TaxTMI Updates e-Newsletter
Jul 07,2020

Exemption under Entry 66(a) of Notification 12/2017 - Central Tax (Rate) - definition of "educational institution" and "approved vocational course" in the Exemption Notification - non-applicability of Entry 64 and Entry 71 of the Exemption Notification

Exemption under Entry 66(a) of Notification 12/2017 - Central Tax (Rate) - approved vocational course - educational institution - The applicant's services in relation to specified skill development courses (diesel mechanic, welder and sewing technology) at BEMVT qualify for exemption under Entry 66(a) of the Exemption Notification. - HELD THAT: - The Exemption Notification defines an "educational institution" to include institutions imparting "education as a part of an approved vocational education course". An "approved vocational course" is a modular employable skill course approved by NCVT and run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship. BEMVT is registered with DGET and the courses in diesel mechanic, welder and sewing technology are approved by NCVT. Consequently, the services supplied to students, faculty and staff in respect of these formally recognised vocational courses fall within clause 2(y)(iii) and are exempt under Entry 66(a). [Paras 3]

Services to students, faculty and staff for the diesel mechanic, welder and sewing technology courses are exempt under Entry 66(a).

Non-applicability of Entry 64 of the Exemption Notification - non-applicability of Entry 71 of the Exemption Notification - Whether exemptions under Entry 64 or Entry 71 apply to the applicant's services. - HELD THAT: - Entry 64 applies to services provided by the Government or a local authority, but the applicant is not the Government or a local authority; therefore Entry 64 is inapplicable. Although services rendered as a project implementation agency under the Deendayal Upadhyaya Grameen Kaushalya Yojana may attract Entry 71, the applicant did not furnish evidence that BEMVT is acting as a project implementation agency under that scheme and did not press this point at hearing. Accordingly, Entry 71 is not held to be applicable on the materials before the Authority. [Paras 3]

Exemptions under Entry 64 and Entry 71 are not applicable to the applicant on the record before the Authority.

Final Conclusion: The Advance Ruling holds that supplies in respect of the formally approved vocational courses (diesel mechanic, welder and sewing technology) at the applicant's centre are exempt under Entry 66(a) of Notification 12/2017; exemptions under Entry 64 and Entry 71 do not apply on the facts presented.

Supply of goods - assets of a business forming part of supply under Schedule II - liquidator as supplier - registration under the GST Act - authorized person of the corporate debtor - continuation of registration by insolvency professional until liability ceases

Supply of goods - assets of a business forming part of supply under Schedule II - liquidator as supplier - Sale of the corporate debtor's assets by the NCLT-appointed liquidator constitutes a supply of goods under the GST Act. - HELD THAT: - Sl. No. 4(a) of Schedule II treats transfer or disposal of goods forming part of the assets of a business by or under directions of the person carrying on the business as a supply of goods. The liquidator, appointed under the IBC to sell assets of a non-going concern corporate debtor, sells plant and machinery, office equipment and furniture under the statutory liquidation regime. Such disposals fall within Schedule II and therefore amount to supply of goods by the liquidator. The Authority applied these statutory provisions to the facts of appointment and the mandated sale of assets under the liquidation regulations and drew the conclusion that the transactions are taxable supplies. [Paras 3]

The sale of the applicant's assets by the liquidator is a supply of goods by the liquidator.

Registration under the GST Act - liquidator as supplier - The liquidator is required to obtain registration under the GST Act for the supplies made in liquidation. - HELD THAT: - Because the liquidator's disposals constitute supplies of goods, the liquidator falls within the taxable person regime under the GST Act and is therefore required to register under the Act. The Authority observed that the liquidator acts in the capacity of the person carrying on the business for purposes of disposing assets and hence must comply with the registration requirement. [Paras 3]

The liquidator must take registration under section 24 of the GST Act for the supplies arising from sale of the corporate debtor's assets.

Authorized person of the corporate debtor - continuation of registration by insolvency professional until liability ceases - Where the insolvency professional is already registered as a distinct person or as the authorized person of the corporate debtor, the registration should continue until liabilities under the GST Act cease. - HELD THAT: - The NCLT-appointed resolution professional/liquidator acts as the authorized person of the corporate debtor. If the insolvency professional has obtained registration as a distinct person of the corporate debtor in terms of the specified notification, that registration remains effective and must be maintained until the professional's liability under the GST Act ends under the statutory provision cited. The Authority noted that the registration continues with appropriate amendments to the certificate if the status or authorized person changes, referring to the administrative guidance provided in the relevant circular. [Paras 3]

An insolvency professional already registered as a distinct person or as the authorized person of the corporate debtor should continue to remain registered until such liability under the GST Act ceases.

Final Conclusion: The Authority ruled that sales of the corporate debtor's assets by the NCLT-appointed liquidator are supplies of goods; the liquidator must register under the GST Act for such supplies; and where the insolvency professional is already registered as a distinct person or authorized person of the corporate debtor, that registration continues until the professional's liability under the Act ceases.

Import of service - place of supply - fixed establishment - supplier located in India - reverse charge - advance ruling admissibility

Import of service - place of supply - fixed establishment - Supply under the Maintenance and Repair Contract (MARC) is import of service or not - HELD THAT: - The Authority found that the MARC envisages long-term, on-site obligations including deployment of officers, support staff and experts, supply of spares and consumables, supervision and training, and maintenance of equipment logbooks over a 17-year period. These arrangements demonstrate a sufficient degree of permanence of human and technical resources at BCCL sites, constituting fixed establishment from which services are supplied. Consequently, the supplier must be treated as a supplier located in India and the supply is not an import of service; the place of supply is to be determined as the location where the machinery and equipment are used. The Authority relied on the contract terms (notably clause 9 and clause 9.2.2) and the factual matrix to conclude that the supplier operates from a fixed establishment in India and therefore the supply cannot be classified as import of service. [Paras 4]

Supply to BCCL under the MARC is not import of service.

Reverse charge - import of service - Whether the recipient is liable to pay tax on reverse charge basis under the notification relied upon by the applicant - HELD THAT: - Since the Authority concluded that the MARC supply is not an import of service because the supplier operates from a fixed establishment in India, the precondition for invoking the notified reverse charge mechanism for import of services is not satisfied. Therefore, the recipient cannot be made liable to pay tax on reverse charge basis under the notification cited by the applicant. [Paras 4]

Recipient is not liable to pay GST on reverse charge basis under the cited notification.

Supplier located in India - advance ruling admissibility - Whether the applicant (the local branch) is to be treated as the domestic MARC Holder and liable to pay GST under clause 9.2.2 of the MARC - HELD THAT: - Although the application initially treated the foreign entity as supplier, the Authority examined the contract structure and factual features and concluded that the applicant performs the substantive role of the MARC Holder at the Indian sites. Clause 9 of the MARC distinguishes between a foreign and a domestic MARC Holder only for statutory compliance, but the contract otherwise addresses the rights and obligations to a single MARC Holder. Given the applicant's role as the registered branch responsible for receiving and making payments and the existence of permanent on-site resources, the applicant must be treated as the domestic MARC Holder. The Authority therefore entertained the advance ruling and pronounced that the applicant is liable for tax as per clause 9.2.2 of the MARC. [Paras 4]

Applicant, as the domestic MARC Holder, is liable to pay GST in terms of clause 9.2.2 of the MARC.

Final Conclusion: The Authority ruled that the services under the MARC are not import of service, the recipient is not liable to pay tax under the cited reverse charge notification, and the applicant (the local branch) must be treated as the domestic MARC Holder liable to pay GST in terms of clause 9.2.2 of the MARC; the ruling is subject to Sections 103 and 104(1) of the GST Act.

Classification of goods under Customs Tariff headings - Integrated LED fixtures versus LED lamps - Exclusion of Chapter 85 goods from Chapter 94 - Interpretation of the First Schedule to the Customs Tariff Act including Section and Chapter Notes - Composite supply and mixed supply under GST - Application of Notification No.1/2017 (Rate) - Schedule II Sl. No. 226

Integrated LED fixtures versus LED lamps - Classification of goods under Customs Tariff headings - Exclusion of Chapter 85 goods from Chapter 94 - Classification of the applicant's LED stem (long bulb) supplied with fixtures as integrated lighting fixtures under the Customs Tariff - HELD THAT: - The authority found on the material and brochures that the product is an integrated LED in which the LED array is built into the fixture and is ready to use on connection to a light source, so that the buyer need not purchase a lamp separately. The competing headings were 8539 (LED lamps) and 9405 (lamps and lighting fittings). Applying the rules for interpretation of the First Schedule and the relevant Explanatory Notes, Chapter 85 covers lamps that are essentially components designed to be used in conjunction with separate fixtures, whereas Chapter 94 covers lamps and lighting fittings which may have a permanently fixed light source and can be equipped with lamp-holders, switches, flex and plugs and function as complete fittings. Chapter Note 1(f) excludes lamps and lighting fittings of Chapter 85 from Chapter 94. Given that the product is an integrated fixture capable of independent functioning as a garden/outdoor light, it does not fall within CTH 8539 but falls within CTH 9405, specifically CTH 94054090 as other electric lamps and lighting fittings. [Paras 7, 8]

The LED stem (long bulb) with fixtures supplied by the applicant is classifiable under CTH 94054090.

