TaxTMI Updates e-Newsletter
Aug 03,2022

Relaxation of limitation - suspension of period of limitation - availability of statutory remedies - appeal against cancellation of registration - defect in service of order on common portal

Relaxation of limitation - appeal against cancellation of registration - defect in service of order on common portal - Whether the benefit of government notifications and orders suspending or extending limitation for seeking revocation of cancellation of registration applies equally to filing appeals against such cancellation orders. - HELD THAT: - The Court found that the Government had, by executive orders and notifications, suspended/placed in abeyance the period of limitation for orders of cancellation passed up to a specified date owing to defects in the common portal and later for reasons including COVID. That relaxation was directed to remedy a generic difficulty in service and was external to the nature of the remedy chosen (revocation application or appeal). To confine the benefit solely to proceedings for revocation and not to appeals would produce an anomalous result in which different deemed dates would apply to the same cancellation order for different remedies. For these reasons the Court concluded that the relaxation/suspension of limitation applied equally to appeals filed against cancellation of registration, and that the appellate authority erred in treating the appeal as time barred. [Paras 9, 10, 11, 12, 13]

The appellate authority's order rejecting the appeal as time barred is set aside; the appeal is to be treated as within limitation and the matter remitted to the appellate authority to pass fresh orders strictly in accordance with law.

Final Conclusion: Writ petition allowed; appellate order dated 31.03.2022 set aside and matter remitted to the appellate authority to decide the appeal treating it as within limitation in light of the government notifications and suspensions of limitation.

Intention to evade tax - Penalty under Section 129 of the Central Goods and Services Tax Act - Clerical error in e-way bill and immunity under departmental circular

Penalty under Section 129 of the Central Goods and Services Tax Act - Intention to evade tax - Whether an order of penalty under Section 129 can be sustained without establishing intention to evade tax. - HELD THAT: - The Court held that in respect of a penal provision such as Section 129, the element of intention to evade tax must be present to sustain an order of penalty. The determinative reasoning is that adjudication of penalty requires inquiry into whether the error was inadvertent and devoid of malafide intent; mere commission of a discrepancy in documents is not automatically sufficient to uphold penalty unless intention to evade tax is ascertained. [Paras 6]

Penalty under Section 129 cannot be sustained without inquiry establishing absence of malafide intention to evade tax.

Clerical error in e-way bill and immunity under departmental circular - Administrative instruction on e-way bill contingencies - Whether the petitioner was entitled to immunity under Clause 5 of the Department of Revenue circular dated 14.09.2018 for the error in the e-way bill. - HELD THAT: - The Court examined Clause 5 of the executive instruction which lists contingencies where proceedings under Section 129 may not be initiated. On the facts, the Court observed that the contingencies envisaged (for example errors limited to spelling, PIN code, locality while other details remain correct) did not strictly cover the present case because the e-way bill showed incorrect locality and other consignee details. The Court therefore concluded that the benefit of Clause 5 may not be available on the material before it, distinguishing earlier coordinate-bench decisions where only limited clerical mistakes existed and other details were correct. [Paras 5, 8]

The immunity under Clause 5 of the circular is not clearly available on the present facts where locality and other consignee details are incorrect.

Intention to evade tax - Appellate reconsideration and inquiry - Whether the appellate authority conducted requisite inquiry into the presence or absence of malafide intention and what remedy is appropriate. - HELD THAT: - The Court found that neither the Taxing Authority nor the appellate authority undertook the necessary exercise to ascertain the real intent behind the incorrect address in the e-way bill. Given the requirement that intention must be examined before imposing penalty, the Court held that the appellate order could not stand without such inquiry. Consequently, the appellate order was quashed and the matter remitted to the appellate authority to reconsider the appeal limited to determining whether there was any malafide intention to evade tax, and to pass appropriate orders after such inquiry. [Paras 7, 9, 10]

Appellate order set aside and matter remitted to appellate authority for fresh consideration limited to presence or absence of malafide intention, after inquiry.

Final Conclusion: The appellate order is quashed and the matter is remitted to the appellate authority to inquire into and decide, within three months, whether the incorrect address in the e-way bill arose from inadvertence without malafide intention to evade tax; appropriate orders to be passed thereafter.

Benefit of Input Tax Credit - commensurate reduction in prices - Section 171 of the CGST Act, 2017 - anti-profiteering - remittance of profiteered amount with interest - works contract tax (WCT) credit admissibility

Benefit of Input Tax Credit - commensurate reduction in prices - Section 171 of the CGST Act, 2017 - Whether the Respondent failed to pass on the benefit of additional ITC to the recipients in contravention of Section 171(1) of the CGST Act, 2017 - HELD THAT: - The Authority examined the pre-GST and post-GST ratios of input tax credit to turnover for the project and found pre-GST ITC ratio at 3.31% and post-GST ITC ratio at 5.42%, yielding an additional ITC benefit of 2.11% of turnover post-GST. Applying Section 171(1), which requires passing on the benefit of additional ITC by way of commensurate reduction in price, the Authority accepted DGAP's calculations (Table-A and Table-B) and concluded that the Respondent had not passed on the additional ITC to buyers. The Authority therefore treated the incremental 2.11% as the basis for determining profiteering and accepted the quantified profiteered amount as calculated in the DGAP report. [Paras 13, 14]

Respondent contravened Section 171(1); profiteering established for the period and quantified as Rs. 3,52,59,318/- (inclusive of the unit-wise amounts), which must be refunded/passed on with interest.

Remittance of profiteered amount with interest - Rule 133(3)(b) of the CGST Rules, 2017 - Relief to be granted and mode of compliance once profiteering is found - HELD THAT: - The Authority ordered that the profiteered amount be refunded/passed on to the affected homebuyers and directed reduction of prices commensurate with the ITC benefit. Interest at 18% per annum was directed to be paid on the entire profiteered amount from the date the amount was profiteered until the date of payment, in terms of Rule 133(3)(b). A timeline of three months from receipt of the order was fixed for passing the benefit/payment, failing which recovery proceedings under the CGST Act were to follow. The Authority also directed the jurisdictional Commissioners to ensure compliance and to publish a notice to inform affected buyers. [Paras 15, 16, 17, 21, 22]

Respondent to pass/refund Rs. 3,52,59,318/- to buyers with interest @18% from date of profiteering; payment/passing to be completed within three months; compliance to be monitored by jurisdictional Commissioners.

Works contract tax (WCT) credit admissibility - input tax credit reflected in returns - Whether WCT credit paid in the pre GST period should be considered for computing the pre GST ITC and thereby affect the profiteering computation - HELD THAT: - The Authority examined the Respondent's contention and the DGAP's position. It rejected the DGAP's categorical view that WCT rebate was per se inadmissible as input tax for profiteering computation. However, on the facts, the Respondent's VAT assessment orders showed that the jurisdictional VAT authority had not allowed the WCT benefit; consequently any WCT credit not reflected in the Respondent's VAT returns or not allowed by the assessing authority could not be taken into account for computing the pre GST ITC. Therefore, despite the legal possibility of WCT being relevant in some cases, on the evidence before the Authority WCT was not permissible to adjust the profiteering computation for this Respondent. [Paras 12]

DGAP's view that WCT was ineligible as credit rejected in principle; on the present facts WCT benefit not considered because it was not allowed by the VAT assessing authority and not reflected in returns.

Anti-profiteering - buyer confirmations of passing on of benefit - Whether the Respondent's claim that ITC benefit was already passed to buyers could be accepted on the basis of buyer confirmations and documentary evidence - HELD THAT: - DGAP sought confirmations from 150 randomly selected buyers and received confirmations from only 15 (about 6%), one negative response and no replies from the remainder. Given confirmations below the 10% threshold adopted by DGAP for acceptance, the Authority did not accept the Respondent's generalized claim of having passed the ITC benefit to all buyers. The Authority accepted the benefit passed in the 15 cases where confirmations and supporting documents were available and reconciled, but found that the Respondent still owed benefit to the remaining eligible buyers as per Annex 15 and Table C. [Paras 2, 20]

Respondent's claim of having passed ITC benefit accepted only in respect of the buyers with confirmed documentary/email evidence (15 buyers); the broader claim was not accepted and further benefit must be passed to remaining eligible buyers.

Penalty under Section 171(3A) - Whether the Respondent is liable for penalty under Section 171(3A) for the period when that provision was in force - HELD THAT: - Section 171(3A) was inserted w.e.f. 01.01.2020. The Authority held that since the investigation period extended to April 2020, the Respondent was liable for penalty under Section 171(3A) for profiteering from 01.01.2020 onwards and directed that notice be issued for imposition of penalty for that period. [Paras 19]

Respondent is liable to notice for penalty under Section 171(3A) for the period from 01.01.2020 onwards; notice to be issued.

Final Conclusion: The Authority held that the Respondent contravened Section 171(1) by not passing on the additional ITC benefit accruing post GST (01.07.2017 to 30.04.2020), quantified profiteering at Rs. 3,52,59,318/-, directed reduction of prices/pass on or refund of the amount to affected buyers with interest @18% from date of profiteering, required compliance within three months and ordered initiation of penalty proceedings under Section 171(3A) for the period from 01.01.2020 onwards; the WCT contention was rejected on the facts because WCT benefit was not reflected/allowed in VAT returns.

Benefit of input tax credit - Section 171 of the CGST Act, 2017 - commensurate reduction in prices - methodology for computing profiteering based on ITC-to-turnover ratio - interest under Rule 133(3)(b) of the CGST Rules, 2017

Benefit of input tax credit - commensurate reduction in prices - Section 171 of the CGST Act, 2017 - Whether the Respondent passed on the benefit of input tax credit to eligible home buyers for the period under investigation - HELD THAT: - The Authority examined DGAP's re investigation, the Respondent's cost sheets, credit notes, customer confirmations and sales data. While upfront discounts recorded in cost sheets and acknowledgements established that 338 post GST purchasers received benefits, DGAP's verification showed 87 post GST purchasers and 308 pre GST purchasers (total 395 recipients) were not given commensurate ITC benefit. The Authority accepted DGAP's factual reconciliation and concluded that the Respondent did not pass on the benefit of additional ITC to all eligible home buyers as required by Section 171(1). The Authority treated the methodology adopted by the DGAP for verification and reliance on documentary evidence as having attained finality. [Paras 20, 21, 22]

The Respondent has not passed on the benefit of input tax credit to all eligible home buyers for the period 01.07.2017 to 31.12.2018.

Methodology for computing profiteering based on ITC-to-turnover ratio - benefit of input tax credit - Quantum of additional ITC benefit and the amount of profiteering to be returned for the period under investigation - HELD THAT: - Using the accepted methodology - comparing the ratio of input tax credit to turnover in the pre GST period (April 2016 to June 2017) with the post GST period (July 2017 to December 2018) and applying the differential to the turnover of those customers who did not receive upfront discounts - DGAP computed an additional ITC benefit of 0.46% of turnover. The Authority found these computations to be based on the Respondent's returns, ITC registers and saleable/sold area data and therefore reliable. Applying this differential to the identified 395 eligible home buyers produced the profiteered amount determined by the Authority. [Paras 21, 22]

Additional ITC benefit is 0.46% of turnover for 01.07.2017 to 31.12.2018; total profiteered amount determined as per DGAP's calculations for that period.

Interest under Rule 133(3)(b) of the CGST Rules, 2017 - commensurate reduction in prices - Relief and directions to be granted to recipients and supervisory measures to ensure compliance - HELD THAT: - The Authority directed that the Respondent must pass the computed benefit to the affected home buyers along with interest at the prescribed rate from the dates amounts were collected until payment, in accordance with Rule 133(3)(b). The Authority ordered price reduction measures and directed the jurisdictional Commissioners of CGST/SGST to monitor compliance, ensure payment to eligible buyers and submit reports; it also directed publication of an advertisement to inform affected home buyers. The Authority noted that penalty under Section 171(3A) cannot be imposed for the investigation period because that provision came into force later. [Paras 22, 23, 25]

Respondent ordered to return the determined benefit with interest and to reduce prices commensurate with ITC benefit; Commissioners CGST/SGST directed to ensure compliance and report.

