TaxTMI Updates e-Newsletter
Jul 20,2021

Classification of textile floor coverings based on manufacturing process - tufting as determinative manufacturing process - HSN Explanatory Notes to Chapter 57 - General Rules of Interpretation of the Customs Tariff - essential character and market-identification test - tariff classification under heading 5703 versus 5705 - GST rate applicability tied to tariff heading

Tufting as determinative manufacturing process - HSN Explanatory Notes to Chapter 57 - The manufacturing process of embedding coir yarn into uncured PVC compound with cutting and embedding as described is a tufting process. - HELD THAT: - The HSN explanatory note to heading 5703 describes tufted carpets/floor coverings produced on tufting machines, by means of needles/hooks (or tufting guns/hand methods) to form loops or tufts, with the pile normally fixed by a coating of rubber or plastics. Examination of the appellant's manufacturing sequence - creel-fed yarn, cutting head producing short pile, vertical compaction of cut yarn into a moving layer of uncured PVC and subsequent curing to fix the pile - corresponds to the tufting process described in the explanatory note. The appellant's argument that no needles/hooks are used is unpersuasive because the explanatory note recognises alternative tufting methods and focuses on the process and fixation of pile by coating/backing. The video demonstration and process description substantiate that the operation employed is tufting. [Paras 15, 16, 17]

The process employed by the appellant is correctly characterised as tufting.

Essential character and market-identification test - classification of textile floor coverings based on manufacturing process - PVC-backed coir products manufactured by the tufting process cannot be treated as simple coir mats/matting under heading 5705. - HELD THAT: - Chapter Note 1 to Chapter 57 and the General Rules require classification by reference to the nature of the exposed textile surface and the manufacturing process. Although coir constitutes the exposed surface, the presence of a PVC (or rubber/latex) backing applied through the tufting process alters the product's character for tariff purposes. The Textile Committee report and Coir Board communications do not address the manufacturing process and therefore do not displace the tariff analysis. Consequently, PVC-backed coir articles produced by tufting are not classifiable as the simple coir mats envisaged for the reduced-rate entries. [Paras 14, 18, 20]

PVC-backed coir mats produced by the tufting process are not to be classified as simple coir mats under heading 5705.

Tariff classification under heading 5703 versus 5705 - GST rate applicability tied to tariff heading - General Rules of Interpretation of the Customs Tariff - The impugned PVC-tufted coir mats are classifiable under Tariff Heading 5703 90 90 and are taxable at 12% GST as per the applicable notification. - HELD THAT: - Given the product is manufactured by a tufting process and fixed by a PVC backing, it falls within the scope of heading 5703 as explained in the HSN notes. Rule-based classification (General Rules and Chapter/Section notes) requires treating products manufactured by tufting as belonging to 5703 rather than the residual heading 5705. The notification schedule links the tariff heading to the rate of tax; goods classifiable under 5703 attract the 12% rate specified for tufted textile floor coverings. Accordingly, the Advance Ruling's classification under 5703 90 90 is upheld and the lower authority's conclusion as to the applicable GST rate is sustained. [Paras 19, 20]

The product is classifiable under 5703 90 90 and is liable to GST at 12%.

Final Conclusion: The Appellate Authority upholds the Authority for Advance Ruling: the appellant's PVC-backed coir mats, being produced by a tufting process, are classifiable under Tariff Heading 5703 90 90 and liable to GST at 12%; the appeal is rejected.

Classification under Customs Tariff Heading 3918 v. 5705 - Textile exclusion from plastics chapter (Note 2(p) to Chapter 39 and Note 1(h) to Section XI) - HSN interpretation using General Rules and Chapter/Section Notes - Impregnated/coated/laminated textile exclusion - Application of Rule 1 of General Rules for Interpretation of the First Schedule - Tax incidence consequent to tariff classification

Classification under Customs Tariff Heading 3918 v. 5705 - Textile exclusion from plastics chapter (Note 2(p) to Chapter 39 and Note 1(h) to Section XI) - Impregnated/coated/laminated textile exclusion - HSN interpretation using General Rules and Chapter/Section Notes - Whether the PVC carpet mats manufactured by the applicant are classifiable under Tariff Item 5705.00.49 or under Tariff Item 3918. - HELD THAT: - The determination turns on whether the exposed surface of the goods qualifies as textile material within Section XI or is a plastics product falling under Chapter 39. The Appellate Authority examined the manufacturing process, samples and the HSN explanatory and chapter/section notes. Note 1(h) to Section XI excludes woven, knitted, crocheted fabrics, felts or non-wovens impregnated, coated, covered or laminated with plastics from Section XI. Chapter 39's Note 1 defines "plastics" and excludes materials regarded as textile materials of Section XI, while Note 2(p) to Chapter 39 excludes goods of Section XI from Chapter 39. The authority found that the applicant's product is produced as a PVC web by moulding/extrusion and subsequently impregnated/laminated with PVC backing; there are no identifiable fibres, filaments or yarns in the exposed surface and the web is essentially 100% PVC. Consequently the product does not qualify as a textile material under Chapter 57's Note 1, and falls within the inclusive provisions of Chapter 39 (3918) describing plastics floor coverings. As classification is resolvable under Rule 1 of the General Rules by reference to headings and notes, resort to Rule 3 was unnecessary. The authority also rejected reliance on unrelated bills of entry for other imports and emphasised that rates cannot determine classification. [Paras 25]

The PVC carpet mats are classifiable under Customs Tariff Heading 3918 (floor coverings of plastics) and not under Heading 5705.

Tax incidence consequent to tariff classification - Application of Rule 1 of General Rules for Interpretation of the First Schedule - Consequent applicable rate of GST on the impugned PVC carpet mats. - HELD THAT: - Having held that the goods are classifiable under Tariff Heading 3918, the Appellate Authority applied the corresponding entries in the IGST Notification schedules. The ruling notes the Notification entries and amendments shifting rates for competing headings, and concludes that the tax rate must follow the classification. The authority accordingly fixed the applicable GST rate corresponding to Heading 3918 as per the Notification in force, as interpreted in the order. [Paras 25]

The impugned goods attract GST as applicable to Tariff Heading 3918; the order specifies the rate as 18% (9% CGST + 9% SGST) restricted to the types of PVC floor coverings/mats manufactured by the applicant as per the submitted manufacturing process and sample.

Final Conclusion: The Appellate Authority holds that the PVC carpet mats produced by the applicant are plastics floor coverings classifiable under Customs Tariff Heading 3918 (and not under 5705), and accordingly attract GST applicable to Heading 3918; the ruling is limited to the products manufactured and sampled as submitted.

Regular bail under Section 439 Cr.P.C. - confirmation of interim bail - no loss of revenue to the State exchequer - constitutional challenge to Sections 69 and 132 of the CGST Act - cooperation with investigation - offence triable by Magistrate with maximum sentence of five years

Regular bail under Section 439 Cr.P.C. - confirmation of interim bail - cooperation with investigation - no loss of revenue to the State exchequer - offence triable by Magistrate with maximum sentence of five years - Confirmation of interim regular bail previously granted to the petitioner in the GST-related criminal proceedings. - HELD THAT: - The Court considered the facts that no complaint or FIR had been filed and no show-cause notice had been issued, that no loss to the State exchequer was shown, that the offence is triable by a Magistrate with a maximum sentence of five years, and that the petitioner had been in custody for the initial period. While the investigation was ongoing and the prosecution sought the petitioner's presence for further inquiries, the petitioner had been admitted to interim bail on 18.01.2021. On these considerations the Court found it appropriate to confirm the interim bail, subject to the conditions that the petitioner furnish fresh adequate bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate and continue to cooperate with the investigation by appearing as and when required upon written notice from the Investigating Officer. The Court expressly refrained from expressing any opinion on the merits and did not decide the constitutional challenge to the provisions invoked, which had only been relied upon by the petitioner in support of bail.

Interim regular bail granted on 18.01.2021 is confirmed subject to furnishing fresh adequate bail/surety bonds to the satisfaction of the trial Court/Duty Magistrate and continued cooperation with the investigation as and when required.

Final Conclusion: The petition is disposed of by confirming the interim regular bail already granted, on the stated conditions; no opinion is expressed on the merits of the underlying case or on the constitutional challenge to the statutory provisions relied upon.

Cancellation of bail - non-bailable warrant - stay of order - interim suspension of warrant - bail condition of deposit of amount - ineligible/fraudulent input tax credit (ITC) - filing of affidavits

Cancellation of bail - ineligible/fraudulent input tax credit (ITC) - stay of order - interim suspension of warrant - Impugned order cancelling bail and issuance of non-bailable warrants was stayed and the NBWs kept in abeyance. - HELD THAT: - The petition challenged the order dated 9th July, 2021 which cancelled the bail granted on 23rd December, 2019 and issued non-bailable warrants after declining to accept certain ledger entries tendered pursuant to the bail condition. The respondent's case before this Court alleges fraudulent availment of ITC of Rs.27.05 crores out of aggregate ITC availment of about Rs.260 crores, and there is no material before the respondent at present to show that the remaining ITC is fraudulent. In view of this factual position and the manner in which the bail deposit and ledger entries were dealt with by the learned CMM, the Court considered it fit to grant interim relief by staying the impugned order and keeping the non-bailable warrants in abeyance until the next hearing. [Paras 6]

Stay granted on the order cancelling bail; NBWs kept in abeyance.

Bail condition of deposit of amount - filing of affidavits - Exemptions and filing directions in respect of affidavits and ledger documents were granted and time fixed for filing attested affidavits. - HELD THAT: - The Court allowed the application for exemption subject to just exceptions and directed that attested affidavits in support of the petition and applications be filed within two weeks. These procedural directions were recorded at the outset and the petitioner was permitted relief on terms requiring production of attested affidavits within the stipulated period. [Paras 1, 2]

Exemption allowed; attested affidavits to be filed within two weeks.

Filing of affidavits - stay of order - Timelines for exchange of affidavits and listing were fixed. - HELD THAT: - The Court directed the respondent to file a reply affidavit within two weeks and permitted a rejoinder affidavit within two weeks thereafter. The matter was listed for further consideration on the fixed date and the order was directed to be uploaded on the Court's website. These interlocutory procedural directions ensure orderly adjudication on the next date of hearing. [Paras 7, 8, 9]

Reply and rejoinder affidavits to be filed in stipulated time; matter listed for further hearing and order to be uploaded.

Final Conclusion: The High Court granted interim relief by staying the order cancelling bail and keeping non-bailable warrants in abeyance, allowed limited exemptions with directions to file attested affidavits within two weeks, fixed timelines for pleadings, and listed the matter for further hearing.

Seizure and release of goods subject to security/indemnity - service by pasting of order on vehicle and validity of service - condonation of delay in filing appeal - stay of coercive action subject to deposit and security under Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017

Stay of coercive action subject to deposit and security under Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017 - deposit of tax and partial penalty to obtain interim protection - Interim protection against coercive action conditional on deposit and furnishing of security - HELD THAT: - Court granted interim relief restraining coercive action pursuant to the impugned orders on terms. The petitioner was directed, within three weeks, to deposit the outstanding tax and 50% of the penalty and to furnish security for the remaining penalty other than cash or bank guarantee, after adjusting the 10% already deposited; upon compliance no coercive steps shall be taken pending further proceedings. The order also prescribes procedural requirements for filing a computer-generated copy of the order and identity verification to be made by the concerned authority from the High Court website.

No coercive action shall be taken for three weeks provided the petitioner deposits the tax, 50% of the penalty and furnishes the prescribed security as directed.

Service by pasting of order on vehicle and validity of service - condonation of delay in filing appeal - seizure and release of goods subject to security/indemnity - Validity of service by pasting on the vehicle, limitation/condonation of the first appeal and related factual contentions - HELD THAT: - The High Court did not finally adjudicate the legal validity of service by pasting the order on the vehicle or the question of limitation/condonation in the appeal. The petitioner's contention that the order was not properly served and that goods were arbitrarily seized was noted and prior interim relief (release of goods subject to security/indemnity) recorded. The court directed respondents to file counter-affidavits within four weeks and permitted the petitioner to file rejoinder, thereby leaving these issues for fuller consideration on the merits rather than deciding them at this stage.

The questions concerning validity of service, limitation/condonation of the appeal and the circumstances of seizure are left for adjudication after exchange of affidavits and are not finally decided in this order.

Final Conclusion: Interim protection granted: respondents restrained from taking coercive action for three weeks provided petitioner deposits the tax, 50% of the penalty and furnishes prescribed security; substantive disputes regarding service by pasting, limitation/condonation of appeal and the seizure/release of goods remain to be adjudicated after filing of affidavits.

Interim release of detained goods and vehicle on deposit of tax and penalty under Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017 - Procedure for verification and release on production of computer generated copy of court order

Interim release of detained goods and vehicle on deposit of tax and penalty under Section 129(1)(a) of U.P. GST Act, 2017 read with Rules 140 of UPGST Rules, 2017 - Verification of computer generated copy of court order for release - Grant of interim relief directing release of the goods and vehicle subject to deposit of tax and penalty and compliance with a prescribed verification procedure - HELD THAT: - The High Court, while keeping the petition pending and after hearing counsel, directed that the detained goods and vehicle be released in favour of the petitioner provided the petitioner deposits the amount of tax and penalty within two weeks in the prescribed manner on the valuation disclosed in the invoice. The order expressly invokes the scheme of Section 129(1)(a) of the U.P. GST Act, 2017 read with Rule 140 of the UPGST Rules, 2017 as the statutory basis for release on deposit. The Court also prescribed procedural safeguards for effecting release: the party obtaining release must file a computer generated copy of the High Court order downloaded from the official website, self attested by the petitioner along with a self attested identity proof (preferably Aadhaar) mentioning the mobile number linked to it; the concerned Court/Authority/Official is required to verify the authenticity of the computerized copy from the official High Court website and to make a written declaration of such verification. The direction is interim in nature and conditioned upon deposit and compliance with the verification protocol; no adjudication on the merits of the challenged order was made.

Directed interim release of the goods and vehicle on deposit of tax and penalty within two weeks and subject to the specified verification procedure.

Final Conclusion: Writ petition admitted for consideration; interim relief granted permitting release of detained goods and vehicle on specified deposit and verification conditions, with the substantive challenge to the impugned orders to be proceeded with after filing of counter and rejoinder as directed.

Release of seized goods on deposit of tax and penalty - seizure under Section 129(1)(a) of U.P. GST Act - valuation challenged without formal adjudication - interim relief in writ petition where no appellate tribunal constituted - verification of computerized court order from official website - security for remaining penalty

Release of seized goods on deposit of tax and penalty - seizure under Section 129(1)(a) of U.P. GST Act - security for remaining penalty - Conditional release of goods and vehicle seized under Section 129(1)(a) of U.P. GST Act - HELD THAT: - The Court directed interim release of the goods and vehicle in favour of the petitioner on the valuation disclosed in the invoice, subject to the petitioner depositing the tax and fifty per cent of the penalty and furnishing security for the remaining fifty per cent of the penalty within two weeks. The direction is granted as an interim measure while the writ petition is pending and is confined to compliance with the statutory regime invoked by the respondents under Section 129(1)(a) read with the relevant rules.

