TaxTMI Updates e-Newsletter
Jul 29,2023

Grant of bail - economic offences constitute a class apart - documentary and electronic evidence - prima facie satisfaction for bail - absence of apprehension of tampering or influencing witnesses

Grant of bail - documentary and electronic evidence - absence of apprehension of tampering or influencing witnesses - Whether the applicant accused of alleged GST offences should be released on bail - HELD THAT: - The Court considered that investigation in respect of the applicant was complete and complaint had been filed; the applicant had been in custody for about five months. Reliance was placed on the decision in Ratnambar Kaushik in which, in GST-evasion matters involving documentary and electronic evidence and official witnesses, the risk of tampering, intimidating or influencing witnesses is reduced. The Court noted that the prosecution case is documentary and electronic in nature and that there was no specific material demonstrating that the applicant had gained benefit or that there was a realistic apprehension of witness tampering. While acknowledging the general principle that economic offences are serious and require careful scrutiny, the Court applied the principle that the court granting bail need only be satisfied that there are reasonable grounds to believe a prima facie case exists and that, on the facts before it, pre-trial detention was not required to prevent tampering or flight. Having balanced these considerations and noting the sentence ceiling and nature of evidence, the Court concluded that bail was appropriate subject to conditions. [Paras 7, 8]

Application allowed; applicant directed to be released on bail on execution of a personal bond and two sureties and subject to conditions including appearance at trial and disclosure/non-alienation of assets without permission of the trial Court.

Final Conclusion: Bail granted to the applicant accused in the GST-related economic offence, on furnishing the prescribed bond and sureties and subject to conditions including attendance at trial and disclosure and preservation of assets; decision reached by balancing seriousness of economic offences against the documentary nature of prosecution evidence and absence of demonstrated risk of tampering or flight.

Compliance with court direction by the nodal officer - abeyance of notice pending administrative decision - post-decisional hearing - opportunity to furnish clarification and documents

Compliance with court direction by the nodal officer - abeyance of notice pending administrative decision - Whether the impugned notice dated 04.10.2022 could be proceeded with before the Nodal Officer complied with this Court's earlier direction to decide the petitioner's representation dated 20.05.2019 - HELD THAT: - The Court noted that by its order dated 08.05.2019 in W.P. No. 26509/2018 the Nodal Officer had been directed to consider the petitioner's complaint/representation within two weeks, and that the petitioner had submitted the representation on 20.05.2019. Finding that the representation had not been decided prior to issuance of the notice dated 04.10.2022, the Court directed that if no decision has been taken on the 20.05.2019 representation, the Nodal Officer shall decide the same within six weeks from receipt of a certified copy of this order. Pending that decision, the Court ordered the impugned notice dated 04.10.2022 to be kept in abeyance and restrained the respondents from proceeding further pursuant to that notice until the Nodal Officer's decision is rendered.

Nodal Officer to decide the representation within six weeks; impugned notice kept in abeyance until such decision is taken.

Opportunity to furnish clarification and documents - post-decisional hearing - Obligations of the petitioner and respondents in relation to the notice and further proceedings - HELD THAT: - The Court observed that the notice itself invited the petitioner to furnish clarification and relevant documents before further proceedings, and recorded that the petitioner ought to have submitted such explanation to the respondents. As a procedural step, the petitioner was directed to furnish a certified copy of this order in the offices of Respondent Nos. 5, 6 and 8 within ten days, thereby enabling the respondents to act in accordance with the Court's directions.

Petitioner to furnish certified copy of the order to Respondent Nos. 5, 6 and 8 within ten days; respondents to await the Nodal Officer's decision before proceeding.

Final Conclusion: The petition is disposed of by directing the Nodal Officer to decide the petitioner's representation dated 20.05.2019 within six weeks of receipt of a certified copy of this order; the notice dated 04.10.2022 is ordered to be kept in abeyance until that decision, and the petitioner must furnish a certified copy of this order to specified respondents within ten days.

Validity of notice under Section 148A(b) of the Act - Compliance with CBDT Instruction No.1/2022 - time limit for providing information and material - Consequences of issuance or mailing of show-cause material after prescribed cutoff date - Requirement of Section 282A - inclusion of name and designation of issuing officer - Nullity of proceedings for non-compliance with mandatory procedural requirements

Validity of notice under Section 148A(b) of the Act - Compliance with CBDT Instruction No.1/2022 - time limit for providing information and material - Consequences of issuance or mailing of show-cause material after prescribed cutoff date - Notices under Section 148A(b) which were mailed after the prescribed cutoff (post the 30-day timeline stated in CBDT Instruction No.1/2022) are invalid and cannot be sustained. - HELD THAT: - The Court examined CBDT Instruction No.1/2022 issued pursuant to the Supreme Court's decision in Union of India v. Ashish Aggarwal, which required that the information and material relied upon be provided to assessees within 30 days (the instruction envisaged that such material be supplied by 2nd June 2022 in the stated cases) and prescribed the procedural consequences flowing therefrom. The impugned notices under Section 148A(b) were mailed after 03.06.2022 and thus were issued/made effective after the timeline prescribed by the CBDT instruction. The Court held that mailing of the notices after the prescribed cutoff not only contravenes the CBDT instruction but effectively abrogates the procedural mandate intended to be complied with before issuance of further proceedings. Having regard to that non-compliance with the prescribed timeline, the notices (and the consequent orders under Section 148A(d)) could not be sustained and were liable to be set aside. [Paras 5, 6, 7, 9]

The notices under Section 148A(b) mailed after the prescribed date were held invalid and set aside.

Requirement of Section 282A - inclusion of name and designation of issuing officer - Nullity of proceedings for non-compliance with mandatory procedural requirements - Notices which do not comply with Section 282A by omitting the name and designation of the issuing officer are vitiated and cannot be sustained. - HELD THAT: - The Court found that the impugned notices failed to disclose the name and designation of the officer issuing the notices as required by Section 282A. Such omission was treated as a defect going to compliance with mandatory procedural requirements. The Court concluded that the notices, insofar as they lacked the requisite particulars, violated Section 282A and therefore could not be sustained. This finding reinforced the decision to set aside the notices and the consequent orders under Section 148A(d). [Paras 6, 7, 9]

The notices were held vitiated for non-compliance with Section 282A and set aside.

Final Conclusion: The writ petitions are allowed: the notices under Section 148A(b) and the orders under Section 148A(d) impugned in these petitions are set aside for non-compliance with CBDT Instruction No.1/2022 timelines and with Section 282A; liberty is granted to the revenue to take further steps in accordance with law.

Eligibility for deduction under Section 80IB(10) - interpretation of statutory conditions for housing project deduction - relevance of project approval/commencement certificate's name - quashing of assessment order passed under Section 143(3) read with Section 153A - role of factual satisfaction by Tribunal based on architect's certificate

Quashing of assessment order passed under Section 143(3) read with Section 153A - Validity of ITAT's quashing of the assessment order passed under Section 143(3) r.w.s. 153A - HELD THAT: - The Court examined the Revenue's challenge to the ITAT's order quashing the assessment under Section 143(3) read with Section 153A and found no substantial question of law arising. The factual matrix admitted that the assessee developed the housing project and offered the income from that project to tax. The Tribunal's conclusion was founded on factual determination that the statutory conditions for claiming the deduction under Section 80IB(10) were satisfied; in that factual backdrop the High Court held that the Revenue's contention did not raise a substantial question of law warranting interference with the ITAT's order. [Paras 2, 4]

The challenge to the ITAT's quashing of the assessment order fails; no substantial question of law is made out.

Eligibility for deduction under Section 80IB(10) - interpretation of statutory conditions for housing project deduction - relevance of project approval/commencement certificate's name - role of factual satisfaction by Tribunal based on architect's certificate - Whether the assessee was entitled to claim deduction under Section 80IB(10) despite the commencement/approval formalities being in a different name - HELD THAT: - The Court agreed with the ITAT that Section 80IB(10) prescribes specific conditions to qualify as an eligible housing project (approval date, commencement and completion time-limits, minimum plot area, unit size limits and limits on commercial area). The statutory test is compliance with those conditions and does not require that the commencement certificate or approval be in the exact name of the assessee who develops the project. On the facts the ITAT relied on an architect's certificate (M/s. Avinash Mhatre & Associates) and found the prescribed conditions fulfilled. The High Court endorsed that factual and legal approach, also noting precedent wherein development at the assessee's risk and cost entitled the assessee to deduction even if land/approval were in the original owner's name. [Paras 2, 3]

Assessee entitled to deduction under Section 80IB(10); the name on the commencement/approval does not, by itself, defeat eligibility where the statutory conditions are otherwise satisfied.

Final Conclusion: The appeals are dismissed; the High Court finds no substantial question of law in the Revenue's challenges, upholds the ITAT's factual and legal conclusion that the assessee satisfied the conditions of Section 80IB(10) and was entitled to the claimed deduction for AY 2008-09.

Double Taxation Avoidance Agreement (DTAA) and its applicability in TDS proceedings - Tax deduction at source - chargeable sum and entitlement to DTAA benefits while determining withholding liability - Retrospective clarificatory explanations to the definition of 'royalty' in Section 9(1)(vi) and their temporal operation - Characterisation of payments to non-resident telecom operators as 'royalty' or 'fees for technical services' - Jurisdiction to tax extra-territorial income where services and facilities are situated outside India - Withholding tax liability under higher withholding provisions where statutory conditions for higher rate apply

Double Taxation Avoidance Agreement (DTAA) and its applicability in TDS proceedings - Tax deduction at source - chargeable sum and entitlement to DTAA benefits while determining withholding liability - ITAT was incorrect in holding that DTAA cannot be considered in proceedings under Section 201 and that a payer cannot take benefit of the DTAA when making payment to a non-resident. - HELD THAT: - The Court applied the principle that tax deductible at source is deductible only out of the chargeable sum and that, consequently, provisions of the DTAA are relevant while applying TDS provisions. Citing the Apex Court's extraction in GE Technology and its treatment in subsequent authorities, the Court held that an assessee is entitled to take benefit under a DTAA in proceedings under the Act and that the ITAT's view excluding DTAA consideration in Section 201 proceedings was untenable. [Paras 17, 18]

DTAA can be considered in proceedings under Section 201 and the assessee is entitled to claim DTAA benefits when determining withholding liability.

Retrospective clarificatory explanations to the definition of 'royalty' in Section 9(1)(vi) and their temporal operation - Retrospective amendment and lex non cogit ad impossibilia - ITAT was not correct in holding that the insertion of Explanations 5 and 6 to Section 9(1)(vi) operates to amend the DTAA or can be applied to prior assessment years for the purpose of holding the payer liable for non-deduction of tax. - HELD THAT: - Relying on the reasoning in Engineering Analysis, the Court held that the retrospective clarificatory explanations inserted by later Finance Acts cannot be applied so as to require a payer to do the impossible for earlier assessment years. The Court recorded the principle that an assessee cannot be expected to apply an expanded definition inserted later into statute to assessment years when that explanation did not factually form part of law, and that an amendment which expands the taxing provision cannot be used to defeat DTAA protections where applicable. [Paras 19, 20, 24]

The retrospective Explanations to the domestic definition of 'royalty' cannot be invoked to enlarge taxing reach or to override DTAA protections in relation to the assessment years under consideration.

Characterisation of payments to non-resident telecom operators as 'royalty' or 'fees for technical services' - Application of domestic definition versus DTAA definition of 'royalty' - Payments made to non-resident telecom operators for interconnect services and transfer of capacity situated outside India are not chargeable to tax in India as 'royalty' for the assessment years in question. - HELD THAT: - The Court noted that for subsequent assessment years certain tribunals had taken a view favourable to the assessee and that the factual matrix shows services and facilities situated outside India with no presence or permanent establishment of the payees in India. In that factual and legal context, and given the inapplicability of the later clarificatory explanations to the earlier years, the Court answered the question against the Revenue. [Paras 21, 22]

Such payments do not qualify as royalty chargeable to tax in India for the assessment years before the clarificatory amendments and on the facts that the facilities and agreements are extraterritorial.

Jurisdiction to tax extra-territorial income - Permanent establishment and situs of services as determinative of taxing rights - Indian tax authorities do not have jurisdiction to tax income arising from extra-territorial sources where the payees have no presence or permanent establishment in India and the facilities and agreements are outside India. - HELD THAT: - The Court recorded the undisputed facts that the equipment and submarine cables are overseas, that Belgacom had no presence in India, and that the agreements relate to bandwidth situated outside India. On that basis the Court held that Indian authorities lack jurisdiction to tax such extra-territorial income. [Paras 15, 22]

No jurisdiction in India to tax the disputed receipts arising from extra-territorial sources in the circumstances of the case.

Withholding tax liability under higher withholding provisions - Applicability of higher withholding rate where statutory conditions apply - The Revenue was not correct in holding that withholding tax liability should be levied at a higher rate for the assessment year in question. - HELD THAT: - The Court noted that the issue was covered in favour of the assessee by applicable precedent (CIT v. Wipro and subsequent follow-up decisions) relied upon by the parties and accordingly answered the question against the Revenue. [Paras 23]

Higher withholding at the rate contended by the Revenue is not leviable in the facts and law of the present case.

Liability of deductor for non-deduction of TDS based on subsequent amendment to taxing provision - Burden on Revenue to establish chargeability and impossibility defence - Assessee cannot be held liable for non-deduction of tax for the assessment years 2008-09 to 2012-13 on the basis of subsequent amendment to Section 9(1)(vi) (Explanation 5 and 6). - HELD THAT: - Applying the principle that the law does not demand the impossible and relying on Engineering Analysis, the Court held that because the clarificatory explanations were inserted later, the assessee could not be required to apply them retrospectively to earlier years. The Court also observed that the assessee is entitled to DTAA benefits and that the Revenue bears the burden of proving that the receipts were chargeable to tax. [Paras 20, 24]

Assessee is not liable for non-deduction of TDS for the earlier assessment years on account of the later-introduced explanations to Section 9(1)(vi).

Final Conclusion: Appeals allowed; questions of law answered in favour of the assessee and against the Revenue. The common ITAT orders dated December 30, 2014 and November 28, 2019 are set aside.

Accommodation entries - notice under Section 148A(b) of the Income tax Act, 1961 - reasoned order under Section 148A(d) - right to inspection of investigation material and disclosure of documents - personal hearing before passing assessment proceedings - remand for de novo consideration

Accommodation entries - reasoned order under Section 148A(d) - Validity of the order dated 20th April 2023 passed under Section 148A(d) insofar as it concluded that the petitioner undertook accommodation entries through imports from M/s. Jogi Gems without disclosing the basis or providing investigative material. - HELD THAT: - The Court found that the impugned order records a conclusion of accommodation entries but does not disclose the foundation on which that conclusion was reached, nor were the investigation documents underlying the conclusion placed before the petitioner. The order states that information from DDIT 1(2), Ahmedabad was made available, yet the petitioner denies receipt and the material of investigation relating to M/s. Jogi Gems was not furnished. The Court observed that the order lacked statement of reasons dealing with the petitioner's submissions and did not indicate on what basis import transactions were said to be bogus. In these circumstances the Court held that the order could not stand and remanded the matter for fresh consideration de novo, directing that any future order under Section 148A(d) be reasoned and address the petitioner's submissions. [Paras 6]

Order dated 20th April 2023 under Section 148A(d) quashed and set aside; matter remanded for de novo consideration with direction to pass a reasoned order dealing with the petitioner's submissions.

Notice under Section 148A(b) of the Income tax Act, 1961 - Validity of the consequential notice issued under Section 148 dated 20th April 2023. - HELD THAT: - The Court quashed the consequential notice issued under Section 148 as it was founded on the same impugned proceedings which the Court set aside. Having set aside the order under Section 148A(d) for lack of adequate disclosure and reasoned consideration, the consequential notice could not be permitted to subsist. [Paras 7]

Consequential Section 148 notice dated 20th April 2023 quashed and set aside.

