TaxTMI Updates e-Newsletter
Jul 24,2020

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - exhaustion of alternative remedy - appealability of administrative orders - judicial restraint where efficacious statutory remedy exists - condonation of delay in filing appeal - requirement of a speaking order by the Appellate Authority

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - exhaustion of alternative remedy - appealability of administrative orders - condonation of delay in filing appeal - requirement of a speaking order by the Appellate Authority - Maintainability of the writ petition challenging rejection of a refund where an appeal lies to the Additional Commissioner, and directions as to further course of action. - HELD THAT: - The petition challenged an order rejecting the petitioner's refund application under the CGST regime. The Court noted that the impugned order itself records that it is appealable to the Additional Commissioner, GST, and observed that when an efficacious statutory remedy of appeal is available, the High Court will not ordinarily entertain a writ petition. Regard being had to a prior Coordinate Bench decision, the Court declined to adjudicate the petition on merits and instead disposed it with liberty to pursue the statutory appeal. The Court directed that an application for condonation of delay, if required, may be filed and that delay alone shall not be a ground for rejection by the Appellate Authority. The petitioner was permitted to place reliance on an interim Division Bench order which shall be considered by the Appellate Authority. Finally, the Court mandated that the Appellate Authority decide the appeal by a speaking order within eight weeks of filing. [Paras 3, 5]

Writ petition not entertained for non-exhaustion of alternate remedy; petition disposed with liberty to appeal to the Additional Commissioner, GST, with directions to consider condonation and an interim Division Bench order and to decide the appeal by a speaking order within eight weeks.

Final Conclusion: The writ petition challenging rejection of refund was dismissed for want of exhaustion of the statutory appeal; petitioner granted liberty to prefer appeal before the Additional Commissioner, GST (with leave to seek condonation of delay), permitted to rely on a Division Bench interim order, and the Appellate Authority directed to dispose the appeal by a speaking order within eight weeks.

Remand for reconsideration - failure to consider evidence of technical glitch and manual submission - power to refer matter to the GST Council for extension of time due to portal technical difficulties - direction to decide within stipulated time

Remand for reconsideration - failure to consider evidence of technical glitch and manual submission - Order of the Commissioner refusing permission to submit GST TRAN-1 and TRAN-2 was set aside and the matter was remitted for fresh consideration. - HELD THAT: - The Commissioner's order dated 14.09.2018 refused permission to submit TRAN-1/TRAN-2 on the ground that the petitioner had not produced material to show attempts to submit within the stipulated time. The High Court found that the Commissioner failed to advert to and consider the petitioner's contemporaneous complaint of portal technical failure dated 26.12.2017 and the subsequent manual submission and registered post dispatch on 18.01.2018. In the absence of any reasons addressing these documents, the Commissioner's finding is prima facie incorrect and requires reconsideration. The court therefore remitted the matter to the Commissioner, directing him to reassess the claim in light of the documents produced by the petitioner and the earlier proceedings before the High Court.

Commissioner's order refusing permission to submit TRAN-1/TRAN-2 set aside and matter remitted for fresh decision.

Power to refer matter to the GST Council for extension of time due to portal technical difficulties - direction to decide within stipulated time - Commissioner may, if necessary, refer the matter to the GST Council for recommendation to extend the date for submission of TRAN-1 on account of technical difficulties; timeline for disposal was prescribed. - HELD THAT: - The court recorded that under the GST law the GST Council is empowered to extend the date for submission of declarations electronically where taxpayers could not file due to technical difficulties on the common portal and the Council has made a recommendation for such extension. The Commissioner was directed that, if required, he may place a report before the GST Council seeking appropriate sanction or recommendation. The court also directed expeditious disposal, prescribing that the Commissioner decide preferably within 60 days of receipt of the order and that any reference to the GST Council ought to be decided by the Council preferably within 90 days of receipt of the reference.

Commissioner may refer the matter to the GST Council and must decide the petitioner's representation promptly, within the time frames indicated by the court.

Final Conclusion: The High Court set aside the Commissioner's order dated 14.09.2018 for failure to consider the petitioner's evidence of technical glitch and manual/posted submissions, remitted the matter for fresh consideration, authorised a reference to the GST Council if necessary, and directed expeditious disposal within specified timelines.

Migration/transition of input tax credit - provisional GSTN user ID and password - access to GST portal for filing GSTR 1/GSTR 3 and claim of TRAN 1 credit - mandamus to issue credentials - positive recommendation by State GST authority to GSTN - payment/assessment and penalty under Section 50 of the PGST Act

Migration/transition of input tax credit - provisional GSTN user ID and password - access to GST portal for filing GSTR 1/GSTR 3 and claim of TRAN 1 credit - positive recommendation by State GST authority to GSTN - Direction to State GST authorities and GSTN to enable migration and portal access so petitioner can upload returns and claim TRAN 1 credit earned under the earlier provisional/incorrect ID for July August 2017. - HELD THAT: - The petitioner, a dealer migrating from the VAT regime, was unable to utilise input tax credit earned for July and August 2017 because no provisional ID was received and an incorrect ID was used. The factual position is admitted by the Commercial Taxes Authorities and respondents' counsel accepted the error involved was human and that, upon a positive recommendation from the Puducherry GST Authorities, GSTN would permit access. In view of these admissions and the need to regularise migration, the Court directed the appropriate authority to issue the necessary positive recommendation for migration/transition of credit held in the R2 account within four weeks of receipt of this order, and directed GSTN/R2 to, within four weeks of receiving that recommendation, intimate the petitioner and permit access to the portal to upload the required forms and claim the TRAN 1 credit. The remedy was granted by way of mandamus to remove the disability caused by non issuance of credentials and to enable the statutory migration process to be completed. [Paras 10]

Authorities to give positive recommendation within four weeks and GSTN/R2 to permit portal access and uploading of forms within four weeks thereafter so the petitioner may claim the TRAN 1 credit for July and August, 2017.

Payment/assessment and penalty under Section 50 of the PGST Act - Request for a pre emptive order permitting deposit of tax, penalty and interest under Section 50 was declined as premature and left to be considered at the time of assessment. - HELD THAT: - The petitioner sought permission in the writ to deposit tax, penalty and interest under Section 50. The Court found no assessment has been made and therefore the prayer to permit pre emptive deposit is premature. The Court recorded that the petitioner may raise the matter, if so advised, during assessment proceedings and that the Authorities shall consider any such request in accordance with law. No substantive determination on liability or condonation of penalty/payment was undertaken. [Paras 11]

Prayer for pre emptive permission to deposit tax, penalty and interest under Section 50 refused as premature; to be considered by Authorities during assessment in accordance with law.

Final Conclusion: Writ petition disposed by directing the Puducherry GST Authorities to issue a positive recommendation within four weeks and GSTN/R2 to permit portal access within a further four weeks so the petitioner can complete migration and claim TRAN 1 credit for July and August 2017; the petitioner's prayer for pre emptive permission to deposit tax/penalty under Section 50 is refused as premature and left to be considered at assessment.