Goods and vehicle released on deposit of tax and 50% of penalty and furnishing security for remaining 50% within two weeks.

Verification of computerized court order from official website - Procedure for effecting release and verification of the Court's order - HELD THAT: - The petitioner shall produce a computer-generated copy of the order downloaded from the High Court's official website, self-attested along with a self-attested identity proof (preferably Aadhaar) mentioning the linked mobile number. The concerned authority is directed to verify the authenticity of the computerized copy from the official website and record a written declaration of such verification before releasing the goods/vehicle.

Release to be effected only after production of self-attested computerized order and identity proof and written verification by the authority.

Time granted to file counter affidavit - Interim procedural directions concerning pleadings - HELD THAT: - The Court granted four weeks' time to the respondents to file a counter affidavit and allowed the petitioners two weeks thereafter to file a rejoinder affidavit. The matter is listed for further consideration after completion of these pleadings. These directions organise the further course of adjudication while preserving the interim relief granted.

Respondents to file counter affidavit in four weeks; petitioner to file rejoinder in two weeks; matter listed thereafter.

Final Conclusion: The writ petition is admitted for consideration; meanwhile, the Court granted conditional interim release of the seized goods and vehicle upon deposit of tax and 50% of the penalty with security for the balance, ordered verification of a computer-generated copy of the order before release, and directed exchange of pleadings within the stipulated timelines.

Ultra vires - legislative competency - levy of IGST on carriage of goods by vessel from outside India to customs station where both supplier and recipient are located outside India - deeming 'importer' to be 'recipient' of service for purposes of IGST - entitlement to refund of IGST paid pursuant to invalidated notification entry

Ultra vires - levy of IGST on carriage of goods by vessel from outside India to customs station where both supplier and recipient are located outside India - Sr. No. 9(ii) of Notification No. 8/2017 - Integrated Tax (Rate) dated 28.06.2017 is unconstitutional and ultra vires to the extent it prescribes levy of Integrated Tax on carriage of goods by vessel from a place outside India up to customs station of clearance where both supplier and recipient are located outside India. - HELD THAT: - The High Court disposed of the petition by following the decision of the Gujarat High Court in Mohit Minerals Private Limited (supra), which declared the impugned entry in Notification No. 8/2017 to be ultra vires for lack of legislative competency. The respondents did not controvert that the present controversy is covered by that decision and the operation of the Gujarat High Court judgment has not been stayed. On that basis, the Rajasthan High Court applied the ratio of Mohit Minerals and allowed the relief sought to the extent indicated.

The impugned entry at Sr. No. 9(ii) of Notification No. 8/2017 is declared ultra vires to the extent stated and relief is granted in terms of the Gujarat High Court decision.

Ultra vires - deeming 'importer' to be 'recipient' of service for purposes of IGST - legislative competency - Sr. No. 10 of Notification No. 10/2017 - Integrated Tax (Rate) dated 28.06.2017 is unconstitutional and ultra vires to the extent it deems an 'importer' within the meaning of the Customs Act to be the 'recipient' of service under the IGST provisions. - HELD THAT: - Relying on the Gujarat High Court's decision in Mohit Minerals Private Limited (supra), which held that the impugned Entry 10 of Notification No. 10/2017 was beyond legislative competence and therefore unconstitutional, the Rajasthan High Court accepted that the same legal principle applies to the petitioner. The respondents did not dispute that the Gujarat decisions govern the present case, and the Rajasthan High Court therefore disposed of the petition accordingly.

The impugned Entry 10 of Notification No. 10/2017 is declared ultra vires to the extent indicated and relief is granted in terms of the Gujarat High Court decision.

Entitlement to refund of IGST paid - refund of IGST paid pursuant to invalidated notification entry - The petitioner is entitled to have the refund claim of IGST paid processed in accordance with the precedents relied upon (M/s COMSOL Energy Pvt. Ltd. and related Gujarat High Court directions) where refund was directed after declaration of the notification entries as ultra vires. - HELD THAT: - The petition was disposed of in terms of the Gujarat High Court decisions, including M/s COMSOL Energy Private Limited (supra), which directed processing and sanction of refunds of IGST paid pursuant to the Entry No. 10 of Notification No. 10/2017 declared ultra vires. The Rajasthan High Court noted that respondents did not controvert applicability of those decisions and therefore directed disposal consistent with those precedents, entitling the petitioner to pursue refund as directed by the Gujarat decisions.

The petitioner is entitled to seek and have processed the refund of IGST paid in accordance with the Gujarat High Court directions; the petition is disposed of accordingly.

Final Conclusion: The writ petition is disposed of by applying the Gujarat High Court decisions in Mohit Minerals Private Limited and M/s COMSOL Energy Private Limited: the challenged entries in Notification No. 8/2017 and Notification No. 10/2017 are declared ultra vires to the extent indicated, and the petitioner is entitled to have its refund claim of IGST processed in accordance with the said precedents.

Quashing of assessment/order - principles of natural justice - fresh adjudication in accordance with the Central Goods and Services Tax Rules, 2017 and the Bihar Goods and Services Tax Rules, 2017 - remand for fresh consideration - stay on coercive measures pending fresh adjudication - de-freezing of bank accounts - speaking order with reasons - refund of excess deposit - liberty to challenge orders and alternate remedies

Quashing of assessment/order - fresh adjudication in accordance with the Central Goods and Services Tax Rules, 2017 and the Bihar Goods and Services Tax Rules, 2017 - remand for fresh consideration - principles of natural justice - Impugned show-cause notice, summary order and rectification order were quashed and the matter remitted to the Assessing Authority for fresh decision in accordance with law and after affording principles of natural justice. - HELD THAT: - The Assistant Commissioner conceded that the impugned Form GST DRC-01 dated 14.02.2021, summary in Form GST DRC-07 dated 23.02.2021 and the rectification order dated 08.04.2021 contained mistakes. The Court observed that such errors, which became apparent on judicial scrutiny, necessitated quashing of the impugned orders to ensure that the assessment process conforms to applicable rules and principles. Accordingly, the Court set aside the impugned orders and directed the Assessing Authority to pass a fresh order strictly in terms of the Central Goods and Services Tax Rules, 2017 and the Bihar Goods and Services Tax Rules, 2017 after affording the petitioner an opportunity of hearing and complying with the principles of natural justice. The Court left all substantive issues open for adjudication by the Assessing Authority on merits.

Impugned orders quashed; matter remitted to the Assessing Authority to decide afresh in accordance with CGST Rules, 2017 and BGST Rules, 2017 after complying with principles of natural justice; merits left open.

Stay on coercive measures pending fresh adjudication - de-freezing of bank accounts - speaking order with reasons - refund of excess deposit - liberty to challenge orders and alternate remedies - Interim protections and procedural directions during the pendency of fresh proceedings were granted. - HELD THAT: - Pending fresh adjudication, the Court restrained the Revenue from taking any coercive steps against the petitioner. The Assessing Authority was directed to afford the petitioner a hearing, decide the case expeditiously (preferably within two months of appearance), and pass a speaking order with reasons, copies of which shall be supplied to the parties. The Court ordered immediate de-freezing/de-attaching of the petitioner's bank account(s) if attached in relation to these proceedings. If any deposit by the petitioner is found to be in excess upon final determination, the excess shall be refunded within two months of the order. The petitioner undertook to cooperate and attend the assessment proceedings and was granted liberty to challenge the fresh order or pursue other remedies as available under law.

No coercive steps to be taken; bank accounts to be de-frozen immediately if attached; Assessing Authority to afford hearing and pass a speaking order expeditiously; refund of any excess deposit directed; liberty reserved to challenge orders.

Final Conclusion: Writ petition disposed by quashing the impugned show-cause notice, summary order and rectification order; the matter is remitted to the Assessing Authority for fresh adjudication in accordance with the CGST and BGST Rules after affording principles of natural justice, with interim protection against coercive action and immediate de-freezing of attached bank accounts; merits left open and liberty to avail statutory remedies preserved.

Quashing of assessment and rectification orders - principles of natural justice - fresh adjudication in accordance with the Central Goods and Services Tax Rules and Bihar Goods and Service Tax Rules - stay of coercive action during pendency - speaking order with reasons - refund of excess deposit - de-freezing of bank accounts

Quashing of assessment and rectification orders - fresh adjudication in accordance with the Central Goods and Services Tax Rules and Bihar Goods and Service Tax Rules - Impugned show cause notice, summary order and rectification order were quashed and the matter was directed to be reconsidered by the Assessing Authority. - HELD THAT: - The Court accepted the plea that the authority below had committed mistakes in passing the impugned order in Form GST DRC-01, the summary in Form GST DRC-07 and the rectification order, and therefore quashed those orders. The Court recorded that the authority itself acknowledged the error when the discrepancy was pointed out. In view of those admitted mistakes and to ensure compliance with the statutory scheme, the Court set aside the impugned orders and directed the Assessing Authority to pass a fresh order in terms of the Central Goods and Services Tax Rules 2017 and the Bihar Goods and Service Tax Rules 2017. The Court expressly left all issues on merits open for fresh adjudication by the Assessing Authority.

Impugned orders quashed; matter remitted to Assessing Authority for fresh adjudication in accordance with law.

Principles of natural justice - stay of coercive action during pendency - speaking order with reasons - refund of excess deposit - de-freezing of bank accounts - Procedural protections and interim directions to be observed by the Assessing Authority during the remand. - HELD THAT: - The Court directed that the Assessing Authority shall decide the case on merits after complying with the principles of natural justice, afford opportunity to place on record necessary documents, and pass a speaking order assigning reasons. The petitioner was to appear before the Assessing Authority on the specified date and to cooperate; the authority was directed to decide expeditiously, preferably within two months from appearance. During pendency no coercive steps shall be taken against the petitioner. If any deposit by the petitioner is ultimately found to be excessive, it shall be refunded within two months from the date of the fresh order. The Court further directed immediate de-freezing/de-attaching of the petitioner's bank account(s), if attached in reference to the proceedings.

Assessing Authority to conduct fresh adjudication after affording natural justice; interim protections including stay of coercive action, de-freezing of bank accounts, speaking order, timeline for disposal and refund directions issued.

Final Conclusion: Writ petition disposed by quashing the impugned notice, summary order and rectification order; matter remitted for fresh adjudication in accordance with the CGST/BGST Rules with directions to afford natural justice, pass a speaking order expeditiously, stay coercive measures meanwhile, de-freeze bank accounts if attached and refund any excess deposit.

Condonation of delay - extension of limitation due to COVID-19 notifications - refund under Section 54(1) of the CGST Act, 2017 - re-credit to electronic credit ledger under Rule 93(2) of the CGST Rules, 2017 - effect of written undertaking as deemed rejection of refund - maintainability of appeal before Appellate Authority

Condonation of delay - extension of limitation due to COVID-19 notifications - Whether the delay in filing the appeal was to be condoned. - HELD THAT: - The Appellate Authority examined the appellant's explanation for delay, including reliance on the Supreme Court orders relating to extension of limitation during the COVID-19 period and the CBIC notifications adjusting limitation timelines. Having considered Notification No.35/2020 and its amendment by Notification No.55/2020 extending relevant limitation dates, and in view of the COVID-19 situation the Authority found it appropriate to condone the delay in filing the appeal and proceeded to decide the matter on merits of maintainability. [Paras 5]

Delay in filing the appeal was condoned and the appeal was admitted for consideration.

Refund under Section 54(1) of the CGST Act, 2017 - re-credit to electronic credit ledger under Rule 93(2) of the CGST Rules, 2017 - effect of written undertaking as deemed rejection of refund - maintainability of appeal before Appellate Authority - Whether the appeal is maintainable where the appellant had given a written undertaking and the rejected refund amount was re credited to the electronic credit ledger under Rule 93(2). - HELD THAT: - The record shows that the appellant submitted a written request acknowledged by the divisional authority, undertaking that they would not file an appeal against the refund rejection and requesting re credit of the rejected amount to the electronic credit ledger. The jurisdictional authority re credited the rejected refund amount through Form PMT 03 in accordance with Rule 93(2) of the CGST Rules, 2017. The Explanation to Rule 93(2) treats a refund as deemed rejected where the claimant gives such an undertaking that he shall not file an appeal. Having voluntarily given that undertaking and obtained re credit, the appellant thereby forfeited the right to challenge the refund rejection before the Appellate Authority. The Appellate Authority therefore found the appeal non maintainable and declined to go into merits. [Paras 9, 10, 11, 12]

Appeal held non maintainable and rejected without adjudication on merits because the appellant had given an undertaking and the amount was re credited under Rule 93(2).

Final Conclusion: The Appellate Authority condoned the delay in filing the appeal but rejected the appeal as non maintainable on the ground that the appellant had given a written undertaking and the rejected refund amount was re credited to the electronic credit ledger under Rule 93(2) of the CGST Rules, 2017; accordingly the appeal is dismissed without deciding the merits.

Arm's Length Price - Transfer Pricing - Deduction under Section 10B for 100% Export Oriented Unit and adjustment under Section 80-1A(10) for inflated profits due to arrangements with associated enterprises - Comparable Uncontrolled Price (CUP) versus Transactional Net Margin Method (TNMM) - Burden of proof of arm's length nature on the assessee - Admission and subsequent retraction in transfer pricing proceedings - Assessing Officer's obligation to specify basis for adjustment of eligible profits

Arm's Length Price - Deduction under Section 10B for 100% Export Oriented Unit and adjustment under Section 80-1A(10) for inflated profits due to arrangements with associated enterprises - Burden of proof of arm's length nature on the assessee - Admission and subsequent retraction in transfer pricing proceedings - Validity of excluding from deduction under Section 10B the excess profit determined by the Assessing Officer (Rs. 3.54 Crores) as inflation of eligible profits on account of arrangements with an associated enterprise. - HELD THAT: - The Court held that the Assessing Officer was entitled to invoke the adjustment mechanism under Section 10B(7) read with Section 80-1A(10) where there was material showing close association between the exporter and the foreign buyer and indications that profits were inflated. The Assessing Officer and CIT(A) relied on the assessee's own CUP-based calculation which showed excess profits, documentary material (including email exchanges) evidencing close connection, and the reality that the product was exported exclusively to the related importer. The Tribunal erred in absolving the Assessing Officer on the ground that the Assessing Officer had not made 'spadework' or specified particular computations: the Assessing Officer reasonably accepted the assessee's earlier admission and comparable-based computation and was justified in excluding the excess profit from exempt income. The Tribunal's reliance on the assessee's subsequent revised calculation (filed late and treated as an afterthought) without giving weight to the earlier admission and associated material was unsustainable. For these reasons the Court restored the Assessing Officer's determination disallowing the claimed deduction to the extent of the excess profit as held by the AO/CIT(A). [Paras 11, 17, 18, 21, 22]

The withholding of deduction under Section 10B by excluding the excess profit determined by the Assessing Officer is upheld; the Tribunal's deletion of that disallowance is set aside.

