TaxTMI Updates e-Newsletter
Jun 30,2022

Principles of natural justice - Form DRC-01A communication procedure - show cause notice under Section 74(1) of the TNGST Act - surprise inspection under Section 67 - personal hearing - recovery under Section 79

Form DRC-01A communication procedure - show cause notice under Section 74(1) of the TNGST Act - personal hearing - principles of natural justice - Validity of the assessment orders passed on 31.01.2022 in light of the procedure followed after issuance of Form DRC-01A and compliance with principles of natural justice. - HELD THAT: - The Court found that after issuance of Form DRC-01A dated 06.12.2021, if the assessee objects and does not pay the ascertained tax, the statutory procedure required issuance of a show cause notice under Section 74(1) and finalisation of assessment only after considering objections and giving personal hearing. The impugned orders were passed without following that mandated procedure. The Court recorded that the petitioner's authorised representative had appeared and filed objections but the assessing authority proceeded to confirm proposals without completing the show cause/adjudication process, thereby resulting in procedural irregularity and breach of principles of natural justice which vitiated the orders. [Paras 13]

Assessment orders dated 31.01.2022 are quashed for failure to follow the statutory adjudication procedure and for denial of appropriate compliance with principles of natural justice.

Recovery under Section 79 - Form GST DRC-09 - principles of natural justice - Validity of the consequential recovery communication issued to the bank pursuant to the impugned assessment orders. - HELD THAT: - The Court observed that the recovery notice (Form GST DRC-09) addressed to the Branch Manager, Axis Bank, Ramanathapuram, stemmed from the impugned assessments which were tainted by procedural infirmity. Since the assessments were quashed for not following the prescribed show cause/adjudicatory process, the consequential recovery action could not stand and was quashed as well. [Paras 13]

The recovery communication dated 10.06.2022 issued to the bank is quashed.

Show cause notice under Section 74(1) of the TNGST Act - personal hearing - surprise inspection under Section 67 - Procedure to be followed on remand for fresh adjudication after quashing of the impugned orders. - HELD THAT: - The Court directed that the respondent shall, in accordance with law, issue the appropriate notice (including show cause notice as required), afford opportunity to file objections and personal hearing, and thereafter pass fresh orders on merits. The Court emphasised that the fresh process must follow the statutory scheme applicable to assessments arising from inspection and be completed expeditiously without delay. [Paras 13]

Matter remitted to respondent for fresh adjudication following the prescribed procedure; respondent directed to complete the process expeditiously.

Final Conclusion: Writ petitions allowed; assessment orders dated 31.01.2022 for the years 2019-2020, 2020-2021 and 2021-2022 and the consequential recovery communication are quashed; respondent to issue proper notice, afford opportunity of objections and personal hearing, and pass fresh orders on merits expeditiously.

Provisional attachment of property under Section 83 of the CGST Act - formation of opinion based on tangible material before ordering provisional attachment - protecting the interest of government revenue - provisional attachment during pendency of proceedings under Section 67 - cessation of provisional attachment upon conclusion of the triggering proceedings

Provisional attachment of property under Section 83 of the CGST Act - cessation of provisional attachment upon conclusion of the triggering proceedings - provisional attachment during pendency of proceedings under Section 67 - Effect of conclusion of proceedings under Section 67 on a provisional attachment ordered under Section 83. - HELD THAT: - The Court applied the principle that provisional attachment under Section 83 is a draconian power which may be exercised only during the pendency of specified proceedings and must be preceded by formation of an opinion by the competent authority based on tangible material showing a live link to the necessity of protecting revenue; the exercise of unguided or indefinite discretion is impermissible (as explained in Radha Krishan Industries ). Where the proceedings under Section 67 have been concluded, the statutory purpose for continuing a provisional attachment under Section 83 ceases. Accordingly, a provisional attachment made during the pendency of Section 67 proceedings loses effect once those proceedings are concluded, although the department retains the statutory power to order attachment again if the conditions and procedural safeguards prescribed by law are satisfied during the pendency of any of the specified proceedings.

Provisional attachment dated 20th January, 2021 ceased to have effect upon conclusion of the proceedings under Section 67 and must be lifted.

Protecting the interest of government revenue - formation of opinion based on tangible material before ordering provisional attachment - Whether the order of provisional attachment should be quashed and the attachment lifted in the present case. - HELD THAT: - Applying the foregoing legal principles to the facts, the Court found that the impugned provisional attachment was ordered during the pendency of Section 67 proceedings which have since been concluded; therefore the continued attachment could not be sustained. The Court emphasised that this conclusion does not preclude the department from exercising its power under Section 83 in future if the statutory conditions and procedural safeguards are met. In view of the conclusion, the impugned order of provisional attachment and the subsequent communication refusing release were quashed and the authority was directed to inform the bank to lift the attachment.

The order dated 20th January, 2021 and the communication dated 14th June, 2021 are quashed; respondents directed to notify the bank to lift the attachment within one week of service of the order.

Final Conclusion: The writ appeal is allowed: the provisional attachment ordered on 20th January, 2021 (and the communication of 14th June, 2021 refusing release) are quashed and the respondents are directed to intimate the appellants' banker to lift the attachment within one week; the department's statutory powers under Section 83 remain preserved for future exercise if the statutory conditions and procedural safeguards are satisfied.

Intermediary (arranges or facilitates supply) - supply under Section 7(1)(a) of the CGST Act - mixed supply and rule of highest-rate component - place of supply under Section 13(5) for events - place of supply under Section 13(2) - location of recipient - consideration inclusive of reimbursements - business - inclusive definition (trade, commerce, vocation) - GST registration and tax liability on import of services

Intermediary (arranges or facilitates supply) - consideration inclusive of reimbursements - Whether the liaison office qualifies as an "intermediary" under the IGST Act or is an agent/other person for its head office - HELD THAT: - The authority examined the statutory definition of "intermediary" and the factual matrix of activities. Although the liaison office acts as an agent of its Dubai head office in representing and promoting the head office, its role for Indian and Dubai businesses is limited to making introductions, sharing information and organizing platforms without arranging or facilitating any actual supply between those businesses. The office does not receive fees from those business entities; its receipts are from the Dubai head office. On these facts the liaison office does not satisfy the essential element of arranging or facilitating an underlying supply between two other persons and therefore is not an "intermediary" under Section 2(13) of the IGST Act. [Paras 11]

The Appellant is not an "intermediary".

Supply under Section 7(1)(a) of the CGST Act - business - inclusive definition (trade, commerce, vocation) - consideration inclusive of reimbursements - Whether the activities undertaken by the Appellant at the behest of its Dubai head office constitute a taxable "supply" under the CGST Act - HELD THAT: - The Appellate Authority held that the bundle of activities performed by the liaison office (introductions, information sharing, organizing physical and virtual events, participating as representative) fall within the wide statutory meaning of "services" and, taken together, amount to economic activity or "vocation" and therefore "business" under Section 2(17). Amounts remitted by the head office, even if described as reimbursements, meet the statutory definition of "consideration". The combined activities form a "mixed supply" since individual components are separable and are supplied for a single price. Consequently, the activities satisfy the requisites of "supply" under Section 7(1)(a). [Paras 12, 13, 21, 22]

The Appellant's activities constitute "supply" under Section 7(1)(a) of the CGST Act.

Mixed supply and rule of highest-rate component - place of supply under Section 13(5) for events - place of supply under Section 13(2) - location of recipient - Characterisation of the supplies (taxable v. non-taxable) and the place of supply for the various components of the Appellant's services - HELD THAT: - The Authority analysed the components: event organisation/assistance (seminars, conferences, trade shows) were classified as support services under SAC 998596 and identified as taxable where the events are held; other support activities (information, representation, reporting) fall under SAC 998599. For event-organisation services the place of supply is where the event is actually held under Section 13(5), and since such events are held in India those services are in the taxable territory. Other support services are governed by Section 13(2) and, where the recipient is located abroad, are outside India. As the supplies form a mixed supply, Section 8(b) applies and the mixed supply is to be treated as the component attracting the highest rate of tax. [Paras 14, 16, 17, 18]

The Appellant's supplies are a mixed supply comprising taxable event-organisation services (place of supply India) and non-taxable support services (place of supply outside India); the mixed supply is to be treated as the event-based support service attracting the highest rate.

GST registration and tax liability on import of services - mixed supply and rule of highest-rate component - Whether the Appellant is required to obtain GST registration and discharge tax on amounts received from the Dubai head office - HELD THAT: - Applying the characterisation and place-of-supply conclusions, the Authority held that the mixed supply will be treated as the event-based support service attracting the highest tax rate (18%). The recipient of services is the Dubai head office and the Appellant receives amounts from it; therefore the Appellant must register under GST and is liable to discharge IGST (as applicable) on the entire amount received from the head office in respect of the mixed supply. [Paras 18, 19]

The Appellant must obtain GST registration and discharge IGST on the amounts received from its Dubai head office.

Final Conclusion: The Appellate Authority modified the MAAR ruling: the liaison office's activities constitute a mixed "supply" of services (not an "intermediary"), with event-organisation services taxable in India and forming the highest-rate component; accordingly the Appellant must obtain GST registration and discharge IGST on amounts received from its Dubai head office. The appeal is dismissed.

Scope of supply - consideration - supply of food as supply of service - activities in course or furtherance of business - Schedule III Entry 1-services by employee to employer - Schedule II clause 6-supply of food as service - Statutory obligation under the Factories Act to provide canteen

Scope of supply - consideration - Schedule II clause 6-supply of food as service - Statutory obligation under the Factories Act to provide canteen - Whether the nominal recovery from employees for food supplied in employer provided canteens (run by employer or through a third party) is taxable under GST. - HELD THAT: - The Authority found that establishing and running a canteen where more than 250 workers are ordinarily employed is mandated by the Factories Act and forms an activity in furtherance of the applicant's business. Where food is supplied to employees in such canteens for a nominal charge and not shown to be part of the contractual terms of employment, that provision of food amounts to an outward supply in the course or furtherance of business. Schedule II clause 6 treats supply of food for consideration as a supply of service. The definition of 'consideration' includes payments made in respect of supply of services; collecting the nominal amount from employees (even by recovery from salary or via ledger/token system) is consideration for the supply of food. The fact that a third party provides the food to the employer and the employer pays the vendor does not negate that the employer is making the supply of food to employees (directly or as principal) and receiving consideration for it. Consequently, the nominal recovery cannot be characterised as a mere non consideration recovery exempt from GST where the canteen supply is not part of the employment contract/CTC and the employer bears mandatory canteen costs under the Factories Act. The Authority therefore concluded that the supply of food is a 'supply of service' and the recovered amount is 'consideration' on which GST is leviable. [Paras 8]

The nominal amount recovered from employees for canteen food supplied by the employer (directly or via a third party) is consideration for a taxable supply of service and is liable to GST.

Final Conclusion: The Advance Ruling answers the question in the affirmative: the amount recovered from employees for food supplied in employer provided canteens (where the supply is not shown to be part of employment contract and the canteen is provided pursuant to the Factories Act) constitutes consideration for a supply of service and is taxable under GST.

Composite supply - principal supply - classification of supply as goods or services - printing service - SAC 998912 - CBIC Circular No. 11/11/2017-Clarification on printing contracts - applicable GST rate on printing services

Composite supply - principal supply - classification of supply as goods or services - CBIC Circular No. 11/11/2017-Clarification on printing contracts - Whether the manufacture and supply of printed leaflets undertaken by the applicant using its own paper and ink, where the printing content is supplied by the recipient, is a supply of goods or a supply of services under the GST law. - HELD THAT: - Applying the statutory definitions of composite supply and principal supply, and having regard to CBIC Circular No. 11/11/2017 which treats printing contracts where the recipient supplies the content and the printer supplies the physical inputs as composite supplies with printing as the principal activity, the Authority found that the applicant's activity-printing content provided by the recipient on paper and materials procured by the applicant and supplying the printed leaflets-is a composite supply. The predominant element is the provision of printing (the service) to which supply of physical material is ancillary; the recipient obtains the transaction chiefly to secure the supplier's printing service. The Authority followed its earlier decision in Macro Media and the Circular in concluding that printing is the principal supply in such cases and, therefore, the transaction is a composite supply classified by reference to the principal supply as a service. [Paras 7]

The supply is a composite supply with the printing service as the principal supply and therefore is to be treated as a supply of services.

Printing service - SAC 998912 - classification of supply as services - Whether the composite supply described above is classifiable under SAC 9989 / SAC 998912. - HELD THAT: - Having held that the principal supply is printing, the Authority applied the service classification schedule which places printing and reproduction services on a fee or contract basis under SAC 998912. The explanatory notes show that printing services on paper fall within this code. Consequently, the composite supply is classifiable under SAC 998912 as the principal supply is a printing service. [Paras 8]

The supply is classifiable under SAC 998912.

Applicable GST rate on printing services - SAC 998912 - What is the applicable rate of GST on the supply so classified. - HELD THAT: - On classification under SAC 998912, the Authority referred to the relevant entries in Notification No. 11/2017-C.T. (Rate) and the State notification. Noting amendments and the rate changes, the Authority identified the rate applicable to the printing services entry as effective from 1 October 2021 and applied that rate to the supply in question. [Paras 9, 10]

With effect from 1 October 2021, the supply is taxable at the rate prescribed for the printing services entry (CGST 9% and SGST 9%).

Final Conclusion: The Authority ruled that printing content supplied by the recipient, printed on paper and materials supplied by the applicant and delivered as printed leaflets, constitutes a composite supply with printing as the principal supply; it is classifiable as a printing service under SAC 998912 and, effective from 1 October 2021, taxable at the notified rate applicable to that service (CGST 9% and SGST 9%).

Obligation to pass on benefit of tax rate reduction under Section 171(1) of the CGST Act, 2017 - Reversal and apportionment of common input tax credit under Rule 42 of the CGST Rules, 2017 - Computation of profiteering and commensurate base price methodology - Deposit of profiteered amount in Consumer Welfare Fund under Rule 133(3)(e) of the CGST Rules, 2017 - Interest on profiteered amount as prescribed under Rule 133(3)(b) of the CGST Rules, 2017 - Non retroactivity of penalty under Section 171(3A) of the CGST Act, 2017

Obligation to pass on benefit of tax rate reduction under Section 171(1) of the CGST Act, 2017 - Computation of profiteering and commensurate base price methodology - Whether the Respondent contravened Section 171(1) of the CGST Act, 2017 by not passing on the benefit of reduction of tax rate on sanitary napkins - HELD THAT: - The Authority examined the DGAP's investigation and methodology comparing pre rate reduction base price with actual selling price in the post reduction period. The investigation covered the period starting 27.07.2018 and the DGAP's mathematical method to compute the commensurate base price and resultant profiteering was held to be correct, appropriate and in consonance with Section 171(1). The DGAP found that the Respondent increased the base price after the tax rate reduction and thereby did not pass on the benefit to customers. The Respondent's contentions regarding allocation and treatment of common input tax credit reversal were considered and rejected as untenable by the Authority on the basis of the DGAP's explanations and the record. The Respondent subsequently offered to pay the amount computed by the DGAP without admitting liability. [Paras 11, 12]

The Respondent was held to have contravened Section 171(1) for the period concerned; the DGAP's computation methodology was accepted.