Passage of benefit of tax reduction by commensurate reduction in prices - denial of input tax credit and its impact on base price - computation of profiteering on each supply/SKU - obligation to deposit unidentifiable profiteered amount in Consumer Welfare Fund - penal liability for contravention of Section 171

Passage of benefit of tax reduction by commensurate reduction in prices - denial of input tax credit and its impact on base price - computation of profiteering on each supply/SKU - Whether the Respondent passed on the commensurate benefit of reduction in GST rate to his customers and whether he contravened Section 171 of the CGST Act, 2017. - HELD THAT: - The Authority found that GST on restaurant services was reduced from 18% to 5% w.e.f. 15.11.2017 with denial of ITC. The DGAP computed the ratio of ITC to net taxable turnover for the pre-rate reduction period (01.07.2017 to 31.10.2017) as 8.72% and compared average pre-rate base prices with actual invoice-wise post-rate base prices. The Authority accepted the DGAP's methodology of adding denial of ITC to the pre-rate average base price and comparing it with actual post-rate invoice prices because Section 171 requires passing the benefit on each supply/SKU to each recipient; averaging post-period prices would deprive individual purchasers of entitled benefit. On the material before it (sales data, returns and price lists submitted by the Respondent), the Authority concluded that for several items the Respondent increased base prices by more than the permissible impact of denial of ITC and therefore failed to pass the commensurate benefit. Contentions about commercial reasons for price increases, royalty/advertising adjustments, delivery fees, MRP treatment, alleged zeroing/netting methodology, promotional reductions and temporal limitation of calculation were examined and rejected: (a) Section 171 does not restrict suppliers from fixing prices but forbids appropriation of tax benefit; (b) the DGAP had considered ITC denial (including on franchisor charges) in the ITC:turnover ratio; (c) delivery fees and hypothetical ITC thereon were not part of pre-rate comparables; (d) netting off positive and negative variances across different recipients/SKUs is not permissible because benefit must be passed on per supply; and (e) the investigation period (15.11.2017-30.06.2019) was appropriate because the Respondent did not establish that the benefit had been passed on earlier. [Paras 32, 33, 34, 35, 36]

The Respondent did not pass on the commensurate benefit of the GST rate reduction and thereby violated Section 171 of the CGST Act, 2017.

Computation of profiteering on each supply/SKU - obligation to deposit unidentifiable profiteered amount in Consumer Welfare Fund - penal liability for contravention of Section 171 - Quantification of the profiteered amount and consequential directions including deposit, interest and initiation of penalty proceedings. - HELD THAT: - Applying the accepted methodology, the DGAP computed the net higher sale realization (profiteered amount) after netting off the permitted impact of denial of ITC on relevant SKUs for the investigation period. The Authority approved the DGAP's computation as detailed in Annexure-13 and determined the profiteered amount to be Rs. 7,53,854/-, inclusive of GST on the base profiteered amount. As the affected recipients were not identifiable, the Authority directed deposit of the entire amount in equal halves into the Central and Rajasthan State Consumer Welfare Funds, with interest at 18% from the dates the amounts were realized till deposit. Further, having found contravention of Section 171, the Authority directed issuance of notice to the Respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed. Monitoring and compliance reporting were directed to the concerned CGST/SGST Commissioners under supervision of the DGAP. [Paras 23, 24, 40, 41, 42]

Profiteered amount fixed at Rs. 7,53,854/-, to be deposited in equal parts into Central and Rajasthan State Consumer Welfare Funds with 18% interest; notice for penalty under Section 171(3A) to be issued and compliance to be monitored by the Commissioners.

Final Conclusion: The Authority held that the Respondent, a restaurant franchisee, failed to pass on the commensurate benefit of GST rate reduction (18% to 5% w.e.f. 15.11.2017) after accounting for denial of ITC and thus contravened Section 171; the profiteered amount was quantified at Rs. 7,53,854/- (inclusive of GST), directed to be deposited equally into the Central and Rajasthan State Consumer Welfare Funds with interest @18%, and a notice for penalty proceedings under Section 171(3A) was ordered.

Refusal to entertain writ petition where alternative efficacious remedy exists - availability of statutory appeal remedy before the Appellate Authority - refund under Section 54 of the Central GST Act, 2017 - condonation of delay in statutory appeals - requirement of a speaking order by the Appellate Authority - consideration of interim orders by the Appellate Authority

Refusal to entertain writ petition where alternative efficacious remedy exists - availability of statutory appeal remedy before the Appellate Authority - Maintainability of the writ petition filed against the Assistant Commissioner's order rejecting the refund application without first availing the statutory appeal. - HELD THAT: - The Court declined to entertain the petition because the impugned order itself records that it is appealable to the Additional Commissioner, GST. Where an alternative efficacious statutory remedy is available and expressly provided, recourse to a writ petition in the High Court is not appropriate. The petition was therefore disposed of by leaving open the statutory remedy of appeal to the Appellate Authority. [Paras 4]

Writ petition not entertained; petitioner granted liberty to prefer an appeal before the Additional Commissioner, GST.

Condonation of delay in statutory appeals - Treatment of delay in filing the statutory appeal before the Appellate Authority. - HELD THAT: - The Court permitted the petitioner to file the appeal along with an application for condonation of delay and directed that delay alone shall not be a ground for rejection of the appeal by the Appellate Authority. The Appellate Authority must consider the condonation application on merits rather than summarily rejecting the appeal for delay. [Paras 4]

Petitioner may apply for condonation of delay; delay alone shall not be a ground for rejecting the appeal.

Consideration of interim orders by the Appellate Authority - requirement of a speaking order by the Appellate Authority - Obligation of the Appellate Authority to consider a previously passed interim order and to pass a speaking order on the appeal. - HELD THAT: - The Court authorised the petitioner to place reliance on an interim order passed by a Co ordinate Bench and directed that the Appellate Authority shall duly take that interim order into consideration while deciding the appeal. The Appellate Authority was further directed to pass a reasoned (speaking) order after considering the appeal and the interim order, ensuring that the decision records the grounds of its conclusion. [Paras 4]

Appellate Authority to consider the interim order relied upon by the petitioner and to pass a speaking order on the appeal.

Final Conclusion: The writ petition was disposed of for lack of maintainability in view of the alternate statutory appeal remedy; petitioner granted liberty to prefer an appeal to the Additional Commissioner with leave to seek condonation of delay, and the Appellate Authority directed to consider the interim order and to pass a speaking order.

Permanent establishment - Fixed place of business - Preparatory or auxiliary activities - Attribution of profits to PE - Burden of proof on Revenue

Permanent establishment - Fixed place of business - Preparatory or auxiliary activities - Whether the Mumbai Project Office of the assessee constituted a fixed place 'permanent establishment' under Article 5(1) of the DTAA. - HELD THAT: - The Court examined the terms of the Board resolution, the RBI registration application and approval, the nature and staffing of the Mumbai office and the accounts produced. It held that the ITAT's reliance on an isolated recital in the Board resolution to treat the Mumbai office as established for 'coordination and execution' of the entire project was a perverse conclusion. The ITAT's rejection of the evidential significance of the Mumbai office accounts and its finding that the onus was on the assessee to prove that the office performed only preparatory or auxiliary functions were also held to be perverse and contrary to authority. Having regard to the materials showing that the office was staffed by only two persons without core technical qualifications and that the accounts did not disclose expenditure indicative of execution activity, the Court concluded that the Mumbai office could not be said to be a fixed place of business through which the core business of the enterprise was wholly or partly carried on. The Court therefore held that the Mumbai Project Office fell within the exclusion for preparatory or auxiliary activity and did not constitute a permanent establishment under Article 5(1). [Paras 27, 28]

No permanent establishment was constituted by the Mumbai Project Office; it fell within the exclusion for preparatory or auxiliary activities under Article 5 and therefore was not a fixed place PE.