Comparable Uncontrolled Price (CUP) versus Transactional Net Margin Method (TNMM) - Assessing Officer's obligation to specify basis for adjustment of eligible profits - Appropriateness of transfer pricing method and the Assessing Officer's discretion to accept a comparable-based (CUP) computation rather than TNMM in the facts of the case. - HELD THAT: - The Court observed that no single transfer pricing method is superior in all circumstances; the most appropriate method depends on transaction nature and comparability. The Assessing Officer and TPO had applied TNMM and CUP in the proceedings, but the Assessing Officer reasonably accepted the assessee's CUP-based comparable(s) (German comparables) as forming a basis for determining excess profit where the alternative comparables (used under TNMM) were imperfect (e.g., lower turnover or different product mix). The CIT(A)'s partial modification in computation (treating the assessed excess as turnover and applying an 83.1% margin) was noted as inconsistent if based on differing methods, but the ultimate restoration of the AO's CUP-based disallowance was supported by the record. The Tribunal's conclusion that the AO/TPO did no calculations was incorrect in view of the material and methods considered. [Paras 16, 17, 19]

Assessing Officer's acceptance of CUP-based computation and resultant adjustment is sustainable on the facts; the Tribunal's contrary conclusion is set aside.

Admission and subsequent retraction in transfer pricing proceedings - Assessing Officer's obligation to specify basis for adjustment of eligible profits - Whether the assessee's subsequent revised calculation (retraction) defeated the Assessing Officer's reliance on the earlier admission of excess profit. - HELD THAT: - The Court treated the late revised calculation submitted by the assessee as an 'after thought' filed after the Assessing Officer had relied on the earlier admission and the comparable relied upon before the TPO. The Assessing Officer was entitled to treat the original submission and associated documentary material as the basis for adjustment; a belated introduction of new comparables did not automatically erase the earlier admission nor require the AO to accept the revised figure, especially when the revised computation altered comparables and lacked explanation for the timing. The Tribunal's elevation of the revised calculation over the earlier admission was therefore rejected. [Paras 18, 21]

The assessee's late retraction did not invalidate the Assessing Officer's reliance on the earlier admitted excess profit; the Tribunal was wrong to rely on the retraction to delete the disallowance.

Deduction under Section 10B for 100% Export Oriented Unit and adjustment under Section 80-1A(10) for inflated profits due to arrangements with associated enterprises - Assessing Officer's obligation to specify basis for adjustment of eligible profits - Validity of the Tribunal's deletions in respect of the value of scrap sales, levy of interest and the CIT(A)'s allowance of 5% of bank interest as expense. - HELD THAT: - The Court examined the ITAT's findings on ancillary points and found no infirmity in the Tribunal's conclusions concerning scrap sales, interest levies and the disallowance of 5% of bank interest as expense. While restoring the Assessing Officer's primary adjustment, the Court accepted the Tribunal's approach on these specific ancillary matters where the Tribunal's reasoning was supported by the record and statutory principles. [Paras 5, 21]

Tribunal's deletions and findings on scrap sales, interest levies and the 5% interest-income adjustment are upheld; no change to those aspects.

Final Conclusion: The Revenue's appeals are allowed in part: the High Court restores the Assessing Officer's adjustment excluding the excess profit (as determined by the AO/CIT(A)) from the Section 10B deduction for Assessment Year 2004-2005, sets aside the Tribunal's deletion of that disallowance, and affirms the Tribunal's conclusions on scrap sales and interest-related adjustments; no costs.

Discrepancy in stock - deletion of addition - estimated value of scrap - findings of fact of the Tribunal - substantial question of law under Section 260A - application of findings across assessment years

Discrepancy in stock - deletion of addition - estimated value of scrap - substantial question of law under Section 260A - Whether the Tribunal's deletion of addition made by the Assessing Officer on account of discrepancy in consumption of raw material and estimated value of scrap for A.Y. 2006-07 involves a substantial question of law permitting interference under Section 260A. - HELD THAT: - The High Court examined the ITAT's reasoning that the addition was founded on arithmetic conversion and calculations, that no defect in maintenance of books was demonstrated by the Assessing Officer, and that mere arithmetic differences did not suffice for making the addition. Although the Tribunal's language could have been more felicitous, those findings are findings of fact. In the absence of any substantial question of law - i.e., no demonstration that the Tribunal's findings were based on no evidence, involved misapplication of legal principles, or constituted a debatable point of law - the High Court declined to interfere. Authorities on the narrow scope of admission and hearing of appeals under Section 260A and the tests for a 'substantial question of law' were applied to conclude that the matter did not raise a substantial question of law warranting appellate interference. [Paras 10, 11, 13]

Tribunal's deletion of the addition is not open to interference under Section 260A; no substantial question of law is involved and the appeal is dismissed.

Application of findings across assessment years - non speaking order - findings of fact of the Tribunal - Whether the ITAT erred or produced a non speaking order by referring to findings in respect of A.Y. 2003-04 (which was dismissed as withdrawn) when dismissing the Revenue's appeal for A.Y. 2006-07. - HELD THAT: - The Court noted that the ITAT's reference to A.Y. 2003-04 in the impugned common order was factually inaccurate because the Revenue's appeal for 2003-04 had been dismissed as withdrawn by a separate order. However, the Tribunal also relied upon and applied findings made earlier in the same impugned order in respect of A.Y. 2005-06 concerning identical issues (arithmetic conversion, absence of defects in books). The High Court held that, notwithstanding the imperfect wording and the erroneous reference to the withdrawn 2003-04 appeal, the Tribunal's result rested on findings of fact for a closely similar assessment year and therefore did not justify interference under Section 260A. [Paras 8, 9, 10]

Although the ITAT's reference to A.Y. 2003-04 was incorrect, that infirmity did not establish a substantial question of law or warrant upsetting the Tribunal's factual conclusions; appeal dismissed.

Final Conclusion: The Tax Appeal is dismissed: the High Court finds no substantial question of law in respect of the Tribunal's deletion of the additions for A.Y. 2006-07, and declines to interfere with the ITAT's findings of fact notwithstanding an imprecise reference to A.Y. 2003-04 in the impugned common order.

Draft Assessment Order - Show-cause opportunity - Principles of natural justice - E-Assessment Scheme, 2019 compliance - Maintainability of writ petition despite alternative remedy - Challenge to order passed without jurisdiction

Draft Assessment Order - Show-cause opportunity - Principles of natural justice - E-Assessment Scheme, 2019 compliance - Validity of an assessment order passed without issuance of a Draft Assessment Order and without serving a notice affording the assessee an opportunity to show cause under the E-Assessment Scheme, 2019. - HELD THAT: - The Court examined clauses 5(1)(viii) and 5(1)(x) of the E-Assessment Scheme, 2019 and held that the Scheme mandates the assessment unit to prepare a written draft assessment order and requires the National E-Assessment Centre to provide an opportunity to the assessee, by serving a notice calling upon him to show cause, where a modification prejudicial to the assessee is proposed. Failure to serve such notice violates the principles of natural justice and renders the resulting assessment order void. The absence of an express provision analogous to Section 144B(9) does not cure the violation; compliance with the statutory Scheme and observance of natural justice are obligatory on the Revenue. [Paras 8, 9, 10, 11, 14]

Impugned assessment order set aside for failure to follow the Scheme and for violation of principles of natural justice; Revenue permitted to pass fresh assessment in accordance with law.

Maintainability of writ petition despite alternative remedy - Challenge to order passed without jurisdiction - Whether the writ petition is maintainable notwithstanding that an appeal against the assessment order had been filed. - HELD THAT: - Relying on the Court's earlier decision in Gurgaon Realtech Limited (as noted), the Court held that where the challenge to an assessment order is that it was passed without jurisdiction or in violation of mandatory procedure, filing of an appeal (even if done to preserve limitation) does not preclude the maintainability of a writ petition. Given the finding that the assessment was passed without complying with the Scheme and contrary to natural justice, the writ petition was held to be maintainable. [Paras 3, 4, 12, 13]

Writ petition maintainable despite the existence of an appeal; objection on maintainability rejected.

Final Conclusion: The assessment order dated 31.03.2021 for Assessment Year 2017-18 is set aside for failure to follow the E-Assessment Scheme, 2019 and for violation of principles of natural justice; Revenue is permitted to pass a fresh assessment in accordance with law and the petitioner may challenge any future action as permissible.

Jurisdiction under section 263 of the Income Tax Act - Erroneous and prejudicial to the interests of revenue - Requirement of specific findings and verification before invoking revision - Rejection of revision based on suspicion or surmise - Comparison of quantitative details in Form 3CD with sales declared in books of account

Jurisdiction under section 263 of the Income Tax Act - Erroneous and prejudicial to the interests of revenue - Requirement of specific findings and verification before invoking revision - Rejection of revision based on suspicion or surmise - Comparison of quantitative details in Form 3CD with sales declared in books of account - Whether the Principal Commissioner of Income Tax was justified in revising the assessment u/s 263 by treating the assessing officer's order as erroneous and prejudicial on the ground of alleged under-reporting of sales determined by comparing Form 3CD quantities with book values. - HELD THAT: - The Tribunal analysed the statutory scope of section 263, emphasising the twin satisfaction requirement that the assessing officer's order must be both erroneous and prejudicial to the interests of revenue before the Principal CIT can exercise revisionary power. The Principal CIT's computation of an alleged under-reporting of sales was founded on an extrapolation using quantities in Form 3CD and closing stock values from the profit and loss account. The assessee had explained that the quantity shown in the tax-audit report included internal transfers to the clothing division and furnished reconciliation of quantitative details. The Principal CIT, however, proceeded on a prima facie computation without making specific factual findings that the sales declared in the books were incorrect and without conducting or recording independent verification. The Tribunal held that revision cannot rest on mere suspicion or surmise nor on generalized observations; the Principal CIT must point out specific errors and verify accounts or documents to demonstrate how the assessment is erroneous and prejudicial. Applying these principles to the material on record, the Tribunal found that the Principal CIT's reasons were speculative and that the AO's order had not been shown to be erroneous and prejudicial in the required manner. [Paras 8, 9, 11]

Revision order passed by the Principal CIT under section 263 quashed and the assessment order dated 28.09.2017 passed under section 143(3) restored.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashing the Principal CIT's revision under section 263 as founded on suspicion and incorrect working without specific verification, and restored the assessment order for AY 2015-16.

Taxability of credit in the year of receipt - addition under section 68 of the Income tax Act relating to unexplained cash credits - treatment of share application money and share premium for assessment year - addition as unexplained expenditure where primary credit is not taxable in the year

Taxability of credit in the year of receipt - addition under section 68 of the Income tax Act relating to unexplained cash credits - Whether share application money and share premium aggregating to Rs.1.05 crores could be taxed in assessment year 2009-10 - HELD THAT: - The Tribunal examined the dates of receipt of the share application and share premium and found that all amounts were received during financial year 2007-08 (relevant to AY 2008-09). Applying the principle that a credit reflected in the books is taxable in the previous year in which it was found, the Tribunal held that where no such amount was received in the year under consideration (AY 2009-10), the amounts could not be taxed in that year. The Tribunal referred to and followed coordinate and higher authority on the point that a credit must be charged in the year in which it arises and cannot be shifted to a later assessment year. Having recorded that the impugned receipts pertained to FY 2007-08, the Tribunal set aside the addition made under section 68 for AY 2009-10. The Tribunal therefore allowed the assessee's challenge to the addition on merit without deciding other contentions which thereby became academic. [Paras 16, 17]

Addition of Rs.1.05 crores under section 68 is not sustainable for AY 2009-10 because the share application money and premium were received in FY 2007-08 (relevant to AY 2008-09) and therefore cannot be taxed in AY 2009-10.

Addition as unexplained expenditure where primary credit is not taxable in the year - Whether the 1% addition made as unexplained expenditure (alleged commission) could be sustained for AY 2009-10 - HELD THAT: - The Tribunal held that since the primary addition in respect of share application money and share premium for AY 2009-10 was deleted as not chargeable in that year, the consequential addition made by the Assessing Officer by way of presuming a 1% commission payment to investor companies also stood on no sustainable footing. The Tribunal further observed that the alleged commission addition lacked evidential support. [Paras 18]

The addition of 1% as unexplained expenditure is deleted as unsustainable and without evidence.

Final Conclusion: The appeal is allowed: the addition of share application money and share premium aggregating to Rs.1.05 crores and the consequential 1% unexplained expenditure addition are deleted for AY 2009-10 (the amounts were found to have been received in FY 2007-08 relevant to AY 2008-09), and other contentions including the validity of reopening were rendered academic.

In completed assessments additions under section 153A require incriminating material - Scope of section 153A post-search - Validity of additions based on non-seized or non-incriminating material - Application of principles under section 153C to section 153A regarding year wise incriminating material

In completed assessments additions under section 153A require incriminating material - Validity of additions based on non-seized or non-incriminating material - Application of principles under section 153C to section 153A regarding year wise incriminating material - Whether additions made under the notice issued post-search under section 153A in respect of assessment years which stood completed before the search are sustainable in the absence of any incriminating material relating to those years. - HELD THAT: - The Tribunal found that for the assessment years before the date of search the assessments had stood completed and the Assessing Officer's orders did not refer to or rely upon any incriminating material seized during the search. Relying on the decision in Pr. CIT v. Meeta Gutgutia as approved by the Supreme Court and the principle articulated in CIT v. Sinhgad Technical Education Society regarding year wise existence of incriminating material (applicable by parity to section 153A), the Tribunal held that additions in respect of completed assessment years can be sustained only if supported by incriminating material pertaining to those specific years. The Tribunal noted that earlier authorities relied upon by the Revenue which permit reassessment under section 153A absent seized incriminating material were distinguishable in view of the later binding precedents. The Tribunal also placed reliance on its own earlier decisions applying Meeta Gutgutia where additions not founded on seized incriminating material were disallowed. On the facts, since the Assessing Officer had not relied on any incriminating/seized material for the completed years, the additions could not be sustained. [Paras 5, 6, 7, 8]

Grounds allowing that additions under section 153A for assessment years completed before the search are not sustainable in the absence of incriminating material; the appeals are allowed on this legal ground and other grounds need not be adjudicated.