Computation of profiteering and commensurate base price methodology - Deposit of profiteered amount in Consumer Welfare Fund under Rule 133(3)(e) of the CGST Rules, 2017 - Interest on profiteered amount as prescribed under Rule 133(3)(b) of the CGST Rules, 2017 - Quantum of profiteering and the manner of its disposition - HELD THAT: - On the basis of the DGAP's invoice level computation distinguishing closing and fresh stock and applying the accepted base price methodology, the Authority determined the total profiteered amount for the adjudicated period. The Authority directed that the determined amount together with interest at the prescribed rate be deposited in the Central and State/UT Consumer Welfare Funds where recipients are not identifiable, in accordance with Rule 133(3)(e) and related provisions. The distribution between Central and State/UT funds follows the DGAP's place of supply break up and the Authority ordered deposit within three months, failing which recovery under the CGST Act would follow. [Paras 13]

Total profiteering as computed by the DGAP was accepted and ordered to be deposited with interest into the specified Consumer Welfare Funds as directed.

Non retroactivity of penalty under Section 171(3A) of the CGST Act, 2017 - Whether penalty under Section 171(3A) could be imposed for the contravention - HELD THAT: - Section 171(3A) came into force w.e.f. 01.01.2020, whereas the contravention relates to the period 27.07.2018 to 31.03.2019. On that temporal basis the Authority held that penalty under Section 171(3A) could not be imposed retrospectively for acts committed prior to its commencement. [Paras 14]

Penalty under Section 171(3A) was not imposed because the provision was not in force during the period of offence.

Final Conclusion: The Authority found that the Respondent contravened Section 171(1) by not passing on the benefit of the tax rate reduction on sanitary napkins for the period 27.07.2018 to 31.03.2019, accepted the DGAP's computation of profiteering, directed deposit of the determined amount with interest into the Central and State/UT Consumer Welfare Funds within three months, declined to impose penalty under Section 171(3A) due to non retroactivity, and directed jurisdictional Commissioners to ensure compliance and report.

Passing on benefit of input tax credit - commensurate reduction in prices - anti profiteering - Methodology for determination of profiteering - investigation period 01.07.2017 to 31.03.2019 - refund of profiteered amount with interest - Section 171 (anti profiteering: passing on benefit of input tax credit)

Passing on benefit of input tax credit - commensurate reduction in prices - Section 171 (anti profiteering: passing on benefit of input tax credit) - Whether the Respondent contravened Section 171(1) of the CGST Act by not passing on the additional benefit of input tax credit to the flat buyers for the project during the investigation period. - HELD THAT: - The Authority examined pre GST and post GST ratios of available CENVAT/ITC to turnover for the project and found that the ITC available to the Respondent increased from 3.56% (pre GST) to 11.74% (post GST), giving an additional benefit of 8.18% of turnover for the period considered. The Authority held that Section 171 mandates that any benefit of input tax credit must be passed on to recipients by way of commensurate reduction in prices and that the additional ITC accruing to the Respondent could not be appropriated. The Authority rejected the Respondent's contentions that (a) anti profiteering provisions violated Articles 14 and 19, (b) the benefit could be withheld until project completion, and (c) the Respondent could escape transfer of the additional ITC by reference to market factors or changes in input costs, concluding that the sacrifice of tax revenue embodied in ITC must be passed to consumers and that the DGAP's comparison of pre and post GST ITC/turnover ratios was a proper basis to determine net benefit. [Paras 16, 19, 20, 23]

The Authority found that the Respondent had contravened Section 171(1) by not passing on the additional ITC benefit to the buyers for the period 01.07.2017 to 31.03.2019.

Methodology for determination of profiteering - anti profiteering - Rule 126 - Authority's power to determine methodology - Validity and applicability of the methodology used by the DGAP/Authority for computing profiteering and the challenge to Rule 126 and the Authority's notified Methodology & Procedure. - HELD THAT: - The Respondent challenged the methodology as arbitrary and contended Rule 126 exceeded Section 171. The Authority held that the concept of 'commensurate reduction' in Section 171 requires computation specific to each case and that Rule 126 empowers the Authority to determine methodology (not to usurp the parent statute). The Authority noted it had notified Methodology & Procedure and that the DGAP applied the accepted methodology for real estate supplies, which compares pre and post GST ITC/turnover ratios to quantify additional ITC benefit. The Authority rejected submissions that changes in service tax rates or market costs defeated the approach, observing that increases in ITC due to higher statutory tax rates are benefits to be passed on and that cost/market factors were considered to the extent reflected in the agreements and returns. [Paras 17, 19]

The Authority upheld the methodology used by the DGAP and rejected the constitutional and Rule 126 objections; the DGAP's computation method was held to be lawful and appropriate in the circumstances.

Refund of profiteered amount with interest - investigation period 01.07.2017 to 31.03.2019 - Quantum of profiteering, interest and remedial directions to be imposed on the Respondent for the investigation period. - HELD THAT: - On the basis of the DGAP's computations (comparing ITC/turnover ratios and recalibrating base price), the Authority accepted that the additional ITC benefit to be passed on aggregated to the amount calculated by DGAP for the project. The Authority determined that the Respondent had profiteered and required refund/adjustment of the profiteered amount to eligible homebuyers together with interest at 18% from the date the amount was profiteered until payment. The Authority directed reduction of prices commensurate with the benefit, refund/payment within three months, required publication of an advertisement to inform affected buyers, and directed the jurisdictional Commissioners to ensure compliance and report within four months. The Authority also held that penalty under Section 171(3A) could not be imposed retrospectively for the period in issue. [Paras 26, 28, 29, 30, 31]

The Authority quantified profiteering for 01.07.2017 to 31.03.2019 and ordered the Respondent to refund/pass on the profiteered amount to identified homebuyers with interest at 18% and to comply with publication and reporting directions; retrospective penalty was not imposed.

Final Conclusion: The Authority found that M/s Indiabulls Real Estate Ltd. (registered as M/s Airmid Real Estate Ltd.) had not passed on the additional input tax credit benefit arising after introduction of GST and therefore contravened Section 171(1) for the period 01.07.2017 to 31.03.2019; the profiteered amount as computed by the DGAP was accepted, the Respondent was directed to pass/refund that amount to the identified homebuyers with interest at 18% within three months, to publicize the Order, and to comply with reporting directions; penalty under Section 171(3A) was held not to be leviable retrospectively for the period under consideration.

Section 195(2) of the Income Tax Act - Nil TDS Certificate - Fees for Included Services (FIS) - "make available" requirement - sum chargeable under this Act - Secondment - employer-employee relationship - Reimbursement versus consideration - Applicability of DTAA / Article 12(4) - Section 197 - application by recipient - Deduction on gross receipts versus proportion of sum chargeable

Section 195(2) of the Income Tax Act - Section 197 - application by recipient - Maintainability of the petitioner's application under Section 195(2) for determination of appropriate proportion and grant of Nil TDS Certificate. - HELD THAT: - The Court held that an application under Section 195(2) by the payer is a recognised statutory remedy and is maintainable in the facts of this case. The Income Tax Rules and prescribed forms (Rule 29BA/Form 15E) envisage an application by the person responsible for payment to seek determination of the proportion of any sum chargeable under the Act. Section 197 is a separate and distinct mechanism available to the recipient; it does not render a payer's Section 195(2) application incompetent. The Assessing Officer's failure to record non-maintainability in the impugned order precluded Revenue from raising that objection for the first time in these proceedings. The Court further observed that Section 195/197 proceedings are tentative safeguards to avoid consequences of non-deduction and the payer cannot be required to establish final taxability before invoking Section 195(2).

Application under Section 195(2) was maintainable and the Revenue could not first raise non maintainability in these proceedings.

Applicability of DTAA / Article 12(4) - Fees for Included Services (FIS) - "make available" requirement - Whether the payments to the non-resident fall within Article 12(4) FIS of the India-U.S. DTAA requiring deduction under Section 195. - HELD THAT: - The Court applied Section 90(2) and construed Article 12(4) of the DTAA as potentially more beneficial to the assessee. It emphasized that Article 12(4) requires not merely rendering of technical/consultancy services but that such services must "make available" technical knowledge, experience, skill, know how or processes. On the material before the Assessing Officer and on scrutiny of the M.S.A., the impugned order failed to engage with the "make available" element and merely treated provision of personnel/services as sufficient to classify the payments as FIS. Because the DTAA's "make available" requirement narrows the scope of taxable FIS vis-a -vis domestic provisions, the Court held that the Assessing Officer's conclusion that the payments were FIS was unsustained on the record and required rejection in this proceeding.

The payments could not be treated as FIS under Article 12(4) on the material considered by the DCIT because the essential "make available" requirement was not shown to be satisfied.

Sum chargeable under this Act - Deduction on gross receipts versus proportion of sum chargeable - Whether deduction under Section 195 is to be made on the gross remittance or only on the proportion of the sum that is chargeable to tax. - HELD THAT: - The Court distinguished Sections 194C/194J (where gross deduction is compelled by the statutory wording) from Section 195, noting that Section 195 alone uses the expression "sum chargeable under the provisions of this Act." Reliance on precedent was made to show that the obligation to deduct under Section 195 arises only when there is a "sum chargeable" and that Section 195(2) provides the mechanism for determining the appropriate proportion chargeable. Consequently, the principle of gross deduction applicable under other provisions does not automatically apply to Section 195 where a payer may seek a determination of the proportion chargeable to tax.

Deduction under Section 195 is not invariably on the gross remittance; Section 195(2) permits determination of the proportion of the sum chargeable to tax.

Secondment - employer-employee relationship - Reimbursement versus consideration - Whether, for the limited purpose of Section 195 determination, the seconded employees were the petitioner's employees and whether the payments were true reimbursements (and thus excluded from chargeability). - HELD THAT: - Examining the M.S.A. and the factual indicia of the secondment, the Court found that the Assessing Officer had overlooked the nature of the petitioner's relationship with the seconded employees during secondment. The Court noted the petitioner's issuance of appointment letters, control over duties, power to terminate during secondment, and treatment of employees (including provident fund contributions and employment visas) as establishing that, for the period of secondment, the petitioner functioned as the employer. The Court further observed that mere labelling and the fact that Walmart Inc. paid salaries and invoiced costs does not convert a bona fide reimbursement into taxable consideration where there is no mark up and the arrangement does not satisfy the DTAA's FIS "make available" test.

On the material before it for the limited Section 195 exercise, the Court treated the payments as genuine reimbursements and accepted that the petitioner functioned as the employer during the secondment period, undermining the DCIT's contrary finding.

Final Conclusion: The impugned order rejecting the petitioner's Section 195(2) application was set aside. The respondent No.1 is directed to issue a certificate under Section 195(2) authorising Nil Tax Deduction at Source in respect of the petitioner's application dated 15.01.2020; the Assessing Officer's finding that the payments were FIS taxable on gross basis and that no employer employee relationship existed during secondment was reversed insofar as required for the limited, tentative Section 195 determination.

Capital receipt - revenue receipt - sale of carbon credits - cost of acquisition / cost of production linked to machinery - Technology Upgradation Fund subsidy and related compensation - deduction under Section 80IA - distinction between capital and revenue in taxing statute - appellate adjustment of tax liability

Sale of carbon credits - capital receipt - revenue receipt - Proceeds from sale of certified emission reduction (carbon) credits are capital receipts and not taxable as business income. - HELD THAT: - The Court held that the question whether receipts from sale of carbon credits are capital or business receipts is answered in favour of the assessee. It followed earlier decisions of coordinate benches and the Andhra Pradesh High Court holding that carbon credits are an offshoot of environmental concerns and not generated as an incident of the assessee's core business, and thus the proceeds constitute capital receipts. The Court observed that this position has been consistently adopted by High Courts and Tribunals and that where precedent has declared the statutory meaning, the declaration governs the characterization of such receipts.

Sale of carbon credits treated as capital receipt; not taxable as business income.

Distinction between capital and revenue in taxing statute - application of tests to characterise receipts - Principles and tests distinguishing capital and revenue receipts apply to carbon credit receipts and support capital characterisation. - HELD THAT: - Relying on authoritative guidance concerning the capital-revenue distinction, the Court noted that deciding the nature of a receipt requires application of established tests and factual appraisal. The Court referred to precedent illustrating that receipts arising from environmental entitlements (such as carbon credits) may be capital in nature because no asset of the business is created and the receipts are not integrally linked to business operations. On that basis, the characterisation adopted by Tribunals and upheld by higher courts was endorsed.

Established tests applied and result supports capital character of carbon credit receipts.

Cost of acquisition / cost of production linked to machinery - sale of carbon credits - The contention that carbon credits arise from generation processes tied to machinery and therefore represent business income (with attendant cost of acquisition/production) was rejected. - HELD THAT: - Although the Revenue argued that generation of carbon credits is intricately linked to the assessee's plant and processes and therefore should be treated as business-derived receipts, the Court observed that Tribunals and High Courts have found carbon credits to be offshoots of environmental measures rather than assets of the business. Consequently, the asserted linkage to machinery did not alter the capital character of the proceeds and did not convert them into taxable business income.

Linkage to machinery/processes does not convert carbon credit proceeds into business income; cost of acquisition/production concept not applicable for taxability.

Technology Upgradation Fund subsidy and related compensation - capital receipt - deduction under Section 80IA - TUF subsidy and compensation for non-performance are capital receipts and not taxable; the fact that assessees claimed deductions under Section 80IA does not preclude capital characterisation of such receipts. - HELD THAT: - The Court referred to precedent (including decisions on purpose-test and subsidy characterisation) to hold that subsidies given for technology upgradation under TUFS and related compensatory receipts are capital in nature. The Court further observed that prior to enactment of a specific charging provision, assessees had uncertainty and sometimes sought relief under Section 80IA; such claims do not defeat the capital characterisation or justify denial of the benefit where precedent establishes capital treatment.

TUF subsidy and compensation are capital receipts and not taxable; Section 80IA claims by assessees do not preclude this conclusion.

Final Conclusion: All substantial questions of law framed in the appeal were answered in favour of the assessee; the Revenue's appeal is dismissed.

Re-opening of assessment under Section 147 - notice under Section 148 and consequent obligations - best judgment assessment under Section 144 - faceless assessment procedure (NaFAC) and portal compliances - principles of natural justice - opportunity to be heard and consideration of explanations - limitation bar as a constraint on granting further time

Principles of natural justice - opportunity to be heard and consideration of explanations - faceless assessment procedure (NaFAC) and portal compliances - best judgment assessment under Section 144 - limitation bar as a constraint on granting further time - Validity of the best judgment assessment passed without accepting the petitioner's explanations and without granting further time to file documents where technical difficulties in responding through the e portal were alleged. - HELD THAT: - The Court found that the petitioner made repeated attempts to reply through the e filing portal which allegedly failed due to technical glitches, and thereafter sent responses by e mail and speed post. The assessing authority refused the petitioner's request for further time on the ground that assessment was to be barred by limitation, and completed a best judgment assessment under Section 144. The Court held that refusal to grant time for furnishing further documents and to consider the petitioner's explanation was improper. Although the assessment proceeded in a faceless manner and e filing requirements are material, the existence of technical difficulties and the petitioner's attempts to communicate required that his explanations be considered before passing a best judgment order. The perceived limitation constraint did not justify summary denial of opportunity; accordingly the impugned order was set aside and the matter remitted for fresh consideration on merits after permitting the petitioner to file his reply and supporting documents within a short time.