Attribution of profits to PE - Burden of proof on Revenue - Whether the Assessing Officer/Dispute Resolution Panel were justified in attributing 25% of gross revenue to the Mumbai Project Office as profits taxable in India. - HELD THAT: - The Court observed that because there was no finding that a permanent establishment existed, it was unnecessary to decide detailed questions of attribution under Article 7. It also recorded that the ITAT's remand on quantification (setting aside the arbitrary 25% attribution) and the High Court's interference without addressing substantial legal questions were misplaced. The Court noted that the ITAT had erred in shifting the evidential onus onto the assessee in light of established principles that the Revenue bears the initial burden of proving a PE. However, having concluded that no PE existed on the facts, the question of attributing any portion of offshore revenues to a PE did not arise for taxation in India. [Paras 27, 28]

The attribution of 25% of gross revenue to the Mumbai Project Office as taxable profits was unwarranted because no PE was established; issues of attribution therefore do not arise.

Final Conclusion: The appeals are dismissed for the reasons stated: the Mumbai Project Office did not constitute a permanent establishment under Article 5 of the DTAA as it was of a preparatory or auxiliary character, and consequently no portion of the assessee's offshore profits could be taxed in India as attributable to that office.

Receipt of non-competitive fee - non-compete fee payable under the Deed of Covenant - capital receipt or revenue receipt - substantial question of law that was raised by the High Court - difference in members of ITAT - majority decision of ITAT said that non-competitive fee was a capital receipt u/s 28(iv) income tax act and not a revenue receipt as envisaged in Section 28(ii) of I.T. Act - whether the said Deed of Covenant can be said to contain a restrictive covenant as a result of which payment is made to the appellant, or whether it is in fact part of a sham transaction which, in the guise of being a separate Deed of Covenant, is really in the nature of payment received by the appellant as compensation for terminating his management of CDBL, in which case it would be taxable under Section 28(ii)(a)?

HELD THAT:- Clearly, without any recorded reasons and without framing any substantial question of law on whether the said amount could be taxed under any other provision of the Income Tax Act, the High Court went ahead and held that the amount of INR 6.6 crores received by the assessee was received as part of the full value of sale consideration paid for transfer of shares – and not for handing over management and control of CDBL and is consequently not taxable under Section 28(ii)(a) - Nor is it exempt as a capital receipt being non-compete fee, as it is taxable as a capital gain in the hands of the respondent-assessee as part of the full value of sale consideration paid for transfer of shares. This finding would clearly be in the teeth of Section 260-A (4), requiring the judgment to be set aside on this score.

The reasons given by the learned Assessing Officer and the minority judgment of the Appellate Tribunal are all reasons which transgress the lines drawn by the judgments cited, which state that the revenue has no business to second guess commercial or business expediency of what parties at arms-length decide for each other.

As decided in Guffic Chem (P) Ltd. [2011 (3) TMI 6 - SUPREME COURT]the agreement entered into by the assessee with Ranbaxy led to loss of source of business; that payment was received under the negative covenant and therefore the receipt of ₹ 50 lakhs by the assessee from Ranbaxy was in the nature of capital receipt. In fact, in order to put an end to the litigation, Parliament stepped in to specifically tax such receipts under the non-competition agreement with effect from 1-4-2003.”

Decided in favour of assessee.

Exemption under section 11 - proviso to section 2(15) as applied to institutions of general public utility carrying on trade, commerce or business - principle of mutuality - beneficiary determination under section 13(3)(b) - precedent in assessee's own case and binding coordinate bench decisions

Exemption under section 11 - proviso to section 2(15) as applied to institutions of general public utility carrying on trade, commerce or business - principle of mutuality - beneficiary determination under section 13(3)(b) - precedent in assessee's own case and binding coordinate bench decisions - Whether the assessee-society is entitled to exemption under section 11 for AY 2013-14 despite receipts from services and membership fees and the proviso to section 2(15) and section 13(3)(b) objections raised by the AO. - HELD THAT: - The Tribunal examined the AO's view that, after the amendment to the proviso to section 2(15), the society's receipts from charging fees for services would render its activities commercial and disentitle it to exemption; and the Revenue's contention that members contributing over the specified amount become beneficiaries under section 13(3)(b) so that the principle of mutuality does not apply. The Tribunal declined to re-open the issue on its merits because the question had been consistently decided in favour of the assessee in its own earlier years: orders of the Tribunal and the Hon'ble Delhi High Court in the assessee's cases for preceding assessment years had held that the activities did not fall within the proviso to section 2(15) and that exemption under section 11 was permissible. The Tribunal therefore followed those binding/co-ordinate bench precedents and the line of authority in the assessee's own case, found no infirmity in the CIT(A)'s conclusions, and rejected the Revenue's grounds challenging charitable character, applicability of mutuality, and the section 13(3)(b) contention.

The Tribunal affirmed the CIT(A)'s finding that the assessee's activities are charitable and that it is entitled to claim exemption under section 11 for AY 2013-14; the Revenue's appeal is dismissed.

Final Conclusion: Following consistent earlier decisions in the assessee's own case and binding coordinate-bench precedent, the Tribunal dismissed the Revenue's appeal and upheld the grant of exemption under section 11 for assessment year 2013-14.

Appreciation of replies received under Section 133(6) of the Income Tax Act, 1961 - disallowance of expenditure as bogus without noting replies - quasi-judicial duty to afford hearing before passing orders on stay applications - conditional stay directing deposit in instalments without hearing - interim protection against coercive recovery pending disposal of stay application

Appreciation of replies received under Section 133(6) of the Income Tax Act, 1961 - disallowance of expenditure as bogus without noting replies - Whether the Assessing Authority had improperly disallowed expenditure by treating payments to contractors as 'bogus' without taking note of or appreciating replies furnished by the contractors prior to the assessment order. - HELD THAT: - The court recorded that replies from contractors (including letters dated 24th and 26th December 2019) were on record and received prior to the assessment order dated 30th December 2019. Prima facie the Assessing Authority did not take note of these replies before treating the expenditure as 'bogus' and disallowing roughly Rs. 7.87 crores of expenses. The court observed that an Assessing Authority is expected to examine and take note of replies received under Section 133(6) before saddling an assessee with tax consequences arising from disallowance. On this basis the assessment decision to treat the payments as bogus without appreciating the replies is opened to scrutiny and cannot be allowed to operate without further consideration. [Paras 8]

Finding recorded that replies were received before the assessment order and prima facie were not appreciated; Assessing Authority's disallowance is susceptible to challenge and requires consideration.

Quasi-judicial duty to afford hearing before passing orders on stay applications - conditional stay directing deposit in instalments without hearing - interim protection against coercive recovery pending disposal of stay application - Whether the Principal Commissioner of Income Tax (PCIT) acted without hearing the petitioner in passing the order directing deposit of 20% of the assessed tax in six instalments, and what interim relief should follow. - HELD THAT: - The petition for stay under Section 246A was pending before the PCIT and was disposed of by an order dated 17th July 2020 directing deposit of 20% in six instalments. The court noted that the application had been pending for more than two months and the petitioner was not heard before the PCIT passed the conditional order. The court emphasised the general requirement that a quasi-judicial authority should hear an applicant before passing orders, particularly where substantial tax liability and payment obligations are imposed. Consequently the court directed that the PCIT must grant an opportunity of hearing (in person or by video conference) and dispose of the stay application afresh within a fixed time, and restrained the Revenue from initiating coercive recovery until the PCIT's fresh decision. [Paras 9, 11]

PCIT to hear the petitioner afresh (petitioner to appear on 30th July 2020) and decide the stay application within four weeks of appearance; no coercive recovery to be initiated until PCIT passes orders.