Right to inspection of investigation material and disclosure of documents - personal hearing before passing assessment proceedings - Extent of procedural relief to be afforded on remand including disclosure of investigation material, redaction, opportunity to reply, and requirement of personal hearing. - HELD THAT: - The Court directed that within two weeks the assessing authority must provide the petitioner with copies of all documents and information regarding the investigation of M/s. Jogi Gems, including statements and collected documents, permitting redaction of portions not pertaining to the petitioner or M/s. Jogi Gems. The petitioner was given two weeks from receipt to file further reply, and the assessing officer was instructed to afford personal hearing after giving at least five working days' notice and to pass a reasoned order addressing every submission of the petitioner before making any further adjudication. [Paras 8, 9]

Directed disclosure of investigation material (with permissible redactions), opportunity to file further reply, obligation to grant personal hearing with specified notice, and requirement to pass a reasoned order on remand.

Final Conclusion: The High Court quashed the order dated 20th April 2023 under Section 148A(d) and the consequential Section 148 notice, remanding the matter for de novo consideration; the assessing authority was directed to furnish investigation material (with limited redaction), permit further reply, provide a personal hearing with advance notice, and thereafter pass a reasoned order addressing the petitioner's submissions.

Assessment passed on non-existent company - effect of amalgamation and vesting of assets and liabilities in transferee - void ab initio of proceedings where notice/assessment issued to non-existent entity - reopening under section 148 and adequacy of reasons to believe - estoppel by participation in proceedings vis-a -vis amalgamation

Assessment passed on non-existent company - effect of amalgamation and vesting of assets and liabilities in transferee - void ab initio of proceedings where notice/assessment issued to non-existent entity - estoppel by participation in proceedings vis-a -vis amalgamation - Validity of assessment framed and notice issued in the name of the transferor company after its amalgamation and consequent cessation of existence - HELD THAT: - The Court found on the record that the respondent company was amalgamated with the transferee on 09.08.2018 and that this fact was brought to the notice of the Assessing Officer by letter received on 19.11.2018, whereas the assessment order was passed on 20.12.2018. The scheme lodged showed transfer of assets, liabilities and treatment of taxes to the transferee. In such circumstances an assessment framed against an entity that had ceased to exist is a substantive illegality and void ab initio. The Court applied the principle in Marshall & Sons, Maruti Suzuki and Mahagun Realtors that where amalgamation has the effect of vesting assets and liabilities in the transferee the proceedings must be competent in law and an assessment in the name of a non-existent amalgamating company cannot stand. Participation in proceedings by or on behalf of the amalgamating/transferee does not operate as an estoppel against law where the assessing records demonstrate that the amalgamating company had ceased to exist at the date of the order. Having held the assessment to be void for being made against a non-existent entity, the Court declined to adjudicate other consequential or substantive contentions raised by the Revenue. [Paras 9, 11, 13]

Assessment order passed on a company that had ceased to exist on the date of the order is bad in law and void ab initio; Tribunal correctly dismissed the Revenue's appeal.

Final Conclusion: The Revenue's appeal is dismissed as devoid of merit; the assessment framed on a company that had ceased to exist at the time of the order is void ab initio and no further questions are decided.

Deduction under section 80P(2)(i)(a) for cooperative societies - Classification as 'cooperative bank' versus 'cooperative society' for eligibility - Registration and nature of membership as determinative of cooperative status per controlling precedent - Membership composition not a ground to deny statutory deduction - Condonation of delay in filing appeal on substantial justice grounds

Deduction under section 80P(2)(i)(a) for cooperative societies - Classification as 'cooperative bank' versus 'cooperative society' for eligibility - Membership composition not a ground to deny statutory deduction - entitlement to deduction under section 80P(2)(i)(a) for Assessment Year 2010-2011 - HELD THAT: - The Tribunal examined whether the assessee, registered as a cooperative society, could be denied deduction under the provision on the basis that it was to be treated as a 'cooperative bank' because its membership comprised regular and nominal members. Relying on the principle that an assessee's status is to be determined by its registration and nature rather than by the composition of membership, the Tribunal rejected the Revenue's contention that mixed membership converts the society into a cooperative bank and thereby disentitles it to the deduction. The Tribunal accepted the assessee's submissions and held that membership composition alone cannot be the criterion to deny the statutory deduction, and therefore allowed the substantive grievance of the assessee in respect of the disallowance. [Paras 3, 4]

The disallowance of deduction under section 80P(2)(i)(a) is set aside and the assessee is held entitled to the deduction for AY 2010-2011.

Condonation of delay in filing appeal on substantial justice grounds - Authority of the court to override technical delay to secure substantial justice - condonation of delay in filing the appeal - HELD THAT: - The Tribunal noted that the appeal was instituted with a delay of 1806 days and that the delay was explained as attributable to communication gaps and miscellaneous reasons. Applying the principle that technical lapses should yield to substantial justice, as articulated by the controlling precedent , the Tribunal exercised its discretionary power to condone the delay and admit the appeal for consideration on merits. [Paras 5]

The delay in filing the appeal is condoned and the appeal is admitted despite the delay.

Final Conclusion: The appeal is allowed: delay in filing is condoned and the disallowance of deduction under section 80P(2)(i)(a) for Assessment Year 2010-2011 is set aside, the assessee being treated as eligible for the deduction.

Assumption of jurisdiction under section 153A read with section 153C in absence of incriminating material - No additions in completed/non-abated assessments without incriminating material seized during search - Scope of post-search inquiry and proper recourse under section 147/148 where no incriminating material is found

Assumption of jurisdiction under section 153A read with section 153C in absence of incriminating material - No additions in completed/non-abated assessments without incriminating material seized during search - Validity of proceedings and assessments completed under section 153A(1)(b) read with section 153C and 143(3) in the absence of any incriminating material found during search. - HELD THAT: - The Tribunal found that the notices in the present matter related to non-abated assessment years and that it is settled by the decision of the Hon'ble Supreme Court in Pr. CIT v. Abhisar Buildwell (P) Ltd. (2023) that completed/non-abated assessments cannot be reopened or additions made under post-search proceedings where no incriminating material was seized during the search. The Assessing Officer's order merely reproduced earlier findings and did not specify any incriminating material seized during the search to justify exercise of jurisdiction under section 153A read with section 153C. The Revenue's contention that post-search inquiry disclosed group companies issuing only bills was not supported by any discussion of specific seized evidence in the assessment order. Where no incriminating material is found, the correct course, if any, is for the Revenue to proceed under section 147/148; it cannot sustain additions in section 153A proceedings in regard to completed assessments absent seized incriminating material. For these reasons the Tribunal concluded that jurisdiction under section 153A(1)(b) r.w.s. 143(3) was not validly exercised in respect of the relevant years. [Paras 4, 6, 7]

The challenge to the assumption of jurisdiction under section 153A r.w.s. 153C is allowed; the impugned assessment orders for the relevant years are quashed. Remaining grounds raised on merits were left as lacking merit for adjudication in view of this finding.

Final Conclusion: The Tribunal allowed the appeals, holding that in the absence of any incriminating material seized during search the Assessing Officer had no valid basis to complete assessments under section 153A read with section 153C and 143(3) for AYs 2011-12 and 2012-13; the impugned assessment orders are quashed and other substantive grounds were left without adjudication.

Business income - Unexplained investment under section 69B read with section 115BBE - Survey inventory and stock difference - Credit in business books as inference of business receipt

Business income - Unexplained investment under section 69B read with section 115BBE - Credit in business books as inference of business receipt - Survey inventory and stock difference - Head of income under which excess stock found on survey is assessable - HELD THAT: - The Tribunal found that the assessee's sole source of income was the trade in gold jewellery and silver articles and that the quantitative excess stock discovered during survey represented trading stock acquired out of undisclosed receipts from that same business. The assessee recorded the excess by increasing book stock and making a corresponding credit to partners' capital account, and the amount was separately offered as business income in the return. Applying the principle that an amount credited in business books permits an inference that it is a business receipt, and relying on the Rajasthan High Court decision cited by the assessee, the Tribunal concluded that the investment in procuring the excess stock was clearly identifiable and related to regular business stock and therefore taxable as business income. The Tribunal distinguished the Madras High Court decision relied on by the Revenue on the ground that in that case there was no corresponding entry in the books of account, whereas in the present case the excess stock was accompanied by a corresponding credit to partners' capital account. On these facts the additions could not be treated as unexplained investment taxable under section 69B read with section 115BBE, and the impugned income was held assessable as business income.

Excess stock found on survey is assessable as business income and not as unexplained investment under section 69B read with section 115BBE.

Final Conclusion: The appeal is allowed: the impugned additions arising from excess stock discovered on survey are held to be business income and not unexplained investment; the assessment treating the amount under section 69B read with section 115BBE is set aside.

Taxability of share premium as income under section 56(2)(viib) - effect of Settlement Commission's acceptance and capitalization on subsequent assessments - admission of fresh evidence by appellate authority and Rule 46A - validity of reassessment notice and service by affixing

Taxability of share premium as income under section 56(2)(viib) - effect of Settlement Commission's acceptance and capitalization on subsequent assessments - Deletion of addition made on account of share premium under section 56(2)(viib) was sustainable. - HELD THAT: - The Assessing Officer treated the security premium received on issue of shares as income chargeable under the provision dealing with premium in excess of fair market value. The assessee was part of the group in which M/s RPP Infra Projects Ltd admitted undisclosed investment in the assessee company before the Income-tax Settlement Commission and the Settlement Commission accepted the income disclosed and allowed capitalization of the investment. The Tribunal held that the very income in question had already been subjected to tax in the hands of the group company as reflected in the Settlement Commission's order, and therefore a fresh addition of the same income in the hands of the assessee could not be sustained. Relying on the Settlement Commission's acceptance and capitalization, the CIT(A)'s deletion of the addition was upheld. [Paras 4, 7, 8]

Addition under section 56(2)(viib) deleted; CIT(A)'s order upheld and revenue's appeal dismissed on this ground.

Admission of fresh evidence by appellate authority and Rule 46A - validity of reassessment notice and service by affixing - Revenue's objection to CIT(A)'s admission of fresh evidence under Rule 46A and procedural challenge to service of notice were not upheld so as to alter the outcome. - HELD THAT: - The revenue contended that the CIT(A) erred in admitting a copy of the application filed before the Settlement Commission contrary to Rule 46A and that the reassessment notice was improperly served by affixture and beyond time. The Tribunal considered the submissions but, having regard to the Settlement Commission's order which admitted and taxed the same income and allowed capitalization, treated the admitted evidence and the Settlement Commission finding as decisive on the merits. The Tribunal did not sustain the revenue's contention in a manner that would revive the addition; the substantive outcome - that the income had already been taxed in the hands of the group company - governed the result. [Paras 5, 7]

Objections to admission of evidence and to the mode/timing of service did not lead to reversal; they did not affect the conclusion that the addition could not be made in view of the Settlement Commission's order.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition made on account of share premium for AY 2009-10 because the identical income had been admitted and accepted by the Income-tax Settlement Commission in the hands of the group company and allowed to be capitalized; the revenue's appeal is dismissed.

Treatment of payments for maintenance of common facilities as revenue expenditure - capitalization versus revenue deduction of infrastructure development expenses - disallowance for non-deduction of tax at source vis-a -vis non-availability of Form 15CA/15CB - treatment of foreign exchange gain/loss and application of section 43A - impermissibility of ad hoc disallowance without pointing out specific defects - legal/professional fees incurred in relation to acquisition of plant treated as revenue expenditure

Treatment of payments for maintenance of common facilities as revenue expenditure - capitalization versus revenue deduction of infrastructure development expenses - Whether the infrastructure development payments made for common facilities outside the assessee's leased premises are capital in nature or revenue expenditure - HELD THAT: - The Assessing Officer treated payments to the developer as capital expenditure on the ground that the lease was for 99 years and was equivalent to ownership. The CIT(A) and the Tribunal found on the basis of the infrastructure development agreement that the payments were for common facilities and amenities outside the assessee's owned property and conferred only a right of access and use. Applying the principle in L.H. Sugar Factory & Oil Mills (and related precedents) that expenditure which merely facilitates business operations without affecting the fixed capital is revenue in nature, and having regard to consistent authority on identical facts, the Tribunal held that the AO erred in capitalising the expenditure and upheld the deletion by the CIT(A). [Paras 10]

Addition deleted; expenditure held to be revenue in nature and the order of the CIT(A) is upheld.

Disallowance for non-deduction of tax at source vis-a -vis non-availability of Form 15CA/15CB - Whether expenditures on certain foreign remittances could be disallowed solely because Forms 15CA/15CB were not on record - HELD THAT: - The AO disallowed payments where Form 15CA/15CB were not produced, treating the assessee as an assessee in default under the TDS provisions. The CIT(A) found that the AO did not examine applicability of TDS on the material available (invoices, nature of transaction, tax residency certificates and DTAA) and that section 40(a)(i) permits disallowance only where tax was deductible and not merely for non-availability of paperwork. The Tribunal agreed with the CIT(A), noting that the AO failed to apply his mind to applicability of TDS and that the non-availability of Forms 15CA/15CB alone did not justify disallowance; reliance of the assessee on higher authority (GE India Technology) supported this approach. [Paras 16]

Addition deleted; disallowance could not be made solely for non-production of Form 15CA/15CB without examining applicability of TDS.

Treatment of foreign exchange gain/loss and application of section 43A - Whether a portion of foreign exchange fluctuation gains treated as capital by the assessee could be reclassified as revenue to increase revenue losses - HELD THAT: - The AO alleged manipulation in bifurcating foreign exchange gain/loss between revenue and capital heads to inflate revenue loss and accordingly sought to treat a capital gain as revenue. The CIT(A) examined ledger entries and financial statements and found that transfers between specified ledger accounts resulted in a net nil impact on the profit and loss account for the disputed amount, and that the assessee had itself made adjustments under section 43A in its computation. The Tribunal observed that the revenue did not challenge the CIT(A)'s factual finding that the net impact was nil and accordingly found no infirmity in the deletion. [Paras 23]

Addition of the disputed foreign exchange amount deleted; AO's reclassification not sustained.

Impermissibility of ad hoc disallowance without pointing out specific defects - Whether an ad hoc disallowance of 2% (reduced to 1% by CIT(A)) of miscellaneous expenses can be sustained when specific defects are not identified - HELD THAT: - The AO made an ad hoc disallowance of 2% of various expenses on the ground that invoices were not fully verifiable. The CIT(A) reduced the adhoc disallowance to 1% after noting limited discrepancies and some invoices produced by the assessee. The Tribunal held that a corporate assessee cannot be saddled with an adhoc deduction without pointing out specific defects; ad hoc disallowances without identification of particular infirmities are impermissible and, on that basis, set aside the orders below and allowed the assessee's grounds. [Paras 29]

Ad hoc disallowance set aside; issue decided in favour of the assessee.

Legal/professional fees incurred in relation to acquisition of plant treated as revenue expenditure - Whether legal fees charged in connection with plant acquisition are capital in nature or revenue (professional) expenditure - HELD THAT: - The AO disallowed a portion of legal fees as capital-related. The CIT(A) examined the invoices and found the payments related to drafting agreements, resolutions and rendering legal consultancy services, i.e., professional services. Applying the principle that fees paid for professional services in relation to such matters can be revenue in nature (relying on United Breweries precedent), the Tribunal found the CIT(A)'s deletion of the disallowance to be reasonable and declined to interfere. [Paras 34]

Disallowance deleted; legal/professional fees held to be revenue expenditure and CIT(A)'s order upheld.

Final Conclusion: All grounds urged by the Revenue are dismissed and the assessee's appeals are allowed in part as indicated above; the Tribunal upholds the CIT(A)'s deletions on the disputed issues and sets aside the adhoc disallowance made by the AO.