Final Conclusion: The Tribunal partly allowed the appeals: for the assessment years that stood completed before the date of search the additions made under proceedings initiated by notice under section 153A were quashed because no incriminating material relating to those years was found or relied upon; other grounds were not adjudicated.

Deemed dividend under section 2(22)(e) - Beneficial shareholder versus registered shareholder - Application of Section 40(a)(ia) for TDS on freight paid via agents - Applicability of Section 172 to agents of non-resident ship-owners - Default under Section 201(1) and inadequate/improper deduction - Allowability of depreciation and incidental vehicle expenses where vehicle is registered in director's name - Proportionate allowance of depreciation under section 38(2) - Under-invoicing additions - methodology, estimation and arms' length analysis

Deemed dividend under section 2(22)(e) - Beneficial shareholder versus registered shareholder - Deletion of addition treated as deemed dividend by invoking Section 2(22)(e) in respect of loan received from another company. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition. The authorities below were examined and it was noted that the assessee was not a registered shareholder of the lender-company and the persons common to both companies did not hold shareholdings that made them beneficial or substantial shareholders. The CIT(A) applied the binding ratio of the jurisdictional High Court and followed the line that Section 2(22)(e) applies where the recipient is a shareholder of the lending company (registered shareholder), and that mere common shareholding or beneficial interest short of the statutory thresholds does not attract the deeming provision. On the facts - absence of registered shareholding and the lender being a public limited company - the addition as deemed dividend was found unjustified and rightly deleted; no interference was called for. [Paras 4, 5, 6, 7]

Addition under Section 2(22)(e) deleted; Revenue's ground dismissed.

Application of Section 40(a)(ia) for TDS on freight paid via agents - Applicability of Section 172 to agents of non-resident ship-owners - Default under Section 201(1) and inadequate/improper deduction - Deletion of disallowance under Section 40(a)(ia) in respect of freight and related charges paid to C&F agents acting for non-resident ship-owners. - HELD THAT: - The Tribunal affirmed the CIT(A)'s finding that the payments to the Indian agents were composite bills comprising freight (in foreign currency) and handling/documentation (in INR), and that the agents acted on behalf of non-resident ship-owners such that Section 172 applied. Applying the CBDT circular position on agent-principal relationship and the consistent approach of the coordinate benches, the Tribunal held that where the payment to the non-resident ship-owner is reimbursement via an agent authorised under RBI guidelines, TDS under Section 194C/195 is not attracted on the freight component and the issue at most concerns inadequate deduction (not complete failure), so Section 40(a)(ia) disallowance was not called for. Alternative finding - if agents declared and paid tax on their share - also negated disallowance. On these bases the disallowance was rightly deleted. [Paras 8, 9, 10, 11]

Disallowance under Section 40(a)(ia) deleted; Revenue's grounds dismissed.

Allowability of depreciation and incidental vehicle expenses where vehicle is registered in director's name - Proportionate allowance of depreciation under section 38(2) - Part-allowance of depreciation and incidental car expenses, and full allowance of interest and insurance where vehicle purchased with company funds but registered in director's name. - HELD THAT: - On the material, the Tribunal sustained the CIT(A)'s approach that the car, though registered in the director's name, was acquired from company funds, appears as an asset/liability in the company books and was under company dominion. Following precedents and the statutory scheme permitting proportionate allowance, the CIT(A) (and Tribunal) allowed interest and insurance in full as business expenditure, and permitted depreciation and running/repair expenses to the extent of 75% while disallowing 25% for personal use, in the absence of supporting log-books to prove exclusive business use. The coordinate-bench decisions in the assessee's own case and other authorities were relied upon and no interference was warranted. [Paras 12, 13, 14, 15]

Depreciation and car expenses allowed to the extent of 75%; interest and insurance allowed in full; Revenue's grounds partly dismissed.

Under-invoicing additions - methodology, estimation and arms' length analysis - Deletion of addition on account of alleged under-invoicing of exports to sister concern. - HELD THAT: - The Tribunal concurred with the CIT(A) that the Assessing Officer's method of determining under-invoicing by averaging selected transactions and computing an overall percentage was unscientific and conjectural. The AO had not followed prescribed transfer-pricing/ALP procedures nor referred the matter to the TPO, and failed to take into account commercial factors (terms of payment, quantities, quality, market conditions) and the audited books. Given the limited volume of exports to the sister concern relative to total exports and absence of evidence of sham transactions (including no adverse findings from survey proceedings), the estimation was held unsustainable and the addition was deleted; reliance was placed on coordinate-bench rulings in the assessee's own case. [Paras 16, 17, 18, 19]

Addition for alleged under-invoicing deleted; Revenue's ground dismissed.

Final Conclusion: All grounds of the Revenue's appeal against the CIT(A)'s order for AY 2009-10 were dismissed: the deemed-dividend addition under Section 2(22)(e) was deleted; disallowance under Section 40(a)(ia) in respect of freight/agent payments was deleted; vehicle-related claims were allowed in part as directed by the CIT(A); and the under invoicing addition was deleted. The Revenue's appeal is therefore dismissed.

Reopening of assessment under section 147/148 - reason to believe - live link/causal nexus - principles of natural justice and Section 142(3) - reliance on inspector/field enquiry reports - unexplained cash credits under section 68 - initial burden on assessee to prove identity, genuineness and creditworthiness

Reopening of assessment under section 147/148 - reason to believe - live link/causal nexus - Validity of the Assessing Officer's initiation of reassessment proceedings under section 147/148. - HELD THAT: - The Tribunal examined the 'reasons recorded' relied upon by the AO and found them limited to (i) a survey at the corporate office, (ii) a statement by an employee of another group alleging that several companies at that address were 'paper companies', and (iii) general observations about shared registered offices and group control. The Reasons Recorded did not contain specific information showing that any particular transactions of the assessees were not genuine or that the share capital/share premium received by them were bogus. Applying settled law, the Tribunal held that a 'reason to believe' must have a rational connection or live link between the material available and the conclusion of escapement of income; mere suspicion, surmise or borrowed satisfaction is insufficient. On the facts, no such specific or tangible material existed to form the requisite belief; accordingly the AO lacked jurisdiction to reopen the assessments under section 147/148 and the resulting proceedings were non est. [Paras 7]

Reopening under section 147/148 quashed for lack of jurisdiction; cross objections on reopening allowed.

Principles of natural justice and Section 142(3) - reliance on inspector/field enquiry reports - Whether the Assessing Officer violated principles of natural justice by using field enquiry/inspector reports without confronting them to the assessees under section 142(3). - HELD THAT: - The Tribunal found that the AO primarily relied on Inspector/field enquiry reports which recorded that certain investor addresses were not found or premises were locked. Those enquiry results were reproduced for the first time in the assessment orders and were not put to the assessees prior to passing the assessments. Section 142(3) mandates that material collected under enquiry which is to be used for assessment must be first put to the assessee to afford an opportunity of being heard. The Tribunal held that conducting enquiries behind the assessee's back and utilizing those reports without confronting them violated the statutory procedure and the principles of natural justice as embodied in section 142(3), thereby vitiating the assessments. [Paras 7]

Assessments vitiated for breach of natural justice; cross objections on this ground allowed.

Unexplained cash credits under section 68 - initial burden on assessee to prove identity, genuineness and creditworthiness - reliance on inspector/field enquiry reports - On the merits, whether additions under section 68 (share capital/share premium) could be sustained. - HELD THAT: - Although the Tribunal quashed reopening and natural justice defects rendered further proceedings non est, it considered the merits for academic purposes. The assessees had produced confirmations, bank statements and ITR acknowledgments evidencing identity, genuineness and creditworthiness, and the investments were routed through banking channels. The AO did not refute these documents but relied on Inspector Reports that were unconfronted and contained inconsistencies (eg. erroneous aggregate figures and mixed findings across enquiries). Pre-AY 2013 position requires discharge of the initial onus by proving identity, genuineness and creditworthiness; source of source was not required. Given the unrefuted documentary evidence and the infirmities in the Inspector Reports, the Tribunal concluded that the AO failed to establish that the credits were unexplained and, on merits, deleted the additions. [Paras 10]

Departmental appeals dismissed; additions under section 68 deleted on merits (although proceedings were primarily quashed on jurisdictional and natural justice grounds).

Final Conclusion: All three cross objections challenging reopening and violation of natural justice are allowed and the reassessment proceedings under section 147/148 are quashed; consequentially, the Departmental appeals are dismissed and the additions under section 68 are deleted (the Tribunal also disposed the merits in favour of the assessees).

Exemption under section 54F - Capital gains reinvestment in purchase or construction of residential house within prescribed period - Deposit in Capital Gains Account Scheme (CGAS) conditional on non utilisation - Requirement of completion/occupation not prerequisite for exemption - Interpretation of proviso and section 54F(4) regarding deposit obligation

Exemption under section 54F - Capital gains reinvestment in purchase or construction of residential house within prescribed period - Deposit in Capital Gains Account Scheme (CGAS) conditional on non utilisation - Requirement of completion/occupation not prerequisite for exemption - Whether the assessee was entitled to full exemption under section 54F despite not depositing amounts in CGAS and despite the house not being complete in all respects within three years - HELD THAT: - The Tribunal analysed section 54F and held that the obligation to deposit unutilized net consideration in a notified Capital Gains Account Scheme arises only where the assessee has not invested the capital gains in purchase or construction of the new residential asset within the periods specified in section 54F(1). If the net consideration has been invested in construction within the three year period, section 54F(4)'s deposit requirement is not attracted. Reliance was placed on the jurisdictional High Court decision in CIT v. K.Ramachandra Rao for the proposition that an assessee who invests the entire sale consideration in construction within the stipulated period cannot be denied exemption merely for not depositing the amount in the CGAS. The Tribunal further held that the statutory words 'purchased' or 'constructed' require demonstration that the consideration has been parted and invested in the new asset; completion of the building in all respects or occupation is not a precondition for the exemption. Consequently, technical non completion aspects such as the absence of electricity bills in the assessee's name or the lack of municipal completion certification do not, by themselves, disentitle the assessee where it is established that the sale proceeds were applied to purchase/construction within the statutory period. The Tribunal noted consistent judicial authorities to the same effect and concluded that the assessee had paid the entire consideration to the builder within the period and was therefore entitled to the benefit of section 54F in full. [Paras 8]

The assessee is entitled to the full benefit of exemption under section 54F as the sale proceeds were invested in the construction/purchase of the residential house within the statutory period; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that where the capital gains proceeds are invested in construction/purchase of a residential house within the period prescribed by section 54F, the deposit obligation in CGAS does not apply and completion/occupation formalities (such as electricity bills in the assessee's name or municipal completion certificate) are not a prerequisite to claim the exemption; the exemption under section 54F was granted in full.

Applicability of Section 43CA - Value adopted by Stamp Duty Authority deemed to be full value of consideration - Effect of prior agreement and date of registration on valuation - Requirement of receipt of consideration by account payee cheque/electronic mode to attract agreement date - Prospective operation of taxing provision

Applicability of Section 43CA - Effect of prior agreement and date of registration on valuation - Requirement of receipt of consideration by account payee cheque/electronic mode to attract agreement date - Whether addition under Section 43CA to adopt stamp duty value as full value of consideration is sustainable where agreements to sell were executed before 01.04.2013 but sale deeds were registered after 01.04.2013 and full consideration was not received by account payee cheque before the agreement date. - HELD THAT: - The Tribunal upheld the findings of the authorities below that Section 43CA was in force during the relevant previous year and is attracted where the transfer by registered sale deed occurred in that year. Sub section (3) of Section 43CA permits, in cases of differing dates between agreement and registration, use of the value assessable by the Stamp Duty Authority as on the date of the agreement only if the conditions of sub section (4) are satisfied. Sub section (4) limits that benefit to cases where the amount of consideration or part thereof has been received by way of an account payee cheque, bank draft or prescribed electronic mode on or before the date of the agreement. On the facts, the assessee failed to establish receipt of consideration through account payee cheque/bank or electronic mode prior to the agreement date for the flats in question. The mere existence of a prior agreement, therefore, did not exclude the transaction from the scope of Section 43CA when the registered transfer took place after Section 43CA came into effect and the statutory condition for treating the agreement date as determinative was not fulfilled. The Tribunal also observed that earlier decisions relied upon by the assessee were distinguishable on facts, particularly where the entire consideration had been paid prior to the operative date of the provision. [Paras 8, 9]

Addition under Section 43CA was sustained; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that Section 43CA applied to the sales where sale deeds were executed after 01.04.2013 and the assessee did not satisfy the condition of receipt of consideration by account payee cheque/electronic mode before the agreement date, thereby upholding the addition.

Allowability of expenditure by a co-operative bank as business expenditure - Allowability of payments to member focused funds (education/gift funds) where benefit accrues to members - Deduction for provision to Special Long Term Finance Fund under the statutory special reserve regime - Allowability and computation of investment depreciation including set off/write back of earlier year losses - Reliance on and application of Tribunal decisions in assessee's own case and coordinate bench precedent

Allowability of expenditure by a co-operative bank as business expenditure - Allowability of payments to member focused funds (education/gift funds) where benefit accrues to members - Reliance on and application of Tribunal decisions in assessee's own case and coordinate bench precedent - Deletion of addition of Rs. 3,00,000 made by AO on account of payment to Education Fund - HELD THAT: - The Tribunal affirmed the CIT(A)'s deletion of the disallowance because the issue was squarely covered by the coordinate bench decision in Surat National Co operative Bank Ltd. and the Gujarat High Court precedents relied upon therein. The Tribunal found no material distinction in facts and no variation brought to its notice; the Revenue did not controvert those precedents. Accordingly the addition on account of an education fund, treated as an expenditure connected with the bank's business for the benefit of members, was held allowable. [Paras 4]

Ground of appeal dismissed; order of CIT(A) affirmed.

Deduction for provision to Special Long Term Finance Fund under the statutory special reserve regime - Reliance on and application of Tribunal decisions in assessee's own case and coordinate bench precedent - Deletion of addition of Rs. 48,00,000 made by AO disallowing deduction claimed as provision to Special Long Term Finance Fund under the special reserve head - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition on the basis that identical issues had been consistently decided in the assessee's own case for earlier assessment years and by the coordinate bench in Surat National Co operative Bank Ltd. The CIT(A)'s factual findings and computations remained uncontroverted before the Tribunal. In view of these consistent precedents and the absence of any distinguishing material, the claimed provision to the special long term finance fund was held allowable. [Paras 10]

Ground of appeal dismissed; order of CIT(A) affirmed.

