TaxTMI Updates e-Newsletter
Jun 23,2022

Quantification of interest under the Central Goods and Services Tax Act, 2017 (Section 50) - writ of certiorari challenging tax demand - remand for fresh quantification and verification - opportunity of personal hearing for assessment/quantification - setting aside and re doing an administrative demand order

Quantification of interest under the Central Goods and Services Tax Act, 2017 (Section 50) - setting aside and re doing an administrative demand order - Impugned order demanding interest was set aside and remitted for fresh quantification. - HELD THAT: - The court found that the core controversy related to rival computations of interest and tax between the petitioner and the department, and that no substantive liability was finally determined except the need for proper quantification. By consent of counsel and in view of the petitioner's request for time and submissions already made, the impugned communication demanding interest was set aside and the matter remitted to the respondent for re computation and issuance of a fresh demand based on deliberations between the parties. The Court directed that the re doing of the order be completed within the time stipulated in the order following the meeting fixed between the parties. The writ petition was allowed and the impugned order quashed to the limited extent of directing fresh quantification. [Paras 6, 7]

Impugned order set aside and remitted for fresh quantification; writ petition allowed.

Opportunity of personal hearing for assessment/quantification - remand for fresh quantification and verification - Parties were directed to meet for deliberation and the petitioner was given an opportunity to appear for personal hearing to enable proper quantification, with a mandate to raise a fresh demand thereafter. - HELD THAT: - Recognising that the dispute was confined to the computation of interest and that the petitioner had sought personal hearing and furnished its computation, the Court directed the petitioner to appear before the respondent on the specified date and time without further notice. The parties were required to deliberate and reconcile rival computations so that the respondent could raise a fresh demand of interest payable. The direction effectively remanded the matter for verification and reconsideration rather than deciding the quantum on merits in the writ proceedings. [Paras 6, 7]

Petitioner to appear for deliberation/personal hearing; parties to reconcile computations and respondent to raise fresh demand.

Final Conclusion: Writ petition allowed by consent; impugned order demanding interest quashed to the extent indicated, matter remitted for personal hearing, reconciliation of rival computations and fresh quantification by the respondent within the time prescribed by the Court.

Anticipatory bail - discretion under Section 438 of the Code of Criminal Procedure - custodial interrogation - economic offence - summons under Section 70 of the CGST Act - relevancy of statement under Section 136 of the CGST Act - parameters in Siddharam Satlingappa Mhetre for grant of anticipatory bail - guidelines in Sushila Aggarwal for considering anticipatory bail applications

Anticipatory bail - custodial interrogation - economic offence - summons under Section 70 of the CGST Act - relevancy of statement under Section 136 of the CGST Act - discretion under Section 438 of the Code of Criminal Procedure - parameters in Siddharam Satlingappa Mhetre for grant of anticipatory bail - guidelines in Sushila Aggarwal for considering anticipatory bail applications - Whether discretion under Section 438 CrPC should be exercised to grant anticipatory bail to the applicant who is alleged to be mastermind and a prime beneficiary of a large-scale GST fraud - HELD THAT: - The Court declined to exercise its discretionary jurisdiction under Section 438 CrPC and rejected the anticipatory bail application. The Court accepted the prosecution's contention, supported by confidential material, that the applicant was the mastermind and a prime beneficiary of an extensive economic offence and that custodial interrogation would be necessary in the investigation. The decision of a Coordinate Bench refusing similar relief to a co-accused, which was not interfered with by the Supreme Court, was treated as a relevant comparative precedent given the commonality of facts. The Court held that at the anticipatory-bail stage the asserted limited evidentiary value of statements under Section 70 of the CGST Act and the conditions for admissibility under Section 136 are not a ground to deny custodial interrogation or to compel grant of anticipatory bail; issues as to admissibility under the CGST provisions are not to be determinative at this stage. The Court applied the governing principles laid down by the Supreme Court (including the parameters in Siddharam Satlingappa Mhetre and the guidance in Sushila Aggarwal), emphasising seriousness of the charges, the scale and intricacy of the alleged fraud, perceived non-cooperation and the need for custodial interrogation, and therefore refused anticipatory bail. [Paras 12, 13, 14, 15, 16]

Anticipatory bail refused; application rejected.

Final Conclusion: The High Court refused to grant anticipatory bail to the applicant, concluding that custodial interrogation was necessary in the prosecution's ongoing investigation into a substantial economic offence and that the statutory and judicial arguments relied upon by the applicant did not merit exercise of discretion in his favour.

Deduction under section 36(1)(viii) - profits derived from eligible business computed under the head 'profits & gains of business or profession' - interest on SLR investments treated as income eligible for deduction under section 36(1)(viii) - apportionment of other income between eligible and non eligible business for computing deduction under section 36(1)(viii) - disallowance under section 14A read with Rule 8D of the Income tax Rules - presumption of investment funded by own funds and Rule 8D(2)(ii) - consideration of only those investments yielding exempt income for Rule 8D(2)(iii) - employees' contribution to PF & ESI and section 36(1)(va) read with section 43B - applicability of amendment to section 36(1)(va) from assessment year 2020 21 - remand for verification and limited re examination by Assessing Officer

Deduction under section 36(1)(viii) - profits derived from eligible business computed under the head 'profits & gains of business or profession' - interest on SLR investments treated as income eligible for deduction under section 36(1)(viii) - apportionment of other income between eligible and non eligible business for computing deduction under section 36(1)(viii) - Computation of deduction under section 36(1)(viii) and treatment of various heads of income for the purpose of arriving at profits derived from eligible business - HELD THAT: - Section 36(1)(viii) grants deduction up to 20% of profits derived from eligible business computed under the head 'profits & gains of business or profession'. Income assessed under heads other than 'profits & gains of business or profession' is not per se eligible for deduction under section 36(1)(viii) unless shown to be profit of the eligible business. The Tribunal recorded that interest from Government securities (SLR) in the assessee's earlier case is a settled position in favour of the assessee and, accordingly, disallowance by the Assessing Officer of deduction in respect of interest on SLR was not sustainable. However, other items - investment income, profit on sale of current investments, profit on sale of fixed assets, miscellaneous income and similar items reported as 'other income' - cannot automatically be included unless the assessee demonstrates apportionment to the eligible housing finance business. The CIT(A) directed exclusion only of income pertaining to the housing finance segment and the assessee accepted that direction, but the record before the Tribunal did not clearly show apportionment. For these reasons the Tribunal accepted that SLR interest is allowable but set aside the remainder of the issue to the file of the Assessing Officer for limited purpose: verification of apportionment and recomputation of deduction following the Tribunal's earlier directions for the assessee's 2005 06 assessment year. [Paras 9, 10, 11]

Interest earned on SLR investments is eligible for consideration under section 36(1)(viii); other incomes reported as 'other income' are not automatically eligible and the matter is remitted to the Assessing Officer to verify apportionment and recompute deduction in accordance with the Tribunal's directions.

Disallowance under section 14A read with Rule 8D of the Income tax Rules - presumption of investment funded by own funds and Rule 8D(2)(ii) - consideration of only those investments yielding exempt income for Rule 8D(2)(iii) - Validity and computation of disallowance under section 14A read with Rule 8D - need to invoke Rule 8D, verification of funding (own funds) and segregation of investments yielding exempt income - HELD THAT: - The assessee earned exempt income (dividends and interest on NHB bonds) and had not made any suo motu disallowance; the Assessing Officer invoked Rule 8D to compute a disallowance. Given common books for taxable and exempt incomes, invocation of Rule 8D was appropriate. As to interest disallowance under Rule 8D(2)(ii), settled precedent establishes that if the assessee proves investments were made from own funds, the presumption of funding from borrowed money is rebutted; the assessee claimed excess own funds but did not produce contemporaneous cash flow details to prove availability when investments were made. As to other expenses under Rule 8D(2)(iii), established law requires consideration only of investments that actually yielded exempt income in the relevant year. The assessee presented computations for the first time before the Tribunal and the lower records did not contain sufficient details. Consequently the Tribunal directed remand to the Assessing Officer to verify availability of own funds, to segregate investments that yielded exempt income in the relevant years, and to recompute disallowance under Rule 8D, restricting any disallowance to the extent of exempt income if necessary in light of the Delhi High Court decision followed by the CIT(A). [Paras 15, 16, 17, 18]

Invocation of Rule 8D was justified; the matter is remanded to the Assessing Officer to verify source of funds, segregate investments that yielded exempt income and recompute disallowance under Rule 8D, restricting disallowance to the extent of exempt income where applicable.

Employees' contribution to PF & ESI and section 36(1)(va) read with section 43B - applicability of amendment to section 36(1)(va) from assessment year 2020 21 - remand for verification - Whether employees' contributions to PF and ESI remitted after the statutory due date but before the due date for filing the return under section 139(1) are disallowable under section 36(1)(va) read with section 43B for the impugned years - HELD THAT: - The Tribunal noted its prior decision in a recent case that the amendment to section 36(1)(va) brought by Finance Act, 2020 applies from AY 2020 21, and that contributions remitted after the statutory due date but on or before the due date for filing the return under section 139(1) cannot be disallowed under section 36(1)(va). The assessee claimed payments were made on or before the return filing due date, but did not place the payment details before the Tribunal. On that basis the Tribunal remitted the issue to the Assessing Officer to verify the actual dates of remittance, directing deletion of additions if payments were made on or before the section 139(1) filing due date for the relevant year. [Paras 20]

Issue remitted to the Assessing Officer to verify dates of payment of employees' contributions; if payments were made on or before the due date for filing the return under section 139(1), additions under section 36(1)(va) read with section 2(24)(x) are to be deleted.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes, upheld that interest on SLR is to be treated in accordance with the assessee's earlier favourable Tribunal decision, and remitted the remaining disputed issues - computation under section 36(1)(viii), disallowance under section 14A/Rule 8D (including verification of own funds and segregation of investments yielding exempt income), and the employees' contribution issue under section 36(1)(va) - to the Assessing Officer for limited verification and recomputation in accordance with the directions given.

Exemption under section 54F of the Income-tax Act - proviso to section 54F - ownership of more than one residential house - proviso to section 54F - purchase of another residential house within one year - joint ownership and entitlement to exemption under section 54F - proviso to section 54F - income from residential house chargeable under "Income from house property"

Proviso to section 54F - ownership of more than one residential house - joint ownership and entitlement to exemption under section 54F - Whether joint ownership of the Indiabulls flat resulted in the assessee owning more than one residential house on the date of transfer of the original asset so as to disentitle him from exemption under section 54F. - HELD THAT: - The Tribunal examined authorities dealing with whether fractional or joint ownership of a residential property renders the assessee an owner of more than one house for the purposes of the proviso to section 54F. The decision notes conflicting precedents but analyses that the issue of joint ownership being a bar had been dealt with by various benches and High Courts. Having considered the rival submissions and the citations furnished by the parties, the Tribunal found force in the assessee's arguments that the authorities relied upon and the facts favoured allowing the claim. The Tribunal accordingly did not accept the assessing officer's denial which treated the Indiabulls booking/application formalities and the alleged lack of exclusive ownership as sufficient to deny exemption. The reasoning reflects acceptance of the legal position advanced by the assessee that joint ownership in the circumstances did not operate to deny the exemption under section 54F. [Paras 12, 13]

Joint ownership of the Indiabulls flat did not disentitle the assessee from exemption under section 54F; the denial by the assessing officer and CIT(A) on that ground was rejected.

Proviso to section 54F - purchase of another residential house within one year - proviso to section 54F - income from residential house chargeable under "Income from house property" - Whether the conditions in the proviso to section 54F (including the purchase-within-one-year limb and the requirement under clause (b) that income from other residential house be chargeable under "Income from house property") operated to deny the assessee's claim. - HELD THAT: - The Tribunal reviewed the chronology of payments, booking, execution and registration, and possession, and noted that the Indiabulls property was under construction and possession was handed over only on 28.12.2016. Consequently, income from that property was not chargeable under the head "Income from house property" during the relevant period. The Tribunal held that the condition in clause (b) of the proviso-requiring such income to be chargeable-was not satisfied. Taking into account the facts and relevant authorities and having found the assessee's arguments persuasive on these points, the Tribunal concluded that the proviso's disqualifying conditions did not operate to deny the exemption. [Paras 11, 12, 13]

The disqualifying conditions in the proviso to section 54F did not apply: the requirement in clause (b) was not satisfied (no income chargeable from the Indiabulls property during the relevant period), and consequently the assessee's claim was not barred by the proviso.

Final Conclusion: The appeal is allowed: the Tribunal found that the proviso to section 54F did not disentitle the assessee to the claimed deduction, accepted the assessee's contentions on joint ownership and on the chargeability of income from the Indiabulls property, and directed the assessing officer to grant consequential relief.

Disallowance on account of alleged bogus purchases - principle of natural justice - right to cross-examine adverse departmental witness - evidentiary value of third party statements - corroboration by contemporaneous business records and banking channel evidence

Disallowance on account of alleged bogus purchases - evidentiary value of third party statements - corroboration by contemporaneous business records and banking channel evidence - principle of natural justice - right to cross examine adverse departmental witness - Addition made by AO and confirmed by CIT(A) in respect of alleged bogus purchases of Rs.39,98,522/- (scaled to Rs.6,50,160/- by CIT(A)) is not sustainable. - HELD THAT: - The Tribunal found that the Assessing Officer and the CIT(A) based the finding of bogus purchases primarily on information from the Investigation Wing and on a statement attributed to Shri R.P. Bhatia, a third party whose connection to the supplier was not established. The assessee produced contemporaneous documentary evidence - invoices/ledgers, VAT entry documentation at State border, excisable stock registers, sales records, VAT returns and bank payments - showing movement of goods and payments through banking channels, and there was no rejection of books or quantification discrepancy in the accounts. The Tribunal held that using the untested statement of an extraneous witness without providing the assessee an opportunity to confront and cross examine that witness violated the salutary principles of natural justice and improperly elevated the evidentiary weight of that statement over the assessee's documentary proof. Once the statement of Shri Bhatia is excluded for that reason, the remaining contemporaneous records sufficiently corroborate the genuineness of the purchases and the Revenue failed to dislodge their sanctity. On these grounds the additions sustained on the basis of the third party statement could not be upheld. [Paras 8, 9]

The additions in relation to the alleged bogus purchases are reversed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2015-16, set aside the addition arising from alleged bogus purchases because the departmental case rested on an untested third party statement and the assessee's contemporaneous documentary and banking evidence established the genuineness of purchases; the assessee was entitled to cross examine the witness and denial of that opportunity vitiated the proceedings.

