TaxTMI Updates e-Newsletter
Jul 26,2024

Adjustment of IGST against CGST and SGST - apportionment of IGST - double taxation - penalty and interest for delayed payment - alternative remedy under Section 107 - principle of natural justice - interim stay of recovery pending appeal

Alternative remedy under Section 107 - interim stay of recovery pending appeal - Availability of remedy under Section 107 and direction to approach the appellate authority with claim for interim relief - HELD THAT: - The Court recorded the respondents' preliminary objection that the petitioner has an efficacious alternative remedy under Section 107 of the GST Act and that disputed questions of fact (including whether supplies were intra- or inter-state) are fit for adjudication by the appellate authority. The Court observed that the question of imposition of CGST and SGST despite payment of IGST involves factual contest and that the appellate forum is the appropriate forum to consider such grievances. In view of this, the petition was disposed by directing the petitioner to file an appeal under Section 107 within two weeks and to seek interim relief; the appellate authority was directed to consider any interim application within two weeks and pass a reasoned and speaking order. The Court also granted a limited stay of recovery for a period of four weeks or until the appellate authority's decision, subject to the petitioner availing the prescribed appeal remedy within the stipulated timeframe.

Petitioner directed to approach the appellate authority under Section 107 within two weeks with liberty to seek interim relief; appellate authority to decide interim application within two weeks; recovery stayed for four weeks or until the appellate authority decides.

Adjustment of IGST against CGST and SGST - apportionment of IGST - double taxation - penalty and interest for delayed payment - Merits of demand for CGST and SGST where IGST has already been paid, including apportionment and liability for penalty and interest - HELD THAT: - The Court noted that the petitioner had paid IGST and contended that no revenue loss was caused to the State as the tax had been discharged; however, it found that the factual matrix (including whether the U.P. offices were merely facilitation centres or places of supply) and the question whether apportionment or adjustment under the IGST law would preclude a fresh demand are matters requiring adjudication by the appellate authority. The Court observed that the question of imposition of penalty and interest, particularly where a bona fide mistake in classification/registration is alleged, should be examined by the appellate authority. Consequently, the Court refrained from adjudicating these substantive questions on merits and left them to the appellate forum for fresh consideration and decision.

Substantive disputes on adjustment/apportionment of IGST and on levy of penalty and interest left for decision by the appellate authority; Court declined to decide merits.

Final Conclusion: Writ petition disposed of by directing the petitioner to file an appeal under Section 107 within two weeks and seek interim relief; appellate authority to consider interim application within two weeks and pass a reasoned order; recovery pursuant to the impugned order stayed for four weeks or until the appellate authority decides; substantive issues of adjustment/apportionment of IGST and liability for penalty and interest are remitted to the appellate authority for fresh consideration.

Allocation of payments between pre-GST (VAT) liabilities and GST liabilities - transitional liability for works contract services during GST implementation - remand for fresh adjudication and computation

Allocation of payments between pre-GST (VAT) liabilities and GST liabilities - transitional liability for works contract services during GST implementation - Validity of the impugned assessment order insofar as amounts paid by the petitioner related to periods under the VAT regime rather than the GST regime - HELD THAT: - The Court observed that the petitioner paid the tax, interest and penalty pursuant to the impugned order but contended that most of the amounts paid related to the VAT period and therefore were not payable under the GST Act. The Court held that, if the petitioner's case was that tax liability related to works contracts prior to 01.07.2017 and was governed by the TNVAT Act, 2006, it was incumbent on the petitioner to have explained that the liability arose under VAT and to have shown tax discharge under the VAT regime. Given the competing contentions and the fact that payments had already been made, the Court concluded that the impugned order could not stand without a proper allocation of the amounts deposited between VAT and GST liabilities and remitted the matter for fresh consideration and computation by the respondent authority. [Paras 9, 10]

Impugned order set aside and matter remitted to the respondent to pass fresh orders allocating the amounts deposited between liabilities under the VAT Act and the GST Act.

Remand for fresh adjudication and computation - procedure for recovery or refund after reallocation - Procedural directions on further steps following remand, including evidence to be produced and powers of the respondent to issue notice for recovery under TNVAT Act, 2006 - HELD THAT: - The Court directed the petitioner to furnish an appropriate reply to the respondent and to enclose a copy of the legal opinion which formed the basis for the writ petition. The Court granted liberty to the respondent to issue suitable notice to recover any balance found payable under the TNVAT Act, 2006 after reallocation. Thus the adjudicatory function and any consequential recovery or refund were left to be determined afresh by the respondent authority upon verification of the petitioner's submissions and documents. [Paras 10]

Petitioner directed to file a reply with the legal opinion; respondent authorised to issue notice to recover any balance under the TNVAT Act after reallocation and fresh orders.

Final Conclusion: The impugned order dated 16.11.2023 for assessment year 2017-18 is set aside and the matter is remitted to the respondent to allocate the amounts deposited between VAT and GST liabilities, with the petitioner required to produce the legal opinion relied upon and the respondent permitted to issue notice to recover any balance under the TNVAT Act, 2006; writ petition disposed of with no costs.

Show cause notice - natural justice - reasoned order - cancellation of GST registration - ab initio cancellation - right to be heard - suspension of registration

Show cause notice - natural justice - right to be heard - The impugned show cause notice is invalid for failing to specify the statutory provisions or concrete allegations on which cancellation was proposed. - HELD THAT: - The show cause notice merely alleged a generic "non compliance of any specified provisions in the GST Act or the Rules made thereunder" without identifying any specific provision or factual allegations. A show cause notice must clearly specify the allegations so as to enable the noticee to make a meaningful response; a cryptic or mechanistic notice that disables the noticee from responding offends the principles of natural justice and is therefore liable to be set aside. The Court applied these principles to hold that the impugned notice did not meet the requisite standards. [Paras 7, 8, 9]

Impugned show cause notice set aside for failure to specify allegations and thereby violating natural justice.

Reasoned order - cancellation of GST registration - ab initio cancellation - suspension of registration - The cancellation order is unreasoned and fails to disclose grounds for cancelling the GST registration (including its ab initio effect), and is liable to be set aside. - HELD THAT: - The cancellation order merely references the show cause notice and records no reasons for cancelling the petitioner's GST registration, which was cancelled with retrospective effect. An administrative order imposing an adverse consequence must disclose the grounds on which it is based; absence of reasons renders the order unsustainable. For these reasons, and coupled with the invalidity of the underlying notice, the Court set aside the cancellation order. The Court clarified that the respondent remains free to issue a fresh show cause notice in accordance with law. [Paras 6, 10, 11, 12]

Impugned cancellation order (including ab initio cancellation) set aside for being unreasoned and for lacking disclosed grounds; respondent permitted to initiate fresh proceedings lawfully.

Final Conclusion: The petition is allowed: the impugned show cause notice and the cancellation order are set aside; the respondent may, if justified, issue a fresh show cause notice and proceed in accordance with law ensuring specification of allegations and reasons.

Show cause notice - cancellation of GST registration - suspension of GST registration - right to fair hearing - reliance on third-party memo - remand for fresh consideration

Show cause notice - reliance on third-party memo - right to fair hearing - Validity of the impugned show cause notice which referred to a Memo not supplied to the petitioner and whether the notice enables the petitioner to meet the allegations - HELD THAT: - The Court found that the impugned show cause notice proposed cancellation and suspension of the petitioner's GST registration on the basis of a Memo alleging fake input tax credit and that the petitioner's principal place of business was found to be non-existent/non-functional. The petitioner contended that it had not received the Memo and therefore could not respond to those allegations. The respondent conceded that a copy of the Memo was not supplied but confirmed, through the counter-affidavit, that the allegations in the Memo are confined to those reproduced in the counter-affidavit. The Court observed that a show cause notice must enable the noticee to meet the case against it and that, although the absence of the Memo rendered the notice vulnerable, the petitioner was now fully informed of the contents of the Memo by the respondent's statement. Rather than setting aside the notice (which would merely require re-issuance), the Court permitted the petitioner to treat the allegations in the counter-affidavit as incorporated into the impugned notice and to file its response within a short, specified period. The Court thus preserved the petitioner's right to a fair hearing while directing that the Proper Officer proceed to consider the petitioner's contentions and take an informed decision. The Court further directed expeditious disposal and authorised the Proper Officer to call for additional material if necessary. [Paras 12, 13, 14, 15, 16]

Impugned show cause notice found vulnerable for not supplying the Memo but cured by treating the allegations in the respondent's counter-affidavit as incorporated into the notice; petitioner permitted to respond within four working days and to appear on the appointed date; Proper Officer directed to decide expeditiously (preferably within one week of the hearing) and may call for further material.

Final Conclusion: Petition disposed by permitting the petitioner to meet the allegations (as set out in the respondent's counter-affidavit) incorporated into the impugned show cause notice; petitioner to respond within four working days and appear on the appointed date, and the Proper Officer to take an informed decision expeditiously.

Unreasoned administrative order - remand for fresh decision on merits - limitation under Section 73 of the DGST Act - extension of time under Section 168A of the CGST Act - exercise of Section 168A power on account of force majeure

Unreasoned administrative order - remand for fresh decision on merits - The impugned order dated 29.04.2024 was not supported by reasons and is therefore liable to be set aside and remanded for fresh consideration. - HELD THAT: - The High Court observed that the Order-in-Original did not contain adequate reasons, noting the concession by respondent counsel that the order lacked reasoning. Given that the petitioner had filed a detailed reply to the Show Cause Notice and that the impugned order merely recorded that the reply was "partially not satisfied" without application of mind, the court considered it appropriate to set aside the order. The matter is remanded to the Adjudicating Authority for re-examination of the petitioner's reply and for an informed fresh decision to be taken within eight weeks from the date of the order. All rights and contentions of the parties are expressly reserved. [Paras 7, 9, 11]

Impugned order set aside and matter remanded to the Adjudicating Authority for fresh decision within eight weeks; rights and contentions reserved.

Limitation under Section 73 of the DGST Act - extension of time under Section 168A of the CGST Act - exercise of Section 168A power on account of force majeure - Whether the order under Section 73 of the DGST Act is barred by limitation and related challenges to the notifications extending limitation and their validity are to be examined afresh by the Adjudicating Authority. - HELD THAT: - The petition raised objections that the Show Cause Notice and the consequent Order-in-Original were issued beyond the period of limitation and challenged the vires of the notifications which extended timelines under Section 168A of the CGST Act for financial years 2018-19 and 2019-2020. The court did not decide these substantive contentions on the merits. Instead, it directed the Adjudicating Authority, upon remand, to examine whether the order under Section 73 of the DGST Act is barred by limitation and to consider the petitioner's objections, including those relating to the validity and scope of the impugned notifications and whether the power under Section 168A could validly be exercised in the circumstances asserted by the petitioner. [Paras 5, 10, 11]

Limitation and validity of the notifications remitted to the Adjudicating Authority for fresh examination; no adjudication of these points by the High Court.