Composite supply and mixed supply under GST - Integrated LED fixtures versus LED lamps - Whether the supply is a single (integrated) supply or a composite/mixed supply - HELD THAT: - The authority evaluated the nature of the product and observed that the models are integrated products where the LED lamp is built into the fixture and supplied as a single ready-to-use unit; the buyer does not, and cannot practically, obtain the lamp separately for those products. Consequently, the supply is a single supply (an integrated product) and not a mixed supply requiring separate classification of constituent parts. [Paras 7]

The supply of the LED stem with fixtures is a single integrated supply and not a mixed supply.

Application of Notification No.1/2017 (Rate) - Schedule II Sl. No. 226 - Classification of goods under Customs Tariff headings - Applicable GST rate for the product classified under CTH 94054090 - HELD THAT: - Having classified the goods under CTH 94054090, the authority applied the rate Notification No. 01/2017-C.T. (Rate) as amended. Entry Sl. No. 226 of Schedule II covers LED lights or fixtures including LED lamps and prescribes the applicable central and state tax rates. On that basis, the product so classified attracts the rate specified against that entry. [Paras 9, 10]

The product is taxable at 6% CGST and 6% SGST as per Sl. No. 226 of Schedule II of Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 (as amended).

Final Conclusion: The Advance Ruling holds that the applicant's LED stem (long bulb) supplied with its fixtures is an integrated lighting fixture classifiable under CTH 94054090, constitutes a single (integrated) supply and is taxable at 6% CGST and 6% SGST under Sl. No. 226 of Schedule II to Notification No. 01/2017-C.T. (Rate) dated 28.06.2017, as amended.

Power of inspection, search and seizure under GST - Applicability of Code of Criminal Procedure search and seizure provisions to GST searches - Presence of independent and respectable witnesses during search - Right to presence of an Advocate during search or examination - Poolpandi precedent on refusal to allow lawyer during departmental interrogation

Power of inspection, search and seizure under GST - Applicability of Code of Criminal Procedure search and seizure provisions to GST searches - Presence of independent and respectable witnesses during search - Validity of search/sealing procedure vis-a -vis requirement to call independent and respectable inhabitants as witnesses under CrPC as applied to Section 67 of the GST Act. - HELD THAT: - The court observed that Section 67(10) of the GST Act makes the provisions of the CrPC relating to search and seizure applicable to searches under the GST Act. Section 100(4) CrPC requires that before making a search the officer shall call upon two or more independent and respectable inhabitants of the locality to attend and witness the search. The court recorded that the search in the present matter was yet to take place and noted the respondents' assurance that the statutory requirement of independent witnesses would be complied with. Given that assurance, the court found no necessity to issue directions at this stage and declined to interfere in the sealing and proposed search procedure so long as the procedure prescribed by law is followed in letter and spirit. [Paras 6, 7, 8]

Requirement of calling two or more independent and respectable inhabitants as witnesses under CrPC (as applied to Section 67) must be complied with; no interim direction necessary in view of respondents' assurance.

Right to presence of an Advocate during search or examination - Poolpandi precedent on refusal to allow lawyer during departmental interrogation - Whether the petitioner is entitled to have an Advocate present during search, seizure or departmental examination under the GST Act. - HELD THAT: - The court held that no statutory provision confers a right to have an Advocate present during search or examination under the GST Act. Relying on the Supreme Court's decision in Poolpandi (as discussed in the judgment) and subsequent authority applying the same principle in the GST context, the court observed that allowing a lawyer's presence during departmental enquiry/examination may frustrate investigation and is not a legal entitlement. The petitioner failed to point out any statutory or constitutional right that would require permitting an Advocate to be present during the search or questioning. Consequently, the prayer for presence of an Advocate during search/examination was rejected. [Paras 9, 10, 11, 12]

No legal right to have an Advocate present during search or departmental examination; prayer for Advocate's presence rejected.

Final Conclusion: Petition dismissed; search and seizure to proceed in accordance with Section 67 of the GST Act and applicable CrPC provisions, including attendance of independent respectable witnesses; no entitlement to have an Advocate present during search or examination.

Necessary or proper party - deletion of party from array - issue of notice - directions for filing amended memo of parties and pleadings

Necessary or proper party - deletion of party from array - Commissioner of Customs (respondent no.4) is not a necessary or proper party and is deleted from the array of parties. - HELD THAT: - On the petitioner's challenge to denial of refund, the learned senior standing counsel for respondents 1 to 3 accepted notice and stated that the Commissioner of Customs, who was arrayed as respondent no.4, is neither a necessary nor a proper party to the proceedings. The Court accepted this position, deleted respondent no.4 from the array of parties and directed the petitioner to file an amended memo of parties within one week. The order thus resolves only the question of party status for respondent no.4 and does not adjudicate the substantive refund claim.

Respondent no.4 deleted; petitioner to file amended memo of parties within one week.

Issue of notice - directions for filing amended memo of parties and pleadings - Interim procedural directions including issuance of notice, time-limits for filing counter-affidavit and rejoinder, and further listing were ordered. - HELD THAT: - The Court issued notice on the writ petition. The respondents (1 to 3) were permitted to file a counter-affidavit within four weeks and the petitioner was permitted to file a rejoinder, if any, within a further period of four weeks. The petition was listed for hearing on the specified date and the interim application (CM Appl.) was allowed subject to just exceptions. These are interlocutory procedural directions to facilitate adjudication of the substantive dispute and do not decide the merits of the refund claim.

Notice issued; counter-affidavit to be filed within four weeks; rejoinder within a further four weeks; matter listed on the specified date; CM application allowed subject to just exceptions.

Final Conclusion: The Court permitted deletion of the Commissioner of Customs as a party, directed filing of an amended memo of parties, issued notice, allowed the interim application subject to just exceptions and gave schedules for filing the counter affidavit and rejoinder, with the matter listed for further hearing.

Entitlement to carry forward CENVAT/ITC on migration - extension of time for filing TRAN-1 for technical difficulties - vires of delegated legislation - arbitrariness under Article 14 - vested right under Article 300A - remedy of availing ITC in GSTR-3B where portal not opened

Vires of delegated legislation - arbitrariness under Article 14 - vested right under Article 300A - Challenge to validity of sub-Rule (1A) of Rule 117 of the Haryana GST Rules, 2017. - HELD THAT: - The Court examined the petitioner's challenge to the vires of sub Rule (1A) of Rule 117, including the contention that denial of relief under that sub rule would be arbitrary and discriminatory and would impinge on vested property rights. While the Court recognised and cited the reasoning of this Court and the Delhi High Court that the restrictive application of sub Rule (1A) may be arbitrary and that CENVAT/ITC is a vested right protected under Article 300A, it exercised judicial restraint and did not declare the sub rule ultra vires. Instead, the Court observed that repeated extensions granted by authorities for filing TRAN I in cases of technical difficulty vindicate the claim that denial of unutilised credit in the absence of portal logs may contravene Article 14 and Article 300A. Accordingly, the Court declined to strike down the provision but proceeded to afford relief to the petitioner on the facts and precedents relied upon. [Paras 6, 7, 8]

Petitioner's challenge to the vires of sub Rule (1A) was not upheld as a matter of striking down the rule; the Court nevertheless recognised the conformity issues with Articles 14 and 300A and afforded relief to the petitioner on that basis.

Entitlement to carry forward CENVAT/ITC on migration - extension of time for filing TRAN-1 for technical difficulties - remedy of availing ITC in GSTR-3B where portal not opened - Relief to petitioner to enable migration of pre GST credit where TRAN 1 could not be uploaded due to technical difficulties. - HELD THAT: - Relying on earlier decisions of this Court and the Delhi High Court treating similar facts, the Court directed respondents to permit the petitioner to electronically upload Form TRAN 1 on or before 30.06.2020. The Court further provided an alternative remedy: in the event the respondents did not open the portal to permit upload, the petitioner would be permitted to take the input tax credit in the monthly return GSTR 3B for July 2020. The Court qualified the grant of relief by permitting the respondents to verify the genuineness of the claimed credits before acceptance. [Paras 2, 6, 9]

Respondents directed to permit upload of TRAN 1 by 30.06.2020; if portal not opened, petitioner may avail the contested ITC in GSTR 3B of July 2020, subject to verification by respondents.

Final Conclusion: Petition allowed: without declaring sub Rule (1A) invalid, the Court directed respondents to permit filing of Form TRAN 1 by 30.06.2020 and, if the portal is not opened, permitted the petitioner to claim the disputed input tax credit in GSTR 3B for July 2020, subject to verification by the authorities.