Final Conclusion: Writ petition disposed directing the PCIT to hear the petitioner on the pending stay application and decide it within four weeks of appearance; coercive recovery stayed until the PCIT's decision; no costs.

Interim stay - continuation of interim relief - equitable relief - expeditious disposal of appeals - judicial discretion to maintain status quo

Interim stay - equitable relief - judicial discretion to maintain status quo - Continuation of the interim stay granted earlier on 30.05.2019 in respect of the statutory appeal filed against assessment orders for Assessment Years 2010-11 to 2013-14. - HELD THAT: - The Division Bench had previously granted an interim stay on 30.05.2019. The appeal before the appellate authority was represented to be ripe for hearing and there was an expectation of early disposal. Given that an interim stay has been in force since 30.05.2019 and that the main appeal is ready for adjudication, it would be inequitable to disturb the interim relief at this stage. Exercising judicial discretion to preserve the status quo and in the interest of fairness, the Court declined to modify or vacate the interim order and directed that it continue until the statutory appeal is heard and disposed of by the appellate authority. The Court also requested that the appellate authority dispose of the appeal at an early date, preferably within six weeks from receipt of this order. [Paras 6]

The interim stay granted on 30.05.2019 shall continue in force until the appeal before the appellate authority is heard and disposed of; the appellate authority is requested to dispose of the appeal preferably within six weeks from receipt of this order.

Final Conclusion: The appeal is disposed of by directing that the interim stay granted on 30.05.2019 remain in force until the statutory appeal concerning Assessment Years 2010-11 to 2013-14 is heard and disposed of, and the appellate authority is requested to conclude the appeal preferably within six weeks of receiving this order.

Unexplained credit - reconciliation of ledger balances - burden to substantiate accounting entries - remand for verification and opportunity to be heard - treatment of receipts accounted in subsequent year

Unexplained credit - reconciliation of ledger balances - treatment of receipts accounted in subsequent year - remand for verification and opportunity to be heard - Whether the difference in opening balance between the books of the assessee and M/s Gulab Farms Pvt. Ltd., treated by the authorities as unexplained credit, is sustainable or requires further verification. - HELD THAT: - The Assessing Officer treated amounts shown in confirmations/ledgers as income on the ground that bills dated after the year-end were nevertheless accounted for in the other party's books as of 31.03.2010. The Commissioner (Appeals) accepted that certain bills related to supplies in the subsequent year and deleted the full addition but sustained an element of Rs. 20,90,000/- as unexplained credit because of an apparent inconsistency in opening balances (Rs. 66,40,280/- v. Rs. 45,50,280/-) between the two sets of books. The assessee asserted that the difference arose from a cheque issued and accounted for by the payor on 31.03.2010 but recorded in the assessee's books when actually received in the next accounting year. The Tribunal observed that neither the AO nor the CIT(A) had sufficiently examined this specific explanation nor given the assessee an opportunity to substantiate the entry during adjudication. In the interest of justice and having regard to the contested factual reconciliation, the Tribunal concluded that the matter should be restored to the file of the AO for verification of the documentary evidence and for giving the assessee an opportunity to substantiate the alleged accounting treatment, for decision afresh in accordance with law. [Paras 11]

Issue restored to the file of the Assessing Officer for verification and adjudication afresh after giving the assessee an opportunity to substantiate the difference in opening balances.

Unexplained credit - grossing up for TDS - reconciliation of ledger balances - remand for verification and opportunity to be heard - Whether the difference between the assessee's ledger and M/s V.C. Solutions P. Ltd.'s ledger, treated as unexplained credit by the authorities, is sustainable or requires further verification. - HELD THAT: - The AO added the receipt of consultancy fees as income; the CIT(A) deleted the gross addition but sustained Rs. 5,21,935/- as unexplained credit on the basis of a mismatch between the balance shown by V.C. Solutions (Rs. 34,94,435/-) and the assessee's ledger (Rs. 29,72,500/-). The assessee submitted that the discrepancy arose from V.C. Solutions grossing up entries for TDS and an erroneously credited amount in the name of a third party, and produced cheque and ledger evidence to explain the accounting. The Tribunal noted that the issue was not adequately addressed in the remand proceedings and that the assessee had not been afforded a sufficient opportunity to have the explanation examined by the AO. Given the factual nature of the dispute and the need to verify documentary particulars (including TDS gross-up and third party credits), the Tribunal directed that the issue be restored to the AO for fresh verification and adjudication in accordance with fact and law. [Paras 17]

Issue restored to the file of the Assessing Officer for verification and adjudication afresh after granting the assessee opportunity to substantiate the accounts and explanations.

Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes by restoring the disputed ledger reconciliation issues relating to M/s Gulab Farms Pvt. Ltd. and M/s V.C. Solutions P. Ltd. to the file of the Assessing Officer for fresh verification and decision after affording the assessee opportunity to substantiate its explanations; other grounds were not pressed or dismissed.

Reopening of assessment - failure to disclose fully and truly all material facts - proviso to section 147 - limitation for reopening beyond four years - reassessment barred by limitation - change of opinion - reasons recorded under section 148

Reopening of assessment - failure to disclose fully and truly all material facts - proviso to section 147 - limitation for reopening beyond four years - reasons recorded under section 148 - change of opinion - Validity of reopening the assessment beyond four years under the proviso to section 147 in the absence of failure by the assessee to disclose fully and truly all material facts - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the reopening u/s 148/147 was barred by limitation because the Department failed to demonstrate that the assessee had failed to disclose fully and truly all material facts necessary for assessment. The proviso to s.147 limits reopening beyond four years where the original assessment was under s.143(3), unless escapement is due to such failure of disclosure; the burden lies on the Department. The reasons recorded must identify the material facts suppressed and how they were suppressed. On the facts, the AO's reasons referred to items (CSR expenses, depreciation on software, prior period entries, s.14A computation, late PF contributions) but did not point to any specific undisclosed material fact or any external tangible information newly discovered. Several of the issues relied upon by the AO had been placed on record and examined in the original proceedings (CSR and prior period entries), one issue involved a change of opinion by the AO (rate of depreciation on software), the s.14A matter was a calculation correction, and the late PF contribution issue was covered by existing judicial precedent. The CIT(A) therefore correctly found absence of non-disclosure and that reopening amounted to a change of opinion; accordingly the extended six-year limitation could not be invoked and the reassessment was time-barred. [Paras 4, 9]

Reopening held to be invalid and reassessment annulled as barred by limitation in absence of failure to disclose fully and truly all material facts.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order annulling the reassessment for AY 2006-07 on the ground that reopening beyond four years was unsustainable because the Department did not establish any failure by the assessee to disclose fully and truly all material facts; other grounds were not adjudicated.

