TaxTMI Updates e-Newsletter
Jul 21,2022

Principles of natural justice - opportunity to be heard - assessment based on social media evidence - prima facie finding - remedy by way of statutory appeal

Principles of natural justice - opportunity to be heard - The Assessment Order did not violate the principles of natural justice as the petitioner was afforded opportunity to raise objections and was granted time for personal hearing but did not respond. - HELD THAT: - The Court examined the record and found that notices were issued and the petitioner sought and was granted additional time for personal hearing. The order indicates that the petitioner thereafter did not file any reply or objections within the extended time. On that basis the contention that the assessment was passed without affording an opportunity was rejected. The Court therefore concluded that there was no breach of the audi alteram partem rule warranting interference under Article 226. [Paras 7]

Petitioner's challenge on grounds of denial of hearing is rejected.

Assessment based on social media evidence - prima facie finding - remedy by way of statutory appeal - The Court declined to adjudicate disputed factual questions regarding reliance on Facebook/social media materials and observed that prima facie the authorities had material indicating events; factual disputes are to be decided by the Appellate Authority. - HELD THAT: - The impugned assessment was founded on information gathered from the petitioner's social media/platform used for business promotion. The Court noted the table of events and, on a prima facie reading, found it cannot be said that no events were conducted during the relevant period. Recognising that these are factual matters requiring detailed adjudication, the Court refrained from reappraising the evidence under Article 226 and dismissed the writ petition while granting liberty to the petitioner to pursue statutory appellate remedies. The Court clarified its observations are for the purpose of the order and shall not influence the Appellate Authority. [Paras 8, 9, 10]

Writ petition dismissed; petitioner granted liberty to file appeal and contest factual/sufficiency issues before the Appellate Authority.

Final Conclusion: Writ petition dismissed. Court found no violation of natural justice and declined to reappraise factual evidence compiled from social media, granting the petitioner liberty to pursue statutory appellate remedies; observations in the order are not to influence the Appellate Authority.

Pre-deposit requirement - dismissal of appeal for non-compliance with mandatory pre-deposit - exceptional relief in view of extension of limitation during COVID-19 - condonation for failure to pre-deposit due to extreme financial hardship during COVID-19 - restoration of appeal on compliance with pre-deposit - inapplicability of pre-COVID precedent to COVID period hardships

Pre-deposit requirement - dismissal of appeal for non-compliance with mandatory pre-deposit - condonation for failure to pre-deposit due to extreme financial hardship during COVID-19 - exceptional relief in view of extension of limitation during COVID-19 - inapplicability of pre-COVID precedent to COVID period hardships - Whether the appeal wrongly dismissed for failure to make mandatory pre-deposit should be reopened in view of extreme financial hardship during the COVID-19 period and orders extending limitation. - HELD THAT: - The Court accepted the petitioner's plea of extreme financial hardship during the COVID-19 period and observed that the original order was passed during the lockdown when extensions of limitation and exceptional reliefs had been granted by the Supreme Court in suo motu proceedings. Consequently, the Delhi High Court decision of 2016 relied upon by the Department was held inapposite to the exceptional circumstances of the pandemic. The Court did not treat the plea of financial hardship as being subject to outright rejection and recognised that the pandemic context justified a different approach to enforcement of the pre-deposit requirement. [Paras 4]

The petitioner's plea of extreme financial hardship during the COVID-19 period is accepted for the limited purpose of granting relief from the consequence of dismissal.

Restoration of appeal on compliance with pre-deposit - pre-deposit requirement - dismissal of appeal for non-compliance with mandatory pre-deposit - Whether the appeal may be restored and the appropriate condition for such restoration. - HELD THAT: - The Court directed restoration of Appeal No. 23/RAN/2021 before the Commissioner (Appeals), Central GST & CX, Ranchi, subject to the petitioner making the mandatory pre-deposit of 7.5% of the duty and penalty within two weeks. The order clarifies that failure to comply with this condition will leave the impugned order intact. The remedy of appeal is thus made available on compliance with the statutory pre-deposit requirement within the specified time-frame. [Paras 5, 6]

The appeal is to be restored on condition that the petitioner deposits 7.5% of the duty and penalty within two weeks; failing which the impugned order shall remain intact and the writ is disposed of.

Final Conclusion: Writ disposed of by allowing limited relief for pandemic-related financial hardship; appeal dismissed for non-deposit is restored subject to the petitioner depositing 7.5% of the duty and penalty within two weeks, failing which the impugned order will continue to operate.

Stay of recovery upon deposit under Section 107(6)(b) of the Central Goods and Services Tax Act, 2017 - operation of Section 107(7) - deemed stay of recovery for balance amount - restoration of amounts wrongly debited from electronic credit ledger

Stay of recovery upon deposit under Section 107(6)(b) of the Central Goods and Services Tax Act, 2017 - operation of Section 107(7) - deemed stay of recovery for balance amount - restoration of amounts wrongly debited from electronic credit ledger - Whether the amount debited from the petitioner's electronic credit ledger on March 7, 2022 must be restored where the petitioner filed an appeal and made the deposit required by Section 107(6)(b), thereby attracting the stay under Section 107(7). - HELD THAT: - The Court found that the petitioner had preferred an appeal against the adjudication order and had complied with the deposit requirement under Section 107(6)(b) of the CGST Act. Under sub Section (7) of Section 107, payment in terms of sub Section (6) renders recovery proceedings for the balance amount deemed to be stayed. Having regard to that statutory scheme, the interest of the revenue was protected by the deposited portion and the respondent authority was not entitled to debit the petitioner's electronic credit ledger while the stay operated. The Court therefore directed restoration of the sum debited on March 7, 2022, observing that the statutory deposit triggers the deemed stay and prevents the recovery action impugned in the writ petition. [Paras 8, 9, 10]

The respondents are directed to restore forthwith, within two weeks, the amount debited from the petitioner's electronic credit ledger on March 7, 2022.

Final Conclusion: Writ petition allowed; the amount debited from the petitioner's electronic credit ledger on March 7, 2022 is to be restored within two weeks, the petition disposed of without costs.

Computation of limitation - exclusion of period for limitation due to COVID-19 - appeal under Section 107(1) of the CGST Act - condonable period of limitation - power to condone delay / outer limit for condonation - restoration of appeal for adjudication on merits

Computation of limitation - exclusion of period for limitation due to COVID-19 - appeal under Section 107(1) of the CGST Act - condonable period of limitation - Applicability of the Supreme Court's order excluding the period from 15.03.2020 to 02.10.2021 for computing limitation and whether the appeal filed on 26.07.2021 against cancellation of registration was within time. - HELD THAT: - The Court examined the order dated 23.09.2021 of the Supreme Court which directed that for computing limitation the period from 15.03.2020 till 02.10.2021 shall stand excluded and that where limitation would have expired during that excluded period all persons shall have a limitation period of 90 days from 03.10.2021 (or longer if the actual remaining balance exceeded 90 days). The petitioner received the order of cancellation on 21.11.2019, making the last date for filing the appeal 20.03.2020 (including the condonable one month under Section 107(4) of the CGST Act), which falls within the period excluded by the Supreme Court's direction. Applying the exclusion, the balance period of limitation available as on 15.03.2021 became available from 03.10.2021 under Category III of the Supreme Court's order; consequently the appeal filed on 26.07.2021 falls within the extended/available period and cannot be treated as barred by limitation. The Appellate Authority failed to take the Supreme Court's order into account and rejected the appeal as time-barred without applying the exclusion directed by the Apex Court. [Paras 6]

The Supreme Court's exclusion of 15.03.2020 to 02.10.2021 for computation of limitation applies and the appeal filed on 26.07.2021 must be treated as within time.

Restoration of appeal for adjudication on merits - power to condone delay / outer limit for condonation - Whether the impugned appellate order rejecting the appeal as barred by limitation should be set aside and the appeal restored for adjudication on merits. - HELD THAT: - Having held that the Supreme Court's order excluding the specified period applies and that the appeal cannot be regarded as time barred, the High Court found that the Appellate Authority conspicuously ignored the purport of the Apex Court's order. In consequence, interference with the impugned order was warranted. The Court set aside the Appellate Authority's order dated 07.10.2021, restored the appeal to file and directed the Appellate Authority to proceed with hearing after affording the petitioner an opportunity and to decide the appeal on merits subject to compliance with statutory requirements and other defects, if any. [Paras 6, 7]

Impugned appellate order set aside; appeal restored to file for fresh hearing and decision on merits after giving opportunity to the petitioner.

Final Conclusion: The impugned order rejecting the appeal as time barred is set aside; the appeal is restored to file and the Appellate Authority is directed to hear and decide the matter on merits in accordance with law, taking due note of the Supreme Court's order excluding 15.03.2020 to 02.10.2021 for computation of limitation.

Validity of show-cause notice under Section 74(1) - requirement of a proper show-cause notice as a sine qua non - violation of principles of natural justice by pre-judged summary notices - opportunity of hearing under Section 75(4) and adjournment under Section 75(5) - adjudication under Section 74(9) - remand for fresh proceedings and non-applicability of limitation under Section 74(2) read with Section 74(10) and Section 75(3)

Validity of show-cause notice under Section 74(1) - requirement of a proper show-cause notice as a sine qua non - violation of principles of natural justice by pre-judged summary notices - Summary show-cause notices in Form GST DRC-01 issued to the petitioners did not satisfy the statutory and procedural requirements and amounted to invalid show-cause notices. - HELD THAT: - The Court examined the language and format of the summary show-cause notices issued in Form GST DRC-01 and found that they amounted to pre-determined conclusions of liability rather than intelligible charges requiring explanation. The statutory mandate in Section 74(1) requires that where fraud, willful misstatement or suppression is alleged, the proper officer shall serve a notice requiring the person to show cause why the specified amount of tax, interest and penalty should not be paid. A summary DRC-01 in the form used, lacking specific allegations and not furnishing relied-upon documents, cannot substitute for a proper show-cause notice. Reliance was placed on this Court's earlier reasoning that proceedings under Section 74 must be preceded by a notice that sets out the specific ingredients of the allegation so that the noticee can effectively answer; a notice that confronts the person with conclusions of guilt vitiates the process. Applying that principle to the present cases, the notices in identical language issued to the petitioners failed to meet the statutory and natural justice requirements and were therefore legally unsustainable. [Paras 11, 12, 15, 17]

The summary show-cause notices in Form GST DRC-01 are quashed as not fulfilling the requirements of Section 74(1) and as violative of principles of natural justice.

Opportunity of hearing under Section 75(4) and adjournment under Section 75(5) - violation of principles of natural justice by denial of hearing - Adjudication orders under Section 74(9) were passed without affording the petitioners the opportunity of hearing required by Section 75(4) and without proper adjournments as contemplated by Section 75(5). - HELD THAT: - The Court noted that the summary notices did not specify dates for furnishing replies or hearing and that adjudication orders confirmed the same liabilities without any recorded hearing. Section 75(4) mandates that an opportunity of hearing be granted where an adverse decision is contemplated or on written request, and Section 75(5) permits adjournments if sufficient cause is shown, subject to limits. The recorded facts showed no meaningful opportunity to respond, no supply of relied-upon documents, and adjudication on the 'first date' in some instances, thereby breaching the statutory hearing protections and the rules of fair hearing. The Court treated these breaches as sufficient to invoke writ jurisdiction and set aside the adjudication orders for want of compliance with Sections 75(4) and 75(5) and with principles of natural justice. [Paras 13, 14, 15]

The adjudication orders passed without affording the requisite opportunity of hearing and without compliance with Sections 75(4) and 75(5) are quashed.

Remand for fresh proceedings and non-applicability of limitation under Section 74(2) read with Section 74(10) and Section 75(3) - Whether the state authorities may initiate fresh proceedings after quashing, and whether such fresh proceedings would be time-barred. - HELD THAT: - Having quashed the impugned notices and adjudication orders for procedural infirmities, the Court expressly refrained from delving into merits and permitted the State Tax authorities to initiate fresh proceedings by issuing proper show-cause notices and deciding the matters in accordance with law. The Court observed that initiation of fresh proceedings would not be barred by limitation in view of Section 74(2) read with Section 74(10) and Section 75(3), and noted that some of the earliest tax periods relate to 2017-18 but that fresh initiation would remain permissible within the statutory timelines identified in the Act. [Paras 8, 17, 18]

The matters are remitted to the State Tax authorities to initiate fresh proceedings in accordance with law; such fresh initiation is not barred by limitation as indicated in the judgment.

Final Conclusion: The court quashed the summary show-cause notices in Form GST DRC-01, the consequent adjudication orders under Section 74(9) and the DRC-07 demand notices as being procedurally defective and violative of principles of natural justice; the State Tax authorities are permitted to initiate fresh proceedings for the specified tax periods in accordance with law and within the applicable statutory timelines.

Validity of order under Section 148A(d) leading to notice under Section 148 - Material available on record - Requirement in cases beyond three years under Section 149(1)(b) - Conjecture cannot substitute tangible evidence for opening reassessment - Strict construction of taxing statutes

Validity of order under Section 148A(d) leading to notice under Section 148 - Conjecture cannot substitute tangible evidence for opening reassessment - The order passed under Section 148A(d) authorising issuance of notice under Section 148 and the consequent notice were validly issued. - HELD THAT: - The Court held that the Assessing Officer must decide under Section 148A(d) 'on the basis of material available on record including reply of the assessee' whether it is a fit case to issue notice under Section 148. In the present case the assessee supplied complete bank statements showing total cash deposits of Rs.19,39,000/-, and those transactions were not disputed by the authority. Despite absence of any material on record to show deposits or income exceeding the threshold relied upon by the department, the officer proceeded to issue the order and notice on the surmise that the assessee 'may have one or more account(s)' in the same bank. The Court found such surmise/ conjecture insufficient to constitute 'material available on record' and therefore inadequate to support the impugned order and notice.

Impugned order under Section 148A(d) and the notice under Section 148 quashed and set aside as made without material on record and based on conjecture.

Material available on record - Requirement in cases beyond three years under Section 149(1)(b) - Strict construction of taxing statutes - Meaning and effect of 'material available on record' under Section 148A and interaction with the limitation condition in Section 149(1)(b) where more than three years have elapsed. - HELD THAT: - The Court interpreted 'material available on record' to mean tangible material capable of supporting the Assessing Officer's satisfaction and rejected an interpretation that would allow mere possibility of obtaining further material or remote likelihood of additional accounts to suffice. Where more than three years have elapsed from the end of the relevant assessment year, Section 149(1)(b) bars issuance of notice under Section 148 unless the Assessing Officer possesses books, documents or evidence revealing that escaped income represented as an asset, expenditure or book entry amounts to or is likely to amount to Rs.50,00,000 or more. The Court emphasised that permitting issuance of notice on conjecture would defeat the object of Section 148A and that taxing provisions must be construed strictly.