Allowability and computation of investment depreciation including set off/write back of earlier year losses - Reliance on and application of Tribunal decisions in assessee's own case and coordinate bench precedent - Deletion of addition of Rs. 3,06,81,350 made by AO on account of disallowance of investment depreciation - HELD THAT: - The Tribunal accepted the CIT(A)'s verification of the working submitted by the assessee showing prior year investment depreciation claims and the adjustment of earlier year losses against current year figures. The Tribunal noted that the CIT(A) had analysed the schedules and workings, and those findings were uncontroverted by the Revenue. Following the Tribunal's earlier order in the assessee's own case (which had examined the schedules and permitted the claim to the extent shown), the Tribunal found no infirmity in allowing the investment depreciation as computed on the working presented. [Paras 14]

Ground of appeal dismissed; order of CIT(A) affirmed.

Final Conclusion: The Tribunal, following consistent decisions in the assessee's own case and coordinate bench precedents, affirmed the CIT(A)'s deletions in respect of (i) payment to Education Fund, (ii) provision to Special Long Term Finance Fund, and (iii) investment depreciation; the Revenue's appeal is dismissed.

Arm's length price - Transfer pricing comparability and FAR analysis - Inclusion and exclusion of comparables - Provision of section 28(iv) - benefit or perquisite - Ownership transfer test for taxable benefit - Remand for factual verification

Arm's length price - Transfer pricing comparability and FAR analysis - Inclusion and exclusion of comparables - Selection of comparable companies for determination of arm's length price in respect of software development services and consequential redetermination of ALP. - HELD THAT: - The Tribunal examined the rival contentions on inclusion and exclusion of specific comparables and applied the coordinate-bench jurisprudence addressing functional comparability and FAR. Following the findings in the co ordinate bench decision in M/s. NXP India Pvt. Ltd., the Tribunal directed exclusion of Larsen & Toubro Infotech Ltd. and C.G. VAK Software Exports Ltd., and directed inclusion of R. Systems International Ltd. and Akshay Software Technologies Ltd. The Tribunal therefore set aside the final list used by the TPO/DRP and remitted the matter to the AO/TPO to re-determine the arm's length price after considering the directed inclusions/exclusions and to give effect to the revised comparables in the TP computation. [Paras 12]

Directed exclusion of L&T Infotech and C.G. VAK and inclusion of R. Systems International and Akshay Software Technologies; AO/TPO to re-determine ALP accordingly.

Provision of section 28(iv) - benefit or perquisite - Ownership transfer test for taxable benefit - Remand for factual verification - Taxability of assets received free of cost from the holding company under section 28(iv) and whether such receipt constitutes a taxable benefit. - HELD THAT: - The Tribunal observed that the determinative question is whether the right of ownership in the assets sent by the AE was transferred to the assessee. If ownership transferred, their value would be assessable as a benefit under section 28(iv); if ownership remained with the AE and assets were only supplied for use in testing/validation, section 28(iv) would not apply. The Tribunal found that the factual aspects necessary to decide this question were not on record and that the DRP's reliance on capitalization in the books did not settle the ownership issue. Accordingly, the Tribunal remitted the matter to the AO for fresh factual examination and directed the assessee to furnish relevant details and clarify whether ownership was transferred. [Paras 22]

Issue remitted to AO for factual inquiry on whether ownership of assets was transferred; assessee directed to furnish relevant details.

Remand for factual verification - Claim for MAT credit which was not granted by the assessing authorities. - HELD THAT: - The Tribunal recorded that the question concerning grant of MAT credit requires factual verification by the AO. No final adjudication on merits was made by the Tribunal; the matter was therefore restored to the file of the AO for fresh examination and appropriate decision on the factual and documentary record. [Paras 23]

Matter remitted to AO for factual verification and adjudication on grant of MAT credit.

Final Conclusion: The Tribunal directed a re-determination of the arm's length price after modifying the final list of comparables as indicated, and remitted the questions regarding taxation of assets received free of cost under section 28(iv) and the claim for MAT credit to the AO for fresh factual examination; the appeal is treated as allowed for statistical purposes.

Penalty under section 271(1)(b) for non-compliance with assessment notices - reasonable cause and non-imposition of penalty under section 273B - effect of acceptance of explanations in appellate/quantum proceedings on levy of penalty - adjournment requests and electronic communications as circumstances constituting reasonable cause for non-compliance - reassessment validity and non-disposal of objection to reopening as relevant to penalty assessment - best judgment assessment under section 144 and its relevance to waiver of non-compliance

Penalty under section 271(1)(b) for non-compliance with assessment notices - reasonable cause and non-imposition of penalty under section 273B - effect of acceptance of explanations in appellate/quantum proceedings on levy of penalty - Whether the penalty under section 271(1)(b) was sustainable when the explanations for cash deposits filed before the Assessing Officer were subsequently accepted in the first appellate/quantum proceedings. - HELD THAT: - The Tribunal found that the information and explanations which the Assessing Officer required for completing assessment were in fact filed by the assessee before the Assessing Officer and were later accepted by the first appellate authority when deleting the additions in the quantum appeal. Having regard to the acceptance of those explanations on merit in the appellate proceedings, the Tribunal held that the non-compliance amounted to a technical or venial breach and, in view of the bar in the statute against imposing penalty where reasonable cause exists, penalty was not imposable. The Tribunal therefore concluded that sustaining the penalty was unjustified and cancelled the penalty upheld by the CIT(A). [Paras 6]

Penalty sustained under section 271(1)(b) set aside because explanations filed by the assessee were accepted in quantum appeal and constituted a reasonable cause under section 273B; penalty cancelled.

Adjournment requests and electronic communications as circumstances constituting reasonable cause for non-compliance - best judgment assessment under section 144 and its relevance to waiver of non-compliance - reassessment validity and non-disposal of objection to reopening as relevant to penalty assessment - Whether specific defaults listed by the Assessing Officer were excusable in view of adjournment applications, emails seeking adjournments, the Assessing Officer's own adjournments, and the fact that objection to reopening was not disposed of. - HELD THAT: - The Tribunal examined the table of alleged defaults and found that for several hearings the assessee had sought adjournments by email or had attended on the relevant date leading to adjournment; in some instances the Assessing Officer himself had adjourned the matter. The Tribunal concluded there was reasonable cause for non-attendance or delay in filing details in respect of specific entries (serial Nos. 3, 5, 6, 7 and 8 as summarized by the CIT(A)), and observed that many defaults occurred within a short one month period. The Tribunal also noted that the assessee's objection to the reopening was not disposed of, which is a prerequisite for valid reassessment, and treated these circumstances as further support for finding the breaches to be technical. While the CIT(A) relied on the fact that an order under section 144 was passed (and cited precedent that waiver may not apply where order is under section 144), the Tribunal held that the factual acceptance of explanations on appeal and the surrounding adjournment communications meant that penalty could not be sustained. [Paras 6]

Defaults in several listed hearings were excused as reasonable cause existed (adjournment requests, emails, Assessing Officer's adjournments and non-disposal of reopening objection); such defaults did not justify imposition of penalty.

Final Conclusion: The Tribunal allowed the appeal, held that the explanations filed by the assessee were ultimately accepted and that adjournment requests and non-disposal of the reopening objection constituted reasonable cause, and accordingly cancelled the penalty sustained by the CIT(A).

Defective penalty notice - vagueness and absence of specific charge in penalty proceedings - penalty under section 271(1)(c) for concealment or for furnishing inaccurate particulars of income - inconsistency between grounds stated in penalty initiation and penalty order - deletion of penalty on procedural infirmity - assessment under section 153A read with section 143(3)

Defective penalty notice - vagueness and absence of specific charge in penalty proceedings - penalty under section 271(1)(c) for concealment or for furnishing inaccurate particulars of income - inconsistency between grounds stated in penalty initiation and penalty order - Validity of penalty levied under section 271(1)(c) for A.Y. 2006-07 in view of the alleged vagueness and internal inconsistency of the penalty notice and order. - HELD THAT: - The Commissioner (Appeals) found that the notice initiating penalty proceedings failed to specify whether penalty was invoked under section 271(1)(c) or 271(1)(b) and did not clearly state whether it was for concealment of income or for furnishing inaccurate particulars. The Commissioner (Appeals) also observed that paragraph 3 of the penalty order treated the matter as one of furnishing inaccurate particulars whereas paragraph 7 treated it as concealment, producing an internal contradiction. The Tribunal noted that Revenue did not point to any flaw in these findings of the Commissioner (Appeals). On the material before it the Tribunal concurred that the notice and penalty order suffered from legal infirmities due to vagueness and inconsistency, rendering the imposition of penalty untenable, and therefore declined to interfere with the deletion of penalty by the Commissioner (Appeals). [Paras 8, 9]

Penalty levied under section 271(1)(c) for A.Y. 2006-07 deleted; Revenue's appeal dismissed.

Deletion of penalty on procedural infirmity - assessment under section 153A read with section 143(3) - identical issue across assessment years - Whether the penalty deletion for A.Y. 2006-07 applies equally to A.Y. 2007-08 where the same defect and reasoning exist. - HELD THAT: - The Tribunal recorded that the issue in A.Y. 2007-08 was identical to that in A.Y. 2006-07 and that the Commissioner (Appeals) had deleted the penalty for similar reasons. Applying the same reasoning and in the absence of any distinguishing submission or material from Revenue, the Tribunal held that no interference was warranted in the second appeal as well. [Paras 10, 11]

Revenue's appeal for A.Y. 2007-08 dismissed for the same reasons; penalty deletion upheld.

Final Conclusion: The Tribunal upheld the deletion of penalty proceedings for both A.Y. 2006-07 and A.Y. 2007-08 on the ground that the penalty notice and order were vague and internally inconsistent as to the statutory provision and the nature of the charge, and dismissed the Revenue's appeals.

Exemption under section 11 - registration under section 12A / 12AA - condonation of delay in filing Form 10 - loss of records due to natural calamity - continuity of charitable status evidenced by benefits under section 80G and exemption under section 10(23C)

Exemption under section 11 - registration under section 12A / 12AA - condonation of delay in filing Form 10 - loss of records due to natural calamity - continuity of charitable status evidenced by benefits under section 80G and exemption under section 10(23C) - Whether the addition made by the AO treating the assessee's surplus as business income for lack of a valid registration under section 12A could be sustained for A.Y. 2014-15. - HELD THAT: - The assessee had longstanding registration under section 12A/12AA since 1972 and had received recurring concessions such as benefits under section 80G and exemption under section 10(23C), which indicated continuous recognition as a charitable institution. The assessee's paper records were lost in the Uttarakhand floods and a fresh application/Form 10 was submitted (manually on 29.09.2014 and later electronically). The CIT(A), after obtaining the AO's remand report, recorded that there was no change in the aims and objectives of the assessee, that earlier registration existed (as reflected in departmental records and prior assessment orders), and relied on the settled principle (as noted in Nagpur Hotel Owners Association) that delay in submitting Form 10 can be condoned. Having examined the documents and the AO's remand observations, the CIT(A) held that the addition could not be sustained. The Tribunal found no error in those findings, accepted the explanation of loss of records due to a natural calamity, and endorsed the deletion of the addition. [Paras 5, 7]

The addition made by the AO was deleted and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition treating the assessee's surplus as business income for A.Y. 2014-15, accepting the assessee's longstanding registration, the impact of loss of records due to floods, the belated filing of Form 10, and the continuity of charitable status; the revenue's appeal is dismissed.

Pre-deposit for prosecution of appeals before the Tribunal - requirement of 10% aggregate pre-deposit inclusive of earlier 7.5% - adjustment of sanctioned refund against sanctioned drawback - remand for fresh consideration in light of higher court precedent

Pre-deposit for prosecution of appeals before the Tribunal - requirement of 10% aggregate pre-deposit inclusive of earlier 7.5% - The legality of requiring the appellant to make an additional 10% pre-deposit over and above the 7.5% pre-deposit made at the first appellate stage for hearing of a second appeal before the CESTAT. - HELD THAT: - The Tribunal examined the applicable rule as laid down by the Hon'ble Delhi High Court in Santani Sales Organization, which held that on filing a second appeal before the Tribunal the appellant is required to deposit 10% of the amount of duty/penalty as confirmed by the first appellate authority inclusive of the 7.5% pre-deposit made for the first appeal; the additional 10% must not be in addition to and over and above the 7.5% already deposited. Applying that principle, the Tribunal found the view taken by the Commissioner (Appeals) - that the appellant must pay 7.5% at the first appellate stage plus a further 10% at the Tribunal stage (total 17.5%) - to be illegal. The Tribunal held that the correct approach is that the total pre-deposit required for adjudication at the Tribunal stage aggregates to 10%, constituted by the earlier 7.5% plus an additional 2.5% at the Tribunal stage, and accordingly modified the impugned order. The appeal was therefore allowed by way of remand for passing fresh orders in conformity with the said legal position. [Paras 4]

Impugned requirement to pay 17.5% (7.5% + 10%) at Tribunal stage held illegal; appeal C/12124/2018 allowed by way of remand to pass fresh order in accordance with the principle that the Tribunal-stage pre-deposit aggregates to 10% inclusive of the earlier 7.5%.

Adjustment of sanctioned refund against sanctioned drawback - remand for fresh consideration in light of higher court precedent - Whether the sanctioned and disbursed refund was correctly adjusted against subsequent sanctioned drawback claims. - HELD THAT: - The Tribunal noted that the adjustment of the refund against the drawback sanction was consequential to the departmental appeal and the arrangements reached between the Deputy Commissioner and the appellant, and that the outcome of the appeal concerning the pre-deposit requirement (C/12124/2018) has a direct bearing on the correctness of that adjustment. Given the modification of the pre-deposit position, the Tribunal concluded that the question of adjustment requires fresh consideration by the Adjudicating Authority in the light of the decision in the remanded appeal. Therefore, the Tribunal did not decide the adjustment on merits but directed remand for the Adjudicating Authority to decide afresh solely on the aspect of adjustment of the sanctioned refund against the drawback claim in accordance with the Tribunal's observations. [Paras 4, 5]

Impugned orders in C/12122/2018 and C/12123/2018 modified; both appeals allowed by way of remand to the Adjudicating Authority to decide afresh the question of adjustment of the sanctioned refund against drawback in light of the order in Appeal No C/12124/2018.

Final Conclusion: The Tribunal held that requiring an additional 10% pre-deposit over and above the 7.5% deposited at the first appellate stage is unlawful and remanded the matter for fresh adjudication in conformity with the principle that the Tribunal-stage pre-deposit aggregates to 10% inclusive of the earlier 7.5%; consequentially, the adjustment of the sanctioned refund against the sanctioned drawback was remanded to the Adjudicating Authority for fresh decision in light of that conclusion.

