TaxTMI Updates e-Newsletter
Jul 13,2021

Provisional attachment to protect revenue - Alternative remedy under Rule 159(5) of the Central GST Rules - Maintainability of writ without exhausting statutory remedy - Release of attached property by order in FORM GST DRC-23

Alternative remedy under Rule 159(5) of the Central GST Rules - Maintainability of writ without exhausting statutory remedy - Whether the writ petition is maintainable without the petitioner first invoking the objection remedy under Rule 159(5) of the Central GST Rules. - HELD THAT: - The Court held that sub rule (5) of Rule 159 provides a specific remedy for a person whose property has been provisionally attached to file an objection within seven days and seek release by an order in FORM GST DRC 23 after opportunity of hearing. That remedy is not ineffective; if sufficient case is made out, substantial relief can be granted by the authority. Given that the petitioner had not availed itself of this prescribed remedy, interference by the writ court at this stage was declined. The Court granted the petitioner one week to approach the Additional Director General under Rule 159(5) and directed that, if an objection is filed, a reasoned order be passed after hearing the petitioner. The availability and adequacy of the statutory remedy therefore render the writ premature. [Paras 2, 3, 6, 7]

Writ petition declined at this stage for non exhaustion of the remedy under Rule 159(5); petitioner granted one week to file objection and the authority directed to pass a reasoned order after hearing.

Provisional attachment to protect revenue - Release of attached property by order in FORM GST DRC-23 - Whether the merits of the claim that the attached bank account (including contentions such as non attachability of a cash credit account) should lead to release of the attachment. - HELD THAT: - The Court did not decide the merits of the contention that the impugned attachment was without jurisdiction or that a cash credit/current account is not attachable. It observed that such contentions require factual examination and determination by the authority when the objection under Rule 159(5) is filed. Accordingly, the merits were left open for consideration by the Additional Director General in the course of deciding any objection, and thereafter by the appropriate forum in accordance with law if assailed. [Paras 5, 6, 8]

Merits of the attachment including the contention regarding non attachability of the account are left open for factual determination by the authority on objection; all contentions on merits kept open.

Final Conclusion: The writ petition is declined for non exhaustion of the statutory objection remedy under Rule 159(5); the petitioner is given one week to file the objection before the Additional Director General, who must pass a reasoned order after hearing, and the merits of the attachment are left open for determination thereafter.

Violation of principles of natural justice - opportunity of personal hearing - non-speaking order - rejection of refund claim - refund of input tax - de novo adjudication - show cause notice

Violation of principles of natural justice - opportunity of personal hearing - rejection of refund claim - Rejection of the refund claim was invalid for failure to afford a personal hearing, thereby violating principles of natural justice. - HELD THAT: - The petitioner had responded to the show cause notice and explained that two export invoices for March 2020 were inadvertently omitted, a point which, according to the petitioner, could have been explained if a personal hearing had been afforded prior to adjudication. The Court found that the impugned order was passed without providing an opportunity of personal hearing and that, as a consequence, the principles of natural justice were violated. In view of this procedural defect the order of rejection could not stand and was set aside to enable the respondent to hear the petitioner and reconsider the refund claim afresh. [Paras 4, 5]

Order of rejection set aside for violation of natural justice; petitioner to be afforded personal hearing and matter reconsidered.

Non-speaking order - refund of input tax - de novo adjudication - The impugned order was non speaking and thus insufficient to sustain the rejection of the refund claim, requiring de novo adjudication. - HELD THAT: - The Court observed that the impugned order contained a column for reasons which was left blank and no reasons were given for rejecting the refund claim. A non speaking order that fails to record reasons for adverse action is legally untenable. Consequently, the Court directed that after hearing the petitioner in person the respondent shall adjudicate the refund request de novo within four weeks from the date of personal hearing, thereby ensuring that reasons are recorded and the claim is decided in accordance with law. [Paras 4, 5]

Impugned non speaking order set aside; respondent directed to adjudicate the refund claim de novo after personal hearing within four weeks.

Final Conclusion: The order dated 22.07.2020 rejecting the refund claim is set aside for lack of personal hearing and for being non speaking. The petitioner is directed to appear before the respondent on 19 July 2021 at 10:30 a.m. and, after hearing the petitioner, the respondent shall decide the refund application de novo within four weeks. Writ petition disposed; no costs.

Proviso to Sub-section (2) of Section 130 of the Central Goods and Services Tax Act, 2017 - confiscation of conveyance - option to pay fine in lieu of confiscation - right to raise objection against tax calculation - release of seized vehicle on payment

Option to pay fine in lieu of confiscation - release of seized vehicle on payment - proviso to Sub-section (2) of Section 130 of the Central Goods and Services Tax Act, 2017 - Petitioner permitted to exercise statutory option to pay fine in lieu of confiscation and obtain release of the conveyance. - HELD THAT: - The Court, without adjudicating the merits of the confiscation, directed that the petitioner is at liberty to pay the amount claimed in the impugned order as the fine in lieu of confiscation under the proviso to Sub-section (2) of Section 130 of the CGST Act before the respondent authority within one week. Upon such payment the respondent authority shall release the conveyance forthwith. The direction is procedural and confined to enabling the exercise of the statutory alternative to confiscation; the Court expressly refrained from deciding the legality or merits of confiscation of the conveyance or goods. [Paras 4, 5]

Payment of the stated fine within the stipulated time will entitle the petitioner to immediate release of the conveyance; order of confiscation set aside to that extent.

Right to raise objection against tax calculation - consideration by respondent authority - Petitioner entitled to raise objection regarding alleged arithmetic error in tax calculation and respondent authority directed to consider it. - HELD THAT: - The Court permitted the petitioner to approach the concerned respondent authority to raise contentions about an arithmetic error in the calculation of the tax amount stated in the impugned order. The respondent authority is required to consider such objection in accordance with law. If dissatisfied with the authority's decision, the petitioner may pursue remedies available under the CGST Act. This direction leaves the substantive adjudication on the calculation to the statutory authority and appellate remedies. [Paras 2, 4]

Objection to calculation may be raised before respondent No.1, which shall consider it according to law; appellate remedies remain available to the petitioner.

Confiscation of conveyance - court not deciding merits - Court clarified it did not decide the merits or legality of the confiscation of goods. - HELD THAT: - The order setting aside the confiscation of the conveyance is confined to permitting the statutory option and consequent release; the Court expressly recorded that it has not gone into the merits nor into the legality and validity of the confiscation of the goods. This clarification limits the scope of the Court's intervention to procedural relief without adjudicating substantive rights concerning confiscation. [Paras 5]

No adjudication on the legality or merits of the confiscation of goods; relief confined to release on payment as directed.

Final Conclusion: The petition is disposed of by permitting the petitioner to pay the stipulated fine under the proviso to Sub-section (2) of Section 130 of the CGST Act within one week for immediate release of the conveyance; the impugned confiscation order is set aside to that extent, subject to the petitioner's right to raise and have considered any objection as to tax calculation and without the Court deciding the merits or legality of the confiscation.

Summary order. Defect No.3 ignored; respondent (CGST) granted four weeks to file counter-affidavit; matter listed after five weeks to enable petitioner to file reply, if so advised.

Principles of natural justice - requirement of issuing draft assessment order and opportunity to respond under Section 144-B(1)(xvi) - faceless assessment procedure and duty to provide personal hearing when variation is prejudicial - remand for fresh assessment with opportunity of personal hearing

Principles of natural justice - requirement of issuing draft assessment order and opportunity to respond under Section 144-B(1)(xvi) - Whether the assessment order dated 14th June, 2021 passed by the NFAC without issuing a draft assessment order and providing an opportunity to the assessee violated the principles of natural justice and Section 144-B procedure when the variation was prejudicial. - HELD THAT: - The Court found that the assessed income and demand for AY 2018-2019, as determined by the NFAC, were disproportionately high when compared with earlier assessment years, and that those figures were not disputed. Such a substantial and prejudicial variation attracted the procedural safeguard contained in Section 144-B(1)(xvi), requiring preparation of a draft assessment order and communication of the same to the assessee to enable a response before passing a final order. Failure to follow that procedure amounted to breach of the principles of natural justice in the faceless assessment process. The court relied on comparable High Court decisions addressing similar NFAC orders and concluded that, on the material on record, the statutory draft-notice procedure should have been invoked prior to making adverse variations. [Paras 7, 8]

Impugned assessment order dated 14th June, 2021 and consequential demand notices/orders set aside; liberty granted to the Department to pass a fresh assessment in accordance with law after giving the assessee a personal hearing.

Final Conclusion: The writ petition is allowed: the NFAC assessment for AY 2018-2019 is set aside for failure to comply with the draft-assessment and hearing requirements when the variation was prejudicial; the Department may re-assess after giving the assessee a personal hearing and following the prescribed procedure.

Assessment under Section 143(3) - Unexplained income under Section 68 - Assessment vitiated by denial of reasonable opportunity - Effect of dysfunctional e filing portal on opportunity to file response - Remand to continue assessment proceedings from earlier stage - Power to call for further information and requirement to produce FIRC - Application of Section 115BBE

Assessment vitiated by denial of reasonable opportunity - Effect of dysfunctional e filing portal on opportunity to file response - Impugned assessment order set aside on ground that the taxpayer was denied reasonable opportunity to respond due to an extremely short timeframe in the show cause notice and a dysfunctional e filing portal. - HELD THAT: - The Court found that the show cause notice dated 11.06.2021 allowed an extremely narrow window to respond (until 11:00 A.M. on 14.06.2021) and that the e filing portal being non functional impeded the petitioner from filing its response. Those circumstances rendered the assessment order unsustainable. For these reasons the assessment order dated 15.06.2021 framed under Section 143(3) was set aside. The Court emphasised that the petitioner had earlier filed a loss return for AY 2017 2018 and that, if any addition were ultimately sustained, appropriate adjustments (including against declared losses) would be open on a fresh consideration; however, the central ground for setting aside was denial of effective opportunity to be heard. [Paras 8]

Impugned assessment order dated 15.06.2021 set aside for want of reasonable opportunity arising from the short timeframe and dysfunctional e filing portal.