Final Conclusion: The Authority accepted DGAP's re investigation and methodology, held that the Respondent contravened Section 171(1) by not passing the additional ITC benefit to all eligible home buyers for 01.07.2017 to 31.12.2018, determined the additional ITC benefit at 0.46% of turnover and directed repayment of the profiteered amount with interest and supervisory compliance by the jurisdictional tax authorities.

Negative blocking of Electronic Credit Ledger - Input Tax Credit (ITC) - adjudication proceedings - opportunity of hearing - reasoned and speaking order - expeditious disposal of reply

Negative blocking of Electronic Credit Ledger - adjudication proceedings - reasoned and speaking order - opportunity of hearing - expeditious disposal of reply - Directing the Officer to consider and dispose of the petitioner's reply to the show-cause notice and to determine the continued negative blocking of ITC in accordance with law - HELD THAT: - The Court noted that the respondents had issued a show-cause notice and that the petitioner filed a reply on 13th June, 2022 after seeking extensions. Although the petitioner was not wholly diligent in filing the reply, the Court directed that the reply must be considered and disposed of expeditiously. The Officer is required to provide the petitioner or his authorised representative an opportunity of hearing, to pass a reasoned and speaking order in accordance with law, and to take immediate steps to revoke the negative blocking of the Electronic Credit Ledger if, on such consideration and hearing, the petitioner establishes a case for revocation. The Court fixed a preferred timeline of three weeks from communication of the order for disposal of the reply, emphasising prompt adjudication and adherence to procedural fairness.

The Officer concerned is directed to consider and dispose of the reply dated 13th June, 2022 expeditiously, provide an opportunity of hearing, pass a reasoned and speaking order, and, if the petitioner succeeds, revoke the negative blocking of ITC; disposal preferably within three weeks of communication of this order.

Final Conclusion: Writ petition disposed by directing the assessing authority to promptly consider the petitioner's reply to the show-cause notice, afford hearing, pass a reasoned speaking order and, if justified, revoke the negative blocking of the Electronic Credit Ledger, preferably within three weeks of communication of the order.

Withholding of refund under Section 241A - mandatory processing of returns under Section 143(1) - mere issuance of notice under Section 143(2) not sufficient to withhold refund - requirement of recorded/speaking reasons and approval for withholding refund - direction for interim/partial refund pending fresh adjudication

Withholding of refund under Section 241A - mere issuance of notice under Section 143(2) not sufficient to withhold refund - requirement of recorded/speaking reasons and approval for withholding refund - Validity of the Order dated 15th June, 2022 passed under Section 241A withholding the refund. - HELD THAT: - The Court held that an order under Section 241A cannot be passed in a mechanical or routine manner and that withholding of refund requires objective, recorded reasons demonstrating that grant of the refund is likely to adversely affect the revenue. Mere issuance of a notice under Section 143(2) or selection for scrutiny does not, by itself, justify withholding. The impugned order was generic and failed to substanti ate how the refund would adversely affect the revenue; it reproduced the statutory language without application of mind. Consistent with precedents cited, the discretion to withhold is channelled and must be exercised with recorded reasoning and appropriate approval. [Paras 9, 10, 11, 12]

Impugned Order dated 15th June, 2022 under Section 241A quashed; matter remanded to the Assistant Commissioner of Income Tax Circle 43(1), Delhi to pass a fresh speaking order within six weeks.

Mandatory processing of returns under Section 143(1) - direction for interim/partial refund pending fresh adjudication - Whether petitioner was entitled to an immediate refund (in part) pending fresh consideration and direction to quantify and release same. - HELD THAT: - The Court reiterated that refunds determined on processing under Section 143(1) are ordinarily liable to be released unless a valid Section 241A order with reasons is in place. Taking into account the tax liability that could legitimately be withheld (computed on alternative bases), the Court directed release of the balance amount forthwith so that the petitioner is not unjustly deprived of the refund while the authority reconsiders the withholding order. The Court imposed a timetable for refund and retained that assessment proceedings may continue unimpaired by its observations. [Paras 13, 14, 15]

Respondents directed to refund the specified balance amount along with applicable interest under Section 244A within two weeks; assessment proceedings to continue without being influenced by the Court's observations.

Final Conclusion: Impugned order under Section 241A quashed for lack of speaking reasons and remanded for fresh consideration within six weeks; meanwhile the Revenue is directed to release the petitioner's specified partial refund with interest forthwith and assessment proceedings shall continue unimpaired.

Maintainability of writ petition challenging order under Section 148A(d) and notice under Section 148 - Section 148A procedural safeguards (opportunity to be heard, consideration of reply, prior approval and reasoned order) - Credible information as basis for reopening assessment - Scope of judicial intervention under Article 226 in tax matters and availability of statutory remedies

Maintainability of writ petition challenging order under Section 148A(d) and notice under Section 148 - Scope of judicial intervention under Article 226 in tax matters and availability of statutory remedies - Credible information as basis for reopening assessment - Whether the writ petition challenging the order under Section 148A(d) and the notice under Section 148 is maintainable at the interlocutory stage. - HELD THAT: - The Court held that Section 148A establishes a statutory mechanism requiring the Assessing Officer to conduct any necessary enquiry with prior approval, serve a show-cause notice, consider the assessee's reply and, within the prescribed time and with prior approval, pass a reasoned order under Section 148A(d) before issuing a notice under Section 148. Applying the scheme and the Supreme Court's exposition in Union of India v. Ashish Agrawal, the Court found that the Assessing Authority in the present case had considered the petitioner's reply and recorded a reasoned finding based on the material including alleged transactions with M/s Panveer Trading Private Limited and information of suspected issuance of fake invoices. The petitioner's contentions denying transactions and denying utilisation of input tax credit are factual defences which are to be examined in the statutory proceedings under Section 148 and before the appellate fora; they do not render the interlocutory challenge maintainable. Given that the Income Tax Act provides a complete remedial scheme and that no jurisdictional defect or failure of the Section 148A procedure was shown, the writ petition at this stage is premature and not maintainable. The Court therefore dismissed the petition without adjudicating the merits, leaving the petitioner to pursue statutory remedies. [Paras 11, 14, 15, 16]

Writ petition dismissed as not maintainable at the interlocutory stage; petitioner to avail statutory remedies and the Assessing Authority to decide the matter on merits in proceedings under Section 148.

Final Conclusion: The challenge to the order passed under Section 148A(d) and the notice issued under Section 148 is premature; the High Court dismissed the writ petition, leaving the petitioner to pursue the available statutory remedies and for the Assessing Authority to examine and decide the matter on merits in the reassessment proceedings.

Breach of natural justice for denial of opportunity to reply to draft assessment - faceless assessment scheme obligation to afford show-cause opportunity before finalising draft assessment - statutory requirement under Section 143(3) read with Section 144B to provide opportunity before final order - remand for fresh adjudication from draft assessment stage

Breach of natural justice for denial of opportunity to reply to draft assessment - faceless assessment scheme obligation to afford show-cause opportunity before finalising draft assessment - statutory requirement under Section 143(3) read with Section 144B to provide opportunity before final order - Final assessment order passed without deciding the assessee's request for time to reply to the draft assessment order and without giving the assessee an opportunity to file objections was impermissible and amounted to breach of natural justice and statutory requirement. - HELD THAT: - The faceless assessment scheme (as embodied in the notification of 13 August 2020 and brought into statutory force from 01.04.2021) contemplates that where modification is proposed in a draft assessment, the assessee must be served a notice calling upon him to show cause before a final order is passed. The petitioner emailed a request on 22.05.2021 seeking time up to 06.06.2021 to file his reply to the draft assessment; that request was received by the Department but was neither decided nor granted, and the final assessment order dated 27.05.2021 was passed without affording the petitioner the statutory opportunity to be heard. Non-compliance with the statutory mandate to afford the opportunity to reply operates prejudicially to the assessee and vitiates the assessment. The Court further noted that the request was made during the peak of the Covid-19 second wave and that, in such circumstances, the Department ought to have adopted a lenient approach in granting the requested time. The Court expressly limited its decision to the procedural breach and declined to express any opinion on the merits of the assessments or additions.

The assessment order dated 27.05.2021 and the contemporaneous notices under Sections 274 and 270A are set aside on the ground of breach of natural justice and statutory non-compliance; relief granted to the assessee on this procedural ground only.

Remand for fresh adjudication from draft assessment stage - Whether the assessment proceedings should be remitted for fresh consideration following the procedural breach. - HELD THAT: - In view of the concluded breach of the statutory requirement to afford an opportunity to reply to the draft assessment, the Court remitted the assessment proceedings to the Assessing Officer to be taken up afresh from the stage of the draft assessment order. The Assessing Officer is directed to provide the petitioner an opportunity to file a reply and to pass an appropriate order thereafter. The Court imposed a timeline for completion of the reassessment process, requiring the proceedings to be completed within twelve weeks from the date of receipt of the order. The remand is confined to rectifying the procedural defect; no view was taken on the substantive merits.

Proceedings remitted to the Assessing Officer to be reopened from the draft assessment stage with an opportunity to the assessee to file a reply; reassessment to be completed within twelve weeks from receipt of this order.

Final Conclusion: Writ petition allowed; the impugned assessment order dated 27.05.2021 and related notices of even date are quashed for breach of the statutory obligation to afford an opportunity to reply to the draft assessment. Proceedings are remitted to the Assessing Officer for fresh adjudication from the draft stage, to be completed within twelve weeks; no opinion expressed on merits.

Arm's Length Price - comparability analysis - functional similarity - service revenue from export/ITES filter - diminishing revenue filter - transfer pricing - TNMM and selection of comparables - Chapter X intention to neutralise transfer of income

Comparability analysis - service revenue from export/ITES filter - diminishing revenue filter - Arm's Length Price - transfer pricing - TNMM and selection of comparables - Validity of the exclusion of Excel Infoways Pvt. Ltd. as a comparable in transfer pricing benchmarking for AY 2012 13 and the correctness of applying the TPO/Tribunal filters. - HELD THAT: - The Court held that the object of Chapter X is to determine the Arm's Length Price so as to eliminate effects of controlled international transactions; comparability must be judged with reference to material similarity and the comparability factors in Rule 10B(2). Reliance on the flexibility of TNMM does not justify diluting standards of selection of comparables; wide deviations in profits or material functional dissimilarity require further analysis. The Tribunal's and TPO's insistence on a service revenue from export/ITES filter (75%) was intended to exclude predominantly domestic entities whose economic circumstances differ from an exporter centric taxpayer. The Tribunal correctly found that Excel Infoways failed the export/service revenue filter and also exhibited diminishing revenue and profitability as shown in the reproduced financial chart; these shortcomings undermine its suitability as a comparable. Having regard to the statutory purpose, precedent emphasising rigorous comparability inquiry, and the factual finding that Excel did not meet the filters, the Court found no reason to interfere with the exclusion of Excel Infoways. [Paras 8, 9, 10]

The exclusion of Excel Infoways as a comparable was upheld and the Tribunal's and TPO's application of the filters was sustained.

Final Conclusion: Delay in filing the appeal was condoned; on merits the appeal is dismissed for lack of any question of law arising, upholding the Tribunal's exclusion of the suggested comparable for AY 2012 13.