Rebuttable presumption of service - service/communication of order - presumption arising from dispatch by registered post - limitation for filing appeal - remand for consideration on merits - power of DRI to issue show cause notice

Rebuttable presumption of service - service/communication of order - presumption arising from dispatch by registered post - limitation for filing appeal - Whether the appeal was rightly rejected as time barred on the ground that the Order in Original was dispatched by registered post. - HELD THAT: - The Tribunal held that dispatch of the Order in Original by registered post raises only a rebuttable presumption of service; where the appellant positively contends non receipt, the burden shifts to the department to prove actual communication. The Tribunal relied on the statutory language referring to "communication" and observed that mere entry in the dispatch register or sending by registered/speed post is not conclusive proof of service unless supported by evidence of delivery (for example, tracking proof or other concrete proof of receipt). In the absence of such proof, the presumption of service cannot be treated as unrebutted and the Commissioner (Appeals) erred in dismissing the appeal as time barred. The Tribunal noted and considered earlier judicial decisions on service and dispatch (including CC Vs Sayed Ali , Mangali Impex Ltd. Vs Union of India , Saral Wire Craft Pvt. Ltd. Vs CC & ST , and V3 International Vs CC (Appeals) ) in reaching this conclusion and found the appellant's plea of non receipt to be sufficiently established on the material on record. [Paras 5]

Impugned finding that the appeal was time barred set aside for want of proof of service; appellant entitled to contest the matter on merits.

Remand for consideration on merits - power of DRI to issue show cause notice - Whether the matter should be remitted to the Commissioner (Appeals) for adjudication on merits. - HELD THAT: - Having held that service was not sufficiently proved and that the appeal could not be dismissed as barred by limitation, the Tribunal did not decide the substantive merits. Noting that the question of DRI's power to issue show cause notices formed part of the merits and that related litigation was pending in higher fora, the Tribunal exercised its discretion to remit the matter to the Commissioner (Appeals) for fresh consideration on merits. The remand was directed so that the Commissioner (Appeals) may adjudicate the controversy afresh after giving the appellant an opportunity to be heard. [Paras 8, 9]

Matter remanded to the Commissioner (Appeals) to be decided on merits after affording opportunity to the appellant; appeal allowed by way of remand.

Final Conclusion: The Order in Original's dispatch by registered post did not amount to conclusive proof of service in the absence of delivery evidence; the Tribunal set aside the Commissioner (Appeals)'s limitation dismissal and remitted the matter to the Commissioner (Appeals) for fresh adjudication on merits.

Time-bar for Review Committee under Section 129D(3) of the Customs Act, 1962 - restoration of appeal - recall of final order - appeal rejected as time-barred versus adjudication on merits - remand for fresh consideration on merits

Time-bar for Review Committee under Section 129D(3) of the Customs Act, 1962 - recall of final order - restoration of appeal - Whether the Review Committee's order was passed within the three-month period and whether the Final Order should be recalled and the appeal restored. - HELD THAT: - The Tribunal accepted the departmental contention that the statutory period of three months for the Review Committee is to be computed from the date of communication, namely 11.03.2019, and thus the three-month period expired on 11.06.2019. The Review Order in the present case was held to be within that statutory time-limit, rendering the contrary statement in the Final Order an apparent mistake requiring rectification. Accordingly, the Tribunal recalled the earlier Final Order No. 40784 of 2020 dated 08.09.2020 and allowed the Miscellaneous Application to restore the appeal. [Paras 2]

Final Order recalled and the appeal restored because the Review Committee's order was within the prescribed three-month period.

Appeal rejected as time-barred versus adjudication on merits - remand for fresh consideration on merits - Whether the First Appellate Authority's rejection of the Revenue's appeal as time barred was correct and whether the matter should be remanded for fresh decision on merits. - HELD THAT: - On perusal of the impugned order of the First Appellate Authority, the Tribunal found no discussion or adjudication on the merits; the First Appellate Authority had rejected the appeal solely as time barred. The Tribunal disagreed with that finding of time bar and observed that, since the question of time limitation had been resolved in favour of the Revenue, the appropriate course is to set aside the impugned order and remit the matter to the First Appellate Authority for fresh decision on merits. The First Appellate Authority was directed to afford reasonable opportunities to both parties and pass a fresh order in accordance with law. [Paras 3, 4]

Impugned order set aside and the matter remitted to the First Appellate Authority for fresh adjudication on merits with opportunity to both sides.

Final Conclusion: The Miscellaneous Application for restoration is allowed; the Final Order is recalled and the appeal restored; the First Appellate Authority's order is set aside and the matter remanded for fresh decision on merits after affording opportunity to both parties.

Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Convening of creditors' meetings for consideration of a scheme of amalgamation - Consent affidavits as ground for dispensing with meetings - Compliance with procedural requirements of Companies (CAA) Rules, 2016 - Appointment of Chairperson and Scrutinizer for creditors' meetings - Notice to statutory authorities and time for representations

Consent affidavits as ground for dispensing with meetings - Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Dispensation of meetings of shareholders and certain classes of creditors where unanimous consent affidavits have been filed. - HELD THAT: - The Tribunal examined the consent affidavits filed by all equity shareholders of the applicant companies and by the secured creditors of Applicant Company No. 2 and Applicant Company No. 4 and by the unsecured creditors of Applicant Company No. 3, and was satisfied that those persons had waived their right to participate in meetings. On that basis the Tribunal dispensed with the meetings of the shareholders of all applicant companies and with the meetings of the secured creditors of Applicant Companies No. 2 and No. 4 and with the meeting of unsecured creditors of Applicant Company No. 3. The Tribunal also recorded that meetings need not be convened where no such class of creditors exists (for example, Applicant Company No. 1 has no secured or unsecured creditors and Applicant Company No. 3 has no secured creditors).

Meetings of the shareholders of all applicant companies, of secured creditors of Applicant Companies No. 2 and No. 4, and of unsecured creditors of Applicant Company No. 3 are dispensed with.

Convening of creditors' meetings for consideration of a scheme of amalgamation - Compliance with procedural requirements of Companies (CAA) Rules, 2016 - Direction to convene meetings of unsecured creditors of Applicant Company No. 2 and Applicant Company No. 4 and the procedural directions governing those meetings. - HELD THAT: - Having allowed dispensation where consents existed, the Tribunal directed that separate meetings of the unsecured creditors of Applicant Company No. 2 and Applicant Company No. 4 be convened for consideration of the Scheme of Amalgamation. The Tribunal prescribed time, place and advance-publication requirements for the meetings, directed service of notices and accompanying documents (including the Scheme and the explanatory statement required under the Act and Rules) to creditors as per the companies' registers as on 31.5.2021, publication in specified newspapers, and timelines for compliance with Rules 6, 8, 12 and 14 of the Companies (CAA) Rules, 2016. The Chairperson was empowered to determine disputed entries in creditor registers for meeting purposes and to decide procedural questions at the meetings.

Meetings of the unsecured creditors of Applicant Company No. 2 and Applicant Company No. 4 shall be convened with the specified notice, publication and procedural directions, and the Chairperson shall have the powers specified.

Appointment of Chairperson and Scrutinizer for creditors' meetings - Compliance with procedural requirements of Companies (CAA) Rules, 2016 - Appointment of the Chairperson and Scrutinizer for the unsecured creditors' meetings and directions for reporting results to the Tribunal and statutory authorities. - HELD THAT: - The Tribunal appointed a named Chairperson to preside over the meetings of unsecured creditors of Applicant Companies No. 2 and No. 4 and appointed a Practicing Company Secretary as Scrutinizer. The Chairperson was directed to issue the advertisements and notices, may avail assistance for carrying out those directions, and must file an affidavit at least seven days before the meetings to confirm compliance with notice and advertisement requirements. The Chairperson must also report the result of the meetings to the Tribunal in Form CAA 4 within 30 days of conclusion. Further, notices in Form CAA.3 together with requisite documents must be sent to statutory authorities (Regional Director, ROC, Income Tax Authorities and Official Liquidator where applicable) affording them 30 days to make representations.

Mr. Bhavesh Pabari appointed Chairperson and Mr. Ankit Thakrar appointed Scrutinizer; directions issued for pre-meeting compliance, filings and notices to statutory authorities with timelines for representations and reporting.

Compliance with procedural requirements of Companies (CAA) Rules, 2016 - Dispensation of meetings under Sections 230-232 of the Companies Act, 2013 - Satisfaction of statutory requirements under Sections 230-232 of the Companies Act, 2013 and consequent allowance of the CA (CAA) application. - HELD THAT: - The Tribunal observed that the present application complied with the requisite criteria of Sections 230 to 232 of the Companies Act, 2013 and the applicable Rules, including necessary board approvals and prescribed accounting treatment statements. On that basis, and having made the directions described above, the Tribunal allowed the company application under Sections 230-232 and disposed of CA (CAA) 39 of 2021.

The application under Sections 230-232 is allowed and CA (CAA) 39 of 2021 is disposed of subject to the directions contained in the order.

Final Conclusion: The Tribunal, satisfied with the filed consents and statutory compliance, dispensed with specified meetings, directed convening of unsecured creditors' meetings for Applicant Companies No. 2 and No. 4 with detailed procedural safeguards (notice, publication, appointment of Chairperson and Scrutinizer, reporting and statutory notices), and allowed CA (CAA) 39 of 2021 under Sections 230-232 of the Companies Act, 2013.

Scheme of Arrangement sanction under Sections 230-232 of the Companies Act, 2013 - Appointed Date - Accounting treatment on amalgamation and compliance with applicable Accounting Standards (AS-14/Ind AS 103; AS-5/Ind AS 8) - Set-off of fees paid on authorised capital upon amalgamation - Compliance with section 186(7) regarding loans and advances to related parties - Compliance with section 188 on related party transactions - Protection of creditors' interests in a scheme of arrangement - Dissolution of transferor companies without winding up - Statutory filing and stamping directions following sanction

Scheme of Arrangement sanction under Sections 230-232 of the Companies Act, 2013 - Protection of creditors' interests in a scheme of arrangement - Sanction of the Scheme of Arrangement and its binding effect on the transferor companies, the transferee company and their shareholders. - HELD THAT: - The Tribunal considered the petitions under Sections 230 to 232 and other applicable provisions, the convening and approval of shareholders' meetings, the reports of the Official Liquidator and the Regional Director and the compliance affidavits filed by the petitioner companies. No objector opposed the scheme. The Official Liquidator reported that the affairs of the transferor companies had been conducted properly and recommended dissolution. The Regional Director's observations were addressed by the petitioners and accepted. On this basis the Tribunal held the Scheme to be fair and reasonable, not violative of law or public policy, and granted sanction making the Scheme binding on the parties. [Paras 1, 5, 21, 22, 23]

The Scheme is sanctioned and declared binding on the transferor companies, the transferee company and their respective shareholders.

Appointed Date - Fixation of the Appointed Date for the Scheme. - HELD THAT: - The Tribunal recorded that the Appointed Date, as defined in the Scheme and undertaken by the petitioners, is 1st April 2019 and so fixed the Appointed Date accordingly. [Paras 13, 23]

Appointed Date is fixed as 1st April 2019.

Accounting treatment on amalgamation and compliance with applicable Accounting Standards (AS-14/Ind AS 103; AS-5/Ind AS 8) - Acceptance of petitioners' undertaking on accounting treatment and compliance with applicable accounting standards in relation to the amalgamation. - HELD THAT: - The Regional Director queried accounting entries and treatment under applicable standards. The petitioners undertook to comply with AS-14 (Ind AS 103) and other applicable accounting standards (such as AS-5/Ind AS 8), to revise Clause 15.5 to reflect that differences will be credited to Capital Reserve and shortfall debited to Goodwill (and not to Profit and Loss), and to pass necessary entries. The Regional Director, in a supplementary report, accepted these clarifications as satisfactory. The Tribunal recorded and accepted these undertakings. [Paras 9, 10, 12, 17, 21]

Petitioners' undertaking on accounting treatment and compliance with applicable accounting standards accepted; Clause 15.5 to be revised as undertaken.

Compliance with section 186(7) regarding loans and advances to related parties - Requirement to ensure compliance with section 186(7) of the Companies Act, 2013 in respect of loans and advances disclosed in the financial statements. - HELD THAT: - The Regional Director observed that transferor and transferee companies showed loans and advances to group concerns and questioned compliance with section 186(7). The petitioners explained the commercial nature of the advances, absence of inter-se balances between the petitioners, and the lack of returns to date. The Transferee Company and petitioners undertook to ensure compliance with section 186(7). The Regional Director accepted the explanation in the supplementary report and the Tribunal recorded that the Transferee Company shall ensure compliance. [Paras 10, 15, 16, 21]

Petitioners to ensure compliance with section 186(7); the Tribunal accepted the undertaking.

Set-off of fees paid on authorised capital upon amalgamation - Undertaking to set off fees paid by transferor companies on their authorised capital against any fees payable by the transferee company post-amalgamation. - HELD THAT: - The Regional Director directed compliance with the provision that fees, if any, paid by transferor companies on their authorised capital shall be set off against fees payable by the transferee company after amalgamation. The petitioners undertook to comply with this requirement in accordance with section 232(3)(i) of the Companies Act, 2013. The Tribunal recorded and accepted this undertaking. [Paras 10, 14, 21]

Petitioners to set off fees paid on authorised capital as undertaken; the undertaking is accepted.

Compliance with section 188 on related party transactions - Undertaking to ensure compliance with section 188 of the Companies Act, 2013 where applicable. - HELD THAT: - The Regional Director observed that section 188 compliance should be ensured. The petitioners stated that as of the date they had not entered into related party transactions attracting section 188 and undertook to ensure compliance going forward. The Tribunal accepted this undertaking. [Paras 10, 18, 21]

Petitioners to ensure compliance with section 188; undertaking accepted.

Dissolution of transferor companies without winding up - Dissolution of the transferor companies pursuant to the sanctioned scheme without the process of winding up. - HELD THAT: - Having sanctioned the Scheme and on the Official Liquidator's report that affairs were conducted properly, the Tribunal ordered that the transferor companies shall be dissolved without winding up in accordance with the Scheme and statutory provisions. [Paras 22, 23]

Transferor companies to be dissolved without the process of winding up.

Statutory filing and stamping directions following sanction - Directions to the petitioner companies regarding statutory filings with the Registrar of Companies and the Superintendent of Stamps and authentication of the sanction order. - HELD THAT: - The Tribunal directed the petitioner companies to lodge a copy of the Order and Scheme with the Registrar of Companies electronically in E-Form INC-28 within thirty days, and directed the Transferee Company to lodge a certified copy with the Superintendent of Stamps for adjudication within sixty days. The Tribunal further directed concerned regulatory authorities to act on a certified copy authenticated by the Tribunal's Registrar. [Paras 23]

Petitioners to comply with statutory filing and stamping directions as ordered.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013 as fair and reasonable, fixed the Appointed Date as 1st April 2019, accepted petitioners' statutory and accounting undertakings (including compliance with applicable accounting standards, sections 186(7), 188 and set-off of authorised capital fees), ordered dissolution of the transferor companies without winding up, and directed prescribed filings and stamping formalities to be completed within stipulated periods.