Remand to continue assessment proceedings from earlier stage - Power to call for further information and requirement to produce FIRC - Assessment under Section 143(3) - Unexplained income under Section 68 - Application of Section 115BBE - Assessment proceedings remitted to the Assessing Officer to continue from the stage at which they were positioned when the show cause notice dated 11.06.2021 was issued, with liberty to call for further information including the FIRC in respect of GMO. - HELD THAT: - The Court permitted the AO to proceed afresh from the point the proceedings stood on issuance of the show cause notice, allowing the revenue to call for any further information it considers necessary before framing a fresh assessment. The petitioner was directed to furnish the FIRC concerning GMO, which was noted as not being on record, and to otherwise render assistance to the revenue. The Court made clear that its setting aside of the earlier order does not preclude the AO from making findings on merits in the fresh assessment nor affect the revenue's lawful exercise of powers (including reliance on Section 68 or levy under Section 115BBE) following compliance with procedural fairness. [Paras 8, 9]

Assessment remitted to the AO to continue from the earlier stage; AO may call for further information and the petitioner shall furnish the FIRC concerning GMO and cooperate in the fresh proceedings.

Final Conclusion: The assessment order for AY 2017 2018 dated 15.06.2021 is set aside for want of a reasonable opportunity caused by an unreasonably short response period and a dysfunctional e filing portal; the matter is remitted to the Assessing Officer to proceed from the stage when the show cause notice of 11.06.2021 was issued, with liberty to call for further information (including the FIRC for GMO) and to pass a fresh assessment in accordance with law.

Reasonable cause for failure to remit TDS under Section 278AA of the Income Tax Act, 1961 - compounding of offence under Section 279(2) of the Income Tax Act, 1961 - quashing of criminal prosecution for failure to deduct or remit TDS - remand for fresh consideration of documentary proof and merits

Reasonable cause for failure to remit TDS under Section 278AA of the Income Tax Act, 1961 - Whether the petitioners have shown reasonable cause for delayed payment of TDS so as to avoid punishment under Section 276B read with Section 278AA. - HELD THAT: - The petitioners pleaded that due to financial constraints the company paid salaries belatedly in September 2012 and, only then, deducted and remitted the TDS with interest. The Court observed that this explanation, if substantiated by documents, amounts to a pleaded reasonable cause. The Court did not adjudicate the sufficiency of the materials on merit; instead it held that the competent authority must examine the documents and determine whether reasonable cause exists under Section 278AA. Accordingly the factual and evidentiary determination as to reasonable cause was not finally decided by the Court but remitted for fresh consideration by the authority. [Paras 7]

Remitted to the competent authority to examine the petitioners' documentary evidence and determine on merits whether reasonable cause exists under Section 278AA.

Compounding of offence under Section 279(2) of the Income Tax Act, 1961 - quashing of criminal prosecution for failure to deduct or remit TDS - Whether the criminal proceedings may be quashed at this stage or the authority entrusted with compounding under Section 279(2) should first consider the asserted reasonable cause and compounding. - HELD THAT: - The Court noted that the power to compound under Section 279(2) can be exercised before or after institution of proceedings and that the petitioners are entitled to place their materials before the authority for consideration of reasonable cause and compounding. The Court declined to quash the criminal complaint outright, directing that the first respondent consider afresh the petitioners' case under Sections 278AA and 279(2) and pass appropriate orders on merits after allowing production of documents. [Paras 5, 7, 8]

Proceedings not quashed; matter remitted to the first respondent to consider compounding under Section 279(2) and the question of reasonable cause under Section 278AA and to pass appropriate orders on merits.

Final Conclusion: The petition is disposed of by remitting the matter to the competent authority to examine the petitioners' documentary proof and to decide, on merits, whether reasonable cause exists under Section 278AA and whether the offence may be compounded under Section 279(2); no quashing of the criminal proceedings is granted by the Court.

Rejection of books of account and estimation of income by applying gross profit rate - no separate addition for items of trading account once income is estimated by gross profit rate - treatment of unexplained investment where source of payment is not in dispute - remand for verification of source of bank deposits in reassessment proceedings

Rejection of books of account and estimation of income by applying gross profit rate - no separate addition for items of trading account once income is estimated by gross profit rate - treatment of unexplained investment where source of payment is not in dispute - Deletion of addition made as unexplained investment of purchases of Rs. 1,51,386/- in assessment under section 143(3) for AY 2012-13. - HELD THAT: - The Assessing Officer rejected the assessee's books of account under the provision invoked and estimated income by applying the gross profit rate declared in the preceding year. That estimation covered trading items, including purchases. The Assessing Officer nonetheless made a separate addition treating certain purchases as unexplained investment because the transaction was not recorded in the books. The Tribunal found that the source of payment for the purchases was not in dispute (payments were made through the bank account of a person who operated the shop in the assessee's absence) and that once income was estimated by applying the gross profit rate after rejection of books, no further addition can be made in respect of expenditure or purchases which form part of the trading account. Applying this determinative principle, the addition on account of unexplained purchases was held not sustainable and was deleted. [Paras 5, 6]

Addition of Rs. 1,51,386/- on account of unexplained investment in purchases deleted; appeal allowed.

Remand for verification of source of bank deposits in reassessment proceedings - treatment of unexplained deposits in bank account in reassessment under section 147 - Whether the addition of Rs. 11,05,000/- made in reassessment proceedings as unexplained deposits in the Bank of Baroda account is sustainable. - HELD THAT: - In reassessment proceedings the Assessing Officer added the deposits as unexplained on the ground that the assessee had not explained their source. Before the CIT(A) the assessee furnished a detailed explanation that the amounts represented business receipts (sale proceeds) and that parts were used for payment of license/excise fees by demand drafts drawn from the said account; bank statements, draft copies and particulars of credits were placed on record. The Tribunal observed that these explanations and documents, including entries purportedly in the books (which had been rejected in original assessment), warranted verification rather than summary rejection. In the interest of justice the Tribunal directed that the issue be set aside to the Assessing Officer for proper verification of the source of deposits and supporting evidence, with an opportunity of hearing to the assessee, and remanded the matter for fresh adjudication. [Paras 10, 11]

Issue set aside to the Assessing Officer for verification and fresh adjudication after affording opportunity to the assessee; appeal allowed for statistical purposes.

Final Conclusion: First appeal allowed with deletion of the unexplained purchase addition; second appeal remanded to the Assessing Officer for verification of the source of bank deposits and fresh adjudication after affording the assessee an opportunity of hearing.

Rectification under section 154 - interest under section 220(2) - interest under sections 234A, 234B and 234C - tax determined by assessment order - binding precedent of the jurisdictional High Court - service of notice

Rectification under section 154 - interest under section 220(2) - tax determined by assessment order - binding precedent of the jurisdictional High Court - Validity of order passed under section 154 to compute and levy interest when the original assessment under section 143(3) recorded tax as nil. - HELD THAT: - The Assessing Officer, after passing an assessment order under section 143(3) determining tax at nil, issued a notice and passed an order under section 154/143(3) to compute interest under section 220(2). The Commissioner (Appeals) deleted the interest by applying the jurisdictional High Court decision in Bharat Commerce and Industries which held that power to levy interest under section 220(2) arises only where an amount specified in a demand has not been paid in accordance with section 220(1), and that a tax liability determined by a rectification order under section 154 does not relate back to the original assessment so as to create such a demand. Because the rectification could not supply a pre-existing demand on which section 220(2) interest could validly be levied, the notice and order under section 154 were held to be without jurisdiction. The Tribunal, noting that the CIT(A) followed this binding precedent and that there was no contrary decision of a higher forum, found no error in quashing the interest demand and upheld the deletion.

Order under section 154/143(3) computing interest under section 220(2) is quashed; deletion of interest by the CIT(A) upheld.

Interest under sections 234A, 234B and 234C - rectification under section 154 - tax determined by assessment order - Whether interest under sections 234A, 234B and 234C could be levied by giving effect to the rectification. - HELD THAT: - The Assessing Officer sought to charge interest under sections 234A, 234B and 234C by treating tax credits and payments differently in the rectification. Since the rectification which purported to alter the tax computation could not validly create a demand retroactively against the original assessment that recorded tax as nil, the basis for calculating and levying such interest was absent. The CIT(A) therefore deleted the levy of interest under these sections by following the jurisdictional High Court precedent, and the Tribunal found no reason to interfere with that conclusion.

Levies of interest under sections 234A, 234B and 234C consequent to the rectification are not sustained; deletion upheld.

Service of notice - Effect of non-representation by the assessee and non-service of notice on adjudication of the appeal. - HELD THAT: - The assessee did not appear and notices sent to the address in the record were not served; the Tribunal observed that non-service was attributable to the assessee's conduct and proceeded to decide the appeal on the material available on record. This procedural circumstance did not affect the legal conclusion reached on the merits regarding the invalidity of the rectification-based interest demand.

Proceedings continued in the absence of the assessee; decision on merits rendered based on available record.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of interest levied pursuant to the rectification order, holding that the rectification could not validly create the demand necessary to sustain interest under section 220(2) (and consequentially under sections 234A, 234B and 234C), in view of the binding jurisdictional High Court precedent.

Penalty under section 271(1)(b) - reasonable cause for failure to comply with notice - non-service of notice due to change of address - assessment under section 147 read with section 144 - relief under section 273B

Penalty under section 271(1)(b) - reasonable cause for failure to comply with notice - non-service of notice due to change of address - relief under section 273B - assessment under section 147 read with section 144 - Whether the penalty imposed under section 271(1)(b) is sustainable where notices issued by the Assessing Officer remained unserved because the assessee had changed residence and a reasonable cause for non-compliance was shown, and whether the case falls within section 273B. - HELD THAT: - The Tribunal found on the record that the Assessing Officer reopened the assessment by issuing notice under section 148 and framed assessment under section 147 read with section 144 because the assessee did not participate in proceedings. The notices under section 142(1) and show-cause notice under section 271(1)(b) remained unserved as the assessee had sold the residence to which notices were sent and had shifted to Noida; this non-availability at the given address is not disputed. The Assessing Officer did not make any effort to ascertain the assessee's new address despite notices remaining unserved. The assessee also settled the quantum dispute under the Vivad se Vishwas Scheme and offered an explanation constituting a reasonable cause for failure to comply with the notices. In these circumstances the Tribunal held that the facts bring the matter within the scope of section 273B and that levy of penalty under section 271(1)(b) was not sustainable. The Tribunal accordingly quashed the penalty. [Paras 2, 4]

Penalty under section 271(1)(b) quashed as unsustainable where notices remained unserved due to change of address, reasonable cause was shown and relief under section 273B applies; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, quashed the penalty imposed under section 271(1)(b) for AY 2009-10 on the ground of non-service of notices due to change of residence and accepted that reasonable cause and relief under section 273B render the penalty unsustainable.