Deduction under Section 80P(2)(d) - Interest income from investments with co-operative banks - Effect of insertion of sub-section (4) to Section 80P - Definition of "co-operative society" under section 2(19) - Revision proceedings under Section 263

Deduction under Section 80P(2)(d) - Interest income from investments with co-operative banks - Effect of insertion of sub-section (4) to Section 80P - Definition of "co-operative society" under section 2(19) - Whether the assessee-cooperative society was entitled to deduction under Section 80P(2)(d) in respect of interest income earned from deposits/investments made with co-operative banks and whether the assessment was erroneous and prejudicial to revenue under Section 263. - HELD THAT: - The Tribunal examined the scope of Section 80P(2)(d) and the effect of the Finance Act, 2006 insertion of sub-section (4) to Section 80P. It held that Section 80P(2)(d) allows deduction where interest is derived by a co-operative society from investments with any other co-operative society. A cooperative bank continues to be a co-operative society as defined by section 2(19), and the insertion of sub-section (4) - which bars co-operative banks themselves from claiming 80P in certain circumstances - does not alter the character of a cooperative bank as a "co-operative society" for the purpose of an investing society claiming deduction under clause (d). The Tribunal relied on its earlier co-ordinate bench decision and on High Court decisions favourable to the assessee to conclude that interest earned on deposits with co-operative banks can qualify for deduction under Section 80P(2)(d) where the statutory conditions are met. Accordingly, the Principal CIT's view that such interest was ineligible and that the assessment was therefore erroneous and prejudicial to revenue was not sustained. [Paras 5, 6]

The Revision order under Section 263 was reversed; the claim of deduction under Section 80P(2)(d) in respect of interest from deposits with co-operative banks was held to be maintainable and the assessment was not held to be erroneous and prejudicial to revenue.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2014-15, set aside the Principal CIT's revision directions under Section 263, and held that interest income earned on deposits with co-operative banks could, on the facts and subject to statutory conditions, qualify for deduction under Section 80P(2)(d).

Generation of electricity treated as manufacture or production for purpose of additional depreciation - clarificatory retrospective effect of legislative amendment classifying generation and distribution of power as manufacturing - non-applicability of section 14A computation to book profit under section 115JB - independent computation of disallowance under clause (f) to Explanation 1 to section 115JB - ad-hoc disallowance where statutory mechanism for computation is absent

Generation of electricity treated as manufacture or production for purpose of additional depreciation - clarificatory retrospective effect of legislative amendment classifying generation and distribution of power as manufacturing - Allowability of additional depreciation claimed on windmills (generation of electricity) for AY 2006-07 - HELD THAT: - The Tribunal considered whether generation of electricity by windmills qualifies as "production or manufacture of an article or thing" so as to attract the additional depreciation claimed. It noted that the Hon'ble Madras High Court in S. Srinivasaraghavan (reported) on identical facts for AY 2006-07 held that generation of electricity is manufacturing and directed allowance of additional depreciation. No contrary binding decision or stay of that High Court ruling was placed on record by Revenue and no distinguishing facts were shown. In view of the High Court authority and absence of contrary precedent, the Tribunal found no infirmity in the CIT(A)'s acceptance of the assessee's claim and dismissed Revenue's ground on this point. [Paras 8]

Ground of appeal relating to disallowance of additional depreciation on windmills is dismissed and additional depreciation is to be allowed.

Non-applicability of section 14A computation to book profit under section 115JB - independent computation of disallowance under clause (f) to Explanation 1 to section 115JB - ad-hoc disallowance where statutory mechanism for computation is absent - Whether disallowance computed under section 14A (and rule 8D) can be adopted while computing book profit under section 115JB, and the manner of making disallowance under clause (f) to Explanation 1 to section 115JB - HELD THAT: - The Tribunal applied the Special Bench Delhi ITAT decision in ACIT vs. Vireet Investment Pvt. Ltd. holding that computation under section 14A r.w.r. 8D is not to be resorted to for computing the amount under clause (f) of Explanation 1 to section 115JB(2). The Tribunal further relied on the Calcutta High Court in CIT v. Jayshree Tea Industries Ltd. that section 115JB is a self-contained code and clause (f) requires an independent computation of expenditure relatable to exempt income. Noting absence of any statutory mechanism under clause (f) to determine such expenditure, and to avoid multiplicity of proceedings, the Tribunal directed an ad-hoc disallowance of 1% of the exempted income subject to the maximum disallowance earlier made by the lower authorities. [Paras 13]

Addition made by AO adopting section 14A computation for book profit is not justified; disallowance under clause (f) to Explanation 1 of section 115JB must be determined independently and, in the facts, an ad-hoc disallowance of 1% of exempted income (capped at the previously made disallowance) is directed.

Final Conclusion: The Revenue's appeal is partly allowed: the challenge to allowance of additional depreciation on windmills for AY 2006-07 is dismissed, while the matter of disallowance for computing book profit under section 115JB is remediated by directing an independent (ad-hoc) disallowance of 1% of exempted income subject to the maximum disallowance earlier made; overall the appeal is partly allowed.

Reopening of assessment - proviso to section 147 - failure to disclose fully and truly all material facts - change of opinion - reason to believe - tangible material - classification of receipts as business income versus capital gains

Reopening of assessment - proviso to section 147 - failure to disclose fully and truly all material facts - reason to believe - Validity of reopening the assessment beyond four years under the proviso to section 147. - HELD THAT: - The Tribunal upheld the order of the ld. CIT(A) that the Assessing Officer failed to satisfy the proviso to section 147 when reopening the assessment beyond four years. The assessee had disclosed the transactions and the original assessment under section 143(3) accepted the claim of capital gains. The Assessing Officer relied on the same material to form a contrary view; no new tangible material was shown to establish a failure by the assessee to disclose fully and truly all material facts. Authorities including Kelvinator, Fenner, Lakhmani Mewal Das and other High Court decisions were applied to conclude that mere escapement or a different view on classification, without an omission or failure to disclose primary facts, does not confer jurisdiction to reopen under the proviso. The Tribunal found no infirmity in the CIT(A)'s conclusion that the jurisdictional condition (failure to disclose) was not established and the reopening was therefore invalid. [Paras 7, 8]

Reopening beyond four years quashed for lack of any recorded failure by the assessee to disclose fully and truly all material facts; reopening held invalid.

Change of opinion - tangible material - classification of receipts as business income versus capital gains - Whether treating previously assessed capital gains as business income based on the same material amounted to permissible reassessment or impermissible change of opinion. - HELD THAT: - On the facts the original assessment accepted the assessee's claim of capital gains after considering the material filed. The Assessing Officer subsequently sought tocharacterise the same receipts as business income relying on the identical material. Applying the principle that reassessment cannot be founded on mere change of opinion and that reopening must be supported by tangible new material or an omission to disclose primary facts, the Tribunal agreed with the ld. CIT(A) that the proposed reclassification was only a change of opinion. In absence of new material or evidence of non-disclosure, the change of opinion cannot justify reopening; therefore the Assessing Officer's action was impermissible. [Paras 7]

Reassessment premised on reclassifying capital gains as business income from the same record is a mere change of opinion and cannot sustain reopening.

Final Conclusion: The Revenue's appeal is dismissed. The reopening of assessment for AY 2008-09 was held invalid: the Assessing Officer relied on the same material to reclassify capital gains as business income, which amounted to a change of opinion, and the proviso to section 147 was not satisfied as there was no failure by the assessee to disclose fully and truly all material facts.

Apportionment of common head office and selling expenses for deduction under Section 80IB - Application of section 14A and Rule 8D for disallowance relating to exempt income - Eligibility of receipts from sale of scrap for deduction under Section 80IB - Corporate guarantee as an international transaction under transfer pricing provisions - Determination of Arm's Length Price for corporate guarantee - imputed guarantee fee and pro rata computation

Apportionment of common head office and selling expenses for deduction under Section 80IB - Assessee's methodology for apportioning common head office and selling expenses for computing deduction under Section 80IB was acceptable and additions disallowed by the AO were to be deleted. - HELD THAT: - The Tribunal noted that the assessee maintained separate books for eligible units and consistently applied a scientific and reasonable basis for allocating common head office and selling expenses (inflation-adjusted historic head office expense with subsequent apportionment by turnover). The same methodology had been examined and accepted by Coordinate benches of the Tribunal in the assessee's own earlier years and, in material cases, affirmed by the jurisdictional High Court. There was no change in facts or law in the years under appeal; consequently, applying the principle of judicial consistency and following the earlier decisions in the assessee's own case, the Tribunal upheld the CIT(A)'s deletion of the addition and directed deletion of the AO's disallowance. [Paras 11]

Addition of Rs.9,38,54,750/- made by the AO is deleted and ground is dismissed.

Application of section 14A and Rule 8D for disallowance relating to exempt income - Disallowance under Section 14A read with Rule 8D computed by the AO was deleted where AO failed to specify cogent reasons and assessee's own funds were adequate to meet investments yielding exempt income. - HELD THAT: - On facts, the assessee had substantial own funds (share capital and reserves) exceeding its investments; the AO applied Rule 8D mechanically without demonstrating nexus of borrowed funds to the investments or satisfactorily rejecting the assessee's claim. The Tribunal followed the Coordinate bench decision in the assessee's own case for AY 2008-09 and the subsequent affirmation by the Calcutta High Court, and found support in Supreme Court authority (South Indian Bank Ltd.) on similar principles. In these circumstances the disallowance under Section 14A/Rule 8D was not maintainable and was deleted. [Paras 14]

Disallowance of Rs.55,04,432/- made by the AO is deleted and ground is dismissed.

Eligibility of receipts from sale of scrap for deduction under Section 80IB - Receipts from sale of scrap arising in the manufacturing process of eligible units qualify as profits of the industrial undertaking for deduction under Section 80IB and the AO's addition is to be deleted. - HELD THAT: - The Tribunal observed no change in factual matrix or law from earlier years where Coordinate benches and various High Courts held that scrap generated in manufacturing is incidental to production and its proceeds form part of profits of the eligible industrial undertaking. Following the assessee's own earlier decisions (and the Calcutta High Court's dismissal of revenue's challenge), the Tribunal held that sale of scrap in the years under appeal is eligible for Section 80IB deduction and deleted the addition. [Paras 16]

Addition of Rs.76,94,000/- made by the AO is deleted and ground is dismissed.

Corporate guarantee as an international transaction under transfer pricing provisions - Determination of Arm's Length Price for corporate guarantee - imputed guarantee fee and pro rata computation - Provision of corporate guarantees to related foreign subsidiaries constitutes an international transaction subject to transfer pricing; ALP adjustment is to be made by imputing guarantee fees at 0.35% per annum, to be computed on a pro rata (days in period) basis. - HELD THAT: - The Tribunal held that the question is no longer res integra: post the retrospective legislative amendment and judicial pronouncements, corporate guarantees are covered by the definition of international transaction and may attract TP adjustment if they confer a financial benefit to the associated enterprise. While rejecting the assessee's contention that the guarantees were purely shareholder/investor acts not amenable to TP provisions, the Tribunal accepted the alternative, without prejudice submission on appropriate fee. Relying on several Tribunal and High Court authorities where guarantee fees in the range 0.2%-0.5% were applied, the Tribunal fixed a representative arm's length guarantee fee at 0.35% p.a. for the present facts. The Tribunal also directed that the charge be computed proportionately for the actual period(s) the guarantees were effective (apportionment by number of days) and remitted computation to the assessing authority for giving effect. [Paras 21]

Ground is partly allowed: corporate guarantee treated as international transaction; ALP imputed at 0.35% p.a. and to be computed on a pro rata days basis; assessing authority to give effect.

Final Conclusion: Assessee's cross appeals dismissed as not pressed. Revenue's appeals for AY 2009 10 and AY 2010 11 are partly allowed: additions/disallowances relating to apportionment of common expenses, Section 14A/Rule 8D, and sale of scrap deleted; transfer pricing adjustment for corporate guarantees upheld in principle but quantified by applying an arm's length guarantee fee of 0.35% per annum apportioned pro rata by days, with computational directions to the assessing authority.