Penalty under section 271(1)(c) for furnishing inaccurate particulars - deletion of additions in the quantum appeal negates basis for penalty - binding effect of a coordinate bench decision pending constitution of a Special Bench - remittance to Assessing Officer for de-novo adjudication

Penalty under section 271(1)(c) for furnishing inaccurate particulars - deletion of additions in the quantum appeal negates basis for penalty - binding effect of a coordinate bench decision pending constitution of a Special Bench - Sustainability of the penalty levied under section 271(1)(c) for A.Y. 2011-12 and A.Y. 2012-13 where the additions/disallowances in the assessment were deleted in the quantum appeal and/or by order giving effect. - HELD THAT: - The Tribunal noted that the coordinate bench in the assessee's own quantum appeals deleted the addition relating to franchise fees and that the Assessing Officer, by the order giving effect, had deleted major parts of the disallowances. It is a settled position that where the additions or disallowances on which a penalty for furnishing inaccurate particulars is founded are deleted, there remains no basis for levy of such penalty. Until a Special Bench decides the conflicting issue, the decision of the coordinate bench is binding on the Tribunal. Applying these principles to the facts, the Tribunal held that the penalty could not be sustained and therefore upheld the deletion of penalty by the CIT(A) for both assessment years. [Paras 7, 8]

Penalty under section 271(1)(c) deleted for A.Y. 2011-12 and A.Y. 2012-13; revenue's appeals dismissed.

Remittance to Assessing Officer for de-novo adjudication - Status of certain disallowances (airfare, travelling, website charges, lodging & boarding/food and catering) in the quantum proceedings. - HELD THAT: - The Tribunal recorded that those issues were remitted to the Assessing Officer for de-novo adjudication by the coordinate bench in the quantum appeals. The order giving effect deleted major parts of the disallowances, but the remaining issues were sent back to the AO for fresh consideration. Consequently, those specific disallowances were not finally decided by the Tribunal in the quantum appeals and required fresh adjudication by the AO. [Paras 7]

Disallowances pertaining to airfare, travelling, website charges and lodging & boarding/food and catering were remitted to the Assessing Officer for de-novo adjudication.

Final Conclusion: The Tribunal dismissed the revenue's appeals and upheld the CIT(A)'s deletion of penalties for A.Y. 2011-12 and A.Y. 2012-13 on the ground that the underlying additions/disallowances were deleted; certain disallowances remain remitted to the Assessing Officer for fresh adjudication.

Taxability of commission to non-resident agents - obligation to deduct tax at source under section 195 where payments are not taxable in India - scope of fees for technical services under section 9(1)(vii) - treatment of participation/ export promotion charges paid to non-residents - application of administrative circulars in determining taxability of payments to agents/organisers - disallowance of interest for diversion of funds where non-interest bearing funds cover advances - business genuineness of expenditure and limits of assessing officer's judgment under section 40A(2)(b) - assessment of preservation/cold-storage charges as revenue expenditure

Taxability of commission to non-resident agents - obligation to deduct tax at source under section 195 where payments are not taxable in India - scope of fees for technical services under section 9(1)(vii) - Deletion of addition of commission paid to foreign agents for non-deduction of TDS under section 195. - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that commission paid to overseas agents for procuring export orders was not taxable in India as fees for technical, managerial or consultancy services and therefore did not attract withholding under section 195. Reliance was placed on the authoritative view of the Delhi High Court that such commission payments do not fall within section 9(1)(vii). The Assessing Officer's invocation of the Transmission Corporation principle was found inapplicable on facts and documentary evidence furnished by the assessee substantiating genuineness and mode of payment via banking channels. Consequently the disallowance under section 40(a)(i) based on non-deduction of TDS was not sustained. [Paras 8]

Addition of Rs. 80,32,863/- disallowed by the AO was deleted and ground No.1 rejected.

Treatment of participation/ export promotion charges paid to non-residents - application of administrative circulars in determining taxability of payments to agents/organisers - Deletion of disallowance of export promotion/participation charges claimed without deduction of TDS, except as adjusted in accordance with applicable administrative guidance. - HELD THAT: - The CIT(A) accepted that participation charges paid to organisations outside India (without a PE in India) were not covered by section 9 and hence not subject to withholding under section 195. One payment to an agent (M/s Comnet Exhibitions Pvt. Ltd.) was treated as partly chargeable in view of CBDT guidance, and 20% of that payment was held taxable in India while the balance was allowed. On this basis the AO's complete disallowance was not sustained and most of the claimed amount was restored. [Paras 11]

Addition of Rs. 13,94,547/- (out of Rs. 14,90,547/-) deleted; ground No.2 rejected.

Disallowance of interest for diversion of funds - use of non-interest bearing funds to cover advances - Deletion of disallowance of interest on the ground of alleged diversion of funds to partners' properties. - HELD THAT: - The CIT(A) found that advances for purchase of properties were covered by the assessee's substantial non-interest bearing funds, and that interest-bearing funds had been applied to stock and sundry debtors. The Revenue failed to controvert these factual findings with evidence. In view of the documentary material and the CIT(A)'s appraisal that interest-free funds adequately covered the advances, the AO's disallowance of interest was reversed. [Paras 15]

Addition of Rs. 13,91,753/- towards disallowed interest deleted; ground No.3 rejected.

Business genuineness of expenditure and limits of assessing officer's judgment under section 40A(2)(b) - assessment of preservation/cold-storage charges as revenue expenditure - Deletion of disallowance of preservation (cold-storage) charges treated by the AO as excessive under section 40A(2)(b). - HELD THAT: - The CIT(A) accepted the assessee's explanation and documentary evidence that additional cold storage chambers were hired due to increased closing stock and higher processing at a particular location, and that preservation of perishable goods is dictated by stock/operational considerations rather than turnover. The Tribunal found no basis to substitute the AO's business judgment where the assessee had justified the commercial necessity for additional storage; accordingly the AO's finding of non-business consideration was not upheld. [Paras 19]

Addition of Rs. 72,00,000/- on account of preservation charges deleted; ground No.4 rejected.

Final Conclusion: All four grounds advanced by the Revenue were dismissed: the Tribunal sustained the CIT(A)'s deletions of the additions relating to commission to foreign agents, export promotion charges (subject to a limited adjustment for one agent), interest disallowance, and preservation charges, and accordingly the Revenue's appeal is dismissed.

Bar on continuation of proceedings during Corporate Insolvency Resolution Process - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - overriding effect of section 238 of the Insolvency and Bankruptcy Code, 2016 - maintainability of revenue appeals during moratorium

Bar on continuation of proceedings during Corporate Insolvency Resolution Process - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - maintainability of revenue appeals during moratorium - Whether the revenue appeal could be proceeded with in view of the NCLT order declaring moratorium and liquidation of the assessee-company under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal recorded that the NCLT had ordered moratorium w.e.f. 03.10.2020 under section 14 of the Insolvency and Bankruptcy Code, 2016, which prohibits institution or continuation of suits or proceedings against the company, including execution of any judgment, decree or order. Applying the principle that section 238 of the IBC gives the Code overriding effect over inconsistent provisions of other enactments, the Tribunal noted that the moratorium extends to appeals by the Income Tax Department against orders of lower authorities in respect of a corporate debtor undergoing CIRP, as upheld by the Supreme Court in the cited authority. In light of the moratorium and the overriding effect of the IBC, the Tribunal concluded that no useful purpose would be served by continuing the present revenue appeal and therefore it was not maintainable while the moratorium remains in force. The Tribunal, however, granted the revenue liberty to pursue remedial measures in accordance with law when it is in a position to justify continuation of proceedings or where necessary in the interest of the parties.

The revenue appeal is dismissed in limine on account of the IBC moratorium; liberty granted to the revenue to seek remedies in accordance with law.

Final Conclusion: The appeal by the Revenue was dismissed in limine because the NCLT-imposed moratorium under the Insolvency and Bankruptcy Code, 2016 bars continuation of proceedings against the corporate debtor; the Revenue is granted liberty to take remedial steps in accordance with law when permissible.

Revisional jurisdiction under section 263 of the Income-tax Act - deduction under section 80P(2)(d) of the Income-tax Act - interest income from investments with co-operative banks - co-operative bank as a co-operative society for the purposes of section 80P - coordinate bench precedent

Revisional jurisdiction under section 263 of the Income-tax Act - coordinate bench precedent - Validity of the Principal Commissioner of Income-tax's exercise of revisional jurisdiction under section 263 in setting aside the assessing officer's order. - HELD THAT: - The Tribunal examined whether the PCIT was justified in holding the assessment under section 143(3) to be erroneous and prejudicial to revenue and in setting it aside under section 263. The Tribunal observed that the Assessing Officer had taken a possible view in allowing deduction under section 80P(2)(d) in respect of interest income from co-operative banks and that this view was supported by precedents of the jurisdictional Tribunal. As the AO's view fell within a tenable interpretation and was consistent with coordinate bench decisions, the PCIT's revisional action to dislodge that view was not justified. The Tribunal therefore concluded that the exercise of revisional jurisdiction was in error and quashed the PCIT's order, restoring the assessment passed by the AO.

The PCIT's order under section 263 is quashed and the assessing officer's order under section 143(3) is restored.

Deduction under section 80P(2)(d) of the Income-tax Act - interest income from investments with co-operative banks - co-operative bank as a co-operative society for the purposes of section 80P - coordinate bench precedent - Whether interest income earned by the assessee from investments with co-operative banks is eligible for deduction under section 80P(2)(d). - HELD THAT: - The Tribunal considered the statutory language of section 80P(2)(d) and the definition of "co-operative society," and relied on a series of coordinate-bench decisions holding that interest received by a co-operative society on deposits with co-operative banks is deductible under section 80P(2)(d). While recognizing that an amendment excluded co-operative banks from claiming section 80P in certain respects, the Tribunal held that a co-operative bank nevertheless remains a "co-operative society" under the statutory definition; accordingly, where a co-operative society derives interest from investments with a co-operative bank, such income falls within the scope of section 80P(2)(d). The Tribunal distinguished the reliance placed by the PCIT on Totgars as not determinative of section 80P(2)(d) in the present context and followed the coordinate-bench jurisprudence favouring the assessee.

Interest income from investments with co-operative banks is eligible for deduction under section 80P(2)(d); the AO's allowance on this ground is acceptable.

Final Conclusion: Appeal allowed; the order passed by the Principal Commissioner under section 263 is quashed and the assessment order passed by the Assessing Officer under section 143(3) is restored for A.Y. 2018-19, the assessee's claim of deduction under section 80P(2)(d) in respect of interest from co-operative banks being sustained.

Characterisation of income as business profits - application of Article 7 (Business Profits) of the India USA DTAA - permanent establishment (PE) requirement under the DTAA - taxability in absence of PE - residual category of "other income" under Article 23 of the India USA DTAA - attributes of business connection (regularity, continuity, frequency, volume) - source rule under section 5(2) of the Income tax Act

Characterisation of income as business profits - application of Article 7 (Business Profits) of the India USA DTAA - permanent establishment (PE) requirement under the DTAA - taxability in absence of PE - residual category of "other income" under Article 23 of the India USA DTAA - attributes of business connection (regularity, continuity, frequency, volume) - Impugned receipts from the Indian customer are business profits and not taxable in India in the absence of a permanent establishment of the assessee in India - HELD THAT: - The Tribunal held that Article 7(7) of the India USA DTAA defines "business profits" to include income from furnishing of services (other than specified included services) and that the assessee indisputably carried on a business of talent booking agency services. The Assessing Officer erred in applying the domestic notions of business connection attributes (regularity, continuity, frequency, volume) to exclude the receipts from being business profits under Article 7. Those attributes are relevant to establishing a business connection or PE in the source State but do not alter the statutory definition of business profits under the DTAA. As there was no finding or material to establish a PE of the assessee in India, the business profits received from the Indian payer are not taxable in India under Article 7. Article 23 (other income) applies only to items not dealt with by other Articles of the DTAA; because the receipts fall within Article 7, they cannot be re characterised into the residual Article 23 for taxation in India. [Paras 7]

Impugned receipts are business profits and not chargeable to tax in India in the absence of a PE; grounds 1, 3, 4 and 5 allowed in favour of the assessee

Final Conclusion: The appeal is allowed: the Tribunal set aside the assessment to the extent the AO taxed the receipts as "other income", holding the receipts to be business profits not taxable in India in absence of a permanent establishment; consequential grounds were accordingly treated as such.

Failure to disclose cause of action - benami transaction - prohibition on suit to enforce rights - fiduciary capacity exception to benami - effect of section 14 of the Hindu Succession Act - woman as full owner - limitation for cancellation of instrument under Article 59

Failure to disclose cause of action - The plaint does not disclose a cause of action requiring trial. - HELD THAT: - The plaint admits that the registered sale deed of 27.03.1992 vests title in defendant No.2 and contains no averment explaining when or how partnership funds were paid for the purchase; it in fact alleges monies were routed through third parties and that ultimately defendant No.2 paid for the property. There is no pleading showing any restriction in the sale deed on defendant No.2's ownership. On a demurrer (Order VII Rule 11 CPC) the court must accept plaint averments but cannot ignore that those averments, taken as a whole, establish sole title in defendant No.2 and fail to make out a legal character or right in favour of the plaintiffs entitling them to declaration, cancellation or partition of the subject property. The plaintiffs' contention that defendant No.2 was bound by a family settlement is not supported by any averment that she was a party or signatory to that settlement. The court therefore finds no cause of action disclosed by the plaint. [Paras 15, 16]

Plaint rejected for failure to disclose a cause of action.

Benami transaction - prohibition on suit to enforce rights - fiduciary capacity exception to benami - The claim to the property is barred by the Benami Transactions Act and the plaint fails to plead facts bringing the defendant within the statutory fiduciary exception. - HELD THAT: - The plaintiffs' own averment (para 8) that funds of the partnership were routed through third parties and that defendant No.2 ultimately paid for the property is precisely the kind of transaction that section 4 of the Benami Transactions Act seeks to prohibit; such an averment, even on demurrer, negates a legally cognisable claim by the funder against the registered holder. Further, the plaint contains no allegation that defendant No.2 was a partner or otherwise stood in the requisite fiduciary relationship contemplated by the exception in section 2(9)(A)(ii) - the mere fact that she is the wife of a partner does not make her a partner or automatically place her in fiduciary capacity. Section 5 of the Partnership Act underlines that partnership is contractual and not created by status. Given the absence of pleadings to establish fiduciary status or that the defendant falls within any statutory exception, the plaintiffs' claim is barred by the Benami Transactions Act. [Paras 15]

Claim barred by Benami Transactions Act; fiduciary-exception not pleaded.

Effect of section 14 of the Hindu Succession Act - woman as full owner - Section 14 of the Hindu Succession Act supports that defendant No.2 is the full owner of the property and the plaint contains no averments to displace that statutory presumption. - HELD THAT: - The plaint admits title in defendant No.2 under a registered sale deed and contains no allegation that the instrument imposes any restriction on her ownership. Section 14 presumes that a female Hindu who acquires property holds it as full owner; absent pleadings establishing that the property was not acquired for her benefit or that the transaction was benami, the legal effect of section 14 applies. The plaintiffs' general assertions do not suffice to rebut the statutory presumption at the demurrer stage. [Paras 15]

Defendant No.2 is prima facie the full owner; plaintiffs have not pleaded facts to displace section 14 presumption.

Limitation for cancellation of instrument under Article 59 - The prayer for cancellation of the 1992 sale deed is barred by limitation under Article 59, and the plaint does not plead facts to postpone or exclude the commencement of limitation. - HELD THAT: - The sale deed was executed on 27.03.1992 and the written family settlement relied upon was signed in February 2013; the suit was filed on 10.09.2018. Article 59 prescribes a three-year period for cancellation actions from the date facts entitling the plaintiff to cancel became known. The plaint does not aver any fact showing a later date of knowledge or any legal disability that would suspend limitation. As held in Renu Khullar, once limitation begins it does not stop and the plaintiffs' failure to plead facts to keep the claim within time is fatal. Consequently, the cancellation claim is time-barred. [Paras 15]

Cancellation claim barred by limitation; plaint fails to plead any grounds to exclude or extend limitation.

Final Conclusion: The application under Order VII Rule 11 CPC is allowed; the plaint in CS(OS) No. 486/2018 is rejected as it fails to disclose any cause of action and the reliefs claimed are barred by law (Benami Transactions Act, section 14 of the Hindu Succession Act and limitation under Article 59).