Impugned best judgment assessment set aside; petitioner directed to submit reply with supporting documents within two weeks and respondents directed to pass appropriate orders on merits and in accordance with law after considering same.

Final Conclusion: The writ petition is allowed to the extent that the assessment order dated 21.03.2022 is set aside; the petitioner is permitted two weeks to file his reply and documents and the assessing authorities shall reconsider and pass orders afresh in accordance with law. No costs.

Rectification under Section 154 - appeal effect order - direction to decide within a stipulated time - no adjudication on merits

Rectification under Section 154 - direction to decide within a stipulated time - Rectification applications filed by the petitioner for Assessment Years 2009-10, 2011-12 to 2014-15 and 2017-18 are to be decided by the Respondent. - HELD THAT: - The High Court noted that the petitioner had filed six rectification applications under Section 154 of the Income Tax Act which remained undecided despite reminders and that the aggregate tax effect exceeded the amount claimed to be locked-up. The respondent accepted notice and raised no objection to a direction that the rectification applications be decided within a time-frame. In view of these facts and the Court's earlier direction in W.P.(C) 14349/2021 to decide a rectification application within a specified period, the Court directed the Respondent to decide the six pending rectification applications in accordance with law within eight weeks. The Court expressly refrained from commenting on the merits of those applications and left the rights and contentions of the parties open. [Paras 6]

Respondent directed to decide the six rectification applications under Section 154 in accordance with law within eight weeks; merits left open.

Appeal effect order - direction to decide within a stipulated time - Implementation of appellate orders (appeal-effect orders) in respect of Assessment Years 2009-10 and 2012-13 is to be carried out by the Respondent. - HELD THAT: - The petitioner sought implementation of the CIT(A)'s order in respect of Assessment Year 2012-13 and refund/implementation in respect of Assessment Year 2009-10. The respondent's counsel accepted notice and did not object to a time-bound direction. The Court directed that the appeal-effect orders for Assessment Years 2009-10 and 2012-13 be passed within eight weeks, while clarifying that it has not adjudicated the merits of the underlying controversies and that all rights and contentions remain open for consideration by the authority in the course of compliance. [Paras 6]

Respondent directed to pass the appeal-effect orders for AY 2009-10 and AY 2012-13 within eight weeks; merits and parties' rights reserved.

Final Conclusion: Writ petition disposed of by directing the Respondent to decide six pending rectification applications under Section 154 for the specified Assessment Years and to pass appeal-effect orders for AY 2009-10 and AY 2012-13 within eight weeks; the Court made no comment on merits and left rights and contentions of the parties open.

Unexplained investment - addition under section 69/69B - reconciliation of sale deeds with books of account - payments evidenced by account-payee cheques and bank statements - deletion of addition on verification of ledgers, cash & bank book and audited accounts

Unexplained investment - addition under section 69/69B - reconciliation of sale deeds with books of account - payments evidenced by account-payee cheques and bank statements - deletion of addition on verification of ledgers, cash & bank book and audited accounts - Deletion of the addition of Rs. 480.66 lacs made by the Assessing Officer as unexplained investment under section 69/69B was sustained. - HELD THAT: - The Assessing Officer treated the difference between amounts shown in sale (purchase) deeds and the tax-audit/accounting entries as unexplained investment. The first appellate authority examined the books of account, year-wise ledgers, cash and bank book, audited accounts and bank statements and found that payments for the land were made by account-payee cheques and that the relevant sale deeds were reflected in the respective years in which registration occurred. The apparent mismatch arose because purchases from farmers were completed over a multi year period and the AO compared deed presentation dates with accounting entries for the single relevant year. During the hearing the Bench directed the parties to specify which entries allegedly remained unpaid; Revenue failed to identify any specific discrepancies. The Bench reconciled the AO's and CIT(A)'s tabulations and found the differences attributable to presentation versus registration dates, not to non payment or undisclosed investment. There was no admission of fresh evidence by the CIT(A), and the material relied upon was on record before the AO. On these findings the Tribunal found no reason to interfere with the deletion of the addition.

Revenue's appeal against deletion of the addition under section 69/69B is dismissed.

Final Conclusion: On the facts and documentary reconciliation, the Tribunal upheld the CIT(A)'s deletion of the addition treating the AO's disallowance as unjustified and dismissed the Revenue's appeal.

Effect of Tribunal's quantum order on levy of penalty - penalty under section 271(1)(c) - concealment of particulars of income versus furnishing inaccurate particulars of income - notice under section 274 vitiated for not striking out the inapplicable limb - imposition of penalty limited to additions sustained by appellate fora

Effect of Tribunal's quantum order on levy of penalty - imposition of penalty limited to additions sustained by appellate fora - Whether additions deleted by the Tribunal in quantum proceedings can be the basis for levying penalty under section 271(1)(c). - HELD THAT: - The Tribunal had restored exemption under section 11 and deleted several additions earlier made by the AO; those deletions were not disturbed by the High Court. The penalty originally computed by the AO on gross additions that were subsequently deleted by the Tribunal cannot be sustained because those additions no longer subsist. The Assessing Officer must compute penalty only on the additions that were ultimately confirmed by the Tribunal (i.e., the additions that form the final taxable income), and cannot levy penalty on amounts eliminated by the appellate order. The Tribunal applied this principle to the assessment years before it and set aside imposition of penalty to the extent it related to deleted additions. [Paras 3, 4, 11, 13]

Penalty cannot be imposed on additions deleted by the Tribunal; penalty must be restricted to additions sustained by the Tribunal and confirmed by higher fora.

Penalty under section 271(1)(c) - concealment of particulars of income versus furnishing inaccurate particulars of income - notice under section 274 vitiated for not striking out the inapplicable limb - Whether the penalty orders are vitiated by defects in the section 274 notice that retained both limbs (concealment and furnishing inaccurate particulars) without striking out the inapplicable one. - HELD THAT: - The AO's notice under section 274 retained both allegations - concealment of particulars of income and furnishing inaccurate particulars of income - without striking off the limb not intended to be pressed. The Tribunal relied on binding precedent of the jurisdictional High Court which holds that where a notice fails to set out the correct charge by not striking out the inapplicable portion, the initiation of penalty proceedings is defective and the consequential penalty is vitiated. Applying that principle, the Tribunal found the penalty invalid where the notice was not confined to the relevant limb and the AO ultimately imposed penalty only for furnishing inaccurate particulars; accordingly, the penalty orders for the relevant years were set aside. [Paras 5, 6, 7, 10]

The penalty proceedings are vitiated where the section 274 notice retains both limbs without striking out the inapplicable one; consequential penalties are to be deleted.

Final Conclusion: The Tribunal held that penalties could only be levied on additions sustained by the Tribunal and that the penalty proceedings (and consequent penalties) were vitiated where the section 274 notice retained both limbs without striking out the inapplicable limb; accordingly, penalties imposed by the AO were deleted for A.Y. 2008-09, A.Y. 2009-10 and A.Y. 2010-11 and the Revenue's appeals were dismissed while the assessee's challenges were allowed as recorded.

Computation of disallowance under section 14A - Prospective operation of Rule 8D - Set-off of brought forward business losses and unabsorbed depreciation in demerger - Genuineness of demerger for purposes of section 72A(4) - Effect of High Court sanction of a scheme on income tax consequences

Computation of disallowance under section 14A - Prospective operation of Rule 8D - Whether the disallowance under section 14A could be computed by applying Rule 8D in assessment year 2006-07 and whether the CIT(A)'s restriction of the disallowance to Rs.70,000/- was sustainable. - HELD THAT: - The Tribunal held that Rule 8D, which prescribes the method of computing disallowance under section 14A, came into force w.e.f. 1.4.2007 and has prospective operation. Reliance is placed on the Supreme Court authority cited in the order to the effect that Rule 8D cannot be applied retrospectively to assessment years prior to 2008-09. Given that Rule 8D was not applicable to the assessment year under consideration, the CIT(A)'s conclusion that the method could not be applied retrospectively was correct. The CIT(A) nevertheless restricted the disallowance to an ad hoc amount of Rs.70,000/-, and because the assessee did not appeal that quantification, the Tribunal confirmed the CIT(A)'s finding and dismissed the Revenue's ground challenging that restriction. [Paras 9]

Rule 8D has no retrospective application to AY 2006-07; the CIT(A)'s restriction of the disallowance to Rs.70,000/- is confirmed.

Set-off of brought forward business losses and unabsorbed depreciation in demerger - Genuineness of demerger for purposes of section 72A(4) - Effect of High Court sanction of a scheme on income tax consequences - Whether the assessee was entitled to set off brought forward business losses and unabsorbed depreciation relating to the demerged undertaking under section 72A(4) when the demerged undertaking's assets were shown as held for sale and business was not carried on post demerger, despite sanction of the scheme by the High Court. - HELD THAT: - The Tribunal examined the object of section 72A and concluded that the provisions governing amalgamation and demerger share the same legislative objective of facilitating revival of sick units, not furnishing a vehicle for tax benefit alone. The Assessing Officer denied the set-off after noting that assets of the demerged undertaking were held for sale and that the undertaking did not carry on business after sanction of the demerger, indicating absence of intent to continue the business and that the scheme was effected solely to avail tax benefit. The Tribunal held that sanction by the High Court does not ipso facto entitle the assessee to the tax benefit under section 72A(4), since sub section (5) permits the denial of benefit where the scheme is not for a genuine purpose. The Tribunal found the CIT(A) erred in permitting the set-off without scrutinising the scheme against the purpose of section 72A, and accordingly reversed the CIT(A)'s order and restored the Assessing Officer's disallowance. [Paras 13, 16, 17]

The set-off of brought forward business losses and unabsorbed depreciation relating to the demerged undertaking is not allowable; the Assessing Officer's denial is upheld and the CIT(A)'s allowance is reversed.

Final Conclusion: The appeal is partly allowed: the CIT(A)'s restriction of the section 14A disallowance to Rs.70,000 is confirmed (Rule 8D not retrospectively applicable), but the CIT(A)'s direction to allow set-off of brought forward losses and unabsorbed depreciation pertaining to the demerged undertaking is reversed and the Assessing Officer's disallowance on merits is sustained.

Tax deduction at source under professional fees (application of Section 194J as distinct from salary under Section 192) - Assessee in default and liability under section 201 - Proviso to section 201 - abatement of deductor's liability where deductee has paid taxes and furnished return - Contract for service versus contract of service (determination of employer-employee relationship)

Tax deduction at source under professional fees (application of Section 194J as distinct from salary under Section 192) - Contract for service versus contract of service (determination of employer-employee relationship) - Payments to doctors engaged as retainers and consultants are chargeable under Section 194J and do not attract Section 192 as salary; the hospital is not an assessee in default for failure to deduct TDS under Section 192 in respect of such doctors. - HELD THAT: - The Tribunal analysed the contractual relationship between the hospital and doctors engaged as retainers/consultants and distinguished it from on-roll salaried employment. It noted recurring judicial precedent and several distinguishing features of retainer arrangements-fixed term, consolidated retainer fee, permissibility of private practice, absence of retirement age and other indicia of subordinate service-which have repeatedly led High Courts and ITAT Benches to treat such payments as professional fees governed by Section 194J. Clauses relied upon by the assessing officer (restrictions on engagement, supervisory conditions, participation in academic activities, assignment of intellectual property) were examined in the light of authority and held insufficient to convert a contract for service into a contract of service. Applying these principles to the facts, the Tribunal found that the AO erred in treating the retainer/consultant doctors as employees for TDS purposes and in invoking Section 192. [Paras 12, 13, 14, 15, 18]

The provisions of Section 194J apply to payments made to retainer and consultant doctors; the appellant cannot be treated as an assessee in default for non-deduction under Section 192 in respect of such doctors.

Assessee in default and liability under section 201 - Proviso to section 201 - abatement of deductor's liability where deductee has paid taxes and furnished return - Interest and default liability under section 201 must be governed by the proviso inserted by the Finance Act, 2012 where the deductee has filed returns and paid tax; the AO's charging of interest up to the date of the order was inconsistent with that proviso. - HELD THAT: - The Tribunal observed the legal position recognised by the proviso to section 201 that a deductor is not an assessee in default where the deductee has furnished return, taken the sum into account and paid the tax due, restricting the deductor's liability to interest under section 201(1A) computed only until the date of furnishing of the deductee's return. The AO had noted direct payments by several retainer doctors (via ITRs and Form 26AS) but proceeded to levy demand and interest up to the date of the order. That approach was contrary to the settled position in the authorities cited and to the statutory proviso. [Paras 7, 8, 16, 17, 18]

The AO's demand under section 201(1)/201(1A) and charging of interest up to the date of the order was not sustainable in the circumstances; deductor's liability is governed by the proviso to section 201 and is limited as stated.

Final Conclusion: The Revenue appeals are dismissed: payments to retainer and consultant doctors are taxable as professional fees under Section 194J and not as salary under Section 192, the appellant cannot be treated as an assessee in default in respect of those payments, and interest/duty under section 201 is to be regulated by the statutory proviso where the deductee has filed returns and paid tax.

Reference to Valuation Officer under section 55A - pre-amendment application of section 55A(a) (terminology "is less than its fair market value") - amendment of section 55A(a) effective from 01.07.2012 (applicable from A.Y. 2013-14) - valuation by Registered Valuer v. valuation by District Valuation Officer - computation of indexed cost of acquisition for long term capital gain

Reference to Valuation Officer under section 55A - pre-amendment application of section 55A(a) (terminology "is less than its fair market value") - valuation by Registered Valuer v. valuation by District Valuation Officer - computation of indexed cost of acquisition for long term capital gain - Whether the Assessing Officer could adopt the District Valuation Officer's value instead of the assessee's Registered Valuer's valuation for computing indexed cost of acquisition for AY 2012-13 by making reference under section 55A. - HELD THAT: - The Court held that the Finance Act, 2012 amendment to section 55A(a) (which permits reference where the value claimed by the assessee "is at variance with its fair market value") is effective from 01.07.2012 and applies for assessment years from A.Y. 2013-14 onwards. For A.Y. 2012-13 the pre-amendment text of section 55A(a) governs, which permits reference to the Valuation Officer only where the Assessing Officer is of the opinion that the value claimed by the assessee "is less than its fair market value." In the present case the assessee's Registered Valuer had valued the property at Rs.80 per sq. meter as on 01.04.1981, which was not less than the value determined by the District Valuation Officer. Applying the pre-amendment statutory test, the Assessing Officer had no basis to prefer the DVO valuation over the Registered Valuer's valuation and to substitute his own figure for computation of long term capital gain. The Tribunal followed the coordinate-bench precedent (Swami Satyananda) which reached the same conclusion and directed adoption of the Registered Valuer's value for computing indexed cost of acquisition.