Deemed income under section 56(2)(vii)(b)(ii) - revision under section 263 - Explanation-2(a) - non-application of mind - remission to Assessing Officer versus deciding the issue on merits - effect of registration and date of transfer under section 2(47) and Registration Act

Deemed income under section 56(2)(vii)(b)(ii) - revision under section 263 - Explanation-2(a) - non-application of mind - Validity of the revisionary order under section 263 setting aside the assessment and remitting the matter to the Assessing Officer for fresh inquiry - HELD THAT: - The Tribunal held that the Assessing Officer had failed to examine applicability of the provision deeming excess consideration as income where there was a large disparity between stated consideration and stamp valuation. The absence of any inquiry or verification by the AO on that issue amounted to non-application of mind, bringing the assessment within Explanation-2 to section 263 and rendering it erroneous and prejudicial to revenue. The Pr. CIT was therefore entitled to invoke revisionary powers and remit the matter to the AO for proper inquiries and de novo consideration rather than leave the assessment unexamined on that germane aspect. The Tribunal emphasised that provisions incident to the transaction (including s.56(2)(vii)(b)(ii)) fell within the scope of scrutiny and the lack of reference to property details and inconsistent dates in the assessment record justified the remand for verification. [Paras 4]

The revisionary order setting aside the assessment and directing the AO to conduct proper inquiries and complete the assessment afresh is upheld.

Remission to Assessing Officer versus deciding the issue on merits - effect of registration and date of transfer under section 2(47) and Registration Act - Whether the Tribunal should itself decide the legal question of date of transfer/registration or remit the matter to the Assessing Officer - HELD THAT: - The Tribunal held that it would be an excess of jurisdiction for it to undertake the role of a first instance fact-finder or to make inquiries that the revisionary authority has chosen to remit to the AO. Although the appellants advanced a legal argument on date of transfer and relied on authorities concerning effect of registration and section 2(47), those contentions were not placed before the revisionary authority nor supported by material there, and the factual matrix (including inconsistent cheque dates, stamp duty/registration delay and the character of the instrument as a lease) required examination. Precedents disapprove the Tribunal making fresh inquiries or converting itself into a court of first instance; remission to the AO remained within the revisional authority's discretion and was not interfered with. [Paras 4, 5]

The Tribunal declined to decide the issue itself and upheld the remand; it would not usurp the function of the revisional authority or the AO.

Final Conclusion: Appeals dismissed - the revisionary order under section 263 setting aside the assessments for AY 2014-15 is upheld and the matters are remitted to the Assessing Officer for fresh inquiry and de novo assessment; the Tribunal declined to decide the merits itself.

Computation of six-year block period under section 153C reckoned from date of recording of satisfaction/handing over - Prospective application of Finance Act, 2017 amendment to sections 153A and 153C - Validity of assessment framed under section 153C r.w.s. 143(3) - Jurisdictional validity of assessment being barred by limitation

Computation of six-year block period under section 153C reckoned from date of recording of satisfaction/handing over - Computation of relevant assessment years for a person other than the searched person - Six-year block for proceedings under section 153C is to be reckoned with reference to the date of recording of satisfaction/handing over of seized material to the Assessing Officer of the other person. - HELD THAT: - The Tribunal followed settled jurisdictional authorities holding that for a person other than the searched person the reference date for computing the six immediately preceding assessment years is the date on which the Assessing Officer of the searched person records satisfaction and hands over the seized material (or the date of recording of satisfaction by the AO of the other person). The rationale is that seized documents belonging to another person come into the possession of that person's AO only after the AO of the searched person is satisfied, and therefore the date of recording of satisfaction/handing over governs the temporal scope of section 153C. The coordinate Bench decisions and High Court precedents were applied to the facts (search 07.04.2016; satisfaction/handing over recorded subsequently) to determine that AY 2012-13 lay beyond the six-year block reckoned from the relevant satisfaction/handing over date. [Paras 7, 8]

The six-year block under section 153C is to be computed from the date of recording of satisfaction/handing over, and on that basis AY 2012-13 falls outside the permissible block period.

Prospective application of Finance Act, 2017 amendment to sections 153A and 153C - Validity of assessment framed under section 153C r.w.s. 143(3) - Jurisdictional validity of assessment being barred by limitation - The amendment made by Finance Act, 2017 to sections 153A and 153C is prospective (effective from 01.04.2017) and, as the search in this case preceded the amendment, the amended provisions do not apply; consequently the assessment framed under section 153C r.w.s. 143(3) dated 31.12.2019 for AY 2012-13 was without jurisdiction and barred by limitation and is quashed. - HELD THAT: - The Tribunal relied on the CBDT Explanatory Notes/Circular and consistent judicial precedents holding the Finance Act, 2017 amendment to sections 153A/153C to be prospective, applicable only where the search/requisition occurred on or after 01.04.2017. Given the search here occurred on 07.04.2016 (prior to the amendment), the enlarged temporal scope introduced by the 2017 amendment could not be invoked. Applying the correct rule for reckoning the block period (from the date of recording of satisfaction/handing over) showed that AY 2012-13 lay outside the six-year window; therefore the AO had no jurisdiction to make assessment for that year and the assessment was barred by limitation. The Tribunal followed coordinate Bench decisions with identical facts and quashed the assessment and consequent appellate order as invalid. [Paras 7, 9, 15]

The amendment is prospective and inapplicable; the impugned assessment under section 153C r.w.s. 143(3) is without jurisdiction and barred by limitation and is quashed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the six-year block under section 153C is to be reckoned from the date of recording of satisfaction/handing over and that the Finance Act, 2017 amendment is prospective; consequently the assessment for AY 2012-13 framed under section 153C r.w.s. 143(3) was without jurisdiction, barred by limitation and is quashed, and the Revenue's cross-appeal was dismissed as academic.

Allowability of revenue expenditure as deduction under wholly and exclusively test of section 37 - limitation of weighted deduction to DSIR certified amount under the scheme for scientific research (claimed versus Form 3CL certified quantum) - depreciation claim on leasehold premium as an intangible asset eligible under depreciation provisions - binding effect of Tribunal's earlier decision in assessee's own case for a preceding assessment year

Limitation of weighted deduction to DSIR certified amount under the scheme for scientific research (claimed versus Form 3CL certified quantum) - allowability of revenue expenditure as deduction under wholly and exclusively test of section 37 - Restoration of uncertified portion of R&D expenditure for fresh verification by the Assessing Officer - HELD THAT: - The assessee claimed weighted deduction under section 35(2AB) in excess of the amount certified in Form 3CL. The Assessing Officer restricted the weighted deduction to the DSIR-certified amount and disallowed the excess; the CIT(A) further declined to allow the uncertified revenue expenditure under section 37 holding the assessee had not satisfied the 'wholly and exclusively' requirement. The Tribunal observed that while the onus lies on the assessee to prove that expenditure is laid out wholly and exclusively for business, the record did not establish the final outcome of similar earlier proceedings and the CIT(A)'s conclusion lacked necessary verification. In view of these lacunae, the Tribunal did not decide the merits on allowance under section 37 but directed that the matter be restored to the file of the Assessing Officer for fresh consideration and verification of facts, after affording the assessee an opportunity of being heard. [Paras 9]

Issue remanded to the Assessing Officer for fresh verification and decision as per fact and law after giving the assessee an opportunity to be heard.

Depreciation claim on leasehold premium as an intangible asset eligible under depreciation provisions - binding effect of Tribunal's earlier decision in assessee's own case for a preceding assessment year - Allowability of depreciation on leasehold premium (leasehold rights) claimed by the assessee - HELD THAT: - The Assessing Officer and the CIT(A) treated the one-time lease premium as capital expenditure to be amortized over the lease period and disallowed depreciation claimed. The Tribunal noted that an identical issue in the immediately preceding assessment year had been decided in favour of the assessee by the Tribunal, which considered applicable authorities and held that the right to operate (leasehold right/premium) can partake the character of an intangible asset eligible for depreciation. Applying the principle of consistency and following the Tribunal's own earlier decision on substantially similar facts, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to follow the Tribunal's order in the assessee's own case and make consequential computation. [Paras 17]

Depreciation on leasehold premium allowed; matter remitted to AO to follow Tribunal's earlier order in assessee's own case and frame consequential computation.

Final Conclusion: Appeal allowed for statistical purposes: R&D uncertified expenditure remanded to the Assessing Officer for fresh verification and decision; depreciation on leasehold premium allowed following the Tribunal's earlier decision in assessee's own case and AO directed to give effect accordingly.

Unexplained investment under section 69 treated as addition - STREEDHAN - CBDT Instruction No. 1916 dated 11-05-1994 regarding jewellery found during search - discretion to exclude larger quantity of jewellery having regard to status, customs and practices of the community - application of CBDT instruction to silver jewellery - community customs and social status as a relevant evidentiary consideration - deletion of addition where excess jewellery is explained

Unexplained investment under section 69 treated as addition - STREEDHAN - CBDT Instruction No. 1916 dated 11-05-1994 regarding jewellery found during search - discretion to exclude larger quantity of jewellery having regard to status, customs and practices of the community - application of CBDT instruction to silver jewellery - community customs and social status as a relevant evidentiary consideration - deletion of addition where excess jewellery is explained - Whether the addition of Rs.17,55,262 made as unexplained investment on account of jewellery found during search is sustainable or must be deleted. - HELD THAT: - Search revealed gold and silver jewellery held by the assessee and family. The assessee explained that major portion was ancestral/received as STREEDHAN on marriage and other family occasions and that some jewellery was purchased from cash withdrawals supported by bank statements. The AO allowed benefit only to the extent prescribed by CBDT Instruction No. 1916 dated 11-05-1994 and held balance as unexplained without adequately probing or rebutting the assessee's explanation. The Tribunal applied the discretionary limb of the CBDT instruction which permits excluding larger quantities having regard to the family's status and community customs. Reliance was placed on precedents where excess jewellery was accepted as explained in light of family tradition, status and customary gifting, and where silver articles were similarly treated in context. The Revenue did not controvert the factual matrix or point to contradicting evidence. Considering the totality of facts - family status, joint residence with parents, photographic and documentary material, cash withdrawals and cultural practice of passing jewellery as STREEDHAN - the excess jewellery was held to be nominal and explained. The Tribunal therefore concluded that the addition was not founded on adequate verification or cogent evidence and deserved deletion.

The addition of Rs.17,55,262 treated as unexplained jewellery is deleted and the grounds of the assessee are allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2018-19, deleted the addition made on account of jewellery found during search after accepting the explanation based on STREEDHAN, community customs, bank withdrawals and CBDT Instruction No. 1916 dated 11-05-1994.

Beneficial rate under section 112(1) - proviso to section 112(1) - capital gains on transfer of long-term equity shares - tax deducted at source and refund claim - binding precedent of the Jurisdictional High Court

Proviso to section 112(1) - beneficial rate under section 112(1) - capital gains on transfer of long-term equity shares - tax deducted at source and refund claim - binding precedent of the Jurisdictional High Court - Assessee entitled to tax long-term capital gain on sale of equity shares at the reduced rate provided by the proviso to section 112(1) and claim refund of excess TDS. - HELD THAT: - The assessee transferred equity shares of Cairn India Ltd. in an off-market transaction and reported long-term capital gain. The purchaser deducted TDS at 20% whereas the assessee claimed taxation of the capital gain at 10% by relying on the proviso to section 112(1) and sought refund of excess TDS. The Assessing Officer denied the claim but the Commissioner (Appeals) allowed it. The Tribunal examined the decision of the Hon'ble Delhi High Court in Cairn UK Holdings Ltd. v. DIT, which interpreted section 48 together with section 112(1) and held that the assessee could avail the beneficial tax rate under the proviso to section 112(1). As that High Court decision is binding on the Tribunal, the Tribunal found no infirmity in the Commissioner (Appeals)'s direction to tax the capital gain at the concessional rate and to permit the refund claim arising from excess TDS. [Paras 7, 8]

Revenue's appeal dismissed; benefit of proviso to section 112(1) allowed and assessee entitled to tax the capital gain at the reduced rate with consequential refund of excess TDS.

Final Conclusion: The Tribunal, following the binding decision of the Jurisdictional High Court, dismissed the Revenue's appeal and upheld the Commissioner (Appeals)'s order granting the assessee the benefit of the proviso to section 112(1) for AY 2012-13, with consequential entitlement to refund of excess TDS.