Section 148A(d) decision must be founded on tangible material on record; in cases beyond three years the material must also demonstrate or reveal that escaped income is likely to amount to Rs.50,00,000 or more as required by Section 149(1)(b).

Final Conclusion: The writ petition is allowed; the order under Section 148A(d) dated 29.03.2022 and the consequential notice under Section 148 are quashed and set aside for want of material on record satisfying the requirements of Section 148A read with Section 149(1)(b).

Reopening of assessment under Section 147 - failure to disclose fully and truly - new tangible material - change of opinion - weighted deduction under Section 35(2AB) - applicability of DSIR guidelines to contract research receipts and expenditure - double taxation

Reopening of assessment under Section 147 - failure to disclose fully and truly - new tangible material - change of opinion - Validitity of reopening the assessments beyond four years - HELD THAT: - The Tribunal found that the reasons recorded for reopening for AY 2009-10 (and identically for AY 2010-11) were based on material already available on record at the original assessment - audited accounts, computation, Form 3CEB and tax audit disclosures - and did not point to any fresh tangible material or specify what facts the assessee had failed to disclose 'fully and truly'. The Assessing Officer's note that he formed a belief on 'perusal of records' and 'new credible information' did not identify any information that was unavailable at the time of the original assessment. The Tribunal held that the reassessment was effectively an attempt to revisit or change opinion on how contract research receipts/expenditure should be treated, which is impermissible; reopening beyond four years requires specific demonstration of failure to disclose or new tangible material, which was absent. For these reasons the Tribunal quashed the reopening orders and held that the CIT(A) erred in upholding them. [Paras 26, 27, 28, 29, 30]

Reopening of the assessments for AY 2009-10 and AY 2010-11 is quashed; cross objections of the assessee allowed on this ground.

Weighted deduction under Section 35(2AB) - applicability of DSIR guidelines to contract research receipts and expenditure - double taxation - Correctness of disallowance of deduction under Section 35(2AB) for contract research adjustments - HELD THAT: - On the merits, and by reference to the material on record and prior coordinate decisions, the Tribunal upheld the view that the assessee had already disclosed contract research receipts, the corresponding contract research expenditures and the net claim for deduction under Section 35(2AB) in the original assessment papers. The DSIR guidelines relied upon by the Assessing Officer were held inapplicable in the facts because those guidelines address reduction of R&D expenditure in respect of sold R&D assets, not income from contract research carried out for third parties. The Tribunal agreed with the CIT(A)'s conclusion that reducing the R&D claim by the contract research expenditure (as done by the assessee) rather than by the contract receipts was permissible on the facts, and that reducing by receipts would amount to double taxation of the same amount. Consequently the disallowance raised by the Assessing Officer was deleted and his appeals were dismissed. [Paras 31, 37]

Disallowance under Section 35(2AB) deleted; appeal of the Assessing Officer dismissed and the assessee's entitlement to weighted deduction confirmed.

Final Conclusion: The Tribunal quashed the reassessment proceedings (Section 147) for AY 2009-10 and AY 2010-11 for lack of new tangible material and failure to demonstrate non-disclosure, and on the merits confirmed deletion of the disallowance under Section 35(2AB), dismissing the Revenue appeals and allowing the assessee's cross objections.

Penalty under Section 271(1)(c) - furnished inaccurate particulars of income - deduction under Section 80IA - assessment under Section 115JB - bonafide belief / difference of opinion - defect in notice vitiates penalty proceedings

Penalty under Section 271(1)(c) - furnished inaccurate particulars of income - deduction under Section 80IA - defect in notice vitiates penalty proceedings - bonafide belief / difference of opinion - Whether penalty under Section 271(1)(c) could be sustained for claiming deduction under Section 80IA on interest income - HELD THAT: - The assessee claimed deduction under Section 80IA on interest earned on fixed deposits and on income-tax refund, relying on judicial precedents and commercial reasons (tariff collections subject to pending litigation and funds kept in FDRs for contractual obligations). The Tribunal noted that the question of entitlement to the deduction was debatable and that the assessee had bona fide grounds for the claim. Proceedings under Section 271(1)(c) initiated by the Assessing Officer were dropped by order dated 18 March 2019. The penalty notice issued by the CIT(A) did not strike off extraneous or twin charges in the notice under Section 274 read with Section 271(1)(c). Applying the principle in the Full Bench decision of the Bombay High Court in Mohd. Farhan A. Shaikh v. DCIT, the Tribunal held that where an assessment order records satisfaction for imposing penalty on one or other of the grounds mentioned in Section 271(1)(c), a defect in the notice - namely failure to exclude irrelevant matters - vitiates the penalty proceedings. In view of these defects and the debatable nature of the claim (and the dropped proceedings), the Tribunal quashed the penalty imposed by the CIT(A). [Paras 9, 10, 11, 15, 16]

Penalty levied under Section 271(1)(c) set aside and the appeal allowed.

Final Conclusion: The Tribunal quashed the penalty imposed under Section 271(1)(c) in respect of the claim of deduction under Section 80IA for A.Y. 2012-13, holding the penalty proceedings vitiated by defects in the notice and noting the debatable and bona fide nature of the claim; the assessee's appeal is allowed.

Exclusion under first proviso to section 56(2)(viib) - Venture Capital Undertaking - Venture Capital Fund - SEBI (Venture Capital Funds) Regulations, 1996 - revenue expenditure vs capital expenditure - subscription-based software expenses - enduring benefit test - ad-hoc disallowance - telephone and internet expenses

Exclusion under first proviso to section 56(2)(viib) - Venture Capital Undertaking - Venture Capital Fund - SEBI (Venture Capital Funds) Regulations, 1996 - Applicability of the first proviso to section 56(2)(viib) where a closely held company received share premium from an investor shown to be a Venture Capital Fund and whether the assessee qualifies as a Venture Capital Undertaking. - HELD THAT: - The Tribunal examined the statutory exclusion in the first proviso to section 56(2)(viib) and the definitions supplied by Explanation (b) referring to clause (a), (b) and (c) of the Explanation to section 10(23FB). The investor Nirvana Digital India Fund was held to be a Venture Capital Fund on the documentary record. The assessee, a private company engaged in IT enabled and BPO services, satisfied the twin conditions in clause (n) of Regulation 2 of the SEBI (Venture Capital Funds) Regulations, 1996 and did not fall within the negative list in the Third Schedule; accordingly it qualified as a Venture Capital Undertaking. The CIT(A)'s reliance on the Kerala High Court decision was misplaced because that decision concerned a different proviso context and overlooked the carve out in section 68; the correct statutory construction leads to application of the first proviso to section 56(2)(viib). Therefore the exclusion applies and the addition under section 56(2)(viib) cannot be sustained. [Paras 4, 5]

The first proviso to section 56(2)(viib) applies as the assessee is a Venture Capital Undertaking and the investor is a Venture Capital Fund; the addition on account of excess share premium is deleted.

Revenue expenditure vs capital expenditure - subscription-based software expenses - enduring benefit test - Whether payments described as 'company international system' expenses (subscription, application usage and payroll software access charges) are capital in nature or deductible revenue expenses. - HELD THAT: - The Tribunal applied the established test that expenditure not incurred to acquire or bring into existence an asset or advantage of enduring benefit is revenue in nature. The invoices and submissions showed payments were for subscription and usage of software where ownership remained with vendors and no acquisition of software occurred. The CIT(A)'s reliance on a precedent where software was acquired was inapposite. As the payments provided only temporary use and no enduring asset or exclusive exploitation rights were created for the assessee, the expenditure partakes the character of revenue expenditure and is allowable. [Paras 6]

The 'company international system' expenses are revenue in nature and allowable; the disallowance is set aside.

Ad-hoc disallowance - telephone and internet expenses - Validity of the ad hoc disallowance (10% upheld by CIT(A)) of telephone and internet expenses. - HELD THAT: - The assessee established that telephones and internet services were installed at office premises and used by employees for official purposes; genuineness of the expenditure was not disputed. The Tribunal noted that a large increase in expense vis a vis the prior year, without challenge to genuineness and in view of substantially higher revenue in the relevant year, cannot alone justify an ad hoc disallowance. In absence of positive material showing personal use, the discretionary percentage disallowance was unjustified. [Paras 7]

The ad hoc disallowance is deleted in full and the assessment is to be modified accordingly.

Final Conclusion: For AY 2015 16 the Tribunal allowed the appeal of the assessee: the addition under section 56(2)(viib) was deleted as the assessee qualified as a Venture Capital Undertaking and the investor was a Venture Capital Fund; the company international system expenses were held to be revenue and allowable; and the ad hoc disallowance of telephone and internet expenses was deleted.

Deduction under section 80IB(7) - Mandatory condition of timely filing for claiming specified deductions under section 80AC - Requirement to furnish return on or before the due date specified under section 139(1) - Analogy between proviso to section 10A(1A) and section 80AC: mandatory nature of condition - Condonation of delay application under exercise of power under section 119(2B)

Deduction under section 80IB(7) - Mandatory condition of timely filing for claiming specified deductions under section 80AC - Requirement to furnish return on or before the due date specified under section 139(1) - Analogy between proviso to section 10A(1A) and section 80AC: mandatory nature of condition - Assessee's entitlement to deduction under section 80IB(7) for AY 2007-08 and AY 2008-09 where returns were not filed on or before the due date under section 139(1). - HELD THAT: - The Tribunal held that the proviso-like mandate in section 80AC, which conditions allowance of deductions under specified sections on furnishing the return on or before the due date under section 139(1), is mandatory and not directory. The Special Bench decision in Saffire Garments (considering proviso to section 10A(1A)) was followed to the effect that failure to file the return within the time prescribed by section 139(1) attracts mandatory consequences, and analogous treatment applies to section 80AC. The Tribunal rejected the contention that filing within the extended time under section 139(4) cures non-compliance with section 139(1), noting precedent that the extended filing period does not dilute the failure to file within the section 139(1) timeline. The decision of the Calcutta High Court in Suolificio Linea Italia (India) (P.) Ltd. was cited to reinforce that where a statute confers a benefit subject to the express condition of filing by the due date in section 139(1), the condition must be strictly complied with and cannot be read to include the extended period under section 139(4). Applying these principles to the facts, the Tribunal concluded that the assessee, having not filed the returns by the due dates specified under section 139(1) for the years in question, was not entitled to claim deduction under section 80IB(7). [Paras 15, 16]

Assessee is not eligible for deduction under section 80IB(7) for AY 2007-08 and AY 2008-09 because the returns were not furnished on or before the due date specified under section 139(1).

Condonation of delay application under exercise of power under section 119(2B) - Direction to adjudicate the assessee's pending application under section 119(2B) seeking condonation of delay in filing the return. - HELD THAT: - The Tribunal noted that the assessee had applied to the CBDT under section 119(2B) for condonation of delay in filing the return. Rather than deciding that application itself, the Tribunal directed the assessing officer to decide the matter in accordance with law and pursuant to any CBDT directions. The direction contemplates fresh consideration of the condonation request by the AO in light of applicable law and CBDT guidance. [Paras 17]

AO to decide the section 119(2B) application in accordance with law pursuant to CBDT directions.

Final Conclusion: Both appeals are dismissed on the ground that the assessee did not file returns on or before the due date under section 139(1) and therefore is not entitled to deduction under section 80IB(7) for AY 2007-08 and 2008-09; the assessing officer is directed to decide the assessee's pending section 119(2B) condonation application in accordance with law and any CBDT directions.

Charitable activity - exemption under section 80G - serving of liquor not a charitable activity - requirement of a speaking order - remand for fresh decision with opportunity of hearing

Charitable activity - serving of liquor not a charitable activity - exemption under section 80G - Characterisation of the activity of serving liquor for purposes of being a charitable activity and eligibility for exemption under section 80G. - HELD THAT: - The Tribunal agreed with the Revenue's contention that serving of liquor, as reflected in the applicant's bills, cannot be treated as a charitable activity for the purposes of claiming exemption under section 80G. The panel observed that such activity does not meet the concept of welfare of the general public and therefore does not prima facie qualify as charitable. This conclusion, however, was reached while noting deficiencies in the impugned order's treatment of the applicant's explanations. [Paras 7]

Serving of liquor is not a charitable activity and thus does not qualify for exemption under section 80G, subject to fresh adjudication on the record.

Requirement of a speaking order - remand for fresh decision with opportunity of hearing - Validity of the Commissioner (Exemption)'s order and the necessity to remand for fresh decision due to non-speaking nature of the order and inadequate adjudication of the applicant's reply. - HELD THAT: - The Tribunal found that the Commissioner relied on bills showing supply of liquor but failed to record or adjudicate the details of the applicant's clarification and explanations; the impugned order therefore lacked necessary reasons and was non-speaking. In view of this procedural and decisional defect the Tribunal set aside the order and directed that the matter be returned to the CIT (Exemption) for fresh decision in accordance with law, explicitly requiring that the assessee be given an opportunity of being heard and that an appropriate speaking order be passed. [Paras 7, 8]

Impugned order set aside as non-speaking; matter remitted to CIT (Exemption) for fresh decision after giving the assessee an opportunity of hearing and passing a speaking order.

Final Conclusion: The appeal is allowed for statistical purposes; the Tribunal agreed that serving of liquor is not a charitable activity but set aside the non-speaking order of the CIT (Exemption) and remitted the matter for fresh adjudication in accordance with law after affording the assessee a hearing.

Rectification under Section 154 of the Income Tax Act - mistake apparent from record - scope of rectification jurisdiction - taxability of write-back of provisions - ex parte proceeding for non-appearance

Rectification under Section 154 of the Income Tax Act - mistake apparent from record - taxability of write-back of provisions - Rectification application rejecting claim that the appellate order was not speaking and that a write-back of provisions should be excluded from income. - HELD THAT: - The Tribunal upheld the CIT(A)'s rejection of the assessee's application under Section 154 on the ground that the alleged error could not be treated as a 'mistake apparent from record'. The Court applied the limited scope of Section 154 and observed that, in the absence of documentary evidence on record showing that a disallowance had been made in the earlier year (Assessment Year 2009-10) when the provision was created, it could not be concluded that the write-back ought to be excluded from income for AY 2010-11 as a matter of apparent error. The rectification jurisdiction does not permit re-opening substantive issues or re-adjudicating facts when the record does not unequivocally disclose an obvious clerical or arithmetical mistake; reconsideration of the merits would be required if the contention were to be accepted, which is beyond Section 154.