Application of GST Council relaxation measures - calculation of demand on net tax excluding input tax credit - opportunity of hearing before tax authority - abeyance of demand / stay of coercive action

Application of GST Council relaxation measures - abeyance of demand / stay of coercive action - Decision dated 12.06.2020 of the GST Council is applicable to the petitioner and the demand notice shall be kept in abeyance pending consideration. - HELD THAT: - The Court observed that the GST Council's decision of 12.06.2020, recommending reduction in late fee and other reliefs to taxpayers, applies to the petitioner who had delayed filing GST returns. Having noted the recommendation and the petitioner's representation, the Court directed that the operation of the demand notice (Exhibit-P7) be kept in abeyance until the competent authority decides the representation. The Court therefore granted interim relief restraining coercive steps and recognised the relevance of the GST Council measures to the petitioner's case, while leaving the substantive decision to the competent authority. [Paras 6]

Demand notice kept in abeyance; GST Council decision of 12.06.2020 held applicable and relevant to petitioner.

Calculation of demand on net tax excluding input tax credit - opportunity of hearing before tax authority - Allegation that the demand notice was based on gross tax instead of net tax (excluding input tax credit) requires consideration by the competent authority after hearing the petitioner. - HELD THAT: - The Court noted the petitioner's contention that the demand was computed on gross tax including input tax credits that should have been excluded. The Court refrained from adjudicating the correctness of the calculation on merits, stating that such determinations fall within the domain of the competent authority. Consequently, the petitioner's representation (Exhibit-P8) must be considered after affording an opportunity of hearing, and the authority is directed to take a decision expeditiously in light of the GST Council measures. This issue is thus remitted to the tax authority for fresh consideration and decision. [Paras 2, 6]

Question of computation (gross versus net tax) remitted to the competent authority for reconsideration after hearing the petitioner.

Opportunity of hearing before tax authority - abeyance of demand / stay of coercive action - Petitioner must be afforded an opportunity of being heard and the competent authority to decide the representation within a specified time-frame. - HELD THAT: - The Court directed the first respondent to afford the petitioner a hearing on the matters raised in the representation and to decide the representation expeditiously. A specific timetable was imposed: the authority is to take a decision within two months from receipt of the judgment copy. Meanwhile, the Court ordered that the demand notice shall remain in abeyance for the interregnum. The petitioner was, however, permitted to file returns periodically, with such filing to be without prejudice to the authority's ultimate decision. [Paras 6]

Authority to hear petitioner and decide representation within two months; demand notice operation stayed until such decision.

Final Conclusion: Writ petition disposed by directing the tax authority to afford the petitioner a hearing and to decide the representation in light of the GST Council measures of 12.06.2020 within two months; operation of the demand notice stayed meanwhile and the question of calculation on gross versus net tax remitted to the authority for fresh consideration.

Conversion of capital asset into stock-in-trade - application of Section 45(2) on conversion of capital asset into stock-in-trade - definition of capital asset excluding stock-in-trade - cost of acquisition on distribution on partition and Section 49(1) - characterisation of assets received on partition - memorandum of family arrangement as evidence of business stock-in-trade - tribunal as fact-finding authority and scope of perversity review

Conversion of capital asset into stock-in-trade - application of Section 45(2) on conversion of capital asset into stock-in-trade - characterisation of assets received on partition - memorandum of family arrangement as evidence of business stock-in-trade - Whether the provisions of Section 45(2) of the Income Tax Act are attracted to the lands allotted to the assessee on partial partition of the HUF. - HELD THAT: - The court held that Section 45(2) applies only when an owner converts a capital asset into, or treats it as, stock-in-trade; three conditions (transfer by way of conversion, conversion by the owner, and conversion of a capital asset) are sine qua non. The memorandum of family arrangement expressly showed that the assets allotted to the assessee formed part of the real estate business's stock-in-trade and that the assessee continued the business after partition. There was no material to show that the assets were capital assets or that any capital asset was converted into stock-in-trade. Consequently, Section 45(2) was not attracted on the facts. The tribunal's factual findings to this effect were based on appreciation of the partition memorandum and other record material and were not shown to be perverse. [Paras 11, 12]

Provisions of Section 45(2) do not apply as the assets allotted on partition were stock-in-trade and there was no conversion of capital assets into stock-in-trade.

Definition of capital asset excluding stock-in-trade - cost of acquisition on distribution on partition and Section 49(1) - Whether Section 49(1) is applicable so as to deem the cost of acquisition of the properties allotted on partition to be the cost to the previous owner. - HELD THAT: - Section 49(1) applies when the asset in question is a capital asset. Since stock-in-trade is excluded from the definition of 'capital asset' under Section 2(14), and the assets allotted to the assessee were found to be stock-in-trade, Section 49(1) does not apply. There was no deeming provision rendering stock-in-trade as capital asset on partition, nor material to treat the allotted properties as capital assets for invoking Section 49(1). [Paras 7, 11]

Section 49(1) is not attracted because the allotted properties were stock-in-trade and not capital assets.

Tribunal as fact-finding authority and scope of perversity review - Whether the High Court should interfere with the tribunal's factual findings that the assets were stock-in-trade. - HELD THAT: - The tribunal is the fact-finding forum and the High Court may interfere only if findings are perverse. The court found that the tribunal's conclusions arose from a meticulous appreciation of the memorandum of family arrangement and other record material; the revenue had not demonstrated perversity or produced material to upset those findings. The substantial questions of law framed were in substance questions of fact and therefore did not warrant interference. [Paras 12, 13]

The High Court will not disturb the tribunal's factual findings in the absence of perversity; the tribunal's findings stand.

Final Conclusion: The revenue's appeal is dismissed; the tribunal's finding that the properties allotted on partition were stock-in-trade (so that Sections 45(2) and 49(1) are not attracted) is upheld and the assessing officer's computation of capital gains is cancelled.

Limited remand - remand to give effect to tribunal's finding - limitation under Section 153(2A) of the Income Tax Act - assessment under Section 153(3) of the Income Tax Act - no prescribed time-limit but requirement of reasonable time

Limited remand - remand to give effect to tribunal's finding - limitation under Section 153(2A) of the Income Tax Act - assessment under Section 153(3) of the Income Tax Act - no prescribed time-limit but requirement of reasonable time - Whether the appellate tribunal's remand was an open remand attracting the two year limitation under Section 153(2A) or a limited remand to give effect to its findings falling under Section 153(3) - HELD THAT: - The tribunal's order (para 12 of its order) directed re examination by the assessing officer on specific aspects and did not set aside or cancel the assessment nor direct a de novo fresh assessment. The High Court held that the direction was a limited remand made to give effect to the tribunal's findings. Consequently the matter falls within the class of matters contemplated by Section 153(3) (i.e., assessments made in consequence of or to give effect to findings/directions in appellate orders) and not within Section 153(2A) which prescribes a two year outer period where an assessment is set aside or cancelled and a fresh one ordered. The court further noted that where no statutory limitation is prescribed under Section 153(3), the statutory action must still be taken within a reasonable time, but the tribunal erred in concluding the assessing officer's order was barred by the two year limitation of Section 153(2A). [Paras 11]

The tribunal erred in holding the remand to attract Section 153(2A); the remand was limited and falls under Section 153(3).

Remand to tribunal for decision on merits - Whether the matter should be restored to the tribunal for adjudication on merits - HELD THAT: - Although the High Court found the tribunal's limitation conclusion to be in error, it observed that the tribunal had not decided the controversy on merits. The High Court therefore quashed the tribunal's impugned orders and remitted the matter to the tribunal for fresh consideration and decision on merits in accordance with law. [Paras 12]

Impugned tribunal orders quashed and matter remitted to the tribunal to decide the controversy on merits.

Final Conclusion: Appeals allowed; the High Court held the tribunal erred in treating the remand as attracting the two year limitation under Section 153(2A) and found it to be a limited remand under Section 153(3); the tribunal's orders are quashed and the matter is remitted to the tribunal for fresh adjudication on merits.

Stay of recovery - conditional payment for interim relief - direction to appellate authority to decide pending appeals within a specified time - order under Section 220(6) of the Income Tax Act - interim relief pending disposal of appeals

Direction to appellate authority to decide pending appeals within a specified time - interim relief pending disposal of appeals - Third respondent directed to consider and decide the appeals (Ext.P2 series) after hearing the petitioner within six months from receipt of copy of the judgment. - HELD THAT: - The High Court, having noted the pendency of Ext.P2 appeals before the 3rd respondent and the petitions earlier dealt with by the Assessing Authority under Ext.P4 and by the Principal Commissioner under Ext.P6, exercised its supervisory jurisdiction to secure expeditious adjudication. Taking into account the petitioner's representation and the pandemic-induced difficulties to the petitioner's business, the Court directed the appellate authority to hear the petitioner and pass orders on the pending appeals within six months from receipt of the judgment, thereby remitting the matters for fresh consideration and disposal by the competent appellate forum. [Paras 3]

Appeals remitted to the 3rd respondent for consideration and final disposal within six months from receipt of this judgment.