Unexplained cash deposits - treatment as unexplained money under Section 69A - presumptive taxation under Section 44AD - attribution of bank deposits to business receipts - standard of proof to explain cash deposits

Unexplained cash deposits - treatment as unexplained money under Section 69A - presumptive taxation under Section 44AD - attribution of bank deposits to business receipts - standard of proof to explain cash deposits - Whether the cash deposits in the assessee's bank account could be treated as unexplained money and added to income under Section 69A, notwithstanding the assessee's declaration of income on presumptive basis under Section 44AD. - HELD THAT: - The Tribunal accepted that the assessee was a very small businessman who had returned income on presumptive basis under Section 44AD and that such traders commonly transact largely in cash. It noted the department had accepted the assessee's turnover for computation of presumptive income and that no other source of income was shown. The Tribunal observed that although taxpayers are required to explain bank deposits, in the peculiar facts - small unorganised business, lapse of six years before reassessment, and practical difficulties in preserving or producing bills - it was unreasonable to demand documentary proof of cash sales after such delay. Applying a holistic and considerate approach, the Tribunal held that the admitted business turnover and the absence of any other income source justified attributing the cash deposits to business receipts rather than treating them as unexplained investments. Consequently, the addition under Section 69A was not sustainable and was to be deleted. [Paras 6, 8]

Addition of cash deposits treated as unexplained money under Section 69A set aside and deleted; deposits attributed to business receipts in view of presumptive return under Section 44AD and factual circumstances.

Final Conclusion: Appeal allowed; the addition made by the Assessing Officer treating cash deposits as unexplained money is deleted and the deposits are attributed to the assessee's business receipts for A.Y. 2010-11.

Treatment of cash deposits as unexplained money u/s. 69A of the Income tax Act - addition based on estimation and human probability hypothesis - requirement of evidential basis beyond suspicion, conjecture or surmise for making additions - weight to books of account, cash book and stock register where purchases are not disputed - comparability of contemporaneous turnover (Dhanteras sales) as relevant benchmark

Treatment of cash deposits as unexplained money u/s. 69A of the Income tax Act - addition based on estimation and human probability hypothesis - requirement of evidential basis beyond suspicion, conjecture or surmise for making additions - weight to books of account, cash book and stock register where purchases are not disputed - comparability of contemporaneous turnover (Dhanteras sales) as relevant benchmark - Validity of the addition of Rs.1,95,03,291 treated as unexplained cash under section 69A, which was computed by the Assessing Officer via an estimation of probable sales during the demonetisation time window. - HELD THAT: - The Assessing Officer's computation rested entirely on hypothetical assumptions about number of customers, time per transaction and average bill value to estimate maximum possible sales on 08.11.2016; those assumptions lacked scientific basis, third party comparables or other corroborative material. The assessee had produced books of account, cash book entries, stock registers, VAT returns and contemporaneous sales details, and purchases were not disputed. The Commissioner (Appeals) accepted the assessee's explanation that opening cash, recorded cash sales and customer advances accounted for the deposits and relied upon contemporaneous comparables (Dhanteras sales) and the firm's infrastructure and manpower to conclude the reported sales were plausible. Applying settled law that an Assessing Officer cannot base an addition on mere conjecture, suspicion or speculative arithmetic without evidential foundation, the Tribunal found the AO's approach impermissible. In these circumstances the Tribunal upheld the CIT(A)'s finding that the addition could not be sustained and that the books and recorded cash sales warranted acceptance for the purpose of the assessment. [Paras 5, 7, 8]

Addition of Rs.1,95,03,291 made as unexplained cash under section 69A is deleted; Revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the order of the Commissioner (Appeals) deleting the addition made by the Assessing Officer-the addition founded on speculative estimation of probable sales during the demonetisation period was unsustainable in absence of evidential basis; Revenue's appeal is dismissed.

Bail in economic offences - Admissibility of statement under Section 108 of the Customs Act - Requirement of independent corroboration for confession recorded under customs law - Proof of importation/smuggling as essential for attracting provisions relating to smuggled goods - Pre-trial detention and Article 21 liberty considerations

Bail in economic offences - Pre-trial detention and Article 21 liberty considerations - Applicant entitled to bail pending trial - HELD THAT: - Having considered the nature of allegations, the materials on record and the legal precedents relied upon, the Court concluded that the applicant has made out a case for bail. The prosecution's case at present principally rests on the statement recorded under Section 108 of the Customs Act; there is no convincing independent or corroborative evidence on record establishing the applicant's culpability. The applicant has been in custody since 27.12.2021, has no criminal antecedents, has represented that he lacks a passport and has family and business ties locally, and there is no material showing risk of tampering with witnesses. The Court applied constitutional considerations under Article 21 and the established principle that pre-conviction detention has punitive content and must be balanced against the right to liberty. In view of these factors and the authorities cited, the court exercised its discretion to grant bail while expressly not commenting on merits of the prosecution case.

Bail application allowed and applicant ordered released on furnishing personal bond and two sureties, subject to specified conditions.

Admissibility of statement under Section 108 of the Customs Act - Requirement of independent corroboration for confession recorded under customs law - Statement under Section 108 of the Customs Act cannot be the sole basis for conviction in absence of corroboration - HELD THAT: - The Court observed that the prosecution's reliance on the statement recorded under Section 108 has to be viewed in light of precedent holding that such statements, particularly if retracted or not supported by independent evidence, cannot alone sustain conviction. The judgment referred to authorities which emphasize that confessions or admissions recorded by customs officers require corroboration by independent and reliable evidence before they can be treated as conclusive. Accordingly, at the bail stage the existence only of the Section 108 statement, without corroborative material, weakens the case for continued pre-trial detention.

The Section 108 statement cannot be treated as conclusive proof without independent corroboration; this consideration weighed in favour of granting bail.

Proof of importation/smuggling as essential for attracting provisions relating to smuggled goods - Prosecution must establish importation/smuggling to attract provisions for smuggled goods - HELD THAT: - The Court noted that to attract the provisions applicable to smuggled goods it is essential to establish that the goods are of foreign origin and were imported clandestinely. Mere possession of foreign-marked goods or unaccounted goods does not of itself prove smuggling; there must be material showing importation from abroad. The absence of evidence establishing importation was one of the factors considered in evaluating the strength of the prosecution case at the bail stage.

On the material before the Court, importation/smuggling was not established; this militated in favour of granting bail.

Bail conditions and verification of sureties - Imposition of specific bail conditions including bank guarantee, surrender of passport and non-tampering obligations - HELD THAT: - While granting bail, the Court imposed conditions tailored to address prosecution concerns and ensure the applicant's presence at trial: surrender of passport (if any), furnishing of a bank guarantee to secure compliance, prohibition on tampering with evidence or witnesses, cooperation in trial proceedings including avoidance of adjournment requests, and verification of sureties before release. The Court made clear that breach of any condition would be a ground for cancellation of bail.

Bail granted subject to the enumerated conditions and verification of sureties; breach to invite cancellation of bail.

Final Conclusion: The bail application is allowed; the applicant is ordered released on furnishing the required bond and two sureties and subject to specified conditions (including surrender of passport, a bank guarantee, non-tampering and cooperation in trial); the Court's observations on evidentiary weaknesses and Article 21 considerations formed the basis for grant of bail, without expressing any opinion on the merits.

Classification of parts versus complete machines - classification under Heading 8517 (machines for reception, conversion and transmission of data) - HSN/CTH interpretation and Explanation G - apparatus allowing connection to communication networks - entitlement to exemption under Notification No. 24/2005-Cus (Sr. No. 13) - uniformity of classification and impermissibility of differential departmental stand

Classification of parts versus complete machines - classification under Heading 8517 (machines for reception, conversion and transmission of data) - Imported Small Form Pluggable modules (SFP) are classifiable as parts of telecommunication equipment (Ethernet switch/Photonic Service Switch) and not as complete machines under sub-headings of Heading 8517. - HELD THAT: - The Bench adopted the reasoning of the Commissioner (Appeals), Hyderabad and Commissioner (Appeals), Mumbai that SFPs cannot perform the essential functions of transmission and reception of optical data independently because they lack power, switching capability and control plane and operate only when mounted in the host chassis or I/O module. Manufacturer statements and product literature show SFPs function as pluggable interface modules forming part of an I/O card/module of an Ethernet/Photonic Service Switch. The original authority's contrary conclusion that SFPs are distinct machines was rejected for failure to demonstrate independent operability. Applying the HSN/CTH for Heading 8517 and the concepts in the relevant Explanatory Notes, the impugned SFPs were held to be parts (classifiable under the parts description of Heading 8517) rather than complete apparatus under sub-heading for other machines. [Paras 5]

SFPs are parts of telecom equipment and not independent machines; they are correctly classifiable as parts under Heading 8517.

Entitlement to exemption under Notification No. 24/2005-Cus (Sr. No. 13) - SFPs, being parts of telecommunication equipment, are entitled to the benefit of Notification No. 24/2005-Cus dated 01.03.2005 (Sr. No. 13) as claimed by the importer. - HELD THAT: - The Commissioner (Appeals), Hyderabad and Commissioner (Appeals), Mumbai recorded that parts of telecommunication equipment falling under the relevant sub-headings of Heading 8517 are covered by the exemption notification. Having held SFPs to be parts of the Photonic Service Switch/Ethernet switch, the Bench accepted that they qualify for the exemption under the cited notification and that the original authority's denial of exemption was incorrect. [Paras 5, 6]

Impugned SFPs are entitled to exemption under Notification No. 24/2005-Cus as parts of telecommunication equipment.

Uniformity of classification and impermissibility of differential departmental stand - The Department cannot adopt differential classification for the same goods imported at different places; the appeals against the impugned orders based on a different classification are rejected. - HELD THAT: - The Bench noted that the Department had not preferred appeals against the detailed orders of the Commissioner (Appeals), Hyderabad and Commissioner (Appeals), Mumbai, and observed that permitting inconsistent classifications across jurisdictions would undermine the Tariff regime and cause avoidable litigation. Given the elaborate and reasoned findings of the appellate authorities which were followed in the impugned orders, no case for interference was made out by the Department. [Paras 7, 8]

Departmental appeals are rejected; differential classification at different ports is impermissible and the impugned orders stand.

Final Conclusion: The Tribunal dismissed the Revenue appeals: SFP modules were held to be parts of telecommunication equipment (not independent machines), entitled to exemption under Notification No. 24/2005-Cus, and the Department was not permitted to maintain inconsistent classifications at different locations.

Valuation based on Fe content - inclusion/exclusion of moisture in shipping bills - application of Gangadhar Narsingdas Aggarwal guidelines - remand to adjudicating authority - Board's Circular No.4/2012-Cus dated 17.02.2012

Valuation based on Fe content - inclusion/exclusion of moisture in shipping bills - application of Gangadhar Narsingdas Aggarwal guidelines - remand to adjudicating authority - Whether the appeals could be entertained on merits or whether the matter should be remanded to the adjudicating authority to determine valuation (including treatment of moisture/impurity) in accordance with the guidelines in Gangadhar Narsingdas Aggarwal and Board's Circular No.4/2012-Cus. - HELD THAT: - The first appellate authority merely remanded the matters to the original adjudicating authority to pass fresh orders taking into consideration the Apex Court's guidelines in Gangadhar Narsingdas Aggarwal and the Board's Circular No.4/2012-Cus. This Bench has earlier in M/s. Vedanta Ltd. remanded valuation issues to the adjudicating authority for fresh decision as per the same guidelines. Valuation in these cases requires assessment based on the Fe content in the exported Iron Ore Fines and the question of including or excluding moisture (claimed as impurity) falls within the domain of the adjudicating authority to apply the Gangadhar guidelines; no merits-based determination was made by the first appellate authority. Given that no valuation exercise in accordance with those guidelines appears to have been undertaken, it is appropriate to concur with the remand for fresh adjudication. [Paras 5, 6, 7]

Concurred with the remand to the adjudicating authority for fresh valuation in accordance with the Gangadhar Narsingdas Aggarwal guidelines and the Board's Circular; appeals dismissed as there is no meritorious finding by the first appellate authority.