The CIT(A)'s order rejecting the Section 154 application was affirmed and the alleged error was held not to be a mistake apparent from record.

Ex parte proceeding for non-appearance - Proceeding ex parte due to the assessee's non-appearance and the consequence for the appeal. - HELD THAT: - The assessee failed to appear despite multiple opportunities. The Tribunal treated the appeal ex parte and proceeded to decide the legal issue on the record. Given the assessee's non-participation, the appeal was dismissed ex parte after endorsing the merits-based conclusion on the rectification point.

The appeal was dismissed ex parte.

Final Conclusion: The Tribunal affirmed the CIT(A)'s refusal to rectify the appellate order under Section 154, holding that the contention about write-back could not be accepted as a 'mistake apparent from record' in the absence of corroborative material; the appeal was dismissed ex parte.

Credit for tax deducted at source in the year income is offered - Interpretation of Section 199(3) read with Rule 37BA(3) - Rectification under Section 154 for apparent error - Relevance of Form 26AS to grant of TDS credit

Credit for tax deducted at source in the year income is offered - Interpretation of Section 199(3) read with Rule 37BA(3) - Relevance of Form 26AS to grant of TDS credit - Entitlement of the assessee to claim TDS credit in Assessment Year 2016-17 for tax deducted by the payer in an earlier year where the assessee offered the corresponding income in Assessment Year 2016-17. - HELD THAT: - The Tribunal accepted the assessee's submission that Section 199(3) read with Rule 37BA(3) mandates that credit for tax deducted at source shall be allowed in the assessment year for which such income is assessable - i.e., the year in which the assessee has offered the income. The fact that the TDS was reflected in Form 26AS of an earlier assessment year does not permit denial or postponement of TDS credit to a different assessment year when the assessee has shown the accrued income in the later year. Denial of credit on the ground that Form 26AS for the year in which TDS was deducted is the only basis would contradict the statutory mandate and result in double taxation. The Tribunal relied on coordinate-bench precedents applying the same statutory reading and held that such denial constituted an apparent error rectifiable under Section 154. [Paras 8]

TDS credit is allowable in Assessment Year 2016-17 when the assessee has offered the corresponding income in that year; denial on the basis of Form 26AS of an earlier year is incorrect.

Rectification under Section 154 for apparent error - Direction to restore the matter to the Assessing Officer to grant TDS credit after verification that the assessee has not claimed the credit in the earlier assessment year. - HELD THAT: - The Tribunal concluded that the CIT(A)'s dismissal of the rectification appeal as 'debatable' was incorrect because the denial was founded on an apparent error in application of Section 199(3) read with Rule 37BA(3). The matter was set aside and remanded to the Assessing Officer with specific instruction to grant the TDS credit in Assessment Year 2016-17 provided the assessee has not availed the same credit in Assessment Year 2015-16. The remand is for verification and consequential grant of credit in accordance with the Tribunal's observations. [Paras 9]

Impugned order of the CIT(A) is set aside and the case is restored to the Assessing Officer to verify and grant the TDS credit in accordance with the Tribunal's directions.

Final Conclusion: The appeal is allowed: the Tribunal holds that under Section 199(3) read with Rule 37BA(3) TDS credit is to be given in the year the income is offered (Assessment Year 2016-17 here), the CIT(A)'s order is set aside, and the file is restored to the Assessing Officer to verify that the credit was not earlier claimed and to grant the credit accordingly.

Condonation of delay - indexation of cost - fair market value as on 01/04/1981 - treatment under Section 50C of Income Tax Act - remand for verification and quantification

Condonation of delay - pursuit of remedy before wrong forum - Whether the delay of 462 days in filing the appeal before the Tribunal is to be condoned. - HELD THAT: - The Tribunal examined the factual chronology showing that the CIT(A) order was dated 03/02/2017 and the appeal to the Tribunal was filed on 10/07/2018, resulting in a delay of 462 days. The assessee had, on legal advice and bonafide belief, filed an appeal against the Assessing Officer's order giving effect before the CIT(A) (filed 04/05/2017), which was dismissed on 31/05/2018. The Tribunal accepted that the time spent pursuing that remedy before a forum which ultimately proved not maintainable constituted a reasonable cause. Reliance was placed on the cited High Court decision to the effect that initiation of proceedings on legal advice can constitute sufficient cause under the Limitation Act. Excluding the period spent pursuing the alternative remedy (04/04/2017 to 01/06/2018) would render the appeal within the prescribed limitation period. On these facts the Tribunal found sufficient cause and exercised its discretion to condone the delay. [Paras 6, 7, 8]

Delay in filing the appeal is condoned.

Indexation of cost - fair market value as on 01/04/1981 - treatment under Section 50C of Income Tax Act - remand for verification and quantification - Whether the assessee is entitled to deduction by taking indexed cost based on fair market value as on 01/04/1981 and what direction should follow given that the CIT(A) did not adjudicate that ground. - HELD THAT: - The Tribunal noted that the assessee had specifically raised a ground before the CIT(A) seeking allowance of indexed value of the asset as on 01/04/1981, but that ground was not adjudicated in the CIT(A)'s order. The property was acquired prior to 01/04/1981 by a predecessor in interest, making the 1981 value relevant for indexation. Having found that the ground remained undecided by the CIT(A), the Tribunal directed that the Assessing Officer grant deduction on the basis of indexed value as on 01/04/1981. The Tribunal also required the Assessing Officer to afford the assessee an opportunity of hearing and to pass an order in accordance with law, and instructed the assessee to furnish complete details to avoid further delay. The matter was therefore remitted to the Assessing Officer for computation/implementation consistent with the Tribunal's direction. [Paras 12, 14]

The Assessing Officer is directed to allow deduction based on indexed value as on 01/04/1981 after affording hearing and passing a reasoned order; matter remitted for such verification and computation.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, allowed the limited relief that the claim for indexed cost based on fair market value as on 01/04/1981 be given effect to by directing the Assessing Officer to grant the deduction after hearing the assessee and passing an appropriate order; the appeal is allowed for statistical purposes.

Condonation of delay in filing appeal in the interest of substantial justice - treatment of alleged agricultural receipts as income from other sources - estimation and disallowance of agricultural expenses determined on best judgment basis - judicial precedent favouring substantial justice over technical delay

Condonation of delay in filing appeal in the interest of substantial justice - judicial precedent favouring substantial justice over technical delay - Whether the delay of 591 days in filing the appeal to the Tribunal should be condoned and the appeal admitted for decision on merits. - HELD THAT: - The Tribunal examined the assessee's undisputed dates of the CIT(A) order (12.07.2017) and filing before the Tribunal (registered 01.05.2019), and the assessee's explanation that the CIT(A) quantum order was not received and came to notice only upon receipt of a penalty order and on checking the e-filing portal. The Revenue's objection that service was recorded in Form-36 was not supported by independent proof that the order was served within a reasonable time. Applying the established principle that substantial justice is to be preferred over technical non-compliance and noting the absence of mala fides or gross negligence, the Tribunal followed the approach in Collector of Land Acquisition v. Katiji and allied authorities and held that the delay ought to be condoned so that the appeal could be heard on merits. [Paras 7]

Delay of 591 days condoned and the appeal admitted for adjudication on merits.

Treatment of alleged agricultural receipts as income from other sources - Whether the sum of Rs.2,20,057 treated by the revenue as not being part of agricultural receipts and added as income from other sources is sustainable. - HELD THAT: - The Tribunal reviewed the material placed before the Assessing Officer and CIT(A), noting that the assessee failed to produce documentary evidence to prove that the specific amount was received in cash from the sugar co-operative as a part of agricultural receipts. The lower authorities had treated the amount as cash-in-hand unsubstantiated as agricultural sale proceeds. In absence of documentary proof tying the contested sum to the mandated receipts, the Tribunal found no merit in the assessee's challenge to the addition and upheld the treatment and addition made by the tax authorities. [Paras 14]

Addition of Rs.2,20,057 treated as income from other sources affirmed; ground dismissed.

Estimation and disallowance of agricultural expenses determined on best judgment basis - Whether the Assessing Officer's disallowance of agricultural expenses by estimating 40% of gross receipts (with resultant disallowance) should be sustained or moderated. - HELD THAT: - The Tribunal noted the Assessing Officer's concern that the assessee's claimed agricultural expenses (about 15%) were abnormally low and that no corroborative evidence was placed before the authorities to support the contention that the co-operative bore certain expenses. The assessee relied on precedents of coordinate ITAT benches which had allowed disallowances in the range of 20-30% in comparable cases. Applying those coordinate decisions, the Tribunal found it appropriate to moderate the AO's estimate: while the AO's exercise of best judgment in estimating expenses was not set aside in principle, the Tribunal directed that the disallowance be restricted to 30% of gross receipts instead of 40% and remitted the matter to the Assessing Officer for recomputation accordingly. [Paras 17]

Disallowance reduced and restricted to 30% of agricultural gross receipts; matter remitted to Assessing Officer for recomputation.

Final Conclusion: The Tribunal condoned the delay and admitted the appeal; the addition treating Rs.2,20,057 as income from other sources was affirmed; the disallowance of agricultural expenses estimated by the AO at 40% was reduced to 30% and the case was remanded for recomputation accordingly, resulting in the appeal being partly allowed.

Deduction under section 80G - Weighted deduction for in house scientific research under section 35(2AB) - Admission of additional claim in assessment/revised return and appellate discretion - Remand for factual verification - Disallowance of expenses on account of alleged personal use - Application of coordinate bench precedent and judicial consistency

Deduction under section 80G - Application of coordinate bench precedent and judicial consistency - Allowability of the deduction claimed under section 80G in respect of donation to Ashwini Rural Cancer Research and Relief Society for A.Y. 2012-13. - HELD THAT: - The Tribunal held that the question was not res integra and followed a coordinate bench decision which had examined the Trust's renewal/recognition records, noted the Trust's prior approvals under sections 12A and 80G, the renewal application and acknowledgements, and the assessment order in the Trust's own case recording valid approvals. In view of those findings and the principle of judicial consistency, the Tribunal accepted the assessee's claim and set aside the disallowance made by the lower authorities. [Paras 4]

Assessee's claim under section 80G for A.Y. 2012-13 is allowed; the disallowance by lower authorities is set aside.

Weighted deduction for in house scientific research under section 35(2AB) - Admission of additional claim in assessment/revised return and appellate discretion - Remand for factual verification - Allowability in principle of the weighted deduction under section 35(2AB) for A.Y. 2013-14 and direction for consequential verification. - HELD THAT: - The Tribunal noted that the assessee's in house R&D facility had been approved by DSIR (Form 3CM dated 24/5/2013) for the relevant period and that the auditor's certification of expenditure predated the filing/revision dates. While the return did not originally claim the deduction and the Form 3CL was received later, the Tribunal, having regard to the documentary record and relevant precedent, exercised its appellate jurisdiction to accept the claim in principle. The matter was remanded to the Assessing Officer for necessary factual verification and consequential proceedings rather than finally adjudicating quantum on the record before it. [Paras 6]

Claim under section 35(2AB) accepted in principle for A.Y. 2013-14; directed remand to the Assessing Officer for factual verification and consequential action.

Amortization/lease charge disallowance - Challenge to disallowance of amortization of lease charge of Rs. 4,717 for A.Y. 2013-14. - HELD THAT: - The Tribunal recorded that this ground was not pressed by the assessee during hearing and accordingly did not entertain the claim. [Paras 7]

The ground relating to amortization/lease charge is not pressed and is rejected.

Disallowance of expenses on account of alleged personal use - Application of coordinate bench precedent and judicial consistency - Validity of the adhoc disallowance of vehicle expenses as personal use for A.Y. 2013-14. - HELD THAT: - The Tribunal observed that the assessee had previously succeeded on the same issue before the Tribunal in an earlier year and, applying judicial consistency, concluded that the adhoc disallowance was erroneous. On that basis the Tribunal allowed the assessee's challenge to the disallowance. [Paras 8]

The adhoc disallowance of vehicle expenses is held to be erroneous and is set aside in favour of the assessee.

Final Conclusion: For A.Y. 2012-13 the appeal is allowed by permitting the section 80G deduction; for A.Y. 2013-14 the appeal is partly allowed - the section 35(2AB) claim is accepted in principle and remanded to the Assessing Officer for verification, the amortization ground is rejected as not pressed, and the adhoc vehicle expense disallowance is set aside.

Characterisation of government subsidy as capital receipt - allowability of corporate social responsibility expenditure under section 37 - condonation of delay in filing appeal - claim of depreciation rate for windmill-related plant and machinery - proof requirement for additional depreciation and disallowance for lack of evidence - characterisation of license fee for technical know-how as revenue expenditure

Characterisation of government subsidy as capital receipt - Deletion of addition made in respect of VAT subsidy received from Andhra Pradesh Government treated as capital receipt. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in deleting the addition of the subsidy of Rs.10,85,54,000/-. The Tribunal followed its own earlier decision in the assessee's case for AY 2011-12 which treated the VAT reimbursement under the Government order as a capital receipt. No higher court decision reversing that coordinate-bench view was placed before the Tribunal; accordingly the Assessing Officer's conclusion that the subsidy was taxable revenue was rejected and the addition deleted. [Paras 3]

Addition deleted; subsidy treated as capital receipt and not taxable as income.

Allowability of corporate social responsibility expenditure under section 37 - Deletion of disallowance of corporate social responsibility expenditure debited to profit and loss account. - HELD THAT: - The Tribunal and the Commissioner (Appeals) accepted the assessee's case, following the coordinate-bench decision in the assessee's own earlier year, that the CSR expenditure was revenue in nature and incurred for a social cause. Explanation 2 to section 37 (inserted by Finance Act, 2014 w.e.f. 01.04.2015) was held not to apply to AY 2014-15; on the facts the Revenue did not dispute genuineness and the addition was directed to be deleted. [Paras 5]

Disallowance deleted; CSR expenditure allowed as deductible revenue expense.

Condonation of delay in filing appeal - Condonation of 662 days' delay in filing the assessee's appeal before the Tribunal. - HELD THAT: - The assessee explained delay by reference to initiation of CIRP and pandemic-related lockdowns; the Department did not seriously oppose. Applying the principle that meritorious matters should ordinarily be decided on merits where reasonable cause exists for delay, the Tribunal condoned the delay and admitted the appeal for adjudication. [Paras 6]

Delay condoned and appeal admitted for adjudication.