Power to search distinct from power to seize - Power to seize only when goods are liable to confiscation under the statute - Confiscation of conveyances when "used as a means of transport" in smuggling - Apprehended future use of a vehicle does not attract confiscation or seizure - Penal provisions to be strictly construed - Exercise of writ jurisdiction despite availability of alternative remedy

Power to search distinct from power to seize - Power to seize only when goods are liable to confiscation under the statute - Confiscation of conveyances when "used as a means of transport" in smuggling - Apprehended future use of a vehicle does not attract confiscation or seizure - Penal provisions to be strictly construed - Legality of seizure of the petitioner's vehicle on the apprehension that it might be used in future for transporting smuggled goods. - HELD THAT: - The Court held that the power to search a vehicle under the Act is distinct from the power to seize. Seizure powers arise only when the officer has reason to believe that goods are liable to confiscation; 'goods' expressly includes vehicles. Confiscation of conveyances under the statutory scheme applies where a conveyance is or has been constructed, adapted or actually used as a means of transport in the smuggling of goods, or is being so used. The phrase "used as a means of transport" bears its ordinary meaning and, in the context of a penal provision, must be strictly construed to refer to past or present use, not to a mere apprehension of future use. Allowing seizure on the basis of possible future use would confer an unbridled and arbitrary power, offend principles of legality and equal protection, and is therefore impermissible. Consequently, seizure of a vehicle on the ground of apprehended future use for smuggling is illegal. [Paras 12, 13, 14, 15, 16]

The seizure of the vehicle on the basis of apprehended future use was illegal and the vehicle must be released.

Exercise of writ jurisdiction despite availability of alternative remedy - Whether the High Court should exercise jurisdiction under Article 226 instead of relegating the petitioner to adjudication under section 122 of the Act. - HELD THAT: - The Court observed that the rule of availability of alternative remedies is a discretionary one. Having considered the admitted facts and the legal question-whether a vehicle may be seized for apprehended future use-the Court exercised its discretion to entertain the writ petition so as to finally resolve the legal controversy rather than remitting the petitioner to the statutory adjudicatory remedy under section 122. [Paras 7]

Writ jurisdiction was appropriately exercised and the petition entertained despite the existence of the alternate statutory remedy.

Final Conclusion: Writ petition allowed: the vehicle seized on the basis of apprehended future use for smuggling is unlawfully detained and must be released; the High Court rightly exercised its Article 226 jurisdiction to decide the legal issue.

Power under Section 105 of the Customs Act to search - power to seal premises - search limited to goods liable to confiscation and documents relevant to proceedings - drastic interference with property rights - Article 300A - right to carry on business under Section 19(1)(g)

Power under Section 105 of the Customs Act to search - power to seal premises - search limited to goods liable to confiscation and documents relevant to proceedings - Whether the powers conferred by Section 105 of the Customs Act, 1962 authorise customs officers to seal the petitioner's premises. - HELD THAT: - The court held that the statutory power to search under Section 105 must be understood as confined to locating goods liable to confiscation and documents relevant to proceedings and does not, by necessary implication, include an express power to seal premises. Sealing is characterised as a drastic step affecting substantive rights; therefore such a power must be expressly conferred by law and cannot be read into the search power. The court relied on the Supreme Court's exposition of Section 105, which emphasises that searches must be targeted to the two categories specified and that safeguards and controls exist to prevent abuse. The respondents did not cite any authority or statutory provision vesting them with the power to seal, and the record did not show that the premises were unavailable for search prior to the sealing. Accordingly, the action of sealing could not be justified under Section 105. [Paras 6, 7, 8, 9]

Section 105 does not authorise sealing of the petitioner's premises; sealing is a drastic power which must be expressly provided by law and cannot be exercised under the search power alone.

Drastic interference with property rights - Article 300A - right to carry on business under Section 19(1)(g) - search limited to goods liable to confiscation and documents relevant to proceedings - What immediate relief should be granted in respect of the sealed office premises and the scope of any subsequent search. - HELD THAT: - Recognising that sealing affects the petitioner's proprietary and business rights (described as engaging Article 300A and the right to carry on business under Section 19(1)(g) in the judgment), and noting the petitioner's expressed willingness to cooperate, the court directed that the premises be unsealed and that any search be conducted in the presence of the petitioner's representatives. The court emphasised that the search must be confined to material relevant to the investigation - i.e., documents and goods connected to the transactions under inquiry - and not be a fishing expedition into unrelated transactions. The order preserved all contentions of the parties regarding the search and any further lawful actions the respondents may take. [Paras 8, 9, 10, 11]

Customs officers were directed to unseal the petitioner's premises and, in the presence of the petitioner's representatives, conduct a search confined to relevant material; all other contentions and lawful remedies of the parties were kept open.

Final Conclusion: The petition succeeds insofar as the court holds that Section 105 empowers search but not sealing of premises; the court directed immediate unsealing and a limited, supervised search in the presence of the petitioner's representatives, while keeping open all other legal contentions and remedies.

Precedent of Tribunal binding on revenue - Provisional release of imported goods on bank guarantee - Proportionate fixation of bank guarantee - Show cause notice not a valid ground to enhance bank guarantee

Precedent of Tribunal binding on revenue - Provisional release of imported goods on bank guarantee - Proportionate fixation of bank guarantee - Whether the bank guarantee/ cash security fixed for provisional release should be reduced by applying the Tribunal's earlier order in the appellant's own case. - HELD THAT: - The Tribunal noted that in its earlier final order dated 11.11.2022 in the appellant's own proceedings the bank guarantee for provisional release of identical imported goods valued at Rs. 4.08 Crores had been fixed at Rs. One Crore and that the Revenue had accepted that order. The present matter involves the same dispute and identical facts except for the port of import. Applying the ratio of the earlier order, the Tribunal held that a proportionate bank guarantee must be fixed in the present case. The Tribunal calculated the proportionate amount against the present consign ment value of Rs. 72,22,361/- and concluded that a bank guarantee of Rs. 18 Lakhs is appropriate. The Tribunal rejected the Revenue's contention that issuance of a show cause notice in the present case (whereas none was issued in the earlier case) constituted a material distinction warranting enhancement of the guarantee, holding that a show cause notice being merely a proposal does not render the facts different for this purpose. For these reasons the impugned order fixing a higher amount was held to be unsustainable and was modified accordingly. [Paras 4, 5, 6]

Goods to be provisionally released on execution of bond for total value and on furnishing a bank guarantee/ cash security of Rs. 18 Lakh; impugned order modified and appeal allowed to that extent.

Final Conclusion: The Tribunal allowed the appeal in part, modifying the impugned order to direct provisional release of the goods on bond and a reduced bank guarantee/ cash security of Rs. 18 Lakh, applying the ratio of the Tribunal's earlier order in the appellant's own case.

Permissible export of ship stores - stores to be free of export duty - duty-free export of stores determined by proper officer - applicability of export prohibition under DGFT to ship stores - revocation of ship chandler permission - penalty for contravention of Customs Act

Permissible export of ship stores - stores to be free of export duty - duty-free export of stores determined by proper officer - applicability of export prohibition under DGFT to ship stores - Lawful export of 3 ply non-woven masks as ship stores and applicability of DGFT export prohibition - HELD THAT: - The Tribunal held that the goods in question were exported as ship stores and the export procedures for ship stores laid down in the Trade Facility Notice were followed by the appellant, including filing a Manual Shipping Bill and obtaining requisite permissions. The Embassy of the Philippines confirmed the goods were a donation to the Philippine Government. Section 89 (stores to be free of export duty) requires the proper officer to determine permissible quantities having regard to vessel size, passengers/crew and voyage length; that determination is a duty of the customs authorities. Given that the appellant complied with the ship stores procedure and obtained permissions, the DGFT export prohibition notifications were not relevant to exempt ship stores so as to sustain a charge of unlawful export by the appellant. The Tribunal therefore found no breach by the appellant of the Customs Act in exporting the masks as ship stores. [Paras 6, 7]

Export of the masks as ship stores was lawful and the DGFT prohibition did not render the appellant's actions unlawful.

Revocation of ship chandler permission - penalty for contravention of Customs Act - Validity of revocation of ship chandler permission and imposition of penalty - HELD THAT: - The Commissioner had revoked the appellant's permission to operate as a ship chandler and imposed a penalty on the basis that the quantity exported exceeded what should have been permitted under Section 89 and that the appellant failed in his duty. The Tribunal found that the appellant had followed prescribed procedures, obtained permissions, and produced records signed by jurisdictional officers; there was no allegation in the impugned order of a substantive breach by the appellant of Customs provisions. As the departmental determination and verification of permissible quantity was a function of the proper officer and the appellant had complied with formalities, the revocation and penalty could not be sustained. [Paras 3, 7]

Revocation of permission and the penalty imposed on the appellant are unwarranted and are set aside.

Final Conclusion: The impugned order is set aside; the appeal is allowed.

Penalty under Section 112(b)(i) of the Customs Act - confiscation under Section 111 and Section 115 of the Customs Act - retracted statements and requirement of corroboration - requirement of cross examination under Section 138B of the Customs Act - admissibility of electronic evidence and certificate under Section 138C of the Customs Act - presumption under Section 123 of the Customs Act - onus to prove licit possession - principles of natural justice in adjudicatory procedure

Penalty under Section 112(b)(i) of the Customs Act - retracted statements and requirement of corroboration - requirement of cross examination under Section 138B of the Customs Act - onus to prove licit possession - presumption under Section 123 of the Customs Act - Validity of imposition of penalty on the appellant under Section 112(b)(i) of the Customs Act - HELD THAT: - The Tribunal found that the revenue's case against the appellant rested primarily on statements recorded from the appellant and co noticees which were retracted at the first opportunity when produced before the magistrate. In these circumstances the adjudicating authority was obliged to test those statements by calling and examining witnesses in adjudication proceedings as contemplated by Section 138B; the revenue did not do so. The record also failed to establish that the appellant was in possession of the seized gold, had claimed ownership of it, or had the requisite knowledge or belief that the goods were liable to confiscation. Allegations that the appellant provided the vehicle or paid rent for accommodation used by carriers were not established on the material before the authority. The Tribunal further held that the presumption under Section 123 does not apply to the appellant because the gold was not seized from his possession nor was it claimed by him. Having regard to these deficiencies and absence of independent corroborative material, the ingredients of Section 112(b)(i) were not made out against the appellant and the penalty could not be sustained. [Paras 34, 35]

Penalty imposed on the appellant under Section 112(b)(i) set aside.

Admissibility of electronic evidence and certificate under Section 138C of the Customs Act - principles of natural justice in adjudicatory procedure - Reliability of electronic evidence and procedural compliance in retrieval/usage of mobile data - HELD THAT: - The Tribunal held that forensic retrieval and reliance on whatsapp chats/photographs required compliance with the safeguards in Section 138C and that no proper panchnama or statutory certificate was placed on record in respect of the mobile data. The Tribunal also noted deficiencies in notice and procedure at the stage of extracting data from phones, and observed that such procedural irregularities, together with the failure to test retracted statements, undermined the evidentiary value of the electronic material relied upon by the revenue. [Paras 34]

Electronic evidence relied upon by the revenue could not be given due weight for want of compliance with Section 138C and attendant procedural safeguards.

Confiscation under Section 111 and Section 115 of the Customs Act - onus to prove licit possession - Return of three silver bars seized from the appellant's premises and related confiscation issue - HELD THAT: - The Tribunal accepted that the three metal bars recovered from the appellant's premises were silver obtained in the normal course of business and that invoices for the underlying purchases had been produced. The Tribunal found that the revenue had not established that those silver bars were smuggled or liable to confiscation and that procedural and substantive deficiencies existed in the adjudication. Consequently the confiscation of the silver bars could not be sustained. [Paras 35]

Confiscation of the three silver bars set aside and revenue directed to return them (or if already sold, to disburse sale proceeds with interest).

Final Conclusion: The appeal is allowed in part: the penalty imposed on the appellant under Section 112(b)(i) of the Customs Act is quashed and the confiscation of the three silver bars is set aside with directions for their return (or payment of sale proceeds with interest if already sold). The Tribunal relied on retraction of statements, failure to comply with Sections 138B/138C and absence of proof of possession/knowledge to reach this conclusion.

Penalty under the Customs Act, 1962 - illicit import and sale of gold (smuggling) - burden of proof and requirement of corroborative evidence - quashing of penalty for lack of admissible evidence - adjudication and appellate review of penalty orders

Penalty under the Customs Act, 1962 - burden of proof and requirement of corroborative evidence - quashing of penalty for lack of admissible evidence - Whether the penalty imposed on the appellant for alleged purchase of smuggled gold is sustainable in absence of admissible and corroborative evidence linking the appellant to the smuggling transaction. - HELD THAT: - The Court noted that two foreign nationals admitted bringing gold into India by illicit means and stated that they sold the gold to Shri Ravinder Suri, who in turn was alleged to have sold gold to the appellant. However, the appellant did not admit purchase and there is no independent or corroborative evidence on record establishing that the appellant purchased smuggled gold. The adjudicating authority and the Commissioner (Appeals) imposed and affirmed a penalty under the Customs Act, but the Tribunal held that, having regard to the admitted statements of the two visitors and the absence of any direct evidence connecting the appellant with the illicit import or sale, the statutory requirement of proof to sustain a penalty was not met. On this basis, the Tribunal set aside the penalty imposed on the appellant. [Paras 5, 6]

Penalty imposed on the appellant is set aside for want of corroborative evidence; appeal allowed with consequential benefits.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under the Customs Act, 1962 on the appellant due to absence of corroborative evidence linking him to the smuggled gold, and granted consequential relief.

Condonation of delay - sufficient cause - power of Commissioner (Appeals) to condone delay up to thirty days beyond sixty days - affidavit as acceptable explanation for delay in absence of contemporaneous medical records - doctrine preferring substantial justice over technical rejection for delay - remand for adjudication on merits

Condonation of delay - sufficient cause - affidavit as acceptable explanation for delay in absence of contemporaneous medical records - power of Commissioner (Appeals) to condone delay up to thirty days beyond sixty days - doctrine preferring substantial justice over technical rejection for delay - remand for adjudication on merits - Delay of eighteen days in filing the appeal is to be condoned and the appeal is remanded to Commissioner (Appeals) for adjudication on merits. - HELD THAT: - The Tribunal examined the appellant's explanation that ill health while visiting his village prevented timely return to sign and file the appeal papers and noted that the appellant furnished an affidavit supporting this account. Although no contemporaneous medical records were produced, the Tribunal accepted that absence of such documents could be reasonably explained where medical aid in a village may be limited. The Tribunal observed that the Commissioner (Appeals) had statutory power to condone delay for a period of thirty days beyond the initial sixty days, and the appeal was filed within that extended period. Applying the justice-oriented approach articulated in the quoted authorities - that delay need not be judged pedantically and substantial justice should prevail over technical rejection - the Tribunal found sufficient cause to condone the short delay. While noting that the Commissioner (Appeals) gave reasons for refusing condonation and that the Singh Enterprises decision was available to the department, the Tribunal considered the appellant's affidavit and directed that the appeal be decided on merits; accordingly the matter was remanded to Commissioner (Appeals) for fresh adjudication on merits. [Paras 5, 6, 7]

Delay of eighteen days is condoned and the matter is remanded to Commissioner (Appeals) to decide the appeal on merits.

Final Conclusion: The appeal is allowed by way of remand: the short delay of eighteen days is condoned and the appeal is sent back to Commissioner (Appeals) for adjudication on merits.

Power of SEBI to direct persons referred to in Section 12 irrespective of registration - Scope and effect of orders under Sections 11(4), 11B and 11D of the SEBI Act and Regulation 35 - Distinction between an administrative communication and a quasi judicial order (order v. email) - Non obstante provision in Section 35 of the SARFAESI Act and the Section 37 saving (harmonisation / carve out) - Priority of secured creditors under Section 26E of the SARFAESI Act and Section 31B of the RDB Act - Maintainability of writ petition vis a vis alternative statutory remedy under Section 15T

Power of SEBI to direct persons referred to in Section 12 irrespective of registration - Scope and effect of orders under Sections 11(4), 11B and 11D of the SEBI Act - Whether SEBI has power to issue directions to banks and to persons/classes mentioned in Section 12 even if not registered under Section 12. - HELD THAT: - The court construed Section 11B(1)(iii)(a) and the definitional scheme in the SEBI Act and Regulations to hold that the phrase 'person or class of persons referred to in Section 12' is not qualified by registration. The plain textual meaning must be given effect to; references in other provisions to 'registered' persons are made where intended. Regulation 35 and Section 11B confer broad, incidental powers necessary for SEBI to protect investors and the securities market, including directions to banks and other constituents. However, the exercise of those powers must be cautious and not used to curtail the effect of other laws. [Paras 61, 67, 74]

SEBI is vested with legal power to direct banks and persons/classes referred to in Section 12 irrespective of registration, subject to due caution and respect for other statutes.