The assessing officer was directed to adopt the assessee's Registered Valuer's valuation (indexed cost at Rs.80 per sq. meter) for computation of long term capital gain for A.Y. 2012-13; the appeal is allowed.

Final Conclusion: Appeal allowed: for A.Y. 2012-13 the pre-amendment wording of section 55A applies; since the Registered Valuer's estimate was not less than the DVO's value, the Registered Valuer's figure is to be adopted for computing indexed cost of acquisition and long term capital gain.

Allowability of provision for warranty as deductible business expense - recognition of provision under AS 29: present obligation, probable outflow and reliable estimate - requirement of scientific basis and historical trend for warranty provisioning - matching and accrual concepts in accounting treatment of warranty provisions - reliance on judicial precedent for allowance of warranty provisions

Allowability of provision for warranty as deductible business expense - recognition of provision under AS 29: present obligation, probable outflow and reliable estimate - requirement of scientific basis and historical trend for warranty provisioning - matching and accrual concepts in accounting treatment of warranty provisions - Provision for warranty claimed by the assessee for AY 2013-14 is allowable in computing income. - HELD THAT: - The Tribunal examined the material filed by the assessee showing invoice-wise sales, transaction-wise warranty expenditures, and the methodology used to compute the provision (made at 3% based on quantum of sales and past experience). Applying the criteria in AS 29, the Tribunal found that (a) a present obligation arose from prior sales, (b) an outflow of resources is probable to meet warranty obligations, and (c) the amount of obligation was capable of reliable estimation on a scientific basis. The authorities had not controverted the details or produced material to show the provision was an unascertained liability; both AO and CIT(A) left the assessee's workings unchallenged. The Tribunal also relied on consistent acceptance of similar provisioning policy in subsequent assessment years and on judicial precedent (including the principles in Rotork Controls India Ltd.) holding that warranty provisions based on past experience and a robust working are allowable. Having found the three AS 29 conditions satisfied and the provisioning methodology consistent and verifiable, the Tribunal concluded the claimed provision for warranty for AY 2013-14 is an allowable business expenditure.

The provision for warranty claimed by the assessee for AY 2013-14 is allowed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's claim for provision for warranty for AY 2013-14, holding that the AS 29 conditions were satisfied, the provisioning was on a scientific and consistent basis and therefore deductible; the appeal is allowed.

Re-fixation of initial assessment year on substantial expansion - Eligibility for 100% deduction under section 80IC after substantial expansion - Application of Supreme Court precedent on reinstatement of full exemption following expansion within ten years

Re-fixation of initial assessment year on substantial expansion - Eligibility for 100% deduction under section 80IC after substantial expansion - Application of Supreme Court precedent on reinstatement of full exemption following expansion within ten years - Assessee entitled to 100% deduction under section 80IC for the years in issue by refixation of the initial assessment year consequent to substantial expansion of plant and machinery. - HELD THAT: - The Tribunal considered the assessee's claim that substantial expansion of its manufacturing unit in the relevant previous year refixed the initial assessment year, thereby restoring entitlement to 100% deduction under section 80IC. The coordinate decisions and High Court rulings on the point were reviewed, and the Tribunal applied the law as laid down by the Supreme Court in PCIT v. Aarham Softronics, which holds that where a registered unit carrying an initial five-year 100% exemption undergoes substantial expansion within ten years, the period for full exemption is re-started from the year of such expansion and 100% deduction may be claimed again. Applying that principle to the facts - namely, the stated substantial expansion in investment in plant and machinery and the refixation of the initial year - the Tribunal concluded that the assessee was entitled to 100% deduction for the assessment years under appeal.

Appeals allowed and 100% deduction under section 80IC permitted for the assessment years 2013-14 and 2014-15 by refixation of the initial assessment year consequent to substantial expansion.

Final Conclusion: The Tribunal allowed the assessee's appeals, holding that substantial expansion of the manufacturing unit refixed the initial assessment year and, in view of the Supreme Court's pronouncement, restored the assessee's entitlement to 100% deduction under section 80IC for AY 2013-14 and AY 2014-15.

Unexplained cash credit under section 68 - burden of proof as to identity, creditworthiness and genuineness - repayment as evidence of genuineness - disallowance under section 14A - computation under Rule 8D(2)(ii) - netting of interest expense and taxable interest income - computation under Rule 8D(2)(iii) - average of investments yielding exempt income - remand for verification and recomputation by Assessing Officer

Unexplained cash credit under section 68 - burden of proof as to identity, creditworthiness and genuineness - repayment as evidence of genuineness - Deletion of addition treated as unexplained cash credit under section 68 in respect of amount received from Sandesh Procon LLP. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s deletion of the addition under section 68 after finding that the assessee discharged the onus by placing on record loan agreement, bank statements, audited balance sheet of the creditor and confirmation; the transaction was further corroborated by repayment of the loan with interest (with TDS). The Tribunal treated repayment as a strong mitigating circumstance supporting genuineness and relied upon the approach in earlier decisions of the jurisdictional High Court and Tribunal to conclude that identity, creditworthiness and genuineness were established and no addition was warranted. [Paras 7]

Addition under section 68 deleted; Revenue's ground on this issue dismissed.

Disallowance under section 14A - computation under Rule 8D(2)(ii) - netting of interest expense and taxable interest income - computation under Rule 8D(2)(iii) - average of investments yielding exempt income - remand for verification and recomputation by Assessing Officer - Validity and quantum of disallowance under section 14A read with Rule 8D, including (a) interest disallowance under Rule 8D(2)(ii) and (b) administrative expenses under Rule 8D(2)(iii). - HELD THAT: - The Tribunal found no infirmity in the Commissioner (Appeals)'s approach. On Rule 8D(2)(ii) the Tribunal accepted that the assessee had substantial interest-free funds and, on facts, had net interest income (taxable interest exceeding interest expense), and therefore the interest disallowance as computed by the Assessing Officer was not sustainable - following the netting principle recognized by the jurisdictional High Court and tribunals. As to administrative expenses under Rule 8D(2)(iii), the Tribunal endorsed the view that average investment for computing disallowance should be confined to investments from which exempt income was actually earned; the matter of recomputing the disallowance on that basis was left to the Assessing Officer for verification and recomputation as directed by the Commissioner (Appeals). [Paras 5, 7]

Part relief to assessee affirmed: interest disallowance under Rule 8D(2)(ii) set aside; administrative-expense disallowance under Rule 8D(2)(iii) to be recomputed by the Assessing Officer after taking average of investments yielding exempt income.

Final Conclusion: The Tribunal dismissed the Revenue's appeal in respect of the addition under section 68 and affirmed the Commissioner (Appeals)'s partial relief on disallowances under section 14A/Rule 8D - setting aside the interest disallowance and directing recomputation by the Assessing Officer of administrative-expense disallowance confined to investments yielding exempt income; the Revenue's appeal was otherwise dismissed.

Penalty under section 271(1)(b) - non-compliance of notice under section 142(1) / 143(2) - limitation on multiple penalties for the same default - best judgment assessment under section 144 as alternative remedy - condonation of delay in filing appeal

Penalty under section 271(1)(b) - non-compliance of notice under section 142(1) / 143(2) - limitation on multiple penalties for the same default - best judgment assessment under section 144 as alternative remedy - Whether the penalty of Rs. 30,000 imposed under section 271(1)(b) for multiple defaults in non-compliance with notices should be sustained or restricted to a single penalty for the first default. - HELD THAT: - The Tribunal examined the facts that multiple notices under section 142(1)/143(2) were issued and the AO imposed penalty for each default. Relying on the reasoning in an earlier decision of the Delhi Tribunal in Smt. Rekha Rani Vs. DCIT [extract reproduced in the order], the Tribunal held that section 271(1)(b) is deterrent and is not intended to permit imposition of cumulative penalties for the same default occurring on multiple notices. The appropriate remedy for continued non compliance with notices is framing of best judgment assessment under section 144, not repeated penalties for the identical default. Applying that principle to the present case, the Tribunal concluded that the penalty should be restricted to the first default and reduced accordingly. The Tribunal therefore set aside the CIT(A)'s confirmation to the extent of the excess penalty and directed deletion of the portion over and above the penalty attributable to the first default. [Paras 11]

Penalty confirmed only to the extent of a single default; penalty reduced to the amount corresponding to the first default (Rs. 10,000) and the balance deleted.

Final Conclusion: The appeal is partly allowed: delay in filing the appeal was condoned; the penalty under section 271(1)(b) is restricted to one penalty for the first default and reduced accordingly.

Validity of proceedings under section 153A read with section 153C - Permissibility of fresh claims in returns filed under section 153A in unabated/previously completed proceedings - Unexplained cash credit test under section 68

Validity of proceedings under section 153A read with section 153C - Rectification of inadvertent reference to section 153A instead of section 153C - Impugned proceedings under section 153A/153C for the assessment years before the Tribunal are valid. - HELD THAT: - The Tribunal accepted the recorded satisfaction by the Assessing Officer that incriminating material seized/requisitioned had bearing on the assessee's income, as evidenced by the Satisfaction Note enclosed in the remand report. The Tribunal held that although notices were framed under section 153A, they must be read as proceedings under section 153A read with section 153C where satisfaction under section 153C exists, and an inadvertent reference to section 153A in assessment paperwork is rectifiable. In view of the AO's recorded satisfaction and the statutory scheme which permits the jurisdictional AO to issue notices under section 153A for assessing persons other than the search/requisition target when section 153C satisfaction exists, the objection to jurisdiction was rejected. [Paras 9, 10]

Jurisdictional objection to proceedings under section 153A/153C rejected and CIT(A)'s order on this point upheld.

Permissibility of fresh claims in returns filed under section 153A in unabated/previously completed proceedings - Claim of exempt agricultural income in returns filed under section 153A - Claim of exempt agricultural income made for the first time in return filed under section 153A in respect of assessment years where no valid original return was filed is not allowable. - HELD THAT: - The Tribunal endorsed the view that proceedings under section 153A do not permit the assessee to introduce fresh claims or deductions in respect of assessment years where the original assessment had been completed or where no valid original return was filed prior to search/requisition (unabated proceedings). The CIT(A) relied on established judicial reasoning that assessment under section 153A is not a de novo assessment permitting new claims absent their having been made in the original return; consequently the agricultural income claimed for the first time in returns filed pursuant to notices under section 153A for the relevant years cannot be accepted. The Tribunal found no contradictory material to overturn that conclusion and therefore upheld the addition made on this ground. [Paras 9, 10]

Claim of exempt agricultural income first made in returns filed under section 153A for the cited years disallowed; CIT(A)'s order on merits upheld.

Unexplained cash credit test under section 68 - Evaluation of creditor's creditworthiness and genuineness of loans - Addition under section 68 in respect of alleged loan of Rs.26,00,000 for AY 2007-08 upheld as unexplained credit. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee failed to satisfactorily prove receipt of the loan from the creditor. The material produced indicated cash-based sources and circular transactions in the creditor's bank account occurring after the ACB search and requisition, suggesting contrived arrangements to explain the investment. The AO and CIT(A) disbelieved the genuineness of the loan, noting deficiencies in documentary evidence, irregularities in the creditor's bank transactions and timing of repayments, and the Tribunal found no contrary material to disturb that conclusion. On this basis the addition under section 68 was sustained. [Paras 17, 18]

Addition as unexplained cash credit under section 68 for AY 2007-08 upheld; CIT(A)'s order affirmed.

Final Conclusion: All appeals filed by the assessee for assessment years 2003-04, 2004-05 and 2007-08 are dismissed; the CIT(A)'s findings on jurisdiction, disallowance of fresh claim of exempt agricultural income in returns filed under section 153A, and the addition under section 68 are upheld.

Penalty under section 271D - contravention of section 269SS - reasonable cause under section 273B - business exigency / compelling circumstances - genuineness of transaction - transactions between family members - deletion of penalty

Penalty under section 271D - contravention of section 269SS - reasonable cause under section 273B - business exigency / compelling circumstances - genuineness of transaction - transactions between family members - Whether penalty under section 271D for receipt of cash loans in alleged contravention of section 269SS was leviable where the assessee proved business exigency, the genuineness of transactions and that funds were received from family members - HELD THAT: - The Tribunal found that the Assessing Officer had accepted the cash receipts as genuine and made no addition under section 68 in the assessment proceedings; the transactions were recorded in books, supported by confirmations, contra entries and income-tax returns, and were isolated, one time transactions taken to meet urgent business exigencies (to honour post dated cheques and avoid invocation of the Negotiable Instruments Act). Section 271D penalises acceptance of loans/deposits in cash contrary to section 269SS, but imposition of penalty is subject to the proviso in section 273B which exempts penalty where the assessee proves a 'reasonable cause' for the failure. Applying a liberal construction of 'reasonable cause', and having regard to the undisputed genuineness of the transactions, their family member origin and the urgent business necessity, the Tribunal held that the explanation constituted a reasonable cause. The revenue decisions cited were distinguishable on facts where no business urgency or reasonable cause had been shown. On these determinations the Tribunal concluded that imposition of penalty under section 271D was not warranted.

Penalty under section 271D deleted and appeals allowed.

Final Conclusion: The Tribunal allowed the appeals and deleted the penalties imposed under section 271D for the assessment years 2012-13, 2013-14 and 2014-15, holding that the assessee established reasonable cause (business exigency and genuine family transactions) within the scope of section 273B so as to preclude levy of penalty.

Delay in adjudication - violation of principles of natural justice - right to personal hearing - duty to pass a reasoned and well reasoned order - opportunity to file further reply and post hearing submissions

Delay in adjudication - violation of principles of natural justice - Validity of proceeding with adjudication of long pending show cause notices notwithstanding delay and contention that delay is fatal - HELD THAT: - Petitioner contended that protracted delay in adjudication-attributed to the respondents keeping notices in the call book-rendered further proceedings violative of principles of natural justice and should be fatal to the show cause notices. Respondents accepted responsibility for delay and undertook to adjudicate the matters. The Court observed that petitioner had filed responses and that the adjudicating authority ought to be given an opportunity to conclude the proceedings. The Court expressly preserved petitioner's right to urge the delay as a ground before the adjudicating authority and required that any final decision address those submissions. Consequently, the Court did not quash the show cause notices on the ground of delay but directed fresh adjudication subject to procedural safeguards and consideration of the delay argument by the authority.

Proceedings permitted to continue; adjudicating authority shall decide the show cause notices after considering delay contentions and the merits, and the delay alone was not automatically treated as fatal by the Court.