Deemed dividend under Section 2(22)(e) - substantial part of business - ordinary course of business - inter-corporate deposit - deployment of funds test - gratuitous loan - interest charged as indicium of commercial transaction

Deemed dividend under Section 2(22)(e) - substantial part of business - ordinary course of business - deployment of funds test - interest charged as indicium of commercial transaction - inter-corporate deposit - Whether unsecured loans received by the assessee from a group concern attract the deeming fiction in Section 2(22)(e) or are excluded as loans advanced in the ordinary course of business by a lender substantially engaged in money lending or as inter corporate deposits. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that Section 2(22)(e) did not apply to the loans in question. On the facts, the lender charged interest on the advances and treated interest as business income, indicating that the advances were not gratuitous but commercial transactions; this aspect alone justified excluding the transactions from the deeming provision by analogy to the reasoning in Pradip Kumar Malhotra. The Tribunal also accepted the appellate finding-based on authorities examining the object clause, deployment of funds and income/asset ratios-that money lending constituted a substantial part of the lender's business for the relevant previous year. The Tribunal treated the deployment of funds approach and relevant judicial tests (including consideration of memorandum of association and percentage of funds deployed in loans) as supporting the view that lending was more than incidental. Having so held, the loans were found to have been made in the ordinary course of the lender's business and, alternatively, characterised as inter corporate commercial advances; accordingly the loans did not fall within the deeming fiction. The Tribunal therefore found no error in the CIT(A)'s reliance on interest being charged, past practice of lending before acquisition of substantial shareholding, and the deployment of funds analysis to conclude that the exceptions to Section 2(22)(e) applied.

Addition under Section 2(22)(e) was rightly deleted; the loans are not taxable as deemed dividend.

Final Conclusion: Revenue's appeals dismissed; the Tribunal found no error in the CIT(A)'s conclusion that the unsecured loans from the group concern did not attract the deeming provision of Section 2(22)(e) on the facts of AY 2011-12 to AY 2013-14.

Admission of additional evidence under Rule 46A - best judgment assessment under section 144 read with section 147 - opportunity to be heard and principles of natural justice - reopening of assessment by notice under section 148 - preference for substantial justice over technicalities

Admission of additional evidence under Rule 46A - opportunity to be heard and principles of natural justice - Whether the Commissioner (Appeals) ought to have admitted the additional evidence produced by the assessee during appellate proceedings after an ex parte assessment under section 144. - HELD THAT: - The Tribunal found that because the assessment was completed under section 144, the assessee had no occasion to place relevant evidence before the Assessing Officer and was thereby prevented from adducing evidence at the assessment stage. Rule 46A authorises admission of additional evidence where the AO made the order without giving sufficient opportunity to adduce evidence. The CIT(A) rejected the additional evidence solely on the ground that no formal application under Rule 46 was filed and did not consider the nature or relevance of the evidence. Applying the principle that substantial justice must prevail over technicalities, the Tribunal held that in these circumstances the appellate authority ought to have admitted and considered the evidence. [Paras 8, 9, 10]

The CIT(A)'s refusal to admit the additional evidence was not sustainable and was set aside insofar as it declined to admit the evidence.

Reopening of assessment by notice under section 148 - best judgment assessment under section 144 read with section 147 - Whether grounds 1 and 2 of the appeal (challenging best judgment assessment and reopening) are pressed by the assessee. - HELD THAT: - Counsel for the assessee expressly stated that grounds 1 and 2 were not pressed before the Tribunal. The Tribunal recorded that submission and dismissed those grounds as not pressed. [Paras 5]

Grounds 1 and 2 are dismissed as not pressed.

Admission of additional evidence under Rule 46A - preference for substantial justice over technicalities - Remand to the CIT(A) for fresh adjudication after admitting the additional evidence and affording a reasonable opportunity of hearing. - HELD THAT: - Having concluded that the additional evidence should have been admitted and that the CIT(A) did not examine its nature or relevance, the Tribunal considered it necessary in the interest of justice to set aside the impugned order and remit the matter. The Tribunal relied on the established principle favouring substantial justice to direct a fresh decision by the appellate authority after admitting the evidence and hearing the assessee. The Tribunal also cautioned the assessee against seeking frivolous adjournments on remand. [Paras 11]

Impugned order set aside and the appeal remitted to the CIT(A) for fresh decision after admitting the additional evidence and affording a reasonable opportunity of being heard.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(A)'s order insofar as it refused to admit additional evidence, dismissed grounds 1 and 2 as not pressed, and remitted the matter to the CIT(A) to decide afresh after admitting the evidence and affording the assessee a reasonable opportunity of hearing.

Treatment of partner's capital substantiated by third party bank evidence - veracity of credit entries and unexplained credits - enquiries under section 133(6) of the Act - reconciliation of sundry creditors - remand for verification of documentary reconciliation - addition as unproven capital or sundry creditors

Treatment of partner's capital substantiated by third party bank evidence - treatment of partner's capital when partners have not filed returns - addition as unproven capital - Deletion of addition of Rs. 1,67,24,489/- treated as partner's unproved capital was upheld. - HELD THAT: - The assessee's audited accounts showed the closing capital balance and the partners explained that new capital was introduced from the sister concern with documentary support including bank statements and cheque evidences. The Assessing Officer, while accepting that the sister concern had filed return, rejected the claim solely because the partners had not filed their individual returns. The Commissioner (Appeals) on examination of the remand report found that the credits and other entries in the partners' capital accounts were explained and supported; consequently no addition could be sustained merely because the partners had not filed returns. The Tribunal declined to interfere with the CIT(A)'s conclusion, noting that the material on record (bank confirmations/cheques and audited accounts) explained the capital introductions and that the Revenue could not sustain the addition on the ground that partners had not filed returns. [Paras 9]

Order of CIT(A) deleting the addition of Rs. 1,67,24,489/- was upheld and Revenue's ground dismissed.

Veracity of credit entries and unexplained credits - enquiries under section 133(6) of the Act - reconciliation of sundry creditors - remand for verification of documentary reconciliation - Claim of sundry creditors required fresh verification and was remitted to the Assessing Officer for examination of the reconciliation chart and supporting documents. - HELD THAT: - The Assessing Officer had disallowed sundry creditors after obtaining replies under enquiries (including returns of notices under section 133(6)), noting discrepancies and non responses from several creditors. The CIT(A) examined the remand report and the assessee's counter reconciliation and accepted that some creditors' balances matched or related transactions were supported, but upheld additions in respect of certain creditors where discrepancies remained and the assessee had not produced supporting bills/vouchers during remand. The Tribunal observed that the assessee produced a creditors' reconciliation chart during hearing which was not examined by the Assessing Officer at assessment; accordingly the Tribunal remitted the matter to the Assessing Officer with directions to verify the reconciliation and allow claims if supported in accordance with law. [Paras 14]

Issue remitted to Assessing Officer for verification of the creditors' reconciliation; additional ground of Revenue allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the deletion of the addition treating partner's capital as unproven is upheld; the dispute over sundry creditors is remitted to the Assessing Officer for verification of the reconciliation and supporting documents, and decided accordingly.

Taxability of interest on non-performing assets (NPA)/sticky loans - receipt basis versus accrual basis of taxation - Real Income Theory - income recognition under RBI prudential norms and overriding effect of Section 45Q of the RBI Act - application of Accounting Standard (AS)-9 on revenue recognition - mercantile system of accounting - distinction between income recognition and computation of taxable income - interest suspense account treatment

Taxability of interest on non-performing assets (NPA)/sticky loans - receipt basis versus accrual basis of taxation - income recognition under RBI prudential norms and overriding effect of Section 45Q of the RBI Act - mercantile system of accounting - application of Accounting Standard (AS)-9 on revenue recognition - Real Income Theory - Interest on NPA/sticky loans is to be taxed on receipt basis and not on accrual basis despite the assessee following the mercantile system of accounting. - HELD THAT: - The Tribunal upheld the deletion of the addition of interest on NPAs by the CIT(A) because the issue was covered by earlier decisions of the ITAT, Chandigarh Bench, notably the Ludhiana and Kangra Cooperative Bank rulings. Those precedents applied the Real Income Theory, AS-9, established accounting practice of placing doubtful interest in an interest suspense account, and the Reserve Bank of India's prudential norms on income recognition. The reasoning accepted that income recognition (whether interest on NPAs accrues) is governed by RBI directions which, by virtue of Section 45Q of the RBI Act, have overriding effect insofar as income recognition is concerned; therefore Section 145 of the Income-tax Act (method of accounting) does not require recognition of such interest on accrual where RBI norms mandate recognition on actual receipt. The Tribunal noted binding precedents of the Supreme Court and various High Courts that interest on sticky loans which is kept in suspense and not brought to profit and loss is not real income until realised, and that the CBDT/RBI circulars and RBI Directions provide the objective test for recognition. The Revenue was unable to distinguish these authorities or produce contrary High Court or Supreme Court rulings applicable to cooperative banks; consequently the addition computed on accrual basis was held not sustainable. [Paras 7, 8]

Order of the CIT(A) deleting the addition of interest on NPAs was upheld and the Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion by the CIT(A) of the addition of interest on NPA/sticky loans for AY 2016-17, holding that such interest is taxable on receipt basis in view of RBI prudential norms, applicable precedents and the Real Income Theory.

Service of notice under section 143(2) mandatory - notice served on person available at assessee's address not a substitute for service on assessee or his authorised agent - reliance on precedent to quash assessment where s.143(2) notice not served on assessee - rectification under section 254(2) limited to mistakes apparent on the record - Tribunal has no power to review or recall its order under the guise of rectification

Service of notice under section 143(2) mandatory - notice served on person available at assessee's address not a substitute for service on assessee or his authorised agent - reliance on precedent to quash assessment where s.143(2) notice not served on assessee - Tribunal correctly held that the notice under section 143(2) was not served on the assessee or his agent and quashed the assessment proceedings. - HELD THAT: - The Tribunal summoned the Assessing Officer's record and examined the notice dated 28/8/2015. The notice was shown to have been served on one Abdul Wahid and not on the assessee or his authorised agent. The Department did not produce evidence to establish service on the assessee or his agent. Applying the jurisdictional precedent cited by the Tribunal, the Tribunal held that service of the prescribed notice within the statutory period is mandatory and in the absence of valid service the assessment proceedings become void. On that basis the Tribunal allowed the appeal and quashed the assessment order, leaving nothing further to adjudicate. [Paras 6, 8]

The Tribunal's allowance of the assessee's appeal and quashing of the assessment proceedings was sustained.