Treatment of interest income as business income versus income from other sources - set off of interest income against interest expenditure - commercial principles of accountancy for determination of real income - prior period expenses and allowance of depreciation on demerger - depreciation under section 32 of the Income-tax Act, 1961

Treatment of interest income as business income versus income from other sources - set off of interest income against interest expenditure - commercial principles of accountancy for determination of real income - Whether interest earned on short-term/flexi bank deposits is to be treated as business income or income from other sources and whether such interest income is eligible to be netted against interest expenditure. - HELD THAT: - The Tribunal noted the deposits were short-term (maximum 91 days) and arose from surplus funds that were part of the assessee's loan liabilities; the assessee required these funds in the immediate future and the deposits were not made as an independent profit-making activity. The Bench accepted that, irrespective of formal classification under heads of income, the interest earned had effectively reduced the assessee's interest burden on loans and therefore warranted netting against interest outgo. The Tribunal relied on the commercial-accounting principle that real income is to be determined on ordinary commercial principles and that permissible expenses must be set off to arrive at true business profit, as reflected in the cited Supreme Court authority. The Tribunal expressly declined to finally determine the head of income for these receipts, but directed that the disallowance made by the Assessing Officer and confirmed by the CIT(A) be deleted and that the AO allow set off of the interest income against interest expenditure. [Paras 8]

Disallowance deleted; AO directed to permit netting of the interest income against interest expenditure.

Prior period expenses and allowance of depreciation on demerger - depreciation under section 32 of the Income-tax Act, 1961 - Admissibility and treatment of prior period expenses (including depreciation attributable to assets received on demerger and arrears) claimed in the relevant assessment years. - HELD THAT: - The Tribunal observed that depreciation is compulsorily allowable under the statute and that the assessee's entitlement to depreciation arising from demerger of GRIDCO and other prior-year expenses came to light during the relevant assessment year. While the Assessing Officer's stance that prior period items relate to earlier years was acknowledged, the Bench held that the assessee should not be deprived of allowances genuinely relating to earlier years simply because details surfaced later. Accordingly, the Tribunal remitted the matter to the file of the AO with a direction to consider and allow such expenses for the specific earlier years to which they pertain. [Paras 11]

Issue partly allowed and restored to the Assessing Officer for consideration and allowance for the respective earlier years to which the expenses relate.

Final Conclusion: Appeals partly allowed: disallowance of interest income deleted and set off against interest outgo directed; prior period expenses remitted to the Assessing Officer for consideration and allowance in the years to which they pertain.

Supervisory jurisdiction under section 263 of the Income Tax Act, 1961 - order erroneous and prejudicial to the interest of the revenue - failure to make requisite enquiries / inadequate verification by Assessing Officer - remand for fresh examination and reassessment - applicability of provisions of section 14A regarding expenditure attributable to exempt income - reconciliation of TDS mismatch - classification and taxation of pre operative/interest income - examination of unsecured loans and inter company balances - allowability of depreciation on leasehold assets - treatment of corporate social responsibility expenditure

Supervisory jurisdiction under section 263 of the Income Tax Act, 1961 - order erroneous and prejudicial to the interest of the revenue - failure to make requisite enquiries / inadequate verification by Assessing Officer - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 and setting aside of the assessment order dated 21-03-2016. - HELD THAT: - The Tribunal, on review of the record and the material placed before it, upheld the Pr. CIT's conclusion that the assessment order passed by the Assessing Officer was rendered erroneous and prejudicial to the revenue by reason of lack of requisite enquiries and inadequate verification. The Pr. CIT's show cause identified specific areas (set out in the impugned order) which were not considered during assessment despite scrutiny being conducted, and the assessee failed to place detailed material in revision proceedings or before the Tribunal to demonstrate that such matters had been properly examined. The Tribunal applied the settled principle that an assessing order which proceeds on incorrect assumptions of fact or without making enquiries called for by the circumstances may be subject to revision under section 263, and found no reason to interfere with the Pr. CIT's invocation of that jurisdiction. [Paras 7, 8]

The Pr. CIT rightly invoked revisional jurisdiction under section 263; the grounds raised by the assessee against the impugned order are dismissed.

Remand for fresh examination and reassessment - applicability of provisions of section 14A regarding expenditure attributable to exempt income - reconciliation of TDS mismatch - classification and taxation of pre operative/interest income - examination of unsecured loans and inter company balances - allowability of depreciation on leasehold assets - treatment of corporate social responsibility expenditure - Whether the matters identified in the show cause (section 14A issue, unsecured loans, TDS mismatch, interest/pre operative income apportionment, depreciation on leasehold assets, CSR expenses) require fresh examination by the Assessing Officer. - HELD THAT: - The Tribunal noted that the Pr. CIT's show cause (reproduced in the impugned order) enumerated several specific items which were not addressed in the assessment order. Given the absence of documentary substantiation before the Pr. CIT and before the Tribunal, and the lack of discussion on these points in the assessment order, the Tribunal agreed that these matters were not properly examined and therefore fell within the scope of revisional interference. Consequently, the Tribunal endorsed the Pr. CIT's direction that the assessment be set aside insofar as these specific points are concerned and remitted them to the Assessing Officer for verification. The Assessing Officer is directed to afford the assessee a reasonable opportunity to produce evidence and thereafter pass a fresh assessment in accordance with law. [Paras 5, 7]

The listed issues were remitted to the Assessing Officer for fresh examination and assessment as directed by the Pr. CIT.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the Pr. CIT's exercise of revisional jurisdiction under section 263, and the assessment is set aside and remitted to the Assessing Officer for fresh examination of the specified issues with liberty to the assessee to produce relevant evidence.

Slump sale - transfer of an undertaking as a going concern - assumption of liabilities in business transfer - valuation of transferred assets - bad debt deduction under Section 36(1)(vii) read with Section 36(2) - written off trade debts featured in unit accounts - recovery and offer to tax in a subsequent year - compensation for non achievement of performance parameters - treatment of compensation as capital receipt and adjustment against cost/WDV for depreciation - belated payment of employees' provident fund contribution - low tax effect as a ground for non pursuance of an appeal

Slump sale - transfer of an undertaking as a going concern - assumption of liabilities in business transfer - valuation of transferred assets - Whether the transfer of the Biax Division Unit II constituted a slump sale - HELD THAT: - The Tribunal and the CIT(A) examined the business transfer agreement and factual matrix and found that assets were sold as individual items with separate valuations (including land), the undertaking was not transferred as a going concern, financial assets were retained by the assessee and the transferee did not take over all loans and liabilities. On these findings, and having placed reliance on the Tribunal's earlier decision in Tongani Tea Co. Ltd. (upheld by the Division Bench), the transfer could not be treated as a slump sale within the meaning of the Act. The Court found no error in the factual and legal conclusion reached by the lower authorities and affirmed their approach. [Paras 6]

Answered against the revenue; transfer held not to be a slump sale.

Bad debt deduction under Section 36(1)(vii) read with Section 36(2) - written off trade debts featured in unit accounts - transfer of sundry debtors in business transfer - recovery and offer to tax in a subsequent year - Whether the Assessing Officer was justified in disallowing the bad debts written off by the assessee - HELD THAT: - The CIT(A) found and the Tribunal affirmed that the debts in question were written off as trade debts of the Biax Division II, that those sundry debtors were not transferred to the joint venture on the date of transfer, and that the debts had been written off in the books in the assessment year under consideration. The Tribunal also noted that the amounts were subsequently recovered in 2006-07 and offered to tax, a fact the revenue did not rebut. On this factual and legal basis, the lower authorities rightly allowed the deduction under the relevant provisions. [Paras 7]

Answered against the revenue; disallowance of bad debts deleted.

Compensation for non achievement of performance parameters - treatment of compensation as capital receipt and adjustment against cost/WDV for depreciation - adjustment of depreciation to reflect reduction in cost - Whether the compensation received from M/s. Batenfeld, UK reduced the cost of machinery entirely or was a capital receipt requiring limited adjustment to depreciation - HELD THAT: - The Assessing Officer treated the entire compensation as reducing the cost of machinery. The CIT(A) and the Tribunal, after examining the settlement/agreements, concluded that only a portion (10% of the invoice value) related to waiver and reduced the capitalised cost and written down value for depreciation, while the balance constituted a capital receipt and did not entirely reduce the cost. The Tribunal applied the relevant principle noted by the CIT(A) and considered the nature and terms of the settlement, holding the lower authorities' restrictive adjustment to be correct. The Court found no error warranting interference. [Paras 8]

Answered against the revenue; Tribunal and CIT(A) upheld in restricting the reduction in cost and allowing the balance as capital receipt.

Belated payment of employees' provident fund contribution - low tax effect as a ground for non pursuance of an appeal - Whether the disallowance for belated remittance of employee's contribution to the Provident Fund should be sustained - HELD THAT: - The Tribunal followed this Court's decision in Vijay Shree Ltd. and granted relief to the assessee. The High Court noted that other appeals on the same issue are pending before the Court, but observed that the tax effect in the present appeal is very small. On that basis the Court declined to decide the substantive question and did not remit or adjudicate the issue further. [Paras 9]

Left open by the Court; appeal dismissed on this point on the ground of low tax effect.

Final Conclusion: The revenue's appeal is dismissed. Substantial questions of law Nos. 1 to 8 and 10 are answered against the revenue; question No. 9 is left open and the appeal is not pursued on that point due to low tax effect.

Reopening of assessment under Section 147/148 - Proviso to Section 147 - failure to disclose fully and truly all material facts - Change of opinion doctrine - Reason to believe and requirement of tangible/new material - Admissibility of expenses prohibited by law under Section 37(1) - Reliance on administrative circular as material

Reopening of assessment under Section 147/148 - Proviso to Section 147 - failure to disclose fully and truly all material facts - Change of opinion doctrine - Reason to believe and requirement of tangible/new material - Reliance on administrative circular as material - The notice under Section 148 and consequent proceedings under Section 147 for A.Y. 2014-15 were not validly initiated and are quashed because the reopening amounted to a prohibited change of opinion and there was no failure by the assessee to disclose fully and truly all material facts. - HELD THAT: - The Court found that the Assessing Officer had the material facts, had raised specific queries on the expenditure in issue during the original scrutiny and had received the petitioner's detailed response (see affidavit and record). The recorded reasons for reopening rely on the same financial information and on Circular No.5/2012, which pre-dated and was available at the time of the original assessment; therefore it did not constitute new tangible material that could justify reopening after the four-year period. The reasons recorded do not identify any particular material fact which was not truly and fully disclosed by the assessee; instead they reflect a re-evaluation of the admissibility of the expenditure (a change of opinion). Citing the principle that an assessment cannot be reopened merely for change of opinion and that after four years reopening requires demonstration of failure to disclose material facts, the Court held the proviso to Section 147 was not satisfied and the reassessment could not be validly initiated. [Paras 16, 18, 19]

The notice dated 26 March 2021 under Section 148 and the order on objections dated 25 January 2022 are quashed for being based on impermissible change of opinion and absence of failure to disclose material facts.

Final Conclusion: Petition allowed; the notice under Section 148 dated 26 March 2021 and the order dated 25 January 2022 are quashed and set aside. Petition disposed of with no order as to costs.

Permanent establishment - fixed place of business - Article 5(2)(c) of Indo-Mauritius DTAA - Article 5(3)(e)(ii) of Indo-Mauritius DTAA - supply of information - preparatory or auxiliary activities - survey under section 133A of the Income Tax Act

Permanent establishment - Article 5(2)(c) of Indo-Mauritius DTAA - Article 5(3)(e)(ii) of Indo-Mauritius DTAA - fixed place of business - The Andheri office did not constitute a permanent establishment under Article 5(2)(c) because its activities fell within the exclusion in Article 5(3)(e)(ii). - HELD THAT: - The Tribunal examined documents seized during the survey and the roles and functions of employees at the Andheri office, finding that the office performed logistics, coordination, communication and back end operations and that no substantial business was conducted from that place. On that factual foundation the Tribunal concluded the office was maintained solely for the supply of information and had a preparatory or auxiliary character falling within Article 5(3)(e)(ii). The High Court held that this is a possible view supported by evidence and not a perverse finding; since the Commissioner (Appeals) and the Tribunal recorded concurrent findings of fact, the question pressed by Revenue is essentially factual and does not give rise to a substantial question of law for interference. [Paras 8]

Question (a) answered against the Revenue; the Andheri office held to be within the Article 5(3)(e)(ii) exclusion and not a permanent establishment.

Preparatory or auxiliary activities - supply of information - permanent establishment - The activities at the liaison office constituted preparatory or auxiliary services and not business carried on so as to create a permanent establishment. - HELD THAT: - This question was treated as a facet of the question whether the office was a PE. The Tribunal's factual findings about the nature of work (logistics, coordination, communications and back end support) led to the conclusion that the office's functions were preparatory or auxiliary. The High Court agreed that those concurrent factual findings are supported by the record and therefore are not open to being upset on appeal as questions of law. [Paras 9]

Question (c) does not arise for consideration separately and is answered against the Revenue.