Stay of recovery - conditional payment for interim relief - order under Section 220(6) of the Income Tax Act - Conditional stay of recovery of amounts confirmed by the assessment orders granted subject to payment by the petitioner of a specified sum within a stipulated period. - HELD THAT: - While not adjudicating the merits of the assessments, the Court provided interim relief by staying recovery of the balance amounts (over and above the sum ordered to be paid) until the 3rd respondent disposes of the appeals. The Court recorded the petitioner's willingness to make an interim payment and took note of the pandemic-related business lockdown as a consideration for moderating interim conditions. Accordingly, on the petitioner paying the directed sum within the prescribed two-month period, recovery of the remainder is stayed pending the appellate decision. [Paras 3]

On payment of Rs. 25,00,000 by the petitioner within two months, recovery of the balance amounts confirmed by the assessment orders shall be stayed until the appeals are decided and communicated.

Final Conclusion: Writ petition disposed by directing the appellate authority to decide the pending appeals within six months; in the meantime, on the petitioner making the specified interim payment within two months, recovery of the remaining assessed amounts is stayed until the appeals are finally disposed.

Lifting of garnishee attachment - stay of further recovery pending disposal of appeal - safeguarding revenue by upholding prior recovery - direction to appellate authority to decide appeal within a time frame

Lifting of garnishee attachment - stay of further recovery pending disposal of appeal - Whether attachments over the assessee's bank accounts should be lifted and further recovery stayed pending final disposal of the appeal by the first appellate authority. - HELD THAT: - The Court noted that the appellate authority had finally heard the assessee's appeal and was expected to deliver its orders shortly. Having regard to the fact that the revenue had already effected recovery by garnishee proceedings to the extent indicated, the Court held that no further recovery need be permitted until the appeal is decided. Consequently the Court upheld the recovery already effected but directed respondents to lift the attachment over the assessee's bank accounts and to keep further recovery proceedings in abeyance until the appellate authority passes and communicates its final order. The direction also permitted the assessee to operate the bank accounts during the interregnum. The determinative reasoning was preservation of the assessee's right of effective remedy pending imminent disposal of the appeal while safeguarding revenue by retaining the already recovered amount. [Paras 3, 4]

Attachments over the petitioner's bank accounts are to be lifted forthwith and further recovery stayed pending final orders by the appellate authority.

Direction to appellate authority to decide appeal within a time frame - Whether the appellate authority should be directed to pass final orders within a specified outer time limit. - HELD THAT: - The Court observed that the appeal had been heard and that final orders were awaited. In order to ensure expeditious disposal and to give effect to the relief granted, the Court directed the appellate authority to pass final orders in the appeal within an outer limit of two months from receipt of a copy of the judgment. This is a case-specific supervisory direction aimed at prompt adjudication rather than an adjudication on the merits of the appeal itself. [Paras 4]

The appellate authority is directed to pass and communicate final orders in the appeal within two months of receipt of this judgment.

Final Conclusion: Writ petition disposed: attachments over the petitioner's bank accounts are ordered lifted and further recovery is stayed until the appellate authority passes final orders within two months; the recovery already effected by respondents is upheld for the time being and the petitioner may operate the bank accounts during the interim.

Bogus purchases - accommodation entries - reassessment on information received from Investigation Wing - reliability of statements retracted by the entry provider - explanation of source of purchases and burden of proof - deletion of additions following Tribunal precedents

Bogus purchases - accommodation entries - explanation of source of purchases and burden of proof - reliability of statements retracted by the entry provider - deletion of additions following Tribunal precedents - Whether the addition of Rs. 1,05,150/- as unexplained expenditure on account of alleged non genuine purchases from M/s AVI Exports should be sustained. - HELD THAT: - The Tribunal found that the addition could not be sustained. The assessee maintained books of account, produced purchase bills, stock records and tax audit particulars and showed corresponding sales; payments were made through banking channels. The Revenue's case rested primarily on statements attributed to the proprietor of the entry provider, which were subsequently retracted by him; the Tribunal held a retracted statement of the entry provider could not be treated as reliable evidence to establish that cheques were routed back as cash to the assessee. Further, no independent evidence was produced to show that the amounts paid were returned to the assessee or that the purchases were not genuinely made. The Tribunal followed its earlier decisions on similar facts where additions based on the same line of evidence were deleted and found no distinguishing fact or legal principle urged by Revenue to sustain the addition. Applying these considerations, the Tribunal concluded that Revenue had not discharged the burden of proving that the purchases were bogus.

The addition of Rs. 1,05,150/- made as unexplained expenditure was deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2015-16 and directed deletion of the addition of Rs. 1,05,150/-, following prior Tribunal decisions and on the basis that the revenue failed to prove that the purchases from M/s AVI Exports were non genuine.

Characterization of interest receipt as business income or income from other sources - nexus between fixed deposits and contract business - relevance of deposit as collateral/tender/security for contract - burden of proof to substantiate business nexus for receipts - remand for fresh examination and verification of facts and documents

Characterization of interest receipt as business income or income from other sources - nexus between fixed deposits and contract business - relevance of deposit as collateral/tender/security for contract - burden of proof to substantiate business nexus for receipts - Whether interest of Rs. 5,45,973 received on fixed deposits used in connection with the assessee's contract business is business income or income from other sources - HELD THAT: - The assessee contended that the fixed deposits (FDRs) were business assets created solely for the contract business, offered as collateral or tender/security to obtain contracts, and that interest thereon was credited to the profit and loss account of the proprietorship business and therefore should be treated as business income. The Assessing Officer recorded that tax was deducted under section 194A on the interest and noted the assessee had not reflected the full amount in the return; the AO treated the interest as income from other sources and added it under section 69A. The Tribunal observed that the assessee had made allegations about the purpose of the FDRs but had not produced documentary evidence to substantiate that the deposits were essential or specifically linked to obtaining the contracts. In view of the absence of material showing the terms of contracts, bank guarantees, tender conditions or other contemporaneous evidence demonstrating that the FDRs were required and used for securing contracts, the Tribunal found it inappropriate to decide the characterization on the record before it. The Tribunal directed the Assessing Officer to examine the issue afresh, in the light of the case law referred to by the parties and any documents the assessee may produce to demonstrate that the FDRs were necessary for obtaining or securing the contract work; if such nexus is established, the interest shall be treated as business income, otherwise it may be treated as income from other sources and assessed accordingly. [Paras 5]

Matter remanded to the Assessing Officer for fresh examination of the nature of the receipt in accordance with the Tribunal's directions; assessee allowed to produce contracts/documents and authorities.

Final Conclusion: The Tribunal set aside the orders below and remanded the sole substantive issue of characterization of interest on FDRs to the Assessing Officer for fresh consideration and verification of documents; the appeal is allowed for statistical purposes.

Valuation of unquoted shares - Discounted Cash Flow method - scrutiny of valuation report by Assessing Officer - Assessing Officer cannot change valuation method - onus on assessee to prove projections - remand to Assessing Officer for fresh valuation

Discounted Cash Flow method - Assessing Officer cannot change valuation method - valuation of unquoted shares - Whether the Assessing Officer was entitled to discard the DCF method adopted by the assessee and adopt a different method for determining fair market value of shares. - HELD THAT: - The Tribunal followed the view of the Bombay High Court in Vodafone M Pesa Ltd. and held that while the Assessing Officer is entitled to scrutinise the valuation report submitted by the assessee, he cannot change the method of valuation chosen by the assessee. If the assessee has opted for the DCF method under the applicable rules, the AO may examine the methodology and underlying assumptions, and if not satisfied, record reasons and either determine a fresh valuation himself or obtain a valuation from an independent valuer; however, the valuation must still be carried out on the DCF basis and not by switching to another method.

AO not entitled to change the valuation method; DCF must be the basis for any fresh valuation while the AO may scrutinise and challenge assumptions with recorded reasons.

Scrutiny of valuation report by Assessing Officer - onus on assessee to prove projections - remand to Assessing Officer for fresh valuation - What procedural steps the Assessing Officer must follow and the standard for scrutiny when rejecting a DCF valuation report. - HELD THAT: - The Tribunal directed that the AO should scrutinise the valuation report and, if dissatisfied, record the reasons and basis for not accepting it before carrying out his own valuation or obtaining an independent valuer's report. The Tribunal emphasised that the most critical input in a DCF model is the cash flow projections: the assessee bears the primary onus to demonstrate that projections, discounting factor and terminal value are reasonable and supported by empirical data, industry norms or other reliable evidence available on the date of valuation. Past data should be used where available to make reliable projections; in start up cases absence of past data means projections should be shown to be reasonable in light of macro and micro factors. Accordingly the matter was remitted to the AO for a fresh decision consistent with these directions.