Final Conclusion: The Tribunal granted early hearing, took the matters up for final disposal, concurred with the first appellate authority's remand for fresh adjudication to determine valuation (including treatment of moisture) in accordance with the Gangadhar Narsingdas Aggarwal guidelines and Board's Circular No.4/2012-Cus, and dismissed the Department's appeals for want of merits in the impugned orders.

Revocation of licence for alleged breach of due diligence and duty to advise by a Customs Broker - Standard of proof required for disciplinary action against a Customs Broker - Proportionality of disciplinary sanctions - Forfeiture of security deposit as a disciplinary measure - Regulatory powers under the Customs Broker Licencing Regulation, 2018

Revocation of licence for alleged breach of due diligence and duty to advise by a Customs Broker - Standard of proof required for disciplinary action against a Customs Broker - Whether the revocation of the Appellant's Customs Broker licence, on the ground that the Appellant violated Regulation 10(d) and 10(e) of CBLR, 2018 by not advising clients and not exercising due diligence, was justified. - HELD THAT: - The Tribunal examined the Inquiry Report and the submissions of the Appellant and found that the Revenue did not bring on record particulars establishing the Appellant's role amounting to connivance, knowledge or intent. While Regulation 10(d) and 10(e) impose duties of advice and due diligence on a Customs Broker, the impugned order does not identify specific acts or documentary evidence demonstrating that the Appellant failed to exercise due diligence or advised clients to violate the law. Allegations of violation, without supporting material showing the Broker's active participation or culpable conduct, cannot substitute for proof. Given the absence of recorded factual findings linking the Appellant to the fraudulent scheme beyond allegations, the extreme sanction of licence revocation was disproportionate and not warranted on the material before the authority. [Paras 5, 6, 8, 9]

Revocation of the Customs Broker licence set aside.

Forfeiture of security deposit as a disciplinary measure - Proportionality of disciplinary sanctions - Regulatory powers under the Customs Broker Licencing Regulation, 2018 - Whether the forfeiture of the full security deposit furnished by the Appellant should be upheld or moderated. - HELD THAT: - Although the Tribunal found the evidence insufficient to sustain revocation, it noted that the Appellant did not satisfactorily demonstrate that it had advised its clients appropriately or exercised all due diligence. Balancing the absence of proof warranting licence revocation against the need for deterrence, the Tribunal exercised its regulatory discretion under the relevant CBLR provisions to moderate the sanction. Rather than upholding forfeiture of the entire security deposit, the Tribunal imposed a limited forfeiture as a deterrent measure, thereby calibrating punishment to the established facts and ensuring proportionality. [Paras 5, 9, 10]

Forfeiture of the full security deposit set aside and restricted to a limited forfeiture as a deterrent.

Final Conclusion: The appeal is allowed: the revocation of the Appellant's Customs Broker licence is set aside; the forfeiture of the security deposit is moderated and restricted to a limited forfeiture as a deterrent; the Tribunal thereby substituted a proportionate penalty for the disproportionate sanction of licence revocation.

Classification of Small Factor Pluggable (SFP) - exemption under Notification No. 24/2005-Cus dated 01.03.2005 - delinking and relisting for fresh consideration

Classification of Small Factor Pluggable (SFP) - exemption under Notification No. 24/2005-Cus dated 01.03.2005 - delinking and relisting for fresh consideration - Three appeals (C/88483, C/88487 and C/88492/2018) were delinked from the batch and ordered to be relisted for fresh hearing so that the classification of SFP and the alternative claim of exemption under Notification No. 24/2005-Cus dated 01.03.2005 may be considered. - HELD THAT: - The Review (ROM) application contended that, in respect of the three specified appeals, besides the main issue already decided on classification of populated printed circuit boards, the additional issue of classification of Small Factor Pluggable (SFP) and, alternatively, the claim for exemption under Notification No. 24/2005-Cus had not been addressed in the final order dated 22.06.2022. The Tribunal examined the ROM submissions and the Final Order and found an apparent error of omission in disposing those three appeals without dealing with the additional issue. In the interest of justice, the Tribunal considered it necessary to rectify the omission by delinking the three appeals from the earlier disposal and directing that they be placed for fresh hearing so that the omitted issues can be decided on their merits. The Tribunal therefore ordered relisting of the three appeals for fresh consideration on the specified date. [Paras 3, 4]

The three appeals C/88483, C/88487 and C/88492/2018 are delinked and directed to be placed for fresh hearing on 13.07.2022 to consider the classification of SFP and the alternative claim of exemption under Notification No. 24/2005-Cus.

Final Conclusion: The ROM application was allowed to the extent that appeals C/88483, C/88487 and C/88492/2018 were delinked from the earlier batch disposal and ordered to be relisted for fresh hearing on 13.07.2022 so that the omitted issues may be considered on merits.

Maintainability of a company petition under sections 397/398 by satisfaction of section 399 thresholds - requirement of one tenth of members or one hundred members for locus to apply - reliance on register of members and right to inspection/perusal - challenge to transfers as acts of oppression designed to defeat petition - equitable construction of 'member' for petitions under sections 397/398

Maintainability of a company petition under sections 397/398 by satisfaction of section 399 thresholds - requirement of one tenth of members or one hundred members for locus to apply - reliance on register of members and right to inspection/perusal - Whether the Company Law Board was justified in dismissing the Company Petition on the ground that the petitioner did not constitute one tenth of the members by relying on the register of members produced by the company without affording the petitioner opportunity to inspect or challenge it - HELD THAT: - The Court held that although section 399 prescribes numerical thresholds for who may apply under sections 397/398, dismissal at a preliminary stage is permissible only where the petitioner's claim cannot be established even assuming the pleaded facts are true. The CLB relied on the register showing 87 members and concluded the petitioner's group of six members did not meet the one tenth threshold. The High Court found that the CLB erred in acting on the register produced by the respondents without giving the petitioner an opportunity to peruse the register and, if appropriate, to challenge transfers recorded therein as fabricated or oppressive. Given authorities recognising that equitable considerations may relax rigid register requirements for petitions against oppression and mismanagement, the petition could not have been thrown out at the threshold without allowing the petitioner to amend or seek preliminary relief to challenge the entries. The Court therefore concluded that the CLB acted in haste in dismissing the petition without affording adequate opportunity on maintainability. [Paras 6, 7, 20, 21, 22]

Impugned order set aside and the Company Petition restored to its original number; CLB acted in haste by dismissing the petition on the basis of the register without affording opportunity to inspect or challenge it.

Challenge to transfers as acts of oppression designed to defeat petition - equitable construction of 'member' for petitions under sections 397/398 - Whether alleged transfers increasing the number of members-if made to defeat the petitioner's right-should be adjudicated as acts of oppression and whether the Court should relax strict reliance on register entries in equitable consideration - HELD THAT: - The Court reiterated that transfers or alterations in membership made with the intent to defeat a minority shareholder's right may amount to oppression and can, in appropriate proceedings, be set aside. Authorities were cited for the proposition that the term 'member' may receive an equitable construction in the context of petitions under sections 397/398 so as to further the protective object of those provisions. However, the High Court expressly refrained from deciding the merits of any challenge to the register or to the transfers recorded therein. Those factual and substantive questions as to whether transfers were oppressive or fabricated were left open for determination by the appropriate forum in accordance with law, permitting the petitioner to pursue those contentions now that the petition is restored. [Paras 16, 19, 23]

Merits of challenges to transfers and any claim of oppression left open for adjudication by the appropriate forum; petitioner entitled to pursue such challenges after restoration of the petition.

Final Conclusion: The High Court set aside the CLB's order dismissing the Company Petition and restored the petition to its original number, holding that the CLB erred in relying on the company's register without giving the petitioner an opportunity to inspect or challenge it; no opinion was expressed on the merits of the register entries or on any allegation of oppressive transfers, those issues being left open for determination by the appropriate forum.

Oppression and mismanagement - interim injunction against alienation of company property - non-joinder of third-party purchaser as bar to grant of injunction - concurrent jurisdiction of Civil Court in contract/specific-performance disputes - prima facie mismanagement due to unaccounted company receipts - status quo preservation of company assets pending adjudication

Interim injunction against alienation of company property - non-joinder of third-party purchaser as bar to grant of injunction - concurrent jurisdiction of Civil Court in contract/specific-performance disputes - Whether the Tribunal should grant an interim injunction restraining respondents from executing, implementing or acting on the agreement to sell dated 05.03.2021. - HELD THAT: - The Tribunal declined to grant the stay of execution, implementation or operation of the agreement to sell because the proposed purchaser, who paid the consideration, is not a party before the Tribunal; any injunction would materially affect the purchaser's rights. The Civil Court has already been seized of the dispute between the parties concerning performance of the sale agreement. In these circumstances the Tribunal held it would be inappropriate to interfere with the transaction by passing an injunction in favour of the petitioner against respondents in respect of that agreement. [Paras 9]

Prayer to stay or restrain implementation of the agreement to sell dated 05.03.2021 is refused for want of joinder of the purchaser and because the Civil Court is seized of the dispute.

Oppression and mismanagement - prima facie mismanagement due to unaccounted company receipts - status quo preservation of company assets pending adjudication - Whether there is prima facie mismanagement warranting preservation of the company's other assets pending disposal of the main company petition. - HELD THAT: - The Tribunal noted that respondent no. 2, acting on behalf of the company, received a total consideration which included a cash component that was not reflected in the company's balance sheet. On a prima facie appraisal the Tribunal considered this indicative of mismanagement of the company's affairs by respondent no. 2. In order to protect the company's interests pending final adjudication of the company petition, the Tribunal directed preservation of the company's other assets while excluding the subject matter of the disputed agreement to sell which is the subject of separate proceedings. [Paras 10]

Prima facie mismanagement is found; respondents 1 to 3 are directed to maintain status quo in respect of the company's other assets (excluding the property under the agreement dated 05.03.2021) until disposal of the main petition.

Final Conclusion: The Tribunal refused to injunct the agreement to sell dated 05.03.2021 because the purchaser is not before it and the Civil Court is seized, but on a prima facie finding of mismanagement (unaccounted receipt) it directed maintenance of status quo over the company's other assets pending disposal of the company petition.

Acknowledgement in writing under Section 18 of the Limitation Act - limitation for Section 7 IBC governed by Article 137 - three years from date of default - books of account / balance-sheet as acknowledgement of liability - application under Section 7 of the IBC in Form 1 - Part IV/V particulars and documents - applicability of the Limitation Act to IBC proceedings as modified by Section 238A - admission of application and commencement of CIRP under Section 7(5) of the IBC

Acknowledgement in writing under Section 18 of the Limitation Act - limitation for Section 7 IBC governed by Article 137 - three years from date of default - Whether the Section 7 application was barred by limitation or saved by acknowledgements made by the corporate debtor thereby restarting the limitation period. - HELD THAT: - The Court held that Article 137 (three years from date of default) governs limitation for an application under Section 7 of the IBC, but an acknowledgement in writing under Section 18 of the Limitation Act restarts the period of limitation. The corporate debtor, having its account declared NPA on 1.12.2008, made written acknowledgements and settlement proposals (notably the letter dated 7.2.2011 and subsequent settlement/extension communications and payments) within three years and thereafter acknowledged liabilities in its financial statements. Those writings, signed and contemporaneous with the stated liabilities, amounted to acknowledgements of a present subsisting liability and therefore operated to compute a fresh three-year limitation period. The Section 7 application filed on 3.4.2018 thus fell within the extended limitation period arising from such acknowledgements and was not time-barred. [Paras 38, 68, 82, 98]

The Section 7 application was not barred by limitation because acknowledgements in writing by the corporate debtor (including the 2011 settlement-related communications and subsequent financial statements) restarted the limitation period, making the 3.4.2018 application timely.