Right to personal hearing - duty to pass a reasoned and well reasoned order - opportunity to file further reply and post hearing submissions - Procedural directions to be followed by the adjudicating authority in concluding the show cause proceedings - HELD THAT: - The Court issued specific procedural directions to ensure fairness: petitioner was permitted to file any further reply within one week; personal hearing must be granted with at least seven working days' notice; if the authority proposes to rely on judicial or quasi judicial pronouncements, a list of such authorities must be provided with the personal hearing notice; petitioner may file written submissions within three days after the hearing; and the adjudicating authority was directed to pass a detailed, well reasoned order dealing with every submission within the prescribed timeline. The Court fixed a final date by which the order must be served on the petitioner, thereby imposing an expeditious timeline on the authority's exercise of adjudicatory power.

Adjudicating authority directed to provide the stated procedural safeguards and to pass and serve a reasoned order within the time fixed by the Court.

Final Conclusion: Petition disposed by directing the adjudicating authority to conclude the listed show cause proceedings promptly and on merits, while observing specific procedural safeguards (further reply, advance notice of personal hearing, list of relied authorities, post hearing submissions) and addressing the petitioner's contention that undue delay undermines the notices; order to be passed and served within the timeline fixed by the Court.

Writ of certiorari for release of goods - Provisional assessment - Bank guarantee for differential duty - Country of origin verification - Goods declared unfit for human consumption - Destruction of consignments - Stay of order preventing destruction

Writ of certiorari for release of goods - Goods declared unfit for human consumption - Country of origin verification - Whether the petition seeking issuance of writ of certiorari to quash the final assessments and order release of the three consignments of Arecanuts could be granted. - HELD THAT: - The consignments had been provisionally assessed and release was conditioned upon furnishing a bank guarantee to cover differential duty pending verification of country of origin. Samples were sent for expert analysis and the Arecanut Research and Development Foundation reported that the samples "seem to be of white whole Areca Nuts of Sri Lankan origin" and that the goods were of poor quality, with a significant proportion infested and not complying with applicable standards, being neither fit for chewing nor human consumption. The Deputy Commissioner of Customs affirmed these averments in an affidavit and no rejoinder contesting this material was filed by the petitioner; counsel for the petitioner acknowledged he had not re-examined the goods and that the affidavit's contents could be correct due to the passage of time. In these circumstances the court held that the petitioner was not entitled to the relief prayed for in clauses (a) and (b) seeking release of the consignments, concluding that the question of granting release did not arise. [Paras 5, 6, 7]

Prayer for writ relief to release the consignments is refused.

Destruction of consignments - Stay of order preventing destruction - Whether the consignments should be ordered destroyed and whether any interim stay of such destruction should be granted. - HELD THAT: - Given the expert report and the unchallenged affidavit stating the goods were unfit for human consumption, the court directed respondents to destroy the consignments in accordance with the prescribed procedure within four weeks. An application for a two week stay of the destruction order was considered and refused because the petitioner had not filed any rejoinder contesting the customs department's averments and the goods had been declared unfit for consumption. [Paras 8, 11]

Consignments to be destroyed within four weeks; request for stay of destruction denied.

Final Conclusion: Writ petition dismissed insofar as release of the consignments was sought; consignments ordered destroyed in accordance with procedure within four weeks; relief as to recovery of costs or damages left open for adjudication in an appropriate forum if the petitioner chooses to pursue it.

Penalty under the Customs Act - confiscation and redemption fine - classification of semi-knocked down goods and its effect on valuation - finality of a tribunal order and its effect on consequential liabilities - exercise of writ jurisdiction under Article 226 of the Constitution

Finality of a tribunal order and its effect on consequential liabilities - penalty under the Customs Act - Whether the penalty imposed on the petitioner as Managing Director could be set aside in view of the CESTAT's order setting aside the valuation and penalties on the company and the department not preferring any further appeal - HELD THAT: - The CESTAT set aside the adjudicating authority's valuation and the penalties imposed on the company on the ground that the imported goods in semi knocked down condition were not within the ambit requiring declaration of MRP, thereby negating the foundational finding of mis-declaration. The department thereafter sought rectification to remove an erroneous reference to the petitioner; the rectification deleted that reference and the department did not challenge the substantive CESTAT decision. Since the foundational finding of undervaluation and mis-declaration against the company has been finally set aside by the CESTAT and no appeal was filed by the department, the consequential penalty imposed on the petitioner stood on that non-existent foundation. In these circumstances further action to enforce the penalty against the petitioner would be purely formalistic. The court therefore held that the penalty imposed on the petitioner in Original Order No.45/2012 dated 12.10.2012 must be set aside. [Paras 11, 12, 13]

Penalty imposed on the petitioner is set aside.

Exercise of writ jurisdiction under Article 226 of the Constitution - finality of a tribunal order and its effect on consequential liabilities - Whether the writ petition was maintainable despite the petitioner not having filed appeals before the appellate authorities - HELD THAT: - Although the petitioner did not independently file appeals before the Commissioner (Appeals) or the CESTAT and had actively participated in the departmental proceedings on behalf of the company, the court examined the effect of the CESTAT's final order which removed the foundational basis for the penalty. Given that the CESTAT's order in favour of the company became final and the department did not pursue further appellate remedy, continuing to enforce the penalty against the petitioner would be futile. On the peculiar facts and circumstances, the court exercised its constitutional jurisdiction under Article 226 to provide effective relief and set aside the penalty, observing that the petitioner would be entitled to the benefit of the tribunal's order in respect of the consequential penalty imposed on him. [Paras 9, 10, 12]

Writ petition entertained and relief granted on merits by quashing the penalty; exercise of Article 226 jurisdiction upheld on these facts.

Final Conclusion: The writ petition is allowed to the extent indicated: the penalty imposed on the petitioner by the adjudicating authority is set aside in view of the CESTAT's final order setting aside the foundational valuation and penalties on the company; the relief is granted by exercise of the High Court's writ jurisdiction on the peculiar facts of the case.

Mandatory pre-deposit under Section 129E of the Customs Act, 1962 - dismissal of appeal for non-compliance with pre-deposit requirement - absence of power in the Tribunal or Commissioner (Appeals) to waive or reduce pre-deposit under Section 129E - distinguishability of Central Excise precedents on waiver of pre-deposit - limited scope of judicial relief despite statutory pre-deposit requirements

Mandatory pre-deposit under Section 129E of the Customs Act, 1962 - dismissal of appeal for non-compliance with pre-deposit requirement - Non-compliance with the pre-deposit requirement under Section 129E justified dismissal of the appeal. - HELD THAT: - The Court held that Section 129E prescribes a mandatory requirement that an appellant must deposit the specified percentage of the duty or penalty before the Tribunal will entertain an appeal. The Tribunal's communications and adjournments and the absence of deposit or proactive steps by the appellant demonstrated failure to comply with the statutory pre-deposit obligation. In those circumstances, and having regard to the express statutory mandate, the Tribunal was justified in dismissing the appeal for non-compliance with Section 129E.

Appeal dismissed for failure to make the mandatory pre-deposit under Section 129E.

Absence of power in the Tribunal or Commissioner (Appeals) to waive or reduce pre-deposit under Section 129E - distinguishability of Central Excise precedents on waiver of pre-deposit - limited scope of judicial relief despite statutory pre-deposit requirements - The Tribunal and the Commissioner (Appeals) are not empowered by Section 129E to waive or reduce the pre-deposit; precedents under the Central Excise Act are distinguishable. - HELD THAT: - After reviewing authorities relied upon by the petitioner, the Court found those decisions either to arise under the Central Excise Act (and not directly applicable) or otherwise distinguishable. The statutory language of Section 129E does not confer discretion on the Tribunal or Commissioner (Appeals) to waive or reduce the pre-deposit requirement. Consequently, reliance on Central Excise decisions permitting waiver was held to be inapposite, and the Court declined to grant relief contrary to the clear legislative mandate. The Court noted that earlier High Court decisions reducing or waiving pre-deposits were not binding precedents to displace the statutory requirement now embodied in Section 129E.

No waiver or reduction of the statutory pre-deposit could be granted; collateral precedents under the Central Excise Act were distinguishable and did not warrant interference.

Final Conclusion: The High Court dismissed the appeal: the Tribunal was right to dismiss for non-compliance with the mandatory pre-deposit under Section 129E of the Customs Act, 1962, and neither the Tribunal nor the Court was found empowered to waive or reduce that statutory pre-deposit in the circumstances.

Made-up goods versus woven fabric classification - Burden of proof on revenue in classification disputes - Reliability of laboratory/test reports and scope for retesting - Forgery of expert report and requirement of clear and cogent evidence - Imposition of personal penalties and entitlement to cross examination

Made-up goods versus woven fabric classification - Burden of proof on revenue in classification disputes - Reliability of laboratory/test reports and scope for retesting - Whether the imported goods are 100% polyester made ups (bed covers) as declared by the appellants or polyester fabric classifiable under chapter 54 as claimed by revenue, and whether revenue discharged the burden of proof for re classification. - HELD THAT: - The Tribunal examined the Textile Committee reports and the ATIRA report relied upon by the parties and found the factual matrix identical to that in the SUN RISE TRADERS decision. The Textile Committee reports could not conclusively establish the required composition threshold (85% textured polyester filaments) because the weft could not be ascertained and warp alone ranged between about 34%-47% texturised yarn. ATIRA's report did not supply new, contrary facts that would satisfy the statutory/HSN threshold. In these circumstances, and applying the settled principle that the onus to establish change of classification lies on the revenue, the Tribunal held that revenue failed to discharge its burden of proof. Reliance on inconclusive or ruptured test reports without unequivocal technical material was insufficient to overturn the classification declared by the importers. [Paras 3]

Classification declared by the appellants as made ups under CTH 63041930 is not disturbed; revenue has not discharged the burden to reclassify the goods under chapter 54.

Forgery of expert report and requirement of clear and cogent evidence - Imposition of personal penalties and entitlement to cross examination - Whether personal penalties imposed on authorised persons and others for alleged forgery of the Textile Committee report are sustainable. - HELD THAT: - The Tribunal noted that the charge of forgery is serious and requires clear and cogent evidence. The penalties were founded largely on confessional statements, two of which were retracted; only the statement of one individual (Mahesh Bhanushali) remained, and the appellants' request for cross examination of that witness was denied below. Given the retractions and the absence of full opportunity for cross examination, the evidence was held inadequate to sustain the finding of forgery. Further, because the claim for reclassification by revenue failed, consequential personal penalties flowing from that claim could not be maintained. [Paras 3]

Personal penalties for alleged forgery set aside for lack of clear and cogent evidence and denial of cross examination; consequential penalties arising from failed classification also do not survive.

Final Conclusion: Impugned orders confirming duty and imposing penalties (including personal penalties) are set aside; appeals allowed and appellants are entitled to consequential relief in accordance with law.

Provisional release under Section 110A of the Customs Act - bank guarantee for provisional release - payment of duty as security - proportionality and reasonableness of conditions for provisional release - mis-declaration of country of origin - functus officio - appealability of orders under Section 110A

Provisional release under Section 110A of the Customs Act - functus officio - appealability of orders under Section 110A - Validity of withdrawal/review of the provisional release order dated 04.02.2022 and whether the office that passed it could review or withdraw it - HELD THAT: - The Tribunal held that an order passed under Section 110A granting provisional release is quasi judicial and appealable, not a mere executive/interlocutory order. Once the Deputy Commissioner issued the provisional release order dated 04.02.2022 he became functus officio and the office did not have jurisdiction to review/withdraw that order; the correct remedy for the department was to challenge the order before the Tribunal. The finding of the Commissioner (Appeals) that the 04.02.2022 order was executive/interlocutory was held to be contrary to the Larger Bench decision in Gaurav Pharma (and subsequent High Court authority) and therefore unsustainable. [Paras 21, 22, 24, 26]

The Commissioner (Appeals)'s conclusion that the 04.02.2022 provisional release order was executive/interlocutory and could be reviewed was rejected.

Bank guarantee for provisional release - proportionality and reasonableness of conditions for provisional release - payment of duty as security - mis-declaration of country of origin - Legality and proportionality of the condition directing the appellant to furnish a bank guarantee of 15% of the value of the seized goods for provisional release - HELD THAT: - Applying settled authorities (including T.G. Enterprise, Amit Enterprises and related Tribunal and High Court decisions), the Tribunal examined whether imposing a BG of 15% of the value of goods was justified where the appellant offered to pay the full customs duty and there was no prima facie allegation of undervaluation or misclassification affecting duty. The seizure and provisional release records showed that the department's case was limited to alleged mis declaration of Country of Origin and did not allege undervaluation; the importer had no role in issuing the COO and the goods were freely importable even if originating from the alleged country. Balancing revenue protection with proportionality, the Tribunal held that the 15% of value BG was excessive and arbitrary in the facts of this case and that security by payment of duty plus a reasonable BG would meet the ends of justice. The Tribunal therefore set aside the direction to furnish BG of 15% of value and ordered provisional release on execution of a bond for full value and furnishing of a bank guarantee of Rs.1 crore, with payment of customs duty at the time of release. [Paras 31, 33, 34, 37, 41]

Direction to furnish bank guarantee of 15% of the value of goods was set aside; goods to be provisionally released on bond for full value and bank guarantee of Rs.1 crore, with payment of customs duty at release.

Final Conclusion: The appeal is allowed to the extent that the Commissioner (Appeals)'s direction to furnish a bank guarantee of 15% of the value of the seized goods is set aside; the goods shall be provisionally released on execution of a bond for the full value and upon furnishing a bank guarantee of Rs.1 crore, subject to payment of customs duty at the time of release.

Penalty under section 112(a) of the Customs Act, 1962 - penalty under section 112(b) of the Customs Act, 1962 - mis-declaration of country of origin - confiscation under section 111(m) of the Customs Act, 1962 - importer under section 2(26) of the Customs Act, 1962 - appropriation of amounts deposited during investigation - notice requirement for imposition of penalty

Penalty under section 112(a) of the Customs Act, 1962 - penalty under section 112(b) of the Customs Act, 1962 - mis-declaration of country of origin - notice requirement for imposition of penalty - confiscation under section 111(m) of the Customs Act, 1962 - Sustainability of penalties imposed on the individual appellants under section 112(a) where show cause notice invoked section 112(b) and there is no evidence of their knowledge or participation in mis-declaration. - HELD THAT: - The Tribunal found that the case of mis-declaration of country of origin and evasion of anti-dumping duty was directed against the importer (Nalin Mehta) and that the appellants' recorded statements indicate limited roles: Jayesh Mehta acted as CHA representative following directions and Harshad Vadodaria denied knowledge of misuse of his company's name/IEC. There is no reliable, corroborative evidence that the appellants knew the goods were of Chinese origin or committed acts rendering the goods liable to confiscation. Further, the impugned order imposed penalty under section 112(a) whereas the show cause notice proposed penalty under section 112(b); appellants were not put on notice under section 112(a). Applying the requirement that a person must be given notice of the specific penalty provision sought to be invoked, the Tribunal held that imposition of penalty under a provision not invoked in the SCN cannot be sustained (citing Amrit Foods). For these reasons the penalties under section 112(a) could not be upheld. [Paras 6]

Penalty imposed on the individual appellants under section 112(a) set aside.