Final Conclusion: The petition is disposed of by setting aside the impugned Order-in-Original and remitting the matter to the Adjudicating Authority to decide afresh (within eight weeks) on the petitioner's reply, including examination of limitation under Section 73 of the DGST Act and the challenges to the notifications; all rights and contentions are reserved.

Discretionary relief under Article 226 - Alternative adequate remedy - Delay and laches in seeking writ relief - Valid service of notice and order - Service going to jurisdiction - Appellate authority to decide preliminary issue of service

Discretionary relief under Article 226 - Alternative adequate remedy - Delay and laches in seeking writ relief - Whether discretionary relief under Article 226 should be granted despite delay and existence of an alternative remedy. - HELD THAT: - The Court held that the availability of an alternative and efficacious statutory remedy is a relevant factor in exercising discretion under Article 226. Where questions of fact (such as service) are involved and an appeal is available, it is a sound exercise of discretion to refuse writ relief and direct the aggrieved party to pursue the appellate remedy. The Court noted that knowledge of proceedings does not substitute for valid service, and that delay in approaching the writ court (challenging an order passed five years earlier) militates against granting extraordinary relief in presence of an alternative remedy. [Paras 5]

Writ relief was refused on discretionary grounds; the appellant must pursue the alternative appellate remedy.

Valid service of notice and order - Service going to jurisdiction - Appellate authority to decide preliminary issue of service - Validity of service of the impugned order and the appropriate forum to decide that question. - HELD THAT: - The Court declined to adjudicate the factual question of whether the impugned order/notice was validly served under the statutory procedure. Observing that service questions are essentially factual and go to the root of jurisdiction, the Court left that issue open and directed that it be examined by the appellate authority in proceedings under the statutory appeals process. The Court relied on precedent that where an alternative remedy is available and factual issues arise, the appellate forum is the appropriate forum to decide those issues. [Paras 6]

The question of service was remanded to the appellate authority to be considered as a preliminary issue in any appeal.

Alternative adequate remedy - Appellate authority to decide preliminary issue of service - Relief granted by the High Court delimiting the appellant's procedural route and timelines. - HELD THAT: - The Court granted the appellant liberty to file an appeal before the appellate authority within a limited period, subject to compliance with statutory conditions (including pre-deposit where applicable). The appellate authority was directed to first examine the issue of service as a preliminary question and thereafter proceed to decide the appeal on merits. This disposition implements the principle that alternative remedies should be pursued where available and factual disputes are to be examined in the appellate forum. [Paras 7]

Liberty granted to file appeal within four weeks from receipt of the judgment; appellate authority to examine service as preliminary issue and then decide the appeal on merits.

Final Conclusion: Writ relief under Article 226 was declined in view of delay and availability of an alternative statutory appeal; the factual question of valid service was left to the appellate authority, and the appellant was granted liberty to file an appeal within four weeks for the appellate authority to first decide service as a preliminary issue and thereafter adjudicate the appeal on merits.

Validity of administrative circulars as mode of assignment of powers - Delegation of adjudicatory powers - Bias of inspecting authority / nemo judex in sua causa - Adjudication of disputed questions of fact and writ jurisdiction under Article 226 - Availability of alternative remedy and self-imposed restraint in exercise of writ jurisdiction

Validity of administrative circulars as mode of assignment of powers - Delegation of adjudicatory powers - Challenge to Circular No.9 of 2019 insofar as it authorises/assigns officers to exercise adjudicatory functions - HELD THAT: - The Court held that the challenge that authorisation must be made by notification under Section 167 is misplaced because the Circular is traceable to the concept of a 'proper officer' under Section 2(91) of the Act and not to Section 167, and therefore issuance of a notification is not necessary for assigning functions as proper officers. The Court relied on precedent rejecting identical contention and observed that the Board/competent authority may assign functions by circulars to constitute officers as proper officers for specified functions; consequently, the challenge to Circular No.9 of 2019 on the ground that authorisation by circular is impermissible is rejected. [Paras 7]

Challenge to Circular No.9 of 2019 on the ground that authorisation by circular is impermissible is rejected.

Bias of inspecting authority / nemo judex in sua causa - Adjudication of disputed questions of fact and writ jurisdiction under Article 226 - Objection that the inspecting authority (Intelligence/Enforcement officer) cannot adjudicate assessment on ground of bias - HELD THAT: - The Court, applying earlier decisions under the erstwhile TNGST Act, held that a general objection of bias against enforcement/intelligence officers authorised to adjudicate cannot be sustained as a matter of law. Mere fact that the inspecting officer collected material during inspection or raid does not disqualify the officer or the scheme empowering the enforcement wing to adjudicate; allegations of bias are factual and must be proved in an individual case. Subsequent circulars and protocols were noted but the determinative point is that the systemic conferment of adjudicatory power on such officers is not vitiated by a general apprehension of bias. [Paras 8, 9]

Challenge based on apprehension of bias of the inspecting authority is rejected.

Adjudication of disputed questions of fact and writ jurisdiction under Article 226 - Availability of alternative remedy and self-imposed restraint in exercise of writ jurisdiction - Maintainability of writ petitions challenging assessment orders for the periods 2017-18 to 2020-21 on merits concerning genuineness of transactions and entitlement to input tax credit - HELD THAT: - The Court declined to entertain the writ petitions attacking the assessment orders because entitlement to input tax credit and genuineness of transactions are disputed questions of fact requiring adjudication on evidence and adequacy of documents. Relying on settled principles that the High Court must exercise restraint under Article 226 where effective alternative remedies exist, and that it should not function as a court of appeal on facts, the Court held that the petitioner should pursue the statutory appellate remedies. Consequently the Court rejected the writ challenge to the assessment orders while granting liberty to file appeals. [Paras 11, 12, 13, 14]

Writ petitions challenging the assessment orders are not entertained and are rejected; petitioner given liberty to pursue statutory appeals.

Final Conclusion: Writ petitions challenging Circular No.9 of 2019 and the assessment orders for 2017-18 to 2020-21 are dismissed; challenge to the Circular and to the inspecting authority adjudicating on grounds of delegation and bias is rejected, and the petitioner is granted liberty to file appeals within four weeks subject to statutory conditions including pre-deposit, if any.

Perquisite - Entry 1 of Schedule III of the CGST Act, 2017 - supply of services - value of perquisite - services provided by employer to employee on own account

Perquisite - Entry 1 of Schedule III of the CGST Act, 2017 - Whether the facility of car lease extended by the appellant to its employees qualifies as a perquisite and thereby falls outside the ambit of GST under Entry 1 of Schedule III - HELD THAT: - The Appellate Authority examined the CBIC clarification that perquisites provided by an employer in terms of a contractual agreement are not subject to GST, and held that two conditions must be satisfied to bring a benefit outside GST under Entry 1 of Schedule III: (i) the activity must qualify as a 'perquisite', and (ii) the perquisite must be provided in terms of the employment contract. The Authority found that the claimant did not establish that the car lease facility conferred a monetary benefit net of recovery; only the actual value of benefit accruing to the employee (as reflected in Form 12BA) counts as perquisite. Mere provision of a facility, where the lease premium is recovered in full from the employee, does not constitute a perquisite for GST purposes. Consequently, where the full lease premium is recovered, the transaction does not fall under Entry 1 of Schedule III and is exigible to GST. [Paras 5, 6]

Facility of car lease does not qualify as a perquisite for GST exclusion where only the actual monetary benefit (if any) to employee is small and the full lease premium is recovered; such recovery is exigible to GST.

Value of perquisite - Form 12BA - Whether the value to be considered for Entry 1 coverage is the full lease premium charged/recovered or only the actual monetary benefit reflected as perquisite - HELD THAT: - Relying on the Income tax concept of 'perquisite' under section 17(2) and the employee's Form 12BA/Form 16 entries, the Authority held that 'perquisite' denotes the value of benefit actually extended by the employer. The portion of a facility that is charged and recovered in actuals from the employee does not form part of the perquisite. Thus the GST exclusion under Entry 1 applies only to the quantified monetary value of the benefit accruing to the employee (as recorded in Form 12BA), not to the entire lease premium recovered on actual terms. [Paras 5]

Only the actual monetary value of the benefit accruing to the employee (as per Form 12BA) is a 'perquisite' for Entry 1; the full lease premium recovered cannot be treated as such.

Eligibility criteria - perquisite - Whether limitation of the car lease facility to eligible or selected employees affects its character as a perquisite - HELD THAT: - The Authority accepted that eligibility criteria per se is immaterial to whether a benefit is a perquisite - a perquisite may be attached to office or position and need not be universally available. However, the impugned AAR did not treat eligibility as determinative of taxability; rather it distinguished the nature of other mass benefits. The determinative factor remains whether a monetary benefit accrues to the employee and whether the employer bears or absorbs any portion of the cost. [Paras 5]

Eligibility criteria for availing the facility is not decisive; taxability depends on whether a monetary benefit (perquisite) is actually conferred and borne by the employer.

Services provided by employer to employee on own account - supply of services - Whether ownership of the car by the company or the appellant acting as a 'facilitator' affects whether the transaction constitutes a supply liable to GST - HELD THAT: - The Authority found that where the company procures the vehicle in its name and provides the facility to employees while recovering the full lease premium, the company is rendering services to the employees on its own account. The appellant's contention that it merely acts as a facilitator is not accepted where the legal ownership rests with the company and it procures the service upfront. Such provisioning on the company's own account points to a 'supply' of services and supports GSTability. [Paras 5]

Ownership of the car by the company and procurement for employees amounts to rendering services on own account and supports treatment as a taxable supply; facilitator argument rejected where company bears legal ownership and recovers full premium.

Final Conclusion: The AAR's advance ruling is modified: only the actual monetary value of benefit accruing to an employee qualifies as a 'perquisite' under Entry 1 of Schedule III; the car lease premium recovered in actuals from employees does not constitute such a perquisite and is therefore subject to GST. The impugned ruling is modified accordingly.