Books of account / balance-sheet as acknowledgement of liability - applicability of the Limitation Act to IBC proceedings as modified by Section 238A - Whether entries in the corporate debtor's books of account and balance-sheets can constitute an acknowledgment under Section 18 of the Limitation Act so as to extend limitation for initiating CIRP under the IBC. - HELD THAT: - The Court rejected the NCLAT's conclusion that a company's books of account cannot be treated as an acknowledgment of liability to a financial creditor. On settled precedent and statutory interpretation, a balance-sheet or financial statement, read with its accompanying notes where necessary, can amount to an acknowledgement in writing of a subsisting liability if it indicates the jural relationship of debtor and creditor and is signed by an authorised person before expiry of the limitation period. The Court reviewed prior authorities and emphasised that Section 238A permits application of the Limitation Act "as far as may be" to IBC proceedings; Sections 14 and 18 principles apply and must be construed purposively. Thus the financial statements and related documents in this case could properly be treated as acknowledgements under Section 18. [Paras 43, 81, 85]

Entries in the corporate debtor's financial statements/books of account can constitute an acknowledgement in writing under Section 18 and extend the period of limitation for a Section 7 IBC application where the entries unambiguously indicate a subsisting liability.

Application under Section 7 of the IBC in Form 1 - Part IV/V particulars and documents - admission of application and commencement of CIRP under Section 7(5) of the IBC - Whether the Adjudicating Authority was precluded from receiving or considering documents filed after presentation of the Section 7 Form 1, and whether additional documents/pleadings may be filed before final adjudication of the application. - HELD THAT: - The Court observed that a Section 7 application must be filed in the prescribed Form 1 but the Form does not preclude filing of additional documents until a final order admitting or dismissing the application is passed. The statutory timelines for the Adjudicating Authority in Section 7(4) are directory; the provisos require reasons if time-limits are not complied with, and Section 7(5)(b) mandates an opportunity to cure defects. Consequently, documents filed along with the application or subsequently (including financial statements and other evidence) may be considered as part of the pleadings; the Adjudicating Authority has discretion to accept cured or additional documents for the ends of justice unless there is inordinate delay warranting refusal. [Paras 48, 62, 64]

There is no absolute bar on filing additional documents in support of a Section 7 application prior to final adjudication; the Adjudicating Authority may accept and consider such documents subject to its discretion and compliance with the Code and Rules.

Final Conclusion: The appeals are allowed; the NCLAT's conclusion that the CIRP initiated by the appellant was barred by limitation is set aside. The Court held that the corporate debtor's written acknowledgements (including settlement communications and financial statements) operated under Section 18 of the Limitation Act to restart limitation, the Section 7 application filed on 3.4.2018 was timely, and the Adjudicating Authority may consider documents filed in support of the application prior to final adjudication.

Appointment of resolution professional - finding of default - applicability of the I&B Code to personal guarantors - territorial jurisdiction of the Adjudicating Authority under Section 60 - effect of foreign citizenship on guarantor's liability - scope of Sections 234 and 235 regarding overseas assets - admission under Section 95(1) and challenge of ultra vires

Appointment of resolution professional - finding of default - Para 7 of the Adjudicating Authority's order did not record a judicial finding of default and appointment of a Resolution Professional at the stage was not tantamount to a pre-decisional finding of default. - HELD THAT: - The Tribunal examined the language of paragraph 7 of the impugned order and held that it merely noted the applicant's averments that the personal guarantor had committed default. A conclusive finding on default could not be recorded at the stage when the Adjudicating Authority appointed a Resolution Professional to make recommendations; the Resolution Professional is required to examine the material and make the recommendation. The Tribunal also considered the procedural record (service and hearing dates) and found that the procedure mandated by the Tribunal's earlier decision in Ravi Ajit Kulkarni had been followed, so there was no illegality in appointing the Resolution Professional pending further recommendations. [Paras 11, 12]

No interference with the order appointing the Resolution Professional; paragraph 7 is to be read as reciting the applicant's averments, not as a judicial finding of default.

Applicability of the I&B Code to personal guarantors - territorial jurisdiction of the Adjudicating Authority under Section 60 - effect of foreign citizenship on guarantor's liability - scope of Sections 234 and 235 regarding overseas assets - The I&B Code applies to personal guarantors irrespective of their citizenship or residence; territorial jurisdiction for proceedings against a personal guarantor is governed by the location of the corporate debtor's registered office under Section 60, and Sections 234-235 apply only where assets are situated outside India. - HELD THAT: - The Tribunal analysed the statutory definitions and scheme: Section 2(e) makes the Code applicable to personal guarantors to corporate debtors and the inclusive definition of 'person' covers persons resident outside India. Section 60(1) assigns adjudicatory jurisdiction to the NCLT having territorial jurisdiction over the registered office of the corporate person; the residence or citizenship of the personal guarantor is not determinative of jurisdiction. Allowing a guarantor to escape liability by later acquiring foreign citizenship would frustrate the Code's object and amount to an absurd result. Sections 234 and 235 concern enforcement in respect of assets situated outside India and, therefore, are attracted only where overseas assets are involved; they do not impede initiation of proceedings where assets and the corporate debtor are within India. Applying these principles to the facts, the Tribunal held that the guarantee executed in India continues to bind the guarantor despite acquisition of Singapore citizenship and that initiation of proceedings before NCLT Kolkata (territorially competent for the corporate debtor) was permissible. [Paras 24, 26, 27, 28, 30]

The guarantee remains enforceable under the I&B Code; the Adjudicating Authority at the NCLT having jurisdiction over the corporate debtor was competent to admit the Section 95(1) application; Sections 234-235 are not attracted as no overseas assets were claimed.

Admission under Section 95(1) and challenge of ultra vires - The Adjudicating Authority did not act beyond its jurisdiction or ultra vires in admitting the Section 95(1) application against the personal guarantor. - HELD THAT: - Having considered the statutory scheme, the admitted guarantee deed and the procedural steps taken by the Adjudicating Authority, the Tribunal found no merit in the contention that admission under Section 95(1) was beyond the Authority's scope. The Code provides an independent remedial mechanism for financial creditors to initiate proceedings against personal guarantors, which is not displaced by alternative remedies such as contractual or arbitration claims. The Adjudicating Authority considered the submissions and facts and rightly rejected the jurisdictional and ultra vires objections when admitting the application. [Paras 31]

Challenge that the admission was ultra vires or beyond jurisdiction is rejected; the admission stands.

Final Conclusion: Both appeals were dismissed: the appointment of a Resolution Professional was proper and did not record a premature finding of default; the I&B Code applies to the personal guarantor notwithstanding subsequent foreign citizenship and the NCLT having territorial jurisdiction over the corporate debtor was competent to admit the Section 95(1) application; Sections 234-235 were inapplicable as no overseas assets were claimed.

Application for withdrawal under Section 12A - Committee of Creditors not yet constituted - Tribunal's inherent powers under Rule 11 of NCLT Rules - proceeding in rem - locus of objecting creditors - withdrawal on settlement

Application for withdrawal under Section 12A - Committee of Creditors not yet constituted - Tribunal's inherent powers under Rule 11 of NCLT Rules - withdrawal on settlement - Application under Section 12A for withdrawal of CIRP was allowable prior to constitution of the Committee of Creditors and was to be considered by the Tribunal in exercise of its inherent powers. - HELD THAT: - The Tribunal applied the principle in Swiss Ribbons and the subsequent decision in Kamal K. Singh which recognise that where the Committee of Creditors is not yet constituted a party may approach the Tribunal for withdrawal or settlement; the Tribunal may, after hearing parties and considering relevant factors, allow or disallow such application under its inherent powers. The IRP filed IA(IBC)/382(CHE)/2022 supported by a Form FA and averments of settlement, and the IRP's fees had been paid. Having considered those facts and the cited precedent, the Tribunal found it permissible to allow the withdrawal application and to treat the underlying company petition as withdrawn.

IA(IBC)/382(CHE)/2022 allowed; IBA/606/2020 dismissed as withdrawn and the CIRP stands withdrawn.

Locus of objecting creditors - proceeding in rem - Objecting operational creditors did not have locus to prevent the Section 12A withdrawal application which was filed before constitution of the Committee of Creditors. - HELD THAT: - The Tribunal observed that, since the withdrawal application was filed before constitution of the Committee of Creditors, the objectors could not prevent the IRP or the corporate debtor from seeking withdrawal before the Tribunal; the Tribunal further relied on the settled position that the Tribunal must hear all parties but that the absence of a constituted CoC limits the scope of objections by individual creditors. The objectors' pending Section 9 claims could be prosecuted separately after withdrawal if appropriate.

IA(IBC)/431(CHE)/2022 and IA(IBC)/432(CHE)/2022 dismissed for want of locus of the objectors to sustain their objections to the Section 12A application.

Withdrawal on settlement - Consequences of allowing the withdrawal: IRP discharged, management returned to board, and corporate debtor released from IBC rigours. - HELD THAT: - Having allowed the withdrawal application and recorded that Form FA was filed and IRP fees paid, the Tribunal directed that the CIRP be withdrawn, the IRP be discharged from the assignment, the management be handed back to the board of directors, and the corporate debtor be released from the rigours of the Insolvency and Bankruptcy Code. The objectors were also directed to pay costs for their contested IAs and to report compliance.

CIRP withdrawn; IRP discharged and directed to hand over management to the board; corporate debtor released from IBC; objectors' applications dismissed with costs payable to Prime Minister's National Relief Fund.

Final Conclusion: The Tribunal, applying the law in Swiss Ribbons and Kamal K. Singh, allowed the pre CoC Section 12A withdrawal on settlement (IA(IBC)/382(CHE)/2022), dismissed the objectors' applications (IA(IBC)/431 & /432) for lack of locus with costs, directed withdrawal of the CIRP, discharged the IRP and restored management to the board, and released the corporate debtor from the rigours of the Code.

Corporate Insolvency Resolution Process - extension of CIRP - Expression of Interest - condonation of delay in submission of EoI - Committee of Creditors' commercial decision - maximisation of assets of the corporate debtor - information memorandum and due diligence - eligibility of prospective resolution applicant

Corporate Insolvency Resolution Process - extension of CIRP - Committee of Creditors' commercial decision - Whether the period of the CIRP should be extended by 90 days from 10 July 2022. - HELD THAT: - The Tribunal considered the Resolution Professional's petition seeking a 90-day extension of the CIRP beyond the initial 180-day period. The CoC had approved the extension with an overwhelming voting share and there were pending processes involving multiple Prospective Resolution Applicants with the last date for submission of resolution plans approaching. On these facts the Tribunal allowed the application and granted an extension of 90 days to enable completion of the CIRP in accordance with the objective of the Code and the CoC's commercial decision. [Paras 28]

Granted 90 days extension of the CIRP from 10 July 2022 to 08 October 2022.

Expression of Interest - condonation of delay in submission of EoI - maximisation of assets of the corporate debtor - information memorandum and due diligence - eligibility of prospective resolution applicant - Whether the applicant's delayed EoI submitted after the stipulated last date should be condoned and the applicant be permitted to participate in the CIRP process. - HELD THAT: - The Tribunal found that the applicant had submitted its EoI after the extended cutoff date but noted the overarching object of the Code to maximise value and the CoC record showing a financial creditor supporting the applicant. Considering that the process of submission of resolution plans was ongoing and that allowing participation would not prejudice other prospective applicants, the Tribunal exercised its discretion to condone the delay. The Resolution Professional was directed to provide the information memorandum and resolve clarifications within specified short timelines; the applicant was given a strict and limited schedule to file its resolution plan and no further time would be granted. If found eligible after due diligence, the Resolution Professional must place all plans before the CoC. [Paras 29, 30, 31, 32, 33]

Delay in filing the EoI condoned; applicant to be provided information memorandum and given a limited timeline to submit a resolution plan; resolution professional to conduct due diligence and place eligible plans before the CoC.

Final Conclusion: The Tribunal granted a 90-day extension of the CIRP and condoned the delayed EoI, directing the Resolution Professional to furnish the information memorandum, permit the applicant to submit a resolution plan within the prescribed short timelines, and to place eligible plans before the CoC; both applications disposed of with the stated directions.