Importer under section 2(26) of the Customs Act, 1962 - appropriation of amounts deposited during investigation - Validity of appropriation of amounts deposited by or on behalf of Shobha Plastics against duty and interest liabilities fixed on another person who was subsequently held to be the importer. - HELD THAT: - The earlier order of the Commissioner dated 19.01.2011 fixed duty liability on Nalin Mehta and did not hold Shobha Plastics liable. The Department did not appeal against that order, which thereby attained finality. In view of that finality, the Tribunal held that appropriation of amounts deposited by or on behalf of Shobha Plastics towards duty and interest liabilities of Nalin Mehta in the impugned order is not sustainable. [Paras 7]

Appropriation of amounts deposited by or on behalf of Shobha Plastics set aside.

Final Conclusion: All appeals are allowed; the impugned Order dated 20.04.2018 is set aside insofar as it imposes penalties on the individual appellants and appropriates amounts deposited by or on behalf of Shobha Plastics, with consequential reliefs.

Refund of amounts appropriated in lieu of confiscation under Section 125 of the Customs Act, 1962 - appropriation of deposited amounts - remand for verification of bank records and fresh decision - bank communication as evidence of ownership of funds - clerical error in recording payee name

Bank communication as evidence of ownership of funds - refund of amounts appropriated in lieu of confiscation under Section 125 of the Customs Act, 1962 - remand for verification of bank records and fresh decision - Whether the refund claim in respect of the disputed demand draft should be remanded for fresh consideration in view of bank communications establishing that the draft was issued from the Appellant's account, notwithstanding the original rejection that the draft was not in the Appellant's name. - HELD THAT: - The Tribunal noted that the Appellant produced email communications from the bank confirming that the demand draft in question was issued on the date alleged and was drawn on the Appellant's account. Those documents had been placed before the Refund Sanctioning Authority and the Commissioner (Appeals). Having regard to the bank's direct confirmation that funds were transferred from the Appellant's account, the Tribunal found the rejection basis recorded by the authority - that no reply was received from the bank and that the draft was not in the Appellant's name - to be incorrect and attributable, on the record, to a likely clerical error. In light of the documentary evidence from the bank and because the matter concerns entitlement to refund of amounts appropriated in lieu of confiscation, the Tribunal considered it appropriate to remit the matter to the Original Authority for fresh adjudication. The remand is limited to hearing the Appellant, verifying the bank documents produced earlier and any communications received directly from the bank, and passing a reasoned fresh decision on the refund claim in accordance with the provisions governing refunds under the Customs Act, 1962.

Matter remanded to the Original Authority for fresh decision after verification of bank documents and hearing the Appellant.

Final Conclusion: The appeal is allowed; the Order-in-Appeal dated 11.02.2022 is set aside and the matter is remanded to the Original Authority to decide afresh within two months after hearing the Appellant and verifying the bank records, with compliance to be reported within two months.

Quashing for lack of jurisdiction - provisional release order - appeal under Section 128 of the Customs Act - directions for expeditious decision by the Competent Authority

Quashing for lack of jurisdiction - CESTAT - Order passed by the CESTAT dated 10.05.2022 was without jurisdiction and was quashed and set aside. - HELD THAT: - The Court accepted the parties' agreement that the CESTAT order dated 10.05.2022 lacked jurisdiction and therefore quashed and set aside that order. The matter was disposed of on that basis without adjudicating the merits of the underlying controversy. The Court recorded the parties' consent on this conclusion and proceeded to dispose of the present appeal accordingly. [Paras 2, 4]

CESTAT order dated 10.05.2022 quashed and set aside; appeal disposed of without going into merits.

Provisional release order - appeal under Section 128 of the Customs Act - directions for expeditious decision by the Competent Authority - Procedure for challenge to the provisional release order and timeframe for decision by the Competent Authority. - HELD THAT: - The respondent gave an undertaking to file an appeal under Section 128 of the Customs Act against the provisional release order dated 06.04.2022 by 25.05.2022. The Court directed that upon such appeal being filed, the Competent Authority shall decide the same within ten days from the date of filing. This direction was given to secure an expeditious administrative determination and is procedural in nature; the Court did not enter upon the merits of the provisional release order itself. [Paras 2, 3]

Respondent to file appeal under Section 128 of the Customs Act by 25.05.2022; Competent Authority to decide the appeal within ten days of filing.

Final Conclusion: The CESTAT order dated 10.05.2022 is quashed for lack of jurisdiction; the respondent will file an appeal under Section 128 of the Customs Act against the provisional release order dated 06.04.2022 by the stipulated date, and the Competent Authority is directed to decide that appeal within ten days; the appeal is disposed of without consideration of merits.

Intervention under Rule 11 of the NCLT Rules, 2016 - impleadment of intervenors - appointment and powers of Administrator - conduct of elections to Board of Directors under Articles of Association - obligation to hand over records and return custody on reconstitution of Board

Intervention under Rule 11 of the NCLT Rules, 2016 - impleadment of intervenors - Interveners' prayer for impleadment as party respondents in TCP/21/KOB/2019. - HELD THAT: - The Tribunal examined the antecedent orders in CP 29/2017 by the NCLT Chennai Bench and the appellate outcomes before the NCLAT and the Supreme Court, which had rejected the contentions of the superseded managing directors and trustees. The intervenors were found to be name-lenders/benamis of the superseded managing directors and trustees and, having not participated appropriately earlier, sought belated impleadment. In these circumstances the Tribunal concluded that the interveners cannot be permitted to be impleaded at this belated stage and that their application for impleadment is not maintainable. [Paras 21]

IVNP/2/KOB/2022 dismissed; interveners not impleaded in TCP/21/KOB/2019.

Appointment and powers of Administrator - conduct of elections to Board of Directors under Articles of Association - obligation to hand over records and return custody on reconstitution of Board - Whether the Administrator should be directed to conduct elections to the Board of Directors of the 4th respondent company and related directions. - HELD THAT: - Although the Tribunal rejected the interveners' prayer for impleadment, it independently considered whether the relief seeking conduct of elections should be granted in the interests of justice. The Tribunal noted the appointment order of the Administrator and the directives of the NCLT Chennai Bench, including that elections are to be conducted after fulfilling the Administrator's mandate. The record showed that more than three years had elapsed without elections being conducted and that the Administrator's stated reasons for delay (ongoing recovery actions and disputes over auditing) did not amount to an absolute bar to holding elections. The Tribunal held that the Administrator is competent to conduct the elections in terms of the Articles of Association and that appointing a separate Commissioner was unnecessary. The Tribunal further directed that, once a Board is elected, the Administrator must hand over charge and return all records and documents kept in his custody pursuant to the Chennai Bench's orders, and must file fortnightly reports of developments. [Paras 22, 23]

IVNP/1/KOB/2022 disposed of by directing the Administrator to conduct elections to the Board within 45 days, to hand over charge and records to the elected Board, and to file fortnightly progress reports.

Final Conclusion: IVNP/2/KOB/2022 (prayer for impleadment) dismissed; IVNP/1/KOB/2022 allowed in part by directing the Administrator to conduct elections to the Board of the 4th respondent company within 45 days, to hand over charge and records to the elected Board, and to submit fortnightly reports of developments.

Reasoned / Speaking Order - Principles of Natural Justice - Cryptic and unreasoned order - Remand for de novo hearing - Opportunity of hearing - Rule 34 of the NCLT Rules, 2016

Cryptic and unreasoned order - Reasoned / Speaking Order - Principles of Natural Justice - Validity of the impugned order dated 24.05.2022 in IA/320/CHE/2021 in CP/1156/IB/2018 - HELD THAT: - The Tribunal found that the impugned order was bereft of adequate qualitative and quantitative reasons and characterised it as cryptic and unreasoned. For that reason, and because reasoned orders are required to safeguard the affected party and to give effect to the principles of natural justice, the impugned order could not be sustained in law. The Tribunal observed that an authority must provide a speaking order after affording adequate opportunity of hearing to the parties, having regard to Rule 34 of the NCLT Rules, 2016 and the tenets of natural justice. On this basis the Tribunal concluded that the impugned order was not valid in law and liable to be set aside.

Impugned order dated 24.05.2022 is set aside as being cryptic and unreasoned for want of adherence to principles of natural justice; it is not valid in law.

Remand for de novo hearing - Opportunity of hearing - Reasoned / Speaking Order - Relief and directions following setting aside of the impugned order - HELD THAT: - Having set aside the impugned order, the Tribunal remitted IA/320/CHE/2021 in CP/1156/IB/2018 to the Adjudicating Authority for fresh hearing de novo. The Adjudicating Authority was directed to afford adequate opportunity to both parties to raise all factual and legal pleas, to take the matters on merits and to pass a reasoned speaking order uninfluenced by the observations of this Tribunal. The Tribunal further permitted the Adjudicating Authority to list other applications along with IA/320/CHE/2021 as it deems fit and directed that final orders in IA/320/CHE/2021 be passed within four weeks from receipt of the Tribunal's order.

Matter remitted to the Adjudicating Authority for de novo hearing and disposal on merits by a reasoned speaking order after giving adequate opportunity to the parties; fresh orders to be passed within four weeks.

Final Conclusion: The appeal is allowed in part: the impugned order dated 24.05.2022 is set aside for being unreasoned and contrary to principles of natural justice; the matter is remitted to the Adjudicating Authority for fresh, de novo hearing and disposal by a reasoned speaking order after giving adequate opportunity to the parties, to be completed within four weeks.

Debt and default - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - scope of adjudicating authority under Section 7 - record-based satisfaction of default - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - condonation of delay in filing pleadings

Condonation of delay in filing pleadings - Application for condonation of delay in filing the counter was allowed and the counter taken on record. - HELD THAT: - The Tribunal considered IA/1186(CHE)/2021 filed by the respondent seeking condonation of 14 days' delay in filing the counter. After hearing, the Tribunal exercised its discretion to condone the delay and ordered that the counter be taken on record.

IA/1186(CHE)/2021 allowed; counter taken on record.

Debt and default - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Section 7 application filed by the financial creditor was admitted on the ground that debt and default stood proved. - HELD THAT: - The Tribunal examined the Form 1 particulars, documents and records placed by the financial creditor and found that the financial debt and the default by the corporate debtor were established. Applying the settled principle that the adjudicating authority must be satisfied from records produced that a default has occurred, the Tribunal concluded that it was constrained to admit the Section 7 application and initiate the CIRP. [Paras 11, 19]

Section 7 application admitted; CIRP initiated against the corporate debtor.

Scope of adjudicating authority under Section 7 - record-based satisfaction of default - The Tribunal applied the principle that under Section 7 the adjudicating authority's role is limited to ascertaining default from records or evidence furnished by the financial creditor. - HELD THAT: - Relying on the ratio in Innoventive Industries Ltd., the Tribunal observed that when a financial creditor triggers the process, the adjudicating authority's enquiry is confined to the records of the information utility or other evidence produced to satisfy itself that a default has occurred. A disputed debt does not preclude admission so long as the debt is 'due' and the authority is satisfied on the material before it. The Tribunal applied this test to the material placed by the financial creditor and found satisfaction of default. [Paras 10]

Adopted record-based test under Section 7; proceeded to admit the application on that basis.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium consequential to admission under Section 7 was declared to be effective from the date of the order until completion of CIRP. - HELD THAT: - Following admission of the Section 7 application, the Tribunal invoked the moratorium provisions. The Tribunal recorded the scope of prohibitions and exceptions under Section 14 and related sub-sections, and directed compliance with the moratorium from the date of the order until completion of the CIRP or earlier cessation as provided by the Code. [Paras 12, 14, 19]

Moratorium declared in accordance with Section 14; operative from the date of the order.

Appointment of Interim Resolution Professional - The interim resolution professional proposed by the financial creditor was appointed and directed to take charge and perform statutory functions. - HELD THAT: - The Financial Creditor proposed Mrs. M. Jayasree as IRP and filed her consent; verification from IBBI records showed valid authorization. The Tribunal appointed the IRP, directed immediate taking of charge, public announcement, invitation of claims under the Regulations, and compliance with statutory duties under the Code. The IRP was also directed to file the first progress report within 45 days of CIRP initiation. [Paras 15, 16, 20]

Proposed IRP appointed; duties and timelines directed to be complied with.

Final Conclusion: The Tribunal allowed the IA for condonation of delay, admitted the Section 7 petition on proof of debt and default, initiated CIRP, declared the moratorium, appointed the proposed Interim Resolution Professional and directed statutory steps and reporting in accordance with the Insolvency and Bankruptcy Code, 2016.

Debt and default under section 7 of the Insolvency and Bankruptcy Code, 2016 - admission of petition and initiation of Corporate Insolvency Resolution Process - application of Swiss Ribbons principle regarding debt and default - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management in the IRP - public announcement and claims process under regulation 6 and section 13 of the IBC

Debt and default under section 7 of the Insolvency and Bankruptcy Code, 2016 - application of Swiss Ribbons principle regarding debt and default - The Company Petition under section 7 is liable to be admitted on proof of debt and default. - HELD THAT: - The Adjudicating Authority examined the loan agreements, demand promissory note, guarantee and hypothecation documents, credit information report and account statements and found that the amount was disbursed to the Corporate Debtor and the default subsists. Relying on the principle affirmed in Swiss Ribbons that admission follows proof of 'debt' and 'default', and noting that the petition satisfies the statutory and procedural requirements including the minimum default threshold, the Authority concluded that debt and default stand established and there was no reason to deny admission. [Paras 14, 15, 17]

Petition under section 7 admitted as debt and default established.

Appointment of Interim Resolution Professional and vesting of management in the IRP - compliance with rule 9(1) relating to written communication in Form 2 and registration of IRP - The Financial Creditor's nominated person is fit to be appointed as Interim Resolution Professional and management of the Corporate Debtor shall vest in the IRP during CIRP. - HELD THAT: - The Financial Creditor proposed a candidate and filed the required written communication in Form 2 together with the Certificate of Registration. The Authority recorded the proposal and the requisite filings and consequently appointed the nominated person as the Interim Resolution Professional. The order directs that the IRP shall perform the functions prescribed in the IBC and that the management of the Corporate Debtor vests in the IRP for the duration of CIRP, with officers mandated to furnish documents and information to the IRP within a stipulated time. [Paras 16, 18]

Nominated person appointed as IRP; management vests in the IRP for the CIRP period.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and initiation of claims process under section 13 and regulation 6 - A moratorium is to operate from the date of order and public announcement and related CIRP steps are to be carried out. - HELD THAT: - Upon admission, the Authority directed the statutory moratorium to operate in respect of institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of property occupied by the Corporate Debtor. The order also directed immediate public announcement of the CIRP in terms of the IBC and the Regulations and mandated the Financial Creditor to deposit funds to meet initial public notice expenses. The moratorium's duration was tied to completion of CIRP, approval of a resolution plan or liquidation, as appropriate. [Paras 18]

Statutory moratorium imposed; public announcement and CIRP steps directed to be taken immediately.