Claim of depreciation rate for windmill-related plant and machinery - Remand to verify installation date for determining applicable rate of depreciation (80% or 15%). - HELD THAT: - The assessee claimed 80% depreciation on certain plant and machinery as covered by New Appendix-I (windmills and related devices). CBDT clarification limits 80% to windmills installed on or before 31.03.2012; installations on or after 01.04.2012 attract 15%. The record did not clearly show installation dates. The Tribunal therefore directed the Assessing Officer to verify whether the windmills/devices were installed on or before 31.03.2012 or on/after 01.04.2012 and decide afresh after affording the assessee an opportunity of being heard; if installed on or before 31.03.2012, 80% applies, otherwise 15%. [Paras 7]

Issue remanded to Assessing Officer for verification of installation date and fresh decision in accordance with law.

Proof requirement for additional depreciation and disallowance for lack of evidence - Confirmation of disallowance of additional depreciation for want of credible evidence. - HELD THAT: - The Assessing Officer called for invoices and capitalization details; the assessee produced invoices mostly pertaining to earlier years and failed to substantiate capitalization/work in progress or provide reliable evidence linking assets to AY 2014 15. The Commissioner (Appeals) and the Tribunal found the assessee could not furnish documentary evidence to justify the additional depreciation claim and therefore sustained the disallowance. [Paras 8]

Disallowance of additional depreciation confirmed for lack of evidence.

Characterisation of license fee for technical know-how as revenue expenditure - License fee paid for technical know how held to be revenue in nature and allowable under section 37. - HELD THAT: - On examining the technical collaboration and license terms, the Tribunal concluded that the arrangement conferred only a right to use the technical know how for a specified period, with ownership retained by the licensor, and therefore constituted a licence (revocable/limited right to use) rather than an assignment. Applying the ratio of earlier authorities relied upon by the Tribunal, the payment was held to be revenue expenditure incurred for manufacturing and allowable under section 37; no higher court decision was shown to the contrary, and the Commissioner (Appeals) order was set aside to allow the deduction. [Paras 9]

License fee held to be revenue in nature; deduction allowed.

Final Conclusion: Revenue appeal dismissed in part (deletion of VAT subsidy addition and deletion of CSR disallowance sustained); assessee's appeal partly allowed - delay condoned; additional depreciation disallowance sustained; claim for depreciation at higher rate remanded for verification of installation date; license fee deduction allowed.

Revision under Section 263 of the Income-tax Act - Error apparent and prejudicial to the interest of Revenue - Scope of inquiry by the Assessing Officer under Section 143(3) - Withdrawal of TDS credit where corresponding income not offered

Revision under Section 263 of the Income-tax Act - Scope of inquiry by the Assessing Officer under Section 143(3) - Error apparent and prejudicial to the interest of Revenue - Validity of the Principal Commissioner of Income-tax's revision under Section 263 insofar as it set aside the assessment order for reassessment of the claim of land vacation compensation charges. - HELD THAT: - The Tribunal found that the Assessing Officer had examined the assessee's claim for deduction of land vacation compensation of Rs.10 crores during the assessment proceedings and had referred to the agreement for vacating and handover and other documents filed by the assessee. The AO allowed the claim pro rata to the extent of land actually sold and disallowed the portion relating to retained land after applying his mind. The PCIT's objections (that additional specific inquiries should have been made) related to matters which the Tribunal considered either immaterial or already evident from documents placed before the AO. In the Tribunal's view, the AO had made necessary inquiries and verifications required for deciding the claim under Section 143(3), and therefore the order could not be characterised as one passed without inquiries or verification as contemplated by Explanation 2(a) to Section 263. Consequently, revision under Section 263 was not justified on this issue and the PCIT's order revising the AO's assessment on the land vacation compensation claim was cancelled. [Paras 6]

PCIT's exercise of revision under Section 263 was unjustified in respect of the land vacation compensation claim; the AO's order under Section 143(3) is restored on that issue.

Withdrawal of TDS credit where corresponding income not offered - Revision under Section 263 of the Income-tax Act - Validity of the PCIT's direction to withdraw the TDS credit allowed by the Assessing Officer where the corresponding income was not offered to tax in the relevant year. - HELD THAT: - The assessee conceded before the Tribunal that the credit for TDS deducted (Rs.9,05,000) was allowed in the assessment year though the corresponding receipt/ income had not been offered to tax in that year. The Tribunal accepted this concession and held that the PCIT was justified in directing the AO to withdraw the TDS credit and allow it only in the year in which the corresponding income is offered to tax, after necessary verification. [Paras 4, 6]

PCIT's direction to withdraw the TDS credit in the assessment under challenge is upheld; credit to be allowed in the year in which corresponding income is offered after verification.

Final Conclusion: The appeal is partly allowed: the revision order under Section 263 is set aside insofar as it directed reassessment of the land vacation compensation deduction (the AO's order on that issue stands restored), while the PCIT's direction to withdraw wrongly allowed TDS credit is upheld and shall be given effect after verification.

Excess sugarcane price - distribution of profit vis-a -vis deductible expenditure - Sale of sugar at concessional rate - appropriation of profit - Remand to Assessing Officer for determination of profit component and deductibility - Application of Section 40A(2) to payments to non-members

Excess sugarcane price - distribution of profit vis-a -vis deductible expenditure - Remand to Assessing Officer for determination of profit component and deductibility - Application of Section 40A(2) to payments to non-members - Restoration of the question of deductibility of excess price paid for sugarcane to the Assessing Officer for fresh determination in accordance with the law articulated by the Hon'ble Supreme Court. - HELD THAT: - The Tribunal held that the question whether the component of additional/sap/final price paid under Clause 5A of the Sugar Cane (Control) Order, 1966 constitutes an appropriation of profit (and thus non-deductible) or is deductible expenditure is governed by the Supreme Court's decision in CIT v. Tasgaon Taluka S.S.K. Ltd. The Apex Court requires the AO to examine accounts, balance sheet and material supplied to the State Government to segregate the profit component (which is an appropriation of profit and not deductible) from the remainder (which is an allowable charge against income). Payments to members may include a distribution of profit; payments to non-members are to be examined under Section 40A(2). Following that precedent, the Tribunal set aside the impugned orders and remitted the issue to the AO for fresh adjudication, directing that the AO allow the statutory minimum price and determine by an evidentiary exercise the extent of any profit component, after affording the assessee a reasonable opportunity of hearing. [Paras 5, 6]

Issue restored to the file of the Assessing Officer for de-novo determination of the profit component and deductibility in accordance with the Supreme Court's directions.

Sale of sugar at concessional rate - appropriation of profit - Remand to Assessing Officer for de-novo consideration in light of Supreme Court guidance - Restoration of the question whether the difference between market price and concessional price of sugar sold to members constitutes appropriation of profit to the Assessing Officer for fresh consideration under the factors identified by the Supreme Court. - HELD THAT: - The Tribunal observed that the issue is governed by the Supreme Court's decision in CIT v. Krishna Sahakari Sakhar Karkhana Ltd., which remitted consideration of whether concessional sales to members represent a custom or practice and whether government resolutions support it, and directed examination of the basis on which quantities are fixed for concessional sale. Given the interrelation with the remand on excess cane price and to avoid fragmentary orders, the Tribunal set aside the impugned addition and restored the matter to the AO for de-novo adjudication on the touchstone of the Supreme Court's directions, with the AO to afford the assessee a reasonable opportunity of hearing. [Paras 7, 8]

Issue restored to the file of the Assessing Officer for fresh adjudication on merits in accordance with the Supreme Court's directions.

Final Conclusion: All three appeals are allowed for statistical purposes; the impugned additions on excess cane price and on concessional sale of sugar are set aside and both issues are remitted to the Assessing Officer for de-novo determination in accordance with the Supreme Court precedents, after affording the assessee reasonable opportunity of hearing (Assessment Years 2012-13, 2013-14 and 2014-15).

Invalidity of omnibus penalty notice for non specification of limb under section 271(1)(c) - Requirement to strike off inapplicable limb in notice issued under section 274 - Non application of mind in issuance of statutory notice - Vagueness and ambiguity in show cause notice leading to prejudice - Quashing of penalty under section 271(1)(c) where notice fails to specify the charge

Invalidity of omnibus penalty notice for non specification of limb under section 271(1)(c) - Requirement to strike off inapplicable limb in notice issued under section 274 - Quashing of penalty under section 271(1)(c) where notice fails to specify the charge - Whether the penalty order under section 271(1)(c) can be sustained where the notice issued under section 274 did not specify or strike off the inapplicable limb (concealment of income v. furnishing inaccurate particulars). - HELD THAT: - The Tribunal examined the statutory notice issued under section 274 read with section 271(1)(c) and found it to be a stereotyped omnibus form which failed to indicate whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income, and did not strike off the irrelevant limb. Relying on the reasoning in the Full Bench decision of the Bombay High Court in Mr. Mohd. Farhan A. Shaikh v. ACIT, the Tribunal noted that the assessee must be informed of the grounds of penalty proceedings through the statutory notice and that an omnibus notice is vitiated by vagueness. The Tribunal also referred to the jurisdictional High Court decision in PCIT v. Sahara India Life Insurance Co. Ltd. which endorsed the view that a notice not specifying the limb under section 271(1)(c) is bad in law. The Tribunal observed that issuance of a printed omnibus show cause notice without deleting inapplicable parts indicates non application of mind and gives rise to ambiguity and prejudice; section 271(1)(c) being a penal provision must be strictly construed. Applying these principles to the facts, and noting that the notice in the present case suffered from the same defect, the Tribunal concluded that the penalty proceedings could not be sustained and the penalty order had to be quashed. The Tribunal expressly declined to decide the merits of other grounds since the preliminary legal defect rendered further adjudication academic. [Paras 6, 7, 8, 9, 10]

Penalty under section 271(1)(c) for AY 2008-09 quashed because the notice under section 274 did not specify or strike off the inapplicable limb and was therefore invalid.

Final Conclusion: Appeal allowed; penalty order under section 271(1)(c) for Assessment Year 2008-09 set aside as the statutory notice was omnibus, failed to specify the charge, and thereby vitiated the penalty proceedings.

Speaking order under section 17(5) of the Customs Act - finalization of provisional assessment under section 18 of the Customs Act - principles of natural justice - opportunity of personal hearing - appeal under section 128 of the Customs Act - remand for fresh assessment with speaking order

Finalization of provisional assessment under section 18 of the Customs Act - speaking order under section 17(5) of the Customs Act - principles of natural justice - Validity of ex parte finalization/re assessment of a provisionally assessed bill of entry without issuing a speaking order or affording personal hearing - HELD THAT: - The Court found it undisputed that the Bill of Entry provisionally assessed under section 18 was finally assessed in January 2019 without affording personal hearing to the petitioner and without issuing any speaking order or communicating reasons for variation. The Court held that when a final assessment is made contrary to the importer's claim, the requirement of a speaking order within fifteen days (as contemplated by section 17(5)) and the opportunity to be heard must be complied with. The judgment follows the reasoning in Zuari Agro Chemicals Ltd., observing that even where provisional assessment under section 18 precedes finalization, the ultimate finalization must comply with the requirements of section 17(5) and with basic principles of natural justice so that the importer can know the reasons for variation and have an efficacious appeal. The respondent's contention that section 17(5) is inapplicable because the assessment arose under section 18 was rejected; section 18(2) contemplates consequences of finalization but does not supplant the requirement of informing the importer and issuing reasons when the final assessment departs from the importer's claim. [Paras 7, 10, 11]

Ex parte final assessment/re-assessment without personal hearing and without a speaking order was held invalid and contrary to principles of natural justice.

Remand for fresh assessment with speaking order - opportunity of personal hearing - appeal under section 128 of the Customs Act - Relief to be granted where finalization is set aside for breach of natural justice and the availability of appellate remedy - HELD THAT: - The Court set aside the final assessment dated 02.01.2019 and consequent demand notices because no hearing was granted and no speaking order was communicated. The matter was remitted to the assessing authority to pass a fresh reasoned final assessment after giving the petitioner an opportunity of personal hearing and by issuing a speaking order stating reasons why the bill as filed is not acceptable. The authority was directed to complete this within twelve weeks from receipt of the order. The Court observed that once a reasoned assessment is made, the petitioner would have the alternative remedy of appeal under section 128; however, in the absence of a speaking order an efficacious appeal would not lie, which justified exercise of writ jurisdiction to set aside the ex parte finalization and remand the matter for fresh consideration. [Paras 12]

Final assessment set aside; respondents directed to afford hearing and pass a speaking order and re-finalize the assessment within twelve weeks; appeal under section 128 remains available thereafter.

Final Conclusion: The writ petition was allowed to the extent of setting aside the ex parte final assessment dated 02.01.2019 and related demand notices; the matter is remitted to the assessing authority to afford personal hearing and to pass a reasoned speaking order on reassessment within twelve weeks, after which the petitioner may pursue an appeal under section 128 if aggrieved.

Transaction value - related person under Rule 2(2) of the Valuation Rules - Project Import Regulations - assessment of contract as a whole - EPC contract versus supply contract - admissibility of electronic/computer printouts under section 138C(4) of the Customs Act - presumption under section 139(ii) of the Customs Act - rejection and redetermination of declared value under rule 12 read with rules 4/9 of the Valuation Rules - comparison with manufacturer's invoice under rule 11 of the Valuation Rules

Typographical error in adjudicating findings - Typographical inconsistency in the adjudicating authority's findings was a clerical error and is to be read as referring to APML instead of APRL, removing any apparent contradiction. - HELD THAT: - A conjoint reading of the adjudicating authority's paragraphs shows the summary paragraph mistakenly used 'APRL' where 'APML' was intended. The Tribunal held this to be a typographical mistake that, when corrected, harmonises the findings: APML was not related to EIF at the time of contract, and APRL's relationship (found to exist for the contract date) did not influence price. The revenue's challenge based on the apparent contradiction is therefore unfounded. [Paras 31, 32, 34, 36]

The apparent contradictory findings are attributable to a typographical error and do not vitiate the adjudicating authority's conclusions.

Related person under Rule 2(2) of the Valuation Rules - Whether APML/APRL were related to EIF within the meaning of Rule 2(2) and, if so, whether such relationship influenced the price. - HELD THAT: - On the material facts the Tribunal upheld the adjudicating authority's conclusion that APML was not related to EIF on the relevant contract date (EIF was owned by a UAE national when APML's contract was signed), whereas APRL's contract was signed after EIF became a subsidiary of EIH and thereby related under Rule 2(2)(iv). Crucially, even where the relationship with APRL existed, contemporaneous market data, comparative per MW project costs and the International Competitive Bidding (ICB) process showed no evidence that the relationship had influenced the contract price. The Tribunal also noted that the show cause notice had not specified the particular sub-clause of Rule 2(2) relied upon, and that mere employment history or an authorised signatory signing for both parties did not establish relatedness under Rule 2(2). [Paras 35, 36, 37, 38, 39]

APML was not related to EIF on the relevant date; APRL was related to EIF on its contract date but the relationship did not affect price.