Project PE - office PE - Article 5(2)(i) - Article 5(2)(c) of Indo-Mauritius DTAA - Whether the case could be simultaneously covered by Article 5(2)(i) and Article 5(2)(c) was not adjudicated as it became academic after answers to the other questions. - HELD THAT: - The contention that the PE could be examined as either an office PE or a project PE was advanced as an alternative. Having upheld the Tribunal's factual conclusion that the Andheri office was auxiliary and fell within the Article 5(3) exclusion, the Court found the alternative submission academic and unnecessary to decide. [Paras 10]

Question (b) is academic and was not considered.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's finding that the Andheri office was a liaison/auxiliary office falling within the Article 5(3)(e)(ii) exclusion and not a permanent establishment is upheld, and the alternative contention regarding project/office PE is rendered academic.

Applicability of amended Section 56(2)(vii)(b)(ii) by reference to date of agreement - Validity of reassessment / revision under Section 263 where assessment is alleged to be erroneous and prejudicial to Revenue - Legal effect of allotment letter as binding agreement for transfer of immovable property - Distinction between pre-amendment and post-amendment scope of Section 56(2)(vii)(b)

Applicability of amended Section 56(2)(vii)(b)(ii) by reference to date of agreement - Legal effect of allotment letter as binding agreement for transfer of immovable property - Validity of reassessment / revision under Section 263 - Whether the Pr. CIT was justified in invoking Section 263 on the ground that the Assessing Officer failed to examine applicability of Section 56(2)(vii)(b)(ii) in respect of the flat registered in A.Y. 2015-16 - HELD THAT: - The Tribunal found on the facts that the allotment letter dated 11.11.2009 constituted a complete and binding agreement between the assessee and the builder with offer, acceptance and payment of substantial consideration, and that the transaction was effectively executed in A.Y. 2010-11. The pre-amendment text of Section 56(2)(vii)(b) (as it stood prior to the Finance Act, 2013) did not cover receipt of immovable property for inadequate consideration; the amendment adding clause (ii) took effect for A.Y. 2014-15 onwards. Consequently, merely because registration occurred later (in A.Y. 2015-16), the expanded provision could not be applied to a transaction executed and substantially performed in the earlier year. The Tribunal relied on precedents holding that the substituted provision is not to be applied retrospectively to transactions completed before its applicability and thus concluded that the Pr. CIT erred in holding the assessment erroneous and prejudicial to Revenue for purposes of Section 263. The High Court recorded that the Tribunal's reasoning is a possible conclusion based on material and there was no breach of natural justice or procedural defect warranting interference. [Paras 7, 8, 9]

The order passed under Section 263 was quashed and the assessment was held not to be erroneous and prejudicial to the interest of Revenue.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's quashing of the Pr. CIT's revision under Section 263 is upheld on the ground that the amended provision of Section 56(2)(vii)(b)(ii) could not be invoked for a transaction effected by agreement in A.Y. 2010-11 and hence the assessment was not erroneous and prejudicial to Revenue.

Reopening of assessment - reason to believe / jurisdiction under section 147/148 - Use of information from survey and external investigation as live link for reassessment - Retrospective withdrawal of approval and its effect on donor's entitlement to deduction under section 35(1)(ii) - Requirement of relevant material (prima facie/tentative opinion) at the stage of issuing notice

Reopening of assessment - reason to believe / jurisdiction under section 147/148 - Requirement of relevant material (prima facie/tentative opinion) at the stage of issuing notice - Validity of issuance of notices under section 148 for the stated assessment years - whether issuance was without jurisdiction - HELD THAT: - The Court applied the settled test that at the stage of issuing a notice under section 148 the question is whether there exists relevant material from which a reasonable person could form the requisite belief that income chargeable to tax has escaped assessment; it is not necessary that the material conclusively prove escapement. The assessments and surveys produced material (including investigation outcomes and withdrawal of approval of the donee) which, taken together, furnished a live link to form the AO's prima facie opinion that reassessment was warranted. The Court noted that some assessments were completed after the survey and some before, but found that the information coming to the AO after the original assessments could justify initiation of reassessment and that this was not a mere change of opinion. On this threshold review the Court declined to interfere with the initiation of reassessment proceedings and rejected the petitions. [Paras 8, 9, 11]

Not interfered with; notices under section 148 held to have been issued within jurisdiction and petitions rejected.

Use of information from survey and external investigation as live link for reassessment - Admissibility / relevance of survey statements at the reason-to-believe stage - Whether material derived from survey and related investigations could constitute relevant material for forming the AO's belief to reopen assessments - HELD THAT: - The Court recognised that information obtained from external investigations and surveys may constitute 'new material' or a live link justifying reassessment. Although statements recorded during survey are not evidence in formal adjudicatory proceedings, they may nonetheless form part of the material on which the AO forms a prima facie belief. Having considered the sequence of surveys, statements and subsequent withdrawal of approval of the donee, the Court concluded that the threshold requirement for initiation of reassessment was satisfied in the present cases. [Paras 8, 10, 11]

Material from survey and investigation accepted as furnishing relevant material at the notice-issuance stage; reassessment initiation sustained.

Retrospective withdrawal of approval and its effect on donor's entitlement to deduction under section 35(1)(ii) - Whether the retrospective withdrawal of the donee's approval precludes the donor's entitlement to deduction under section 35(1)(ii) - scope for adjudication in reassessment - HELD THAT: - The Court observed that the legal question whether a donor/assessee can be denied the deduction merely because approval granted to the donee is subsequently withdrawn (retrospectively or otherwise) requires examination on the merits with reference to the material available, including whether there is evidence that donated amounts were returned to the donor. The Court held that this substantive contention was not to be decided at the threshold jurisdictional stage and must be examined during the reassessment proceedings with the further material that the parties may place on record. [Paras 12]

Left open for determination in the reassessment proceedings; requires fresh consideration on the merits.

Locus to challenge administrative notification withdrawing approval - Whether the petitioners (donors) had locus to impugn the notification withdrawing the donee's approval - HELD THAT: - Counsel for petitioners conceded lack of locus to challenge the notification itself, and the Court accepted that the petitioners were not the proper parties to directly attack the administrative withdrawal of approval of the donee. The Court nevertheless considered the consequences of the withdrawal insofar as they affect the petitioners' rights, but held that direct challenge to the notification was not maintainable by the petitioners. [Paras 5, 12]

Petitioners lack locus to directly impugn the notification withdrawing the donee's approval; consequential issues to be examined in reassessment.

Final Conclusion: On a threshold review the High Court held that the Assessing Officer had relevant material to form a prima facie belief justifying issuance of notices under section 148 for AYs 2013-14, 2015-16 and 2012-13; survey and investigation material could furnish the necessary live link and the petitions were dismissed, while the substantive question whether donors remain entitled to deduction despite retrospective withdrawal of the donee's approval is left open for determination in the reassessment proceedings.

Service of notice under section 148 as a condition precedent to making reassessment - jurisdiction to reopen assessment vests on issue of notice within limitation but service is condition precedent to assessment - reassessment void ab initio for want of valid service of notice - notice addressed to incomplete/incorrect address defeats service

Service of notice under section 148 as a condition precedent to making reassessment - reassessment void ab initio for want of valid service of notice - Validity of the reassessment order framed u/s 147 read with section 144 where no proof of service of notice u/s 148 is on record and the notice was issued to an incomplete/incorrect address. - HELD THAT: - The Tribunal examined the original assessment record and found no proof of service of the notice issued under section 148. The Assessing Officer's notes only recorded issuance with prior approval but did not demonstrate service. Reliance was placed on RK Upadhyaya v. Shanabhai P. Patel which recognises that while issuance within limitation vests jurisdiction to proceed, service of the notice is a condition precedent to making the reassessment order. The Delhi High Court decisions cited (including CIT v. Eshaan Holdings and CIT v. Chetan Gupta) reinforce that where the department's records contain a later/complete address and the notice is sent to an old or incomplete address, valid service is not established and reassessment is without jurisdiction. As the Revenue failed to prove service in accordance with law and the notice carried an incomplete address, the reassessment consequent to such notice is void ab initio. [Paras 4, 7, 8, 12]

The reassessment order passed u/s 147 read with section 144 is quashed for want of valid service of notice u/s 148; the reassessment is void ab initio.

Admission of additional legal grounds - Admissibility of additional grounds challenging validity of the section 148 proceedings raised by the assessee. - HELD THAT: - The Tribunal considered the contention that the additional grounds were purely legal and went to the root of the matter without necessitating fresh factual inquiry. Applying the principles for admitting additional grounds and relying on precedent, the Tribunal admitted the additional grounds as being purely legal in nature. [Paras 3, 4]

Additional legal grounds challenging the validity of the section 148 proceedings were admitted.

Final Conclusion: The assessee's appeal is allowed on the preliminary ground that there is no proof of service of the notice under section 148 and the reassessment made pursuant thereto is void; additional legal grounds were admitted and other merits were left undecided as academic.

Allocation of expenses between EOU and non-EOU units - Deduction under section 10B - Independent/standalone unit - Allocation of Research & Development expenditure - Deduction under section 35(1)(iv) - Setting off losses of non-EOU against profits of EOU - Remand for de novo adjudication

Allocation of expenses between EOU and non-EOU units - Deduction under section 10B - Independent/standalone unit - Remand for de novo adjudication - Whether the expenditure of the Dombivali incinerator unit could be allocated to the Taloja EOU for computation of deduction under section 10B, and if so, on what basis. - HELD THAT: - Tribunal found that the Dombivali unit had been set up to provide services both to outside customers and to the assessee's own units and maintained separate books, invoices and division-wise profitability. However, for the year under consideration there was no material to show that services were actually rendered to the Taloja EOU; the Assessing Officer allocated the entire Dombivali expenditure to Taloja without basis. The Tribunal held that mere possibility of future benefit or prior operation does not justify allocation of present-year expenditure to the EOU when no services were availed. The question whether any portion of the Dombivali expenses relates to services actually rendered to Taloja (or were superseded by use of other incineration facilities) was not examined by lower authorities. Consequently the impugned allocation was set aside and the matter was remanded to the Assessing Officer for fresh examination; if services to Taloja are found, only the expenditure attributable to those services is to be allocated, otherwise no additional allocation to Taloja should be made. [Paras 14]

Impugned allocation of Dombivali unit expenditure to Taloja EOU is set aside and the matter is remanded to the Assessing Officer for de novo adjudication to determine whether any expenditure relates to services actually rendered to the EOU; only attributable expenditure, if any, shall be allocated.

Allocation of Research & Development expenditure - Deduction under section 35(1)(iv) - Independent/standalone unit - Whether the Bangalore R&D unit's expenses and deduction under section 35(1)(iv) should be apportioned to Pharma EOU units or treated as attributable to an independent R&D unit. - HELD THAT: - The Tribunal, following its coordinate-bench precedent in the assessee's own case for a closely similar year, accepted that the Bangalore R&D is a standalone unit with separate plant, staff, inputs, customers and division-wise accounts capable of generating independent revenue. The Assessing Officer's basis for allocating R&D expenses to EOUs (including a contested 5% allocation) was found unjustified on the facts and inconsistent with prior acceptances by the revenue. No change in facts or law was shown to warrant deviation. Respectfully following the earlier decision, the Tribunal allowed the claim and held that the eligible deduction under section 35(1)(iv) need not be reduced by allocating R&D expenses to the EOU units. [Paras 19]

R&D expenditure of the Bangalore unit is treated as pertaining to a standalone R&D unit and need not be apportioned to the Pharma EOUs; the deduction under section 35(1)(iv) is allowed accordingly.

Setting off losses of non-EOU against profits of EOU - Deduction under section 10B - Whether business losses of non-EOU units may be set off against profits of EOU units for computing the allowable deduction under section 10B. - HELD THAT: - Relying on the Tribunal's earlier decision in the assessee's own cases and the Madras Special Bench precedent, the Tribunal held that losses of non-eligible (non-EOU) units cannot be set off against the profits of units eligible for deduction under section 10B for the purpose of determining the allowable exemption. The revenue did not demonstrate any change in facts or law to warrant departure from that precedent. Accordingly the Assessing Officer's adjustment setting off non-EOU losses against EOU profits was disallowed. [Paras 25]

Losses of non-EOU units cannot be set off against profits of EOU units for computing deduction under section 10B; the adjustment by the Assessing Officer is disallowed.

Final Conclusion: Appeal is partly allowed: allocation of Dombivali incinerator expenditure to Taloja EOU is set aside and remanded for de novo consideration; R&D expenditure of Bangalore unit is held to be of a standalone unit and need not be apportioned to EOUs; losses of non-EOU units cannot be set off against EOU profits for computing the section 10B deduction.

Sanction to reopen assessment under Section 148 of the Income tax Act - Requirement of recording satisfaction by competent authority - Application of mind versus mechanical approval - Validity of assessment reopened for failure to record proper satisfaction - Unexplained cash credit treated under Section 68 of the Income tax Act

Sanction to reopen assessment under Section 148 of the Income tax Act - Application of mind versus mechanical approval - Validity of assessment reopened for failure to record proper satisfaction - Validity of reopening the assessment where the competent authority recorded approval in a single word "Yes" without any articulated satisfaction. - HELD THAT: - The Tribunal examined the document of approval placed on record which showed the Principal Commissioner recorded satisfaction by writing only the word "Yes". Relying on precedents that require the competent authority to apply its mind to the reasons submitted by the Assessing Officer and to record a real satisfaction (and noting that even fuller formulations such as "Yes, I am satisfied" have been held to be mechanical), the Tribunal held that a bare, one word approval cannot be read as evidence of application of mind. Availability of the Assessing Officer's reasons before the competent authority does not dispense with the requirement that the authority itself record a proper satisfaction. Following the ratios in the cited High Court decisions, the assumption of jurisdiction to reopen was held bad in law and the assessment completed pursuant thereto was declared void ab initio. Because the reopening was invalid, the Tribunal found it unnecessary to examine the merits of the addition under Section 68 and other contested issues, which were rendered academic. [Paras 7, 8, 9]

The sanction to reopen the assessment was recorded mechanically and without application of mind; the reassessment under Section 143(3) r.w.s. 148 is void ab initio and is cancelled.

