services, and dismissed the departmental appeal for penalty enhancement as infructuous.

Entitlement to Cenvat credit on invoices issued by a second stage dealer - Validity of dealer invoices for availing Cenvat credit under Rule 7(1) of the Cenvat Credit Rules - Receipt of goods directly in user's premises as determinative for credit eligibility - Correlative linkage between goods received by the user and dealer's invoice - Consignee status vis-a -vis buyer's entitlement to Cenvat credit

Entitlement to Cenvat credit on invoices issued by a second stage dealer - Receipt of goods directly in user's premises as determinative for credit eligibility - Correlative linkage between goods received by the user and dealer's invoice - Cenvat credit could not be denied to the appellant merely because the invoice was issued by a second stage dealer and the appellant was shown as consignee while another entity was shown as buyer. - HELD THAT: - The Tribunal held that where the goods were received at the appellant's factory and recorded in its books, and the invoices clearly identified the appellant (including ECC details), the invoices issued by a second stage dealer are valid documents for taking Cenvat credit. Relying on the principle embodied in Rule 7(1) of the Cenvat Credit Rules and earlier Tribunal decisions, the decisive considerations are (a) direct receipt of inputs by the user-manufacturer at its premises, and (b) the ability to correlate the goods received by the user with the dealer's invoice. Mere mention of another party as the customer on the dealer's invoice does not render the invoice ineligible where the consignee received the goods and proper co-relation is established. Applying that reasoning to the facts, the Tribunal found parity with the cited precedents and allowed the credit.

Appellant entitled to Cenvat credit on the invoices issued by the second stage dealer; impugned denial set aside.

Final Conclusion: Appeal allowed; Cenvat credit granted to the appellant and the impugned order denying credit is set aside with consequential relief.

Summary suit based on dishonour of cheques - Issuance of cheque substitutes original loan liability - Leave to defend in summary proceedings - Falsehood in affidavit disentitles party to relief - Grant of decree on summary procedure where no real triable issue - Award of interest in absence of agreed rate

Summary suit based on dishonour of cheques - Issuance of cheque substitutes original loan liability - Grant of decree on summary procedure where no real triable issue - Plaintiff entitled to summary decree on the basis of dishonour of cheques issued by the Defendants. - HELD THAT: - The Court found that the plaint and the letter dated 10th October, 2019 (Exhibit A) recorded the Defendants' admission of receipt of monies and agreement to repay, and that the cheques issued in Annexure A were given for repayment. Citing the principle that when payment of a loan is made by cheque the liability under the loan is substituted by the liability to honour the cheque, a distinct obligation arises under the Negotiable Instruments regime upon dishonour. The Defendants did not deny issuance of the cheques or their dishonour and, accordingly, there was no real triable issue to warrant leave to defend; the Summons for Judgment was therefore made absolute and the suit decreed on the summary procedure. [Paras 5, 6, 7, 17]

Summons for Judgment allowed and suit decreed on the basis of dishonour of the cheques and substitution of the original loan liability by the cheque liability.

Falsehood in affidavit disentitles party to relief - Leave to defend in summary proceedings - Defendants' false statements in the Affidavit in Reply disentitled them to leave to defend the Suit. - HELD THAT: - The Defendants asserted in the Affidavit in Reply that the letter relied upon by the Plaintiff was fraudulently altered and that they did not know a named signatory. The Court examined the document produced by the Defendants (Exhibit C) and observed internal inconsistencies and that the Defendants' sworn statements were false and misleading. Applying the principle that a party who bases its case or defence on falsehood may be summarily thrown out and disentitled to relief, the Court held that the Defendants were disentitled to leave to defend and their defences could not be entertained on merit. [Paras 15, 16]

Unconditional leave to defend refused; Defendants disentitled from having defences considered because of falsehood in affidavits.

Grant of decree on summary procedure where no real triable issue - Leave to defend in summary proceedings - Even on merits, the Defendants' contentions that the amounts were investments (not loans) and that cheques required prior consent were untenable. - HELD THAT: - The Court observed that Exhibit C (the document which the Defendants relied upon) itself referred to the cheques in Annexure A as repayment of loan, undermining the Defendants' contention that the transfers were investments. The legal position that issuance of a cheque for repayment substitutes the original liability was applied to hold that the Defendants' arguments were frivolous and devoid of merit. Consequently, there existed no genuine triable issue requiring trial. [Paras 17]

Defendants' substantive defences rejected as frivolous; no triable issues found to warrant trial.

Award of interest in absence of agreed rate - Interest awarded on the decretal sum from the date the cheques were payable; rate fixed by the Court in absence of contractual interest rate. - HELD THAT: - The Court noted absence of any contract stipulating the rate of interest payable on the sum repayable under the cheques. In exercise of its discretion it determined that interest should run from 31st December, 2019 (the date the cheques were payable) and fixed the rate to be applied to the decretal amount. The final order records the rate and the period from which interest is to be computed until realisation. [Paras 18]

Interest awarded from 31st December, 2019 until realisation at the rate specified in the decree.

Final Conclusion: The Court allowed the Summons for Judgment, decreed the suit on the basis of dishonour of the cheques and the substitution of the original loan liability by the cheque liability, refused leave to defend because of falsehood in the Defendants' affidavit and rejected their substantive defences as frivolous, and directed payment of the decretal sum with interest from 31st December, 2019 together with refund of court fees as applicable.