Matter remitted to AO to re examine the DCF valuation with recorded reasons, permitting AO to obtain independent valuation if needed; assessee must substantiate projections and other DCF inputs.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and restored the matter to the Assessing Officer for fresh consideration on the lines laid down by the Bombay High Court and followed by the Tribunal: the DCF method chosen by the assessee must be the basis for valuation, the AO may scrutinise and, after recording reasons, obtain or make a fresh DCF based valuation, and the assessee bears the primary onus to substantiate the DCF inputs; appeal allowed for statistical purposes.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - show-cause notice under Section 274 specifying the limb of Section 271(1)(c) - requirement of specific grounds in penalty notice to satisfy principles of natural justice - distinct and independent nature of penalty proceedings - deeming provision in Explanation 1B to Section 271 and its limited application

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - show-cause notice under Section 274 specifying the limb of Section 271(1)(c) - requirement of specific grounds in penalty notice to satisfy principles of natural justice - distinct and independent nature of penalty proceedings - Validity of penalty imposed under Section 271(1)(c) where the notice under Section 274 did not specify whether penalty was for concealment of income or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal held that imposition of penalty under Section 271(1)(c) cannot rest solely on the fact that additions were sustained in assessment; the Assessing Officer must show that the conditions for levy of penalty (concealment or furnishing inaccurate particulars) exist. A notice under Section 274 initiating penalty proceedings must specifically state the ground/limb under Section 271(1)(c) so the assessee knows the charge to be met, failing which principles of natural justice are infringed. Reliance was placed on the reasoning in the Karnataka High Court authority (as summarised in paragraph 63 of that decision) and the subsequent approval by the Delhi High Court. Applying those principles, the Tribunal found that the notices in the present case were vague and did not inform the assessee whether the proceeding was for concealment or for furnishing inaccurate particulars; accordingly the penalty could not be sustained. The Tribunal therefore set aside the appellate authority's order and directed deletion of the penalty. [Paras 5, 6]

Penalty under Section 271(1)(c) set aside and deleted for lack of a specific notice under Section 274 specifying the limb of Section 271(1)(c); appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the orders sustaining penalty and directed deletion of the penalty imposed under Section 271(1)(c) because the Section 274 notice was vague and did not specify whether the penalty was proposed for concealment of income or for furnishing inaccurate particulars.

Allowability of business expenditure - allowability of cash expenses and evidentiary burden - evaluation of books of account without rejection - religious/puja expenses as business expenditure - appellate dismissal of unpressed and general grounds

Appellate dismissal of unpressed and general grounds - Dismissal of grounds which were general in nature or not pressed before the Commissioner (Appeals). - HELD THAT: - Grounds 1 and 6, being general, were dismissed by the Tribunal. Ground nos. 4 and 5 were not pressed before the Commissioner (Appeals) and were not pressed before the Tribunal; accordingly those grounds were also dismissed. [Paras 2, 3]

Grounds 1 and 6 dismissed as general; grounds 4 and 5 dismissed as not pressed before the lower appellate authority.

Allowability of cash expenses and evidentiary burden - allowability of business expenditure - evaluation of books of account without rejection - Deletion of disallowance of miscellaneous cash expenses claimed by the assessee. - HELD THAT: - The assessee, engaged in transport operations in difficult hilly and remote areas, claimed miscellaneous cash expenses incurred by drivers and cleaners while plying in North East States. Although the payments were largely in cash and documentary vouchers were not available, the Tribunal noted that the books of account were maintained and audited and were not rejected by the assessing officer. Taking into account the nature of operations, practical difficulties in obtaining local receipts, the declared turnover and gross profit (25.80%), and that the AO made the addition without rejecting the books, the Tribunal held that the disallowance of the miscellaneous expenses was not warranted and directed the assessing officer to delete the disallowance confirmed by the Commissioner (Appeals). [Paras 6]

Disallowance of Rs. 2,77,418/- confirmed by the CIT(A) deleted and the addition set aside.

Religious/puja expenses as business expenditure - allowability of cash expenses and evidentiary burden - Allowability (subject to a limited disallowance) of puja expenses incurred in the course of transport business. - HELD THAT: - The assessee claimed puja expenses incurred routinely by drivers and cleaners before commencing journeys in remote areas. Both lower authorities disallowed the claim for lack of vouchers and cash payments. The Tribunal accepted that such daily puja expenses were incurred for the smooth functioning of the transport business in the peculiar operational circumstances of the North East routes and therefore were connected with business. However, to safeguard revenue the Tribunal allowed the claim but disallowed 10% of the puja expenses as a prudential adjustment. [Paras 8]

Puja expenses allowed except for a 10% disallowance; balance directed to be deleted.

Final Conclusion: The appeal is partly allowed: the miscellaneous expenses disallowance confirmed by the Commissioner (Appeals) is deleted; puja expenses are allowed subject to a 10% disallowance; the unpressed and general grounds are dismissed.

Deductibility of education cess under Section 40(a)(ii) - Characterisation of share application money and applicability of transfer pricing provisions - Disallowance under Section 14A and computation under Rule 8D

Deductibility of education cess under Section 40(a)(ii) - Whether amounts paid as Education Cess and Secondary and Higher Education Cess are disallowable under Section 40(a)(ii). - HELD THAT: - The Tribunal followed the decision of the Bombay High Court in Sesa Goa Ltd., which held that the expression "any rate or tax levied" in Section 40(a)(ii) does not include "cess", since the legislature deliberately omitted the word "cess" from the provision when the Bill was considered by the Select Committee and the CBDT Circular of 18-5-1967 supports this construction. Principles of strict interpretation of taxing statutes and appellate powers to admit claims not in the original return were applied. The Tribunal concluded that there is no prohibition in Section 40(a)(ii) against deducting amounts paid as cess while computing business income. [Paras 7]

The claim that Education Cess and Secondary and Higher Education Cess are disallowable under Section 40(a)(ii) is rejected; the additional ground is allowed in favour of the assessee.

Characterisation of share application money and applicability of transfer pricing provisions - Whether notional interest could be charged under transfer pricing provisions on share application money pending allotment to an associated enterprise. - HELD THAT: - On the facts the Tribunal's earlier view in the assessee's own cases for earlier years was followed: the payment was a genuine capital contribution for business purposes, eventual allotment of shares occurred, and delays were due to regulatory/legal processes. Absent a finding that the transaction was sham or substantially at variance with its form, revenue could not recharacterise the capital contribution as a loan and impose notional interest under Chapter X. The Tribunal's reasoning in related precedents (including Bharti Airtel and the consolidated orders cited) was applied to uphold deletion of the TP adjustment. [Paras 11, 13]

Deletion of the notional interest on share application money (TP adjustment) is upheld and the revenue's grounds challenging its deletion are dismissed.

Disallowance under Section 14A and computation under Rule 8D - Whether the Assessing Officer's additional disallowance under Section 14A read with Rule 8D should be sustained or the matter remanded for fresh adjudication on the sufficiency of the assessee's suo moto disallowance and related computations. - HELD THAT: - The assessee had voluntarily offered an ad hoc disallowance of Rs. 17 lakhs but failed to furnish a cogent basis for that figure. The lower authorities declined that suo moto figure and applied Rule 8D to compute a larger disallowance, while the CIT(A) accepted certain exclusions (foreign dividend-bearing investments) following precedents. For consistency with the Tribunal's approach in the assessee's earlier assessment years, and because the quantification of the assessee's suo moto disallowance was not supported by adequate reasoning or material, the Tribunal set aside the issue to the AO. The AO is directed to re-examine the sufficiency or correctness of the suo moto disallowance with reference to the assessee's accounts and explanations, record speaking reasons if not satisfied, and exclude investments not yielding exempt dividend income as directed by precedent. [Paras 8]

The matter under Section 14A/Rule 8D is restored to the file of the Assessing Officer for fresh adjudication in accordance with the directions given.

Final Conclusion: The assessee's appeal is partly allowed: the additional ground on deductibility of education cess is allowed and the Section 14A disallowance issue is remitted to the Assessing Officer for fresh adjudication; the revenue's appeal challenging deletion of the transfer pricing adjustment on share application money is dismissed.

Penalty under section 271(1)(c) - requirement to specify the limb (concealment or furnishing inaccurate particulars) - Jurisdictional defect in penalty notice - Precedential effect of High Court and Supreme Court rulings on specificity of penalty initiation notice

Penalty under section 271(1)(c) - requirement to specify the limb (concealment or furnishing inaccurate particulars) - Jurisdictional defect in penalty notice - Penalty levied could not be sustained because the notice initiating penalty did not specify which limb of section 271(1)(c) proceedings were initiated under. - HELD THAT: - The Assessing Officer's penalty initiation and levy failed to identify under which limb of section 271(1)(c) the proceedings were initiated - whether for concealment of particulars of income or for furnishing inaccurate particulars. That omission constitutes a jurisdictional defect. The Tribunal applied the binding reasoning of the jurisdictional High Court and of the Supreme Court in SSA's Emerald Meadows and related authorities, which hold that a notice not specifying the nature of default under section 271(1)(c) is bad in law. The departmental contention that the assessee understood the purport of the notice and thereby suffered no prejudice was rejected as insufficient to cure the jurisdictional deficiency in the notice. Consequently, the penalty could not be maintained and had to be deleted. [Paras 5, 6, 7, 8, 9]

Penalty under section 271(1)(c) set aside as invalid for AY 2010-11 on account of jurisdictional defect in the penalty notice.

Final Conclusion: Following binding High Court and Supreme Court authorities, the Tribunal held the penalty invalid because the penalty notice did not specify which limb of section 271(1)(c) was invoked; revenue's appeal is dismissed and the penalty deleted for AY 2010-11.