Exemption under section 54/54F - date of purchase/possession for claiming exemption - treatment of consideration in exchange transactions - power of appellate authorities to admit new claims - remand for fresh adjudication to Assessing Officer

Exemption under section 54/54F - date of purchase/possession for claiming exemption - power of appellate authorities to admit new claims - Entitlement of the assessee to claim exemption under section 54/54F in respect of long-term capital gain. - HELD THAT: - The Tribunal examined whether the assessee was entitled to exemption under section 54/54F having invested in a residential flat after receiving a flat under a development arrangement and subsequently selling that flat. Relying on CBDT Circular No. 672/1993 and judicial authorities (including the principle that possession/payment completing a transaction may be treated as the date of purchase), the Tribunal accepted the legal proposition that where substantial completion/payment/possession occurs within the statutory periods, the date of possession/payment can be treated as the date of purchase for claiming exemption. The Tribunal noted that appellate authorities are not barred from admitting and deciding new claims even if the Assessing Officer is so barred (reference to Goetze India Ltd). Applying these legal principles and precedents, the Tribunal held that on the undisputed facts the assessee is prima facie eligible for exemption under section 54/54F, since the substance of the transaction (payment/possession) falls within the temporal limits prescribed for investment to claim the exemption.

Held that the assessee is eligible, in law, to claim exemption under section 54/54F subject to verification of records and evidence.

Treatment of consideration in exchange transactions - remand for fresh adjudication to Assessing Officer - Whether the claimed cost of construction and the correct treatment of consideration received (including characterization on exchange and subsequent sale) have been properly assessed. - HELD THAT: - The Tribunal reviewed the development agreement and observed that the assessee received the second-floor flat in exchange for land and that the fair market value on receipt/possession should be considered in assessing capital gains on the exchange; any subsequent gain on sale would be taxed when the second-floor flat was sold. Noting factual disputes and documentary material yet to be examined, and that parallel issues were to be considered consistently with co-owner assessments, the Tribunal found that these factual and evidentiary matters require fresh consideration. Consequently the Tribunal directed that the entire assessment be restored to the Assessing Officer for de novo adjudication after verification of documentary evidence and affording the assessee opportunity to be heard.

Directed restoration of the assessment to the Assessing Officer for fresh adjudication on the cost/construction and treatment of consideration issues after verification of records.

Final Conclusion: The Tribunal accepted the legal entitlement, on the facts, of the assessee to claim exemption under section 54/54F (treating possession/payment as the operative date for purchase) but, because documentary and factual aspects remained to be verified, restored the entire assessment to the Assessing Officer for de novo adjudication and directed that the assessee be afforded an opportunity of being heard; appeal allowed for statistical purposes.

Inseparable letting - intention of the parties - primary object of letting - income from house property - income from other sources - deduction under section 24(a) - letting of plant, machinery or furniture

Inseparable letting - intention of the parties - deduction under section 24(a) - income from other sources - income from house property - Whether rental income from letting 50 workstations was rightly treated as not being income from house property and the standard deduction under section 24(a) disallowed because the letting of workstations (with amenities) was inseparable from letting of the building and therefore chargeable under the head income from other sources. - HELD THAT: - The Tribunal applied the test of "inseparable letting" as elucidated in Sultan Brothers and the test of primary object from Shambhu Investment, focusing on the intention of the parties as discernible from the lease. The lease described the demised premises as 50 workstations taken on lease "as is where is basis" with easements and common-area rights, fixed rent per workstation, and an Annexure listing amenities and fixtures provided. The Tribunal found that the agreement created an interest in workstations (plant/machinery/furniture) rather than a simple letting of the building; use of the building was incidental to exploitation of the workstations. Applying the established tests, the Tribunal concluded that the parties intended the letting of workstations and their facilities to be enjoyed together with the building, making the letting inseparable; consequently the income fell under the residuary head (income from other sources) and the statutory standard deduction under section 24(a) applicable to income from house property was not available. The Tribunal noted that a separate letting of other floors of the building to a different party (assessed as income from house property and left undisturbed) further supported that the present lease concerned exploitation of workstations rather than letting of the building itself. The findings of the Assessing Officer and the Commissioner (Appeals) were upheld.

The disallowance of the standard deduction under section 24(a) was upheld and the rental income from the 50 workstations was held to be chargeable under the head income from other sources; the sole ground of appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, upholding the characterization of the lease of 50 workstations (with amenities) as an inseparable letting of plant/machinery/furniture and building such that the income is chargeable under income from other sources and the standard deduction under section 24(a) is not allowable.

Maintainability of contempt petition - scope of appellate order - continuation of investigation under Companies Act, 1956 notwithstanding Companies Act, 2013 - contempt for disobedience of court order - restrain on coercive steps

Maintainability of contempt petition - contempt for disobedience of court order - Whether the contempt petition filed by Alchemist Healthcare Ltd. and a director was maintainable and justified on the allegation of wilful disobedience of the Division Bench orders dated 18.03.2019 and 10.04.2019. - HELD THAT: - The Court found that Healthcare was neither a party to the original writ petitions nor a pro forma respondent in LPA No.189/2019 and was incorporated after the orders challenged in those writ petitions. The Division Bench orders arose from writ petitions filed by Infra Realty and related to allegations specifically against Infra Realty; there is no material to show that those orders extended or directed action qua Healthcare. The contempt jurisdiction is discretionary and must be founded on clear facts showing wilful disobedience. On the record before the Court there was no substance to the contention that respondent Nos.1 to 3 had acted in contempt of the Division Bench orders by issuing the impugned summons to Healthcare. The petition was therefore a misconceived and calculative attempt to embroil the respondents in litigation and to obtain undue advantage. [Paras 8, 9, 11, 12]

Contempt petition was not maintainable and is dismissed.

Scope of appellate order - restrain on coercive steps - continuation of investigation under Companies Act, 1956 notwithstanding Companies Act, 2013 - Whether the Division Bench orders (18.03.2019 and 10.04.2019) were confined to Infra Realty or extended protection to other group companies, and whether issuance of summons amounted to prohibited coercive action. - HELD THAT: - The Division Bench clarified that the inquiry must be held strictly in accordance with the provisions of the Companies Act, 1956 (relying on sub section (16) of Section 213 of the 2013 Act) and that parties could raise objections before the statutory authority. However, the orders in LPA No.189/2019 related to Infra Realty and did not indicate any direction or restraint applicable to pro forma respondents or other group companies impleaded without leave. The subsequent interlocutory order keeping coercive steps in abeyance applied to coercive measures; mere issuance of summons did not, in the Court's view, amount to taking coercive action contrary to the orders. There was therefore no basis to treat the impugned summons as violating the Division Bench directions. [Paras 9, 10, 11]

The Division Bench orders were confined to Infra Realty; the restraint related to coercive steps and did not render issuance of summons contemptuous.

Contempt for disobedience of court order - maintainability of contempt petition - Whether, having regard to the facts and prior proceedings, contempt proceedings should be permitted to proceed or ought to be dismissed with costs. - HELD THAT: - Applying the established discretionary principles governing contempt, the Court took note of the absence of any clear finding that respondent Nos.1 to 3 had acted in wilful violation of the orders. The petition was characterised as vexatious and an attempt to intimidate public authorities in the discharge of statutory duties. Given the lack of substance and the abuse of process, the Court exercised its discretion to dismiss the contempt petition and to impose costs as a deterrent against such litigation tactics. [Paras 11, 12, 13]

Contempt petition dismissed with costs.

Final Conclusion: The contempt petition filed by Alchemist Healthcare Ltd. and a director is dismissed for want of merit; the Division Bench orders pertained to Infra Realty and did not extend protection to other group companies, and the impugned summons did not amount to contemptuous coercive action. The petition is dismissed with costs directed to be deposited with the Delhi High Court Advocates Welfare Trust and the PM CARES Fund as ordered.