Final Conclusion: The appeal is allowed; the reassessment effected pursuant to the impugned sanction is quashed as void ab initio, and other contested issues were left undecided as academic.

Source taxation of interest - gross basis taxation - beneficial owner - permanent establishment - effectively connected - attribution to permanent establishment - business profits - Article 11(6) exclusion

Article 11(6) exclusion - effectively connected - attribution to permanent establishment - gross basis taxation - business profits - Whether interest earned on suppliers' credit is taxable under Article 11(2) at concessional gross rate or is excluded by Article 11(6) and taxable as business profits under Article 7 because it is effectively connected with the assessee's permanent establishment in India. - HELD THAT: - The Tribunal analysed the scheme of Article 11 read with Articles 7 and 14 and held that Article 11(6) operates only where the debt-claim in respect of which interest is paid is "effectively connected" with a permanent establishment or fixed base so as to render the interest taxable under Article 7 or Article 14. Mere existence of a permanent establishment, or a mere connection between the interest and clients of the PE, is insufficient. "Effectively connected" means the interest must be directly or indirectly attributable to the PE (for example forming part of PE assets, allocation of economic ownership to the PE, or the PE playing a critical role in earning the interest) so that taxability under Article 7(1) or Article 14(1) arises. The Assessing Officer failed to make any finding or adduce cogent material showing that the supplier-credit debt claim was attributable to the Indian PE or that the PE played any role in creating or earning the interest; he proceeded only on the basis that the assessee had a PE in India. The onus of establishing effective connection rests with the revenue, and the AO did not discharge it. In these circumstances Article 11(2) continues to apply and the interest is taxable at the concessional gross rate, rather than being brought into business profits under Article 7. [Paras 6, 7, 8, 9, 10]

The Tribunal upheld the CIT(A)'s conclusion that the interest income is not shown to be effectively connected with the Indian permanent establishment and therefore remains taxable under Article 11(2) at the concessional gross rate; the appeal is dismissed.

Final Conclusion: The appeal is dismissed. The Assessing Officer failed to establish that the supplier credit debt claim was "effectively connected" with the assessee's permanent establishment in India; accordingly Article 11(2) applies and the interest is taxable at the concessional gross rate rather than as business profits under Article 7.

Levy of fee under section 234E - intimation issued under section 200A - scope of adjustments permissible under section 200A prior to 01-06-2015 - processing of TDS statements and consequent demands

Levy of fee under section 234E - intimation issued under section 200A - scope of adjustments permissible under section 200A prior to 01-06-2015 - Adjustment of fees charged under section 234E by way of intimation under section 200A for periods prior to 01-06-2015 is not permissible. - HELD THAT: - The Tribunal examined the text and scope of section 200A as it stood prior to the amendment effective 1-6-2015 and noted that processing under section 200A then permitted only (a) adjustments for arithmetical errors and incorrect claims apparent from the statement and (b) computation of interest on sums deductible as computed in the statement. There was no provision permitting an adjustment for fees levied under section 234E. The amendment by Finance Act 2015 (effective 1-6-2015) expressly added computation of fee under section 234E as an adjustment; prior thereto no enabling provision existed to raise a demand for section 234E fees through an intimation under section 200A. The Tribunal followed consistent decisions of co-ordinate Benches (including Marshall Breeders and other cited Tribunal benches) holding that levying fee under section 234E by processing and intimation under section 200A before 1-6-2015 exceeded the mandate of section 200A and was therefore unsustainable. As the intimation under section 200A must be issued within one year from the end of the financial year in which the statement is filed, and the relevant period had elapsed, the defect could not be cured retrospectively. Applying that legal principle to the facts (TDS statements filed in the relevant period and fees charged prior to 1-6-2015), the Tribunal set aside the intimation to the extent it levied fees under section 234E and deleted the fees. [Paras 10, 11]

Intimation under section 200A as confirmed by the CIT(A) insofar as it levied fee under section 234E for periods prior to 01-06-2015 is set aside and the fee deleted.

Final Conclusion: All appeals are allowed: intimation(s) under section 200A, insofar as they sought to levy fee under section 234E for periods prior to 01-06-2015, are quashed and the fees deleted.

Coercion - payment of duty on own ascertainment - interim refund of deposits - partial exemption under Notification No.50/2017-Cus., Sr. No.107 - due process of law

Coercion - payment of duty on own ascertainment - due process of law - Whether the payment of Rs.2.5 Crores by the petitioner was made under coercion or voluntarily - HELD THAT: - The Court analysed the contention that the deposit was made under coercion in the context of the investigation. Coercion was defined in conventional terms and the Court observed that coercion must be pleaded and proved. The petitioner relied on internal emails, a panchanama and a draft covering letter to show threat of seizure and pressure; respondents relied on the covering letter presented with the payment and other material to contend voluntariness, and further pointed out that law permits a person chargeable with duty to pay on his own ascertainment during investigation. Having considered the materials at the interlocutory stage, the Court recorded that the contentions for and against coercion could not be finally resolved: the petitioner's contemporaneous communications and the covering letter were noted but were not found to be conclusive either way. Given the need for a greater degree of proof to establish coercion and the broader substantive challenge to the Notification, the Court declined to adjudicate the question of coercion finally at this stage and left the matter to be decided at final disposal of the writ petition. [Paras 9, 11, 12, 13]

Existence of coercion not finally determined at interlocutory stage; question left for final adjudication.

Interim refund of deposits - payment of duty on own ascertainment - Whether the petitioner is entitled to interim refund of the Rs.2.5 Crores deposited during pendency of the writ petition - HELD THAT: - The Court considered the petitioner's prayer for interim refund of the amount paid, in light of competing contentions about voluntariness and the permissibility of pre-notice payment based on own ascertainment. Noting the inability to conclude on coercion at interlocutory stage and recognising that the larger challenge to the Notification remained pending, the Court declined to grant interim refund. The Court observed that the deposit would remain subject to the final outcome of the petition and that the relief of refund could be considered at final disposal when the factual and legal issues are fully adjudicated. [Paras 11, 12, 13]

Request for interim refund refused; deposit to remain subject to final outcome of the writ petition.

Final Conclusion: At the interlocutory stage the High Court declined to order refund of the Rs.2.5 Crores deposited by the petitioner and did not finally decide whether the payment was made under coercion; those issues and the substantive challenge to the Notification are reserved for final adjudication, with the deposit to remain subject to the petition's ultimate outcome.

Provisional release under Section 110A of the Customs Act, 1962 - seizure in reasonable belief of liability to confiscation under Section 110 - adjudicatory nature of orders under Section 110A - judicially reviewable exercise of discretion in imposing conditions for provisional release - invalidity of executive instruction insofar as it supplants statutory provision - security limited to erasure of commercial advantage derived from improprieties - pre deposit under Section 129E as benchmark for reasonable security

Adjudicatory nature of orders under Section 110A - appealability of orders fixing terms of provisional release - Tribunal's competence to entertain appeal against terms imposed for provisional release under Section 110A of the Customs Act, 1962 - HELD THAT: - The Tribunal held that the power to permit provisional release under Section 110A is adjudicatory in nature and therefore amenable to appellate scrutiny. Prior decisions of coordinate benches and higher courts support that an order fixing terms for provisional release may have civil consequences and affect proprietary rights, and consequently is appealable under the statutory scheme conferring right of appeal. The Tribunal may, in exercise of its appellate jurisdiction, examine whether the conditions imposed amount to effective denial of provisional release and interfere where conditions imposed are impossibly harsh or tantamount to denial. The decision to entertain the appeal does not pre-empt adjudication on merits of seizure or confiscation. [Paras 11, 18]

Appeal against the terms of provisional release under Section 110A is maintainable and the Tribunal may review the propriety of conditions imposed.

Invalidity of executive instruction insofar as it supplants statutory provision - Circular No. 35/2017-Cus - Validity and applicability of Circular No. 35/2017-Cus as a bar to provisional release - HELD THAT: - The Tribunal concluded that executive instructions cannot supplant the clear statutory language of Section 110A. Para 2 of Circular No. 35/2017-Cus, to the extent it excludes categories of goods from eligibility for provisional release or prescribes conditions not found in the statute, encroaches upon adjudicatory discretion and is objectionable. The Board's instructions, issued under Section 151A, cannot direct disposal of particular cases in a particular manner or interfere with adjudicatory discretion; therefore the circular cannot render ineligible goods that are otherwise eligible under Section 110A and is not a legitimate fetter on the adjudicatory exercise of discretion. [Paras 14, 15, 16]

Circular No. 35/2017-Cus cannot operate to exclude or foreclose provisional release except insofar as consistent with Section 110A; its contrary prescriptions are not enforceable in adjudicatory proceedings.

Judicially reviewable exercise of discretion in imposing conditions for provisional release - security limited to erasure of commercial advantage derived from improprieties - pre deposit under Section 129E as benchmark for reasonable security - Proper legal standard for fixation of terms and quantum of security for provisional release under Section 110A - HELD THAT: - The Tribunal endorsed the principle that conditions for provisional release must be a fair and reasonable exercise of discretion, aimed at removing any commercial advantage derived from alleged improprieties and safeguarding the revenue without imposing punitive or prohibitive burdens. The computation of redemption fine and security lies within discretion, but must not exceed what is necessary to erase potential windfall to the importer. As a practical benchmark, the Tribunal indicated that the mandatory pre-deposit prescribed under Section 129E (for appeals against adjudication) ordinarily provides an appropriate yardstick for quantification of reasonable security at the provisional release stage. The Tribunal emphasized that provisional release is interlocutory and should not be rendered otiose by demands tantamount to effective denial. [Paras 9, 21, 22]

Conditions for provisional release must be proportionate, directed to neutralizing commercial advantage, and may be measured with reference to pre-deposit norms; excessive or impossible conditions justify interference.

Provisional release under Section 110A of the Customs Act, 1962 - Disposition of the present appeal and modification of terms for provisional release of the seized consignment at Nhava Sheva - HELD THAT: - Applying the foregoing principles to the facts, the Tribunal found the previously insisted securities disproportionate. Considering the estimate adopted by the adjudicating authority and the standards of reasonable security, the Tribunal directed provisional release to be allowed upon furnishing a bond for the value of the goods and execution of a bank guarantee in the specified moderate amount fixed by the Tribunal. The order clarified that this interlocutory modification does not prejudice the adjudication on the show cause notice. [Paras 23]

Provisional release granted on furnishing bond for the value of the goods and a bank guarantee of Rs. 50,00,000; appeal disposed accordingly.

Final Conclusion: The Tribunal held that appeals against terms imposed under Section 110A are maintainable; executive instructions that exclude eligibility or prescribe mandatory onerous conditions contrary to Section 110A are unenforceable in adjudicatory proceedings; conditions for provisional release must be reasonable and aimed at eliminating commercial advantage from impropriety (with Section 129E pre deposit norms serving as a relevant benchmark); applying these principles the Tribunal directed provisional release on bond for value and a bank guarantee of Rs. 50,00,000 and disposed of the appeal.

Transaction value under section 14 and the Customs Valuation Rules - residual method under rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - additions to transaction value under rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rejection of declared value and sequential application of rules 4 to 9 with invocation of rule 12 - valuation by Chartered Engineer and the CBEC instruction on inspection/appraisement reports - classification between competing tariff headings (8901, 8905 and 8906) - burden on customs to establish aptness of an alternative tariff heading - penalties under section 112 and section 114AA of the Customs Act, 1962

Transaction value under section 14 and the Customs Valuation Rules - residual method under rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - additions to transaction value under rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - valuation by Chartered Engineer and the CBEC instruction on inspection/appraisement reports - Enhancement of assessable value of the imported vessel set aside and declared value accepted for the purpose of assessment; reliance on the valuation by the Chartered Engineer appointed by customs and additions under rules 9/10 not sustained. - HELD THAT: - The Tribunal held that the valuation regime gives primacy to the declared transaction value under section 14 and the Customs Valuation Rules, and departure from the declared price is permissible only in the circumstances and sequential manner prescribed by the Rules. The adjudicating authority's concatenated reliance on rule 12 and then on rules 9 and 10 to substitute and further add to the declared value was not justified. The report of the Chartered Engineer nominated by customs was an estimate and, in the circumstances, its preferment over the importer's surveyor was tainted by bias; further procedural infirmity arose from denial of cross-examination. CBEC instructions regarding appraisal reports do not justify displacing the declared transaction value where there is no proper invocation of the relevant valuation rules. Rule 10 additions are permissible only in the specific situations envisaged therein and cannot be layered upon a value determined by the residual method (rule 9) which is not a transaction value; buying commissions and pre-shipment inspection charges could not be included absent evidence that they formed part of the price or conditions of sale. For vessels arriving under their own power that are statutorily deemed 'goods' only for limited purposes, inclusion of freight/insurance as additions was also found unsupported on the facts. Applying these principles, the enhancement of assessable value in the impugned order was set aside. [Paras 17, 18, 19, 20, 21]

Enhancement of the vessel's assessable value set aside; declared transaction value accepted and the additions upheld in the impugned order reversed.