Rectification under section 254(2) limited to mistakes apparent on the record - Tribunal has no power to review or recall its order under the guise of rectification - The Department's Miscellaneous Application seeking recall/review of the Tribunal's order could not be entertained under section 254(2) as it amounted to a review rather than correction of a mistake apparent on the record. - HELD THAT: - The Court examined the Department's grounds in the application and found that they raised disputed factual and legal contentions which were not advanced at the earlier hearing and do not constitute an obvious, patent or clerical error. Reliance was placed on settled authorities that section 254(2) empowers the Tribunal only to amend its order to rectify mistakes apparent on the face of the record (clerical, arithmetical or patent errors) and does not confer a power to review or reappraise the merits of its decision. Accordingly, the attempt to re-open or recall the final order was impermissible and not a proper subject of rectification under section 254(2). [Paras 7, 8, 18]

The Miscellaneous Application was dismissed for being an impermissible attempt to review the Tribunal's order rather than to rectify a mistake apparent on the record.

Final Conclusion: The Miscellaneous Application filed by the Department was dismissed; the Tribunal's order of 28/2/2019 quashing the assessment for non-service of the s.143(2) notice on the assessee or his agent is maintained, and the Department cannot seek recall of that order under section 254(2) which is confined to rectifying mistakes apparent on the record.

Provisional release pending adjudication - Provisional release under section 110A of the Customs Act, 1962 - Discretionary power of the adjudicating authority to grant provisional release - Effect of pendency of show-cause proceedings under section 124 on provisional release - Interpretation of the phrase "pending the order of the adjudicating authority" - Consequences of non-issuance of notice under section 124 within six months

Provisional release pending adjudication - Provisional release under section 110A of the Customs Act, 1962 - Discretionary power of the adjudicating authority to grant provisional release - Effect of pendency of show-cause proceedings under section 124 on provisional release - During the pendency of proceedings initiated by issuance of a show-cause notice under clause (a) of section 124 of the Customs Act, 1962, the adjudicating authority may, in its discretion, consider and grant provisional release of goods under section 110A. - HELD THAT: - A plain reading of sections 110, 110(2) and the proviso, and the text of section 110A (introduced by amendment), shows that section 110A confers power on the adjudicating authority to release seized goods "pending the order of the adjudicating authority". The legislative language does not expressly or by necessary implication prohibit consideration of applications for provisional release once proceedings under section 124 have been initiated. The scheme governing seizure and return where no notice under section 124 is issued within six months is distinct and does not nullify the discretionary remedial provision in section 110A. Consequently, notwithstanding the pendency of adjudication under section 124, the adjudicating authority retains the discretion to entertain and decide applications for provisional release on such bond, security and conditions as it deems fit. The Court therefore granted liberty to the adjudicating authority to proceed with the pending section 124 proceedings and directed that the existing representations for provisional release by the petitioners be considered in accordance with law and decided as early as possible, and in any event within three weeks of receipt of this order. [Paras 8, 9, 10, 11, 12]

The adjudicating authority may, notwithstanding pendency of section 124 proceedings, in its discretion consider and, if appropriate, allow provisional release under section 110A; the authority is directed to decide the petitioners' representations within three weeks.

Final Conclusion: Writ petitions disposed by directing the adjudicating authority to continue section 124 proceedings and to consider the petitions for provisional release under section 110A in accordance with law, with a decision on the representations to be given within three weeks; no order as to costs and all merits reserved.

Detention certificate as an eligibility certificate - Claim for refund/release against Customs Cargo Service Provider - Adjudication of contractual disputes between service provider and importer - Limitations of writ jurisdiction under Article 226 in disputes involving private parties - Obligations of Customs Cargo Service Provider under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - Undertaking by Service Provider under Regulation 5(5)

Detention certificate as an eligibility certificate - Obligations of Customs Cargo Service Provider under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - Detention certificate issued under Regulation 6(1)(l) does not itself confer a direct right to claim refund or compel release of goods from a private Customs Cargo Service Provider without further adjudication. - HELD THAT: - The Court held that a Detention Certificate issued by customs pursuant to Regulation 6(1)(l) certifies eligibility to claim waiver/refund of rent or demurrage but does not automatically create an enforceable right against a private service provider. Regulation 6(1)(l) reiterates that, subject to other law, the service provider shall not charge rent or demurrage on goods detained or seized; nevertheless, the certificate is evidentiary of eligibility and enables an importer to seek refund but does not substitute for factual and contractual adjudication. Where disputes arise from the contractual terms or claims by the service provider (for example, on deposits, freight, transportation or other charges), those disputes must be resolved by the appropriate adjudicatory forum before any refund or directive for release can be enforced. The Court emphasized that verification of records, scrutiny of evidence and determination of liabilities are necessary and cannot be undertaken in a writ proceeding under Article 226 merely on the basis of the certificate. [Paras 15, 19, 21, 23, 25]

Detention certificate is an eligibility certificate and does not entitle the holder to direct refund or release from the service provider without adjudication of disputes.

Adjudication of contractual disputes between service provider and importer - Limitations of writ jurisdiction under Article 226 in disputes involving private parties - Relief in the form of directing a private service provider to refund amounts or release goods cannot be granted in writ proceedings where there are disputed contractual or factual issues between the service provider and the importer; such disputes require adjudication by the competent forum. - HELD THAT: - The Court explained that although the detention certificate binds the service provider as to eligibility under the Regulations, the contractual relationship and any claims under that contract remain matters between private parties. High Court cannot, in exercise of writ jurisdiction, resolve such mixed questions of fact and law that require detailed evidence and scrutiny. The proper course is for the aggrieved party to invoke the relevant adjudicatory mechanism against the service provider to determine entitlement to refund or release. The Court noted that extraordinary jurisdiction under Article 226 is not to be used as a substitute for the adjudicatory processes required to resolve private contractual disputes, and directions against private respondents for refund or release are not ordinarily grantable absent facts warranting exercise of such power. [Paras 17, 18, 22, 24, 26]

Petitioner must pursue appropriate adjudication against the service provider; writ relief compelling private party to refund or release goods is not granted in the presence of disputed contractual/factual issues.

Final Conclusion: Detention Certificate under Regulation 6(1)(l) is an eligibility certificate enabling claim for waiver/refund of demurrage/detention but does not itself create an enforceable right to immediate refund or release against a private Customs Cargo Service Provider; disputes as to contractual liabilities must be adjudicated before the competent forum and, accordingly, the writ petition seeking direct refund/release is dismissed with liberty to pursue appropriate remedies.

Detention certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - eligibility certificate for claiming refund - obligation of Customs Cargo Service Provider not to charge demurrage on confiscated/detained goods - binding effect of subordinate legislation over conflicting private contracts - necessity of adjudication of contractual disputes before directing refund or release - possession of confiscated goods by Customs and its effect on levy of charges

Detention certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 - eligibility certificate for claiming refund - necessity of adjudication of contractual disputes before directing refund or release - The legal effect of a Detention certificate issued under Regulation 6(1)(l) and whether it entitles the holder to a writ directing a Customs Cargo Service Provider to release goods or refund demurrage/detention without adjudication of disputes between the Service Provider and the importer. - HELD THAT: - The Court construed the Detention certificate as an affirmation of the statutory position under Regulation 6(1)(l) but held that it is essentially an eligibility certificate enabling the importer or exporter to claim refund. Eligibility to claim refund is distinct from an enforceable right to obtain a refund or compel release of goods from a private Service Provider. Where disputes arise between the importer/exporter and the Customs Cargo Service Provider concerning contractual terms, amounts deposited, or other claims, those disputes require adjudication before the Service Provider can be directed to refund or release goods. The High Court noted that factual enquiry, scrutiny of records and resolution of contractual liabilities cannot be undertaken in writ proceedings and that the Detention certificate alone cannot bypass the adjudicatory process. The Court therefore refused to grant a writ directing release or refund solely on the basis of the certificate when contested contractual issues remain.

Detention certificate is an eligibility certificate; it does not by itself confer a right to a writ ordering a private Customs Cargo Service Provider to release goods or refund demurrage/detention charges where adjudication of contractual disputes between the parties is necessary.

Obligation of Customs Cargo Service Provider not to charge demurrage on confiscated/detained goods - possession of confiscated goods by Customs and its effect on levy of charges - binding effect of subordinate legislation over conflicting private contracts - Whether a Customs Cargo Service Provider may levy demurrage or container detention charges when goods are confiscated and in the possession of Customs, and the legal force of the statutory/regulatory prohibition on charging in such circumstances. - HELD THAT: - The Court accepted the proposition that when goods are confiscated and thereby become the property or are taken into possession by Customs, the Service Provider is not entitled to levy demurrage or detention charges in respect of those confiscated goods; any deposits collected in such circumstances ought to be refunded. The judgment also recognises the regulatory scheme as imposing responsibilities on the Service Provider under Regulation 6(1)(l). However, the Court qualified this rule by observing operational realities where goods remain physically under custody of the Service Provider and where contractual disputes exist; in such situations the Service Provider's grievances must be considered and cannot be summarily resolved in writ proceedings. The Court thus balanced the statutory prohibition on charging with the requirement that disputes as to sums payable or entitlement be adjudicated through appropriate forums.

Service Providers are not entitled to charge demurrage/detention for goods confiscated and in Customs possession, and any improper charges should be refunded; nevertheless, where contractual disputes or custody issues persist, resolution requires adjudication and cannot be effected solely by a writ directing immediate release or refund.

Final Conclusion: The writ petition is dismissed. While a Detention certificate under Regulation 6(1)(l) confirms eligibility to claim waiver or refund and the regulatory scheme prohibits charging demurrage on confiscated/detained goods, the certificate alone does not empower the High Court to direct a private Customs Cargo Service Provider to release goods or refund amounts without prior adjudication of any contractual or factual disputes between the parties.