Just and equitable winding up - Loss of substratum - Illegal allotment of shares - Board resolution requirement for allotment - Suppression of material facts - Non-production/destruction of company records and consequences - Non-cooperation with auditor and administrator - Siphoning off of company assets - Contempt for non-compliance with court/administrator directions

Illegal allotment of shares - Board resolution requirement for allotment - Suppression of material facts - Allotment of equity shares on 17.12.2007, 28.12.2007 and 27.02.2008 was not shown to have been approved by the Board and involved suppression of material facts. - HELD THAT: - The Tribunal found that no board resolution was placed before the NCLT or this Appellate Tribunal to establish that the allotments were made in accordance with law. The appellants admitted that no board meetings were held for the allotments, and supporting statements (including that of the appellant's wife denying consent) undermined the claim of lawful allotment. These facts amounted to suppression and false claims by the appellants; consequently the Appellate Tribunal agreed with the NCLT's finding that the allotments were not shown to be validly authorised. [Paras 9, 29, 36]

Findings of the NCLT that the impugned share allotments were made without requisite board approval and involved suppression are upheld.

Non-production/destruction of company records and consequences - Non-cooperation with auditor and administrator - Contempt for non-compliance with court/administrator directions - Respondent No.2 (and those in control at times) failed to produce statutory records and assets were removed, leading to adverse findings including initiation of contempt proceedings. - HELD THAT: - The Tribunal noted complaints and inconsistent explanations by Respondent No.2 regarding loss of records during shifting and later destruction by burning; the Administrator recorded removal of tangible assets from company premises; and the High Court ordered suo moto contempt proceedings for disobedience of earlier directions. Having regard to these findings and the Administrator's report, the Tribunal concluded that Respondent No.2's conduct in relation to production of records and preservation of assets was deficient and prejudicial to the company's affairs. [Paras 10, 11, 12]

Respondent No.2's conduct in failing to produce records and in removal of assets is criticised and justified initiation of contempt proceedings; the NCLT's adverse findings on this conduct are supported.

Non-production/destruction of company records and consequences - Non-cooperation with auditor and administrator - Siphoning off of company assets - Contempt for non-compliance with court/administrator directions - The appellant in Company Appeal (AT) No.23/2019 failed to produce statutory records when directed, offered inconsistent explanations (loss in shifting and later burning), did not cooperate with the Administrator and Auditor, and was found to have siphoned off company assets. - HELD THAT: - The Tribunal recorded that the appellant undertook to produce records before the Administrator but failed to do so and subsequently claimed destruction in a car fire; the Tribunal doubted the repetition of such incidents and treated the explanations as a deliberate attempt to avoid production. The Administrator's proceedings and the High Court's initiation of contempt proceedings against the appellant reinforced the conclusion that the appellant obstructed inspection and preservation of records and had siphoned assets. The Tribunal held that, in the absence of records and with admitted removal/non-existence of assets, meaningful relief other than winding up would be futile. [Paras 26, 30, 31, 36]

Appellant's failure to produce records, non-cooperation with authorities, and siphoning of assets are established; these conduct-based findings support the impugned orders.

Just and equitable winding up - Loss of substratum - Winding up of the company on just and equitable grounds is justified because the company has lost its substratum due to mismanagement by persons in control at different times. - HELD THAT: - The Tribunal noted persistent dispute and mutual mismanagement between directors, each of whom when in control acted in a manner resulting in mismanagement and loss of the company's substratum. Where substratum is lost and both principal controllers have contributed to destruction of the company, winding up on just and equitable grounds does not unfairly prejudice members and is an appropriate remedy. Given the absence of records and removal/non-existence of assets, the Tribunal found that remedial orders short of winding up would be futile. [Paras 32, 33, 34, 36]

The NCLT's order for winding up on just and equitable grounds is proper and is upheld.

Final Conclusion: The Appellate Tribunal found no merit in the appeals: the impugned NCLT order was held to be speaking and well-reasoned, the contested share allotments were not shown to be validly authorised, both sides' conduct in relation to preservation and production of records and assets was adverse to the company's interests, and winding up on just and equitable grounds was upheld; the appeals are dismissed with costs as ordered.

Rectification of approved resolution plan - jurisdiction of Adjudicating Authority under Section 60 of the I&B Code - correction of clerical/arithmetical/typographical error - inherent powers and limitation on reopening final orders - finality of approved resolution plan

Rectification of approved resolution plan - finality of approved resolution plan - Adjudicating Authority's jurisdiction to entertain an application to rectify and substantially alter an approved and implemented resolution plan after the completion of CIRP (13 months later). - HELD THAT: - The Tribunal held that once a resolution plan has been approved by the Adjudicating Authority and implemented, the approved plan attains finality and the Adjudicating Authority has no jurisdiction to entertain an application for rectification which results in substantial changes to the plan after such finality. The inherent or general powers of the Adjudicating Authority cannot be used to effect substantive amendments to an approved resolution plan where such amendments do not involve questions of priorities or matters arising under the insolvency resolution or liquidation proceedings under the Code. Reliance was placed on the principle that inherent powers cannot be exercised to do what is expressly prohibited by statute and that correction under such powers is limited to clerical or arithmetical mistakes. Applying these principles, the Tribunal concluded that the Adjudicating Authority erred in allowing substantial modification of the share allocation of the implemented plan 13 months after completion of CIRP.

Adjudicating Authority lacked jurisdiction to entertain and allow rectification resulting in substantial change to the approved and implemented resolution plan after the CIRP had been completed; the impugned rectification was set aside.

Rectification of approved resolution plan - joint resolution applicants and consent requirement - Whether one joint resolution applicant could seek rectification of a jointly submitted and approved resolution plan without the consent of the other joint applicant. - HELD THAT: - The Tribunal observed that the resolution plan before the Adjudicating Authority had been a joint plan submitted and approved on a joint basis by the two resolution applicants. An application for amendment or rectification of such an approved joint plan filed by only one of the joint applicants, without the consent of the other, was not competent. The Adjudicating Authority therefore erred in permitting amendment of the jointly submitted and approved plan on the basis of an application made by only one joint applicant, because the joint nature of the plan required mutuality of consent for substantive changes.

Rectification sought and allowed by a single joint resolution applicant without the co-applicant's consent was impermissible; the impugned order allowing such amendment was set aside.

Correction of clerical/arithmetical/typographical error - inherent powers and limitation on reopening final orders - Whether the substantial re allocation of shareholding effected by the impugned order could properly be treated as correction of a typographical/arithmetical/clerical error. - HELD THAT: - The Tribunal applied settled law that powers to correct clerical or arithmetical mistakes are narrow and cannot be used as a pretext to alter a decree or order which has attained finality. A change that materially alters rights (here, a large re allocation of shareholding from one resolution applicant to another) cannot be treated as a mere typographical or numerical slip. The exercise of inherent or ancillary powers to correct errors is confined to true clerical/arithmetic slips and does not extend to substantive modifications of an approved resolution plan. Consequently, the Tribunal concluded that the Adjudicating Authority's characterisation of the dispute as arising from a clerical/arithmetic error was misplaced.

Substantial change in shareholding could not be justified as correction of a clerical/arithmetical/typographical error; such purported correction was impermissible and the rectification was set aside.

Final Conclusion: The appeal is allowed; the impugned order of the Adjudicating Authority dated 20th November 2019 permitting rectification of the approved and implemented resolution plan (resulting in substantial change of shareholding and effected on the application of one joint applicant without the other's consent) is set aside for lack of jurisdiction and because the changes could not be treated as mere clerical/arithmetic corrections.