Input tax credit - blocked credits - proviso to Section 17(5)(b) of the CGST Act - obligatory for an employer to provide - eligibility and conditions under Section 16 of the CGST Act - leasing, renting or hiring of motor vehicles for transportation of persons - CBIC Circular No. 172/04/2022 clarification - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employees

Input tax credit - blocked credits - proviso to Section 17(5)(b) of the CGST Act - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employees - eligibility and conditions under Section 16 of the CGST Act - Eligibility to claim ITC on GST paid for leasing/renting/hiring of motor vehicles provided as transport for safety and security of women employees under Tamil Nadu Shops and Establishments Act, 1947 - HELD THAT: - Section 17(5)(b) ordinarily categorises leasing, renting or hiring of motor vehicles as blocked credit. The proviso to Section 17(5)(b) renders ITC available where the inward supply is obligatory for an employer to provide to employees under any law for the time being in force. The Authority examined the Tamil Nadu notification imposing an obligation on employers to provide transport to women employees working in shifts and the CBIC clarification that the proviso applies to the whole of clause (b). Applying these legal positions, the Authority held that GST paid on leasing/renting/hiring of motor vehicles to provide transport facilities for ensuring safety and security of women employees is eligible as input tax credit, subject to satisfying the general eligibility and conditions prescribed in Section 16 of the CGST Act, 2017. [Paras 6]

The applicant is eligible to avail ITC on such motor-vehicle transport services for women employees, subject to Section 16 conditions.

Proviso to Section 17(5)(b) of the CGST Act - obligatory for an employer to provide - leasing, renting or hiring of motor vehicles for transportation of persons - eligibility and conditions under Section 16 of the CGST Act - Whether the entire ITC on transportation can be availed for all shifts or only for specified shift timings - HELD THAT: - The proviso makes ITC available only where the supply is obligatory for an employer to provide under any law. The Tamil Nadu notification mandating transport applies to women employees arriving or leaving workplace between 8.00 P.M. and 6.00 A.M. Consequently, the Authority limited ITC to tax paid on motor-vehicle services provided to women employees who arrive or depart during 8.00 P.M. to 6.00 A.M. Any claim for transport in other shifts does not fall within the statutory obligation relied upon and thus does not qualify under the proviso. The availability remains, in all events, subject to meeting Section 16 requirements. [Paras 6]

ITC is available only for transport services provided to women employees arriving or leaving between 8.00 P.M. and 6.00 A.M., subject to Section 16.

Proviso to Section 17(5)(b) of the CGST Act - CBIC Circular No. 172/04/2022 clarification - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employees - eligibility and conditions under Section 16 of the CGST Act - Temporal scope - the date from which ITC is allowable on such transport services - HELD THAT: - Clause (b) of Section 17(5) was amended with effect from 01.02.2019, but the proviso operates only when the supply is obligatory under a law in force. The Authority examined the dates of Tamil Nadu notifications and found that the obligation was made effective by the State notification dated 28.05.2019. A circular is clarificatory and does not itself create the statutory obligation earlier than the State notification. Therefore, the Authority concluded that ITC in respect of leasing/renting/hiring of motor vehicles for this statutory purpose is available from 28.05.2019 onwards, subject to the conditions of Section 16. [Paras 6]

ITC is allowable from 28.05.2019 onwards, subject to Section 16 conditions; claims prior to that date are not supported by the statutory obligation.

Final Conclusion: The Authority ruled that GST paid on leasing/renting/hiring of motor vehicles for transporting women employees is eligible as input tax credit where such transport is obligatory under the Tamil Nadu Shops and Establishments Act, 1947, limited to women arriving or leaving between 8.00 P.M. and 6.00 A.M., and that such ITC is available from 28.05.2019 onwards, in each case subject to satisfying the eligibility and conditions of Section 16 of the CGST Act, 2017.

Place of supply - export of services - place of effective use and enjoyment - services related to pharmaceutical sector notified under Section 13(13) - services relating to goods physically made available to the supplier (Section 13(3)) - zero-rated supply

Services related to pharmaceutical sector notified under Section 13(13) - place of effective use and enjoyment - Applicability of Notification No. 04/2019 - Integrated Tax (30.09.2019) to the applicant's research and development services in the agrochemical sector - HELD THAT: - Notification No. 04/2019 was issued under Section 13(13) of the IGST Act to specify descriptions of services for which the place of supply shall be the place of effective use and enjoyment. The notification, by its clear and unambiguous terms, applies only to research and development services related to the pharmaceutical sector as set out in Table B. The Authority examined the applicant's contracts and the nature of services actually performed (quality analysis of Long Lasting Insecticidal Nets and related pesticide testing) and found these services are not circumscribed by the pharmaceutical entries in Table B. The power to extend the benefit to any other category of services rests with the Government under Section 13(13); the Authority cannot expand the scope of the notification by reason of perceived similarity between sectors. Reliance on policy material and fitment-committee recommendations cannot alter the plain language of the notification. Consequently, the notification does not apply to the applicant's agrochemical R&D services. [Paras 18, 19]

Notification No. 04/2019 is not applicable to the applicant's research and development services in the agrochemical sector.

Services relating to goods physically made available to the supplier (Section 13(3)) - place of supply - export of services - Proper determination of place of supply for the applicant's services to foreign sponsors - HELD THAT: - Section 13(3) of the IGST Act provides that where services are supplied in respect of goods required to be physically made available by the recipient to the supplier, the place of supply is the location where the services are actually performed. The applicant's contracts demonstrate that test samples (e.g., LLIN/mosquito nets and related pesticide-impregnated materials) are physically provided and consumed in India during testing and analysis. On these facts the place of supply continues to be the location where services are performed (i.e., India) under Section 13(3), so the services do not qualify as export of services for the purpose of zero-rating merely because consideration is received in convertible foreign exchange and other export conditions are met. The Authority therefore affirms that the transactions remain taxable in India. [Paras 17, 18]

The place of supply for the applicant's services is the location where the services are actually performed under Section 13(3) and therefore the supplies are taxable in India.

Place of effective use and enjoyment - zero-rated supply - Whether the applicant's conformity with GLP certification or similarity to pharmaceutical R&D suffices to bring agrochemical services within Notification No. 04/2019 - HELD THAT: - The Authority noted the applicant's GLP recognition and the asserted technical similarities between agrochemical and pharmaceutical R&D processes. However, GLP certification and conceptual similarity do not alter the statutory scope of Notification No. 04/2019, which is expressly limited to pharmaceutical R&D services. The Authority observed that NGCMA recognition is a quality/management regime and has no legal nexus to expand the notification's scope. Therefore, the applicant's GLP status or functional overlap with pharmaceutical tests cannot convert agrochemical services into the notified pharmaceutical services for the purpose of place of supply or zero-rating. [Paras 17, 18]

GLP recognition and asserted similarity to pharmaceutical R&D do not bring agrochemical services within the ambit of Notification No. 04/2019.

Final Conclusion: The Authority rules that Notification No. 04/2019 - Integrated Tax (30.09.2019) applies only to research and development services related to the pharmaceutical sector as notified; it does not apply to the applicant's R&D services in the agrochemical sector. On the facts, the applicant's services involve goods physically supplied by the recipients and consumed in India, so the place of supply remains where the services are performed under Section 13(3) of the IGST Act, and the supplies are taxable in India.

Scope of supply - consideration - course or furtherance of business - gratuitous grant - advance ruling binding only on the applicant and the concerned/jurisdictional officer

Scope of supply - consideration - course or furtherance of business - gratuitous grant - Whether the grant from the Food and Agriculture Organization of the United Nations to the applicant constitutes a 'supply' under the GST law - HELD THAT: - The Authority examined the inclusive definition of 'supply' under Section 7 of the CGST Act and the parameters commonly used to characterise a transaction as a supply. The grant agreement shows funds were provided as a gratuitous grant to strengthen the applicant's enterprise and were to be disbursed against achievement of project milestones; the grantor did not receive goods or services from the applicant. On the facts and the work-plan in the grant agreement, there is no supply of goods or services to the FAO. The Authority held that the amount received cannot be treated as 'consideration' under Section 2(31) because it is not payment in respect of, in response to, or for inducement of a supply of goods or services. The Authority further observed that, even if the mandated activities were viewed as supplies, the transaction lacks commercial connotation and is not in the course or furtherance of business. Applying these considerations, the grant does not fall within the scope of 'supply' under the GST law. [Paras 7, 8]

The grant from the Food and Agriculture Organization of the United Nations is not a 'supply' within the meaning of the GST Act.

Final Conclusion: Advance ruling: the FAO grant to the applicant is not a taxable supply under GST; consequential questions on export/IGST/CGST liability and refund were not answered as they cease to exist or are outside the Authority's purview.

Taxability as royalty under Section 9(1)(vi) - use or right to use copyright - End User Licence Agreement (EULA) and distribution agreements - Double Taxation Avoidance Agreement - obligation to deduct tax at source under section 195 - DTAA definition prevails where it is not more beneficial to assessee

Taxability as royalty under Section 9(1)(vi) - use or right to use copyright - End User Licence Agreement (EULA) and distribution agreements - Double Taxation Avoidance Agreement - obligation to deduct tax at source under section 195 - Payments made by the assessee for obtaining computer software from non-residents are not taxable in India as "royalty" under Section 9(1)(vi) of the Income Tax Act and do not attract an obligation to deduct tax at source under Section 195. - HELD THAT: - The Court held that the transactions before it are factually similar to those considered by the Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd. The Supreme Court construed the distribution agreements/EULAs as not creating any interest in or right to use copyright such as would constitute "royalty" under the DTAA definitions; consequently, amounts paid by resident end-users/distributors to non-resident software suppliers did not give rise to income taxable in India as royalty and there was no obligation on persons covered by Section 195 to deduct tax at source. Given the applicability of relevant DTAAs in the present cases and the authoritative Supreme Court ruling, the approach of the Assessing Officer was contrary to the correct position of law and the appeals do not raise a substantial question of law.

The payments for purchase/use/resale of computer software under the EULAs/distribution agreements are not "royalty" taxable in India and no TDS was required to be deducted; appeals dismissed as raising no substantial question of law.

Final Conclusion: Following the Supreme Court's ruling in Engineering Analysis Centre of Excellence (P.) Ltd., the High Court dismissed the Revenue's appeals, holding that the software payments in issue are not taxable as royalty in India and no tax deduction at source was required.

Deduction under section 80IB(10) - built-up area - retrospective application of statutory amendment - approval by local authority prior to 1.4.2005 - avoidance of absurd and harsh results in statutory interpretation

Deduction under section 80IB(10) - built-up area - retrospective application of statutory amendment - approval by local authority prior to 1.4.2005 - Whether the Tribunal was justified in granting deduction under section 80IB(10) for a project sanctioned prior to 1.4.2005 despite a DVO report showing two row houses exceeding the 1500 sq.ft. limit, having regard to the definition of 'built-up area' introduced with effect from 1.4.2005. - HELD THAT: - The Court answered the question in favour of the assessee. Relying on the reasoning in the Supreme Court's decision in Commissioner of Income-tax v. Sarkar Builders, the Court held that the inclusive definition of 'built-up area' inserted with effect from 1.4.2005 could not be applied retrospectively to housing projects sanctioned before that date. Applying that principle avoids producing unreasonably harsh or absurd results by imposing a statutory condition which did not exist when the project was approved. The Court observed that where a housing project was sanctioned prior to 1.4.2005 (as the present project was), entitlement to deduction under section 80IB(10) must be determined by reference to the approvals and applicable rules in force at the time of sanction; consequently the post 1.4.2005 definition (including balconies/projections within built-up area) cannot be invoked to deny the deduction. The Court also noted supporting precedent from a Division Bench decision (Tinnwala Industries) and its confirmation on special leave review, reinforcing that the post 2005 definition should not be applied to projects sanctioned earlier. [Paras 4, 5, 6, 7, 8]

The Tribunal's grant of deduction under section 80IB(10) was upheld; the post 1.4.2005 definition of 'built up area' does not apply to projects sanctioned prior to 1.4.2005, and the question is decided in favour of the assessee.