Finality of criminal conviction and confiscation order - effect of repeal on actions duly done under a repealed statute - application of Section 6 of the General Clauses Act, 1897 - distinguishing precedent based on stay of proceedings - continuing operation of offences under unaffected statutes (Customs Act)

Finality of criminal conviction and confiscation order - The petitioners cannot seek return of the confiscated gold where convictions and confiscation orders became final in 1980. - HELD THAT: - The court noted that the trial court and appellate court judgments convicting petitioner no.1 and upholding confiscation of the gold were rendered in 1980 and were never challenged further. Once those judgments attained finality, the petitioners cannot in these proceedings seek to reopen the correctness of the conviction or reclaim the confiscated gold after more than three decades. The Sessions Judge correctly dismissed the revision since the earlier orders had become final and the petition therefore lacked merit. [Paras 3, 4, 5, 10, 13]

Revision and collateral challenge to obtain return of gold cannot be entertained because conviction and confiscation became final in 1980.

Effect of repeal on actions duly done under a repealed statute - application of Section 6 of the General Clauses Act, 1897 - Repeal of the Gold (Control) Act, 1968 by the Gold (Control) Repeal Act, 1990 does not invalidate or undo earlier final convictions or confiscation orders made while the Act was in force. - HELD THAT: - The court observed there is no saving provision in the Repealing Act that would direct return of gold or reversal of actions taken during the validity of the Gold (Control) Act. Section 6 of the General Clauses Act preserves the previous operation of a repealed enactment and protects anything duly done thereunder unless a contrary intention appears. Accordingly, the mere repeal in 1990 does not entitle persons to reclaim items forfeited under the earlier final orders. [Paras 14, 15, 21, 22, 23]

The repeal of the Gold (Control) Act does not nullify prior final actions taken under it and does not warrant return of the confiscated gold.

Distinguishing precedent based on stay of proceedings - The Supreme Court's decision in Sushila N. Rungta (concerning show cause proceedings stayed in 1973 and later affected by repeal) is distinguishable and not applicable to this case. - HELD THAT: - The court examined Sushila N. Rungta and noted that in that matter proceedings under the impugned show cause notice had been stayed in 1973 and the Supreme Court's order was rendered in that factual matrix. In contrast, the present case involved convictions and confiscation orders which became final in 1980 and were not sub judice at the time of repeal. Thus the ratio of Rungta is inapplicable here and, insofar as it was applied in that case, it was in the exercise of the Supreme Court's extraordinary jurisdiction under Article 142. [Paras 16, 18, 20]

Sushila N. Rungta is distinguishable on facts and does not assist the petitioners.

Continuing operation of offences under unaffected statutes (Customs Act) - Conviction under provisions of the Customs Act, 1962 (Section 135(b)) remains operative and independently justifies denial of relief. - HELD THAT: - The court recorded that petitioner no.1 was also convicted under Section 135(b) of the Customs Act, 1962, a provision which was not repealed. Even if issues arose from the repeal of the Gold (Control) Act, the continued existence and application of the Customs Act conviction precludes granting the relief sought. Consequently, there is no ground to entertain the petition. [Paras 24]

Conviction under the Customs Act remains valid and provides an independent basis to refuse the petitioners' claim for return of the gold.

Final Conclusion: The petition is dismissed. The court upholds the Sessions Judge's dismissal of the revision and declines to order return of the confiscated gold because the convictions and confiscation orders became final in 1980; the 1990 repeal of the Gold (Control) Act does not undo prior final actions and the Customs Act conviction continues to apply.

Detention certificate as eligibility for refund - Responsibility of Customs Cargo Service Provider under Regulation 6(1)(l) - Requirement of adjudication of contractual disputes before grant of refund - Entertainability of writ petitions under Article 226 versus mere maintainability - Limits on issuance of writ relief against private service providers

Detention certificate as eligibility for refund - Responsibility of Customs Cargo Service Provider under Regulation 6(1)(l) - Whether a Detention Certificate issued under Regulation 6(1)(l) confers a self-executing right to refund from the Customs Cargo Service Provider. - HELD THAT: - The Court construed the Detention Certificate as a certification of eligibility to claim refund under Regulation 6(1)(l) rather than as a self-executing entitlement. Regulation 6 imposes responsibilities on Customs Cargo Service Providers, including a prohibition on charging rent or demurrage where goods are seized or detained. The Detention Certificate certifies that the importer or exporter is eligible to seek refund of any excess rent or demurrage paid, but it does not undertake adjudication of disputed facts such as the quantum of refund, applicability of other charges (freight, transportation, etc.), or contractual terms between the parties. Consequently, the certificate enables the holder to make a claim but does not itself determine or compel a refund without further adjudication of the underlying disputes and contractual obligations. [Paras 16, 18, 19, 21, 25]

Detention Certificate is an eligibility certificate permitting a claim for refund under Regulation 6(1)(l) but does not, by itself, confer a right to immediate refund absent adjudication of disputed facts and contractual obligations.

Requirement of adjudication of contractual disputes before grant of refund - Entertainability of writ petitions under Article 226 versus mere maintainability - Limits on issuance of writ relief against private service providers - Whether the High Court should, by writ under Article 226, direct the Customs authority or the private Customs Cargo Service Provider to give refund forthwith without adjudication of disputes between the parties. - HELD THAT: - The Court held that although writ petitions may be maintainable, entertainability for the remedy sought requires establishment of a right to relief. The Detention Certificate does not obviate the need for factual and contractual adjudication; contested matters such as the amount deposited, period of entitlement, and other charges must be resolved by a competent forum through verification of records and evidence. Roving enquiries or detailed factual adjudication cannot be conducted in writ proceedings; the High Court will not direct a private Service Provider to refund amounts in the absence of adjudication of disputes. While extraordinary writ jurisdiction may be used to prevent miscarriage of justice, it cannot be used to bypass required adjudicatory processes or to compel a private party to comply where rights remain unestablished. [Paras 23, 24, 26, 28, 29]

The High Court will not direct immediate refund by the Customs authority or a private Customs Cargo Service Provider on the basis of the Detention Certificate alone; adjudication of disputed contractual and factual issues before the competent forum is necessary, and the writ petitions seeking direct enforcement of refund are not maintainable as framed.

Final Conclusion: The Detention Certificate under Regulation 6(1)(l) is an eligibility certificate to claim refund but does not itself create an enforceable right to immediate refund from the Customs Cargo Service Provider; disputed factual and contractual issues must be adjudicated by the appropriate forum, and accordingly the writ petitions seeking direct directions for refund are dismissed for failure to establish a right to the relief sought.

Natural justice - necessary party - impleadment - persons concerned with the affairs of the company - effective, efficacious adjudication - tribunal's discretion to add or strike out parties - not bound by Civil Procedure Code procedure

Necessary party - impleadment - persons concerned with the affairs of the company - effective, efficacious adjudication - Validity of the National Company Law Tribunal's order impleading the applicant as Additional Respondent No.23 in CP No.21/KOB/2020 - HELD THAT: - The Appellate Tribunal held that the NCLT did not err in impleading the applicant. The applicant was shown to be a shareholder of the company at the date of filing and asserted a direct interest in the subject matter (the Jatayupra Eco Tourism Project); the petition before the Tribunal alleged mismanagement and oppression. Given those allegations, the presence of a person 'concerned with the affairs of the company' was necessary for a complete and effective adjudication. The Court emphasised that impleadment is a procedural relief under the Tribunal's discretion and may be permitted where a party's rights would be affected or where their presence is necessary to avoid plurality of proceedings; it is not indispensable that a specific relief be sought against the added party. The Tribunal is guided by principles of natural justice and is not strictly bound by the Civil Procedure Code; thus its exercise of judicial discretion to add the applicant as a respondent was legally tenable. Consequently, the appellate challenge to the impleadment was rejected and the impugned order upheld. [Paras 13, 16, 18, 21]

The NCLT order impleading the applicant as Additional Respondent No.23 is upheld as legally tenable.

Final Conclusion: The appeal is dismissed; the NCLT order dated 15.03.2021 impleading the applicant as Respondent No.23 in CP No.21/KOB/2020 is affirmed. IA No.238 of 2021 is closed.

Dispensation of shareholders' meeting - non-convening of creditors' meeting where no creditors exist - directions for convening meetings under Sections 230 to 232 of the Companies Act, 2013 - compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - requirement of notice, advertisement and filing of affidavits and Form CAA-4 - appointment of chairperson and scrutinizer for members/creditors' meetings

Dispensation of shareholders' meeting - consent affidavits - Meetings of the Equity Shareholders of the Applicant Resulting/Transferee Company are dispensed with. - HELD THAT: - The Tribunal examined the consent affidavits filed by the two Equity Shareholders of the Applicant Resulting/Transferee Company and, having considered those affidavits and submissions, accepted the shareholders' unanimous consent to approve the proposed Scheme and to waive their right to participate in a formal meeting. On that basis the Tribunal directed that convening of a meeting of the Equity Shareholders of the Resulting/Transferee Company is not required and the meeting is dispensed with. [Paras 12]

Dispensed with the meeting of Equity Shareholders of the Applicant Resulting/Transferee Company.

Non-convening of creditors' meeting where no creditors exist - chartered accountant's certificate on absence of creditors - Meetings of Secured and Unsecured Creditors of the Applicant Resulting/Transferee Company are not required to be held as there are no such creditors. - HELD THAT: - The Applicant Resulting/Transferee Company produced certificates from its Chartered Accountant certifying that there are no Secured or Unsecured Creditors. The Tribunal, on the basis of those certified records and the Applicants' submissions, held that the question of convening meetings of Secured and Unsecured Creditors of the Resulting/Transferee Company does not arise. [Paras 11, 12]

No meetings of Secured or Unsecured Creditors of the Applicant Resulting/Transferee Company are required.

Directions for convening meetings under Sections 230 to 232 of the Companies Act, 2013 - compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - requirement of notice, advertisement and filing of affidavits and Form CAA-4 - appointment of chairperson and scrutinizer - Meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Demerged Company shall be convened and conducted in accordance with the directions and timelines specified by the Tribunal. - HELD THAT: - The Tribunal directed the Applicant Demerged Company to convene separate meetings for its Equity Shareholders, Secured Creditors and Unsecured Creditors on the dates and times stated in the order, and prescribed procedural requirements including publication of an advertisement in specified newspapers, dispatch of notices together with the Scheme and the statement required under Section 102 of the Act, provision for proxies, quorum rules, appointment of chairperson and scrutinizers, and filing of compliance affidavits and Form CAA-4 within the timelines mandated by the Companies (CAA) Rules, 2016. The Tribunal also required sending statutory notices in Form CAA.3 to specified authorities and afforded those authorities 30 days to make representations, in conformity with sub section (5) of Section 230 and Rule 8 of the CAA Rules. These directions implement the statutory scheme for meetings and statutory compliances attendant to approval of compromise/arrangement. [Paras 13]

Directed the Demerged Company to convene and conduct the meetings and to comply with the procedural and filing requirements set out in the order.