Scope and effect of orders under Sections 11(4), 11B and 11D of the SEBI Act and Regulation 35 - Distinction between entities and persons in the SEBI directions - Whether the SEBI orders dated 29.05.2018 and 14.12.2018 prevent the petitioner bank from alienating the mortgaged property belonging to the borrowers. - HELD THAT: - The Court examined the operative paragraphs of the SEBI orders and identified three categories of directions: (i) directions to specified persons/entities; (ii) directions to market connected bodies (depositories, RTAs); and (iii) directions to broader persons/entities including banks. The orders distinguish between 'entities' (companies) and 'persons' (individuals). Paragraph 27(e) and related directions restrict assets of the named 'entities' and the depositories/stock exchange measures; paragraph 27(h) restricts debits from specified bank accounts. The mortgaged property belongs to the individual borrowers (persons), not the 'entities' addressed in paragraph 27(e), and nothing in the confirmatory or final order expressly bars the petitioner bank from enforcing its SARFAESI rights over that mortgage. [Paras 78, 85, 95, 98]

Although the SEBI orders apply to the petitioner bank in general, their precise wording does not prevent the bank from auctioning the mortgaged property under the SARFAESI Act.

Distinction between an administrative communication and a quasi judicial order (order v. email) - Nature and legal effect of communications sent by SEBI officials - Whether the impugned e mails dated 29.01.2021 and 18.03.2021 amount to quasi judicial orders binding the petitioner bank. - HELD THAT: - Applying the tests for quasi judicial character (legal authority, determination of rights, duty to act judicially) and the principle that substance prevails over form, the Court held the e mails to be communicative/advisory. The 29.01.2021 message informed the bank of the existing orders and advised compliance; the 18.03.2021 email asserted (erroneously) that the orders operate in rem and advised the bank not to proceed. The communications lacked the requisites of an order and expanded the scope of the SEBI orders beyond their terms. [Paras 106, 108, 113]

The impugned e mails are communicative in nature, erroneous and wholly without jurisdiction; they do not constitute quasi judicial orders binding the petitioner bank.

Maintainability of writ petition vis a vis alternative statutory remedy under Section 15T - Person aggrieved and locus to challenge SEBI communications - Whether the writ petition challenging the impugned e mails is maintainable despite the availability of appeal under Section 15T against SEBI orders. - HELD THAT: - The Court distinguished challenge to the SEBI orders (which the bank did not impugn) from challenge to the separate impugned communications. Since the petitioner bank was not aggrieved by the SEBI orders (they did not prevent auction) but was directly affected by the emails which unlawfully interfered with its SARFAESI rights, the statutory appeal mechanism did not render the writ petition incapable of being maintained. The Court noted settled principles that availability of alternative remedy bears on entertainability not absolute maintainability, and exceptions exist where actions are wholly without jurisdiction or natural justice is violated. [Paras 114, 124, 138]

The writ petition is maintainable; the petitioner was the right person seeking the right remedy against the impugned communications.

Non obstante provision in Section 35 of the SARFAESI Act and the Section 37 saving (harmonisation / carve out) - Harmonisation of special and general statutes - Whether proceedings/actions under the SARFAESI Act are affected or overridden by orders under the SEBI Act, i.e., the interplay of Section 35 (non obstante) and Section 37 (not in derogation) of SARFAESI. - HELD THAT: - After a textual and purposive analysis, the Court found the non obstante clause in Section 35 to be unfettered (not made subject to Section 37), and therefore the SARFAESI regime constitutes a specific statutory code to enable swift realisation of secured assets. The object and mischief addressed by SARFAESI - expedited enforcement of security without court intervention - support giving effect to SARFAESI proceedings as a carve out. Harmonious construction requires that SARFAESI's specific scheme be given primacy in its field so that SEBI directions, which operate in a different regulatory sphere, should not thwart the statutory scheme of secured creditor realisation. [Paras 158, 183, 205]

Proceedings under the SARFAESI Act are to be treated as a carve out and remain unaffected by SEBI orders/directions to the extent they conflict with the SARFAESI statutory scheme.

Priority of secured creditors under Section 26E of the SARFAESI Act and Section 31B of the RDB Act - Legislative intent to prioritise secured creditor recovery - Whether the statutory amendments creating priority to secured creditors (Section 26E SARFAESI; Section 31B RDB Act) support the bank's right to realise its security notwithstanding other claims. - HELD THAT: - The Court examined the 2016 amendments and their statements of objects and reasons, and concluded they evidence Parliament's intent to prioritise secured creditors' rights to realise secured debts over other debts and government dues, subject to insolvency law. The amendments aim to protect efficient recovery and ease of doing business by safeguarding bank enforcement of registered security interests. [Paras 199, 202, 204]

The legislative scheme recognises priority for secured creditors, reinforcing that banks' SARFAESI enforcement of registered securities is to be given primacy over competing claims.

Final Conclusion: SEBI possesses power to direct banks and relevant persons, but the impugned SEBI orders (29.05.2018 and 14.12.2018) do not, by their terms, prevent the petitioner bank from auctioning the mortgaged property under the SARFAESI Act. The impugned e mails of 29.01.2021 and 18.03.2021 were communicative, erroneously expanded the scope of the SEBI orders and are wholly without jurisdiction. Proceedings under the SARFAESI Act operate as a carve out and secured creditors enjoy statutory priority; the writ petition is accordingly maintainable and is disposed of in the petitioner's favour on these terms.

Preliminary enquiry - cognizable offence - investigation by specialised agency - non-reconciliation of accounts and inventory - duty to provide access to records - oversight of Resolution Professional

Preliminary enquiry - non-reconciliation of accounts and inventory - oversight of Resolution Professional - CBI to conduct a preliminary enquiry into the complaint dated 13.08.2021 and the representation dated 19.01.2022, and to take into consideration the Liquidator's communication dated 01.03.2022. - HELD THAT: - The Court found that although prior complaints against the Resolution Professional had been considered by IBBI, fresh material disclosed by the Liquidator-specifically, the alleged unreconciled shortage in inventory and account balances running to large figures-warrants investigation by a specialised agency. The matter cannot be left solely to IBBI/IBBI oversight in view of the fresh disclosures and the Liquidator's inability to reconcile accounts despite seeking explanations. For effective probe, the CBI is directed to undertake a preliminary enquiry into the earlier complaint and representation and may have regard to the Liquidator's communication of 01.03.2022 while doing so. [Paras 7, 9]

The CBI is directed to conduct a preliminary enquiry into the complaint and representation, with power to consider the Liquidator's communication.

Cognizable offence - investigation by specialised agency - If the CBI's preliminary enquiry discloses a cognizable offence, the agency is to register a case and proceed in accordance with law. - HELD THAT: - The Court authorised the CBI to convert the preliminary enquiry into formal criminal proceedings if the enquiry establishes that a cognizable offence has been committed. This direction contemplates that the CBI, on finding requisite material during preliminary inquiry, shall register an FIR and continue investigation pursuant to statutory procedure. [Paras 9]

On a finding of a cognizable offence during the preliminary enquiry, CBI shall register a case and proceed according to law.

Duty to provide access to records - oversight of Resolution Professional - Relevant parties and persons in possession of SLO Industries' accounts and records shall grant access to the investigating officer for the purposes of the preliminary enquiry without demur or protest. - HELD THAT: - Recognising that the Liquidator and investigative agency may require access to company premises and accounts to verify the alleged discrepancies, the Court directed that if the investigating officer needs access to any account or records at SLO Industries' premises, the concerned parties must provide such access. This direction seeks to remove obstacles to fact-finding and ensure the preliminary enquiry can be effectively conducted. [Paras 9]

If required by the investigating officer, parties shall provide access to accounts and records at SLO Industries' premises without objection.

Final Conclusion: The petition is disposed of by directing the CBI to conduct a preliminary enquiry into the specified complaint and representation (and consider the Liquidator's communication); if a cognizable offence is disclosed, CBI shall register a case and proceed; and concerned parties must provide access to records to facilitate the enquiry.

Repeal and saving - non obstante clause - taking notice by adjudicating officer within limitation - cognizance by Court - construction of 'and' as 'or' - due care under Reserve Bank of India guidelines - concurrent findings of fact - standard of perversity - strict construction of fiscal statute

Repeal and saving - non obstante clause - taking notice by adjudicating officer within limitation - cognizance by Court - construction of 'and' as 'or' - strict construction of fiscal statute - Validity of proceedings initiated under the repealed Foreign Exchange Regulation Act, 1973 (FERA) after commencement of the Foreign Exchange Management Act, 1999 (FEMA) and interpretation of Section 49(3) of FEMA with reference to the time-limit for taking notice or cognizance. - HELD THAT: - Section 49 of FEMA contains a non obstante saving which repealed FERA but limited the period within which courts could take cognizance of offences and adjudicating officers could take notice of contraventions to two years from commencement. The adjudicating officers in these matters dated their memoranda May 31, 2002. Section 49(3) does not require completion of service on the noticee; it requires that the adjudicating officer take notice of the contravention within the prescribed period. The legislative scheme contemplates distinct and disjoint functions for adjudicating officers (civil/adjudication) and courts (criminal/cognizance) under FERA; they are not required to act simultaneously. Construing the conjunctive 'and' in Section 49(3) as requiring both court cognizance and adjudicating officer notice within the period would frustrate the scheme of FERA and produce anomalous results. Reading Section 49 with section 6 of the General Clauses Act and the other saving provisions (sub-sections (4) and (5)) shows that actions taken under FERA within the period continue to be operative insofar as they are not inconsistent with FEMA. The Department discharged its burden by producing memoranda dated May 31, 2002; the appellants did not rebut that evidence. Consequently, the adjudicating officers validly took notice within the limitation period and proceedings under FERA were not barred by the repeal. [Paras 34, 36, 37, 38, 39]

Proceedings initiated by adjudicating officers dated May 31, 2002 are valid under Section 49(3) of FEMA; the conjunctive requirement is to be read so as not to demand simultaneous court cognizance and adjudicating notice within the two-year period.

Due care under Reserve Bank of India guidelines - concurrent findings of fact - standard of perversity - Whether the adjudicating authorities' and Tribunal's factual findings that the appellants acted without due care and violated RBI guidelines in selling foreign currency were perverse. - HELD THAT: - The adjudicating officers and the Appellate Tribunal concurrently found that the appellants repeatedly sold foreign currency to persons sponsored by fictitious firms within a short period, failed to exercise reasonable care, and contravened RBI instructions. The High Court reviewed these concurrent findings and found no perversity: the factual record established the pattern of fictitious sponsorships and repeated releases in short intervals, and the appellants did not successfully rebut the findings. Precedents cited by appellants concerning limits of adjudication and liability where procedures were followed do not apply on these facts because the authorities found breach of RBI guidelines and lack of reasonable care. The appellate fact-findings were therefore sustainable. [Paras 40, 41, 42, 43, 44]

Concurrent findings that the appellants violated RBI guidelines and failed to exercise due care are not perverse; the appeals on factual merits fail.

Final Conclusion: All three appeals are dismissed on merits; the adjudication proceedings dated May 31, 2002 are validly initiated within the saving period under Section 49 of FEMA, and the concurrent factual findings of violation of RBI guidelines and lack of due care are upheld.

Deprivation of property without authority of law - insufficiency of corroborative evidence - retracted confessional statement - refund of seized cash with interest - hearing in absence and fair opportunity to be heard

Insufficiency of corroborative evidence - retracted confessional statement - Impugned appellate order could not be sustained where the enforcement proceedings rested on an uncorroborated statement later retracted and there was no material to prove receipt and distribution of the seized cash. - HELD THAT: - The Court examined the record of seizure and subsequent proceedings and held that the Appellate Tribunal had heavily relied upon statements recorded at the time of raid which the petitioner later retracted. The FERA Appellate Board earlier had set aside the penalty imposed under the first show cause notice on the ground that the retracted confessional statement lacked corroboration. There is nothing on the record to establish that the petitioner received foreign remittances and distributed the amounts as alleged; seized documents did not corroborate the asserted receipt and distribution. In these circumstances the impugned order, which sustained liability on essentially the same factual matrix, could not be sustained and resulted in unlawful deprivation of the petitioner's cash. [Paras 21, 27, 29, 30]

Impugned order set aside on merits for lack of corroborative evidence and reliance on a retracted statement.

Deprivation of property without authority of law - refund of seized cash with interest - Petitioner entitled to refund of the balance seized amount with interest where retention by authorities was not supported by lawful basis. - HELD THAT: - The Court concluded that the respondents could not lawfully retain the balance amount of the seized cash on the tenuous and uncorroborated allegations, and that the petitioner had been deprived of funds he was legitimately entitled to. Considering the injustice of retaining the amount over a prolonged period and the absence of lawful basis for such retention, the Court directed refund of the seized balance to the petitioner with simple interest at 6% per annum from the date of seizure. [Paras 31, 32]

Respondents directed to refund the balance amount to the petitioner with interest at 6% per annum from 12 May 1988 within four weeks.

Hearing in absence and fair opportunity to be heard - Proceeding and disposal of the appeal in the petitioner's absence, when he had communicated financial inability to attend, was a material circumstance contributing to unfairness of the impugned decision. - HELD THAT: - The petitioner, a small trader residing in Mumbai, informed the Tribunal of his inability to travel to Delhi for the hearing. The Appellate Tribunal proceeded to hear and dispose of the appeal in his absence. The Court noted this fact as part of the surrounding circumstances showing that the petitioner was not afforded an adequate opportunity to present his case, which reinforced the conclusion that retaining the seized amount lacked justification and that interference with the appellate order was warranted. [Paras 12, 15, 25, 31]

The impugned order, passed after hearing in the petitioner's absence despite his communicated inability to attend, was set aside as part of allowing the writ petition.

Final Conclusion: Writ petition allowed: the Appellate Tribunal's order dated 24.3.2004 is set aside and the respondent is directed to refund the balance of the seized cash to the petitioner with simple interest at 6% per annum from 12 May 1988, the refund to be made within four weeks.

Offence of money-laundering under Section 3 PMLA - Definition of "proceeds of crime" - Possession, acquisition or use as processes connected with proceeds of crime - Legal presumption under Section 24 PMLA - Prima facie case for trial and discharge standard

Offence of money-laundering under Section 3 PMLA - Definition of "proceeds of crime" - Possession, acquisition or use as processes connected with proceeds of crime - Prima facie case for trial and discharge standard - Whether, on the facts of the case, a prima facie case under Section 3 of the PMLA is made out against the petitioner so as to refuse discharge and proceed to trial. - HELD THAT: - The Court examined the statutory meaning of "proceeds of crime" and the processes or activities (concealment, possession, acquisition, use, projecting/claiming as untainted property) which attract the offence under Section 3. Applying those provisions to the material on record, the Court noted that a sum of alleged laundered money was transferred into the husband's account and part of those funds was used for purchase of a flat in the joint names of the petitioner and her husband. The petitioner was also a shareholder in the company whose share transfers were part of the fraudulent scheme. On that factual matrix the Court held that the altered form of the tainted money could be regarded as proceeds of crime and that the petitioner could prima facie be implicated for being involved in a process or activity connected with such proceeds (possession/acquisition/use/projecting as untainted property). Given these facts, the Court found that it could not be said that no prima facie case existed and that the petitioner could not be exonerated at the pre-trial discharge stage; the defence of lack of knowledge would have to be addressed at trial. [Paras 7, 8, 10, 11, 14]

Prima facie case under Section 3 PMLA is made out against the petitioner; discharge is refused and trial may proceed.