Final Conclusion: The appeals by the Revenue are dismissed; the deduction under section 80IB(10) was properly allowed for the project sanctioned before 1.4.2005 and the post 2005 definition of 'built up area' cannot be applied retrospectively to deny the benefit.

Cessation/remission of trading liabilities - section 41(1) deemed income on cessation/remission - adjustment of trade receivables against liabilities - allowability of bad debt under section 36(2) - verification of existence and genuineness of creditors - remand for verification and opportunity to produce confirmations

Cessation/remission of trading liabilities - section 41(1) deemed income on cessation/remission - adjustment of trade receivables against liabilities - Deletion of addition made by Assessing Officer on account of reduction/cessation of liabilities (long term liabilities, short term borrowings, trade payables and other current liabilities) of Rs. 1,05,69,417/- - HELD THAT: - The Assessing Officer treated reduction in various liabilities as remission/cessation taxable under section 41(1). The CIT(A) found that the reduction in liabilities was not a unilateral cessation but was discharged by adjustment against trade receivables, and that reduction in trade receivables could not be treated as income since those receivables related to earlier years and, if written off, would qualify as bad debts. The Tribunal examined the details of debtors and creditors as considered by the CIT(A) and declined to interfere with the CIT(A)'s reasoning that there was adjustment of liabilities against receivables rather than an independent remission giving rise to income under section 41(1). [Paras 4, 5]

The deletion of the addition on account of reduction/cessation of liabilities is sustained and the Tribunal declines to interfere with the CIT(A)'s order.

Adjustment of trade receivables against liabilities - allowability of bad debt under section 36(2) - Deletion of addition made by Assessing Officer on account of reduction in trade receivables of Rs. 1,05,57,313/- - HELD THAT: - The Assessing Officer made an addition solely because trade receivables had reduced and there was no corresponding bank credit. The CIT(A) held that the reduction in trade receivables resulted from adjustment against trade payables and other liabilities and, alternatively, that even if treated as cessation of liabilities under section 41(1), the corresponding reduction in receivables would be an allowable deduction as bad debts under section 36(2), so that both effects would appear in the profit and loss account. The Tribunal accepted the CIT(A)'s reasoning and did not interfere with the deletion. [Paras 4, 5]

The deletion of the addition on account of reduction in trade receivables is sustained.

Verification of existence and genuineness of creditors - section 41(1) deemed income on cessation/remission - remand for verification and opportunity to produce confirmations - Addition of Rs. 3,84,82,411/- on account of unexplained creditors, long term liabilities and other liabilities (assessee failed to file confirmations) was not finally adjudicated and is remanded - HELD THAT: - The CIT(A) had deleted the addition observing no cessation of liabilities. The Tribunal observed that the assessee did not furnish confirmations before the Assessing Officer, and there was absence of material showing intention to pay, reminders, or litigation records. The Tribunal noted that the CIT(A)'s conclusion regarding applicability of provisions other than those in the assessment records was not supported by the record. Consequently, the Tribunal directed remand to the Assessing Officer for due verification of the existence of parties, whether such liabilities were written off by creditors in their books, and to afford the assessee an opportunity to file confirmations and relevant details. [Paras 6, 7]

The addition is remanded to the Assessing Officer for verification and for the assessee to produce confirmations and relevant details; the Revenue's appeal on this ground is allowed for statistical purposes.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletions of additions made in respect of reduction of liabilities and reduction of trade receivables, declining to interfere; however, the Tribunal set aside the CIT(A)'s deletion insofar as unexplained creditors and other liabilities are concerned and remanded that issue to the Assessing Officer for verification and opportunity to file confirmations.

Principles of natural justice - Confrontation of material by Assessing Officer - Use of 'insight portal' information by tax authorities - Remand for fresh examination after providing material - Disallowance under Section 14A read with Rule 8D - No disallowance where no exempt income

Principles of natural justice - Confrontation of material by Assessing Officer - Use of 'insight portal' information by tax authorities - Remand for fresh examination after providing material - Addition of interest income based on information from the departmental 'insight portal' was set aside and remitted to the Assessing Officer for fresh consideration after furnishing the material to the assessee. - HELD THAT: - The Assessing Officer made an addition to income relying on information available on the departmental 'insight portal' which was not supplied to the assessee. The Tribunal found that the assessee could not be expected to offer explanations in the absence of the material and that the Principles of natural justice require the AO to confront the assessee with the materials relied upon. In these circumstances there was a violation of natural justice. The appropriate course is to remit the matter to the Assessing Officer for fresh examination after providing the relevant material to the assessee so that the assessee may be afforded an opportunity to respond. [Paras 4]

Order on this addition set aside and restored to the file of the Assessing Officer for fresh examination after supplying the relied-upon material to the assessee.

Disallowance under Section 14A read with Rule 8D - No disallowance where no exempt income - Disallowance under Section 14A of the Act (computed under Rule 8D) was deleted because the assessee did not earn any exempt income in the year. - HELD THAT: - The Assessing Officer computed a Section 14A disallowance despite the admitted fact that the assessee earned no exempt income. The Tribunal relied on authoritative decisions holding that disallowance under Section 14A cannot exceed the exempt income and that no disallowance is required where no exempt income is earned. Applying that principle to the admitted facts, the AO was not justified in making the disallowance and the disallowance was therefore deleted. [Paras 7]

Disallowance under Section 14A deleted and the addition made by the AO set aside.

Final Conclusion: Appeal allowed in part: the addition of interest income based on departmental 'insight portal' information is remanded to the Assessing Officer for fresh consideration after furnishing the relied-upon material to the assessee; the disallowance under Section 14A is deleted as the assessee earned no exempt income.

Section 56(2)(viib) - start-up recognition exemption - DIPP recognition certificate - valuation of unquoted shares - Discounted Cash Flow method - net asset value method - remand for fresh consideration

Section 56(2)(viib) - start-up recognition exemption - DIPP recognition certificate - remand for fresh consideration - Whether the assessee is entitled to exemption from applicability of section 56(2)(viib) by virtue of recognition as a start-up and related DIPP certificate, and direction for adjudication by the AO. - HELD THAT: - The Tribunal observed that the assessee had specifically claimed exemption as a start-up and produced a DIPP recognition certificate which was not considered by the lower authorities. The CIT(A) had confined itself to endorsing the AO's rejection of the valuation report without adjudicating the assessee's claim of start-up status and exemption from clause (viib). The Tribunal therefore found it appropriate to restore the issue to the file of the AO for fresh consideration. The AO is directed to take into account the DIPP recognition evidence and other materials on record, and to afford the assessee an opportunity of hearing before deciding the applicability of section 56(2)(viib). The Tribunal allowed the relevant ground of appeal for statistical purposes and remitted the matter for adjudication rather than deciding the exemption on merits. [Paras 8]

The issue of exemption from section 56(2)(viib) on account of start-up recognition is remitted to the AO for fresh adjudication after considering the DIPP certificate and giving the assessee an opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the question whether the assessee is exempt from section 56(2)(viib) as a start-up (on the basis of its DIPP recognition) to the AO for fresh consideration and directed the AO to consider the evidence and grant an opportunity of hearing; the appeal is allowed for statistical purposes.

Disallowance of interest on diversion of borrowed funds to interest free advances - advances given for business purposes - availability of sufficient interest free funds as a defence to disallowance - application of precedent on source of funds and burden on revenue

Disallowance of interest on diversion of borrowed funds to interest free advances - advances given for business purposes - availability of sufficient interest free funds as a defence to disallowance - Whether interest of Rs. 11,48,472/- claimed by the assessee could be disallowed on the ground that interest bearing borrowed funds were diverted as interest free advances. - HELD THAT: - Tribunal found that the advances of Rs. 95,70,601/- were made for the stated purpose of purchase of capital goods and renovation of plant constituting business purposes, and that non execution of the planned installation or renovation later due to adverse market conditions did not obliterate the business purpose for which the advances were made. The Tribunal observed that such business decisions about expansion or modernization are for the assessee to take and cannot be a ground for disallowing consequential expenditure. Independently, the Tribunal noted that the assessee had available interest free capital (share capital) amounting to Rs. 1,63,55,749/-, which exceeded the quantum of interest free advances. Applying the principle established in the jurisdictional decisions relied upon by the assessee, where sufficient interest free funds are available such that the interest bearing borrowed funds cannot be said to have been utilised for making interest free advances, the revenue is not justified in disallowing interest expenditure. On these concurrent findings-that the advances were for business purposes and that adequate interest free funds existed-the Tribunal held that the addition under section 36(1)(iii) could not be sustained.

Addition of Rs. 11,48,472/- by disallowing interest was deleted and the assessee's appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2014-15, holding that the advances were made for business purposes and that the assessee had sufficient interest free funds to meet those advances; consequently the disallowance of interest under the invoked provision was not sustainable.

Revisionary powers under Section 263 - Erroneous and prejudicial to the interests of the revenue - Verification of identity, creditworthiness and genuineness under Section 68 - Permissible view of the Assessing Officer - Two views doctrine - Inadequate inquiry not alone a ground for revision - Faceless assessment regime

Revisionary powers under Section 263 - Erroneous and prejudicial to the interests of the revenue - Verification of identity, creditworthiness and genuineness under Section 68 - Permissible view of the Assessing Officer - Two views doctrine - Inadequate inquiry not alone a ground for revision - Validity of the Principal Commissioner's exercise of revisionary powers under Section 263 in setting aside the assessment framed under Section 143(3) - HELD THAT: - The Tribunal examined whether the AO's acceptance of unsecured loans after inquiries and documentary verification amounted to an order that was both erroneous and prejudicial to revenue. Applying the established test that revision under Section 263 requires demonstration of an error causing prejudice, the Tribunal held that the AO had verified identity, creditworthiness and genuineness of the transactions in terms of Section 68 and had taken a permissible view based on materials on record. Reliance was placed on authorities recognising that mere difference of opinion, or the Commissioner's view that further inquiries ought to have been made, does not render an order erroneous. The fact that the assessment record contained inquiries and the assessee's responses (even if not exhaustively reflected in the assessment order) militated against a conclusion of error prejudicial to revenue. The PCIT did not demonstrate that any alleged inadequacy in inquiry produced an erroneous, revenue-prejudicial assessment. In these circumstances, the Tribunal concluded that exercise of revisionary jurisdiction was not justified and the order under Section 263 must be quashed. [Paras 6, 7]

The revisionary order passed by the Principal Commissioner under Section 263 is quashed and the appeal is allowed.