Winding up for fraudulent conduct - default in filing financial statements and annual returns for five consecutive financial years - misfeasance and misconduct by promoters/directors - sanction of Central Government to prosecute winding up - appointment of Official Liquidator - restraint on disposition of assets pending winding up - costs and incidental to petition to be paid from company assets

Default in filing financial statements and annual returns for five consecutive financial years - winding up for fraudulent conduct - misfeasance and misconduct by promoters/directors - sanction of Central Government to prosecute winding up - Whether the Company, Bhasank Foods Pvt. Ltd., should be wound up under the provisions of Section 271(c) and (d) of the Companies Act, 2013. - HELD THAT: - The Tribunal examined the Registrar's records and annexed Master Data and found that the company defaulted in filing its balance sheet and annual return for the immediately preceding five or more consecutive financial years and has not filed income tax returns after 31 March 2012. The company was found not to be functioning for more than five subsequent financial years. The Tribunal also noted findings of fraudulent conduct in the affairs of related group companies pursuant to SFIO reports and concluded there is reason to believe promoters/directors guilty of misfeasance and misconduct. The petitioner had obtained prior sanction of the Central Government and the company failed to respond to statutory intimation and notices; sufficient opportunities were given and served notices returned unserved. On these facts the Tribunal was satisfied that the statutory predicates under clauses (c) and (d) of Section 271 were made out and that winding up is proper in the interest of justice. [Paras 17, 18]

The petition to wind up Bhasank Foods Pvt. Ltd. under Section 271(c) and (d) is allowed; the Tribunal directed winding up of the company.

Appointment of Official Liquidator - winding up procedures and timeline - Appointment of a liquidator and directions for taking possession and conduct of winding up. - HELD THAT: - In exercise of its powers on allowing the winding up petition, the Tribunal appointed the Official Liquidator attached to the Hon'ble High Court, Guwahati, as Liquidator for the company. The Liquidator was directed to take immediate possession of assets, properties and books of accounts, to submit quarterly progress reports beginning the quarter ending June 2021, and to ensure completion of the winding up process within one year from the date of the order. [Paras 19]

Official Liquidator attached to the Hon'ble High Court, Guwahati is appointed as Liquidator with directions to take possession and to complete winding up within the stipulated timeline.

Restraint on disposition of assets pending winding up - costs and incidental to petition to be paid from company assets - Interim and consequential reliefs ancillary to winding up: restraint on disposal of assets and payment of costs from company assets. - HELD THAT: - Concomitant with the winding up order, the Tribunal restrained the company from disposing of its assets and properties pending completion of winding up. It further directed that costs and incidental expenses of the petition be paid out of the proceeds of the company's assets and that winding up costs must not increase due to any delay in completion of the process. The Registry was directed to communicate the order to the Liquidator by speed post and e-mail, if available. [Paras 19]

The company is restrained from disposing of its assets; costs and incidental to the petition are payable out of the company's assets, and the Registry is to send the order to the Liquidator.

Final Conclusion: The Tribunal allowed the ROC's petition and ordered winding up of Bhasank Foods Pvt. Ltd. under Sections 271(c) and (d) of the Companies Act, 2013; the Official Liquidator attached to the High Court, Guwahati was appointed as Liquidator with directions to take possession, submit quarterly progress reports and complete winding up within one year, the company was restrained from disposing assets, and costs were ordered to be paid from the company's assets.

Consent of the majority of the unitholders - winding up of a mutual fund scheme - harmonious construction of Regulations 39 to 42 with Regulation 18(15)(c) - cease-and-freeze effect of Regulation 40 - trustees' opinion to wind up under Regulation 39(2)(a) - timing of seeking unitholders' consent (post-publication under Regulation 39(3)) - SEBI's powers under Section 11 and Section 11B of the SEBI Act - challenge of manifest arbitrariness / excessive delegation to trustees

Consent of the majority of the unitholders - Regulation 18(15)(c) - Meaning of 'consent' in Regulation 18(15)(c). - HELD THAT: - The Court held that 'consent' in Regulation 18(15)(c) denotes affirmative consent of the majority of unitholders present and voting (i.e. simple majority of votes cast), not the majority of the entire body of unitholders. Silence or abstention by absent unitholders is neither acceptance nor rejection. The ordinary and purposive interpretive approach was applied to avoid an impracticable quorum requirement for an indefinite and fluctuating electorate of unitholders; practical construction and authorities on corporate/quorum principles were relied upon to conclude that the consent is to be computed by reference to those who exercise their right to vote, and in a poll by reference to units held.

Consent means a simple majority of the unitholders present and voting (in a poll, computed by units), not majority of all unitholders.

Timing of seeking unitholders' consent (post-publication under Regulation 39(3)) - cease-and-freeze effect of Regulation 40 - Regulations 39 to 42 - When the consent of unitholders under Regulation 18(15)(c) must be sought in relation to winding up under Regulations 39-42. - HELD THAT: - The Court construed Regulations 39-42 harmoniously with Regulation 18(15)(c) and held that trustees' decision to wind up under Regulation 39(2)(a) must be followed by disclosure by the trustees under Regulation 39(3); the unitholders' consent required by Regulation 18(15)(c) is to be sought after publication of the notice (post-disclosure), not before publication. This construction preserves the instantaneous operation of Regulation 40 on publication and avoids practical absurdity and commercial chaos that would result from requiring prior polling before notice. Regulation 41(1) (meeting to authorise steps for winding up) remains the procedural mechanism by which unitholders may authorise the authorised person to take steps for winding up.

The trustees must publish the notice under Regulation 39(3) and then seek unitholders' consent; consent is not a pre-condition to publication and triggering of Regulation 40.

Trustees' opinion to wind up under Regulation 39(2)(a) - SEBI's powers under Section 11 and Section 11B of the SEBI Act - Whether SEBI can inquire into or issue directions in relation to a trustees' decision to wind up under Regulation 39(2)(a). - HELD THAT: - The Court rejected the categorical proposition that SEBI has no role to examine trustees' decision. Although clause (a) vests primacy in trustees' opinion, SEBI retains power under Sections 11 and 11B of the SEBI Act to conduct inquiry/investigation and to issue directions where justified (e.g. if trustees act extraneously or contrary to fiduciary duties or regulatory mandates). Section 11B enables SEBI to issue directions after enquiry if necessary in the interest of investors or market, and such powers can be exercised to ensure compliance with the Regulations; SEBI's remedial powers therefore can engage even when trustees form an opinion under Regulation 39(2)(a). The Court emphasised statutory safeguards, delegated-regulation context, and the trustees' fiduciary role but held SEBI oversight is not excluded.

SEBI may, after enquiry, inquire into and issue directions under Sections 11/11B even in respect of trustees' winding-up decisions where regulatory requirements or fiduciary duties are breached.

Challenge of manifest arbitrariness / excessive delegation to trustees - Regulation 39(2)(a) - Constitutional challenge that Regulation 39(2)(a) is void for excessive delegation and manifest arbitrariness. - HELD THAT: - Applying principles of purposive and restrained review in economic regulation, and having construed Regulation 18(15)(c) to require post-publication unitholder consent and noting the statutory framework (trustees' independence, notice and disclosure obligations, SEBI oversight), the Court held the challenge on grounds of vagueness/excessive delegation and manifest arbitrariness fails. The expression 'happening of any event' is read with the qualification 'which requires the scheme to be wound up' and in the context of the Regulations, giving flexibility to trustees to respond to diverse commercial contingencies does not amount to unconstitutional delegation.

The constitutional challenge to Regulation 39(2)(a) on grounds of excessive delegation/arbitrariness is rejected.

Regulation 53(b) and Regulation 40 - redemption requests received prior to publication - Whether AMCs/trustees must honour redemption/repurchase requests received prior to publication of the winding-up notice when Regulation 40's cease-and-freeze operates. - HELD THAT: - The Court identified this as a grey factual and legal area requiring full factual adjudication and clarity from the adjudicating authorities. The interaction between the obligation in Regulation 53(b) to dispatch redemption proceeds within ten working days and the immediate freeze under Regulation 40 upon publication raises contested factual questions (timing of requests, compliance, possible regulatory violations, availability of funds, borrowing within prescribed limits). Given outstanding factual disputes and pending adjudication under the SEBI Act, the Court refrained from a final pronouncement and left the question to be addressed in the adjudication proceedings and on full facts.

Issue remanded for factual determination in the adjudication proceedings; no final decision here on honouring redemption requests received before publication.

Final Conclusion: The Court construed Regulation 18(15)(c) to require affirmative consent of a simple majority of unitholders present and voting (in a poll, by units), and held that trustees may publish the winding-up notice under Regulation 39(3) and trigger Regulation 40 immediately; unitholders' consent is to be sought after that disclosure. SEBI retains power to inquire and issue directions under Sections 11/11B where trustees act contrary to regulatory duties. The constitutional challenge to the winding-up provisions was rejected. The specific issue whether redemption requests received before publication must be honoured despite Regulation 40 was left for factual adjudication and is remanded to the statutory process.

Operational Creditor vs Financial Creditor - Application under section 60(5) of the IBC, 2016 - Maintainability on account of prior adjudication - Preclusion by earlier order / issue already decided

Maintainability on account of prior adjudication - Preclusion by earlier order / issue already decided - Operational Creditor vs Financial Creditor - Maintainability of the application under section 60(5) of the IBC, 2016 in view of an earlier detailed order on the same controversy. - HELD THAT: - The Bench examined whether the present application challenging the Resolution Professional's classification of the applicant as an Operational Creditor could be entertained when an identical grievance had been earlier raised and decided in CA/1511/2019. The Tribunal reproduced and relied upon its detailed order dated 28.02.2020 in CA/1511/2019, which had considered the rival submissions and confirmed the RP's decision to treat the applicant as an Operational Creditor. Given that the same question had already been examined and concluded by this Adjudicating Authority, the present petition was held to be not maintainable as it sought reconsideration of a matter already adjudicated. The fact that an appeal against the earlier order was pending before the NCLAT did not render the present application maintainable before this Tribunal. [Paras 6, 7, 9, 10]

Present application is not maintainable and is dismissed.

Final Conclusion: The application under section 60(5) of the IBC, 2016 challenging the RP's classification of the applicant as an Operational Creditor was dismissed on the ground that the identical issue had already been decided by this Bench by order dated 28.02.2020; the petition is therefore not maintainable.

Validity of demand notice sent in Form 3 with invoices - Attachment of invoices as documents to prove existence of operational debt - Compliance with Rule 5(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Interpretation of the word 'or' in Section 8(1) of the Insolvency and Bankruptcy Code, 2016 - Procedural irregularity or incorrect label not vitiating substantive claim

Validity of demand notice sent in Form 3 with invoices - Attachment of invoices as documents to prove existence of operational debt - Compliance with Rule 5(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Interpretation of the word 'or' in Section 8(1) of the Insolvency and Bankruptcy Code, 2016 - Procedural irregularity or incorrect label not vitiating substantive claim - Demand notice issued in Form 3 by the operational creditor, accompanied by the unpaid invoices as documents, complies with Rule 5(1) and Section 8(1) and is not invalid merely because Form 4 was not used. - HELD THAT: - The Tribunal examined whether a demand notice sent in Form 3 on the basis of invoices satisfies Rule 5(1) read with Section 8(1) of the Code. It distinguished the facts of Neeraj Jain (where no invoices were annexed) and relied on the express requirement in Form 3 (column 7) to attach documents proving the operational debt and amount in default; where invoices are generated they may be annexed to Form 3 to establish the debt. The Tribunal noted that Form 4 functions as a cover notice for an invoice, whereas Form 3 requires comprehensive particulars including amount, date of default and list of documents, and better informs the corporate debtor of statutory rights such as the notice of dispute. The judgment held that the use of Form 3 with attached unpaid invoices does not prejudice the corporate debtor and is permissible; further, mere mislabeling or choice of form is a procedural irregularity which will not defeat the substantive claim (following the principle that procedural defects which cause no prejudice are not fatal). Consequently, where invoices relevant to the operational debt are annexed, issuance of the demand notice in Form 3 is in order, and the reasoning in Neeraj Jain applies only where invoices, though generated and relevant, are not annexed with the demand notice. [Paras 22, 23, 27, 28, 29]

Demand notice in Form 3, when accompanied by the unpaid invoices forming part of the transaction, satisfies Rule 5(1) and Section 8(1) and is valid; sending Form 3 with invoices does not render the petition infirm.

Final Conclusion: The petitioner's demand notice dated 22.04.2020 sent in Form 3 with annexed unpaid invoices is held to be in compliance with the statutory scheme; the question of other aspects of the petition (merits, service, dispute, limitation, pecuniary jurisdiction) remains open for further hearing.

Taxability of surrender charges under insurance service - transaction in an actionable claim versus taxable service - quid pro quo requirement for levy under Finance Act, 1994 - precedential value of coordinate bench decisions and recall of orders - limitation under section 73 of Finance Act, 1994

Taxability of surrender charges under insurance service - transaction in an actionable claim versus taxable service - quid pro quo requirement for levy under Finance Act, 1994 - Whether amounts retained as 'surrender charges' on premature termination of ULIP policies constitute consideration for a taxable service or are part of a transaction in an actionable claim not exigible to service tax. - HELD THAT: - The Tribunal held that the amounts retained as surrender/discontinuance charges are not consideration for any service rendered by the insurer but represent sums retained by the insurer when the insured exercises the right to receive the insurance money. The court observed that for levy under the Finance Act a quid pro quo of service and consideration is essential; if the withheld amount were consideration for past management-of-investment or life-insurance services, that service would have been taxable when rendered and not be triggered only upon surrender. Decisions of coordinate benches in re Shriram Life Insurance Company and re MAX Life Insurance Co Ltd were followed, which concluded that surrender charges, as permitted and limited by IRDA regulations, are intended to recoup initial expenses and operate as part of an actionable claim rather than a taxable service. Having considered rival contentions and precedents, the Tribunal found those decisions persuasive and applied their reasoning to set aside the demand. [Paras 10, 11, 12, 13, 15]

Amounts retained as 'surrender charges' are transaction-in-actionable-claim receipts and not consideration for a taxable service; the demand is set aside.