Right of a financial creditor to initiate Corporate Insolvency Resolution Process - Inter-Creditor Agreement - Independent enforcement rights under a Common Rupee Loan Agreement - Overriding effect of the Insolvency and Bankruptcy Code - Section 7 of the Insolvency and Bankruptcy Code, 2016

Right of a financial creditor to initiate Corporate Insolvency Resolution Process - Inter-Creditor Agreement - Independent enforcement rights under a Common Rupee Loan Agreement - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether an Inter-Creditor Agreement or related consortium financing documents can bar an individual financial creditor from invoking the corporate insolvency resolution process under Section 7 of the I&B Code in respect of its own financial debt and default. - HELD THAT: - The Tribunal found that existence of financial debt and default was admitted and not disputed. The financing documents (CLA, STA, ICA) do not extinguish or curtail the statutory right of an individual financial creditor to enforce its claim or to initiate proceedings under Section 7. Clause 2.2 of the Common Rupee Loan Agreement expressly provides that the rights of each lender are separate and independent and that any lender may separately enforce its rights; clause 1.3 of the Inter-Creditor Agreement confirms that nothing therein is intended to alter, modify or impair the rights of the lenders against the borrower under the finance documents. The internal arrangements among creditors are matters inter se the creditors and do not confer on the corporate debtor a locus to object to enforcement by an individual lender. A contractual procedure in an inter-creditor arrangement cannot override the statutory mechanism and rights created under the I&B Code, particularly where the debt and default are otherwise payable and not barred by law. [Paras 9, 10, 11, 12]

The Inter-Creditor Agreement and related financing documents do not bar the Bank of India from individually invoking Section 7; the appeal is without merit and dismissed.

Final Conclusion: The appeal is dismissed. The adjudicating authority was correct in admitting the Section 7 petition by the Bank of India; consortium arrangements do not oust an individual financial creditor's statutory right to initiate insolvency proceedings.

Approval of resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code - Compliance with Section 30(2) requirements including payment to operational creditors and CIRP costs - Effect of committee of creditors' commercial decision and judicial non-interference - Implementation provisions and effective implementation plan - Performance security under Regulation 39(4) (read with Regulation 36B(4A))

Approval of resolution plan under Section 31(1) of the Insolvency and Bankruptcy Code - Effect of committee of creditors' commercial decision and judicial non-interference - The Adjudicating Authority was satisfied to approve the resolution plan submitted by M/s New Ram Traders as approved by the CoC. - HELD THAT: - The Tribunal examined whether the conditions of Section 31(1) are met: that the plan was approved by the CoC under Section 30(4), meets the requirements of Section 30(2), and contains provisions for effective implementation. The plan had been approved by 100% of the voting share of financial creditors. The Resolution Professional certified compliance in Form H and confirmed the resolution applicant's eligibility under Section 29A. The Tribunal declined to re-examine the commercial wisdom of the CoC, relying on the principle that commercial decisions of financial creditors are not ordinarily subject to judicial reappraisal and noting relevant authority to that effect. In these circumstances the Tribunal found no ground to interfere with the CoC's commercial decision and approved the plan, making it binding on the corporate debtor and stakeholders. [Paras 36, 41, 42, 43, 45]

Resolution plan of M/s New Ram Traders approved under Section 31(1); CoC's unanimous approval and RP's certifications sustain the approval and the Tribunal will not re-open the commercial decision of the CoC.

Compliance with Section 30(2) requirements including payment to operational creditors and CIRP costs - Implementation provisions and effective implementation plan - The resolution plan satisfies the requirements of Section 30(2) (including provision for insolvency resolution process costs, treatment of operational creditors, management and supervision) and contains provisions for effective implementation as required by the proviso to Section 31(1). - HELD THAT: - The Tribunal reviewed the particulars certified in Form H and the resolution plan. For Section 30(2)(a) the plan allocates CIRP costs (Rs. 1050 lakhs estimated to 31-3-2019) and undertakes to meet any incremental CIRP cost prior to payments to other creditors. For Section 30(2)(b) (as amended), the Tribunal noted the liquidation value and that financial creditors' claims exceed that value so that liquidation distribution to operational creditors would be nil; nevertheless the RA proposed and the CoC approved a payment to operational creditors of 2.5% of admitted claims (to be paid in priority to financial creditors). The plan provides for payment to workmen and employees and a settlement to corporate guarantee holders as stated. For Sections 30(2)(c) and (d) the plan sets out management arrangements (IMC, CEO, reconstituted board) and supervision and an implementation schedule (payments in 30/90 days, escrow arrangements, stated sources of funds including equity infusion, loans and term loan). On these bases the Tribunal was satisfied that the plan meets Section 30(2) and has provisions for effective implementation. [Paras 33, 34, 38, 39, 40]

The plan meets the substantive requirements of Section 30(2) and contains adequate provisions for its implementation; accordingly the proviso to Section 31(1) is satisfied.

Performance security under Regulation 39(4) (read with Regulation 36B(4A)) - The requirements of Regulation 39(4) (read with Regulation 36B(4A)) regarding submission and validity of performance security were complied with by the resolution applicant. - HELD THAT: - The Tribunal noted that the process document required a Proposal Performance Guarantee, which was furnished by the resolution applicant. The performance security (bank guarantee) submitted was on record and its validity and claim expiry dates (as per amendment) were noted. On this basis the Tribunal held that the performance security requirement under the Regulations was satisfied. [Paras 44]

Performance guarantee requirements under the Regulations are complied with.

Final Conclusion: The Tribunal approved the resolution plan submitted by M/s New Ram Traders as meeting the statutory requirements of the Code and Regulations, directed cessation of the moratorium, and ordered the RP to forward the CIRP records to the Board; CA No. 893/2019 disposed of.

Financial creditor - financial debt - commercial effect of borrowing - residuary clause - time value of money - admission of claim by Resolution Professional - deduction of liquidated damages

Financial creditor - financial debt - commercial effect of borrowing - time value of money - Whether M/s. Versatile Commotrade Private Limited is to be classified as a financial creditor in respect of advances paid under the sale agreements with the Corporate Debtor. - HELD THAT: - The Tribunal applied the test in Section 5(8) read with Section 3(33) of the Code and relied on the analysis in Pioneer Land & Infrastructure Ltd. v. U.O.I., holding that clause (f) is a residuary, "catch-all" provision which covers transactions that have the commercial effect of borrowing. A "debt" must be a liability or obligation in respect of a claim and, to qualify as "financial debt", the amount should be disbursed against consideration for the time value of money or arise under a transaction having the commercial effect of borrowing. The sale agreements involved advance payments made for a particular purpose (purchase of land) where the corporate debtor was to return the equivalent by executing the sale deed and profited from the arrangement in its real estate business; on these facts the advance had the commercial effect of borrowing and therefore constituted financial debt. The Tribunal rejected the submission that Pioneer applies only to real estate allottees, observing that the residuary clause applies where the commercial effect of borrowing is present regardless of the precise label of the transaction. [Paras 14, 21, 22]

M/s. Versatile Commotrade Private Limited is a financial creditor; the RP correctly admitted its claim as a financial debt.

Admission of claim by Resolution Professional - financial creditor - Whether the Resolution Professional acted improperly or biasedly in admitting the claim of M/s. Versatile Commotrade Private Limited and reconstituting the CoC. - HELD THAT: - After examining the nature of the transaction and applying the legal test under Section 5(8)(f) as explained in Pioneer, the Tribunal concluded that the RP's classification of the claim as financial debt was legally tenable. Since the admitted claim was rightly characterized as financial, the consequent reconstitution of the CoC and the reduction of the applicant's voting share followed from that admission and did not reflect procedural impropriety or bias warranting interference. [Paras 6, 14, 20, 22]

No fault in the RP's admission of the claim; the admission and consequent reconstitution of the CoC were upheld.

Deduction of liquidated damages - Whether liquidated damages, if proved, may be deducted from the claim. - HELD THAT: - The Tribunal noted that although the admitted advance constitutes financial debt, any liquidated damages claim is subject to proof and may be deducted if established. The observation treats deduction of liquidated damages as a permissible adjustment to the admitted claim upon appropriate proof. [Paras 20]

Liquidated damages, if proven, can be deducted from the claim.

Final Conclusion: The application is disposed of by upholding the Resolution Professional's admission of M/s. Versatile Commotrade Private Limited as a financial creditor under Section 5(8)(f) (transaction having the commercial effect of borrowing); the RP's actions in admitting the claim and reconstituting the CoC are sustained, and any proven liquidated damages may be deducted.