Final Conclusion: The Tribunal held that the AO's order under Section 143(3) for AY 2018-19 was neither erroneous nor prejudicial to the revenue; consequently the PCIT's revision under Section 263 was unjustified and is quashed; the assessee's appeal is allowed.

Re-opening of assessment and limitation / time-bar under section 148/section 149 - Validity of reassessment where reasons are unverified and vague - Acceptance of bank deposit certificate as proof of cash deposits - Assessee's discharge of onus in respect of unexplained cash credits - Quashing of reassessment and deletion of additions where reassessment is time barred and merits favor the assessee

Re-opening of assessment and limitation / time-bar under section 148/section 149 - Validity of reassessment where reasons are unverified and vague - Reassessment proceedings reopening the assessment were time barred and liable to be quashed. - HELD THAT: - The Tribunal examined the statutory time limit provisions as set out in the Act and noted that the department's reasons for reopening were unverified and vague. Having considered the facts and the submissions placed before the appellate authority, the Tribunal found that the reopening did not satisfy the statutory constraints and was therefore time barred. On that basis the reassessment was set aside. [Paras 7]

Reopening of the assessment is quashed as time barred.

Acceptance of bank deposit certificate as proof of cash deposits - Assessee's discharge of onus in respect of unexplained cash credits - Quashing of reassessment and deletion of additions where reassessment is time barred and merits favor the assessee - The claimed unexplained cash credits/addition was not sustainable on merits as the assessee established the actual cash deposits and their sources. - HELD THAT: - The Tribunal recorded that the assessee produced a bank deposit certificate confirming cash deposits of Rs. 35.75 lakhs (not the inflated figure relied upon by the AO). The assessee also furnished particulars and PANs of persons alleged to have advanced cash and evidence of family funds and broker ledger entries to explain the entries. The Tribunal found these facts reasonable and tenable, concluding that the assessee had discharged the onus in respect of the credits. Consequently, the addition made as unexplained cash credit was not upheld. [Paras 4, 5, 7, 8]

Addition as unexplained cash credit deleted and the assessment on merits set aside.

Final Conclusion: The assessee's appeal is allowed: the reassessment is quashed as time barred and, on the merits, the unexplained cash credit/addition is deleted; the orders of the authorities below are set aside.

Restoration to assessing officer for fresh adjudication - ex-parte dismissal / non-prosecution for non-appearance - unexplained cash credit under section 68 - duty of assessing officer to make independent inquiries - real income to be taxed in the hands of the right assessee - power to summon and examine bankers, brokers and depositories

Restoration to assessing officer for fresh adjudication - duty of assessing officer to make independent inquiries - power to summon and examine bankers, brokers and depositories - unexplained cash credit under section 68 - real income to be taxed in the hands of the right assessee - Appeal allowed and matter restored to the file of the Assessing Officer for fresh adjudication on the disputed addition under section 68. - HELD THAT: - The Tribunal found that the Assessing Officer recorded the addition as unexplained cash credit without conducting necessary enquiries which a case of alleged accommodation entries and synchronized trading mandated. The Tribunal observed that the AO ought to have made specific enquiries from the bank regarding source of funds, from brokers regarding transactions on the stock exchange, from depositories regarding demat credits and debits, and should have summoned the named third party who allegedly deposited cross bearer cheques. Given these lacunae, and the principle that real income must be taxed in the hands of the right assessee, the Tribunal concluded that a fresh adjudication is necessary. Rather than deciding the merits, the Tribunal restored the matter to the AO with directions to make the stated inquiries and proceed in accordance with law, thereby allowing ground no. 1 of the appeal. [Paras 7]

Ground No. 1 allowed; appeal restored to the Assessing Officer for fresh decision after making the requisite enquiries.

Issues remanded for fresh adjudication - ex-parte dismissal / non-prosecution for non-appearance - All other grounds of appeal were not adjudicated and were left open for consideration by the Assessing Officer following the remand. - HELD THAT: - In view of the restoration to the AO for fresh adjudication on the primary contest, the Tribunal expressly refrained from adjudicating other grounds raised by the assessee (including challenge to the confirmation of the addition and disallowance of capital loss). Those grounds were left open so they can be considered afresh by the AO in the course of the reassessment process. [Paras 8]

Other grounds left open and not decided; to be considered afresh by the Assessing Officer.

Final Conclusion: The appeal is allowed for statistical purposes by restoring the case to the Assessing Officer for fresh adjudication on the unexplained cash credit after conducting the specified inquiries; other grounds remain open for fresh consideration.

Penalty under Section 271G for non-maintenance of documents - Applicability of transfer pricing provisions to specified domestic transactions - Legal effect of omission of clause (i) of Section 92BA - Requirement to maintain transfer pricing documents under Section 92D - Relationship between deletion of transfer pricing adjustment and liability to penalty

Penalty under Section 271G for non-maintenance of documents - Requirement to maintain transfer pricing documents under Section 92D - Applicability of transfer pricing provisions to specified domestic transactions - Legal effect of omission of clause (i) of Section 92BA - Whether penalty under Section 271G could be levied for non-maintenance/non-furnishing of transfer pricing documentation in respect of specified domestic transactions for the assessment year in question - HELD THAT: - The Tribunal held that the transfer pricing adjustment related to specified domestic transactions covered by clause (i) of Section 92BA(1). Following a coordinate bench and the Karnataka High Court decision in PCIT v. Texport Overseas (as applied by the Tribunal), clause (i) of Section 92BA was omitted by the Finance Act, 2017 with effect from 1 April 2017, and therefore the transfer pricing provisions did not apply to the assessee for the impugned assessment year. Because the transfer pricing provisions were not applicable, there was no legal requirement to maintain the documents mandated by those provisions under Section 92D for the transactions in question. In the absence of any statutory requirement to maintain such documents, imposition of penalty under Section 271G could not be sustained. The Revenue's contention that deletion of the transfer pricing adjustment does not automatically entitle the assessee to delete the penalty was noted, but the Tribunal found that in the facts of this case there was simply no requirement to maintain the documents and hence no basis for penalty. [Paras 8, 9]

Penalty under Section 271G deleted because transfer pricing provisions in respect of the specified domestic transactions did not apply and consequently there was no obligation to maintain the documents.

Relationship between deletion of transfer pricing adjustment and liability to penalty - Whether deletion of the transfer pricing adjustment necessarily results in deletion of penalty for non-maintenance of documents - HELD THAT: - The Tribunal observed that, as a general proposition, deletion of a transfer pricing adjustment does not automatically lead to deletion of a penalty for non-maintenance of documents. However, that general principle was applied to the facts: since the transfer pricing provisions were never applicable to the specified domestic transactions for the assessment year (by reason of the omission of clause (i) of Section 92BA), there was no statutory obligation to maintain the documents in the first place. For that reason, the penalty could not be sustained in this case. [Paras 9]

Deletion of the TP adjustment does not automatically delete a penalty as a rule, but on the facts the penalty was deleted because there was no statutory duty to maintain the documents.

Final Conclusion: The appeal filed by the Assessing Officer is dismissed; the order of the CIT(A) deleting the penalty under Section 271G is confirmed.

Treatment of alleged bogus purchases - addition measured by gross profit rate on non-genuine purchases - application of precedent of coordinate bench and High Court to fix profit rate - application of profit rate of 4% on alleged bogus purchases

Treatment of alleged bogus purchases - addition measured by gross profit rate on non-genuine purchases - application of profit rate of 4% on alleged bogus purchases - Whether the addition of 25% of alleged bogus purchases should be sustained or reduced by applying a profit rate of 4% on the alleged non-genuine purchases for AY 2011-12. - HELD THAT: - The Tribunal found that the present case is covered by the Coordinate Bench decisions in the assessee's own cases for AY 2009-10 and AY 2010-11, which directed application of a 4% profit rate on the alleged bogus purchases. The Tribunal also relied on the decision of the Hon'ble Bombay High Court in Mohammed Haji Adam & Co., which directs that additions in such cases be restricted to the extent of bringing the gross profit rate on the impugned purchases to the same rate as genuine purchases. Applying these precedents to the facts before it, the Tribunal directed the Assessing Officer to apply a profit rate of 4% on the alleged non-genuine purchases of Rs. 2,15,88,627/-, thereby reducing the addition confirmed by the lower authorities. [Paras 7, 8]

Addition confirmed at 25% is not sustained; Assessing Officer is directed to apply 4% profit rate on the alleged bogus purchases for computation of income.

Final Conclusion: Appeal partly allowed: the Tribunal directed the Assessing Officer to compute the addition by applying a 4% profit rate on the alleged bogus purchases for Assessment Year 2011-12, following coordinate-bench and High Court precedents.

Time limit for reassessment notices - Bar of limitation under the first proviso to Section 149 - Validity of notice under section 148 after Finance Act, 2021 amendments - Effect of Ashish Agarwal on treatment of prior notices as Section 148A(b) show cause notices - Relate back theory of reopening notices - Extension of limitation under TOLA and related Notifications

Time limit for reassessment notices - Bar of limitation under the first proviso to Section 149 - Validity of notice under section 148 after Finance Act, 2021 amendments - Effect of Ashish Agarwal on treatment of prior notices as Section 148A(b) show cause notices - Extension of limitation under TOLA and related Notifications - Relate back theory of reopening notices - Impugned reassessment proceedings under section 147/148 for AY 2014-15 are barred by limitation and the reopening notice is invalid. - HELD THAT: - The Tribunal examined Section 149 read with the explanation in the Finance Bill, 2021 and held that where a notice was barred under the pre amendment law, the amendment could not revive that barred right - "what could not be done earlier, cannot be done even after the amendment". The Tribunal applied the reasoning in the decisions of the Bombay High Court and other authorities relied upon in the record, observing that Ashish Agarwal treated earlier Section 148 notices as falling to be considered as notices under Section 148A(b) and mandated compliance with the procedural safeguards of Section 148A before issuing fresh notices under Section 148; that treatment, however, does not enlarge the outer time limit for issuing a notice under Section 148 where limitation had already expired under the erstwhile provision. The Tribunal analysed the scope and limited applicability of TOLA and the Notifications relied upon by the Revenue, and accepted the view that those instruments do not operate to revive or extend the limitation where it had already expired prior to 1 April 2021. The Tribunal rejected the relate back theory urged by the Revenue and followed the line of authority which holds that the first proviso to Section 149 operates as a fetter on issuance of notices for assessment years beginning on or before 1 April 2021 and that the extended ten year period under amended Section 149(1)(b) cannot be used to issue a notice in cases where the right to reopen had already been barred prior to the amendment. Applying these legal principles to the facts, the Tribunal concluded that the notice issued for AY 2014-15 was beyond the time permitted by Section 149 and the ensuing reassessment proceedings were vitiated, hence required to be quashed; having so held, the Tribunal declined to decide the merits of the additions. [Paras 8, 11]

Impugned notice and reassessment proceedings quashed as barred by limitation.