Initiation of corporate insolvency resolution process - Default for the purposes of the Insolvency and Bankruptcy Code - Limitation and effect of vacated stay on fresh cause of action - One-time settlement as acknowledgment and continuance of debt - Evidence of debt by bankers' books certificate - Moratorium under sections 13 and 14 of the IBC - Appointment of Interim Resolution Professional - Remedy in rem

Limitation and effect of vacated stay on fresh cause of action - One-time settlement as acknowledgment and continuance of debt - Petition under section 7 is not barred by limitation and was filed within limitation period. - HELD THAT: - The Tribunal found that the earlier stay by the High Court barred recovery proceedings and that clear cause of action arose only after the vacation of the interim order on March 7, 2018. The Tribunal further relied on the corporate debtor's repeated one-time settlement proposals submitted after institution of the petition as evidence of acknowledgement and continuance of the debt, supporting the view that the petition was within limitation. On these bases the Adjudicating Authority held the petition filed on August 21, 2018 to be timely. [Paras 20, 21]

Section 7 petition is maintainable and not time-barred.

Default for the purposes of the Insolvency and Bankruptcy Code - Evidence of debt by bankers' books certificate - Existence of debt and occurrence of default by the corporate debtor established. - HELD THAT: - The Tribunal noted that loan facilities were sanctioned and availed by the corporate debtor, charges were recorded with the Registrar of Companies, and that the statement of accounts together with the CIBIL report and certificate under the Bankers' Books Evidence Act were placed on record. On the basis of these documents the Adjudicating Authority concluded that the corporate debtor had defaulted in repayment, recording the date of default as May 1, 2000. [Paras 20, 21]

Existence of debt in excess of the statutory threshold and default on May 1, 2000 were established.

Initiation of corporate insolvency resolution process - Remedy in rem - The application filed by the financial creditor under section 7 was complete and fit for admission to initiate CIRP. - HELD THAT: - The Tribunal examined the material filed by the financial creditor, including sanction letters, account workings, ROC charge records, CIBIL report and the bankers' books certificate, and observed that the petition was filed by an authorised official in prescribed format and a proposed resolution professional had given his consent. Having found the application complete and the statutory prerequisites satisfied, the Adjudicating Authority admitted the petition for initiation of CIRP. [Paras 20, 21]

The section 7 petition is complete and admitted for initiation of CIRP.

Appointment of Interim Resolution Professional - Moratorium under sections 13 and 14 of the IBC - An Interim Resolution Professional was appointed and moratorium declared from the date of the order. - HELD THAT: - Pursuant to admission of the petition, the Tribunal appointed the proposed insolvency professional as the Interim Resolution Professional and directed him to make the public announcement and to perform duties under the Code. The Adjudicating Authority declared the statutory moratorium with its attendant prohibitions as prescribed under the Code, effective from the date of the order until completion of the CIRP. [Paras 22, 23]

IRP appointed and moratorium under the IBC declared with effect from the date of the order.

Final Conclusion: The Adjudicating Authority admitted the financial creditor's petition under section 7 of the IBC (admission date January 3, 2020), having found existence of debt, occurrence of default, timeliness of the petition, and completeness of the application; an Interim Resolution Professional was appointed and moratorium declared to commence the CIRP.

Confirmation of provisional attachment under Section 8(4) of the PMLA - manner of taking possession of money under Rule 4(5) of the Prevention of Money-Laundering Rules, 2013 - transfer of bank balances to the Directorate on confirmation of attachment - prima facie case for grant of ad interim status quo ante - bank guarantee as alternative security to preserved attachment

Transfer of bank balances to the Directorate on confirmation of attachment - confirmation of provisional attachment under Section 8(4) of the PMLA - Whether the stay application had become infructuous by reason of the transfer of the attached amount to the Enforcement Directorate and whether that application should be dismissed as infructuous. - HELD THAT: - The Tribunal recorded that by the time the stay application was being pursued the amount stood transferred from the appellant's bank account to the respondent. The transfer rendered the specific relief sought in the stay application (preventing operation of the impugned order so as to keep the funds in the appellant's account) ineffective. The Tribunal therefore concluded that the stay application had lost its purpose and was accordingly dismissed as infructuous. The factual finding that the impugned sum had already been transferred removed the operative basis for the interim relief sought.

Stay application dismissed as infructuous because the attached amount had already been transferred to the Enforcement Directorate.

Manner of taking possession of money under Rule 4(5) of the Prevention of Money-Laundering Rules, 2013 - confirmation of provisional attachment under Section 8(4) of the PMLA - prima facie case for grant of ad interim status quo ante - bank guarantee as alternative security to preserved attachment - Whether an ad interim order should be granted directing reversal of the transfer and restoration of status quo ante, or alternatively directing retransfer subject to a bank guarantee. - HELD THAT: - On confirmation of the Provisional Attachment Order, Section 8(4) operates and must be read with Rule 4(5) which prescribes the manner of taking possession of money lying in a bank. Rule 4(5) authorises the authorised officer to direct the bank to transfer and credit the money to the account of the Directorate of Enforcement. The Tribunal held that the respondent had followed the statutory procedure under Section 8(4) read with Rule 4(5) and that there was no illegality in effecting the transfer. Having regard to those provisions, the Tribunal found that the appellant had not made out a prima facie case entitling him to an interim reversal of the transfer. The appellant's offer to furnish a bank guarantee was also declined at the interim stage because the amount was alleged to be proceeds of crime and could not be permitted for use by the appellant pending adjudication; the Tribunal left such questions for determination on the merits at the hearing of the appeal.

Application for ad interim reversal of transfer and restoration of status quo ante (and alternative relief by way of bank guarantee) dismissed for want of a prima facie case; transfer under Section 8(4) read with Rule 4(5) held lawful.

Final Conclusion: The application for interim stay was dismissed as infructuous because the attached amount had already been transferred to the Enforcement Directorate. The separate application seeking ad interim reversal of the transfer or restoration of status quo ante (or alternatively acceptance of a bank guarantee) was rejected on the ground that the transfer was effected lawfully under Section 8(4) of the PMLA read with Rule 4(5) of the 2013 Rules and the appellant had not made out a prima facie case; the appeal remains listed for final hearing.

Appeal under Section 35L(b) of the Central Excise Act - Appeals concerning determination of rate of duty or taxability lie to the Supreme Court - Not maintainable before High Court - Determination of taxability or excisability as determination of rate of duty

Appeal under Section 35L(b) of the Central Excise Act - Appeals concerning determination of rate of duty or taxability lie to the Supreme Court - Not maintainable before High Court - The appeals before the High Court are not maintainable because the impugned Appellate Tribunal orders relate to determination of the rate of duty/taxability and therefore fall within the class of matters covered by Section 35L(b), entitling appeal to the Supreme Court. - HELD THAT: - The Court examined Section 35L and noted that appeals from appellate tribunal orders relating to the determination of any question having relation to the rate of duty of excise or to the value of goods (which includes determination of taxability or excisability) are covered by clause (b) and lie to the Supreme Court. The impugned orders of the Appellate Tribunal were held to concern the rate of duty of service tax or taxability; accordingly, such appeals are not maintainable before this High Court. The Court therefore declined to entertain the admitted substantial questions of law on merits and disposed of the appeals as not maintainable, while leaving the parties free to proceed before the appropriate forum in accordance with law. [Paras 5, 6, 7, 8]

Both appeals dismissed as not maintainable before the High Court; liberty granted to pursue remedy before the appropriate forum (Supreme Court) in accordance with law.