Legal presumption under Section 24 PMLA - Prima facie case for trial and discharge standard - Whether the legal presumption under Section 24 of the PMLA applies at the stage of considering discharge and its effect on the burden of proof. - HELD THAT: - The Court observed that even if the petitioner denies knowledge of the tainted origin of funds, once the material establishes involvement of proceeds of crime in the transaction (here, funds routed through the husband's account and applied to purchase an immovable property in joint names), Section 24 permits a presumption that such proceeds were involved in money laundering. The consequence is that the onus shifts to the accused to rebut that presumption during trial. In the present facts the Court held that this presumption could be applied for prima facie assessment and therefore the petitioner could not obtain discharge merely by asserting lack of knowledge prior to trial. [Paras 12, 13]

Section 24 presumption is attracted on the available material for prima facie purposes and the burden to rebut it lies on the petitioner at trial; discharge is not warranted on that basis.

Final Conclusion: The revisional applications are dismissed; the petitioner is not discharged and the trial before the Special Court shall proceed. No order as to costs.

Pre-deposit made during investigation - refund of pre-deposit - principle of unjust enrichment - non-attraction of refund provisions to deposits made under protest - entitlement to refund where demand set aside

Pre-deposit made during investigation - refund of pre-deposit - entitlement to refund where demand set aside - The nature of the amount of Rs. 2.37 crores deposited by the assessee and whether it is refundable following setting aside of the demand. - HELD THAT: - The Tribunal found that the sum deposited by the assessee during the course of inquiry was a deposit made under protest and was treated as a pre-deposit at the time of admission of the appeal. Having regard to settled precedents and board circulars cited in the judgment, amounts deposited during investigation or as pre-deposit are not governed by provisions relating to recovery under Section 11B read with Section 83 and are refundable where the demand is subsequently set aside. The Court relied on authorities recognizing that pre-deposits made under protest must be returned when adjudicating orders are set aside, and noted Board circulars and Supreme Court decisions affirming the refundability of such pre-deposits (including grant of interest in analogous orders), thereby supporting the view that the deposited amount is refundable. [Paras 5]

The deposited amount of Rs. 2.37 crores is a pre-deposit made during investigation and is refundable in view of the demand being set aside.

Principle of unjust enrichment - non-attraction of unjust enrichment where incidence not passed on - verification by chartered accountant and records - Whether the principle of unjust enrichment applies so as to bar refund of the deposited amount. - HELD THAT: - The Tribunal held that unjust enrichment was not established. The revenue had not shown that the assessee passed on the incidence of the deposited amount to its customers: no supplementary invoices or adjustments evidencing recovery from customers were produced, and BSNL's pre determined tariff structure precluded discretionary passing on of the expenditure. Further, a certificate from the assessee's chartered accountant and entries in the relevant register indicated the expenditure was absorbed by the assessee and debited to past period expenditure rather than recovered from customers. On these facts, and consistent with precedents permitting CA certification and accounting records to negate unjust enrichment, the Tribunal accepted that the incidence was not passed on and unjust enrichment did not arise. [Paras 5]

Unjust enrichment is not attracted; the assessee did not pass on the incidence and is therefore entitled to refund.

Final Conclusion: The appeal is dismissed and the Commissioner (Appeals) order granting refund of the pre-deposit to the assessee is upheld: the deposited amount is refundable and unjust enrichment does not apply.

Binding nature of a resolution plan approved by the Adjudicating Authority - extinguishment of claims not part of an NCLT approved resolution plan - operational creditor claims in corporate insolvency resolution process - abatement of statutory appeals upon approval of resolution plan - departmental claims and refunds of pre deposit where claim stands extinguished

Binding nature of a resolution plan approved by the Adjudicating Authority - extinguishment of claims not part of an NCLT approved resolution plan - abatement of statutory appeals upon approval of resolution plan - Whether the appeals before the Tribunal survive after approval of a resolution plan by the NCLT in respect of the corporate debtor, or whether such claims/demands stand extinguished and the appeals abate. - HELD THAT: - The Tribunal held that in view of the decision in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (supra) the resolution plan approved by the Adjudicating Authority under Section 31 of the IBC binds the corporate debtor, its creditors (including the Central/State Government and local authorities) and other stakeholders; claims not included in the approved plan stand frozen and extinguished and no proceedings in respect of such claims can be continued. The CBIC SOP (Instruction No.1083/04/2022-CX.9) reiterates that once a plan is approved, no demands can be raised on the resolution applicant. The Tribunal also relied on the principle applied in Ruchi Soya Industries Ltd. (supra) regarding refund of pre deposit where the claim does not survive post approval. Applying these authorities and the factual position that the NCLT approved the resolution plan relating to the appellant, the Tribunal concluded that the appeals in respect of the periods prior to the approval date have abated and the Tribunal has become functus officio. [Paras 4, 5, 6, 7, 8]

Appeals abated and disposed in view of the NCLT approved resolution plan which extinguishes pre approval claims.

Final Conclusion: The Tribunal disposed of the appeals as abated because the NCLT approved resolution plan binds creditors and extinguishes claims not included in the plan; consequently the Tribunal is functus officio in respect of the matters before it.

Charge of service tax on services received from outside India - taxable services provided from outside India and received in India - reverse charge mechanism - received in India for use in relation to business or commerce - refund of service tax

Charge of service tax on services received from outside India - taxable services provided from outside India and received in India - received in India for use in relation to business or commerce - Whether services provided and consumed outside India but billed to an assessee having place of business in India are taxable under Section 66A and Rule 3 (Notification No.11/2006-ST) as services 'received in India'. - HELD THAT: - The Tribunal found as a fact that the services in question were provided by overseas service providers and were sought, received and consumed outside India through the appellant's branch/agents abroad, although invoices were raised in the Indian entity's name. Section 66A operates only where the service is provided from outside India and received by a recipient located in India; Rule 3 is expressly 'subject to' Section 66A and applies only to taxable services received in India. The Tribunal applied the principle that merely having a place of business in India or invoices raised to an Indian address does not convert services actually provided and consumed abroad into services 'received in India' for the purpose of charging service tax under the reverse charge mechanism. Reliance on the reasoning in Orient Crafts Ltd. (as reproduced) and other authorities supported the conclusion that services consumed outside India are not taxable in India. The Tribunal therefore held that the conditions of Section 66A were not satisfied and Rule 3(iii) could not be invoked to fasten liability where the services were consumed abroad, notwithstanding that payments or invoices involved the Indian entity. [Paras 5, 17]

Services provided and consumed outside India were not taxable under Section 66A/Rule 3; the appellant was not liable to pay service tax on those services.

Refund of service tax - reverse charge mechanism - Whether the service tax paid by the appellant (self-assessed and paid with interest) was refundable and whether the refund sanction order dated 28.05.2013 was in accordance with law. - HELD THAT: - The Tribunal noted that the appellant had voluntarily paid service tax and interest, that Revenue had not raised any demand during the relevant period, and that the adjudicating authorities (on verification of bills/invoices and books) found no passing on of the tax amount (no unjust enrichment). Given the legal conclusion that the services were not taxable in India, the payment was not legally due and therefore refundable. The Tribunal concluded that the original refund sanction dated 28.05.2013 was lawful and that the subsequent rejection was unsustainable. [Paras 5, 12, 13]

The refund previously granted by order dated 28.05.2013 was in accordance with law and the appellant was entitled to refund of the service tax paid.

Final Conclusion: Appeal allowed; the order-in-original dated 28.05.2013 sanctioning the refund is upheld, the impugned order rejecting refund is set aside and consequential relief (including quashing of ongoing recovery proceedings) is granted.

Separately invoiced goods treated as sale not part of service - exemption under Notification No. 12/2003-S.T. - Service Tax assessable value - exclusion of value of goods separately shown and taxed under VAT - issue no longer res integra in view of binding tribunal/high court precedents

Separately invoiced goods treated as sale not part of service - Service Tax assessable value - exclusion of value of goods separately shown and taxed under VAT - exemption under Notification No. 12/2003-S.T. - Whether the value of consumables/spare parts, separately invoiced and on which VAT/Sales Tax was paid, is includible in the assessable value of taxable service for levy of Service Tax. - HELD THAT: - The Tribunal found that the appellants raised separate invoices for service (on which service tax was paid) and for consumables/spare parts (on which VAT was paid). Relying on earlier Tribunal decisions (notably Samtech Industries and subsequent affirmance by the High Court) and the Board's communication accepting that where the cost of items supplied is specifically shown and documentary proof of sale exists, Service Tax demand on the cost of such goods is not sustainable, the Tribunal held that goods separately sold cannot be treated as part of the service for valuation. The Tribunal applied the established legal position that where the value of goods used in providing a service is shown separately in the invoice and subjected to Sales Tax/VAT, that value is excluded from the taxable value of the service and the exemption under Notification No. 12/2003-S.T. is attracted. In light of the settled precedents and the documentary practice of separate billing and VAT payment, the impugned demand and upholding by the lower authority were held unsustainable.

Impugned order set aside; appeal allowed and Service Tax demand relating to value of separately invoiced consumables/spares dismissed with consequential relief.

Final Conclusion: Following consistent Tribunal and High Court decisions and the Board's view, the appeal is allowed: value of separately invoiced goods/consumables on which VAT was paid is not includible in the assessable value of the service and the Service Tax demand on such goods is set aside.

Reliance on precedent - followed judgment of a coordinate High Court - absence of challenge to a precedent before this Court - condonation of delay

Reliance on precedent - followed judgment of a coordinate High Court - absence of challenge to a precedent before this Court - Validity of the High Court's order insofar as it followed the Bombay High Court judgment relied upon by the High Court. - HELD THAT: - The High Court's decision was questioned on the ground that it placed reliance on the Bombay High Court's decision in Commissioner of Central Excise, Mumbai-III vs. CEAT Limited. The Court noted that the Bombay High Court judgment relied upon was not assailed before this Court by the Revenue. In those circumstances the Supreme Court found no infirmity in the High Court's impugned order which had followed the said Bombay High Court judgment, and therefore upheld the High Court's approach.

The High Court's order was held to be free of infirmity insofar as it followed the Bombay High Court judgment; the challenge accordingly failed.

Final Conclusion: Delay in filing was condoned; the special leave petition was dismissed and pending applications were disposed of.

Scope of adjudication by appellate authority - effect of appellate order accepting refund and finality of departmental appeal - jurisdiction to drop or prosecute a show cause notice in light of a CERA audit objection and Section 11A read with Sections 11AC and 11B - remand for fresh consideration by the Tribunal - obligation of the Tribunal to decide all rival contentions and not confine its adjudication to audit objections alone - compliance with procedural timelines and rules of CESTAT in pronouncement of orders

Obligation of the Tribunal to decide all rival contentions and not confine its adjudication to audit objections alone - scope of adjudication by appellate authority - remand for fresh consideration by the Tribunal - Whether the CESTAT erred in confining its decision to the audit objection (CERA) and thereby dismissing the revenue's appeal without considering other rival contentions and the effect of departmental communications. - HELD THAT: - The High Court found that the Tribunal confined adjudication solely to the narrow question of the audit objection recorded by CERA, without addressing rival contentions raised by the revenue concerning the validity of the show cause notice and related developments. The Court noted that material communications (including a departmental communication dated 26th May 2008) and the chronology - particularly that the show cause notice was issued before the audit objection was closed but that the revenue's appeal was rejected by the Commissioner (Appeals) - were not properly placed before the Tribunal for its comprehensive adjudication. In the circumstances the Court held that the Tribunal ought to have considered all issues raised by the parties on merits instead of limiting the scope of the appeal to the CERA objection. The High Court therefore concluded that the Tribunal's limited approach was erroneous and that the matter required fresh consideration on all contentions by the Tribunal. [Paras 9, 11]

Impugned order dated 20th December 2018 set aside; Excise Appeal No. 504 of 2008 restored and remitted to the Tribunal for fresh disposal of all issues on merits.

Effect of appellate order accepting refund and finality of departmental appeal - jurisdiction to drop or prosecute a show cause notice in light of a CERA audit objection and Section 11A read with Sections 11AC and 11B - Whether the grant of refund and the Commissioner (Appeals) order dismissing the departmental appeal precluded prosecution of the show cause notice or required application of provisions invoked in consequence of CERA objections. - HELD THAT: - The High Court observed that the revenue's contentions concerning the validity of the show cause notice, the applicability of provisions invoked in consequence of the CERA objection, and the legal effect of the Commissioner (Appeals) order rejecting the departmental appeal were matters that fell for adjudication. The Court expressly refrained from deciding these questions on merits, including reliance placed on Supreme Court and other decisions, and left them open for examination by the Tribunal. Consequently, the Court remitted these legal issues - including the interplay between the refund order, the appellate order, and the departmental audit objection invoking Section 11A read with Sections 11AC and 11B - for fresh consideration by the Tribunal. [Paras 8, 9, 11]

The questions concerning the validity of the refund, the effect of the Commissioner (Appeals) order, and the departmental powers in view of the CERA objection are remitted to the Tribunal for fresh adjudication on merits.

Compliance with procedural timelines and rules of CESTAT in pronouncement of orders - scope of adjudication by appellate authority - Whether the delay in issuance of the impugned order by the CESTAT and compliance with CESTAT procedure rules affected the adjudication. - HELD THAT: - The High Court recorded that one of the contentions raised related to the time taken by the Tribunal in passing its order and alleged non-compliance with CESTAT procedural rules and circulars. The Court did not determine this contention on the merits but directed that all contentions, including those relating to delay and procedural compliance, remain open for the Tribunal's fresh consideration when deciding the appeal on merits. The Tribunal was also requested to decide the appeal expeditiously within four months. [Paras 8, 11]

Contentions relating to delay and procedural compliance are left open and to be considered afresh by the Tribunal; direction issued for expeditious disposal within four months.

Final Conclusion: The impugned CESTAT order dated 20th December 2018 is set aside and Excise Appeal No. 504 of 2008 is restored. All issues raised by the parties - including the validity of the refund, the legal effect of the Commissioner (Appeals) order, the prosecution of the show cause notice in light of the CERA objection and invoked statutory provisions, and procedural contentions including alleged delay - are remitted to the Tribunal for fresh adjudication on merits; the Tribunal is requested to decide the appeal expeditiously within four months. No costs.

Classification of rectified spirit as excisable good - eligibility of Cenvat credit on inputs captively consumed in manufacture of exempted final products subject to compliance with Rule 6(3)(i) - effect of restructuring of tariff (6-digit to 8-digit) and scope of Notification No. 3/2005 preserving existing duty treatment - invocation of extended period of limitation and imposition of penalty where revenue was previously aware of the facts and on identical issue earlier decisions had been rendered

Classification of rectified spirit as excisable good - effect of restructuring of tariff (6-digit to 8-digit) and scope of Notification No. 3/2005 preserving existing duty treatment - eligibility of Cenvat credit on inputs captively consumed in manufacture of exempted final products subject to compliance with Rule 6(3)(i) - Whether rectified spirit manufactured by the appellant is to be treated as excisable (or as exempted excisable) product after the introduction of 8-digit tariff and consequently whether Cenvat credit of duty on molasses used in its manufacture is allowable subject to compliance with Rule 6(3)(i). - HELD THAT: - The Tribunal held that the re structuring of the Central Excise Tariff from 6 digit to 8 digit codes did not effect a substantive change in the excisability/ duty treatment of rectified spirit, having regard to CBEC Circular No. 808/5/2005 CX and Notification No. 3/2005 which were issued to preserve existing duty rates on specified commodities. Following earlier Tribunal decisions in the appellant's group matters (Final Order No.40789 40799/2014) and the Supreme Court's upholding of that approach, rectified spirit and ENA as produced were to be regarded as goods covered by the exemption notification and the appellants had discharged the obligation under Rule 6 of the Cenvat Credit Rules by reversing the specified percentage. On that basis denial of exemption on molasses captively consumed in manufacture of rectified spirit and extra neutral alcohol, and consequent disallowance of Cenvat credit claimed on molasses, could not be sustained. The Tribunal therefore set aside the impugned demand and related findings, allowing the appellant's claim for credit subject to compliance with Rule 6(3)(i). [Paras 13]

Impugned denial of Cenvat credit on molasses used in manufacture of rectified spirit is set aside; rectified spirit/ENA treatment under Notification No. 3/2005 and compliance with Rule 6(3)(i) entitles the appellant to credit.