Final Conclusion: Appeal allowed: reassessment proceedings for AY 2014-15 under section 147/148 set aside as time barred; merits not adjudicated.

Rectification of assessment on ground of mistake apparent from record - consequential order giving effect to appellate directions - jurisdictional limits on rectification - composite order combining consequential and rectification orders - finality of allowance of claim in assessment - procedural validity of service and DIN

Composite order combining consequential and rectification orders - jurisdictional limits on rectification - finality of allowance of claim in assessment - procedural validity of service and DIN - Validity of the Assessing Officer's Order dated 31.03.2021 titled as a combined consequential order under section 250 read with rectification under section 154 and the lawfulness of disallowing the brought forward unabsorbed depreciation in that order. - HELD THAT: - The Tribunal upheld the conclusion that the AO transgressed jurisdiction by passing a composite order which combined the consequential order giving effect to the CIT(A)'s directions and a rectification purportedly under mistake apparent from record. There is no provision to pass a single "composite" order combining both functions; the AO ought to have passed separate orders. While giving effect to the CIT(A)'s directions the AO was bound to remain within the scope of those directions and could not, in the guise of rectification, revisit and disallow the brought forward unabsorbed depreciation which had earlier been allowed and for which there was no direction from the CIT(A). The record also showed procedural irregularities - including inconsistent forwarding letters, the same manually entered DIN on two different orders and an attempt to ask the assessee to ignore a duly served order - which undermined validity of the AO's action. For these reasons the composite order was held to be bad in law and invalid on procedural and technical grounds, and therefore quashed. Because the order was invalidated in limine, the Tribunal did not examine the merits of the disallowance itself as that would be an academic exercise. [Paras 6, 7]

The AO's composite order dated 31.03.2021 is quashed as bad in law; the AO exceeded jurisdiction by disallowing the brought forward unabsorbed depreciation while giving effect to the CIT(A)'s order and the impugned order is invalidated on procedural and technical grounds.

Final Conclusion: The Revenue's appeal is dismissed; the Assessing Officer's composite consequential-cum-rectification order dated 31.03.2021 is quashed as invalid and the Tribunal confirmed the CIT(A)'s order without adjudicating the merits of the disallowance, which were left undecided.

Disallowance based on third party information - principles of natural justice - right to cross examination of third party witnesses - requirement of independent verification and corroboration by Assessing Officer - assessment of cumulative evidence and factual substratum - precedential value of Coordinate Bench decisions in fact sensitive matters

Disallowance based on third party information - principles of natural justice - right to cross examination of third party witnesses - requirement of independent verification and corroboration by Assessing Officer - Whether additions made on the basis of third party information and statements recorded by the Investigation Wing, without independent verification and without affording opportunity of cross examination to the assessee, are sustainable - HELD THAT: - The Tribunal examined two sets of evidence: the information from DIT(Investigation) alleging that certain suppliers provided accommodation entries, and the assessee's contemporaneous records including audited accounts, stock and purchase registers, banking evidence of payments, PAN/VAT/TIN particulars and quantitative reconciliation between purchases and sales/closing stock. Relying on the Supreme Court's reasoning in the cited decisions, the Tribunal held that information gathered by the Investigation Wing may only be the trigger for inquiry but cannot be treated as conclusive proof to disallow claimed purchases unless the Assessing Officer independently verifies that material and the third party statements are subjected to opportunity for cross examination. Where third party statements recorded behind the back of the assessee are used as evidence without affording the assessee a chance to cross examine, such statements must be excluded. Weighing the cumulative effect of the assessee's verifiable records and the small proportion of purchases from the suppliers in question, the majority concurred that the addition was not sustainable and deletion was warranted. [Paras 25, 26, 27, 28, 30]

Additions based solely on unverified third party information and statements recorded without affording cross examination are rejected; the disallowances are deleted.

Precedential value of Coordinate Bench decisions in fact sensitive matters - assessment of cumulative evidence and factual substratum - Whether the contrary view of a Coordinate Bench must be followed notwithstanding material factual differences between the cases - HELD THAT: - The Tribunal observed that the obligation to follow decisions of Coordinate Benches arises chiefly where interpretation of statute or legal principle is involved. In matters turning on factual evaluation and inferences from documentary and circumstantial evidence, slight variations in facts can lead to different outcomes. Consequently, a Coordinate Bench decision based on its particular factual matrix does not mandate identical treatment where the facts differ; the question is one of application of principle to the specific evidence on record rather than mere mechanical adherence to another factual decision. [Paras 27, 28, 29]

Coordinate Bench decisions do not bind when the adjudication is fact sensitive and the underlying facts differ; the Judicial Member's fact based conclusion was rightly preferred.

Final Conclusion: By majority, the Tribunal set aside the orders of the Commissioner (Appeals) for the specified assessment years and deleted the additions; the appeals of the assessee are allowed.

Invalid assumption of jurisdiction for want of transfer under Section 127 - Recording of reasons for transfer is mandatory under Section 127 - Intra city transfer does not dispense with recording reasons under Section 127 - Notice under Section 143(2) must correspond to the Assessing Officer who frames assessment - Quashing of assessment for lack of valid transfer/assumption of jurisdiction

Invalid assumption of jurisdiction for want of transfer under Section 127 - Recording of reasons for transfer is mandatory under Section 127 - Intra city transfer does not dispense with recording reasons under Section 127 - Assessment framed by ITO 4(2), Raipur dated 27.12.2017 was invalid for want of a transfer order under Section 127 and is liable to be quashed - HELD THAT: - The Tribunal examined the material on record and Section 127 and held that transfer of a case from one Assessing Officer to another requires recording of reasons by the prescribed authority; while subsection (3) dispenses with hearing in intra city transfers, it does not eliminate the statutory requirement of recording reasons. No transfer order under Section 127(1) was shown to have been passed after the notice under Section 143(2) was issued by ITO 2(1), Raipur, and the A.O.'s letter asserting vesting of jurisdiction by internal notification did not cure the absence of a statutory transfer order. Reliance on authorities (including Kusum Goyal and the Tribunal precedents cited) supports that an A.O. cannot unilaterally transfer a file and that omission to record/communicate transfer reasons vitiates jurisdiction. On these findings the Tribunal concluded that ITO 4(2) assumed jurisdiction invalidly and therefore the assessment framed by him is non est in law. [Paras 15, 16, 19]

Assessment order dated 27.12.2017 framed by ITO 4(2), Raipur is quashed for want of valid assumption of jurisdiction under Section 127.

Notice under Section 143(2) must correspond to the Assessing Officer who frames assessment - Quashing of assessment for lack of valid transfer/assumption of jurisdiction - Additions made by the Assessing Officer (including addition under Section 68) were not adjudicated on merits by the Tribunal in view of quashing of the assessment and are left open for consideration - HELD THAT: - Having quashed the assessment for invalid assumption of jurisdiction, the Tribunal expressly refrained from adjudicating the substantive grounds of appeal challenging the additions (including the unexplained cash credit addition). Those additions and related grounds were therefore not decided on merits and remain open for fresh consideration in appropriate proceedings after valid assumption of jurisdiction. [Paras 20]

Substantive additions are left undecided and remain open for fresh consideration; Tribunal did not adjudicate them on merits.

Final Conclusion: The appeal is allowed: the assessment order dated 27.12.2017 (A.Y. 2015 16) framed by ITO 4(2), Raipur is quashed for lack of valid transfer/assumption of jurisdiction under Section 127; the substantive additions challenged before the Tribunal are left open for fresh consideration.

Option to pay fine in lieu of confiscation - liability to pay duty under Section 125(2) - assessment and determination of duty under Section 28 - interest on delayed payment under Section 28AB - confiscation proceedings under Chapter XIV - distinction between penalty/fine and duty - clarification of the ratio in Jagdish Cancer

Option to pay fine in lieu of confiscation - liability to pay duty under Section 125(2) - distinction between penalty/fine and duty - There is a liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Act. - HELD THAT: - The Court affirmed that once an owner exercises the statutory option to pay fine in lieu of confiscation, subsection (2) of Section 125 imposes a distinct obligation that the owner "shall in addition be liable to any duty and charges payable in respect of such goods." This position accords with the earlier decision in Security Finance which drew the statutory distinction between a punitive levy (fine/penalty) and an independent duty liability, and with the statutory amendment of 1985 which expressly recognised Section 125(2). The obligation to pay duty therefore arises by virtue of the exercise and acceptance of the option under Section 125, and is not displaced by the fact that proceedings originated under confiscation provisions of Chapter XIV. The Court also explained that this duty-obligation under Section 125(2) is conceptually distinct from the procedural mechanism by which duty is assessed and recovered, which is governed by Section 28. [Paras 1, 8]

Owner redeeming confiscated goods by paying fine under Section 125(1) is liable to pay customs duty under Section 125(2).

Assessment and determination of duty under Section 28 - interest on delayed payment under Section 28AB - The duty liability arising on redemption under Section 125(2) must be assessed under Section 28, and interest under Section 28AB is consequently attracted for delayed payment. - HELD THAT: - The Court held that although the substantive obligation to pay duty arises under Section 125(2) upon exercise of the redemption option, the procedural machinery for calculation, assessment and determination of that duty falls within Section 28. Once Section 28 is applied to quantify the duty, the incidental statutory consequence - liability to pay interest for delayed payment as provided by Section 28AB - follows. Thus the availability of Section 125(2) to create the duty does not immunise the assessed amount from the procedural consequences (including interest) prescribed by Section 28 and Section 28AB. [Paras 1, 8, 10]

Duty arising under Section 125(2) is to be assessed under Section 28 and attracts interest under Section 28AB for delayed payment.