Maintainability of a section 7 insolvency petition where a winding up petition has been admitted - application of Forech India (Supreme Court) decision to parallel winding up and insolvency proceedings - independence of a financial creditor's insolvency proceeding vis-a -vis pending winding up proceeding - liberty to seek transfer of winding up proceeding to NCLT under the proviso to section 434 of the Companies Act

Maintainability of a section 7 insolvency petition where a winding up petition has been admitted - application of Forech India (Supreme Court) decision to parallel winding up and insolvency proceedings - Section 7 petition filed by the financial creditor against the corporate debtor was not maintainable in the facts of this case. - HELD THAT: - The Tribunal examined the admitted winding up proceedings before the High Court of Bombay and the effect of the Supreme Court's decision in Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. Noting Forech India, the Tribunal observed that the Supreme Court addressed the interaction between pending winding up proceedings and insolvency applications and granted liberty to parties to seek transfer of winding up proceedings to the NCLT under the proviso to section 434. Applying that decision to the present facts, the Tribunal concluded that the challenge by the shareholder (Appellant) to the section 7 petition filed by the financial creditor was covered by the ratio in Forech India and, on that basis, held the impugned section 7 application to be not maintainable. The Tribunal recorded that the appellant may approach the High Court of Bombay in accordance with the liberty recognised by the Supreme Court to seek appropriate relief, including under the proviso to section 434, rather than proceeding under section 7 before the Adjudicating Authority. [Paras 5]

Appeal dismissed; the section 7 application filed by the Respondent was held not maintainable and the Appellant was granted liberty to approach the High Court of Bombay consistent with the Supreme Court's observations in Forech India.

Final Conclusion: The Appellate Tribunal dismissed the appeal, holding the financial creditor's section 7 petition not maintainable in the circumstances and noting that the appellant may pursue remedies before the High Court of Bombay in line with the Supreme Court's directions in Forech India; no costs were awarded.

Retention of seized records and digital devices for investigation - search and seizure under PMLA - reason to believe requirement - interaction of Section 17 and Section 8(3) - retention during investigation - jurisdiction of Appellate Tribunal under Section 26 to grant stay/status quo - right to privacy and protection against self incrimination (Articles 20(3) and 21) before statutory tribunal

Jurisdiction of Appellate Tribunal under Section 26 to grant stay/status quo - retention of seized records and digital devices for investigation - Appellate Tribunal's power to grant stay or status quo orders vis a vis an Adjudicating Authority order under PMLA and whether such orders may be used to stall investigation - HELD THAT: - The Tribunal has jurisdiction to entertain appeals under Section 26 and, on receipt of an appeal, may pass such orders as it thinks fit. However, that jurisdiction is subject to the limits of the statute and does not extend to issuing an order whose practical consequence is to stall or obstruct an ongoing investigation. The impugned order under Section 8(3) confirmed retention of seized records for investigation under Section 17(4); a stay seeking to prevent investigatory use of those records (limited here to cell phones) would effectively impede the investigation and is not within the Tribunal's jurisdiction to grant in the circumstances of these cases. The Tribunal therefore declined to grant the status quo/stay sought by the appellants as it would prejudice the investigation and exceed the remedial scope conferred by the PMLA. [Paras 21, 23, 24, 25]

Prayer for stay/status quo that would stall investigation is rejected; Tribunal will not grant an order which impedes investigation.

Retention of seized records and digital devices for investigation - interaction of Section 17 and Section 8(3) - retention during investigation - Whether retention of seized digital devices (including cell phones) by the Enforcement Directorate under Section 17(4) / Section 8(3) is permissible for investigation - HELD THAT: - Sections 17(1)(i)-(iv) and Section 8(3) are to be read together: the statute contemplates retention of records seized under Section 17 for the purposes of investigation and Section 8(3) contemplates confirmation of such retention where property is found to be involved in money laundering. The Tribunal noted that retention is linked to the investigatory process and may continue for the period permitted by the statute (referenced in the order as not exceeding 365 days). Consequently, retention of records/digital devices for investigation falls within the statutory scheme and the Adjudicating Authority's order allowing retention was an exercise of powers envisaged by the PMLA. [Paras 13, 22]

Retention of seized records and digital devices for the purposes of investigation is permissible under the PMLA scheme and the impugned order permitting such retention stands.

Search and seizure under PMLA - reason to believe requirement - jurisdiction of Appellate Tribunal under Section 26 to grant stay/status quo - Whether appellants' contention that the Adjudicating Authority failed to examine the 'reason to believe' or other statutory contingencies under Section 17(1) justifies staying the retention order - HELD THAT: - The record shows the Adjudicating Authority noted that opportunities were given to parties and adjudicated on the material before it; the appellants' present challenge - that the statutory preconditions under Section 17(1) were not considered - was not established as a ground warranting a stay of retention. The Tribunal observed that objections relating to the adjudicatory process and the sufficiency of reasons are matters for the appeal on merits, but they do not justify a status quo order that would impede investigation. Moreover, the appellants had not raised before the Adjudicating Authority the specific plea that devices should not be unlocked/retained. [Paras 14, 15, 16, 21]

Absence of a demonstrated failure to meet the statutory 'reason to believe' threshold in the stay proceedings did not justify interim relief; stay denied.

Right to privacy and protection against self incrimination (Articles 20(3) and 21) before statutory tribunal - Whether constitutional challenges based on right to privacy and protection against self incrimination (Articles 20(3) and 21) could be adjudicated by the Appellate Tribunal in the stay proceedings to prevent unlocking of cell phones - HELD THAT: - The Tribunal held that constitutional issues of this nature - including allegations that unlocking cell phones would infringe Articles 20(3) and 21 or the right to privacy - are not amenable to determination in these interlocutory proceedings before the Tribunal, which has limited statutory jurisdiction under Section 26. The contention that summons to unlock phones would violate fundamental rights was not argued before the Adjudicating Authority and, in any event, falls outside the Tribunal's remit in deciding a stay application that would obstruct investigation. Such constitutional challenges are to be raised in appropriate forums (High Court or Supreme Court) where the Tribunal lacks competence to decide them in the present context. [Paras 4, 19, 23]

Claims of infringement of Articles 20(3) and 21 / right to privacy cannot be decided by the Tribunal in these stay proceedings; such relief is not available here and the stay application is rejected on this ground as well.

Final Conclusion: Applications for stay/status quo limited to cell phones and other digital devices are rejected. The Appellate Tribunal affirmed that, while it has power under Section 26 to pass orders on appeals from the Adjudicating Authority, it will not grant interim relief that has the practical effect of stalling an ongoing investigation; retention of seized records/digital devices for investigatory purposes falls within the statutory scheme under Sections 17 and 8(3), and constitutional objections regarding unlocking devices were held unsuitable for determination in these interlocutory proceedings before the Tribunal.

Principles of natural justice - Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - rejection of application under the Scheme - authenticity of correspondence - pre-adjudicatory opportunity to be heard

Principles of natural justice - rejection of application under the Scheme - pre-adjudicatory opportunity to be heard - Petition challenging rejection of applicant's Scheme application on grounds of alleged violation of natural justice taken on board for further adjudication; interim directions issued for respondents to file a counter-affidavit. - HELD THAT: - Petitioner contested the respondents' communication rejecting its application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 on the ground that the rejection breached principles of natural justice and contravened the Scheme. Respondents, in turn, relied on a communication said to be dated 26th September, 2019; petitioner disputed the date and contended the document was a statement dated 26th March, 2019. In view of this factual controversy and the petitioner's allegations that the rejection was without adherence to natural justice, the Court did not decide the merits on the record then before it but directed the respondents to file a counter-affidavit addressing the rejection and the correspondence relied upon. Time-limits were fixed for filing the counter-affidavit and any rejoinder to enable substantive consideration of the legal and factual contentions, including whether the procedure under the Scheme and the requirements of natural justice were complied with.

Notice issued; respondents directed to file a counter-affidavit within four weeks and petitioner permitted to file rejoinder within a further four weeks; matter listed for further hearing.

Authenticity of correspondence - Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - Dispute as to the authenticity and date of the correspondence relied upon by respondents identified for determination and left to be addressed in the counter-affidavit process. - HELD THAT: - The Court recorded that respondents produced a letter said to be dated 26th September, 2019 while the petitioner maintained that the document was a statement made on 26th March, 2019. Given this contradiction as to the provenance and date of the communication-an evidentiary fact relevant to the legality of the rejection under the Scheme-the Court required respondents to file a counter-affidavit clarifying and proving the correspondence relied upon so that the question of admissibility, authenticity and its bearing on the Scheme's rejection could be adjudicated.

Issue of authenticity of the correspondence reserved for adjudication after filing of the counter-affidavit.

Final Conclusion: Writ petition admitted for consideration; interim relief limited to issuance of notice and directions for respondents to file a counter-affidavit (with opportunity for rejoinder) to enable determination of whether the rejection under the Scheme complied with principles of natural justice and whether the correspondence relied upon is authentic; matter posted for further hearing.