Admissibility of electronic/computer printouts under section 138C(4) of the Customs Act - presumption under section 139(ii) of the Customs Act - Whether the electronic/bank documents (ORTTs/AORTs and bank printouts) relied upon by the Department are admissible evidence and attract the presumptions in section 139(ii). - HELD THAT: - The Tribunal held that the documents obtained from foreign bank branches were computer-generated records and could be admissible only if the certificate mandated by section 138C(4) of the Customs Act was produced. The Department had not produced the requisite certificate authenticating the computer printouts, nor were many relied-upon documents signed or properly attested. Consequently the documents could not be admitted and the presumption under section 139(ii) could not be invoked where authenticity was in doubt. The Tribunal followed the Supreme Court's exposition on electronic evidence (section 65B analogue) and earlier Tribunal decisions requiring compliance with statutory authentication. [Paras 57, 58, 60, 61, 62]

The bank/electronic documents are inadmissible for lack of the certificate under section 138C(4) and unsatisfied authenticity; section 139(ii) presumption does not apply.

EPC contract versus supply contract - Whether the contracts between APML/APRL and EIF were turnkey EPC contracts or mere supply contracts. - HELD THAT: - On analysis of the contract clauses (lump-sum price, supplier obligations for design, engineering, procurement, testing, training, performance guarantees, retention and LD regimes) and the tender scope, the Tribunal agreed with the adjudicating authority that the agreements were EPC/turnkey contracts. The Tribunal emphasised that dissecting the consortium arrangement or subsequent splitting among consortium members does not change the nature of the contract awarded by APML/APRL: the employer contracted for a lump-sum EPC obligation and was concerned with the overall contractual price rather than itemised supplier invoices. [Paras 71, 74, 75, 78, 80]

The contracts between APML/APRL and EIF were EPC/turnkey contracts and not mere supply contracts.

Project Import Regulations - assessment of contract as a whole - Whether goods imported under registered Project Import contracts must be valued/assessed only at the project/contract level or whether each consignment's transaction value can be redetermined independently. - HELD THAT: - The Tribunal upheld the adjudicating authority's reading of the Project Import Regulations (PIR) and Chapter 98.01: registration under PIR contemplates assessment of the contract as a whole. PIR's scheme requires registration of a specific contract and reconciliation/finalisation for the project; it therefore recognises project-level assessment and does not envisage routine revaluation of each individual consignment contrary to the registered contract. Consequently, the Department could not, without challenging the contract itself, re-determine value of each consignment in isolation. [Paras 83, 84, 85, 86, 87]

Under PIR/Heading 98.01 the registered project contract is to be assessed as a whole; individual consignments are not to be separately revalued contrary to the registered contract.

Rejection and redetermination of declared value under rule 12 read with rules 4/9 of the Valuation Rules - comparison with manufacturer's invoice under rule 11 of the Valuation Rules - Whether the declared transaction value should be rejected under rule 12 and redetermined under rules 4/9 based on OEM invoices/aggregate remittances. - HELD THAT: - Because the electronic/bank documents underlying the Department's redetermination were inadmissible, and because the APML/APRL-EIF contracts were bona fide lump-sum EPC contracts awarded after ICB with market-comparable per-MW costs (and within CERC benchmarks), the Tribunal found no basis to reject the declared transaction value under rule 12. The Tribunal explained that rule 11's comparison with OEM invoices requires careful contractual comparison: the standalone OEM supply contracts were not comparable to the turnkey EPC contracts and had materially different risk, payment and warranty profiles. Rule 3 (transaction value) therefore governed and the declared values were to be accepted; the Department's proportional reduction across consignments (using an extrapolated inflation ratio) was unsustainable. [Paras 103, 104, 106, 108, 111]

The declared transaction values are accepted; rejection and redetermination under rules 4/9/12 is not sustainable.

Incomplete investigation - reliance on limited bank remittances - Whether the Department's investigation, based on remittances via two banks, established the alleged overvaluation. - HELD THAT: - The Tribunal found the Department's inquiry incomplete: the remittance evidence produced related to select banks (Axis Bank and Bank of Baroda) while other bankers (e.g., Standard Chartered) also appeared on the record, undermining the assertion that the produced ORTTs represented all remittances. The burden to show completeness and to prove why other bankers were not involved lay on the Department. This lacuna contributed to the inability to sustain the redetermination allegation. [Paras 115, 116]

The investigation was incomplete; the remittance evidence from limited banks does not establish aggregate payments to OEMs and does not support the overvaluation case.

Confiscation and penalty where overvaluation not established - Whether confiscation or penalty proceedings required separate examination once overvaluation was not established. - HELD THAT: - The Tribunal observed that confiscation/penalty contentions need not be decided because the foundational allegation of overvaluation (and consequential incorrect valuation) had not been established. The adjudicating authority's dropping of proceedings thus obviated the need to decide confiscation/penalty issues in the appeal. [Paras 117, 119, 120]

As overvaluation was not established, considerations of confiscation and penalty need not be adjudicated; the proceedings were rightly dropped.

Final Conclusion: The appeal is dismissed. The adjudicating authority did not err in dropping the show cause proceedings: (i) APML was not related to EIF and APRL's relationship did not affect price; (ii) the contracts were bona fide EPC/turnkey contracts assessable under Project Import as a whole; (iii) the Department's bank/electronic documents were inadmissible for lack of required authentication and the investigation was incomplete; and (iv) there is no sustainable basis to reject the declared transaction values or to remand for re-determination.

Condonation of delay - restoration of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - interpretation of limitation for condonation under Section 61 - procedural rules intended to serve the cause of justice

Restoration of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - condonation of delay - Validity of the orders restoring CP(IB) No. 294/NCLT/AHM/2019 and condoning delay in filing the restoration application. - HELD THAT: - The Supreme Court declined to entertain the challenge to the NCLT's short order restoring the petition and condoning the delay. The Tribunal had considered the applications for condonation of delay and for restoration and, being satisfied with the cause for delay and absence, granted both prayers. The Court observed that procedural formalities and the question whether a particular application was registered were matters of form which did not affect the Tribunal's satisfaction on merits. There was no basis shown for interference with the exercise of the Tribunal's discretion in restoring the petition.

Appeal challenging restoration and condonation dismissed; no case for interference with the Tribunal's orders.

Interpretation of limitation for condonation under Section 61 - condonation of delay - Whether the limitation and 15 day cap for condonation under Section 61 (relating to appeals) applies to an application for restoration before the Tribunal. - HELD THAT: - The Court rejected the submission that the 15 day limitation for condoning delay in filing appeals under Section 61 could be imported to restrict the Tribunal's power to condone delay in an application for restoration. Section 61 governs appeals and the temporal prescription for condonation in that context cannot be read as curtailing the Tribunal's separate power to condone delay in restoration applications. No provision was shown which limits the Tribunal's power in this regard, and procedural timelines cannot be applied mechanistically where the Tribunal's discretion to further the cause of justice is engaged.

Tribunal was entitled to condone delay in the restoration application; the 15 day cap under Section 61 is inapplicable.

Procedural rules intended to serve the cause of justice - form versus substance in registration of applications - Whether failure to register a particular application or formal defects deprived the Tribunal of power to restore the petition. - HELD THAT: - The Court treated the contention about registration as a matter of form lacking substance. Emphasising that procedural rules exist to serve justice rather than to penalise litigants, the Court noted the Tribunal had addressed the substance - the cause of delay and cause of absence - before ordering restoration. Accordingly, form-related objections which did not affect the Tribunal's satisfaction on the merits were rejected.

Form-related objection on registration rejected; no interference with Tribunal's substantive satisfaction and order of restoration.

Final Conclusion: The appeal was dismissed as devoid of merit: the Tribunal acted within its discretion in condoning the delay and restoring the Section 9 petition, the 15 day condonation limit under Section 61 (applicable to appeals) could not be imported to restrict restoration applications, and procedural/formal objections did not warrant interference.

Maintainability of an application under Section 9 of the IBC - Threshold limit under Section 4 of the IBC - Definition of "debt" as per Section 3(11) of the IBC - Definition of "claim" as per Section 3(6) of the IBC - Interest on delayed payment forming part of operational debt - Limitation under the Limitation Act, 1963

Limitation under the Limitation Act, 1963 - Time-barred nature of the Section 9 application under the Limitation Act, 1963 - HELD THAT: - The Adjudicating Authority found that the last invoice date was 01.02.2020 and the Section 9 application was filed on 31.12.2020. The Tribunal, on reviewing the record, found no inconsistency with that finding and agreed that the application was filed within the period of limitation. The Appellant's contention that the cause of action arose in 2017 and therefore the petition was time-barred was not accepted. [Paras 9]

The Section 9 application is not time-barred and the challenge based on limitation is rejected.

Maintainability of an application under Section 9 of the IBC - Threshold limit under Section 4 of the IBC - Definition of "debt" as per Section 3(11) of the IBC - Definition of "claim" as per Section 3(6) of the IBC - Interest on delayed payment forming part of operational debt - Whether interest on delayed payment stipulated in invoices must be included in the debt for computing the minimum threshold under Section 4 and thereby affects maintainability of the Section 9 application - HELD THAT: - Section 4 of the IBC permits the Central Government to notify a higher minimum amount of default; by notification dated 24.3.2020 the threshold was fixed at Rs. 1 crore. The Tribunal examined the invoices and noted that all nine invoices expressly stipulated interest on delayed payment (rate specified). The Tribunal analysed statutory definitions: "debt" under Section 3(11) includes operational debt, and "claim" under Section 3(6)(a) includes a right to payment whether disputed or undisputed. Since interest on delayed payment was contractually stipulated in the invoices, it gives rise to a "right to payment" and thus forms part of the "debt". The Tribunal distinguished the cited authority where interest was not shown to have been agreed by the corporate debtor, and relied on precedents treating contractually agreed interest as part of the debt for threshold calculation. Applying these principles, the Tribunal held that the principal together with contractual interest raised the total debt above the notified threshold of Rs. 1 crore, rendering the Section 9 application maintainable. [Paras 9]

Contractually stipulated interest on delayed payment is part of the debt/claim and, when included, the total debt exceeds the notified threshold; the Section 9 application is maintainable.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's order admitting the Section 9 application and appointment of the Insolvency Professional: the application was held not to be time-barred and, on inclusion of contractually stipulated interest in the debt, met the notified minimum threshold under Section 4 of the IBC. The appeal is dismissed.

Meaning of "filed" for purposes of Sections 94-96 of the IBC and Rule 10 of the 2019 Rules - effect of presentation at the Registry / electronic filing versus subsequent numbering by Registry - interim moratorium arising on filing of application under Section 96 - applicability of Rules 20-24 and 26 of Part III of the NCLT Rules to filing - curability of procedural defects and relation back to date of presentation

Meaning of "filed" for purposes of Sections 94-96 of the IBC and Rule 10 of the 2019 Rules - effect of presentation at the Registry / electronic filing versus subsequent numbering by Registry - Whether an application under Section 94 or 95 is to be treated as "filed" on the date it is presented/filed in the Registry (including electronic filing) or only on the later date when the Registry completes scrutiny and allots a filing/numbering - HELD THAT: - Rule 10 of the 2019 Rules makes Rules 20-24 and 26 of Part III of the NCLT Rules applicable to filing. Rule 23 contemplates presentation at the filing counter and lists requirements, while Rule 2(14) defines "filed" as filed in the office of the Registry. Where electronic filing facility exists, Rule 10(2) indicates filing and registration electronically completes the filing. The Tribunal analysed the statutory scheme and precedent, including Surendra Trading Co., to identify stages: filing/presentation is the first stage, followed by registry scrutiny for defects. Treating filing as dependent upon subsequent numbering would produce uncertainty as to the date on which statutory consequences (notably the interim moratorium under Section 96) crystallise and would permit respondents to postpone moratorium by delaying cure/numbering. The Supreme Court's decision in Vidyawati Gupta was examined to observe that procedural defects are curable and the date of presentation can relate back; thus defects do not render the initial presentation a nullity. The Adjudicating Authority's finding that the SBI application was filed/efiled on 01.10.2021 (and assigned an electronic filing number on that date) was upheld as consistent with the Rules and the statutory scheme; numbering by Registry for administrative purposes is distinct from the act of filing/presentation which triggers statutory consequences. [Paras 13, 14, 18, 24]

Filing occurs when the application is presented/registered in the office of the Registry (including electronic filing); subsequent administrative numbering by the Registry does not defer the date of filing.

Final Conclusion: The Adjudicating Authority correctly held that the State Bank of India's application was filed on the date it was presented/efiled at the Registry and therefore the appeals challenging appointment of the Resolution Professional and the consequent proceedings are dismissed.

Related party - committee of creditors composition and exclusion under the first proviso to Section 21(2) - praesenti rule for determination of related party status - exception where former related party divests to sabotage CIRP - locus of a prospective resolution applicant to challenge constitution of CoC

Related party - committee of creditors composition and exclusion under the first proviso to Section 21(2) - praesenti rule for determination of related party status - exception where former related party divests to sabotage CIRP - Financial Creditor (Respondent No.2) is not a related party of the Corporate Debtor for purposes of exclusion from the CoC and therefore was not disqualified from membership of the CoC. - HELD THAT: - Applying the Supreme Court's exposition in Phoenix ARC Pvt. Ltd., the status of being a related party is to be determined in praesenti; a financial creditor who is not a related party at the time of the CIRP commencement is not automatically disqualified. The appellate court found undisputed material that Smt. Sunaina Singh had resigned as director of the Corporate Debtor on 25.03.2019 and was not a director on the date of filing of the Section 7 application or on admission. The appellant's pleadings did not aver or establish that the Financial Creditor divested its relationship with the sole intention of participating in the CoC to sabotage the CIRP (the limited exception recognised in Para 103 of Phoenix ARC). The Adjudicating Authority's earlier detailed findings-recording absence of control, advice or concerted management between the debtor and the Financial Creditor and rejecting the contention of related-party status-were available for review and were not shown to be erroneous. Consequently, the Financial Creditor could not be excluded from the CoC under the first proviso to Section 21(2). [Paras 15, 16, 19]

No error in holding that Respondent No.2 was not a related party at the relevant time and was not disqualified from being a CoC member.