Precedential value of coordinate bench decisions and recall of orders - precedential effect pending appeal or rectification - Whether the recall of a prior Tribunal order (re Reliance Life Insurance Co Ltd) or pendency of appeals before higher courts nullifies the precedential value of other coordinate-bench decisions on identical disputes. - HELD THAT: - The Tribunal held that a recall of one decision does not ipso facto destroy the precedential value of independently reasoned decisions of other coordinate benches on identical facts. While noting the doctrine in Union of India v. West Coast Paper Mills Ltd that admission of an appeal places the correctness of a judgment in jeopardy, the court emphasised judicial consistency and tax certainty, observing that inferior appellate bodies should not disregard their own or co-ordinate benches' rulings merely because an order is under challenge. The recall effected by rectification proceedings substitutes the recalled order, but mere reference to the recalled order does not render other decisions bereft of value where those decisions were reached independently. Accordingly, the Tribunal followed the coordinate-bench precedents and declined to treat the recall or pendency as a bar to applying those decisions. [Paras 8, 13, 14]

Coordinate-bench decisions in re Shriram Life and re MAX Life remain binding for adjudication of the present dispute despite recall of another related order or pendency of appeals; reliance on such precedents is appropriate.

Final Conclusion: The appeal is allowed: the impugned demand on surrender charges is set aside, the Tribunal holding such charges to be part of an actionable claim and not consideration for a taxable service, and applying coordinate-bench precedents notwithstanding recall or pendency of related orders.

Eligibility of refund of Cenvat credit on input services used for export of services - nexus between input services and output export services - input services excluded as personal consumption under Rule 2(l)(c) of Cenvat Credit Rules, 2004 - non-availability of refund of Krishi Kalyan Cess

Eligibility of refund of Cenvat credit on input services used for export of services - nexus between input services and output export services - Refund of Cenvat credit availed on Air Travel Agency Services is allowable - HELD THAT: - The Tribunal found there was no case by the department that the air travel services were not availed for the purpose of providing the output (export) services, nor evidence that they were for personal consumption. Documents filed by the appellant indicated travel for business purposes (client meetings, workshops, seminars). The issue was also supported by the Tribunal's earlier final order in the appellant's own case. On these bases the denial of refund for air travel services was held to be unjustified. [Paras 6]

Refund of Cenvat credit on Air Travel Agency Services allowed

Eligibility of refund of Cenvat credit on input services used for export of services - nexus between input services and output export services - Refund of Cenvat credit availed on short term Hotel Accommodation Services is allowable - HELD THAT: - The Tribunal accepted documentary evidence (hotel invoices, e mails) showing that short term accommodation was availed for business purposes-attending workshops, seminars and meeting clients-not for personal consumption. Reliance was placed on a prior decision of the Tribunal accepting credit on hotel accommodation services, and accordingly the denial of refund was reversed. [Paras 6]

Refund of Cenvat credit on short term Hotel Accommodation Services allowed

Eligibility of refund of Cenvat credit on input services used for export of services - nexus between input services and output export services - Refund of Cenvat credit availed on Cleaning Services is allowable - HELD THAT: - The Tribunal held that cleaning services were necessary to keep the appellant's office premises in a clean and hygienic condition and thus had a direct nexus with the provision of the appellant's exported services. Given their essential role in maintaining the work environment, there was no justification to deny refund of the credit on these services. [Paras 7]

Refund of Cenvat credit on Cleaning Services allowed

Eligibility of refund of Cenvat credit on input services used for export of services - nexus between input services and output export services - Refund of Cenvat credit availed on Pest Control Services is allowable - HELD THAT: - The Tribunal found pest control services were availed to keep office premises free from pests and to maintain a proper working environment, establishing a sufficient nexus with the exported services. Consequently, the denial of refund for pest control services was held to be untenable. [Paras 7]

Refund of Cenvat credit on Pest Control Services allowed

Non-availability of refund of Krishi Kalyan Cess - Refund of Krishi Kalyan Cess is not allowable and the appellants do not contest this head - HELD THAT: - The appellant's counsel expressly stated that the credit availed on Krishi Kalyan Cess was not eligible and that they were not contesting the denial. The Tribunal accordingly upheld the rejection of refund claimed under this head. [Paras 8]

Refund of Krishi Kalyan Cess denied and upheld

Final Conclusion: The appeals are allowed except insofar as they seek refund of Krishi Kalyan Cess; Appeal No.ST/40105/2020 is partly allowed and Appeal No.ST/40104/2020 is allowed, with consequential reliefs, if any.

Availability of input tax credit against inputs supplied by units availing exemption - exemption under Notification No.01/10-CE dated 6.2.2010 and amendment by Notification No.02/14-CE (N.T.) dated 20.1.2014 - extended period of limitation - divergent views of the Revenue as a bar to invocation of extended limitation - limitation bar to recovery of denied credit

Extended period of limitation - divergent views of the Revenue as a bar to invocation of extended limitation - availability of input tax credit against inputs supplied by units availing exemption - Denial of credit was barred by limitation because the show cause notice invoked the extended period when Revenue had divergent views on the issue. - HELD THAT: - The Tribunal, without adjudicating the substantive entitlement to credit, observed that similarly placed assessees had been allowed credit and that Revenue had filed appeals against those favourable orders. In such circumstances, where the Revenue itself maintained divergent views on the question of grant of credit, the extended period of limitation could not be invoked to issue the present show cause notice dated 23.10.2017 for the period 01.10.2012 to 19.01.2014. Consequently, the denial of credit, being challenged after invocation of extended limitation, was held to be time-barred and not maintainable.

Impugned order denying credit set aside on the ground of limitation; appeal allowed with consequential relief, if any.

Final Conclusion: The appeal succeeds on the sole ground that the assessment action denying input credit for the period 01.10.2012 to 19.01.2014 was barred by limitation because the Revenue had divergent views, and therefore invocation of the extended period was not permissible; the impugned order is set aside.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption and onus of proof - preponderance of probabilities as sufficient to rebut statutory presumption - contradictions in complainant's evidence and lack of corroboration - acquittal for offence under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption and onus of proof - The statutory presumption under Section 139 in favour of the payee and the burden to rebut that presumption. - HELD THAT: - The Court observed that proof of issuance of the cheque and its return unpaid by reason of insufficiency of funds prima facie attracts the presumption under Section 139 that the cheque was issued for a legally enforceable debt. That presumption, however, is rebuttable. Reliance on binding precedents establishes that once the presumption arises the onus shifts to the drawer to disprove the existence of a legally enforceable debt, but rebuttal need not always require the drawer to enter the witness box or produce documentary evidence; it suffices if the drawer can establish a preponderance of probabilities to raise reasonable doubt about the complainant's case. [Paras 12, 17]

Presumption under Section 139 arose in favour of the complainant but was rebuttable; the accused could rebut it by establishing a preponderance of probabilities without necessarily leading affirmative evidence.

Preponderance of probabilities as sufficient to rebut statutory presumption - contradictions in complainant's evidence and lack of corroboration - acquittal for offence under Section 138 of the Negotiable Instruments Act - Whether material contradictions in the complainant's evidence, together with absence of corroboration, were sufficient to rebut the presumption and render the convictions perverse. - HELD THAT: - The Court examined the complainant's testimony and documents and found material variations as to the date and the mode of payment of the alleged loan between the complaint/examination-in-chief and the cross-examination. The complainant alone was examined and no corroborative oral or documentary evidence was placed on record. Those contradictions, coupled with the accused's defence that the cheque had been given to a third person who allegedly handed it to the complainant, created a preponderance of probabilities favouring the accused. The trial Court and the Sessions Judge failed to appreciate these infirmities. On that basis the appellate and trial findings were held to be perverse and liable to be set aside. [Paras 16, 17, 18]

Material contradictions in the complainant's case and lack of corroboration rebutted the statutory presumption; convictions under Section 138 were set aside and the accused was acquitted.

Final Conclusion: Criminal Revision Petition allowed; the judgments of conviction and sentence under Section 138 of the Negotiable Instruments Act dated 15.09.2015 (trial Court) and 08.09.2017 (Sessions Court) are set aside and the petitioner/accused is acquitted; registry directed to transmit copies of this order to the trial and Sessions Courts.

Handwriting expert opinion - comparison of signatures - fair trial - examination under Section 313 of the Code - invocation of Section 73 of the Evidence Act - offence under the Negotiable Instruments Act

Handwriting expert opinion - comparison of signatures - fair trial - The trial court's refusal to send the alleged money receipt to a handwriting expert for comparison with admitted signatures was set aside and the document was directed to be sent for expert examination. - HELD THAT: - The petitioners challenged the magistrate's rejection of their application to have the signature on the money receipt compared by a handwriting expert, the receipt being the basis of consideration for the cheque. The High Court observed that the learned Magistrate purportedly relied on a comparison under Section 73 of the Evidence Act but did not compare the signature on the alleged money receipt itself, rendering that exercise futile. Given that the authenticity of the signature on the money receipt directly bears on the defence and the genuineness of consideration, denying expert comparison would impinge on the accused's right to a fair trial. Accordingly, the court concluded that the money receipt should be sent for expert comparison and directed the trial court to undertake the exercise expeditiously and conclude proceedings without unnecessary adjournments, bearing in mind statutory timelines under the Negotiable Instruments Act. [Paras 6, 7, 9, 10, 11]

Application to send the money receipt to a handwriting expert for comparison is allowed; the trial court is directed to send the document for expert examination and complete the exercise expeditiously.

Examination under Section 313 of the Code - invocation of Section 73 of the Evidence Act - An application for handwriting expert opinion is not precluded merely because it was made after the accused was examined under Section 313 of the Code; the revisional court erred in holding otherwise. - HELD THAT: - The revisional court had held that the application for expert opinion was filed after the Section 313 examination. The High Court found that the revisional court's factual conclusion was incorrect and, in any event, held that even if the application is made after examination under Section 313, the accused remains entitled to seek expert assistance. The court referred to precedent recognising that seeking expert opinion post-Section 313 examination does not amount to procedural impropriety and that such a request may be necessary to ensure a fair trial. [Paras 5, 8]

The revisional court's conclusion on the timing and bar to seeking handwriting expert opinion was rejected; an accused may seek expert comparison even after examination under Section 313.

Final Conclusion: The impugned orders of the trial and revisional courts are set aside to the extent they refused expert comparison of the money receipt; the trial court is directed to send the receipt for handwriting expert examination and to conclude the trial expeditiously in accordance with statutory timelines.

Dishonour of cheque under Section 138 - Sentencing discretion - imprisonment or fine - Compensation under Section 357(1)(b) of the CrPC - Fine linked to cheque amount as remedial and restitutive measure - Grant of interest as component of compensation in cheque-dishonour cases

Dishonour of cheque under Section 138 - Sentencing discretion - imprisonment or fine - Whether a criminal court convicting an accused under Section 138 of the Negotiable Instruments Act may impose only a fine instead of imprisonment. - HELD THAT: - The Court examined Section 138 and relevant Supreme Court precedents and held that the language of Section 138, employing the disjunctive 'or', vests discretion in the sentencing court to impose either imprisonment or fine, or both, depending on facts and circumstances. Earlier authorities emphasising that sentencing must reflect the object of Section 138 - to secure payment - were followed to conclude that imposition of fine only is a competent and permissible sentence in cheque-dishonour cases; imprisonment is not mandatory. [Paras 7, 10, 11, 12, 13]

The appellate Court's reduction of sentence to fine only is legally permissible as sentencing courts have discretion to impose fine without imprisonment under Section 138.

Compensation under Section 357(1)(b) of the CrPC - Fine linked to cheque amount as remedial and restitutive measure - Grant of interest as component of compensation in cheque-dishonour cases - Whether compensation should be directed to the complainant under Section 357(1)(b) CrPC in a conviction under Section 138 and, if so, the quantum and manner of award. - HELD THAT: - Relying on chapter XVII principles and binding decisions which regard Section 138 as both punitive and compensatory, the Court held that criminal courts should ordinarily direct payment of compensation corresponding to the cheque amount (and reasonably, interest) when convicting under Section 138, because the fine provision linked to the cheque amount is intended to ensure restitution. Applying these principles to the facts, the Court found the trial court had imposed imprisonment without fine and the appellate court had ordered only a nominal fine; in the interest of restitution and uniformity, the Court enhanced the fine to the cheque amount and added a reasonable sum by way of interest, directing payment to the complainant under Section 357(1)(b). The Court permitted credit for the nominal fine already deposited and provided a default stipulation for non-payment. [Paras 17, 18, 19, 20, 21]

The convict was ordered to pay as fine the cheque amount and an additional sum as interest, to be paid as compensation to the complainant under Section 357(1)(b); credit was given for the earlier nominal fine and default imprisonment was stipulated for non-payment.

Final Conclusion: Criminal revision allowed in part: conviction under Section 138 is affirmed; sentence modified to require payment of the cheque amount and an additional sum as interest by way of fine to be paid as compensation under Section 357(1)(b) CrPC, with credit for the nominal fine already deposited and a default imprisonment stipulation for non-payment; the related petition is dismissed as infructuous.

Section 9 of the Arbitration and Conciliation Act, 1996 - interim relief restraining encashment of bank guarantee - withdrawal of petition with liberty to restore - amicable settlement / exploration of settlement

Section 9 of the Arbitration and Conciliation Act, 1996 - interim relief restraining encashment of bank guarantee - withdrawal of petition with liberty to restore - Petition under Section 9 seeking injunction restraining encashment of bank guarantees dismissed as withdrawn with liberty to approach later. - HELD THAT: - Counsel for the respondent recorded on instructions that the respondent has not invoked the bank guarantees and does not intend to do so in the immediate future. In light of that statement and the parties' intention to attempt a settlement, the petitioner, without prejudice to its rights and contentions, chose not to press the petition. The Court accepted the position and dismissed the petition as withdrawn while expressly granting liberty to the petitioner to approach the Court again if the respondent initiates steps for invocation of the bank guarantees. [Paras 2, 3]

Petition dismissed as withdrawn with liberty to the petitioner to approach the Court later if the respondent seeks invocation of the bank guarantees; pending applications disposed of.

Amicable settlement / exploration of settlement - withdrawal of petition with liberty to restore - Arbitral petition (claiming non-invocation of arbitration clause) dismissed as withdrawn with liberty to approach later to explore settlement or revive proceedings. - HELD THAT: - Respondent's counsel contended that the petitioner had not invoked the arbitration clause and that the respondent was taken by surprise; petitioner nevertheless, taking cue from that statement and without prejudice to its rights, indicated willingness to explore an amicable settlement and did not press the petition. The Court recorded the statements and dismissed the petition as withdrawn, granting liberty to the petitioner to approach the Court again if required. Pending applications were disposed of. [Paras 4, 5]

Petition dismissed as withdrawn with liberty to the petitioner to approach the Court at a later stage if needed; pending applications disposed of.

Final Conclusion: Both petitions were dismissed as withdrawn by consent of the parties with the Court granting liberty to the petitioner in each matter to approach the Court again should efforts to settle fail or should the respondent take steps to invoke the bank guarantees or otherwise require judicial intervention; pending applications in both matters were disposed of.