Invocation of extended period of limitation and imposition of penalty where revenue was previously aware of the facts and on identical issue earlier decisions had been rendered - Whether the extended period of limitation could be invoked for the show cause notice (period April 2010 to September 2012) and whether penalty could be imposed in the facts of the case. - HELD THAT: - The Tribunal noted that the question raised in the show cause notice arose from the restructuring of the tariff and that identical issues had earlier been considered and decided in the appellant's group cases and other precedents which had brought the facts to the department's notice. Having accepted the earlier decisions which held that rectified spirit/ENA were covered by the exemption and that the appellants had complied with Rule 6, the extended period invocation and the penalty based on denial of credit could not be sustained. The adjudicating authority's reliance on extended limitation and imposition of penalty was therefore untenable in the circumstances, and the impugned order confirming demand and penalty was set aside. [Paras 11, 13]

Extended period invocation and penalty confirmed by the original authority are not sustained and are set aside.

Final Conclusion: Following earlier Tribunal and Supreme Court authority and having found that rectified spirit/ENA continued to attract the exemption preserved by Notification No. 3/2005 and that the appellant had complied with Rule 6(3)(i), the Tribunal allowed the appeal, set aside the impugned demand including invocation of extended period and penalty, and granted consequential relief.

Exemption under Notification No. 10/97-CE (serial 2(b)) - consumables for research institutions - substantial compliance of certificate requirement - denial of exemption for minor lacuna in certificates - extended time proviso under Section 11A - personal penalty under Section 11AC

Exemption under Notification No. 10/97-CE (serial 2(b)) - consumables for research institutions - Metal Finishing Chemical/Electroplating salts manufactured by the appellant fall within the category of "consumables" under serial No.2(b) of Notification No.10/97-CE dated 01.03.1997 and are therefore eligible for exemption when supplied to specified research institutions. - HELD THAT: - The Tribunal examined the description of exempted goods in serial No.2(b) of the notification, which expressly includes "accessories and spare parts thereof and consumables" supplied to non-commercial research institutions. The product manufactured by the appellant-Metal Finishing Chemical/Electroplating salt-was held to be consumables used by electronic and scientific institutions identified in the record. Applying the notification's description to the product's nature and use, the Tribunal concluded that the goods fall squarely within the exempted category and are entitled to the notification's benefit. [Paras 5]

Benefit of Notification No.10/97-CE (serial 2(b)) granted in favour of the appellant for the goods in question.

Substantial compliance of certificate requirement - denial of exemption for minor lacuna in certificates - Certificates produced by recipient research institutions satisfy the requirements of the notification and minor lacunae in the authority-signing the certificates do not disentitle the appellant to the exemption. - HELD THAT: - The Tribunal reviewed the certificates produced by premier research institutions and found that the statutory conditions of the notification-registration/status of the institutions and certification that goods are for research purposes-were satisfied. The Tribunal held that inconsequential defects in the authority signing the certificates cannot be treated as fatal to compliance and that substantial compliance with the notification's conditions suffices to confer the exemption. Consequently, absence of a formal or technical perfection in signatures did not justify denial of benefit where the institutions and the end-use were otherwise established. [Paras 6]

The exemption cannot be denied on account of minor lacunae in certificates; the appellant is entitled to the benefit.

Extended time proviso under Section 11A - personal penalty under Section 11AC - Invocation of the extended time proviso under Section 11A and imposition of personal penalty under Section 11AC against the appellant (and the nominated officer) was not sustainable and has been set aside. - HELD THAT: - Having upheld the entitlement to exemption and the sufficiency of certificates, the Tribunal found no basis for alleging suppression or wrongful claim that would justify invocation of extended time limits or penal consequences. In view of the determination that goods were properly exempted and documentary requirements substantially met, the extended time proviso and the personal penalty imposed on the company's officer were held to be unjustified and were therefore rescinded. [Paras 7]

Orders invoking extended time and imposing personal penalty set aside; impugned orders are quashed.

Final Conclusion: The appeals are allowed: the goods manufactured by the appellant are covered as "consumables" under Notification No.10/97-CE (serial 2(b)), the certificates on record satisfy the notification's requirements notwithstanding minor lacunae, and the extended-time invocation and personal penalty are set aside; the impugned orders are quashed.

Travel beyond scope of show cause notice - Violation of principles of natural justice - Remand for de-novo adjudication - Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - Maintenance of separate accounts under Rule 6(2) of the Cenvat Credit Rules, 2004 - Extended period of limitation under proviso to Section 11A

Travel beyond scope of show cause notice - Violation of principles of natural justice - Impugned adjudication travelled beyond the scope of the show cause notice and violated principles of natural justice by relying on verification reports not disclosed to the appellant. - HELD THAT: - The Tribunal examined the show cause notice and the adjudicating authority's order and found that the notice primarily challenged reversal of Cenvat credit under Rule 6(3) on account of common use of inputs and lack of separate accounts as per Rule 6(2). The Commissioner, however, confirmed demand on the basis of verification reports showing that the principal manufacturer (M/s. Metal and Steel Factory, Ishapore) cleared final products under an exemption notification, a factual basis that was not disclosed in the show cause notice nor furnished to the appellant for defence. The Tribunal held that reliance on undisclosed verification reports and the introduction of a new factual basis amounts to travelling beyond the show cause notice and breaches natural justice, applying the principles articulated in the cited authorities. For these reasons the adjudicating authority's order cannot stand. [Paras 5]

Set aside the impugned order-in-original insofar as it rests on undisclosed verification reports and conclusions not raised in the show cause notice.

Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - Maintenance of separate accounts under Rule 6(2) of the Cenvat Credit Rules, 2004 - Extended period of limitation under proviso to Section 11A - Remand for de-novo adjudication - Merits of the demand under Rule 6(3), compliance with Rule 6(2), and invocation of extended period are not finally decided and are remanded for fresh consideration. - HELD THAT: - Having found procedural infirmity and breach of natural justice in the original adjudication, the Tribunal declined to adjudicate the substantive merits. The question whether Cenvat credit reversal under Rule 6(3) is payable, whether the appellant exercised any option under Rule 6(3), whether separate accounts as required by Rule 6(2) were maintained, and whether the proviso to Section 11A to invoke extended limitation applies, are to be examined afresh by the adjudicating authority. The matter is remitted for de-novo adjudication so that the appellant is furnished with all material relied upon and afforded an opportunity to be heard on the substantive issues. [Paras 5, 6]

Matter remanded to the Adjudicating Authority for de-novo adjudication on merits after furnishing relevant verification material and granting opportunity of hearing.

Final Conclusion: The Tribunal set aside the adjudication order insofar as it depended on undisclosed verification reports and remanded the case for de-novo consideration of the substantive issues under Rule 6(2)/6(3) of the Cenvat Credit Rules, 2004 and related limitation questions, directing that the appellant be furnished the material relied upon and be heard afresh.

Cenvat credit on input services - exclusion clause in definition of 'input service' (Rule 2(l) of Cenvat Credit Rules) - temporal application of amendments to Rule 2(l) - extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 - penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC - bar on issuance of notice after payment under Section 11A(2)

Cenvat credit on input services - exclusion clause in definition of 'input service' (Rule 2(l) of Cenvat Credit Rules) - temporal application of amendments to Rule 2(l) - Validity of denial and demand of Cenvat credit in respect of insurance services (vehicle and life) and civil work for the period April 2010 to October 2012. - HELD THAT: - The Tribunal examined the history of amendments to Rule 2(l) and held that the exclusions relied upon by the Commissioner (Appeals) arose from the post-1.4.2011 amendments. The adjudicating authority had proceeded on the wording of the pre-1.4.2011 definition in its original order, whereas the appellate authority relied on the subsequently inserted exclusion clauses. The appellate finding applying the amended exclusion to deny credit in respect of the services taken during the relevant earlier period was therefore unjustified. Further, no specific ground for denial in respect of civil/construction services was raised in the show cause notice or the original order; the appellate order alone invoked that ground. The appellant also produced consistent evidence of reversal of the credit and pointed to contemporaneous departmental treatment in identical matters allowing credit. In these circumstances the demand and confirmation of interest and appropriation sustained below could not be maintained. The Tribunal concluded that the impugned orders sustaining the demand were not sustainable and allowed the appeal on this score. [Paras 4]

Demand and confirmation of Cenvat credit denial (and related interest/appropriation) in respect of the stated insurance and civil work services for the period April 2010 to October 2012 set aside; appeal allowed on this ground.

Extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 - penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC - bar on issuance of notice after payment under Section 11A(2) - Sustainability of penalty imposed and invocation of extended period where appellant had reversed the credit and paid interest. - HELD THAT: - The Tribunal found no valid basis for invoking the extended limitation period under Section 11A(4); the sole allegation in the show cause notice pleaded non-filing of returns and wilful intent without concrete supporting findings. Given that the appellant had reversed the contested credit and paid the interest, Section 11A(2) should have precluded issuance of the show cause notice in respect of the duty so paid. Relying on the principles distinguishing ordinary recovery from penalty for deliberate deception under Section 11AC, and noting absence of findings of suppression, fraud or wilful mis-statement, the Tribunal held that the penalty imposed under Rule 15 read with Section 11AC could not be sustained and ought to be set aside. [Paras 4]

Penalty imposed under Rule 15 read with Section 11AC set aside for lack of justification for invoking extended period and in view of reversal/payment falling within Section 11A(2); appeal allowed on this ground.

Final Conclusion: The appeal is allowed: the orders confirming denial of Cenvat credit (and related interest/appropriation) in respect of the specified insurance and civil work services for April 2010 to October 2012, and the penalty imposed under Rule 15 read with Section 11AC, are set aside; the show cause notice was not maintainable in view of the circumstances and payment/reversal by the appellant.

Right to cross-examination under quasi-judicial proceedings - admissibility of statements recorded under Section 9D of the Central Excise Act - obligation to summon and examine maker before admitting statement under Section 9D(1)(b) - requirement of a reasoned and speaking order when invoking Section 9D(1)(a) - non-retrospective operation of penal amendments - penalty under Rule 26 for issuance of invoices without supply of goods

Right to cross-examination under quasi-judicial proceedings - admissibility of statements recorded under Section 9D of the Central Excise Act - obligation to summon and examine maker before admitting statement under Section 9D(1)(b) - Whether the proceedings vitiated by denial of opportunity to cross examine persons whose statements were relied upon and whether the adjudicating authority complied with the procedure under Section 9D before admitting those statements. - HELD THAT: - The Tribunal found that the impugned order was founded substantially on statements recorded during investigation and that the appellants had specifically sought opportunity to cross examine key witnesses. The Adjudicating Authority rejected the request on the ground that the request was not repeatedly pressed and that it was too late, relying on a precedent; this approach was held unacceptable. The Tribunal applied the statutory scheme of Section 9D and authorities cited, observing that where clause (a) of Section 9D(1) does not apply the procedure in clause (b) is mandatory: the person who made the statement must be examined as a witness before the adjudicating authority and the authority must record reasons for admitting the statement in evidence before permitting cross examination. Not allowing cross examination of key witnesses whose statements are relied upon was held to vitiate the quasi judicial proceedings. In consequence, the Tribunal remanded the matter for de novo adjudication after affording the appellants the opportunity to cross examine the witnesses and for the authority to follow the Section 9D procedure and record reasoned conclusions. [Paras 8, 9, 10, 11, 12]

Impugned order set aside insofar as it relied on statements without observing the Section 9D procedure; appeals by M/s Lauls Limited and its Director remanded to the Adjudicating Authority for fresh adjudication after permitting cross examination and compliance with Section 9D.

Non-retrospective operation of penal amendments - penalty under Rule 26 for issuance of invoices without supply of goods - Whether penalty could be imposed on Shri Ram Bilas Bansal under Rule 26 for issuance of invoices without supply for transactions during January 2003 to January 2005. - HELD THAT: - The Tribunal examined the scope of Rule 26 as it stood during the relevant period and the amendment inserting liability for issuance of invoices without supply effective 01.03.2007. It held that penal provisions inserted w.e.f. 01.03.2007 cannot be applied retrospectively unless the amending notification clearly so provides. As the case against Shri Ram Bilas Bansal related to the period January 2003 to January 2005, the Tribunal concluded that the post 2007 amendment could not be invoked to sustain penalty for that period. Reliance was placed on precedents and reasoning that prior to the amendment mere issuance of invoices without movement of goods did not attract Rule 26 penalty in the manner subsequently made punishable. [Paras 13, 14]

Penalty imposed on Shri Ram Bilas Bansal set aside for the period January 2003 to January 2005.

Final Conclusion: The Tribunal set aside the impugned adjudication order and remanded the case against M/s Lauls Limited and its Director for fresh adjudication after permitting cross examination of key witnesses and compliance with Section 9D; the penalty on Shri Ram Bilas Bansal was quashed insofar as it related to January 2003 to January 2005. The Adjudicating Authority was directed to decide the matter within sixteen weeks.

Relevancy of statements recorded before a Gazetted Central Excise Officer under Section 9D - Admissibility of investigative statements and mandatory procedure under Section 9D(1)(b) - Right to cross-examination in adjudication proceedings - Principles of natural justice in quasi-judicial proceedings - Remand for fresh adjudication to enable cross-examination of key witnesses

Relevancy of statements recorded before a Gazetted Central Excise Officer under Section 9D - Admissibility of investigative statements and mandatory procedure under Section 9D(1)(b) - Right to cross-examination in adjudication proceedings - Principles of natural justice in quasi-judicial proceedings - Denial of opportunity to cross-examine witnesses whose statements were relied upon vitiated the adjudication for want of compliance with Section 9D and principles of natural justice. - HELD THAT: - The Tribunal examined Section 9D and authorities which require that statements recorded before a Gazetted Central Excise Officer cannot be admitted in adjudication proceedings without following the statutory procedure unless clause (a) is legitimately invoked. Clause (b) mandates that the person who made the statement be examined as a witness before the adjudicating authority and the authority record reasons for admitting the statement in evidence in the interests of justice. The impugned order relied on investigative statements but contains no finding explaining denial of the appellants' specific requests to cross-examine key witnesses. Having regard to binding precedent of higher courts that non grant of cross examination where statements are relied upon is a serious breach of natural justice, the Tribunal held that failure to allow cross examination vitiates the adjudication and requires fresh consideration. [Paras 13, 15, 16]

The impugned order is vitiated for not permitting cross examination of key witnesses and for not recording reasons under Section 9D(1); the proceeding cannot be sustained on that basis.

Remand for fresh adjudication to enable cross-examination of key witnesses - Right to cross-examination in adjudication proceedings - Whether the matter should be remanded for fresh adjudication with opportunity to cross examine specified key witnesses and for adjudicating afresh. - HELD THAT: - In view of the defect identified-denial of cross examination of witnesses whose statements formed the basis of the impugned order-the Tribunal directed that the matters be remitted to the Adjudicating Authority for fresh consideration. The remand is limited to permitting the appellants to cross examine the named witnesses whose statements were relied upon (Shri Parmeshwar Lal Sharma, Munim of M/s R.K. Trading, and Shri Ajay Kumar, operator of M/s Ajay Plastics India) and for the Authority to decide the case de novo after permitting such cross examination and recording requisite findings. The Bench expressly refrained from expressing any opinion on the merits and directed expeditious disposal within the period stated. [Paras 16, 17]

The appeals are allowed to the extent the impugned order is set aside and the matters are remanded to the Adjudicating Authority for fresh adjudication after permitting cross examination of the specified witnesses and for decision within the prescribed time.

Final Conclusion: Impugned Order-in-Original set aside on grounds of denial of cross examination and non compliance with Section 9D and principles of natural justice; all three appeals remitted to the Adjudicating Authority for fresh adjudication after permitting cross examination of the named key witnesses, with no expression of opinion on merits and a direction for expeditious disposal.