Locus of a prospective resolution applicant to challenge constitution of CoC - The appellant's status as an unsuccessful prospective resolution applicant does not furnish any pleaded or established ground to reconstitute the CoC; the challenge to CoC composition was rejected. - HELD THAT: - The Corporate Debtor and Resolution Professional asserted that the appellant, being an unsuccessful resolution applicant (H-3) whose plan was not even placed for vote, lacked locus to seek reconstitution of the CoC. The appellate court noted these preliminary objections in the record and observed that the Adjudicating Authority had similarly considered a like challenge by another creditor in I.A. No. 344/2020 and rejected it on merits. While the court primarily decided the dispute on related-party grounds, it also treated the appellant's locus objection as unavailing, given the appellant's failure to demonstrate any substantive illegality in constitution of the CoC or any exceptional circumstance warranting reconstitution. [Paras 13, 19]

The application by the unsuccessful prospective resolution applicant to reconstitute the CoC was appropriately rejected.

Final Conclusion: The appeal is dismissed; the order of the Adjudicating Authority rejecting I.A. No. 728 of 2020 is upheld on the ground that the Financial Creditor was not a related party at the relevant time and no exception for deliberate divestment to sabotage the CIRP was made out, and the appellant's challenge to reconstitute the CoC fails.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - cessation of moratorium under Section 14 and commencement of moratorium under Section 33(5) - appointment of the resolution professional as liquidator - vesting of management and board powers in the liquidator - liquidator's powers and duties under the Code and Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - entitlement of liquidator to fees as specified under Section 34(8) of the Code - public announcement of liquidation and notice of discharge to employees

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Application under Section 33 for commencement of liquidation of the Corporate Debtor was allowed and the Corporate Debtor ordered to be liquidated. - HELD THAT: - The Resolution Professional filed the application pursuant to a CoC resolution (with 100% voting share) to initiate liquidation after no Expression of Interest or Resolution Plan was received during the CIRP. The Tribunal, after considering the averments and the CoC's decision, concluded that the matter was fit for liquidation and ordered liquidation of the Corporate Debtor in accordance with Chapter III of the Code. [Paras 7]

IA-2462 of 2020 is allowed and the Corporate Debtor is ordered to be liquidated.

Appointment of the resolution professional as liquidator - The Resolution Professional, Mr. Laxmikant Yeshwant Desai, was appointed as the Liquidator of the Corporate Debtor. - HELD THAT: - The CoC had itself resolved to appoint the RP as Liquidator subject to adjudicating authority's confirmation. The Tribunal accepted and confirmed that appointment in the liquidation order, vesting the functions of liquidator in the RP to carry out the liquidation process. [Paras 7]

The present Applicant, Mr. Laxmikant Yeshwant Desai, is appointed as Liquidator.

Cessation of moratorium under Section 14 and commencement of moratorium under Section 33(5) - The moratorium declared during CIRP under Section 14 shall cease and a fresh moratorium under Section 33(5) shall commence upon liquidation. - HELD THAT: - The Tribunal directed that the earlier CIRP moratorium would end with commencement of liquidation and that the statutory moratorium applicable to liquidation under Section 33(5) shall operate henceforth, thereby regulating the institution of suits and proceedings subject to the statutory exceptions. [Paras 7]

Section 14 moratorium ceases and moratorium under Section 33(5) commences.

Vesting of management and board powers in the liquidator - All powers of the Board of Directors, Key Managerial Personnel and partners of the Corporate Debtor cease and are vested in the Liquidator. - HELD THAT: - The Tribunal ordered that on liquidation the management powers previously exercised by the company's officers shall cease and be exercised by the Liquidator, who will manage affairs of the Corporate Debtor for the purpose of liquidation in accordance with the Code and Regulations. [Paras 7]

Powers of the Board and KMP cease and are vested in the Liquidator.

Liquidator's powers and duties under the Code and Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - entitlement of liquidator to fees as specified under Section 34(8) of the Code - The Liquidator shall exercise powers and perform duties as envisaged under Sections 35 to 50 and 52 to 54 of the Code read with the Liquidation Process Regulations and shall be entitled to fees as may be specified by the Board under Section 34(8). - HELD THAT: - The Tribunal directed that the Liquidator is to carry out the statutory functions and exercise the powers conferred by the specified provisions of the Code and the corresponding Regulations. It also recorded entitlement of the Liquidator to fees in accordance with the Board's specification under Section 34(8), noting the CoC's prior resolution concerning payment of professional fees during CIRP. [Paras 7]

Liquidator to exercise statutory powers and is entitled to fees as per Section 34(8) and relevant Regulations.

Public announcement of liquidation and notice of discharge to employees - The Liquidator is directed to make a public announcement of liquidation and the order shall be deemed to be a notice of discharge to officers, employees and workmen subject to the continuance of business during liquidation. - HELD THAT: - The Tribunal ordered issuance of public notice of liquidation by the Liquidator and stated that the liquidation order serves as notice of discharge to employees, except where the Liquidator continues the business during the liquidation process. The order also prescribes furnishing copies to statutory authorities and stakeholders. [Paras 7, 8]

Liquidator to publish public announcement; order deemed notice of discharge to employees, with prescribed communications to authorities.

Final Conclusion: The Tribunal allowed the RP's application for liquidation under Section 33 of the IBC, appointed the RP as Liquidator, directed commencement of the liquidation moratorium and transfer of management powers to the Liquidator, and mandated the Liquidator to perform statutory duties, make public announcement and is entitled to fees as specified by the Board.

Moratorium under section 14 of the Code - bar on initiation of suits or legal proceedings during liquidation under section 33(5) of the Code - proceedings under Section 7A of the EPF & MP Act are judicial/legal proceedings - social welfare dues of employees and workmen requiring identification and relatability - priority and payment of admitted provident fund, pension and gratuity dues under the Code

Moratorium under section 14 of the Code - bar on initiation of suits or legal proceedings during liquidation under section 33(5) of the Code - Orders and recovery notices issued by the Respondent after imposition of moratorium and during liquidation are in breach of the moratorium and barred by the Code. - HELD THAT: - The Tribunal held that section 14 imposes a complete prohibition on institution or continuation of proceedings against the corporate debtor during the moratorium, shielding it from pecuniary attacks to enable revival. Section 33(5) similarly bars institution of suits or legal proceedings when liquidation has been ordered. Proceedings and consequent orders and recovery notices initiated by the Respondent despite being aware of the moratorium and liquidation thus violated the statutory embargo. The impugned orders and notices were therefore liable to be set aside for being in conflict with the moratorium and the liquidation bar, without deciding the substantive merits of the EPF claims. [Paras 14, 15, 20, 24]

Impugned orders and recovery notices issued after moratorium and during liquidation are set aside as barred by section 14 and section 33(5) of the Code.

Proceedings under Section 7A of the EPF & MP Act are judicial/legal proceedings - Proceedings under Section 7A of the EPF & MP Act are legal/judicial in nature and cannot be treated as mere assessment proceedings exempt from the moratorium. - HELD THAT: - A reading of Section 7A shows the officer conducting inquiry has powers akin to a civil court and such inquiries are expressly stated to be judicial proceedings within the meaning of specified Indian Penal Code provisions. The Respondent's own circular acknowledges the need for prima facie evidence before initiating Section 7A proceedings. Since such proceedings may culminate in imposition of pecuniary liability, they are caught by the moratorium and the liquidation bar; the contention that they are mere assessment proceedings not barred by section 14 was rejected. [Paras 16, 17, 18, 19]

Section 7A inquiries are judicial/legal proceedings and are barred by the moratorium and liquidation embargo; the Respondent's contention that they are mere assessment proceedings is rejected.

Social welfare dues of employees and workmen requiring identification and relatability - priority and payment of admitted provident fund, pension and gratuity dues under the Code - The impugned orders failed to identify employees/workmen and did not establish relatability of claimed dues to identifiable beneficiaries; such deficiency renders the orders prima facie bad in law. - HELD THAT: - Section 36 and the scheme of the Code protect social welfare dues and place such amounts outside the liquidation estate only where they are relatable to identifiable employees or workmen. The Tribunal noted that the orders under challenge do not disclose names, PF numbers or other particulars of beneficiaries, and were passed without relating claimed amounts to specific workmen or employees. While recognising the protection and priority due to legitimate social welfare claims, the Tribunal concluded that orders passed in haste without identifying beneficiaries are prima facie invalid. The Tribunal left open the employees' entitlement to file claims under the Code and directed that admitted dues are to be dealt with in accordance with the law. [Paras 21, 22, 23]

Orders which do not relate claimed dues to identifiable employees/workmen are prima facie bad in law; employees remain entitled to file claims and admitted dues must be prioritized under the Code.

Final Conclusion: The Tribunal set aside the EPF determination orders and consequent recovery notices issued after initiation of moratorium and during liquidation-finding Section 7A proceedings to be judicial in nature and caught by the moratorium/liquidation bar, and noting that the impugned orders additionally failed to identify relatable employee beneficiaries; the decision preserves employees' rights to file claims and requires admitted social welfare dues to be prioritised under the Code.

Operational Debt - Operational Creditor - initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016 - definition of Operational Debt under section 5(21) of the Code - investment by a director not an Operational Debt

Operational Debt - definition of Operational Debt under section 5(21) of the Code - investment by a director not an Operational Debt - Whether an investment made by a director of the company qualifies as an operational debt for the purpose of initiating CIRP under section 9 of the Code. - HELD THAT: - The Tribunal examined the statutory definition of Operational Debt as confined to claims in respect of the provision of goods or services (including employment) or debts in respect of repayment of dues arising under law payable to government authorities. The petitioner was a director who had invested funds into the corporate debtor for film production. Such an investment does not fall within the three categories specified in the definition of Operational Debt and therefore cannot be treated as an operational debt under the Code. Because the claim is not an operational debt, the petitioner cannot invoke initiation of CIRP under section 9 as an Operational Creditor on that basis. The Tribunal accordingly dismissed the company petition, while leaving the petitioner free to pursue other remedies available in law. [Paras 15, 16, 17, 18, 19]

An investment by a director in the corporate debtor is not an operational debt under the Code; the petition under section 9 is dismissed.

Final Conclusion: The petition under section 9 of the Insolvency and Bankruptcy Code, 2016 is dismissed because the claimed investment by the director does not constitute an operational debt; the petitioner remains free to pursue alternate legal remedies.

Existence of debt and default - assignment of debt - acknowledgment of debt and applicability of Section 18 of the Limitation Act - maintainability of petition under Section 7 of the IBC - initiation of CIRP and moratorium under Section 14 - appointment of Interim Resolution Professional - public announcement and invitation of claims - directions to update Registrar of Companies

Assignment of debt - existence of debt and default - maintainability of petition under Section 7 of the IBC - The Financial Creditor is entitled to initiate proceedings under Section 7 of the IBC as it is the assignee of SBI and the Corporate Debtor had defaulted on the debt. - HELD THAT: - The Tribunal examined the record and found that the loan facilities were originally sanctioned by SBI and the account was declared NPA on 29 March, 2012. By the Assignment Agreement dated 18 July, 2014, SBI assigned the debt to the Financial Creditor and the Financial Creditor stepped into the shoes of SBI. The Corporate Debtor's own filings and the Financial Creditor's documents show admission/acknowledgement of liability and non-payment, establishing both debt and default. On these facts, the petition under Section 7 read with the applicable Rules is maintainable and the Financial Creditor has satisfied the threshold requirement of existence of debt and default necessary to invoke Section 7. [Paras 10, 11, 12]

Petition under Section 7 by the assignee Financial Creditor is maintainable; debt and default established.

Acknowledgment of debt and applicability of Section 18 of the Limitation Act - limitation - Acknowledgements by the Corporate Debtor revived limitation and Section 18 of the Limitation Act applies to the Section 7 petition. - HELD THAT: - The Tribunal relied on the Corporate Debtor's communications and financial statements showing acknowledgements of the debt and on the Supreme Court decisions cited in the order that Section 18 of the Limitation Act applies to proceedings under Section 7 of the IBC. The Corporate Debtor had made settlement proposals, paid an upfront sum, and thereafter communicated intent to pay the balance, which amounted to written acknowledgements within the relevant period. Consequently, the limitation defence raised by the Corporate Debtor was rejected since acknowledgements gave rise to a fresh period of limitation permitting the Section 7 petition to be entertained. [Paras 11, 12, 13, 14]

Limitation objection rejected; written acknowledgements by the Corporate Debtor operate under Section 18 to revive the limitation for filing the Section 7 application.

Initiation of CIRP and moratorium under Section 14 - appointment of Interim Resolution Professional - public announcement and invitation of claims - directions to update Registrar of Companies - The Section 7 petition is admitted and CIRP is ordered to commence with attendant directions including moratorium, appointment of IRP, public announcement, deposit for CIRP expenses and Registrar of Companies update. - HELD THAT: - Having found that debt and default were established and limitation was not a bar, the Tribunal admitted the Company Petition and directed commencement of the Corporate Insolvency Resolution Process. The order imposes a moratorium under Section 14 effective from the date of the order until completion of CIRP or further orders, directs immediate public announcement and claim invitation as per the Regulations, appoints an Interim Resolution Professional subject to production of required authorisation, requires deposit to meet initial CIRP expenses, and directs service of the order and updating of the Registrar of Companies. The IRP is directed to perform statutory functions and to submit progress reports, and officers of the Corporate Debtor are directed to cooperate. [Paras 15]

CIRP admitted; moratorium imposed; IRP appointed; public announcement, expenses deposit and Registrar of Companies update directed.

Final Conclusion: The Adjudicating Authority admitted the Section 7 petition filed by the assignee Financial Creditor, holding that debt, default and requisite acknowledgements exist (bringing Section 18 into play), ordered commencement of CIRP with moratorium, appointed an Interim Resolution Professional and issued ancillary directions including public notice, deposit for CIRP expenses and updating of the Registrar of Companies.

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor - debt and default - memorandum of understanding - acknowledgement of debt - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - initiation of corporate insolvency resolution process

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor - debt and default - memorandum of understanding - acknowledgement of debt - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Whether the petition filed by the operational creditor under Section 9 of the IBC discloses a debt and default and is maintainable for admission. - HELD THAT: - The Tribunal examined the Memorandum of Understanding, the email of 20.02.2019, the demand notices and the replies. The Corporate Debtor contested liability on the grounds that the MoU's commission obligation applied only where sales were made to the specified Client, that the Company did not secure the main contract, and that the email communication was an offer made without prejudice and not an admission of liability. The Operational Creditor relied on the MoU and the email as establishing a claim of 10% commission on the stated sales and issued demand notices under Section 8 before filing the Section 9 petition. On consideration of the record and submissions, the Tribunal found that the Operational Creditor had not satisfactorily established that a legally enforceable debt and continuing default existed such as to warrant initiation of the corporate insolvency resolution process. The Tribunal accepted the Corporate Debtor's position that the email and subsequent conduct did not amount to an unequivocal admission giving rise to an enforceable operational debt under the MoU and that the claim was disputed on substantive grounds. [Paras 31]

The Section 9 petition is dismissed as the Operational Creditor has not made out a case for admission.