Final Conclusion: The joint application under Sections 230 to 232 of the Companies Act, 2013 is allowed: meetings of Equity Shareholders of the Resulting/Transferee Company are dispensed with; no meetings of Secured and Unsecured Creditors of the Resulting/Transferee Company are required; and the Tribunal directed convening and conduct of meetings of the Demerged Company's Equity Shareholders, Secured and Unsecured Creditors with specified procedural safeguards and statutory compliances. CA (CAA) 40 of 2021 is allowed and disposed of.

Compliance with Section 30(2) of the Insolvency and Bankruptcy Code - judicial review of the Committee of Creditors' commercial wisdom - valuation and appointment of registered valuer under Regulation 35 of the CIRP Regulations - fair value and liquidation value as guiding estimates - balancing interests of all stakeholders including operational creditors - delay and abuse of process in challenging approval of a resolution plan

Valuation and appointment of registered valuer under Regulation 35 of the CIRP Regulations - fair value and liquidation value as guiding estimates - Whether the variance between two registered valuers' reports (about 15.62% on land valuation) warranted rejection of the valuation or appointment of a third valuer under Regulation 35. - HELD THAT: - The Tribunal held that valuations by registered valuers are estimates and may differ. The observed variance (15.62%) in land valuation between the two valuers was treated as not substantial or material so as to compel appointment of a third valuer under Regulation 35(1)(a)-(c). The Resolution Professional had additionally computed values in accordance with accepted international valuation standards and on physical verification; the valuers' figures were only aids to the Committee of Creditors. Consequently, non-appointment of a third valuer was not a ground to vitiate the CIRP or to reject the resolution plan. [Paras 48, 49]

Variance in the two valuation reports was not material and did not require appointment of a third valuer; challenge to valuation fails.

Compliance with Section 30(2) of the Insolvency and Bankruptcy Code - judicial review of the Committee of Creditors' commercial wisdom - Whether the Adjudicating Authority erred in approving the resolution plan without ensuring compliance with Section 30(2), and whether the Tribunal/Appellate forum could reappraise CoC's commercial decision on merits. - HELD THAT: - The Tribunal reiterated the limited scope of judicial review under Section 31(1): the Adjudicating Authority must be satisfied that the requirements of Section 30(2) were complied with, but it cannot substitute its commercial judgment for that of the Committee of Creditors. On the material before it, the Registry and the Adjudicating Authority had found that requirements of Section 30(2) were complied with and the CoC had approved the plan (100% voting). The Tribunal relied on Supreme Court precedents emphasising restrained review and held there was no basis to reopen the CoC's commercial decision or to interfere with the approval. [Paras 50, 51, 54]

No interference with the Adjudicating Authority's approval of the resolution plan; limited judicial review satisfied and commercial wisdom of the CoC upheld.

Balancing interests of all stakeholders including operational creditors - compliance with Section 30(2) of the Insolvency and Bankruptcy Code - Whether the distribution under the approved resolution plan discriminated unlawfully between employee doctors and consultant doctors and violated the duty to balance stakeholders' interests under Section 30(2)(e) and Article 14. - HELD THAT: - The Tribunal examined the factual distinction between employee doctors (regular salary, benefits) and consultant doctors (professional/retainer fees, independent practice) and held there was an intelligible differentia and rational relation to the classification adopted by the CoC. The Committee's distribution reflected its commercial decision and, given the limited judicial review, the Tribunal found no arbitrariness or violation of Article 14 or Section 30(2)(e) warranting interference. [Paras 37, 58, 59, 60]

Classification and differential treatment of employee and consultant doctors did not amount to unlawful discrimination; challenge fails.

Delay and abuse of process in challenging approval of a resolution plan - judicial review of the Committee of Creditors' commercial wisdom - Whether the Adjudicating Authority erred in treating the application as belated/delaying tactic and in dismissing it when filed shortly before the scheduled approval of the plan. - HELD THAT: - The Tribunal noted that the applicant had been heard earlier and filed the instant application at the last moment (after curing defects shortly before the scheduled pronouncement). The Tribunal found the IA to be a delaying tactic that would impede the process of approval and observed that statutory remedies under Section 61(3) were available if aggrieved. On these facts and in view of the limited scope of judicial review, the Adjudicating Authority's dismissal of the belated application was held to be justified. [Paras 21, 61]

The application was filed belatedly and amounted to delay/obstruction; the Adjudicating Authority rightly dismissed it.

Final Conclusion: The Appellate Tribunal dismissed the appeal; the Adjudicating Authority's approval of the resolution plan was upheld, the valuation discrepancy did not require a third valuer or vitiate the process, the CoC's commercial decision and classification of creditors were not interfered with, and the belated challenge was correctly rejected.

Operational Debt and Default - requirement to bring existence of dispute to the Operational Creditor before receipt of the demand notice under Section 8(2)(a) of the IBC, 2016 - initiation of Corporate Insolvency Resolution Process - pecuniary jurisdiction where threshold limit increased by notification with retrospective effect on pending applications - withdrawal of application under Regulation 30A / Form FA and consequential stay on formation of Committee of Creditors

Operational Debt and Default - requirement to bring existence of dispute to the Operational Creditor before receipt of the demand notice under Section 8(2)(a) of the IBC, 2016 - Whether the Adjudicating Authority correctly found existence of operational debt and default and rejected the Corporate Debtor's contention of a pre-existing dispute under Section 8(2)(a) of the IBC, 2016. - HELD THAT: - The Adjudicating Authority examined the Memorandum of Understanding dated 22.08.2019, payments made thereunder and the reply dated 18.11.2019 from the Corporate Debtor. It observed that the Corporate Debtor did not inform the Operational Creditor of any dispute prior to receipt of the demand notice (sent 24.10.2019 and received 26.10.2019) and that allegations raised thereafter were attempts to defeat the crystallised claim. On that basis, the Adjudicating Authority concluded that the debt in respect of the remaining sum as per the MoU had been crystallised, the Corporate Debtor had committed default, and no pre-existing dispute as contemplated by Section 8(2)(a) was established. The Tribunal recorded these findings and proceeded on the basis that the Operational Creditor had proved existence of operational debt and default, warranting initiation of the Corporate Insolvency Resolution Process. [Paras 12, 13, 14, 16]

Findings of existence of operational debt and default were upheld by the Adjudicating Authority; no pre-existing dispute under Section 8(2)(a) was found on the materials before it.

Pecuniary jurisdiction where threshold limit increased by notification with retrospective effect on pending applications - Whether the Adjudicating Authority had pecuniary jurisdiction to admit the Section 9 application filed before the notification increasing the threshold limit. - HELD THAT: - The Adjudicating Authority noted that although the threshold for filing claims under Section 9 was increased to Rs. 1 crore by a notification effective from 24.03.2020, the present application had been filed on 10.01.2020. On that factual basis the Adjudicating Authority held it had pecuniary jurisdiction to entertain the petition as the claim had been instituted prior to the notification effecting the increase in the threshold limit. [Paras 17]

The Adjudicating Authority's exercise of pecuniary jurisdiction was held to be proper because the application was filed before the notification raising the threshold limit.

Withdrawal of application under Regulation 30A / Form FA and consequential stay on formation of Committee of Creditors - Relief to be granted in view of the parties' subsequent settlement communications and payment acknowledgements. - HELD THAT: - Having noted that the Corporate Debtor had made substantial payments and that the Operational Creditor had issued an acknowledgment dated 04.06.2021 stating full and final settlement (with the Appellant asserting further payment), the Tribunal, in the interests of substantial justice, directed the Operational Creditor to file an application for withdrawal of the main Section 9 application on the file of the Adjudicating Authority as per the applicable provisions and Form FA. The Tribunal further ordered that, pending disposal of that withdrawal application by the Adjudicating Authority, formation of the Committee of Creditors shall remain stayed. The Tribunal thereby provided a procedural pathway for discontinuance of the insolvency proceedings contingent on the Operational Creditor's filing and the Adjudicating Authority's expeditious disposal of the withdrawal application. [Paras 9]

Operational Creditor directed to file withdrawal application in Form FA; formation of Committee of Creditors stayed until disposal of that application.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's findings of operational debt and default and its pecuniary jurisdiction to admit the Section 9 petition filed before the threshold notification, and in view of subsequent payments and an acknowledgement of settlement directed the Operational Creditor to file a withdrawal application (Form FA/Regulation 30A) while staying formation of the Committee of Creditors pending its disposal; the appeal was disposed of accordingly.

Withdrawal of CIRP under Rule 11 of NCLT Rules, 2016 - Pre-constitution of Committee of Creditors (pre-COC) relief - Section 12A - withdrawal post-constitution of COC - Regulation 30A of CIRP Regulations - procedure for withdrawal - Scope of delegated legislation and consistency with parent statute - Proceedings in rem and interests of all stakeholders - Locus to seek withdrawal and requirement of clean hands - Judicial exercise of inherent jurisdiction in public interest

Withdrawal of CIRP under Rule 11 of NCLT Rules, 2016 - Pre-constitution of Committee of Creditors (pre-COC) relief - Section 12A - withdrawal post-constitution of COC - Regulation 30A of CIRP Regulations - procedure for withdrawal - Whether the application for setting aside the admission into CIRP at the stage prior to constitution of the Committee of Creditors is to be dealt with under Rule 11 of NCLT Rules, 2016 or under Regulation 30A/Section 12A. - HELD THAT: - The Tribunal held that where the Committee of Creditors has not been constituted, Rule 11 of the NCLT Rules, 2016 can be invoked to consider withdrawal of CIRP, following the approach in Swiss Ribbons. Regulation 30A and Form FA were framed to implement Section 12A, but Regulation 30A cannot expand or override the substantive scope of Section 12A where the statutory provision does not cover the pre-COC stage. The Tribunal examined the legislative scheme (Sections 239-241 and 240) and concluded that IBBI's regulations must be consistent with the Code and rules; insofar as Regulation 30A purports to operate where Section 12A does not, it is not binding in the present facts. Consequently, the present withdrawal application falling in the pre-COC stage is maintainable under Rule 11 of the NCLT Rules, 2016 and need not be dismissed for non-compliance with Regulation 30A procedural formalities. [Paras 9, 11, 26]

Application to set aside admission at pre-COC stage is entertainable under Rule 11 of NCLT Rules, 2016; Regulation 30A does not apply mandatorily to pre-COC withdrawals in the present facts.