Classification between competing tariff headings (8901, 8905 and 8906) - burden on customs to establish aptness of an alternative tariff heading - Classification issue not finally determined by the Tribunal and remanded to original authority for fresh decision on the appellant's claim for fitment within heading 8906; appellants may also make submissions on original classification during remand. - HELD THAT: - The Tribunal found that the impugned order's analysis was incomplete as it did not adequately resolve the competing classification between heading 8905 and heading 8906 (and the claim originally made under 8901). Because the adjudicating authority had not satisfactorily decided the alternative contention advanced by the importer and had not bridged the evident gap in reasoning between the rival headings, the Tribunal set aside the impugned order insofar as classification is concerned and remanded the matter for a fresh decision. The remand is directed specifically to enable the original authority to examine the claim for fitment within heading 8906 and, in the course of that fresh adjudication, to permit the appellant also to press for the original classification if desired. [Paras 23, 24]

Impugned order set aside insofar as classification; matter remanded to the original authority for fresh adjudication on fitment within heading 8906 (with liberty to revisit original classification).

Penalties under section 112 and section 114AA of the Customs Act, 1962 - Penalties imposed on the individual appellants set aside. - HELD THAT: - Given the Tribunal's disposition to remand the classification issue and having set aside the valuation enhancement, it found no basis in the impugned order to sustain penalties against the individuals. The Tribunal observed that neither the intention to evade duty nor the role of the individual appellants in misdeclaration of stores and bunkers was made out in the adjudicating order. In consequence, the penalties levied on the individuals were set aside to permit their appeals. [Paras 25]

Penalties imposed on the individual appellants set aside; appeals of those individuals accordingly allowed.

Final Conclusion: The Tribunal set aside the enhancement of the vessel's assessable value and the penalties on the individual appellants, but has remanded the classification dispute between the competing tariff headings to the original authority for fresh decision (with liberty to the appellants to make submissions on original classification); the appeals disposed accordingly.

Non-disclosure of political contributions - Section 182(3) and (4) of the Companies Act, 2013 - Disclosure in profit and loss account and income tax returns - Mens rea in economic offences - Abuse of process of law - Quashing of criminal proceedings under Section 482 Cr.P.C.

Non-disclosure of political contributions - Section 182(3) and (4) of the Companies Act, 2013 - Disclosure in profit and loss account and income tax returns - Mens rea in economic offences - Abuse of process of law - Whether criminal proceedings for alleged failure to disclose political contributions as required by Section 182(3) and contravention of Section 182(4) of the Companies Act, 2013, should be quashed - HELD THAT: - The Court found that the company had disclosed the payments as donations in its profit and loss account, had declared the contribution in the Income Tax Return for Assessment Year 2017-2018 and had furnished financial statements and an explanation to the Registrar including a Note recording other expenses which include donations. The format used for disclosure to the Registrar did not contain a specific column to declare political contributions and the company responded to a show cause notice, produced minutes authorising the payment and identified the recipient political party. On the facts, the failure to make a separate statutory disclosure was treated as an irregularity rather than criminality. The Court applied the principle that criminal liability in such economic offences requires consideration of intention and mens rea, and in the absence of intentional concealment or a deliberate evasion of the statutory disclosure requirement, continuation of prosecution would amount to an abuse of process. The decision of a Coordinate Bench in IBC Knowledge Park Pvt. Ltd. [reported judgment of the Court reproduced in the record] was noted as analogous, where similar factual disclosures and lack of mens rea led to quashing. Applying that reasoning to the present factual matrix, the Court concluded there was no criminal intention and the proceedings were liable to be quashed. [Paras 9, 10, 11]

Criminal proceedings under C.C. No. 135/2019 alleging violations of Section 182(3) and (4) are quashed as an abuse of process, there being no intentional non disclosure amounting to criminality.

Final Conclusion: The petition is allowed and the criminal proceedings in C.C. No. 135/2019 pending before the Special Court of Economic Offences, Bengaluru, are quashed for want of criminality and as an abuse of process of law.

Maintainability of civil revision under Article 227 - availability of statutory alternative remedy before NCLAT - superintendence jurisdiction of High Court under Article 227 - exhaustion of statutory appeal remedy under the IBC - limited exception for breach of principles of natural justice

Maintainability of civil revision under Article 227 - availability of statutory alternative remedy before NCLAT - exhaustion of statutory appeal remedy under the IBC - limited exception for breach of principles of natural justice - The Civil Revision Petition under Article 227 challenging an order of the NCLT is not maintainable where an appeal to the NCLAT under the Insolvency and Bankruptcy Code, 2016 is available. - HELD THAT: - The Court applied the principle that the IBC is a complete code providing a three tier adjudicatory mechanism (NCLT, NCLAT and this Court) and that where a statutory alternative remedy of appeal is furnished by the Code the High Court should ordinarily refrain from entertaining a petition under Article 227 which seeks to bypass that remedy. The Court followed recent authoritative decisions holding that the availability of an alternate adequate remedy before a specialised appellate forum militates against invoking the supervisory jurisdiction of the High Court, subject to the narrow exception where a writ jurisdiction may be appropriate (for example, limited procedural breaches such as denial of natural justice). Having considered precedents and the petitioner's submissions (including reliance on decisions recognising narrow exceptions), the Court found that the petitioner could raise all available grounds before the NCLAT and that no exceptional circumstance was shown to justify bypassing the statutory appeal. Consequently the Civil Revision Petition was dismissed as not maintainable. [Paras 5, 6]

Civil Revision Petition dismissed as not maintainable; petitioner to avail remedy of appeal before the NCLAT.

Final Conclusion: The High Court declined to exercise its supervisory jurisdiction under Article 227 to entertain a challenge to an NCLT order where the Insolvency and Bankruptcy Code provides an appellate remedy to the NCLAT; the Civil Revision Petition was dismissed as not maintainable.

Moratorium under Section 14(1)(b) of the Insolvency and Bankruptcy Code, 2016 - Computation and condonation of limitation for appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 - Execution and registration of sale deeds vis-a -vis possession and agreement to sell - Classification of receipts from sale of constructed units by a real estate company as revenue from operations - Protection of home buyers' rights during Corporate Insolvency Resolution Process - Duties and powers of Resolution Professional regarding transfer of property and compliance with resolution plan

Computation and condonation of limitation for appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016 - Validity of the appeal filed on 20.02.2020 as within time and not barred by limitation - HELD THAT: - The Tribunal applied the statutory scheme under Section 61(2) IBC which prescribes filing within thirty days with a discretionary extension up to fifteen days. Having considered the uploaded date of the impugned order and the jurisprudence emphasising prompt action by appellants under the IBC, the Tribunal concluded that the appeal filed on 20.02.2020 was within the permissible period when viewed in the light of the provisions allowing limited condonation and the requirement that buyers exercise due diligence. The Tribunal therefore rejected the Respondent's contention that the appeal was barred by limitation and proceeded to decide the merits.

The appeal was held not to be barred by limitation and the Tribunal entertained the appeal.

Moratorium under Section 14(1)(b) of the Insolvency and Bankruptcy Code, 2016 - Execution and registration of sale deeds vis-a -vis possession and agreement to sell - Classification of receipts from sale of constructed units by a real estate company as revenue from operations - Protection of home buyers' rights during Corporate Insolvency Resolution Process - Whether execution and registration of sale deeds in favour of allottees of a real estate project during CIRP would violate the moratorium - HELD THAT: - The Tribunal examined the character of constructed units in the hands of a real estate company and concluded that sale of such units ordinarily constitutes the company's revenue from operations rather than the disposal of an 'asset' in the sense foreclosed by Section 14(1)(b). Relying on the commercial nature of the transaction for a real estate developer and on precedents recognising protection of home buyers, the Tribunal found that registration of sale deeds in favour of buyers who were already in possession would not amount to prohibited transfer under the moratorium provision. The Tribunal treated registration as a procedural formality in the context of a real estate company where possession and commercial purpose had already been established, and stressed that CIRP must not operate to defeat bona fide rights of home buyers.

Registration and execution of sale deeds in favour of the allottees was not held to violate the moratorium and could be carried out.

Duties and powers of Resolution Professional regarding transfer of property and compliance with resolution plan - Execution and registration of sale deeds vis-a -vis possession and agreement to sell - Relief to be granted and the procedural direction regarding execution of sale deeds by the Resolution Professional - HELD THAT: - Balancing the foregoing conclusions, the Tribunal set aside the Adjudicating Authority's order dismissing the application of the allottees and directed the Resolution Professional to execute the sale deeds in favour of the allottees. The Tribunal made this conditional upon collection of outstanding dues, costs, registration charges, penalties and other incidental costs, if any. The direction treats execution/registration as an act to be performed by the RP consistent with preserving the rights of bona fide buyers while ensuring recovery of lawful dues.

The impugned order was set aside and the RP was directed to execute sale deeds after recovery of dues and incidental costs.

Final Conclusion: The Tribunal allowed the appeal, holding it within time; ruled that execution and registration of sale deeds in favour of allottees of a real estate project during CIRP did not contravene the moratorium where such sales constitute the company's revenue from operations and possession had been delivered; set aside the Adjudicating Authority's order and directed the Resolution Professional to execute sale deeds after collecting outstanding dues and incidental costs.

Offence under Section 74(3) of the Insolvency and Bankruptcy Code, 2016 - vicarious liability - summoning of promoters and directors in proceedings initiated against a company - cognizance and opportunity of hearing before recommending prosecution under Chapter VII of Part II of the IBC - interim exemption from personal appearance

Interim exemption from personal appearance - Application for exemption from personal appearance (CRL.M.A.1961/2022). - HELD THAT: - The Court allowed the prayer for exemption subject to just exceptions and disposed of the specific exemption application. This is a final order on that interim application and grants the relief sought in CRL.M.A.1961/2022. [Paras 1]

Exemption allowed subject to just exceptions; CRL.M.A.1961/2022 disposed of.

Offence under Section 74(3) of the Insolvency and Bankruptcy Code, 2016 - vicarious liability - summoning of promoters and directors in proceedings initiated against a company - cognizance and opportunity of hearing before recommending prosecution under Chapter VII of Part II of the IBC - Challenge to the complaint under Section 74(3) IBC and the order summoning the company and its promoters/directors; prima facie view on vicarious liability and directions for further proceedings. - HELD THAT: - The petition seeks quashing of the complaint filed under Section 74(3) IBC and the trial court order dated 30.10.2021 summoning the company and three individuals who are promoters/directors. The Court noted earlier NCLAT guidance requiring an opportunity to the successful resolution applicant before recommending prosecution, and observed the protracted proceedings before NCLT/NCLAT/Supreme Court. On the specific contention that Section 74(3) does not impose vicarious liability and that the individuals could not be summoned when the complaint was filed only against the company, the Court recorded that prima facie there appears to be merit in that contention. The Court did not finally adjudicate or quash the complaint/order; instead it issued notice, directed the respondent to file a reply affidavit and the petitioners to file a rejoinder within stipulated timelines, listed the matter for further hearing, and granted interim limited relief by exempting petitioners Nos. 2-4 from personal appearance before the trial court till the next date. [Paras 6, 7, 8, 9, 10]

Notice issued; respondent to file reply and petitioners to file rejoinder; matter listed for further hearing; court recorded a prima facie view that Section 74(3) does not impose vicarious liability and granted interim exemption to petitioners Nos. 2-4 from personal appearance before the trial court.

Final Conclusion: The Court allowed the exemption application and disposed of it; on the substantive challenge to the complaint and summons under Section 74(3) IBC the Court recorded a prima facie view favouring the petitioners' contention regarding absence of vicarious liability, issued notice, directed pleadings, listed the matter for further hearing and granted interim exemption to certain petitioners from personal appearance before the trial court.

Approval of resolution plan under Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code - Compliance with Section 30(2) and Regulation 38/39(4) of the CIRP Regulations - Non contravention of Section 29A (ineligibility) of the Code - Comparative adequacy to liquidation value as justification for approval - Limited judicial review of Committee of Creditors' commercial decision - Extinguishment of claims not included in the approved resolution plan

Approval of resolution plan under Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code - Compliance with Section 30(2) and Regulation 38/39(4) of the CIRP Regulations - Whether the resolution plan approved by the Committee of Creditors satisfies the requirements of Section 30(2) of the Code and Regulations so as to merit approval by the Adjudicating Authority - HELD THAT: - The Tribunal examined the resolution plan, the Form H compliance certificate and associated documents and found that the plan addresses the payment of CIRP costs, repayment to operational creditors, post approval management and implementation supervision in the manner required by Section 30(2) and Regulations 37, 38, 38(1A) and 39(4) of the CIRP Regulations. The Committee of Creditors approved the plan by 76.69% voting share. The Tribunal applied the limited scope of judicial review as articulated by higher authorities and satisfied itself that the plan as approved by the CoC meets the statutory requirements; the Resolution Professional had complied with regulatory procedures and filings. Consequently the Tribunal allowed the application and approved the plan to become effective and binding on stakeholders. [Paras 26, 30, 31, 32, 35]

The resolution plan as approved by the CoC meets the requirements of Section 30(2) and relevant Regulations and is approved by the Adjudicating Authority.

Non contravention of Section 29A (ineligibility) of the Code - Whether the resolution plan and the Resolution Applicant contravene Section 29A rendering the plan ineligible for approval - HELD THAT: - The Tribunal considered whether any disqualification under Section 29A applied to the Resolution Applicant or the plan and recorded that the plan is not in contravention of Section 29A. On the materials before it and the compliance certificate filed by the RP, the Tribunal concluded there was no statutory bar under Section 29A to approval of the plan. [Paras 35]

The Resolution Plan does not contravene Section 29A of the Code and is not barred on that ground.

Comparative adequacy to liquidation value as justification - Valuation and liquidation value under Regulation 27 - Whether the consideration proposed under the resolution plan is demonstrably higher than the liquidation value and whether that justification supports approval - HELD THAT: - The Tribunal noted that liquidation value and fair value were ascertained by two registered valuers under Regulation 27; the aggregate average liquidation value was recorded and the plan amount was found to be higher than the liquidation value. The Tribunal accepted that one justification for approval is that the proposed recovery under the plan exceeds the liquidation value, and relied upon that comparison as part of its satisfaction that the plan is feasible and provides better recovery than liquidation. [Paras 28, 29]

The plan proposes an amount higher than the liquidation value and that comparative adequacy supports approval of the plan.