Final Conclusion: The Tribunal dismissed the insolvency petition under Section 9 of the IBC for failure of the Operational Creditor to establish a legally enforceable debt and default; the petition is not admitted.

Exclusion of time from the Corporate Insolvency Resolution Process period - non-functioning of the Resolution Professional - delay between order of admission and Resolution Professional taking charge - failure to carry out CIRP timelines and hand over of records - application of precedent permitting exclusion of intervening period

Exclusion of time from the Corporate Insolvency Resolution Process period - non-functioning of the Resolution Professional - delay between order of admission and Resolution Professional taking charge - Exclusion of specified periods (10 days from 03.11.2021 to 12.11.2021; 72 days from 10.01.2022 to 23.03.2022; and 57 days) from computation of the CIRP period of the Corporate Debtor. - HELD THAT: - The Tribunal accepted the Resolution Professional's application to exclude intervening periods from the CIRP timeline as a special case. Reliance was placed on the NCLAT decision in Quin Logistics which recognises that certain intervening periods may be excluded where, inter alia, the CIRP is stayed, no Resolution Professional is functioning, or there is a delay between admission and the RP taking charge. The factual matrix established that the initial IRP could not continue on medical grounds and was replaced; the IRP subsequently expressed unwillingness to continue and the CoC nominated a new RP whose appointment by the Tribunal was on 16.03.2022 and the order was received by the RP on 23.03.2022. Further, physical records were handed over only after delay and several statutory/regulatory steps required during the CIRP remained pending. The CoC, with overwhelming voting, resolved to seek exclusion of the impugned period and extension to complete pending actions. The Tribunal found these circumstances amounted to non-functioning of an RP and delay in commencement of the RP's effective possession, fitting within the recognised grounds for exclusion; it also noted the former IRP's conduct in delaying handover of records. Applying the precedent and the facts, the Tribunal concluded that exclusion of the specified periods is warranted to enable effective completion of the CIRP. [Paras 10, 11, 12]

Application allowed; the specified periods are excluded from the CIRP period and the RP directed to complete the process without further delay.

Regulatory notification to Insolvency Regulator regarding conduct of Insolvency Professionals - Communication of the Tribunal's order to the Insolvency and Bankruptcy Board of India for perusal and appropriate action in relation to panel preparation of Insolvency Professionals. - HELD THAT: - In view of the delays and deficiencies in conduct by the earlier IRP, the Tribunal directed the Registry to send a copy of this order to the IBBI so that appropriate steps may be considered when preparing the panel of Insolvency Professionals. This is a procedural direction aimed at regulatory oversight rather than a substantive adjudication on disciplinary measures. [Paras 13]

Registry directed to send a copy of the order to the IBBI for their perusal and appropriate steps.

Final Conclusion: The application to exclude a total of 139 days from the CIRP period of the Corporate Debtor is allowed; the Resolution Professional is directed to complete the CIRP without further delay and the Registry is to forward the order to the IBBI for appropriate consideration.

Seizure under Section 37A of FEMA - provisional nature of seizure orders - availability of alternate efficacious remedy - jurisdictional challenge under Article 226 - reason to believe and recording of reasons - contravention of Section 4 of FEMA - adjudication by Competent Authority under Section 37A(3) - interim judicial relief preserving business operations

Availability of alternate efficacious remedy - seizure under Section 37A of FEMA - jurisdictional challenge under Article 226 - Maintainability of writ petition at the stage of a seizure order under Section 37A(1) of FEMA and whether an alternate remedy exists. - HELD THAT: - The Court held that an order of seizure passed by the Authorized Officer under sub Section (1) of Section 37A is a provisional step and, at that stage, the person affected is not yet provided the adjudicatory opportunity that Section 37A(3) contemplates. The seizure order and supporting material must be placed before the Competent Authority within 30 days and only thereafter will the Competent Authority proceed to confirm or set aside the seizure after hearing the parties. The appeal remedy under Section 37A(5) is available against the Competent Authority's order and not against the Authorized Officer's provisional seizure. For these reasons the Court concluded that, while the existence of an alternate remedy is a relevant consideration in exercising writ jurisdiction, the petitioner is not provided an effective alternate remedy against the Authorized Officer's seizure order at the present stage. [Paras 18, 19, 20]

At the stage of a seizure order under Section 37A(1) the petitioner has no effective alternate remedy against the Authorized Officer's provisional seizure.

Provisional nature of seizure orders - adjudication by Competent Authority under Section 37A(3) - reason to believe and recording of reasons - Whether the writ is premature and the appropriate course pending adjudication by the Competent Authority. - HELD THAT: - The Court found the writ challenging the provisional seizure to be premature because the Competent Authority had not yet exercised its statutory function under Section 37A(3) to confirm or set aside the seizure after hearing the parties. Questions whether the payments constitute 'royalty' for use of SEPs and whether Section 4 is attracted are factual matters requiring appreciation of material and are therefore to be decided by the Competent Authority in the adjudicatory process. Examining the sufficiency of the Authorized Officer's reasons at this stage would prejudice both parties. Given the statutory timelines, the Court directed that, since the seizure order and materials had already been placed before the Competent Authority, the Competent Authority should issue notice, hear the parties and decide the matter expeditiously; the Court fixed an outer period of 60 days from making this order available for the Competent Authority's decision. The interim directions previously granted by this Court preserving the petitioner's ability to operate the seized bank accounts for day to day expenses (subject to restrictions on royalty payments) were continued until the Competent Authority's decision. [Paras 21, 23, 25, 26, 27]

The writ is premature; the Competent Authority is directed to issue notice, hear the parties and confirm or set aside the seizure within 60 days of making this order available; the interim orders preserving limited operation of the seized accounts continue until that decision.

Final Conclusion: Writ petition disposed of as premature: petitioner has no effective alternate remedy against the Authorized Officer's provisional seizure under Section 37A(1), but the matter must be adjudicated by the Competent Authority under Section 37A(3); Competent Authority directed to hear the parties and decide within 60 days, with the Court's interim directions continuing until such decision; all merits left open for the adjudicating authority.

Grant of regular bail under Section 439 Cr.P.C. - Offences under the Prevention of Money Laundering Act and the presumption of guilt under Section 24 - Gravity of economic offences, risk of dissipation of proceeds and tampering with evidence - Sufficiency of attachment of property as a ground for bail - Custody under Section 167 Cr.P.C. and invocation of statutory bail

Grant of regular bail under Section 439 Cr.P.C. - Offences under the Prevention of Money Laundering Act and the presumption of guilt under Section 24 - Gravity of economic offences, risk of dissipation of proceeds and tampering with evidence - Sufficiency of attachment of property as a ground for bail - Whether the petitioner should be enlarged on regular bail in proceedings involving alleged offences under IPC and the PML Act - HELD THAT: - The High Court rejected the bail application. The Court treated as material the investigation findings that the petitioner, as chairman of the credit society, was alleged to have misappropriated investors' funds to the tune of about Rs. 250 crore, while properties attached so far amount to a substantially smaller sum and only a limited refund has been effected. The Court noted that partial investigation discloses transfers of properties to family members and associates and that the presumption under the PML Act (Section 24) and the nature and gravity of the allegations weigh against release. Reliance was placed on higher judicial authority holding that in substantial economic frauds involving siphoning of investors' funds there is a real risk that an accused on bail may frustrate recovery by dissipating or shielding assets or interfering with the prosecution. Given these circumstances, the Court concluded it was not a fit case to exercise discretion in favour of bail and that the petitioner had not discharged the requisite burden or shown adequate assurance against risk of absconding or evidence tampering. [Paras 10, 11]

Bail rejected on merits due to the scale of alleged misappropriation, limited attachment, prima facie material of siphoning to family/associates, and risk of dissipation/tampering.

Custody under Section 167 Cr.P.C. and invocation of statutory bail - Sufficiency of record to invoke Section 167(2) Cr.P.C. - Whether the petitioner was entitled to statutory bail under Section 167(2) Cr.P.C. on account of delay in completion of investigation - HELD THAT: - The Court declined to accept the contention that statutory bail under Section 167(2) Cr.P.C. had arisen. It observed that the ground was raised for the first time before the High Court, no application under Section 167 had been presented to or decided by the trial court in the manner contemplated, and the complaint did not contain the detailed chronology or acknowledgements required to make out the statutory claim at this stage. The High Court therefore held that the Hyderabad High Court decision relied upon was inapposite to the present factual matrix and that Section 167(2) could not be invoked on the facts before it; the petitioner could pursue appropriate remedies before the trial court. [Paras 12]

Statutory bail under Section 167(2) Cr.P.C. not made out and cannot be invoked at this stage before this Court.

Final Conclusion: The petition for regular bail is dismissed: the High Court declined bail on merits in view of the alleged large-scale misappropriation, limited attachment of assets, prima facie material of transfers to relatives/associates and risk of dissipation or tampering, and refused to entertain a claim of statutory bail under Section 167(2) Cr.P.C. on the present record.

Reverse charge mechanism - admissibility of input credit for tax paid under RCM - extended period of limitation - audit objection based on statutory books - divergent judicial views and limitation

Extended period of limitation - admissibility of input credit for tax paid under RCM - divergent judicial views and limitation - audit objection based on statutory books - Whether invocation of the extended period of limitation to demand service tax under RCM was sustainable. - HELD THAT: - The Tribunal found that the appellant's liability to pay tax under the reverse charge mechanism was not in dispute but the adjudication proceeded to invoke the extended period of limitation. The bench noted that prior to the Supreme Court decision in CCE v. Ultratech Cement Ltd. there were contrary judicial views on the admissibility of input credit for tax paid under RCM, and where such divergent decisions existed the extended period of limitation could not be legitimately invoked against the assessee. The demand in the present case arose from an audit objection and was based entirely on information available in the appellant's statutory books; there was no allegation of clandestine activity. Applying the principle that demands founded on statutory records and raised after audit do not attract the extended period where the law was unsettled, and relying on the reasoning of the Allahabad High Court in Triveni Engineering, the Tribunal held that invocation of the extended period was improper. The Tribunal therefore set aside the demand insofar as it related to the period beyond the normal limitation, granting consequential relief to the appellant. [Paras 7, 8]

Demands raised beyond the normal period of limitation were set aside and the appeals allowed on the ground of limitation with consequential relief to the appellant.

Final Conclusion: Both appeals allowed on limitation grounds: demands for periods beyond the normal period of limitation (2012-13) set aside, as extended period could not be invoked where credit admissibility was a matter of divergent judicial views and the case arose from audit information recorded in statutory books.

Service tax on liquidated damages - declared service for agreeing to the obligation to refrain from an act, or to tolerate an act, or to do an act - taxability of penalties/compensation versus consideration for a declared service - reliance on binding Tribunal precedents

Service tax on liquidated damages - declared service for agreeing to the obligation to refrain from an act, or to tolerate an act, or to do an act - reliance on binding Tribunal precedents - Levy of service tax on amounts collected by the assessee as liquidated damages for the period April 2016 to June 2017. - HELD THAT: - The adjudicating authority had confirmed demand of service tax on amounts characterized as penalties or liquidated damages recovered from contractors/suppliers. The Commissioner (Appeals) set aside that demand following earlier decisions of the Tribunal which examined whether such receipts fall within the declared service described as agreeing to the obligation to refrain from an act, to tolerate an act, or to do an act. The Tribunal decisions relied upon (including those in South Eastern Coalfields Ltd., Lemon Tree Hotel, K.N. Food Industries, Neyveli Lignite Corporation and Steel Authority of India Ltd.) held that amounts collected as liquidated damages are not consideration for the said declared service and therefore are not exigible to service tax. Applying those consistent Tribunal precedents to the facts and characterization of the receipts as penalties/compensation, the Commissioner (Appeals) correctly set aside the demand confirmed by the Additional Commissioner.

Demand of service tax on liquidated damages for April 2016 to June 2017 was not sustainable and the demand was set aside.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals) correctly set aside the service-tax demand on amounts collected as liquidated damages for the period April 2016 to June 2017 in conformity with Tribunal precedents.

Refund of service tax paid on ocean freight - Cenvat credit - cash refund under Section 142(3) read with Section 11B - remand for fresh consideration - reference to Larger Bench

Refund of service tax paid on ocean freight - Cenvat credit - cash refund under Section 142(3) read with Section 11B - Claim for refund of service tax paid on ocean freight, asserted as entitlement to Cenvat credit and consequent cash refund under Section 142(3) read with Section 11B, remitted to the original authority for fresh adjudication. - HELD THAT: - The Tribunal noted that identical questions concerning cash refund of Cenvat credit of service tax on ocean freight have been the subject of a Division Bench reference to a Larger Bench (in Bosch Electrical Drive India Private Limited v. Commissioner). The lower authorities had not examined the appellant's claim on the specific ground now urged - that the levy of service tax on ocean freight may be affected by the Gujarat High Court decision relied upon by the appellant - and that judgment was not before the lower authorities. In view of the pending reference and the lack of examination by the original authorities of the appellant's present contention, the Tribunal declined to adjudicate the refund claim on merits and, following the reasoning in the Tribunal's earlier order in Galaxy Poly Plast Industries, remanded the matter to the original authority for fresh consideration in the light of the relevant judicial developments and the appellant's submissions.

Matter remanded to the original authority for fresh adjudication of the refund claim.

Final Conclusion: The Tribunal, noting a pending Division Bench reference and that the lower authorities did not consider the appellant's present contention, remands the appellant's claim for refund of service tax on ocean freight to the original authority for fresh consideration.