Inclusion of freight in assessable value - excess freight as profit on transportation not part of the transaction value - transaction value for charging excise duty - precedent of Baroda Electric Meters

Inclusion of freight in assessable value - excess freight as profit on transportation not part of the transaction value - transaction value for charging excise duty - Whether excess amount collected from customers as freight over and above the actual freight paid to the transporter is includable in the transaction value/assessable value for charging excise duty. - HELD THAT: - The Tribunal determined that the excess freight collected from customers represents profit on transportation and is not part of the value of the goods. Reliance was placed on the authoritative decision in Baroda Electric Meters which held that where freight charged to customers exceeds the freight actually paid, the difference is appropriation by the seller and constitutes profit on transportation rather than part of the assessable value of goods; the duty of excise is a tax on the manufacturer and not on such profits. The Tribunal observed that Baroda Electric Meters remains applicable and that subsequent amendments to Section 4 and the Rules post 01.07.2000 do not displace that principle in the identical factual matrix. Having decided the matter on merits by applying that precedent, alternate submissions were left unaddressed. [Paras 4, 5, 6]

Excess freight collected by the appellant over and above the actual freight paid to the transporter is not includable in the transaction value/assessable value for charging excise duty; impugned orders set aside and appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that excess freight collected is profit on transportation and cannot be included in the transaction/assessable value for excise duty, applying the Baroda Electric Meters precedent; impugned orders were set aside.

Benefit of concessional rate under the relevant excise notification - sale to industrial or institutional consumers - treatment of builders, developers and government as institutional buyers - requirement of declaration/printing of retail sale price on packaged goods under legal metrology - precedential effect / issue no more res integra

Sale to industrial or institutional consumers - benefit of concessional rate under the relevant excise notification - treatment of builders, developers and government as institutional buyers - requirement of declaration/printing of retail sale price on packaged goods under legal metrology - Whether cement supplied in 50 kg bags to builders, hotels, hospitals and government manufacturing industries qualified as sales to industrial or institutional customers to avail the concessional rate under the notification and whether demand of differential duty is sustainable. - HELD THAT: - The Tribunal noted earlier judicial determinations in favour of treating sales of 50 kg cement bags to builders/developers and government as institutional purchases for the purpose of the concessional notification and relied on those precedents. It observed that industries which used cement for construction or allied purposes would fall within the category of builders and that ready-mix-concrete producers who used cement in manufacture of excisable goods similarly qualified. The Tribunal further recorded that Revenue did not contend that the recommended retail sale price was required to be printed on such sales under the metrology provisions. Applying these precedents and reasoning, the Tribunal held the issue to be no more res integra and concluded that the benefit of the concessional rate was available on the impugned clearances, rendering the demand of differential duty unsustainable. [Paras 5, 6, 7]

Demand of duty set aside; cement sales in 50 kg bags to the stated buyers qualify as institutional/industrial sales for concessional notification and no demand is sustainable.

Final Conclusion: Appeals allowed; impugned orders set aside and demands of differential duty withdrawn, with consequential reliefs, the Tribunal applying earlier precedents and holding the issue no longer res integra.

Transfer of ownership under a Master Development Agreement - possession under a licence versus possession under Section 53A of the Transfer of Property Act, 1882 - meaning of 'belonging to' for chargeability under the Wealth Tax Act - no objection certificate under Chapter XX-C of the Income-tax Act - evidentiary significance - exclusion of urban land from wealth-tax as land 'occupied by any building which has been constructed' - exclusion of urban land from wealth-tax as 'land held as stock-in-trade' - consistency of pleaded stands - approbate and reprobate doctrine

Transfer of ownership under a Master Development Agreement - possession under a licence versus possession under Section 53A of the Transfer of Property Act, 1882 - Whether the Master Development Agreement resulted in transfer of ownership or possession such that the impugned urban land did not 'belong to' the assessee on the valuation date. - HELD THAT: - The Tribunal examined the material clauses of the MDA and held that the agreement granted the developer a licence to enter and develop the land and did not confer rights akin to ownership. Reliance was placed on precedents holding that a licence to enter for development cannot be equated with transfer of possession within the meaning of Section 53A of the Transfer of Property Act, 1882, and that mere contractual language deeming possession to be part performance is not determinative; it is the conduct of the parties that matters. The developer had not performed the vital parts required under Section 53A (notably, performance by the transferee and acts in furtherance of the contract), and the recorded facts showed limited activity (disputed construction of boundary walls) and ultimately termination of the MDA. Consequently, there was no transfer of ownership and the land continued to 'belong to' the assessee for wealth tax purposes. [Paras 15, 16, 20, 21, 28]

The MDA did not effect transfer of ownership; possession under the MDA was a licence only and Section 53A was not attracted, so the land continued to 'belong to' the assessee.

No objection certificate under Chapter XX-C of the Income-tax Act - evidentiary significance - Whether the No Objection Certificate (NOC) issued under Chapter XX-C of the Income-tax Act establishes that the developer had power to alienate the owners' portion and thus negates wealth-tax chargeability on the assessee. - HELD THAT: - The Tribunal noted that the NOC only certifies that the Appropriate Authority had 'no objection' to registration of a transfer (if any) under the MDA; it is not a conclusive finding that an actual transfer of ownership occurred or that possession akin to transfer was effected. In light of the analysis on the MDA and Section 53A, and subsequent authoritative decisions on licence versus transfer, the NOC was held not to be a determinative factor extinguishing the assessee's liability to wealth tax. [Paras 25, 26, 27]

The NOC under Chapter XX C is not determinative of an actual transfer of ownership and does not negate the chargeability of the land to wealth tax.

Exclusion of urban land from wealth-tax as 'land occupied by any building which has been constructed' - exclusion of urban land from wealth-tax as 'land held as stock-in-trade' - consistency of pleaded stands - approbate and reprobate doctrine - Whether the impugned urban land was exempt from wealth tax either because it was land occupied by a constructed building or because it was held as stock in trade. - HELD THAT: - On the clause excluding land 'occupied by any building which has been constructed', the Tribunal held that only boundary walls (and disputed even that) existed; authorities establish that a building 'has been constructed' requires a completed building, not mere commencement or partial works, so that exclusion did not apply. On the stock in trade plea, the assessee had consistently treated the land as an investment/capital asset in books and for income tax purposes (capital gains on later sale), and failed to adduce material to demonstrate stock in trade status. The Tribunal further invoked the principle that an assessee cannot adopt mutually inconsistent positions in different fora; approbate and reprobate could not be permitted. Accordingly, the stock in trade exclusion was not available. [Paras 32, 33, 34, 35, 36]

Neither the 'constructed building' exclusion nor the 'stock in trade' exclusion applies; the land is chargeable to wealth tax.

Final Conclusion: On a fresh consideration of the MDA, the Chapter XX C NOC and the contemporaneous letters, the Tribunal concluded that there was no transfer of ownership under the MDA, the NOC did not establish an actual transfer, and the land did not fall within statutory exclusions relied upon by the assessees; the appeals are dismissed and the wealth tax assessments sustained.

Validity and scope of an arbitration agreement vis-a -vis non-signatories - Reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - Binding effect of a memorandum of understanding executed between specific parties

Validity and scope of an arbitration agreement vis-a -vis non-signatories - Reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 - Binding effect of a memorandum of understanding executed between specific parties - Whether disputes in suits involving parties who are not signatories to the MoU containing an arbitration clause could be referred to arbitration under Section 8 of the 1996 Act. - HELD THAT: - The MoU dated 14 September 2010, containing Clause 15 with an arbitration agreement, was executed solely between the appellant and the first respondent. The suits before the Civil Judge (Junior Division) impleaded additional parties - notably a private limited company and Canara Bank - who are not parties to the MoU. The reliefs in the two suits seek, inter alia, injunctions against alienation and directions against the bank in respect of lending; these reliefs involve parties and rights outside the contractual ambit of the MoU. Non-family shareholdings and entities not party to the MoU cannot be bound by its terms. In these circumstances the trial Judge's reference of the disputes to arbitration under Section 8 was patently in error; the High Court's order setting aside the trial court and directing reference to arbitration was therefore unsustainable. Consequently the applications under Section 8 must be dismissed and the consequential orders passed pursuant to the High Court's direction cannot survive. [Paras 9, 10, 11]

Arbitration reference under Section 8 was inappropriate because the MoU and its arbitration clause applied only to the parties who executed it; parties not signatory to the MoU cannot be compelled to arbitrate, and the Section 8 applications are dismissed.

Final Conclusion: The Single Judge's order of 1 August 2017 directing reference to arbitration is set aside; the appeals are allowed, the applications under Section 8 of the 1996 Act are dismissed and the consequential orders of the trial court made pursuant to the High Court's direction no longer survive.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability on directors/officers not in charge - liability depends on role and control, not designation alone - company secretary's duties and distinction between managerial control and clerical/administrative functions - exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash criminal proceedings to prevent abuse of process

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability - liability depends on role and control, not designation alone - company secretary's duties - Section 482 Cr.P.C. - quashing to prevent abuse of process - Whether the petitioner, a company secretary who was not the signatory of the dishonoured cheque and not involved in day-to-day running of the company, could be prosecuted under Sections 138/141 of the Negotiable Instruments Act. - HELD THAT: - The High Court applied the settled principles laid down by the Supreme Court that liability under Section 141 is vicarious and arises only for persons who, at the time of commission of the offence, were in charge of and responsible for the conduct of the company's business. Mere designation as a director, secretary or officer does not suffice; specific averments are required showing how the person was in charge of or responsible for the conduct of business. The court noted that a company secretary's statutory and usual duties are to assist and advise, facilitate meetings and compliance, and do not necessarily amount to day to day control of business. In the present complaint there were no specific averments that the petitioner was in charge of and responsible for the company's business or that the offence was with her consent, connivance or attributable to her negligence; she was not the signatory of the cheque and was not shown to run the day to day affairs. Bearing in mind the penal nature of Section 141 and the need for strict construction, the court held continuation of proceedings against the petitioner would be an abuse of process and quashed the proceedings against her using its inherent jurisdiction under Section 482 Cr.P.C. [Paras 11, 12, 13, 14, 16]

Proceedings under Sections 138/141 of the Negotiable Instruments Act are quashed insofar as they relate to the petitioner, Namarta Vashisht, on the ground that there are no specific averments establishing she was in charge of and responsible for the conduct of the company's business or otherwise liable under Section 141.

Final Conclusion: The revisional petition is allowed; the criminal complaint under Sections 138/141 NI Act (Case No. C.S. 93322 of 2018) is quashed only as against the petitioner, Namarta Vashisht, while proceedings against other accused may continue.

Compounding of offence under Section 138 of the Negotiable Instruments Act - permissibility of compounding at appellate or later stages - effect of Section 147 (non obstante clause) on compounding - settlement/compromise between parties - acquittal on compounding - imposition and reduction of compounding fee/costs

Compounding of offence under Section 138 of the Negotiable Instruments Act - permissibility of compounding at appellate or later stages - settlement/compromise between parties - Compounding of the offence was permissible after the parties effected an amicable settlement even though proceedings had concluded before the appellate forum. - HELD THAT: - The Court recorded that the complainant filed an affidavit stating full and final receipt of the agreed settlement amount and no objection to compounding. Reliance was placed on Supreme Court precedent holding that the nature of offence under Section 138 is primarily civil, made compoundable, and that Section 147 does not bar compounding at later stages including on appeal. In view of the parties' settlement and the settled legal position permitting compounding even at appellate stages, the Court allowed compounding of the offence in the peculiarity of the case. [Paras 10, 11, 12, 13, 14]

Offence under Section 138 was permitted to be compounded pursuant to the settlement between the parties.

Imposition and reduction of compounding fee/costs - acquittal on compounding - Whether the compounding fee should be waived and the consequential order as to costs and acquittal upon compounding. - HELD THAT: - Although the petitioner sought waiver of the compounding fee on grounds of poverty and mitigation, the Court declined to waive the compounding fee entirely but exercised discretion to reduce the costs in view of mitigating circumstances. Applying the principle that imposition of costs is discretionary and may be reduced for reasons to be recorded, the Court ordered deposit of a reduced amount as costs with the State Legal Services Authority and, upon compliance, set aside conviction and sentence and acquitted the petitioner. [Paras 14, 15]

Prayer for waiver of compounding fee refused; costs reduced and fixed for deposit; upon compliance conviction and sentence set aside and petitioner acquitted.

Compliance report - administration of costs via State Legal Services Authority - Procedure for implementation of the costs order and reporting. - HELD THAT: - The Court directed the petitioner to deposit the ordered amount with the Haryana State Legal Services Authority by a specified date and directed that a compliance report be forwarded by that Authority within one week after deposit. This provides the administrative mechanism for effecting the reduction of costs and recording compliance prior to finalising the consequence of compounding. [Paras 14, 16]

Petitioner ordered to deposit the reduced costs with the Haryana State Legal Services Authority and a compliance report to be filed thereafter.

Final Conclusion: In view of the parties' settlement and controlling Supreme Court authority, the offence under Section 138 NI Act was compounded; the petitioner's conviction and sentence were set aside and he was acquitted subject to deposit of reduced costs with the State Legal Services Authority, and a compliance report was directed.

Section 202 Cr.P.C. inquiry - Section 138 Negotiable Instruments Act - territorial jurisdiction of the trial court - partnership firm liability for cheque dishonour - requirement of sterling incontrovertible material to quash process - evidence by affidavit under Section 145 of the Negotiable Instruments Act

Section 202 Cr.P.C. inquiry - evidence by affidavit under Section 145 of the Negotiable Instruments Act - Validity of the summons where no formal inquiry under Section 202 Cr.P.C. was held before issuing process in a Section 138 NI Act complaint involving accused residing outside the court's territorial jurisdiction. - HELD THAT: - The Court applied the Apex Court's reasoning in Sunil Todi and the Constitution Bench direction in Re: Expeditious Trial of Cases under Section 138 to hold that where the accused reside outside the court's territorial jurisdiction the Magistrate must be satisfied by an inquiry under Section 202 Cr.P.C. before issuing process; however, in complaints under Section 138 the Magistrate need not examine witnesses on oath and may rely on the complaint, documents and affidavit evidence filed by the complainant to reach satisfaction. The impugned order shows the Magistrate adverted to the complaint, annexed documents, the complainant's affidavit and submissions and thereafter issued summons; on that basis the Court found no non-application of mind or illegality in relation to Section 202. [Paras 6, 7, 8]

Magistrate's issuance of summons was lawful; inquiry under Section 202 need not include examination of witnesses on oath and reliance on affidavit/documents is permissible in Section 138 complaints.

Territorial jurisdiction of the trial court - Section 138 Negotiable Instruments Act - Whether courts in Delhi have territorial jurisdiction to try the complaint alleging dishonour of the cheque. - HELD THAT: - The Court noted that the cheque was presented at and returned unpaid by the HDFC Bank branch in New Delhi which placed the cause of action within the territorial jurisdiction of the Delhi courts. Consequently, the complaint was triable in Delhi. [Paras 9]

Delhi courts have territorial jurisdiction to try the complaint.

Partnership firm liability for cheque dishonour - requirement of sterling incontrovertible material to quash process - Whether the petitioners (partners) were entitled to quash process on the ground that they had retired from the partnership prior to issuance/dishonour of the cheque. - HELD THAT: - The petitioners relied on purported Partnership Retirement and Reconstitution Deeds to show retirement; the Court observed inconsistencies in those documents and noted absence of evidence of compliance with Section 63 of the Indian Partnership Act (notice to Registrar). The complaint averred that all partners participated in obtaining the loan and in issuance of the cheque, and the reply to the legal notice continued to name a petitioner as partner. Applying the principle in S.P. Mani and related precedents, the Court held that to succeed in quashing a summons an exculpatory partner must produce sterling, incontrovertible material; the petitioners failed to do so and the disputed contentions were held to be triable issues requiring trial scrutiny. [Paras 11, 12, 13, 14, 15]

Process could not be quashed on the present record; questions of retirement and liability are triable and petitioners did not produce incontrovertible material to displace the complaint.

Final Conclusion: The High Court dismissed the petition under Section 482 Cr.P.C., upheld the summoning order in the Section 138 complaint, and declined to quash process; the contentious issues regarding partners' retirement and liability were left open for trial.