Final Conclusion: The Adjudicating Authority admitted the section 7 petition on proof of debt and default, imposed the statutory moratorium, appointed the nominated Interim Resolution Professional with management vesting in him, directed immediate public announcement and incidental steps for conducting the CIRP.

Corporate Insolvency Resolution Process (CIRP) - debt and default - admission under section 7 - balance-sheet admission as acknowledgement of debt - absence of written financial contract not fatal where debt acknowledged - moratorium under section 14 - appointment of Interim Resolution Professional

Debt and default - admission under section 7 - The petition under section 7 is maintainable because the Financial Creditor has established existence of debt and occurrence of default. - HELD THAT: - The Tribunal found on the material on record - disbursement entries, the balance confirmation dated 15.04.2017 signed by the Corporate Debtor and the disclosure in the Corporate Debtor's balance sheet showing the borrowings as inter-corporate loans repayable on demand - that the Corporate Debtor owed a financial debt to the Financial Creditor and that default had occurred. Reliance was placed on the settled principle that once debt and default are established from records, the adjudicating authority is obliged to admit a section 7 petition; the Tribunal noted the Supreme Court's guidance that the adjudicating authority need only be satisfied from records or information utility or other evidence that a default has occurred. Having concluded that the statutory threshold under section 4(1) (minimum amount) was met and that the application was complete, the Tribunal admitted the petition and initiated CIRP. [Paras 15, 16, 19, 20, 22]

Petition under section 7 admitted as debt and default stood established.

Absence of written financial contract not fatal where debt acknowledged - balance-sheet admission as acknowledgement of debt - The absence of a written financial contract did not preclude admission where the Corporate Debtor had acknowledged the debt by balance confirmation and in its balance sheet. - HELD THAT: - The Corporate Debtor contended that no written financial contract specifying tenure, interest and repayment terms was produced. The Tribunal observed the relevant documents on record - the balance confirmation signed by the Corporate Debtor and entries in the last filed balance sheet (note showing inter-corporate loans repayable on demand) - and held that such acknowledgement in the balance sheet and the confirmation of accounts amount to admission of debt. The Tribunal further relied on authoritative pronouncements that an admission in the balance sheet gives rise to an acknowledged debt and is sufficient for the purposes of establishing debt and default under section 7. [Paras 9, 10, 15, 18, 19]

Non-production of a formal written financial contract did not defeat the section 7 petition where the Corporate Debtor had acknowledged the debt in balance confirmation and its balance sheet.

Corporate Insolvency Resolution Process (CIRP) - moratorium under section 14 - appointment of Interim Resolution Professional - Upon admission, CIRP was ordered to commence, moratorium declared and an Interim Resolution Professional was appointed with consequential directions. - HELD THAT: - Having admitted the petition, the Tribunal ordered initiation of CIRP and applied the statutory moratorium provisions, specifying the prohibitions and exceptions (suits, asset transfers, enforcement of security, recovery by owners/lessors, and continued supply of essential goods). The Financial Creditor's proposed IRP, Mr. Rajesh Mittal, filed the requisite Form 2 and certificate of registration; the Tribunal appointed him as IRP and directed him to perform functions under the Code, required cooperation from the Corporate Debtor's officers, directed the Financial Creditor to deposit security for public notice expenses, and directed communication of the order to the Registrar of Companies and parties. [Paras 21, 22, 23]

CIRP initiated; moratorium imposed; Mr. Rajesh Mittal appointed as IRP with ancillary directions.

Final Conclusion: The Tribunal admitted the section 7 petition, holding that the Financial Creditor had established debt and default by balance confirmations and the Corporate Debtor's balance-sheet entries; CIRP was ordered to commence, moratorium imposed and the nominated Interim Resolution Professional appointed with consequential directions.

Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 - declaration of solvency - public announcement and claims process - notification to Registrar of Companies and Insolvency and Bankruptcy Board of India - dissolution under Section 59(8) - liquidator's completion of duties and distribution to members - tax dues and conditional dissolution

Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 - declaration of solvency - public announcement and claims process - notification to Registrar of Companies and Insolvency and Bankruptcy Board of India - liquidator's completion of duties and distribution to members - dissolution under Section 59(8) - Applicant company satisfied statutory conditions for voluntary liquidation and the Adjudicating Authority could order its dissolution. - HELD THAT: - The Tribunal found that the board had formed the requisite opinion and filed the declaration of solvency with supporting audited financial statements and affidavits; a special resolution for voluntary liquidation and appointment of an insolvency professional was passed; the liquidator published the statutory public announcement and no claims were received; the Registrar of Companies was notified and reported no adverse proceedings; the liquidator filed the preliminary and final reports, opened a liquidation account, realized funds and distributed proceeds to members. On these findings the Tribunal held that the procedural and substantive prerequisites of Section 59 and the applicable IBBI Regulations were complied with and the liquidator had performed the duties necessary to seek dissolution, warranting an order of dissolution under Section 59(8). [Paras 9, 12, 13, 14, 15]

The corporate person SAIF Advisors Private Limited is ordered to be dissolved with effect from 27.06.2022.

Tax dues and conditional dissolution - No Objection/No-Dues Certificate - The dissolution was ordered subject to an outstanding demand reported by the Income Tax Department for Assessment Year 2016-17, and certain post-dissolution filings were directed. - HELD THAT: - While a No Dues Certificate had been obtained and supplied, the Income Tax Department's affidavit reported an outstanding demand for Assessment Year 2016-17. The Tribunal therefore granted dissolution but expressly made the order subject to that outstanding amount. The Tribunal also directed the liquidator to file the financial statements for the year 2018-2019 before the Registrar of Companies and required communication of the dissolution order to the RoC and IBBI within the prescribed period. [Paras 10, 16, 17, 18]

Dissolution is ordered subject to the aforesaid outstanding amount for Assessment Year 2016-17 and with directions for specified post-dissolution compliance.

Final Conclusion: The Company Petition is allowed: SAIF Advisors Private Limited is dissolved effective 27.06.2022, subject to the recorded outstanding tax demand for Assessment Year 2016-17 and subject to the liquidator complying with directed post-dissolution filings and communications.

Determination of default for admission under Section 7 of the IBC - Record of default with an Information Utility as prima facie evidence - Default as the trigger for Corporate Insolvency Resolution Process - Moratorium under Section 14 of the IBC - Appointment of Interim Resolution Professional and requirement of Authorisation for Assignment - Public announcement of CIRP and claims invitation

Record of default with an Information Utility as prima facie evidence - Determination of default for admission under Section 7 of the IBC - Whether the financial creditor established default by the corporate debtor so as to warrant admission of the Section 7 application. - HELD THAT: - The Tribunal relied upon the record of default produced from the Information Utility (NeSL), which is shown as "Deemed to be Authenticated", and held that such record constitutes prima facie evidence of default. Applying the guiding principles in Innoventive Industries Ltd. and Swiss Ribbons, the adjudicating authority need only be satisfied from the information utility records or other evidence that a default has occurred; disputes as to the debt do not preclude admission where the debt is shown to be due. The application was found complete and the debt and default established on the documentary record produced by the financial creditor. [Paras 15, 16, 17, 19]

Default stood established on the documentary record produced and was sufficient to admit the Section 7 petition.

Default as the trigger for Corporate Insolvency Resolution Process - Determination of default for admission under Section 7 of the IBC - Whether the Section 7 petition filed by the financial creditor should be admitted and CIRP be initiated against the corporate debtor. - HELD THAT: - Having found that the requirements of Form 1 and Rule 4 were complied with and that the documentary evidence established a debt and default exceeding the statutory threshold, the Tribunal applied the statutory scheme and relevant authorities to hold that the petition must be admitted. The Tribunal observed there was no ground to deny admission where the application was complete and the default proved from the records. [Paras 19, 20]

The Section 7 petition was admitted and the Corporate Insolvency Resolution Process was ordered to be initiated against the corporate debtor.

Appointment of Interim Resolution Professional and requirement of Authorisation for Assignment - Selection and appointment of the Interim Resolution Professional in light of non-production/expiry of the Authorisation for Assignment (AFA). - HELD THAT: - Although the financial creditor proposed Mr. Francis Mathew and he had filed consent and registration certificate, the required Authorisation for Assignment was not produced and the AFA available on the IBBI website showed validity only up to 21.04.2022. In consequence, the Tribunal declined to appoint the proposed IRP and instead appointed another insolvency professional from the IBBI panel whose authorisation was valid for the relevant period, directing that the IRP perform functions under the IBC and that fees comply with applicable regulations. [Paras 18, 20]

Appointed an alternative Interim Resolution Professional due to non-production/expiry of the AFA for the proposed IRP.

Moratorium under Section 14 of the IBC - Public announcement of CIRP and claims invitation - Imposition of moratorium and ancillary directions consequential to admission of the Section 7 petition. - HELD THAT: - On admission, the Tribunal directed the statutory moratorium to operate from the date of the order until completion of CIRP or approval of a resolution plan or liquidation. The order specified the usual prohibitions (institution or continuation of suits, transfer or disposal of assets, enforcement of security, recovery of property occupied by the corporate debtor) and the exceptions (supply of essential goods/services and other categories notified by Central Government). The Tribunal further directed immediate public announcement of the CIRP in terms of the IBC and regulations to invite claims. [Paras 20]

A moratorium was declared and public announcement of the CIRP was ordered with the usual statutory exceptions.

Public announcement of CIRP and claims invitation - Interim directions concerning interim funding, deposit for public notice expenses and statutory compliance reporting. - HELD THAT: - The Tribunal directed the financial creditor to deposit a specified sum with the IRP to meet expenses of public notice and claims invitation, subject to CoC approval and clarified that such deposit is not to be treated as IRP fee. Further, the registry was directed to communicate the order promptly and the IRP to send a copy to the Registrar of Companies for updating master data and to obtain compliance report within a stipulated time. [Paras 20]

Directed deposit for CIRP notice expenses, prompt communication of the order and ROC updating and reporting.

Final Conclusion: The Tribunal admitted the Section 7 petition, held that default stood established on the Information Utility record, initiated CIRP, imposed the statutory moratorium, appointed an alternative Interim Resolution Professional due to AFA non-availability/expiry, directed public announcement and interim administrative steps including a deposit for notice expenses and ROC update.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Preferential transaction and avoidance under Section 43(2) of the Insolvency and Bankruptcy Code, 2016 - Statutory charge of a purchaser/home buyer under Section 55(6)(b) of the Transfer of Property Act, 1881 - Project wise resolution versus company level CIRP

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Preferential transaction and avoidance under Section 43(2) of the Insolvency and Bankruptcy Code, 2016 - Statutory charge of a purchaser/home buyer under Section 55(6)(b) of the Transfer of Property Act, 1881 - Project wise resolution versus company level CIRP - Whether the Interim Resolution Professional can hand over possession of four apartments to the applicant during the pendency of the CIRP. - HELD THAT: - The Tribunal examined the effect of the moratorium under Section 14 of the IBC and the doctrine of preferential transactions under Section 43(2). Allowing handing over of the apartments during CIRP would amount to transferring, alienating or disposing of assets or legal/beneficial interest of the corporate debtor and could put the applicant in a beneficial position vis-a -vis other creditors contrary to the distribution scheme under Section 53. The RP pointed out that post admission there were no business operations and that project wise resolution was not ordered; separate books for projects were not maintained. Having regard to the prohibition on actions that alter the status of corporate debtor's assets during CIRP and the risk of creating an avoidable preferential transfer, the Tribunal held that possession cannot be handed over during the CIRP and the applicant must await conclusion of the process. [Paras 9, 10]

Relief for handing over possession during CIRP is refused and the application is dismissed; the applicant must wait until conclusion of the CIRP.

Final Conclusion: IA(IBC)/98(KOB)/2022 dismissed: possession of the four apartments cannot be handed over during the continuity of the corporate insolvency resolution process in view of the moratorium and risk of preferential transfer; applicant to await conclusion of CIRP.

Duties of the interim resolution professional - Corporate Insolvency Resolution Process - One Time Settlement - Committee of Creditors' approval - withdrawal of claim upon settlement

Duties of the interim resolution professional - One Time Settlement - Committee of Creditors' approval - Whether the IRP is entitled, at present, to be provided books of account, assistance to identify assets, handover of factory keys and cooperation from suspended directors to complete the CIRP. - HELD THAT: - The IRP filed the application under Section 19(2) seeking access to records, custody/possession and cooperation to discharge duties prescribed under Section 18(1). The respondent had negotiated and obtained an OTS approved by the Financial Creditor, which envisages payment of the bank's claim by 31/07/2022 and, upon payment in full, withdrawal of the bank's claim before the CoC and release of security documents. In view of the sanctioned OTS giving the Corporate Debtor time until the cut-off date to clear liabilities and the Financial Creditor's apparent willingness to withdraw its claim on full payment, the Tribunal held that the IRP's prayer cannot be granted at this stage and that the IRP must await the outcome of the OTS. The Tribunal therefore dismissed the application without prejudice and granted liberty to the IRP to take appropriate steps if the OTS fails and the Financial Creditor reports default to the CoC. [Paras 8, 9]

Application dismissed for the present with liberty to the IRP to act if the approved OTS fails and is reported to the CoC.

Final Conclusion: The application by the IRP for records, custody/possession and cooperation from the suspended directors is dismissed at present because an OTS approved by the Financial Creditor gives time to the Corporate Debtor to discharge liabilities by 31/07/2022; liberty is granted to the IRP to pursue appropriate steps if the OTS is not complied with and reported to the CoC.

Operational debt - default - pre-existing dispute - admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Operational debt - default - pre-existing dispute - There existed an operational debt due from the Corporate Debtor, the Corporate Debtor had defaulted in payment and no pre-existing dispute was shown to bar admission of the Section 9 application. - HELD THAT: - The Corporate Debtor, through its counsel, expressly admitted the liability and the inability to pay the claimed amount during the hearing. On consideration of the pleadings, documents on record and the admission made on instructions of the Corporate Debtor, the Tribunal found that an operational debt was due and that default had occurred. In the absence of any substantiated pre-existing dispute raised by the Corporate Debtor (the police complaint and other contentions were treated as not constituting a pre-existing dispute), the statutory bar to admission was not established and the Section 9 application was held sustainable. [Paras 5, 6, 7]

Application under Section 9 admitted as there is an operational debt, default is established and no pre-existing dispute prevents admission.

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - On admission of the Section 9 petition the Tribunal appointed the proposed Interim Resolution Professional and directed imposition of the moratorium prescribed under the Code. - HELD THAT: - Following admission of the application, the Tribunal confirmed the Operational Creditor's proposed replacement IRP, noting that the proposed IRP had filed the requisite registration, Form 2 declaration and authorization. The Tribunal directed the appointed IRP to take the steps required under the Code and to file his report within thirty days. Consequent to admission, the Tribunal imposed the statutory moratorium forthwith, recording its scope in terms of suspension of proceedings, restraint on alienation or encumbrance of assets, and preservation of supply of essential goods or services, with the moratorium to remain effective until completion of the CIRP or earlier approval of a resolution plan or order for liquidation. [Paras 7]

Interim Resolution Professional confirmed and moratorium under Section 14 imposed from the date of the order pending CIRP.