Limited judicial review of Committee of Creditors' commercial decision - Extinguishment of claims not included in the approved resolution plan - Whether the Adjudicating Authority may modify the CoC approved plan and whether claims not part of the approved plan stand extinguished on approval - HELD THAT: - The Tribunal applied the settled principle that the Adjudicating Authority's review is limited to the criteria prescribed in Section 30(2) and cannot trespass upon the commercial decision of the CoC, as reiterated from higher judicial pronouncements. Upon approving the plan, the Tribunal directed that the plan be binding on the corporate debtor, its creditors and other stakeholders, and observed (with reference to precedent) that claims not part of the approved resolution plan shall stand extinguished and cannot be pursued further. [Paras 33, 34]

The Adjudicating Authority will not modify the CoC's commercial decision beyond the limited review under Section 30(2); on approval, claims not included in the resolution plan are extinguished.

Final Conclusion: The Tribunal allowed IA No.106 of 2021 in CP No.1796 of 2018 and approved the resolution plan submitted by Mr. Rakesh Ranjan jointly with M/s Equilibrated Venture CFLOW Private Limited, holding that the plan complies with Section 30(2) and relevant CIRP Regulations, does not offend Section 29A, proposes recovery in excess of liquidation value, is binding on stakeholders and results in extinguishment of claims not forming part of the approved plan.

Operational debt - pre-existing dispute - leave and licence agreement - admission of debt and demand notice procedure

Operational debt - leave and licence agreement - Non-payment of lease/rent under a leave and licence agreement does not constitute an "operational debt" under Section 5(21) of the Code in the present proceedings. - HELD THAT: - After considering the statutory definition of "operational debt" and the precedents cited by the parties, the Tribunal followed the NCLAT full Bench view in M. Ravindranath Reddy v. G. Kishan and subsequent decisions holding that debts arising out of lease/rent do not fall within the ambit of Section 5(21). Noting that the question is pending consideration before the Supreme Court in Promilla Taneja, the Bench nevertheless held on the facts and law before it that rent/lease obligations in the present case cannot be treated as operational debt for the purpose of initiating CIRP. [Paras 11, 13, 14]

The claimed lease/rent dues are not maintainable as an operational debt under the Code and cannot support initiation of CIRP.

Pre-existing dispute - admission of debt and demand notice procedure - There exists a pre-existing dispute between the parties prior to the issuance of the demand notice, barring admission of the section 9 petition. - HELD THAT: - The record shows an ongoing L.D. Suit in the Small Causes Court and specific denials and contesting of the claim by the Corporate Debtor in response to the demand notice. The Tribunal found that the Corporate Debtor had disputed the claims and that litigation on the same subject matter was pending, which establishes a pre existing dispute. On that basis the petition could not be admitted under the summary jurisdiction exercised under the Code. [Paras 16]

The claim is hit by a pre-existing dispute and therefore the section 9 petition cannot be admitted.

Scope of contract and invoicing - consent for additional use - Invoice raised for use of additional space not incorporated in the leave and licence agreement cannot be sustained without the Corporate Debtor's consent. - HELD THAT: - The Tribunal observed that the use of additional terrace/parking space was not a contractual term in the original leave and licence agreement. Invoicing for such additional space, and claiming sums therefor, cannot be upheld in the absence of evidence of agreement or consent by the Corporate Debtor to those additional terms. [Paras 15]

The Operational Creditor cannot sustain invoices for additional space not agreed to in the contract without the Corporate Debtor's consent.

Final Conclusion: The Company Petition under Section 9 is dismissed: the Tribunal held that the claimed rent/lease dues do not qualify as operational debt under the Code on the facts before it, there is a pre-existing dispute between the parties, and invoices for additional space not agreed in the contract are unsustainable; the petition is dismissed with no costs and without prejudice to the Operational Creditor's rights before other fora.

Existence of financial debt and default - determination of date of default - application of Section 10A of the Insolvency and Bankruptcy Code, 2016 - bar on initiation of CIRP for defaults between 25.03.2020 and 24.03.2021

Existence of financial debt and default - determination of date of default - There exists a financial debt and the debt was in default; the date of default is 01.10.2020. - HELD THAT: - The Tribunal examined the loan documents and account statements filed by the Financial Creditor and noted that the Corporate Debtor did not dispute the loan agreement or the claim amount. The Information Utility (NESL) report annexed by the Financial Creditor records default as on 01.10.2020. The Corporate Debtor produced material showing that interest for the period from January 2020 to August/September 2020 was funded by the Financial Creditor through FITL and new loan accounts, and account entries demonstrate that the FITL was disbursed on 01.09.2020. On this factual matrix, the Tribunal concluded that the initial default triggering the present proceedings occurred from 01.10.2020 and not on 01.01.2020 as earlier pleaded by the Financial Creditor. [Paras 8, 9, 10, 11, 12]

Findings recorded that a financial debt existed and was in default, and the operative date of default is 01.10.2020.

Application of Section 10A of the Insolvency and Bankruptcy Code, 2016 - bar on initiation of CIRP for defaults between 25.03.2020 and 24.03.2021 - The petition under Section 7 is barred by Section 10A of the IBC because the date of default falls within the protected period 25.03.2020 to 24.03.2021. - HELD THAT: - Having determined the date of default to be 01.10.2020, the Tribunal applied the proviso to inserted Section 10A of the IBC, which prohibits instituting insolvency proceedings for defaults occurring between 25.03.2020 and 24.03.2021. Since the default in this case falls within that period, the statutory bar operates to preclude the present Section 7 petition. The Tribunal therefore dismissed the petition on that ground while clarifying that observations made are without prejudice to the petitioner's rights before other forums. [Paras 10, 13, 14, 15]

The Section 7 application is dismissed as barred by Section 10A of the IBC because the date of default is within 25.03.2020 to 24.03.2021.

Final Conclusion: The Tribunal held that a financial debt was in default with the date of default being 01.10.2020, and-because that date falls within the period protected by Section 10A of the IBC (25.03.2020 to 24.03.2021)-the Section 7 petition is dismissed as barred by law, without prejudice to the petitioner's remedy before other forums.

Financial debt - date of default - limitation - post-dated cheques and rebuttable presumptions under the Negotiable Instruments Act - summary jurisdiction and adequacy of documentation - use of the Insolvency & Bankruptcy Code as a recovery mechanism

Financial debt - date of default - limitation - summary jurisdiction and adequacy of documentation - use of the Insolvency & Bankruptcy Code as a recovery mechanism - Maintainability of the application under section 7 of the Insolvency & Bankruptcy Code, 2016 in the absence of adequate documentation to establish a financial debt and the date of default. - HELD THAT: - The Tribunal held that admission of a petition under section 7 requires establishment of the existence of a financial debt and the date of default. In the present case the loans were said to have been advanced across multiple financial years but, in the absence of documentary evidence, the tenure of the loans and the date on which default occurred could not be ascertained. Receipt of interest was alleged but supported only by two letters from the corporate debtor; such limited material was insufficient to establish that interest was payable or received as a matter of record. The petitioners' acceptance of periodic interest payments did not, by itself, fix the loan tenure or permit calculation of the date of default. The Tribunal emphasised that in summary jurisdiction, adequacy of documentation is necessary to determine whether the claim is a financial debt under the Code and not merely a disputed recovery of money. Allowing the Code to be used as an easy recovery mechanism was impermissible. [Paras 9, 10, 12]

Application under section 7 is not maintainable and is dismissed for failure to establish financial debt and date of default due to inadequate documentation.

Post-dated cheques and rebuttable presumptions under the Negotiable Instruments Act - summary jurisdiction and adequacy of documentation - Evidentiary value of post-dated cheques and concurrent proceedings under the Negotiable Instruments Act in the context of section 7 petition. - HELD THAT: - The Tribunal observed that copies of post-dated cheques, while placed on record, do not constitute unqualified admissions of debt because the statutory presumptions under the Negotiable Instruments Act are rebuttable. The petitioners had already initiated proceedings under the Negotiable Instruments Act, and the existence of such proceedings and the rebuttable nature of the presumptions meant that the cheques alone could not establish a clear financial debt or date of default for the purposes of admitting an insolvency petition under the Code. [Paras 7, 11]

Post-dated cheques do not, by themselves, establish the debt or date of default for admission under section 7; related NI Act proceedings remain available to the petitioners.

Final Conclusion: The section 7 application is dismissed for lack of adequate documentary proof to establish a financial debt and the date of default; the petitioners remain free to pursue remedies under other laws (including proceedings under the Negotiable Instruments Act).

Corporate Insolvency Resolution Process - meaning of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - relationship of financial creditor and corporate debtor - privity of contract - confirming party - default - assurance money

Relationship of financial creditor and corporate debtor - privity of contract - Corporate Insolvency Resolution Process - No relationship of financial creditor and corporate debtor existed between the applicants and the respondent such as would entitle initiation of Corporate Insolvency Resolution Process. - HELD THAT: - The loan had been disbursed to Sparkspell Homes Pvt. Ltd. (earlier Proplarity Home Pvt. Ltd.) and the respondent was not a party to the loan agreement; therefore there was no privity of contract between the applicants and the respondent. The respondent's role arose only under the sale deed of 1st May, 2017 in which the applicants were recorded as confirming parties. The Tribunal found that the loan agreement does not establish any contractual obligation on the respondent to repay the loan taken by the vendor, and accordingly the applicants could not be treated as financial creditors vis-a -vis the respondent for the purposes of initiating CIRP. [Paras 15, 19]

Application under the IBC dismissed for want of relationship of financial creditor and corporate debtor.

Meaning of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - default - There was no transaction of the nature of financial debt between the parties and no default by the respondent within the meaning of the IBC. - HELD THAT: - On examination of the contractual matrix and available documentary evidence, the Tribunal held that the applicants failed to establish that the respondent incurred any financial obligation towards them. In the absence of an agreement imposing liability on the respondent, or documentary proof of a repayable loan and its recall, the facts did not satisfy the statutory test for 'financial debt' or establish a default by the respondent under the IBC. [Paras 16, 18, 19]

No financial debt or default established; application liable to be rejected.

Confirming party - privity of contract - assurance money - Clauses of the sale deed (including Clause 35) and the alleged handing over of cheques did not create a legal obligation on the respondent to repay the vendor's debt to the applicants; the amount paid on 29.04.2017 was treated as assurance money, not a loan repayable by the respondent. - HELD THAT: - Clause 35 was construed as reflecting the confirming-party arrangement whereby the confirming party would receive sale consideration from the vendor and record no objection to the sale deed; it did not impose liability on the respondent to discharge the vendor's debts. The schedule showed cheques handed to the vendor who was to pass them to the applicants; failure of the vendor to do so did not convert the respondent's position into that of a debtor. The single-day timing of the Rs. 20,00,000 payment and absence of documentary evidence or an agreement treating it as a loan led the Tribunal to accept the respondent's case that the amount was assurance money given to facilitate execution of the sale deed rather than a refundable loan. [Paras 16, 17, 18]

Sale-deed provisions and payment particulars do not create respondent's liability; the Rs. 20,00,000 is not a repayable loan.

Final Conclusion: The petition under the Insolvency and Bankruptcy Code, 2016 is dismissed because the applicants failed to establish privity or a financial-debt relationship with the respondent, no default within the meaning of the IBC was shown, and the sale-deed provisions and the alleged payment did not create a liability on the respondent; applicants remain free to pursue recovery by other lawful remedies.

Adjustment of input/CENVAT credit under Sab Ka Vishwas (Legacy Dispute Resolution) Scheme - verification of correctness under section 126 of the Finance Act, 2019 and Rule 6 of the Sabka Vishwas Rules - effect of final adjudication on entitlement to scheme adjustment - pre deposit/amounts paid by utilising input credit and their adjustment under the Scheme

Adjustment of input/CENVAT credit under Sab Ka Vishwas (Legacy Dispute Resolution) Scheme - pre deposit/amounts paid by utilising input credit and their adjustment under the Scheme - Whether the Designated Committee was obliged to deduct the CENVAT credit claimed by the petitioner while issuing SVLDRS-3 in view of circulars and FAQs under the Scheme. - HELD THAT: - The petitioner's contention rested on circulars and FAQ (including para 10(g) of circular dated 27.08.2019 and FAQ No.46) which state that where tax/duty has been paid through input credit, the amount already paid shall be adjusted by the Designated Committee at the time of determination of final amount payable under the Scheme. However, in this case the adjudicating authority had disallowed a substantial portion of the CENVAT credit claimed by the petitioner and the appeal against that adjudication was dismissed as time barred and attained finality. The court held that where the claimed CENVAT credit has already been disallowed in a final adjudication, the circulars and FAQs do not entitle the declarant to automatic adjustment under the Scheme without proof. The petitioner had not produced supporting documents to establish entitlement to the CENVAT credit; the department's finding that only a portion was allowable was upheld. Thus the Designated Committee was not obliged to deduct the entire claimed credit when issuing SVLDRS-3 in the absence of documentary proof and in the face of a final adverse adjudication. [Paras 11, 12, 13, 14, 15]

The SVLDRS-3 issued without deducting the claimed CENVAT credit was not shown to be unlawful; adjustment was not warranted where the credit had been disallowed by a final adjudication and documentary proof was lacking.