Grant of bail under Section 37 NDPS Act - prima facie satisfaction that the accused is not guilty - inadmissibility of disclosure/confession statements in evidence - presumption of possession and culpable mental state under the NDPS statutory scheme - jail is the rule and bail is the exception in NDPS cases (twin conditions of Section 37)

Grant of bail under Section 37 NDPS Act - prima facie satisfaction that the accused is not guilty - jail is the rule and bail is the exception in NDPS cases (twin conditions of Section 37) - Petition for regular bail under the NDPS Act was allowed on the ground that the court was prima facie satisfied that the petitioner may not be guilty and would not commit an offence while on bail. - HELD THAT: - On a broad prima facie appraisal of the material on record the Court found that the available evidence did not establish that the petitioner was the owner or in conscious possession of the intercepted package. The sequence of events, contemporaneous statements and the courier-person's statement suggested that the petitioner acted as an intermediary who facilitated booking at the request of a foreign national and sent receiver details by WhatsApp. Six months elapsed between arrest and filing of the complaint without fresh incriminating material against the petitioner. Applying the standard articulated by the Supreme Court in Mohd. Muslim v. State (NCT of Delhi), the Court concluded that, on the material presented at the bail stage, it was reasonably satisfied prima facie that the petitioner may not be guilty and was not likely to re-offend. Having balanced the statutory presumption principle with the limited evidence, the Court exercised its discretion to grant bail subject to specified conditions and furnishing of bonds. [Paras 14, 15, 16, 17, 18]

Bail granted on furnishing personal bond and surety with conditions.

Inadmissibility of disclosure/confession statements in evidence - prima facie satisfaction that the accused is not guilty - The Court declined to rely on the disclosure alleged to have been made by the petitioner on 19th November 2022 for negating bail, treating such disclosure as inadmissible for the purpose of establishing guilt at the bail stage. - HELD THAT: - The Court observed that the only material suggesting the petitioner's knowledge of contraband was a disclosure recorded three days after initial interrogation. In the absence of admissible corroborative evidence and having regard to settled law on inadmissibility of such confessions for substantive proof, the Court held that reliance on the disclosed statement to deny bail would be impermissible at this stage. Consequently, the alleged confession could not be the determinative basis to find conscious possession or guilt for the purposes of the bail application. [Paras 13, 14]

Disclosure recorded on 19th November 2022 treated as inadmissible and not relied upon to refuse bail.

Presumption of possession and culpable mental state under the NDPS statutory scheme - presumption of possession and culpable mental state under the NDPS statutory scheme - The Court held that it would be premature to apply statutory presumptions of possession and culpable mental state against the petitioner at the bail stage. - HELD THAT: - While the prosecution relied on statutory presumptions under the NDPS enactment, the Court found that the material then available showed the petitioner was not shown to be the packer or owner of the contraband and that there was no recovery from him. The evidence pointed to involvement of foreign nationals and to the petitioner acting as an intermediary. Given the lack of direct evidence linking the petitioner to conscious possession and the inadmissibility of the post-arrest disclosure relied upon by the prosecution, the Court concluded that invoking the presumptions to deny bail would be premature on the existing record. [Paras 11, 13, 14]

Statutory presumptions of possession and culpable mental state not applied at the bail stage.

Final Conclusion: On a prima facie assessment of the record the High Court granted regular bail to the petitioner in the NDPS prosecution, concluding that the material did not establish conscious possession or guilt and that the disclosure relied upon by the prosecution could not be treated as admissible evidence for denying bail; bail was subject to furnishing of bonds and specified conditions.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - management and control vested in the Interim Resolution Professional under Section 17 IBC - duties and authority of Interim Resolution Professional under Section 18 IBC - prosecution under Section 138 of the Negotiable Instruments Act - incapacity of banking institutions to honour instruments during moratorium

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - management and control vested in the Interim Resolution Professional under Section 17 IBC - prosecution under Section 138 of the Negotiable Instruments Act - incapacity of banking institutions to honour instruments during moratorium - Whether the summoning order under Section 138 of the Negotiable Instruments Act against the petitioners (promoters/directors) could be sustained where CIRP had been admitted and the IRP had directed banks not to permit debit transactions. - HELD THAT: - The Court held that admission of CIRP on 04.02.2020 triggered the moratorium under Section 14 IBC and, by operation of Sections 17 and 18 IBC, management and control of the corporate debtor's affairs, including authority to operate bank accounts, vested in the IRP. The IRP's communication dated 07.02.2020 instructing banks not to allow debit transactions meant that, at the time of presentation of the cheques on 12-13.02.2020, the petitioners were not in control or management of the company's accounts and the banking institutions could not lawfully encash the instruments. Distinguishing P. Mohanraj by reference to facts, the Court observed that in the present case the moratorium and IRP's directive preceded presentation of the cheques, rendering the instruments incapable of encashment and negating criminal liability of the petitioners under Section 138. Observations in other authorities relied upon by the respondent were treated as not determinative of this case where the moratorium and IRP control were effective prior to cheque presentation. [Paras 15, 16, 18, 19, 21]

Summoning order dated 24.11.2020 in CC No. 7754/2020 is quashed as the cheques were incapable of encashment after commencement of CIRP and the IRP had authority over the accounts, absolving the petitioners of criminal liability under Section 138 in the circumstances.

Final Conclusion: The petition is allowed; the magistrate's summoning order in the complaint arising from the dishonour of the cheques is quashed because CIRP had commenced and the IRP had assumed control of the corporate debtor's accounts before the cheques were presented, rendering prosecution of the petitioners under Section 138 NI Act unsustainable in the facts of this case.