Final Conclusion: The Tribunal admitted the Section 9 application, held that an operational debt and default existed without any pre-existing dispute, appointed the proposed Interim Resolution Professional, and directed immediate imposition of the moratorium while initiating the corporate insolvency resolution process.

Money-laundering - bail under the Prevention of Money Laundering Act, 2002 - reasonable ground to believe - revival of the twin conditions of Section 45(1) by Amendment Act 13 of 2018 - presumption as to constitutionality of a legislative amendment

Bail under the Prevention of Money Laundering Act, 2002 - reasonable ground to believe - money-laundering - revival of the twin conditions of Section 45(1) by Amendment Act 13 of 2018 - Whether the applicant should be released on bail in the money laundering prosecution under the PMLA. - HELD THAT: - Having considered the materials on record including bank transaction scrutiny, audit report and provisional attachment of properties, the Court concluded that there exist reasonable grounds to believe that the applicant was guilty of the offence of money laundering and that he is likely to commit the offence if enlarged on bail. The Court further held that the defects in Section 45(1) of the PMLA, as identified by the Supreme Court in Nikesh Tarachand Shah, were cured by Parliament by Amendment Act 13 of 2018 and consequently the twin conditions of Section 45(1) stand revived; the amended provision has not been stayed by the Supreme Court and its presumption of constitutionality must be given effect to. Applying these principles and having regard to the nature of transactions attributed to the applicant, including signing and operating rights over the trust accounts and significant cash movements, the Court exercised its discretion to refuse bail under the statutory framework of the PMLA. [Paras 9, 11, 15]

Bail application rejected.

Final Conclusion: On the materials and law, including the revival of the twin conditions in Section 45(1) by Amendment Act 13 of 2018, the petition for bail was refused as there were reasonable grounds to believe the applicant guilty of money laundering and likely to reoffend if released.

Extended period of limitation for recovery - suppression of facts - bona fide belief arising from confusion as to admissibility of Cenvat credit for trading activities - disclosure in balance sheet as negating suppression - Cenvat credit inadmissible for trading activities - reliance on precedent and contemporaneous legal uncertainty

Extended period of limitation for recovery - disclosure in balance sheet as negating suppression - bona fide belief arising from confusion as to admissibility of Cenvat credit for trading activities - Whether invocation of the extended period of limitation could be sustained where the assessee's trading activity appeared from its balance sheet and there was contemporaneous confusion about entitlement to Cenvat credit for trading. - HELD THAT: - The Court held that the show cause notice itself recorded that it was based on the balance sheet for the year ending 2008, establishing that the trading activity was disclosed to the department. In those circumstances, there was no suppression of material facts by the assessee. The Tribunal's finding that there was substantial confusion in law as to whether credit could be availed for trading activities and that the assessee acted under a bona fide belief was accepted. Relying on the principle that bona fide belief in the face of contemporaneous conflicting decisions and subsequent clarificatory treatment negates the applicability of extended limitation for recovery, the Court affirmed the Tribunal's decision to drop demand for the extended period and to confine recovery to the normal period. [Paras 9, 10, 11]

Extended period of limitation could not be invoked; demand under the extended period was set aside as there was no suppression and a bona fide belief existed due to legal confusion about availment of credit for trading.

Suppression of facts - prior knowledge of department - perversity challenge to Tribunal's factual finding - Whether the Tribunal was perverse in finding that the department had prior knowledge of the assessee's trading activity and in disregarding the factual findings in the Order-in-Original. - HELD THAT: - The Court examined the Revenue's contention that the department only learned of the trading activity through intelligence, and observed that the show cause notice expressly recorded that it was issued based on the balance sheet for the year ending 2008. Consequently, the Revenue's factual challenge to the Tribunal's finding was rejected as untenable. The Court treated the Tribunal's conclusion that there was prior knowledge as consistent with the record and not perverse, and therefore declined to interfere with the Tribunal's factual conclusion which supported denial of extended-period recovery. [Paras 9, 11]

Tribunal's finding that the department was aware of the trading activity and that there was no suppression was not perverse and was upheld.

Final Conclusion: The appeal is dismissed. The Tribunal's decision to set aside demand invoked under the extended period was affirmed on the ground that the trading activity had been disclosed in the balance sheet and the assessee acted under bona fide belief amid legal confusion about entitlement to Cenvat credit for trading; the Tribunal's factual findings were not perverse.

Personal liability under Rule 26 of Central Excise Rules, 2002 - penal liability for possession of unaccounted excisable goods - clandestine removal / absence of proof of intent to remove goods without payment of duty - reduction of penalty for supervisory lapse

Personal liability under Rule 26 of Central Excise Rules, 2002 - penal liability for possession of unaccounted excisable goods - clandestine removal / absence of proof of intent to remove goods without payment of duty - Whether the Chairman & MD could be held personally liable and subjected to the full penalty upheld under Rule 26 for possession of finished excisable goods found unaccounted for, on the ground that those goods were kept for clandestine removal without payment of duty. - HELD THAT: - The Tribunal examined the Commissioner (Appeals) finding (reproduced at 5.2) that the Chairman & MD was in possession of finished excisable goods not accounted for in statutory records and that such possession demonstrated acts constituting contraventions warranting penal action under Rule 26. The Tribunal found, on review of the records and the appellant's statements, that there was no evidence showing the appellant admitted or was shown to have intended clandestine removal of the excess goods or that the goods were kept for removal without issuance of invoices and without payment of duty. The appellant's explanations attributed the unaccountal to mismatch and cessation of factory operations with staff having left, and there was no material establishing the mens rea or specific conduct of clandestine removal. Given absence of such evidence, the serious allegation of clandestine removal was held not proved. However, the Tribunal observed that as Chairman & MD he had a supervisory duty to ensure proper accountal of finished goods; that supervisory lapse was established even if clandestine intent was not; and that such lapse justified only a token penalty rather than the full penalty originally imposed. Applying this reasoning, the Tribunal reduced the personal penalty while confirming that some penal consequence for managerial failure was appropriate. [Paras 4, 5]

The finding that clandestine removal was proved is rejected for lack of evidence; personal penal liability is reduced to a token penalty for supervisory lapse, and the penalty is reduced from Rs.5 Lacs to Rs.1 Lac.

Final Conclusion: Appeal partly allowed: the Tribunal upheld that possession of unaccounted excisable goods warranted penal consequence but, in absence of proof of clandestine removal or intent, reduced the personal penalty on the Chairman & MD from Rs.5 Lacs to Rs.1 Lac as a token penalty for supervisory failure.

Classification of goods - specific tariff entry preferred over residuary entry - residuary entry - burden of proof on the revenue - trade or commercial meaning / user test - interpretation favouring the assessee where two views are possible - rusk as bread

Classification of goods - specific tariff entry preferred over residuary entry - residuary entry - rusk as bread - burden of proof on the revenue - trade or commercial meaning / user test - interpretation favouring the assessee where two views are possible - Whether Bread-Rusk is classifiable as 'Bread' under Entry 9 of Schedule B and therefore exempt from VAT, rather than as an unlisted item under the residuary entry. - HELD THAT: - The Court held that attempts must first be made to bring a product within a specific tariff entry and the residuary entry invoked only as a last resort. Applying settled precedent, the burden to show that a product does not fall within a specific entry lies on the revenue. On the facts the majority of ingredients and the manufacturing process for rusk and bread are the same; the only material distinction is reduced moisture content in rusk achieved by longer baking (dehumidification) which enhances shelf life. Authoritative dictionary meanings and multiple judicial decisions were relied upon to conclude that rusk is essentially a form of bread (a slice of bread dried and cooked again). The authorities below had not discharged the onus to show that by no reasonable process of reasoning rusk could be held to fall under the tariff entry for bread. Where two plausible classifications exist, the one favourable to the assessee must be preferred. Applying these principles, the Court found merit in the writ petitions and held that rusk is classifiable as bread and not as an unlisted residuary item. [Paras 14, 16, 18, 29, 31]

Writ petitions allowed; Bread-Rusk is classifiable as 'Bread' under Entry 9 of Schedule B and not taxable as an unlisted residuary item.

Final Conclusion: The petitions (including the civil revision) were allowed: Bread-Rusk is to be treated as bread for purposes of the HPVAT Act and the assessments/demands treating it as an unlisted residuary item are set aside.

Offence under Section 138 of Negotiable Instruments Act (dishonour of cheque) - Legally enforceable debt or other liability - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption on preponderance of probabilities - Scope of interference in appeals against acquittal - Perverse conclusion / manifest illegality as test for interference

Offence under Section 138 of Negotiable Instruments Act (dishonour of cheque) - Legally enforceable debt or other liability - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption on preponderance of probabilities - Whether the complainant proved a legally enforceable debt and whether the presumption under Section 139 was successfully rebutted so as to sustain conviction under Section 138 NI Act. - HELD THAT: - The trial Court found that the complainant failed to establish that the sum drawn in the cheque represented a legally enforceable debt. The learned Magistrate relied on documentary anomalies in the loan agreement (interpolations, absence of company seal/signature), the admitted promissory note for a lesser sum, absence of evidence explaining how the liability rose to the cheque amount, and the complaint itself being framed only for the original loan amount. Applying the law that Section 139 raises only a rebuttable presumption and that the standard to rebut is preponderance of probabilities, the trial Court concluded that the accused had raised a probable defence and rebutted the presumption. On re-appreciation of the record, this Court found no material error in that conclusion: the complainant did not prove that the amount on the cheque was a legally recoverable debt and thus the ingredients of Section 138 were not fulfilled. The Court therefore upheld the finding that the presumption under Section 139 was rebutted and that conviction could not be sustained. [Paras 7]

The acquittal was upheld because the complainant failed to prove a legally enforceable debt and the presumption under Section 139 was rightly held to be rebutted.

Scope of interference in appeals against acquittal - Perverse conclusion / manifest illegality as test for interference - Whether this Court should interfere with the trial Court's order of acquittal on re-appreciation of evidence. - HELD THAT: - The Court reiterated the settled principles governing interference in appeals against acquittal: while an appellate court has power to re-appreciate evidence, it must give due weight to the presumption of innocence and the trial Court's advantage in assessing witness credibility; interference is warranted only if the trial Court's approach is vitiated by manifest illegality, perverse conclusions, or if relevant material was ignored or inadmissible material was relied upon. Applying these principles to the record, the High Court found that the trial Judge had properly considered the evidence and reached a permissible conclusion. No demonstrable perversity or manifest illegality was shown that would justify upsetting the acquittal. [Paras 6]

No interference; the appeal against acquittal is dismissed as the trial Court's conclusion was not perverse or vitiated by manifest illegality.

Final Conclusion: The High Court dismissed the appeal and confirmed the trial Court's order of acquittal, holding that the complainant failed to establish a legally enforceable debt and that there was no justification to disturb the acquittal on appeal.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Legally enforceable debt or other liability - Burden on accused to rebut presumption by preponderance of probabilities - Scope of interference in appeals against acquittal

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Legally enforceable debt or other liability - Presumption under Section 139 of the Negotiable Instruments Act - Whether the complainant proved that the cheque was issued for discharge of a legally enforceable debt or other liability and thereby established the ingredients of Section 138 NI Act. - HELD THAT: - The trial Court found, and this Court on re-appreciation agreed, that the complainant failed to prove a legally enforceable debt. Although the cheque was signed and dishonoured with endorsement "Account Closed", the existence of a legally recoverable debt is not supplied by Section 139 and must be proved. The complainant alleged having lent Rs.20 lakh but produced no documentary evidence or evidence of persons said to have provided portions of that sum; his own certificate (Exh.50) recorded no outstanding from the accused; the account was closed before the cheque date; and the complainant's asserted sources (personal savings and agricultural income) were not substantiated. The Court applied the principle that Section 139 raises a rebuttable presumption and the accused may discharge it on the preponderance of probabilities; on the material before the Court the accused successfully raised a probable defence and rebutted the statutory presumption. Consequently the essential ingredient of a legally enforceable debt for conviction under Section 138 was not established beyond reasonable doubt. [Paras 7, 10]

Complainant failed to prove existence of a legally enforceable debt; ingredients of Section 138 NI Act not made out and presumption under Section 139 was rebutted.

Scope of interference in appeals against acquittal - Burden on accused to rebut presumption by preponderance of probabilities - Whether this Court should interfere with the trial Court's order of acquittal. - HELD THAT: - The Court reviewed settled principles governing appeals against acquittal: an appellate Court may re-appreciate evidence but must give weight to the presumption of innocence and the trial Court's opportunity to assess witness demeanour; interference is justified only if the trial Court's conclusion is perverse or vitiated by manifest illegality. Applying those principles to the evidence, this Court found the trial Judge had methodically considered the documentary and oral evidence, and the conclusions reached were not perverse or demonstrably unsustainable. The complainant's failure to prove source of funds and the existence of legally enforceable debt furnished a valid basis for acquittal; hence there were no compelling grounds to disturb the acquittal. [Paras 6, 7, 11]

No interference with the trial Court's order of acquittal; appeal dismissed.

Final Conclusion: The High Court confirmed the acquittal recorded by the trial Court, holding that the complainant failed to prove a legally enforceable debt and that the statutory presumption under Section 139 was rebutted; there being no perversity or manifest illegality in the trial Court's approach, the appeal is dismissed and the order of acquittal upheld.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal on preponderance of probabilities - existence of legally enforceable debt - offence under Section 138 of the Negotiable Instruments Act - conviction perverse and warranting interference

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal on preponderance of probabilities - existence of legally enforceable debt - Whether the presumption of existence of legally enforceable debt under Section 139 was successfully rebutted and, if so, whether the conviction under Section 138 was perverse and liable to be set aside. - HELD THAT: - The Court found the cheque was dishonoured and notice sent, thereby attracting the statutory presumption under Section 139. That presumption, however, is rebuttable on the basis of preponderance of probabilities. The accused led oral evidence (including his own testimony and three witnesses) and elicited material statements in cross-examination of the complainant which contradicted the complainant's account about the alleged loan of Rs.50,000 and the delivery/scribing of the cheque. Independent witnesses supported the accused's case that only a smaller loan was advanced on a different date and that three blank signed cheques were given as security and one cheque was later misused by the complainant. Significant parts of the complainant's testimony (about the role and conduct of a third person) were specifically denied by that person when examined and remained undisturbed. The trial and appellate courts, the High Court observed, treated the initial statutory facts mechanically and did not apply the correct standard to the defensive evidence. Once the presumption under Section 139 was held to be rebutted, the onus shifted to the complainant to prove existence of a legally enforceable debt; the complainant failed to discharge that onus. For these reasons the conviction under Section 138 was held to be perverse and unsustainable. [Paras 16, 21, 22, 27, 28]

The presumption under Section 139 was successfully rebutted on preponderance of probabilities; the complainant failed to prove existence of a legally enforceable debt and the conviction under Section 138 was perverse and set aside.

Final Conclusion: Revision allowed; the conviction and sentence under Section 138 of the Negotiable Instruments Act set aside and the accused acquitted.