Verification of correctness under section 126 of the Finance Act, 2019 and Rule 6 of the Sabka Vishwas Rules - effect of final adjudication on entitlement to scheme benefits - Whether the phrase 'verify the correctness' empowers the Designated Committee to embark on a full adjudication of entitlement to CENVAT credit or whether limited verification only was permissible. - HELD THAT: - Petitioner argued that 'verify the correctness' could not be stretched to permit full adjudication of entitlement to input credit by the Designated Committee and that the Committee should have mechanically adjusted admitted input credit. The court observed that verification contemplated by the Scheme cannot override an existing final adjudication. Where entitlement to credit is in dispute and has been examined and disallowed by the adjudicating authority (and the appeal stands dismissed), the Designated Committee may require documentary proof and is not bound to accept the declarant's unsupported claim. Thus, 'verify the correctness' allows the Committee to require sufficient proof and to treat a previously disallowed credit as not automatically deductible under the Scheme. [Paras 5, 11, 12, 14]

The Designated Committee's power to 'verify the correctness' includes examining documentary proof and does not preclude refusal to adjust claimed CENVAT where entitlement has been finally disallowed and proof is lacking.

Final Conclusion: Writ petition dismissed. The SVLDRS-3 issued to the petitioner was not vitiated by failure to deduct the claimed CENVAT credit where that credit had been disallowed by a final adjudication and the petitioner failed to produce documentary evidence proving entitlement; circulars and FAQs do not supply entitlement in the face of a final adverse order.

Export of services - Service Tax - Erection, Commissioning or Installation - Destination Based Consumption Tax - reimbursement versus taxable service - refund under Section 11B regime - limitation for refund claims

Service Tax - Erection, Commissioning or Installation - Export of services - Destination Based Consumption Tax - Whether amounts charged as machine commissioning charges constitute export of services or are taxable as erection/commissioning services rendered and consumed in India - HELD THAT: - The Tribunal examined the distributor agreement, the bills raised and the nature of services rendered. The bills predominantly described the activity as "machine commissioning charges" and the authority found that the appellants undertook commissioning of machines at customers' premises in India. Such activity falls within the category of "Erection, Commissioning or Installation" and, being performed and consumed in India, cannot be treated as export of services under the Export of Services Rules. The fact that payment was received from the overseas supplier does not convert a service rendered and consumed in India into an export; Service Tax is a destination-based consumption tax and therefore the commissioning activity is taxable. The appellants did not effectively controvert these findings on the merits during proceedings. [Paras 7, 9, 10]

Payment of Service Tax on machine commissioning charges is valid and no refund is admissible on this ground.

Reimbursement versus taxable service - refund under Section 11B regime - limitation for refund claims - Whether amounts described as office expenses and commission are taxable and whether refund is admissible, and the applicability of limitation governing refund claims - HELD THAT: - The Tribunal held that amounts shown as office expenses are reimbursements of costs and do not exhibit an element of service to the overseas principal; accordingly they are not liable to service tax. Commission receipts prima facie contain an element of service and may have been rendered to overseas principals, but the Tribunal accepted that the appellants are not required to pay service tax on the amounts classified as 'Office Expenses' and (subject to further scrutiny) 'Commission'. With respect to refunds, the Tribunal reiterated that refunds are governed by the Section 11B regime and subject to its limitation; consequently, any entitlement to refund for office expenses and commission must be examined by the Original Authority within the statutory limitation framework. For these limited purposes the matter was remitted to the Original Authority to determine if any refund is due, subject to limitation and other admissibility criteria. [Paras 11, 12]

Office expenses are not taxable; commission is not exigible as regards certain receipts; appeals remanded to the Original Authority to examine and determine any refund due on office expenses and commission, subject to limitation and admissibility.

Final Conclusion: Appeals partly allowed and partly dismissed: refunds on machine commissioning charges rejected; office expenses and commission held not exigible as specified and remitted to the Original Authority for determination of any refund admissible subject to the limitation prescribed under the refund regime.

Commercial or industrial construction service - erection, commissioning and installation services - taxability of services to government / non-commercial structures - unjust enrichment - limitation - remand for fresh consideration

Commercial or industrial construction service - erection, commissioning and installation services - taxability of services to government / non-commercial structures - Whether the services rendered by the appellant (providing and fixing stadium seating; providing and laying synthetic athletic track surface) are taxable as commercial or industrial construction service or as erection, commissioning and installation services when provided for government-owned sports facilities. - HELD THAT: - The Tribunal examined the statutory definition of commercial or industrial construction service and concluded that the activities of fixing seating and laying a synthetic athletic track fall within the descriptive ambit of completion/finishing or similar services in relation to a building or civil structure. However, applying the principle adopted in the Tribunal's decision in B.G. Shirke Construction Technology Pvt. Ltd., sports stadia and similar facilities owned by the State and used for public/non commercial purposes are to be treated as non commercial constructions. Consequently, although the physical activities correspond to the description of CCIS, when performed in respect of government sports facilities that are non commercial in nature they are not chargeable to service tax under CCIS. The Tribunal further noted that the appellant had classified the service as erection, commissioning and installation services, and that no exemption for non commercial structures exists under that category; nevertheless, on the facts the services were held not taxable because the structures were non commercial government sports facilities. [Paras 6, 7, 8, 9, 11]

Services of providing/fixing seating and providing/laying synthetic athletic track for government sports facilities are not taxable as commercial or industrial construction services.

Unjust enrichment - limitation - remand for fresh consideration - Whether the refund claims are barred by unjust enrichment, limitation, or by failure to challenge self assessment in light of the Apex Court decision referred to, and whether these legal and factual aspects were addressed by the adjudicating authority. - HELD THAT: - The Tribunal observed that the impugned order rejected the refund claims on taxability grounds and therefore did not examine grounds of unjust enrichment or limitation, nor the implication of the Apex Court decision invoked by the Department concerning challenge to self assessment. Since these legal issues were not considered by the lower authority, the Tribunal could not decide them in appeal. Being legal questions and requiring factual and legal determination by the original adjudicating authority, the Tribunal directed remand for fresh consideration of unjust enrichment, limitation and any consequences of the cited Apex Court decision. [Paras 10, 11]

Matters of unjust enrichment, limitation and the consequences of the Apex Court ruling on self assessment are remanded to the original Adjudicating Authority for fresh consideration.

Final Conclusion: The appeal is partly allowed: on merits the Tribunal holds the services rendered for government sports facilities are not taxable as commercial or industrial construction services; issues of unjust enrichment, limitation and implications of the cited Apex Court decision were not decided below and are remanded to the original Adjudicating Authority for fresh adjudication.

Penalty not to be imposed in certain cases (Section 80) - Extended period of limitation - suppression of facts and intent to evade - Reasonable cause for failure - Revenue neutrality and availability of CENVAT credit not conclusive against invocation of extended limitation - Reverse Charge Mechanism

Penalty not to be imposed in certain cases (Section 80) - Reasonable cause for failure - Whether the adjudicating authority was correct in invoking Section 80 to waive penalty for failure to pay service tax. - HELD THAT: - The Tribunal upheld the adjudicating authority's exercise of discretion under Section 80, holding that the Commissioner was justified in finding that the respondent had established reasonable cause for non-payment. The Court accepted that the respondent (a Government of India undertaking) paid the service tax and interest after detection by DGCEI and was entitled to CENVAT credit of the amounts paid; these facts, together with absence of material proving suppression or an intent to evade, supported the conclusion of reasonable cause. The Tribunal further stated that invoking Section 80 to waive penalties is not inconsistent with factual findings that the tax was payable, and endorsed the Commissioner's conclusion that penalties could be dropped on the facts of the case. [Paras 5, 17]

Waiver of penalty under Section 80 was correct and is upheld.

Extended period of limitation - suppression of facts and intent to evade - Revenue neutrality and availability of CENVAT credit not conclusive against invocation of extended limitation - Whether the extended period of limitation was correctly invoked by the Commissioner in confirming the demand. - HELD THAT: - The Tribunal held that invocation of the extended period requires proof of factors such as fraud, collusion, wilful mis-statement or suppression of facts with intent to evade payment. Availability of CENVAT credit or revenue neutrality is a relevant but not necessarily decisive factor; each case depends on its facts. Applying these principles, the Tribunal concluded that, on the facts (respondent being a PSU, the respondent gained nothing by non-payment and would itself have benefited via CENVAT), the elements necessary to invoke the extended period were not present. The Tribunal therefore found that invoking the extended period was not correct in the factual matrix, although it observed that the confirmation of demand in the impugned order could not be modified because the respondent had not appealed that confirmation. [Paras 5, 13, 14, 15, 16]

Invoking the extended period of limitation was not correct on the facts of this case, but the Tribunal did not disturb the confirmed demand as it was not challenged by the respondent.

Contradictory pleas on taxability - Reasonable cause for failure - Whether the respondent could be faulted for taking apparently inconsistent contentions (ignorance of levy and territorial non-taxability) in defending the liability. - HELD THAT: - The Tribunal rejected Revenue's criticism that the respondent impermissibly advanced inconsistent pleas. The Court noted that a party may advance more than one bona fide ground of defence (for example, that a service is not taxable and alternatively that it was provided outside Indian territorial jurisdiction). The fact that multiple grounds were relied upon did not establish suppression or negate reasonable cause; the Commissioner properly recorded such submissions as factors in determining absence of suppression. [Paras 6, 7]

Acceptance of multiple bona fide defences by the respondent did not justify penalty or establish suppression of facts.

Final Conclusion: The departmental appeal is dismissed. The Tribunal upholds the waiver of penalties under Section 80 on the facts of the case, finds that invocation of the extended period of limitation was not sustainable in the factual matrix (though the confirmed demand remains undisturbed as it was not assailed), and records that availability of CENVAT credit or revenue neutrality is a relevant but not decisive factor in deciding extended limitation; absence of material proving suppression or intent to evade led to dismissal of the appeal.

Goods Transport Agency (GTA) - service recipient liability under reverse charge mechanism - consignment note requirement under Rule 4B - taxable service in relation to transport of goods by road

Consignment note requirement under Rule 4B - Goods Transport Agency (GTA) - Whether the transporters, having not issued consignment notes, could be treated as Goods Transport Agency so as to render the transportation service a GTA service. - HELD THAT: - The Tribunal applied the principle that a Goods Transport Agency provides service in relation to transport of goods by road under a consignment note containing particulars prescribed by the Explanation to Rule 4B. Mere transportation by individual truck owners and issuance of fortnightly bills, without serially numbered consignment notes or documents containing the prescribed particulars, does not amount to the service of a Goods Transport Agency. Reliance was placed on the Tribunal's earlier decision in NANDGANJ SIHORI SUGAR CO. LTD., which held that absence of consignment notes, GRs or challans as required by Rule 4B means the transporters cannot be classified as GTAs and the activity remains simple transportation not covered by the GTA taxable service. Applying that reasoning to the admitted facts that no consignment notes were issued, the Tribunal concluded the transporters were not GTAs for the transactions in question. [Paras 3]

Transporters did not issue consignment notes as required; therefore their activity was not GTA service.

Service recipient liability under reverse charge mechanism - taxable service in relation to transport of goods by road - Whether the respondent sugar mill could be treated as recipient liable to pay Service Tax under the reverse charge mechanism for freight charges paid to the transporters. - HELD THAT: - Given the finding that the transporters did not provide GTA services (for want of consignment notes), the respondent could not be regarded as having received the GTA service which would attract liability under the reverse charge mechanism. The adjudicating authority's conclusion that the respondent was not the recipient of GTA services was sustained on this basis. The Tribunal therefore found no Service Tax liability on the respondent for the period covered by the show cause notice. [Paras 4]

Respondent was not a service recipient liable under reverse charge; demand for service tax was not sustainable.

Final Conclusion: The impugned order dropping the demand for service tax on freight charges (for the period January 2005 to March 2010) is sustained; the department's appeal is dismissed and the respondent's cross-objection is disposed of.

Taxability of services in the Exclusive Economic Zone (EEZ) - extension of the Finance Act to installations, structures and vessels in the continental shelf and EEZ by executive notification - declaratory versus substantive character of a notification - taxation of services consumed by the seabed (prospecting/extraction activities)

Taxability of services in the Exclusive Economic Zone (EEZ) - extension of the Finance Act to installations, structures and vessels in the continental shelf and EEZ by executive notification - declaratory versus substantive character of a notification - taxation of services consumed by the seabed (prospecting/extraction activities) - Drilling services rendered by the appellants in the continental shelf and Exclusive Economic Zone between July 2009 and February 2010 are not exigible to service tax. - HELD THAT: - The Tribunal applied the settled finding of the Hon'ble Bombay High Court in Greatship (India) Ltd that the 2009 Notification extended the Finance Act only to services rendered to installations, structures and vessels, and did not bring within the service-tax net services consumed by the seabed for prospecting/extraction. The 2010 Notification, which superseded the 2002 Notification as amended in 2009, widened the scope of taxation and cannot be treated as merely clarificatory; it effected a substantive change and therefore operates from its date of issue. Consequently services of the nature rendered by the appellants became taxable only after the 2010 Notification came into effect, and the period July 2009 to February 2010 falls outside the taxable ambit under the 2009 Notification as interpreted by the High Court. Reliance on the High Court's construction led the Tribunal to set aside the demands made for the disputed period. [Paras 4]

Impugned orders demanding service tax for the period July 2009 to February 2010 are set aside and the appeals are allowed.

Final Conclusion: The Tribunal, following the Bombay High Court's construction, holds that the drilling services in the continental shelf and EEZ were not taxable between July 2009 and February 2010; the demands for that period are quashed and the appeals are allowed.

Simultaneous levy under Article 246A and Article 246 - aspect doctrine / plurality of taxable aspects - National Calamity Contingent Duty as an additional duty of excise - non obstante clause and its effect - exemption to one excise levy not automatically extending to separate levy - manifest arbitrariness test under Article 14

Simultaneous levy under Article 246A and Article 246 - non obstante clause and its effect - Levy of basic excise duty on tobacco and tobacco products post 101st Amendment is constitutionally valid and can coexist with GST. - HELD THAT: - The court held that Article 246-A and Article 246 operate in different spheres and provide independent sources of legislative power; Article 246-A does not denude or override the power under Entry 84 of List I to levy duties of excise. The non-obstante language in Article 246A and Article 246 does not effect an abrogation of the distinct source of power under Article 246 for excise; Article 246A embodies a power of simultaneous levy rather than exclusivity. Applying the aspect doctrine, the levy under Entry 84 (manufacture) and GST (supply) relate to different legally cognisable aspects and therefore can legally coexist. [Paras 27, 28, 30, 31]

Levy of basic excise duty on tobacco and tobacco products after 01.07.2017 is constitutionally sustainable alongside GST.