Clarification of the ratio in Jagdish Cancer - liability to pay duty under Section 125(2) - assessment and determination of duty under Section 28 - The correct ratio of Jagdish Cancer is that liability to pay duty can arise under Section 125(2) in confiscation proceedings without a separate Section 28 notice, but Jagdish Cancer does not preclude assessment or determination of that duty under Section 28. - HELD THAT: - The Court analysed Jagdish Cancer and observed that the decision recognised that where an option under Section 125 was exercised the duty-obligation arose under subsection (2) and thus a separate notice under Section 28 was not a precondition to levy. However, Jagdish Cancer was not an authority for the broader proposition that once liability arises under Section 125(2) the calculation, determination or assessment of such duty cannot be made under Section 28. In short, Jagdish Cancer was correctly understood as addressing the source of liability (Section 125(2)) and not as barring the procedural application of Section 28 for assessment and associated consequences. [Paras 9]

Jagdish Cancer establishes that duty liability may arise under Section 125(2) without a Section 28 notice, but does not preclude assessment under Section 28 or application of Section 28AB.

Final Conclusion: The appeal is dismissed and the High Court's order upholding recovery of duty and interest is affirmed: redemption of confiscated goods by payment of fine under Section 125(1) creates a duty-liability under Section 125(2); that liability must be assessed under Section 28; and interest under Section 28AB is payable for delayed payment. Jagdish Cancer is clarified accordingly.

Summary order. Civil Appeal dismissed following earlier order dated 10.07.2024; delay condoned and pending applications disposed of.

Condonation of delay - affirmation of appellate tribunal's order - dismissal of civil appeal

Affirmation of appellate tribunal's order - dismissal of civil appeal - The correctness of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata's view and the resulting dismissal of the Civil Appeal. - HELD THAT: - The Supreme Court heard the Additional Solicitor General for the appellant and examined the matter. The Court found that the view taken by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata was correct and, having accepted that view, dismissed the Civil Appeal. No separate legal reasoning is recorded beyond the Court's acceptance of the Tribunal's conclusion.

The Tribunal's view is affirmed and the Civil Appeal is dismissed.

Final Conclusion: Delay in filing the Civil Appeal was condoned; on merits the Tribunal's decision was affirmed and the Civil Appeal dismissed.

Prohibitory order and its effect on subsequent share transfers - appointment of Provisional Liquidator and custody of company assets - time of passing of property in shares and intention of parties for transfer - verification of payment and delivery as condition precedent to transfer - remand for limited inquiry into date of sale and payment

Prohibitory order and its effect on subsequent share transfers - appointment of Provisional Liquidator and custody of company assets - time of passing of property in shares and intention of parties for transfer - verification of payment and delivery as condition precedent to transfer - Limited remand to ascertain whether the subject shares were sold by CRB Capital Markets Limited prior to 09.04.1997 and, if so, to whom, and whether the respective respondents paid the consideration to the brokers - HELD THAT: - The Court observed that the crucial dates are 09.04.1997 (RBI prohibitory order) and 22.05.1997 (appointment of Provisional Liquidator) and that the validity of the transfer to respondents depends upon whether CRB had divested itself of rights in the shares before 09.04.1997. The Court noted discrepancies and lacunae in the record - including timing of contract notes, delivery bills and proof of payment - and divergent factual matrices between the present cases and earlier decisions relied upon. Rather than disturbing the Company Court's conclusion, the High Court remanded the matter for a limited inquiry: (a) to determine when the specific shares (4000, 1500, 900 and 600 respectively) were sold by CRB and to whom; and (b) to verify that each respondent paid the consideration to the broker from whom they purchased the shares. The Court made clear that if it is established that sale by CRB concluded before 09.04.1997 and consideration was paid by the respondents to their brokers, the effect of the impugned order shall follow. The remand is confined to factual verification of sale date, recipient of sale and payment; broader questions of maintainability and other objections were not decided. [Paras 41, 42]

Matter remanded to the Company Court for limited factual inquiry as to date and recipient of sale by CRB and verification of payment by the respondents; impugned order left in place pending that inquiry

Final Conclusion: Appeals disposed of by remanding the matters to the Company Court for a limited enquiry into (i) whether CRB divested itself of the relevant shares prior to 09.04.1997 and to whom, and (ii) whether each respondent paid the purchase consideration to the broker; impugned order not disturbed pending the outcome of that inquiry.

Transfer of pending winding up proceedings to National Company Law Tribunal - inability to pay debts / creditor's petition for winding up - stage of proceedings determining transferability - application of Section 434 of the Companies Act, 2013 - effect of the Insolvency and Bankruptcy Code, 2016 on winding up proceedings - precedent in Action Ispat on transfer of winding up matters

Transfer of pending winding up proceedings to National Company Law Tribunal - application of Section 434 of the Companies Act, 2013 - stage of proceedings determining transferability - precedent in Action Ispat on transfer of winding up matters - Transfer of the admitted but nascent company petition to the NCLT for further adjudication - HELD THAT: - The Court held that since the company petition, though admitted, had not progressed to any irreversible stage and no substantive winding up steps had been taken, it was appropriate to transfer the proceedings to the NCLT. The Court relied on the scheme of Section 434 of the Companies Act, 2013 which contemplates transfer of pending winding up proceedings to the Tribunal, and on the Supreme Court's decision in Action Ispat which directs transfer of winding up matters that have not reached an advanced or irreversible stage. In view of the enactment of the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013, and the absence of effective winding up actions having been taken by the High Court, the petition was directed to be transmitted to the NCLT to be dealt with in accordance with law, with the Registry to transmit electronic records and with directions for appearance before the NCLT on the listed date. Interim orders, if any, were preserved until the next listed date before the NCLT. [Paras 11, 12, 13, 14, 15]

The company petition is transferred to the National Company Law Tribunal and the Registry is directed to transmit the electronic record; parties to appear before the NCLT on the listed date and interim orders, if any, will continue until then.

Inability to pay debts / creditor's petition for winding up - effect of the Insolvency and Bankruptcy Code, 2016 on winding up proceedings - Factual conclusion that the respondent company is unable to pay its debt and has failed to discharge liabilities to the petitioner - HELD THAT: - On the material on record the Court found that the petitioner performed work as per the work order and raised invoices, that part payments were made and several cheques issued by the respondent were dishonoured, and that despite settlement undertakings the respondent paid only a portion of the agreed sum and failed to pay the balance despite repeated opportunities. The Court recorded that the respondent had neglected to repay the balance amount and was unable to discharge its liability to the petitioner. This factual finding formed the basis for continuation of creditor remedies and for transferring the petition to the NCLT for further action under the relevant statutory framework. [Paras 3, 4, 5, 6, 7]

The respondent company is found unable to pay its debt to the petitioner and has failed to discharge its liabilities despite undertakings and multiple opportunities.

Final Conclusion: The High Court has recorded that the respondent is unable to pay its debt and, as the admitted winding up petition is at a nascent stage with no irreversible steps taken, the petition and pending applications are transferred to the National Company Law Tribunal for adjudication; the Registry is directed to transmit records and the parties are directed to appear before the NCLT on the listed date, with existing interim orders to continue until then.

Dissolution of company - Winding up cannot proceed for want of funds or assets - When the affairs of the company have been completely wound up - Official Liquidator discharged - Section 481 Companies Act, 1956

Dissolution of company - Winding up cannot proceed for want of funds or assets - When the affairs of the company have been completely wound up - Section 481 Companies Act, 1956 - Company in liquidation should be dissolved under Section 481 of the Companies Act, 1956 - HELD THAT: - The Court applied the principle that where the affairs of a company have been completely wound up or the liquidator cannot proceed with winding up for want of funds or assets, it is just and reasonable to dissolve the company. The record shows that the secured creditors had sold the Moradabad property and deposited/distributed sums as directed, the Official Liquidator is not seized of any movable or immovable assets from which further realisation may be made, and no funds remain to satisfy unsecured creditors. Reliance was placed on the Supreme Court's reasoning in Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti & Ors. that the court may dissolve a company when winding up is complete or cannot proceed. Having regard to these facts and the statutory criterion in Section 481, the Court concluded that the liquidation proceedings should be brought to an end and the company dissolved. [Paras 9, 10, 11, 12, 13]

The company M/s. Moradabad Syntex Ltd. (in liquidation) stands dissolved.

Official Liquidator discharged - Permission to close books of account - Communication to Registrar of Companies - Official Liquidator to be discharged and permitted to close books; requirement to communicate dissolution to Registrar of Companies - HELD THAT: - Consequent to the dissolution, the Court discharged the Official Liquidator as liquidator of the company and authorised the Official Liquidator to close the company's books of account. The Court further directed that a copy of the judgment be communicated to the Registrar of Companies within 30 days by the Official Liquidator. These directions flow directly from the order dissolving the company and are incidental to bringing the liquidation to an end. [Paras 13, 14, 15]

The Official Liquidator is discharged as liquidator, may close the books of account, and shall communicate a copy of the judgment to the Registrar of Companies within 30 days.

Final Conclusion: The application under Section 481 is allowed: the company M/s. Moradabad Syntex Ltd. (in liquidation) is dissolved; the Official Liquidator is discharged and authorised to close the books of account; and the Official Liquidator shall communicate this judgment to the Registrar of Companies within 30 days. The company petition and pending applications are disposed of.

Dissolution of company - Court's power to dissolve where winding up cannot proceed for want of funds - Exemption from publication of final winding up citation - Discharge of Official Liquidator - Closure of books of accounts by Official Liquidator - Liability of ex-directors for failure to file statement of affairs

Dissolution of company - Court's power to dissolve where winding up cannot proceed for want of funds - The respondent company in liquidation is to be dissolved under Section 481 of the Companies Act, 1956. - HELD THAT: - The Official Liquidator reported negative funds and no realizable movable or immovable assets from which money might be recovered, and that there were no further assets to be realised. Applying the statutory test in Section 481(1) and the principle that the court may dissolve a company when affairs are completely wound up or the liquidator cannot proceed for want of funds, the Court concluded that continuing the winding up would serve no useful purpose and dissolution is justified. The Court relied on the cited dictum affirming that dissolution ends the winding up process where the liquidator cannot proceed. [Paras 12, 15, 16]

Company dissolved and winding up brought to an end.

Exemption from publication of final winding up citation - The Official Liquidator is exempted from carrying out publication of the citation of the final winding up. - HELD THAT: - Having found no assets to realize and that dissolution was appropriate in the circumstances, the Court allowed the Official Liquidator's request to be exempted from publishing the final winding up citation and permitted closure of the matter without the further publication formalities. [Paras 15]

Exemption from publication granted to the Official Liquidator.

Discharge of Official Liquidator - Closure of books of accounts by Official Liquidator - The Official Liquidator is discharged and permitted to close the books of accounts of the dissolved company after adjusting expenses and losses from the CPL; Registrar of Companies to be informed. - HELD THAT: - Following dissolution the Court discharged the Official Liquidator from his office in respect of the company, permitted the Official Liquidator to close the books of account after meeting expenses and losses from the Company Public Ledger (CPL), and directed that a copy of the judgment be communicated to the Registrar of Companies within thirty days. [Paras 16, 17, 18]

Official Liquidator discharged; permitted to close books of accounts; communication to Registrar of Companies directed.