Final Conclusion: The High Court disposed of the appeals as not maintainable because the Tribunal's orders relate to determination of rate of duty/taxability within the meaning of Section 35L(b) of the Central Excise Act, leaving the parties at liberty to approach the appropriate forum in accordance with law; no opinion was expressed on the merits.

Entitlement to C forms for inter state purchases of High Speed Diesel - application of precedent in rem to all similarly situated dealers - obligation of assessing authorities to apply binding High Court decisions until stayed or reversed

Entitlement to C forms for inter state purchases of High Speed Diesel - concessional rate of tax on interstate purchase of fuel - Benefit of concessional rate via issuance of 'C' forms is available to dealers who purchase High Speed Diesel by way of inter state sale. - HELD THAT: - The High Court applied and followed its earlier decision in M/s Ramco Cements Ltd. which held that dealers purchasing High Speed Diesel from suppliers in other States are entitled to the concessional rate by obtaining 'C' forms. The court noted that other High Courts have reached the same conclusion and that a decision of the Punjab and Haryana High Court on an identical issue has been confirmed by the Supreme Court in State of Haryana & Others v. Caparo Power Ltd. The petitioner's difficulty in procuring 'C' forms from blocked web portals did not negate the legal entitlement recognised by these precedents. Having found complete identity of facts and law with the earlier decided matters, the court reiterated that the legal position favours the assessee and that the benefit must be extended in accordance with those decisions. [Paras 3]

Entitlement to 'C' forms for inter state purchases of High Speed Diesel recognised and extended to the petitioner in accordance with the court's earlier decision.

Application of precedent in rem to all similarly situated dealers - obligation of assessing authorities to apply binding High Court decisions until stayed or reversed - Assessing authorities within the State must apply the rationale of the Ramco Cements decision to all pending assessments and must not confine its benefit to the parties to that litigation. - HELD THAT: - The court rejected the departmental stance that the benefit could be granted only to dealers who were parties to the earlier writ. It held that the High Court's decision operates in rem and is thus applicable to all dealers seeking the benefit, subject to compliance with law. Until the Ramco Cements decision is stayed or reversed, Assessing Authorities are directed to implement its reasoning forthwith. The petitioner's representation that the department's portals were blocked and that authorities refused to extend the benefit underscored the need for an immediate departmental directive to give effect to the binding decision. [Paras 3, 4]

Department directed to apply the in rem effect of the precedent to all pending assessments and to take necessary action forthwith; benefit not restricted to parties to the earlier writ.

Final Conclusion: The writ petition is allowed; the State/department is directed to implement the High Court's earlier decision granting entitlement to 'C' forms for inter state purchases of High Speed Diesel and to apply that precedent in rem to all similarly situated dealers until it is stayed or reversed; no costs.

Validity of levy of Energy Development Cess on Distributors - reasonableness of classification for taxing purpose - self-contained taxing statute and mechanism for assessment, payment and recovery - principles of natural justice in taxation statutes - interest on delayed payment as notified under subordinate rules - utilisation of cess for energy development purposes

Validity of levy of Energy Development Cess on Distributors - reasonableness of classification for taxing purpose - Constitutional validity of Section 3(1) of the Chhattisgarh Upkar Adhiniyam, 1981 insofar as it imposes EDC on Distributors - HELD THAT: - The Court held that Section 3(1) is not unconstitutional. The statutory scheme imposes cess on Distributors at a specified rate per unit and the legislative classification does not suffer from arbitrariness or discriminatory treatment that would violate Article 14. The insertion of a separate provision for Producers (Section 3(1-a)) and its challenge before the Supreme Court did not render Section 3(1) invalid; both categories are within the tax net and the case law invoked by the petitioners on classification was found inapplicable on the facts (paras 13-16, 22-24). The purpose of the levy - as reflected in subsection (3) of Section 3 - links collection to identifiable public purposes in the field of energy development and utilisation, negating the submission that no service or quid pro quo exists (paras 22-24). [Paras 14, 15, 22, 23, 24]

Section 3(1) of the 1981 Act imposing EDC on Distributors is constitutionally valid and not vitiated by arbitrariness or lack of connection to public purpose.

Self-contained taxing statute and mechanism for assessment, payment and recovery - principles of natural justice in taxation statutes - Whether the Act and applicable rules lack procedural machinery (notice, assessment, hearing, redress) rendering the cess unconstitutional - HELD THAT: - The Court found the Act to be self-contained and the Rules under the Madhya Pradesh Electricity Duty Act, 1949 (applied mutatis mutandis) provide the procedural machinery: time and manner of payment, requirement to submit treasury receipt and returns, power of the Electrical Inspector to assess in default, dispute resolution route and penalties (paras 17-19). Given the statutory clarity on rate and quantum and the distributor's duty to file returns and retain records, absence of an additional pre-assessment notice did not invalidate the levy; principles of natural justice were not breached because the statute prescribes the scheme of payment and assessment and does not contemplate a separate quasi-judicial pre-fixation process (paras 17-20, 25). The petitioners had not complied with the statutory payment/return obligations or shown any prior dispute being raised before competent authorities (para 20). [Paras 17, 18, 19, 20, 25]

The statutory scheme and Rules supply adequate procedural safeguards; lack of separate pre-assessment notice or hearing does not render the cess unconstitutional in the circumstances.

Liability to pay cess and right to recover from consumers under non-obstante clause - Whether the petitioners were liable for the arrears of EDC and whether non-recovery from consumers excused them - HELD THAT: - The Court noted that the petitioners, having obtained distribution licence in 2005, were aware of the statutory liability and had contractual clauses acknowledging cess components in tariffs (paras 26-29). Section 4 of the Electricity Duty Act, 1949 (applied to cess) permits recovery from consumers; the petitioners' failure to collect or remit did not absolve them of statutory obligation to pay, and the interim Supreme Court order relating to Section 3(1-a) did not affect the continuance of Section 3(1) liability (paras 26-29). The petitioners did not contend that they had deposited cess or filed returns for the relevant period (para 34). [Paras 26, 27, 28, 29, 34]

Petitioners remained liable to satisfy the arrears of EDC; alleged failure to recover from consumers did not discharge their statutory obligation.

Interest on delayed payment as notified under subordinate rules - Validity and applicability of interest charged at varying rates up to 24% for delayed payment of cess - HELD THAT: - The Rules (Rule 5) permit the Provincial/State Government to notify rates of interest subject to a maximum of 24% per annum. The standing Notification dated 22.07.1975 prescribes a sliding scale (12%, 15%, 20%, 24%) depending on the lateness of payment (para 33). The respondents applied the correct graduated rates to the respective delayed periods rather than a uniform 24% on the entire arrear; the petitioners did not dispute that they had failed to pay for the periods in question (paras 31-34). Consequently, charging interest at the rates computed in Annexure P/2 conformed to the Rules and the Notification and was not penal in the sense alleged by the petitioners (paras 31-34). [Paras 31, 32, 33, 34]

Interest charged in accordance with the notified rates (up to 24% as applicable for delays beyond 12 months) is lawful and correctly applied to the respective periods.

Final Conclusion: The writ petition challenging liability to pay the Energy Development Cess (and the interest computed for the period October, 2007 to January, 2014) was dismissed: Section 3(1) is constitutionally valid; the statutory rules provide an adequate mechanism for payment, assessment and dispute resolution; the petitioners remained liable for arrears; and interest was lawfully computed under the notified scale up to the maximum of 24%.