Definition of input service - main limb covering services used for clearance of final products "from the place of removal" - inclusive limb of input service - outward transportation "upto the place of removal" - Cenvat credit for Goods Transport Agency services in relation to clearance from factory to depots/customers - effect of amendment substituting "from the place of removal" with "upto the place of removal" - payment of service tax on reverse charge basis and its relevance to Cenvat credit admissibility - application of precedent in Vasavadatta Cements to entitlement of credit for transport upto depot/customer

Definition of input service - main limb covering services used for clearance of final products "from the place of removal" - Cenvat credit for Goods Transport Agency services in relation to clearance from factory to depots/customers - application of precedent in Vasavadatta Cements to entitlement of credit for transport upto depot/customer - Whether Cenvat credit of service tax paid on GTA services for clearance of finished goods from the factory (place of removal) to depots and/or customers prior to amendment effective 1 April 2008 is admissible as input service. - HELD THAT: - The dispute relates to the period before the terminology was amended by Notification No.10/2008-CE (N.T.) (effective 1 April 2008) which replaced "from the place of removal" with "upto the place of removal." Applying the controlling ratio in Vasavadatta Cements, the Tribunal held that the main limb of the definition of input service then in force covered services used for clearance of final products "from the place of removal," and that tax paid on transportation of final products from the place of removal up to the first point (such as a depot or the customer) must be allowed as input. The Tribunal expressly treated the factual position that service tax was paid on reverse charge basis as not being controverted in the show-cause notice and not fatal to the claim; accordingly, following the Supreme Court's pronouncement, the denial of Cenvat credit was held unsustainable and the appellate order set aside.

Impugned order denying Cenvat credit for GTA services used to clear finished goods from the factory to depots/customers prior to 1 April 2008 set aside; credit allowed following Vasavadatta Cements, and reverse charge payment did not bar relief as it was not disputed in the proceedings.

Final Conclusion: The appeal is allowed; the denial of Cenvat credit for GTA services in respect of clearance from the factory to depots/customers for the period prior to the 1 April 2008 amendment is set aside and credit is permitted in accordance with the Supreme Court's decision in Vasavadatta Cements; the fact of service tax having been paid on reverse charge basis did not preclude the relief as it was not controverted in the show-cause proceedings.

Benefit of conclusion under Section 11A(1A) r/w proviso to sub Section 2 - deemed closure of proceedings - co noticees / other persons - scope of proviso to Section 11A(2) as to matters stated in the show cause notice - interpretation of ''other persons'' in the proviso

Benefit of conclusion under Section 11A(1A) r/w proviso to sub Section 2 - co noticees / other persons - Appellants who are co noticees (directors) are entitled to the benefit of deemed conclusion of proceedings where the main noticee (manufacturer) has paid duty with interest and penalty as envisaged by Section 11A(1A) read with the proviso to sub Section (2). - HELD THAT: - The Tribunal held that the statutory language of Section 11A(1A) read with the proviso to sub Section (2) plainly provides that where the person from whom duty is demanded (the manufacturer) pays the duty with interest and the stipulated penalty, the proceedings in respect of 'such person' and 'other persons' to whom notices are served are to be deemed conclusive. The facts show that the manufacturer deposited duty, interest and penalty during investigation and the Commissioner concluded proceedings qua the manufacturer. The Commissioner failed to appreciate the scope and purport of the words 'other persons' and to apply the settled interpretation that the expression embraces co noticees (directors, transporters, employees linked to the alleged contravention). The Tribunal followed the reasoning in the Division Bench decision in Orbit Jewellers (which applied the Board's Circular interpreting the amendment as a beneficial, litigation reducing measure) and rejected the Revenue's narrower construction that would permit continuation of separate penalty/confiscation proceedings against co noticees. Applying the plain statutory text and the judicial and administrative guidance relied upon in the judgment, the Tribunal concluded that once the conditions of Section 11A(1A) are satisfied by the main noticee, proceedings against co noticees must also be treated as concluded, subject only to the exceptions expressly carved out in the statute. [Paras 10, 11]

All appeals allowed insofar as the present appellants (co noticees/directors) are concerned; they are entitled to consequential benefits of deemed closure under Section 11A(1A) r/w proviso to sub Section (2).

Final Conclusion: The Tribunal set aside the impugned order insofar as it refused deemed closure to the co noticee appellants and held that, following payment by the manufacturer of duty with interest and penalty as prescribed, the proviso to Section 11A(2) operates to conclude proceedings in respect of the manufacturer and the co noticees; appeals allowed and consequential relief granted.

Levy of entry tax on imported vehicles - Requirement of assessment under Entry Tax Act before recovery - Three-year limitation on assessment - Exclusion of period of litigation and subsisting interim orders from limitation - Best-judgment assessment where returns not filed - Penalty under Section 15(2) for delay without reasonable cause - Penalty liability calculable only from date law attained finality

Levy of entry tax on imported vehicles - Importers who brought foreign motor vehicles into Tamil Nadu are liable to pay entry tax. - HELD THAT: - The court held that the liability of importers to pay entry tax on vehicles imported and brought into the State for use or sale has been finally declared by authoritative decisions culminating in the Division Bench decision in V.Krishnamurthy, which followed the Supreme Court's reversal of the Kerala Division Bench in Fr. William Fernandez. In view of those decisions the petitioners cannot avoid the statutory liability to pay entry tax on imported vehicles and the writ petitions seeking to escape that liability must fail. [Paras 16]

Petitioners are liable to pay entry tax on the imported vehicles as demanded by the Revenue.

Requirement of assessment under Entry Tax Act before recovery - Three-year limitation on assessment - Best-judgment assessment where returns not filed - Exclusion of period of litigation and subsisting interim orders from limitation - Demands and recoveries based on assessments made under Section 8 (including assessment by best judgment under sub section (4)) are valid and limitation is not fatal where the period during which litigation and subsisting interim orders prevented revenue action is excluded. - HELD THAT: - The court analysed the statutory scheme: charging under Section 3, return obligation under Section 7, assessment under Section 8 and the three year bar in Section 8(5). Where assessees did not file returns, the assessing authority could proceed under Section 8(4) to determine value to the best of its judgment. Although Section 8(5) prescribes a three year cut off, the court held that the period during which litigation (including subsisting interim injunctions restraining revenue action) prevented the Revenue from proceeding can be excluded for practical purposes; the Revenue was thus not automatically time barred from making assessments and issuing demands in the present cases. Consequently the petitioners' contention that no assessment could now be made or that demands are barred by limitation was rejected. [Paras 32, 33, 34, 36, 37]

The assessments/demands made by the Revenue (including by best judgment under Section 8) are sustainable and limitation is not a bar insofar as the period of pending litigation/interim orders is excluded.

Penalty under Section 15(2) for delay without reasonable cause - Penalty liability calculable only from date law attained finality - Penalty under Section 15(2) can be imposed only for period after the law became settled; penalty cannot be levied for pre finality delay caused by bona fide litigation. - HELD THAT: - Section 15(2) permits penal levy where tax is not paid without reasonable cause. The court observed that where the legal position was unsettled for many years and interim orders restrained Revenue action, assessees' failure to pay was attributable to bona fide litigation and uncertainty. Applying precedent, the court held that penalty could not be invoked for the period prior to 29.01.2019 (the Division Bench decision in V.Krishnamurthy which unequivocally declared liability). Thereafter, if petitioners paid only after 29.01.2019 or have still not paid, the Revenue may impose penalty under Section 15 from 29.01.2019 until payment; the Revenue is directed to verify dates of payment and act accordingly. [Paras 46, 47, 49, 50, 51]

Penalty cannot be imposed for delay prior to 29.01.2019; penalty under Section 15 may be imposed only from 29.01.2019 until payment, and Revenue shall verify payments and act accordingly.

Final Conclusion: Writ petitions dismissed insofar as liability to pay entry tax on imported vehicles is concerned; assessments/demands made by Revenue are sustainable (limitation excluding the period of pending litigation/interim orders); penalty under Section 15 may not be levied for pre 29.01.2019 delay but may be imposed from 29.01.2019 until payment; Revenue to verify dates of payment and proceed accordingly.

Penalty for tax evasion - security deposit for release of seized goods - presumption of multiple transportation to evade tax - inspection and interception powers of Intelligence Officer - reduction of penalty in exercise of revision

Penalty for tax evasion - presumption of multiple transportation to evade tax - inspection and interception powers of Intelligence Officer - security deposit for release of seized goods - reduction of penalty in exercise of revision - Whether the penalty of Rs.55,880/- imposed for alleged attempt to evade tax by multiple transportation of goods and the demand of security for release of goods was sustainable, and if so whether its quantum required interference. - HELD THAT: - The vehicle carrying MS ingots was intercepted the same day it was consigned, with an unexplained delay between consignment time and interception giving rise to suspicion of multiple transportation and tax evasion. Although the KVAT Act does not prescribe a running time for intra-State transit or prohibit stops, the Intelligence Officer had recorded reasons to suspect misuse of transport documents. The Tribunal and the first appellate authority upheld the penalty and related proceedings. The High Court found no ground to disturb the substantive finding of culpability or the imposition of penalty, but, exercising its revisional power, considered the attendant circumstances and the value of goods and concluded that the quantum of penalty was excessive. The court therefore confirmed liability but reduced the penalty by fifty percent. [Paras 5]

Liability and penalty upheld; quantum of penalty reduced by 50% (penalty confirmed but reduced from Rs.55,880/- to Rs.27,940/-).

Final Conclusion: Revision allowed in part; orders confirming penalty are sustained on merits but the penalty amount is reduced by fifty percent.

Compounding of offence under Section 147 of the Negotiable Instruments Act - Setting aside conviction under Section 138 of the Negotiable Instruments Act upon compounding - Power to compound at any stage of proceedings (trial, appeal or revision) - Non obstante clause in Section 147 giving overriding effect over Code provisions - Compensatory nature of cheque dishonour offence and preference for settlement - Exercise of constitutional power under Article 142 to effectuate compounding

Compounding of offence under Section 147 of the Negotiable Instruments Act - Setting aside conviction under Section 138 of the Negotiable Instruments Act upon compounding - Power to compound at any stage of proceedings (trial, appeal or revision) - Compounding of the offence under Section 138 was permitted and the convictions and sentences recorded by the courts below were set aside. - HELD THAT: - The High Court recorded that the parties had fully settled the claim and the respondent had no objection to compounding. The Court followed the settled position that Section 147, introduced with a non obstante clause, permits compounding of offences under the Negotiable Instruments Act and can be invoked at any stage of proceedings including trial, appeal and revision. The Court relied on precedents which hold that once a matter is compounded under Section 147 the conviction under Section 138 should be annulled and the accused acquitted. The Court further noted the compensatory character of cheque dishonour offences and the legislative intent to facilitate settlements, and observed that Article 142 may be employed to mould relief in line with compounding principles where necessary. Applying these principles to the undisputed settlement and payments made by the petitioner, the Court exercised its power under Section 147 to allow compounding and set aside the judgments of the courts below. [Paras 4, 5, 6, 7, 8]

Allowed compounding under Section 147; impugned convictions and sentences under Section 138 set aside and the petitioner to be released if not required in any other case.

Final Conclusion: The petition was allowed: in view of the settlement and consent to compound, the High Court permitted compounding under Section 147 of the Negotiable Instruments Act, set aside the convictions and sentences under Section 138 recorded by the courts below and directed release of the petitioner if not required in any other case.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - initial burden to prove existence of a legally enforceable debt or liability - rebuttal of presumption by oral and documentary evidence - acquittal under Section 255(1) Cr.P.C.

Initial burden to prove existence of a legally enforceable debt or liability - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by oral and documentary evidence - Offence under Section 138 of the Negotiable Instruments Act - acquittal under Section 255(1) Cr.P.C. - Whether the acquittal of the accused for the offence under Section 138 of the Negotiable Instruments Act calls for interference - HELD THAT: - The Court affirmed that the complainant bears the initial burden of proving that the cheque was issued in discharge of a legally enforceable debt or liability before the presumption under Section 139 can operate, relying on the principle in G.B. LINGAM v. VITTA MURALI KRISHNA MURTHY . The evidence showed that the complainant relied on an oral loan transaction and produced Exs. P-1 to P-3, whereas the accused adduced oral evidence and documentary material (Exs. D-1 to D-4) including a criminal complaint and stop-payment letters asserting that the cheque was misused or that stop-payment instructions were given prior to the cheque date. The trial Court found that the complainant failed to discharge the initial burden of proving a legally enforceable debt and that the accused successfully rebutted any presumption under Section 139 by adducing evidence; consequently the onus shifted back on the complainant, who did not substantiate his financial capacity or the cash transaction. Having considered the record and submissions, this Court concluded that the trial Court correctly applied the legal test and the acquittal was legally sound. [Paras 13, 14, 16]

The acquittal of the accused is upheld; the complaint under Section 138 is rightly dismissed and the accused is acquitted under Section 255(1) Cr.P.C.

Final Conclusion: Criminal appeal dismissed; the judgment and order of acquittal passed by the trial Court are confirmed.

Renewal of passport pending criminal complaint under Section 138 of the Negotiable Instruments Act - requirement of permission from the Criminal Court for passport renewal - right of personal hearing before administrative decision - submission of explanation in response to impugned communication - consideration of Division Bench precedent in administrative review

Submission of explanation in response to impugned communication - right of personal hearing before administrative decision - Petitioner to be directed to submit explanation and to be afforded a personal hearing before the respondent decides the passport renewal application. - HELD THAT: - The Court found it appropriate, without expressing any view on the merits of the underlying criminal matters, to direct that the petitioner be given an opportunity to explain why permission from the Criminal Court should not be required for renewal of the passport and that the respondent must consider that explanation on merits. The Court emphasised that the petitioner be granted a fair hearing, including the right of personal hearing, and be permitted to produce relevant documents and authorities in support of the contentions. These procedural directions balance the petitioner's right to be heard with the respondent's duty to decide in accordance with law. [Paras 5, 6]

Petitioner to submit explanation within one week; respondent to decide on merits after affording a personal hearing within four weeks of receipt of the explanation.

Renewal of passport pending criminal complaint under Section 138 of the Negotiable Instruments Act - requirement of permission from the Criminal Court for passport renewal - consideration of Division Bench precedent in administrative review - Whether obtaining permission from the concerned Criminal Court is required for renewal of passport where prosecution is lodged under Section 138 NI Act-left for fresh consideration by the respondent. - HELD THAT: - The Court declined to adjudicate the legal question on the merits and observed that the Division Bench decision relied upon by the petitioner may not be directly applicable to the present facts. Consequently, the matter was remitted to the respondent for fresh consideration of whether court permission is necessary for passport renewal in the context of a pending Section 138 prosecution. The respondent is directed to take the petitioner's explanation into account, give due consideration to the authorities produced by the petitioner including the cited Division Bench decision, and decide the question in accordance with law after affording a personal hearing. [Paras 4, 6]

Substantive question remanded to the respondent for fresh consideration on merits after hearing the petitioner and considering the precedents relied upon.

Final Conclusion: Writ petition disposed by directing the petitioner to furnish an explanation within one week and permitting the respondent to decide the passport-renewal request on merits after affording a personal hearing within four weeks; the legal question whether court permission is required in cases of pending Section 138 prosecutions is remitted for fresh consideration by the respondent in light of the petitioner's submissions and authorities.