Liability of ex-directors for failure to file statement of affairs - The petition against the ex-directors for failure to file the statement of affairs is disposed of as no useful purpose would be served after dissolution. - HELD THAT: - An earlier petition under provisions requiring ex-directors to file statements of affairs remained pending, but since the Official Liquidator reported no recoverable assets and the Court ordered dissolution of the company, it found that continuing the proceedings against ex-directors would be futile. Consequently the petition and pending applications were disposed of. [Paras 19, 20, 21]

Petition against ex-directors and pending applications disposed of.

Final Conclusion: The Court dissolved the respondent company under Section 481, discharged the Official Liquidator and permitted closure of the company's accounts (with exemption from final-publication formalities), directed communication to the Registrar of Companies, and dismissed as futile the pending proceedings against the ex-directors.

Tagging of matters - Writ jurisdiction under Article 32 - Maintainability of writ petition - Limitation as bar to appellate remedy

Tagging of matters - Writ jurisdiction under Article 32 - Maintainability of writ petition - Writ petition directed to be tagged with Civil Appeal No. 7943 of 2023 while maintainability is left open. - HELD THAT: - The petitioner sought writ relief under Article 32 praying for payment of the entire claim accepted earlier by the Resolution Professional; she also requested that the present petition be tagged with Civil Appeal No. 7943 of 2023 pending before this Court. Respondents opposed tagging on the ground that the petitioner had earlier exhausted remedies and lost on limitation grounds before NCLAT and this Court. Notwithstanding the contest on maintainability and the respondents' objection, the Court exercised its administrative power to consolidate or tag matters for hearing and directed that the present writ petition be tagged with Civil Appeal No. 7943 of 2023, expressly keeping the question of the writ petition's maintainability open for adjudication. [Paras 6]

The writ petition is to be tagged with Civil Appeal No. 7943 of 2023; maintainability to be kept open.

Final Conclusion: The Supreme Court directed administrative tagging of the writ petition with Civil Appeal No. 7943 of 2023 for listed hearing, while reserving and keeping open the question of the petition's maintainability.

Works contract service - commercial or industrial construction service - classification test where supply of materials accompanies services - tax incidence linked to effective date of levy (01.06.2007) - penalty not imposable

Works contract service - commercial or industrial construction service - classification test where supply of materials accompanies services - The services rendered by the appellant are properly classifiable as works contract service and not as commercial or industrial construction service. - HELD THAT: - On examination of the scope of work and the agreement, the Tribunal found that the appellant's turnkey contract for development of ash pond included supply of materials along with services. Relying on the reasoning accepted by the Apex Court in Commissioner of Central Excise and Customs, Kerala v. Larsen & Toubro Ltd., the Tribunal held that where services are rendered together with supply of materials, the activity falls within the ambit of works contract service rather than a pure construction service. Accordingly, the impugned classification as "commercial or industrial construction service" was held to be incorrect. [Paras 3]

Classification as works contract service upheld; classification as commercial or industrial construction service rejected.

Tax incidence linked to effective date of levy (01.06.2007) - works contract service - No service tax is payable for the period 10.09.2004 to 31.03.2005 because the levy on works contract service took effect from 01.06.2007. - HELD THAT: - The Tribunal noted that the statutory levy treating the activity as works contract service became effective from 01.06.2007. Since the appellant's activity for which demand was raised relates to the period 10.09.2004 to 31.03.2005, which is prior to the effective date of the levy, the Tribunal concluded that no service tax was exigible for that period. Consequently, the entire demand confirmed under the category of commercial or industrial construction service was set aside. [Paras 3, 4]

Demand of service tax for the period 10.09.2004 to 31.03.2005 is unsustainable and set aside.

Penalty not imposable - No penalty is imposable on the appellant in the facts and circumstances of the case. - HELD THAT: - Having held that the activity was a works contract service and that the levy was not in force during the relevant period, the Tribunal observed that the circumstances did not warrant imposition of penalty. On that basis the Tribunal held that no penalty should be imposed. [Paras 4]

Penalty cancelled.

Final Conclusion: The appeal is allowed: the activity is held to be a works contract service (not commercial or industrial construction service), no service tax is payable for the period 10.09.2004 to 31.03.2005 because the levy on works contract service commenced on 01.06.2007, and no penalty is imposable; the impugned order is set aside with consequential relief.

Offence under Section 138 of the Negotiable Instruments Act - Liability of firms and associations of persons under Section 141 - Deemed owner / benami ownership and vicarious liability - Summoning order - quashing under Section 482 Cr.P.C. - Requirement of unimpeachable and incontrovertible evidence to avoid trial - Abuse of process of law

Offence under Section 138 of the Negotiable Instruments Act - Liability of firms and associations of persons under Section 141 - Deemed owner / benami ownership and vicarious liability - Summoning order - quashing under Section 482 Cr.P.C. - Requirement of unimpeachable and incontrovertible evidence to avoid trial - Whether the summoning order against the petitioner under Section 138 read with Section 141 NI Act could be sustained when petitioner is not shown to be a partner or authorized signatory and is alleged to be a deemed owner. - HELD THAT: - The complaint alleged that the cheque was issued by the accused firm and averred that the petitioner was a partner/owner; however, the respondent conceded that the petitioner was not a partner or authorized signatory and relied on a bald averment of deemed/real ownership. The Court held that Section 138 prosecution requires the drawer to be shown to have drawn the cheque or, as governed by Section 141, that a person be in charge of and responsible for the conduct of the firm's business. Mere assertion of deemed ownership without supporting material is insufficient. The petitioner produced a certificate of acknowledgement of registration of the firm which did not include him as a partner, and there was no evidence that he was a signatory or was in control of the firm's affairs at the time of the offence. Relying on the principle that an accused seeking quashing under Section 482 must place unimpeachable and incontrovertible material to show that making him stand trial would be an abuse of process, the Court found the certificate to be such material and observed that forcing the petitioner to trial on an unsubstantiated bald averment would amount to abuse of process. Consequently, in absence of evidence bringing the petitioner within Section 138 read with Section 141, the summoning order could not be sustained. [Paras 9, 10, 12]

Summoning order and complaint against the petitioner quashed for want of evidence linking him as partner, authorized signatory or person in charge of the firm; proceeding would be an abuse of process.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed; the summoning order and complaint against the petitioner are quashed for lack of evidence to bring him within Section 138 read with Section 141 of the Negotiable Instruments Act, and the pending application is disposed of as infructuous.

Territorial jurisdiction - assistance under Section 14 of the SARFAESI Act - jurisdiction of the Debts Recovery Tribunal under Section 17 of the SARFAESI Act - efficacious alternative remedy - suspension of impugned order pending recourse to statutory remedy

Territorial jurisdiction - Order dated 09th January, 2024 passed by learned CMM, North-West, Rohini in CT No. 96/2024 was without territorial jurisdiction. - HELD THAT: - The Court accepted the report from the Principal District & Sessions Judge (North-West), Rohini Courts that, although the petition before the CMM (North-West) mentioned P.S. Bharat Nagar, the area where the property is situated falls for civil and criminal jurisdiction under North District (recorded at para 8). On that basis the Court held that the order dated 09th January, 2024 passed by the learned CMM, North-West District was without territorial jurisdiction (paras 9-11, 16). The Court relied on the statutory allocation of authority in Section 14 of the SARFAESI Act, which empowers the Chief Metropolitan Magistrate or District Magistrate within whose jurisdiction the secured asset is situated to assist in taking possession (paras 14-15). [Paras 10, 11, 14, 15, 16]

Impugned order of the learned CMM, North-West, Rohini is without territorial jurisdiction.

Jurisdiction of the Debts Recovery Tribunal under Section 17 of the SARFAESI Act - efficacious alternative remedy - Petitioner has an efficacious remedy before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act to challenge the measures taken by the secured creditor. - HELD THAT: - The Court noted that Section 17(2) vests jurisdiction in the DRT to consider whether measures taken by the secured creditor under Section 13(4) and enforced via Section 14 comply with the Act (paras 12-13). Consequently, the Court held that the petitioner can raise the territorial jurisdiction objection and other contentions before the DRT, since an efficacious statutory remedy is available (paras 17-18). [Paras 12, 13, 17, 18]

Petitioner should approach the DRT under Section 17 of the SARFAESI Act to challenge the enforcement measures.

Suspension of impugned order pending recourse to statutory remedy - Interim suspension of the impugned order was granted for a limited period to enable the petitioner to approach the DRT. - HELD THAT: - Balancing equities in light of the Court's finding that the CMM's order was without jurisdiction and acknowledging the availability of the DRT remedy, the Court suspended the order dated 09th January, 2024 for one week to afford the petitioner opportunity to file an application before the DRT under Section 17 (para 19). The suspension is limited and procedural, aimed solely at permitting invocation of the statutory remedy. [Paras 19]

Order dated 09th January, 2024 is suspended for one week to enable the petitioner to approach the DRT.

Final Conclusion: The petition is disposed of: the High Court found the CMM (North-West, Rohini) order dated 09th January, 2024 to be without territorial jurisdiction, directed the petitioner to seek remedy before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, and suspended the impugned order for one week to permit such recourse.

Liability under Section 138 for cheque issued from joint account without drawer's signature - Requirement of prior statutory notice for prosecution under Section 138 - Prosecution under Section 138 of Negotiable Instruments Act - Abuse of process of law

Liability under Section 138 for cheque issued from joint account without drawer's signature - Prosecution under Section 138 of Negotiable Instruments Act - Whether the complaint under Section 138 of the Negotiable Instruments Act against a joint account-holder who has not signed the cheque is maintainable - HELD THAT: - The court found that the cheque on record was signed only by the petitioner's late husband although drawn on a joint account. Reliance was placed on the principle that a joint account-holder who has not signed the cheque cannot be prosecuted under Section 138; prosecution is permissible only against the drawer/signatory. The court referred to the reasoning in Aparna A. Shah and Alka Khandu Avhad to the effect that Section 138 does not operate to fasten criminal liability on a person who is not a signatory to the cheque even if jointly liable in civil terms. Applying that principle to the admitted factual position (absence of petitioner's signature on the cheque), the complaint against the petitioner was held to be an abuse of process and not maintainable. [Paras 8, 9, 10, 11]

Criminal complaint under Section 138 against the petitioner quashed for being filed against a non-signatory joint account-holder; complaint is an abuse of process.

Final Conclusion: The petition is allowed and the complaint under Section 138 NI Act filed against the petitioner is quashed as not maintainable against a joint account-holder who did not sign the cheque; pending application disposed of as infructuous.