Proceedings in rem and interests of all stakeholders - Locus to seek withdrawal and requirement of clean hands - Judicial exercise of inherent jurisdiction in public interest - Whether the applicant (a shareholder/promoter) and the intervening financial creditors have locus to be heard and whether withdrawal would prejudice stakeholders. - HELD THAT: - The Tribunal reiterated that CIRP proceedings are in rem and, accordingly, any application for withdrawal must consider interests of all stakeholders. However, where the CoC is not formed, Rule 11 empowers the Adjudicating Authority to hear concerned parties. A person whose interests would be prejudiced has locus; a stranger does not. The applicant (a shareholder/promoter) prima facie had locus. The Intervenors were afforded hearing; the Tribunal found no demonstrable prejudice that would be caused to them by allowing withdrawal because (i) they could pursue remedies under Section 7/9 as applicable, (ii) some had not filed independent proceedings or claims before this Authority opposing withdrawal, and (iii) the admitted operational claim that led to admission had been settled. The Tribunal also noted that stakeholders such as employees, creditors and public interest weigh in favour of preserving a going concern where feasible. [Paras 19, 21]

Intervenors had opportunity to be heard but no bar to the applicant's maintainability; allowing withdrawal would not prejudice the Intervenors' legal rights in the circumstances.

Judicial exercise of inherent jurisdiction in public interest - Locus to seek withdrawal and requirement of clean hands - Whether the facts justify exercise of the Tribunal's inherent jurisdiction to allow withdrawal under Rule 11 in equity. - HELD THAT: - The Tribunal emphasised that inherent jurisdiction is equitable and may be exercised to meet ends of justice, subject to limits of the Code and absence of fraud or mala fides. The Corporate Debtor's conduct was examined; no material showed contravention of the moratorium or commission of fraud warranting refusal. Allegations relied on by intervenors were either sub judice or not shown to deny the Corporate Debtor clean hands. Given the settlement of the operational creditor's claim that occasioned the admission, availability of funds to meet certain undisputed claims, and no demonstrable prejudice to other creditors, the Tribunal concluded the equities favoured permitting withdrawal. [Paras 18, 21]

The circumstances justified exercise of inherent jurisdiction under Rule 11 to allow withdrawal; the applicant met the requisite equitable threshold.

Scope of delegated legislation and consistency with parent statute - Regulation 30A of CIRP Regulations - procedure for withdrawal - Whether Regulation 30A, as amended, could validly operate to displace Rule 11 or Section 12A in the present factual matrix. - HELD THAT: - The Tribunal analysed legislative history and the limits of delegated rule-making under Sections 239-241 and 240 of the Code. It observed that Regulation 30A derives its function from Section 12A and must be consistent with the Code and the Central Government rules. Where Regulation 30A seeks to operate beyond the scope of Section 12A (i.e., to create independent substantive rights/procedures not contemplated by the Code), that part cannot be allowed to bind the Tribunal. While the Tribunal did not purport to pronounce on constitutional invalidity, it held that Regulation 30A could not be mechanically applied to defeat the Tribunal's power under Rule 11 in pre-COC cases. [Paras 25, 26]

Regulation 30A cannot be applied so as to displace Rule 11 in pre-COC situations where it would be inconsistent with the Code; the Tribunal may exercise inherent jurisdiction subject to the Code's scheme.

Proceedings in rem and interests of all stakeholders - Reliefs and directions to be issued if withdrawal is allowed. - HELD THAT: - Applying the foregoing conclusions to the facts - settlement of the operational creditor claim, absence of CoC, no material showing fraud or siphoning, and consideration of stakeholder interests (employees, creditors, shareholders) - the Tribunal directed closure of the CIRP. In doing so it imposed protective measures to safeguard creditor interests and corporate assets: the Corporate Debtor was released from CIRP rigours but directed to pay fees and expenses incurred by the IRP; the IRP was directed to hand over records and possession to the management forthwith; and the suspended management was restrained from acting so as to prejudice the Corporate Debtor or its creditors in view of pending proceedings. [Paras 22]

CIRP closed; Corporate Debtor released from CIRP subject to payment of IRP's fees/expenses, handing over of records/possession by IRP, and restraint on suspended management from prejudicial acts.

Final Conclusion: The application under Rule 11 of the NCLT Rules, 2016 for setting aside the order admitting the Corporate Debtor into CIRP at the pre-COC stage was allowed. The Tribunal held that Rule 11 governs pre-COC withdrawals; Regulation 30A cannot be applied inconsistently with the Code to displace Rule 11. Having found no fraud or prejudice to stakeholders, the CIRP was closed, with directions to pay IRP's costs, to hand over records and possession to management, and to prevent the suspended management from acting to the prejudice of the Corporate Debtor or its creditors.

Quashing of impugned order - remand for fresh consideration - opportunity of personal hearing - natural justice - opportunity to be heard - direction to furnish explanations, documents and evidence

Quashing of impugned order - remand for fresh consideration - opportunity of personal hearing - submission of explanations and documents - Impugned Order-in-Original dated 15.09.2018 quashed and the matter remitted for fresh consideration after affording opportunity to submit explanations, documents and personal hearing. - HELD THAT: - The petitioner had refrained from submitting defence statements and documents, seeking time in view of pending writ petitions challenging the authority to demand service tax. Notwithstanding that request, the respondent passed the final order without granting further time or affording opportunity to present explanations and evidence. The High Court noted that in other writ petitions challenging similar show cause notices the Court directed authorities to permit submission of explanations and to follow the procedures contemplated under the Act before passing final orders. Applying that approach, the Court found it necessary to set aside the impugned order and remit the matter to the respondent for fresh consideration. The Court directed the petitioner to furnish explanations, documents and evidence within eight weeks of service of the order and directed the respondent to provide opportunity, including personal hearing, consider the material and pass final orders expeditiously and in accordance with law.

Impugned Order-in-Original dated 15.09.2018 quashed; matter remitted to respondent for fresh adjudication after giving the petitioner an opportunity to submit explanations, documents and a personal hearing within the time stipulated.

Final Conclusion: Writ petition allowed: the Order-in-Original dated 15.09.2018 is quashed and the matter is remanded for fresh consideration in accordance with the directions to afford the petitioner an opportunity to submit explanations, documents and to be personally heard; petitioner to file materials within eight weeks and respondent to decide expeditiously.

Service - Declared Services - Consideration for taxable service - Liability to pay service tax lies on service provider - Machine Availability clause not amounting to agreeing to tolerate an act - Valuation of taxable services - Distinction between condition of contract and consideration - Compensation / liquidated damages not taxable as consideration for service

Machine Availability clause not amounting to agreeing to tolerate an act - Declared Services - Machine Availability clause in the O&M agreement does not create service tax liability on the appellant by constituting an agreement to tolerate a deficiency of service under the concept of 'Declared Services'. - HELD THAT: - The Tribunal examined whether the machine availability clause amounted to the appellant agreeing to tolerate deficiencies in service so as to attract classification as a 'Declared Service'. The clause imposed on the service provider (SGSL) a warranty of annual average machine availability and provided for compensation to the owner if availability fell below the agreed threshold. The clause therefore places a liability on the service provider to compensate the recipient for shortfall, rather than expressing any tolerance by the recipient of deficient service. The provision is a contractual safeguard/penal clause to secure performance and to protect the commercial interest of the owner, and is not consideration for tolerance. Consequently the clause does not convert the recipient into a service provider or create a declared service liability on the appellant. [Paras 9, 16, 17, 18, 20]

Machine Availability clause does not amount to agreeing to tolerate an act and does not attract 'Declared Services' classification; no service tax liability arises on the appellant on that basis.

Consideration for taxable service - Valuation of taxable services - Distinction between condition of contract and consideration - Amounts received by the appellant as compensation/credit notes from the service provider are not consideration for any service rendered by the appellant and therefore do not form part of the value of taxable service. - HELD THAT: - The Tribunal applied the statutory scheme that taxable value must have nexus with a service provided by one person to another and that 'consideration' must flow to the service provider for the taxable service. The credit notes and compensation represented refunds/compensation by the service provider for excessive charges or for failure to meet contractual availability, and did not represent payment to the appellant for rendering any service. The Tribunal relied on authority and principles distinguishing contractual conditions/penal clauses from contractual consideration: liquidated damages or compensation to insure against default are not consideration for a taxable service. Accordingly, the sums received are not includible in the taxable value of services as they lack the necessary nexus to a service provided by the appellant. [Paras 14, 15, 19, 20, 21]

Compensation/credit notes received by the appellant are not consideration for taxable services and cannot be taxed as part of service value.

Liability to pay service tax lies on service provider - Service - Where a service is provided by one person to another, the statutory liability to discharge service tax rests on the service provider and cannot be fastened upon the service recipient in the facts of this case. - HELD THAT: - The Tribunal reiterated statutory definitions and charging provisions showing that service tax is leviable on services provided by one person to another and that the liability to pay is that of the service provider, even if consideration is recovered from the recipient. The record showed that SGSL was the service provider and had charged service tax on invoices; the appellant was the recipient who received compensation/credit notes from the provider. There was no material to show that the appellant performed any service for SGSL; hence the liability could not be shifted to the appellant. The Tribunal also cited precedent that absent any service rendered by the assessee, service tax cannot be levied. [Paras 10, 11, 15, 18, 21]

Service tax liability in the present contractual arrangement lies on the service provider (SGSL); the appellant cannot be fastened with the tax liability.

Final Conclusion: The impugned findings holding the appellant liable to service tax on amounts received by way of compensation/credit notes under the Machine Availability clause are set aside. The appeal is allowed and no service tax is payable by the appellant in respect of the sums received for 2015-16 under the facts of this case.