Aspect doctrine / plurality of taxable aspects - Excise duty targets a distinct aspect (manufacture) which is not subsumed by the CGST taxable event (supply). - HELD THAT: - Relying on the aspect doctrine and relevant precedents, the court explained that a single transaction may give rise to distinct taxable events; manufacture and supply are independent activities in the goods chain. The definition of 'supply' under the CGST Act does not subsume 'manufacture', and therefore imposition of excise on manufacture does not amount to impermissible overlap with GST which taxes supply. [Paras 30, 31]

Excise duty is levied on a separate and distinct aspect (manufacture) and does not impermissibly overlap with GST.

National Calamity Contingent Duty as an additional duty of excise - exemption to one excise levy not automatically extending to separate levy - Levy of NCCD on tobacco and tobacco products is valid; exemption from excise duty does not ipso facto extend to NCCD unless expressly provided. - HELD THAT: - The court observed that NCCD is levied by Parliament as a duty of excise under Article 271 and is an independent surcharge/duty in addition to any other excise duties. Decisions holding that exemptions from one duty carry over to another were examined and the court followed precedents which require explicit notification for exemption to apply to separate levies. Accordingly, an exemption from basic excise duty does not automatically exempt NCCD in the absence of an express exemption for NCCD. [Paras 32, 33, 34, 35]

Levy of NCCD on tobacco and tobacco products is not legally infirm and exemption to excise duty does not automatically cover NCCD.

Manifest arbitrariness test under Article 14 - Challenge under Article 14 alleging hostile discrimination in levying excise duty on tobacco and tobacco products fails for want of pleaded and proved manifest arbitrariness. - HELD THAT: - The court reiterated settled principles that taxation classifications receive wide legislative latitude and that a complainant must plead and prove hostile discrimination or manifest arbitrariness. The petition lacked necessary averments and material showing irrational or capricious classification. Given the policy choices inherent in fiscal legislation and established standards of judicial review in taxation matters, the levy did not offend Article 14. [Paras 36, 37, 38, 39]

The Article 14 challenge to the levy of excise duty on tobacco and tobacco products is dismissed.

Final Conclusion: The High Court dismissed the challenge: basic excise duty and NCCD on tobacco and tobacco products post the 101st Constitutional Amendment are constitutionally sustainable alongside GST, NCCD is a valid additional excise duty not automatically covered by an exemption to basic excise duty, and the Article 14 challenge alleging discriminatory or manifestly arbitrary classification was not made out.

Cenvat credit admissibility - burden of proof for non-receipt of inputs - reliance on third party transporter and RTO records - compliance with Cenvat Credit Rules and receipt of inputs

Cenvat credit admissibility - burden of proof for non-receipt of inputs - reliance on third party transporter and RTO records - compliance with Cenvat Credit Rules and receipt of inputs - Whether Cenvat credit could be denied to the appellant solely on the basis of transporter/RTO check post records notwithstanding statutory records at the factory and banking evidence of payment - HELD THAT: - The Tribunal found that the appellant had recorded receipts of the disputed inputs in RG 23A Part I and II, in the raw material register and books of account, had used the inputs in manufacture of dutiable goods, and had effected payments (including transport) through banking channels. The investigation produced evidence from transporters and RTO check posts suggesting non movement of consignments, but revenue did not adduce any evidence from the appellant's factory or from the suppliers' units to contradict the appellant's statutory records. Rule 4 and Rule 9 of the Cenvat Credit Rules require that credit be taken only after receipt of inputs; where the manufacturer's statutory records show receipt and there is no cogent contradictory evidence from the department, denial of credit merely on the basis of third party transporter/RTO records is not sustainable. The Tribunal relied on authority holding that the burden to prove non receipt of inputs lies on the Revenue and that clandestine removal cannot be established solely by transporter statements without independent corroboration. Applying these principles, the adjudicating order demanding recovery of credit was set aside. [Paras 6, 7]

Impugned orders denying Cenvat credit were set aside and the appeals allowed; the Revenue failed to discharge the burden of proving non receipt of inputs by evidence beyond transporter/RTO records.

Final Conclusion: The Tribunal allowed the appeals, holding that in the absence of cogent contrary evidence from the department and on facts showing statutory receipt entries and banking payments, Cenvat credit could not be denied on the sole basis of transporter or RTO check post records; the impugned orders were set aside with consequential reliefs.

Extended period of limitation - Limitation under Section 11A of the Central Excise Act, 1944 - Willful misstatement or suppression of facts as prerequisite for invoking extended period - Audit objection insufficient to invoke extended period

Extended period of limitation - Limitation under Section 11A of the Central Excise Act, 1944 - Validity of demand confirmed for the period 01.04.2004 to 30.09.2006 as being beyond the five year limitation - HELD THAT: - The show cause notice dated 31.10.2011 could not validly demand duty for periods prior to October 2006. Section 11A permits invocation of the extended five year period only where the proviso conditions are satisfied. The Tribunal held that demands confirmed for the period from 01.04.2004 to 30.09.2006 fall outside the five year window measured from the date of the show cause notice and are therefore unsustainable. The adjudicating authority's confirmation of duty for that earlier period was set aside for being barred by limitation. [Paras 6]

Demand confirmed for 01.04.2004 to 30.09.2006 set aside as barred by limitation.

Willful misstatement or suppression of facts as prerequisite for invoking extended period - Audit objection insufficient to invoke extended period - Whether extended limitation could be invoked for the remaining demand (period up to October 2006) in absence of evidence of fraud, collusion or willful suppression - HELD THAT: - The Tribunal examined whether the proviso to Section 11A could be invoked. Relying on authoritative precedent, it applied the principle that mere non payment or audit objections do not constitute the deliberate conduct (fraud, collusion, willful misstatement or suppression of facts) necessary to attract the extended five year period. The case was booked on the basis of audit scrutiny and there was no material showing intentional evasion or mala fide conduct by the assessee. In the absence of such evidence the proviso cannot be invoked and the show cause notice is barred by limitation. Having reached that conclusion, the Tribunal declined to enter upon the merits of valuation or Rule 8 application. [Paras 7, 8, 9]

No material of fraud, collusion or willful suppression found; extended period cannot be invoked and the show cause notice is barred by limitation; merits not adjudicated.

Final Conclusion: The impugned order is set aside. The demands confirmed by the authorities are barred by limitation and the appeal is allowed with consequential relief; the Tribunal refrained from deciding merits after holding the show cause notice time barred.

Right to defence under Section 243(2) Cr.P.C. to procure process for defence evidence - permissibility of handwriting/forensic examination to determine age of ink and authorship of writings on negotiable instruments - refusal of defence application only when made for purpose of vexation, delay or defeating ends of justice - presumption under Section 139 of the Negotiable Instruments Act and right to rebut same - inchoate stamped instruments and implied authority to complete blank signed cheques - where precedents conflict, accused entitled to expert assistance under Section 243(2) unless application is vexatious or used for delay

Right to defence under Section 243(2) Cr.P.C. to procure process for defence evidence - permissibility of handwriting/forensic examination to determine age of ink and authorship of writings on negotiable instruments - refusal of defence application only when made for purpose of vexation, delay or defeating ends of justice - presumption under Section 139 of the Negotiable Instruments Act and right to rebut same - inchoate stamped instruments and implied authority to complete blank signed cheques - Whether the trial court erred in dismissing the accused's application to examine handwriting/fingerprint expert for comparison and age determination of writings on the cheque. - HELD THAT: - The Court held that once the accused, after entering defence, seeks to send the disputed cheque for handwriting/forensic examination under Section 243(2) Cr.P.C., the Magistrate should ordinarily grant such request unless he records that the application is made for vexation, delay or to defeat the ends of justice. Reliance was placed on Kalyani Baskar and T. Nagappa which recognise the accused's right to adduce rebuttal evidence by expert opinion to meet the prima facie presumption under Section 139 (and Section 118(a)) of the Negotiable Instruments Act. The trial Court's sole basis for refusal-admission of signature-was inadequate to deny the accused the opportunity to obtain expert opinion, because an accused who contends that a signed blank cheque was misused by filling the body by another person must be permitted to test that contention through appropriate examination of the document (including age of ink and comparison of handwriting). The Court observed that certain precedents (including Bir Singh and Sampelly) reiterate that a signed cheque may give rise to a presumption of liability but do not displace the rule that an accused must have a fair opportunity to rebut the presumption by adducing relevant defence evidence. Where decisions of coordinate Benches appear to conflict, the Court found the reasoning in T. Nagappa (and Kalyani Baskar) more elaborate and consonant with the principle of fair trial, and accordingly directed that the accused be permitted to examine the handwriting expert. The Court therefore quashed the impugned order dismissing the application and imposed a time-bound direction for adducing the expert evidence and concluding the trial.

Impugned order dated 24.07.2019 quashed; petitioner-accused permitted to examine a handwriting expert as defence witness within four weeks and the Trial Court directed to conclude the trial within eight weeks thereafter.

Final Conclusion: The revision petition succeeds; the order of the Judicial Magistrate refusing to send the cheque for handwriting/forensic examination is quashed, the accused is granted a limited opportunity to produce expert evidence within a specified timeline, and the trial is directed to be expeditiously completed.

Principal debtor and surety under the Negotiable Instruments Act - contract to the contrary modifying statutory liability under Section 37 of the NI Act - acceptance by bank through SFMS (IFN754) and related bank-to-bank communications - enforceability of a bank-to-bank promise by the payee/beneficiary - buyer's liability de hors a bill of exchange - trade usage and prior dealings as evidentiary basis for co-acceptance

Acceptance by bank through SFMS (IFN754) and related bank-to-bank communications - principal debtor and surety under the Negotiable Instruments Act - contract to the contrary modifying statutory liability under Section 37 of the NI Act - Liability of the buyer's bank (second Defendant) to pay under the bill of exchange. - HELD THAT: - Although the bill of exchange did not contain an endorsement showing acceptance in the formal manner prescribed by Section 7 of the NI Act, the chain of communications between the seller's bank and the buyer's bank (including SFMS/IFN754 messaging and subsequent emails) amounted to a contractual undertaking by the buyer's bank to effect payment on the due date. Such a contract qualifies as a "contract to the contrary" under Section 37 read with Section 33 of the NI Act and thereby imposed liability on the buyer's bank. The court also noted that, on the facts, it is immaterial whether the buyer's bank's obligation operates as principal debtor under the contract or as surety, because the buyer failed to pay, thereby triggering the bank's liability in either view. Reliance was placed on the content of the bank-to-bank emails, the SFMS acceptance practice, evidence of prior similar transactions, and the deposition of the bank official who explained banking practice regarding IFN754 messages. [Paras 15, 16, 18, 20]

The buyer's bank is liable to pay the bill pursuant to the contract evidenced by SFMS/IFN754 and related communications, thereby varying the statutory allocation of liability under the NI Act.

Buyer's liability de hors a bill of exchange - principal debtor and surety under the Negotiable Instruments Act - Liability of the buyer (first Defendant) for the price of goods despite absence of formal acceptance on the bill of exchange. - HELD THAT: - The first Defendant, as buyer of the goods, is liable to pay for the goods independently of whether it formally accepted the bill by endorsement. The buyer issued the purchase order, received the goods, and sought an extension of time from the buyer's bank, which demonstrates the buyer's acknowledgement of the debt. Therefore, the buyer's liability for the supply of goods is established irrespective of the formal requirements for acceptance on the negotiable instrument. [Paras 16, 19, 20]

The first Defendant is liable to pay for the goods supplied and cannot escape liability merely because formal acceptance on the bill was not recorded.

Enforceability of a bank-to-bank promise by the payee/beneficiary - trade usage and prior dealings as evidentiary basis for co-acceptance - Whether the Plaintiff (payee) can enforce the contract made between the two banks. - HELD THAT: - The communications between the seller's bank and the buyer's bank were made on behalf of and for the benefit of the Plaintiff, and the Plaintiff had been debited by its bank on account of non-payment. The contract thus formed was intended to benefit the Plaintiff and is enforceable by it. The court also observed that consistent prior practice of the buyer's bank honouring similar SFMS/IFN754 acceptances supported the conclusion that co-acceptance without physical endorsement was effective in the trade between the parties. [Paras 22, 23]

The Plaintiff is entitled to enforce the bank-to-bank undertaking and recover under the contract.

Loser pays principle and award of interest - trade usage and prior dealings as evidentiary basis for co-acceptance - Entitlement to recovery, interest and costs. - HELD THAT: - The Plaintiff proved debit by its bank consequent to non-payment by the buyer and buyer's bank. The court held that the Plaintiff is entitled to recover the claimed sum from the first and second Defendants jointly and severally. Penal interest debited by the Plaintiff's bank was attributable to the defendants' default and recoverable. Taking into account prevailing interest rates, the court awarded interest on the decretal amount at 9% per annum from the date specified in the judgment until realization. Costs were awarded to the Plaintiff under the loser pays principle and quantified by the court after considering court fee and reasonable legal expenses. [Paras 24, 25]

Suit decreed against the first and second Defendants; Plaintiff entitled to the decretal sum, interest at 9% per annum from the date in the judgment, and costs as awarded.

Final Conclusion: The suit was decreed: the first and second Defendants are jointly and severally liable to the Plaintiff for the claim arising from supply of goods and the unpaid bill of exchange; the Plaintiff may enforce the bank-to-bank undertaking reflected in SFMS/IFN754 and related communications; interest was awarded at 9% per annum from the date specified until realization and costs were awarded to the Plaintiff.