Sabka Vishwas (Legacy Dispute Resolution) Scheme - quantification of tax dues under SVLDRS-3 - deduction of pre-deposit from amount payable - hearing before the Designated Committee - remand for fresh adjudication and computation

Sabka Vishwas (Legacy Dispute Resolution) Scheme - quantification of tax dues under SVLDRS-3 - deduction of pre-deposit from amount payable - Validity of Form SVLDRS-3 dated 18.11.2019 quantifying the estimated amount payable under the Scheme - HELD THAT: - The Court found it inappropriate to confirm the quantification made in Form SVLDRS-3 because the Designated Committee had not considered the petitioner's interpretation of the statutory provisions regarding deduction of pre-deposits and had not afforded a hearing before confirming the balance demand. The petitioner's contention - that amounts already paid as pre-deposit should be deducted in computing the final amount payable under the Scheme pursuant to the definition of "amount payable" and the relief provisions - was not addressed by the Committee. In view of these lacunae in consideration and procedure, the Court concluded that the impugned SVLDRS-3 could not be sustained. [Paras 9]

SVLDRS-3 Form dated 18.11.2019 quantifying the estimated amount payable is quashed and set aside.

Hearing before the Designated Committee - remand for fresh adjudication and computation - refund of excess deposit - Procedure to be followed on remand and interim deposit direction - HELD THAT: - The Court directed that the petitioner deposit the assessed sum indicated by the Committee within the limited time granted; upon such deposit the Designated Committee must hear the petitioner on estimation and computation of liability, determine the excise duty payable and pass a fresh order in Form SVLDRS-3 in accordance with law. If the Committee determines a liability less than the deposited amount, the differential shall be refunded within two weeks of the fresh order. The order thus mandates a fresh adjudicatory hearing and recomputation by the Committee, providing for restitution if the deposit exceeds the ultimately determined liability. [Paras 11]

Petitioner to deposit Rs. 55,56,045.00 within one week; on deposit, the Designated Committee to re-hear, determine liability and pass a fresh SVLDRS-3, with refund of any excess within two weeks of the fresh order.

Final Conclusion: The petition is disposed by quashing the impugned SVLDRS-3; the petitioner is directed to make the specified deposit within one week, after which the Designated Committee shall re-hear and recompute the liability and pass a fresh order, with refund of any excess deposit if applicable.

Eligibility of Cenvat credit for outward freight charges on export goods - refund under Rule 5 of the Cenvat Credit Rules, 2004 - finality of adjudication on refund vis-a -vis subsequent demand - prohibition on revenue adopting inconsistent standards in refund and credit proceedings - limitation/extended period and absence of suppression where ER2 returns were filed

Eligibility of Cenvat credit for outward freight charges on export goods - refund under Rule 5 of the Cenvat Credit Rules, 2004 - finality of adjudication on refund vis-a -vis subsequent demand - prohibition on revenue adopting inconsistent standards in refund and credit proceedings - Admissibility of Cenvat credit (input service) in respect of outward freight charges for export goods and effect of prior sanction of refund on subsequent show-cause/demand. - HELD THAT: - The refund sanctioning authority had examined and sanctioned refund claims under Rule 5 of the Cenvat Credit Rules, 2004 in respect of input services including outward freight charges, by specific Orders-in-Original which were not appealed against and thus attained finality. The sanction of refund necessarily involved determination of the admissibility of the Cenvat credit for the input service for which refund was claimed. Once the refund adjudication has become final, the revenue cannot adopt a different yardstick later and issue a show-cause or demand on the same input service. In those circumstances a subsequent demand on the identical credit already examined and allowed in final refund orders is not proper or legal, and the impugned demand is unsustainable. [Paras 4]

Refund adjudication having finally examined and allowed the input-service credit, subsequent demand on the same credit is not sustainable and must be set aside.

Limitation/extended period and absence of suppression for ER2 returns - Whether the demand raised under the extended period is barred by limitation in view of absence of suppression and filing of ER2 returns. - HELD THAT: - The appellant had been filing ER2 refund claims periodically from 2013 onwards and had regularly filed ER2 returns; there was no concealment or suppression of facts. Given the disclosure through ER2 filings and periodic refund claims, the demand under the extended period lacks the foundation of suppression required to sustain extended-period proceedings. Consequently, the demand is hit by limitation. [Paras 5]

Demand raised under extended period is time-barred in absence of suppression of facts where ER2 returns and periodic refund claims were filed.

Final Conclusion: The impugned demand is unsustainable; the appeal is allowed, the order set aside and consequential reliefs granted.

Eligibility of CENVAT credit on inputs and capital goods used for installation of machinery - immovability of goods when permanently embedded and its effect on excisability - phased credit under Rule 4 of CENVAT Credit Rules, 2004

Eligibility of CENVAT credit on inputs and capital goods used for installation of machinery - immovability of goods when permanently embedded and its effect on excisability - CENVAT credit admissibility on various steel and cement items used for fabrication, foundations and installation of machinery. - HELD THAT: - The Tribunal examined whether items such as M.S. angles, channels, plates and similar steel and cement items used in installation of machinery qualify for CENVAT credit as inputs or as capital goods. The Revenue's contention that such items become immovable when embedded and thereby cease to be excisable goods was considered in the light of subsequent High Court decisions which reversed the earlier Larger Bench view in Vandana Global Limited. Identical conclusions reached by higher courts (including High Courts of Chhattisgarh, Andhra Pradesh and Madras) establish that steel and cement used for installation/erection of capital goods do not lose their character for the purpose of CENVAT credit. In view of these authoritative decisions and the fact that the issue is no longer res integra, the Tribunal held that the appellant was entitled to CENVAT credit on the disputed items and the demand based on their alleged immovability must be set aside. [Paras 9]

Demand for CENVAT credit on the disputed steel and cement items set aside; appellant entitled to credit.

Phased credit under Rule 4 of CENVAT Credit Rules, 2004 - Validity of Revenue's contention that only 50% of CENVAT credit could be taken in the relevant year and remaining 50% in the following year. - HELD THAT: - The Tribunal noted the Revenue's objection that the appellant took 100% of capital goods credit in the same year whereas, as per the contention, only 50% could be availed in the first year and 50% in the next. The Tribunal observed that several years have elapsed since the periods in question and that it is not the law that an assessee is entitled to only 50% of the credit as a strict temporal bar; accordingly the point has become infructuous. Given the passage of time and the absence of a continuing legal impediment, the Tribunal declined to sustain the demand on this ground. [Paras 10]

Objection based on alleged requirement to stagger credit (50% each year) held infructuous and not sustained.

Final Conclusion: The appeal is allowed; the impugned order is set aside - the demand and penalty based on disallowance of CENVAT credit on the disputed steel and cement items are quashed, and the objection regarding phased availment of credit is held infructuous, with consequential reliefs, if any.

Entitlement to concessional C forms for inter-state purchase of High Speed Diesel - binding effect of a High Court decision in rem until stayed or reversed - duty of assessing authorities to apply settled judicial precedent to similarly situated taxpayers - mandate to implement court directions including restoration/unblocking of access to statutory forms

Entitlement to concessional C forms for inter-state purchase of High Speed Diesel - binding effect of a High Court decision in rem until stayed or reversed - Benefit of concessional C forms is available to dealers purchasing High Speed Diesel by way of inter-state sales and the decision in M/s Ramco Cements Ltd. is binding in rem until stayed or reversed. - HELD THAT: - The Court accepted that the identical issue had been decided in favour of assessees by a Coordinate Single Judge in M/s Ramco Cements Ltd. and that several other High Courts have taken the same view, one of which was affirmed by the Supreme Court. The State had indicated an intention to challenge that decision but no stay or reversal had been obtained. Accordingly, until the Ramco Cements decision is stayed or reversed, its rationale governs all pending assessments and similarly situated dealers are entitled to the concessional benefit by obtaining C forms for inter-state purchases of High Speed Diesel. The court declined the narrower approach suggested by assessing authorities that relief be confined only to parties to that litigation, holding that the precedent operates in rem and applies to all dealers seeking the benefit in accordance with law. [Paras 2, 3, 4]

The petitioners are entitled to the benefit of concessional C forms for inter-state purchases of High Speed Diesel in terms of the Ramco Cements decision, which remains binding until stayed or reversed.

Duty of assessing authorities to apply settled judicial precedent to similarly situated taxpayers - mandate to implement court directions including restoration/unblocking of access to statutory forms - Assessing authorities in Tamil Nadu must forthwith apply the Ramco Cements rationale to all pending assessments and take necessary administrative steps to enable dealers to obtain C forms. - HELD THAT: - The Court found the departmental practice of restricting the benefit to parties to the earlier writs unacceptable. Given the binding nature of the precedent, the authorities are directed to implement the court's reasoning across the board. The petitioner specifically stated inability to download C forms because the website access was blocked; the Court directed the department to take necessary action forthwith to enable the claim, thereby requiring administrative measures (including unblocking or restoring access) so that eligible dealers can obtain the forms and claim the concessional rate. [Paras 6]

The Assessing Authorities are directed to apply the Ramco Cements rationale to all pending assessments and to take immediate administrative steps necessary to enable dealers to obtain C forms.

Final Conclusion: Writ petitions allowed; the High Court reiterated that the decision in M/s Ramco Cements Ltd. governs entitlement to concessional C forms for inter-state purchases of High Speed Diesel until stayed or reversed, and directed the State authorities to implement that precedent forthwith and to restore administrative access enabling dealers to obtain the forms.