Taxability of sale of time for advertisement and supply of content for uploading on internet platforms - CENVAT credit entitlement and admissibility despite non-filing of ST-3 returns - eligibility for Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) after initiation of enquiry/search - application of proviso to Section 73(1) for recovery of service tax collected but not deposited - penalty under Section 78 of the Finance Act and penalty on officers under Section 78A - remand for de novo adjudication to verify CENVAT invoices and recompute tax/penalty

Taxability of sale of time for advertisement and supply of content for uploading on internet platforms - application of proviso to Section 73(1) for recovery of service tax collected but not deposited - Demand for service tax (and consequent recovery under the proviso to Section 73(1)) for services provided during October 2014 to June 2017 upheld - HELD THAT: - The appellants did not dispute taxability or quantification of the liability for the period October 2014 to June 2017. Records and admissions indicated that the company provided sale-of-time advertising services and supplied content for uploading on an internet-based platform, collected service tax from clients, but failed to remit the tax and did not file ST-3 returns. The adjudicating authority invoked the proviso to Section 73(1) for recovery of service tax collected but not deposited. On the material before it the appellate authority found no justification to interfere with the original authority's invocation of the proviso to Section 73(1); the appellants' pleas of financial difficulty and other case-law relied upon did not negate the factual finding that tax was collected and not deposited. [Paras 7, 10]

Demand and recovery under the proviso to Section 73(1) confirmed

CENVAT credit entitlement and admissibility despite non-filing of ST-3 returns - remand for de novo adjudication to verify CENVAT invoices and recompute tax/penalty - Claim for CENVAT credit to be examined afresh and allowed subject to rule-based verification; matter remanded to original authority for de novo adjudication on credit and recomputation of net liability and penalty - HELD THAT: - The appellants contended that CENVAT credit was reflected in audited books and entitlement arises on receipt of inputs/input services and invoices, not by mere filing of ST-3 returns. The appellate authority accepted that Rule 4 and related provisions permit entitlement to credit on receipt of inputs/invoices and that procedural non-filing of ST-3 alone cannot defeat substantive entitlement where documentary proof exists. The Authority held that the original order did not adequately examine documentary proof of credit and directed remand so the original authority can verify invoices, allow CENVAT credit subject to the Cenvat Credit Rules, 2004, work out the net service tax liability for the impugned period and recompute penalties accordingly; appellants to produce invoices and cooperate in remand proceedings. [Paras 9, 12]

Appeal by the appellant company remanded for de novo adjudication on CENVAT credit entitlement, net liability and recomputed penalty

Eligibility for Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) after initiation of enquiry/search - SVLDRS declaration not barred by Section 125(1)(f)(i) where search was conducted after the Scheme's relevant date; Form SVLDRS-3 was issued but Form SVLDRS-4 was not issued due to non-payment within stipulated time - HELD THAT: - Section 121(m) defines 'enquiry or investigation' to include search of premises. The Authority applied the CBIC clarification that eligibility for the Scheme with respect to categories such as enquiry/investigation is to be determined with reference to the relevant date 30.06.2019. As the appellant's premises was searched on 20.12.2019 (after 30.06.2019), the appellant was not barred under Section 125(1)(f)(i) from filing a voluntary declaration. The designated committee had issued Form SVLDRS-3 on 09.01.2020, but no Form SVLDRS-4 was issued because the declared amount was not paid within 30 days; the adjudication was therefore proceeded with by the original authority. The appellate authority found no infirmity in those factual findings. [Paras 8]

Appellant not barred from filing SVLDRS declaration by reason of the search; issuance of SVLDRS-3 noted and lack of SVLDRS-4 caused by non-payment

Penalty under Section 78 of the Finance Act and penalty on officers under Section 78A - Penalties under Section 78 on the company and penalties under Section 78A on the three officers upheld; appeals of the three officers dismissed - HELD THAT: - The three officers (Chairman-cum-Director, Managing Director and Chief Accounts Manager) were found to have been in charge and responsible for the conduct of the company during the impugned period, were aware of service tax liabilities, and were knowingly concerned in the contravention of non-payment of collected service tax. Given the admitted collection of service tax and failure to remit the same, the appellate authority agreed with the original finding of culpability and rejected the appellants' contention that absence of mala fide or financial difficulty absolved them. The three individual appeals contesting penalties under Section 78A were dismissed. [Paras 11, 12]

Penalties on the company and penalties on the three officers sustained; individual appeals of the three officers dismissed

Final Conclusion: The appeal of the company is remanded to the original authority for de novo adjudication limited to verification of CENVAT invoices, allowance of credit under the Cenvat Credit Rules, recomputation of net service tax liability and consequential recomputation of penalties; the demand under the proviso to Section 73(1) is otherwise upheld; the appeals of the three officers are dismissed.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - representation of a company by an authorised employee pursuant to board resolution - competence of complainant and role of de facto natural person for a juristic complainant - territorial jurisdiction where the cheque is dishonoured - prospective effect of Supreme Court pronouncement on territorial jurisdiction (Dashrath Rupsingh Rathod) - insufficiency of court-fees as a taxing statute and duty to afford opportunity to pay deficit

Representation of a company by an authorised employee pursuant to board resolution - competence of complainant and role of de facto natural person for a juristic complainant - maintainability of complaint under Section 138 of the Negotiable Instruments Act - Validity of complaints filed on behalf of the payee company by an employee (Deputy In-charge) authorised by a Board resolution and whether such filing vitiates cognizance under Section 138 proceedings. - HELD THAT: - The court found that the complaints were filed in the name of the payee-company and were presented by Sri Ratnakar Nayak, an employee who swore an affidavit averring that he was authorised by a Board resolution dated 07.07.2012. Applying authoritative precedents, the court held that where the complainant is a juristic person it must associate a natural person as de facto complainant, and that Section 142's eligibility criterion is satisfied if the complaint is in the name of the payee-company. The court emphasised that the magistrate cannot decline to take cognizance solely because the person presenting the complaint is not a director or principal officer, particularly where there is a prima facie Board resolution and the representative is capable of deposing to the facts. If the accused disputes authority, the opportunity to prove or disprove such authority arises at trial rather than at the threshold. The court also treated a minor spelling variation in the company name as immaterial on the record before it. [Paras 10, 15, 17]

Complaints filed by the company through the authorised employee are maintainable; cognizance cannot be quashed for want of filing by a director or principal officer where a Board resolution prima facie authorises the representative.

Insufficiency of court-fees as a taxing statute and duty to afford opportunity to pay deficit - Whether insufficiency of court-fees under the Orissa amendment requires dismissal of the Section 138 complaints at the threshold. - HELD THAT: - The court observed that the Court Fees Act and its State amendment are taxing statutes. Reliance was placed on precedent holding that court-fee provisions serve revenue purposes and should not be used as a technical weapon to defeat causes of action. Consequently, where inadequate court-fees have been paid the proper course is to afford a reasonable opportunity to make good the deficit; dismissal at the threshold is inappropriate. Even at final hearing, the court may direct payment of deficit court-fees as a condition for the operative effect of its order. [Paras 11, 12]

Insufficient court-fees do not mandate dismissal of the complaints; complainant must be given opportunity to pay the deficit.

Territorial jurisdiction where the cheque is dishonoured - prospective effect of Supreme Court pronouncement on territorial jurisdiction (Dashrath Rupsingh Rathod) - Effect of the Supreme Court's ruling on territorial jurisdiction where cheque is dishonoured, and the consequent remedy for complaints presently pending before a court that lacks the territorial jurisdiction. - HELD THAT: - The court noted the Supreme Court's exposition that the proper forum for a Section 138 complaint is the court within whose local jurisdiction the cheque is dishonoured. However, the High Court construed the three-Judge Bench ruling as prospective in operation and observed that the present complaints were filed before the Supreme Court judgment. While the cognizance taken by the learned SDJM need not be quashed on jurisdictional grounds because of the prospective application, the court recognised that trial cannot proceed in courts which, as per the clarified law, do not possess territorial jurisdiction. Given that evidence had not proceeded to the stage specified by the Supreme Court (Section 145(2)) in all but one matter and even there cross-examination had not begun, the High Court directed that the complaints be withdrawn and re-presented before the competent JMFC at Barbil (where the cheques were dishonoured). The court empowered the SDJM to endorse the complaints and return them to the complainant for refiling within the period of limitation. [Paras 13, 14, 19]

Although cognizance before SDJM is not quashed, the complaints are to be withdrawn and re-presented before the JMFC, Barbil (proper territorial court); the SDJM shall endorse and return the complaints for refiling within the prescribed period.

Final Conclusion: The High Court refused to quash the magistrate's orders of cognizance on grounds of alleged non-authorisation, deficient court-fees, or territorial jurisdiction; it held that the complaints filed by the company through an authorised employee are maintainable and that insufficient court-fees do not warrant dismissal but require opportunity to pay. However, in light of the Supreme Court's clarifications on territorial jurisdiction, the pending complaints (which have not proceeded to the stage of recorded oral evidence) are to be withdrawn by the SDJM and re-presented before the JMFC, Barbil within the period of limitation.

Suspension in contemplation of disciplinary proceedings - Extension of suspension - Reinstatement - Subsistence allowance - Delay in investigation not to prejudice employee

Suspension in contemplation of disciplinary proceedings - Extension of suspension - Delay in investigation not to prejudice employee - Reinstatement - Subsistence allowance - Whether the Tribunal was justified in directing that the suspension of the respondent should not be continued after the present extension and that he should be reinstated. - HELD THAT: - The Court accepted the Tribunal's conclusion that, although suspension had been imposed, the Investigating Authorities had ample time-over two years-to complete the inquiry but had not filed any chargesheet or issued any charge memo. The Court agreed that an employee cannot be prejudiced by inordinate delay in investigation and that continuation of suspension where subsistence allowance must be paid serves little purpose when services can be usefully utilised. The petitioner's contention that suspension was in contemplation of criminal proceedings and preceded by arrest was noted, but the Court observed that no formal steps (chargesheet or charge memo) had been taken in the intervening period to justify perpetuating suspension. On these bases the Court found no reason to interfere with the Tribunal's direction for cessation of suspension on expiry of the present extension and for reinstatement.

Tribunal's order directing that suspension shall not be continued after the current extension and that the respondent be reinstated was upheld; no interference in writ jurisdiction.

Final Conclusion: Writ petition dismissed; impugned Tribunal order upheld directing cessation of suspension on expiry of the present extension and reinstatement of the respondent. Compliance to be effected as stated by counsel within fifteen days; no contempt proceedings if complied with.