Pre-existing dispute - initiation of corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - use of the Insolvency and Bankruptcy Code as a recovery mechanism - ability of corporate debtor to place material to show pre-existing dispute despite no reply within 10 days to the demand notice

Pre-existing dispute - initiation of corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - use of the Insolvency and Bankruptcy Code as a recovery mechanism - ability of corporate debtor to place material to show pre-existing dispute despite no reply within 10 days to the demand notice - Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable in view of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal examined the sequence of events, correspondence and invoices relied on by the parties and accepted the corporate debtor's case that disputes about non-delivery and delay in delivery of drawings/services arose prior to or contemporaneously with the alleged defaults on later invoices. The Operational Creditor had received payment of earlier invoices until 2018, and the unpaid invoices complained of were raised when the parties' dispute about non-delivery crystallised. The corporate debtor put on record emails (annexures R1 and R2) and particulars of counterclaims relating to alleged deficiency of services, delay and consequential losses, which the Tribunal found lent credence to the existence of a pre-existing dispute. The Tribunal noted established authorities that an absence of a reply within ten days to a demand notice under Section 8 does not preclude the corporate debtor from placing materials before the Adjudicating Authority to establish a pre-existing dispute. Applying these principles, and having regard to the material on record showing the nexus between the dispute and non-payment of the later invoices, the Tribunal concluded that the insolvency petition was an attempt to use the Code as a recovery mechanism and that a bona fide pre-existing dispute existed which rendered the Section 9 application not maintainable. [Paras 12, 13]

The Section 9 application is dismissed as there exists a pre-existing dispute which renders the petition not maintainable.

Final Conclusion: The Tribunal dismissed the Section 9 application and held that a pre-existing dispute between the parties precluded initiation of the corporate insolvency resolution process; the petition was an impermissible attempt to use the Code as a recovery mechanism.

Operational debt and default - pre-existing dispute - running account and limitation - reliance on ledger entries and bank statements - appointment of Interim Resolution Professional and moratorium

Operational debt and default - There exists an operational debt due from the corporate debtor and the corporate debtor has defaulted in making payment. - HELD THAT: - On appreciation of the invoices, correspondence and the material on record the Tribunal found that the Operational Creditor supplied goods over a period and raised bills, the last of which was dated 11.09.2019. The Adjudicating Authority accepted the Operational Creditor's claim that the outstanding liability remains unpaid and, having considered the parties' submissions, concluded that an operational debt in default is made out and the petition under Section 9 is admitable. This conclusion is recorded after noting the documents produced by the Operational Creditor and hearing both sides' counsels. [Paras 8, 14]

The application under Section 9 is admitted on the ground that an operational debt in default exists.

Pre-existing dispute - No pre-existing dispute between the parties was established prior to issuance of the demand notice. - HELD THAT: - Applying the principle in Mobilox Innovations (as relied upon by the parties), the Tribunal examined the communications relied upon by the Corporate Debtor and observed that the emails alleging defective goods were dated after issuance of the demand notice. The Corporate Debtor did not produce any contemporaneous material proving a dispute existed before receipt of the demand notice. In the absence of evidence of a pre-existing dispute, the Tribunal rejected the Corporate Debtor's contention that the claim was barred by a prior dispute. [Paras 9, 11]

The contention of a pre-existing dispute is rejected; no such dispute existed before the demand notice.

Running account and limitation - The petition is within the period of limitation on the basis of a running account and the last bill dated 11.09.2019. - HELD THAT: - The Tribunal observed that the parties maintained a running account with periodic invoices and part payments. The limitation period for filing the petition was held to commence from the date of the last bill submitted by the Operational Creditor. Since the petition was filed on 18.01.2020 and the last bill was dated 11.09.2019, the Tribunal concluded that the application falls within limitation. [Paras 8]

The claim is within limitation as the period commences from the last bill in the running account.

Reliance on ledger entries and bank statements - The ledger entries produced by the Corporate Debtor are not accepted as sufficient proof of payments in the absence of supporting bank statements. - HELD THAT: - The Tribunal noted that the Corporate Debtor relied on its ledger to assert payments but did not produce bank statements or other reliable proof of remittance. It reiterated that unilateral ledger entries lack requisite authenticity and therefore cannot be relied upon to displace the Operational Creditor's claim. Consequently, the claim of earlier payments as per the ledger was rejected for want of credible evidence. [Paras 12, 13]

Ledger entries alone are insufficient; the Corporate Debtor's contention of prior payments is rejected for lack of bank statements or verifiable proof.

Appointment of Interim Resolution Professional and moratorium - On admission of the Section 9 petition the Tribunal appointed an Interim Resolution Professional, directed deposit for immediate expenses, ordered public announcement and declared moratorium under the Code. - HELD THAT: - Having admitted the application, the Tribunal appointed the proposed Insolvency Resolution Professional to act as IRP and directed the Operational Creditor to deposit an amount to meet immediate CIRP expenses, to be accounted for and recoverable as costs. The Tribunal further directed the IRP to make the public announcement within the prescribed period and declared the statutory moratorium with its specified prohibitions and clarifications regarding licenses, essential supplies and exceptions under amended provisions. [Paras 17, 18, 19, 20, 21]

IRP appointed, deposit directed, public announcement ordered and moratorium declared; IRP to perform statutory functions.

Final Conclusion: The Section 9 petition is admitted: CIRP is initiated against the Corporate Debtor; an Interim Resolution Professional is appointed, the Applicant directed to deposit funds for immediate CIRP expenses, a public announcement is ordered and moratorium under the Code is declared.

Constitutional writ jurisdiction under Article 226 - investigation and adjudication of title or ownership of disputed movable property - maintainability of a writ petition challenging a show-cause notice issued to third parties - territorial jurisdiction for quashing enforcement actions - adjudication proceedings under Section 16 read with Section 13 of FEMA, 1999

Constitutional writ jurisdiction under Article 226 - investigation and adjudication of title or ownership of disputed movable property - High Court should not investigate or adjudicate the ownership of disputed cash seized during search and seizure in exercise of writ jurisdiction under Article 226. - HELD THAT: - The Court held that it is a well-settled principle that a High Court exercising jurisdiction under Article 226 should not embark upon investigation or determination of title or ownership of disputed movable or immovable property. The petition sought a declaration and release of cash seized from the residence of a third party and thereby required the Court to decide a highly disputed question of ownership which is intrinsically part of pending adjudication proceedings before the adjudicating authority. In these circumstances the High Court declined to entertain a writ petition that would effectively decide ownership of the seized cash instead of leaving that issue to the appropriate adjudicatory forum and proceedings.

Petition dismissed insofar as it sought judicial investigation and adjudication of the ownership of the seized cash; the High Court will not decide title in exercise of Article 226.

Maintainability of a writ petition challenging a show-cause notice issued to third parties - territorial jurisdiction for quashing enforcement actions - adjudication proceedings under Section 16 read with Section 13 of FEMA, 1999 - Writ petition was not maintainable in this Court to quash a show-cause notice issued to third parties by enforcement authorities located outside this Court's territorial jurisdiction. - HELD THAT: - The petitioners, who were not the addressees of the impugned show-cause notice, sought quashing of a notice issued to 24 third parties located in various jurisdictions and of adjudication proceedings pending before another Adjudicating Authority. The Court noted that the enforcement actions and the pending adjudication arise from searches and seizures conducted by authorities outside the territorial jurisdiction of this Court, and that the actual noticees had not themselves challenged the notices or responded to them. Given these facts and that the relief sought would interfere with fora and proceedings situated elsewhere, the writ was not entertained as a maintainable challenge in this Court.

Writ petition dismissed as not maintainable before this High Court to quash the impugned show-cause notice and related adjudication proceedings instituted against third parties outside its territorial jurisdiction.

Final Conclusion: The writ petition challenging the show-cause notice and seeking release/declaring ownership of seized cash was dismissed: the High Court will not adjudicate disputed ownership of seized property in exercise of Article 226, and the petition was not maintainable to quash enforcement action and adjudication proceedings initiated against third parties outside this Court's territorial jurisdiction.

Service Tax on revenue realised versus revenue recognised - Accounting Standard AS 7 - percentage completion method and recognition of contract revenue - Reconciliation of project wise realised revenue with ST 3 returns - Disallowance of Cenvat credit under Rule 14 read with Section 73 - Penalty under Section 78 - requirement of concealment/wilful suppression - Interest under Section 75 - Penalty under Rule 15(3) of the Cenvat Credit Rules

Service Tax on revenue realised versus revenue recognised - Accounting Standard AS 7 - percentage completion method and recognition of contract revenue - Reconciliation of project wise realised revenue with ST 3 returns - Validity of demands (Issues 1-4) raised on the basis of book entries relating to unbilled revenue, mobilization advances and project trial balances - HELD THAT: - The Tribunal held that Accounting Standard AS 7 governs recognition of contract revenue and distinguishes recognition (percentage completion / expected revenue) from actual realisation. Service tax is payable on revenue realised and reflected in ST 3 returns, not on amounts merely recognised in the books under AS 7. The impugned demands were founded on entries in the appellant's books representing expected or accrued contract revenue rather than demonstrable amounts not declared as realised in ST 3 returns. The revenue was directed to undertake a contract wise reconciliation of realised receipts (including advances and completion receipts) with the ST 3 returns; only amounts that remain unreconciled as realised but not declared would sustain a demand. For these reasons the Tribunal set aside the demands made on the basis of the book entry recognition and remanded Issues 1-4 to the original authority for reconsideration and reconciliation.

Demands in respect of Issues 1-4 set aside and remanded to the original authority for contract wise reconciliation of realised revenue with ST 3 returns.

Disallowance of Cenvat credit under Rule 14 read with Section 73 - Penalty under Section 78 - requirement of concealment/wilful suppression - Penalty under Rule 15(3) of the Cenvat Credit Rules - Interest under Section 75 - Sustainability of demand, interest and penalties relating to Cenvat credit and related entries (Issues 5-6) - HELD THAT: - The Tribunal accepted the impugned order insofar as the demand relating to Cenvat credit and associated interest (Issues 5 and 6) was concerned, noting that the appellant did not materially contest the confirmed amount. However, the Tribunal found that invocation of Section 78 penalties could not be sustained because the relevant facts were within the knowledge of the department; absence of concealment or wilful suppression precluded imposition of the statutory penalty. Accordingly, while the demand and interest were upheld as per the original order, penalties under Section 78 (and consequentially under Rule 15(3) as applicable) were set aside.

Demands and interest in respect of Issues 5-6 upheld; penalties under Section 78 (and corresponding penalty imposition) set aside.

Final Conclusion: The appeals are partly allowed: demands based on book entry recognition of contract revenue (Issues 1-4) are set aside and remanded for contract wise reconciliation with ST 3 returns; demands and interest relating to Cenvat credit (Issues 5-6) are upheld but statutory penalties under Section 78 are set aside. The original authority is directed to finalise remand proceedings within three months.

Exclusion from 'Business Auxiliary Service' for activities amounting to 'manufacture' under Section 2(f) of the Central Excise Act, 1944 - contract manufacturing / contract bottling arrangement - application of Board Circular F.No.249/1/2006-CX.4 dated 27.10.2008 on taxable services during production of alcoholic beverages

Exclusion from 'Business Auxiliary Service' for activities amounting to 'manufacture' under Section 2(f) of the Central Excise Act, 1944 - Whether the activities of blending, bottling and labeling of IMFL carried out by the respondent amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944 and are therefore excluded from the definition of 'Business Auxiliary Service'. - HELD THAT: - The adjudicating authority held, on examination of the contracts and the statement of the respondent's director, that the respondent undertook the production processes for IMFL on behalf of brand owners under direction and control of the clients, received manufacturing/job charges, and did not retain property, risk or reward in the product. The Commissioner applied the Board's Circular dated 27.10.2008 which explains that whether a process is 'manufacture' under Section 2(f) is to be determined independently of whether the resulting product is excisable; a process producing a new product with distinct name, character or use and capable of being marketed can amount to 'manufacture' even if the product is non-excisable. Applying that principle, the Commissioner concluded that the processes undertaken by the respondent amounted to 'manufacture' within the meaning of Section 2(f) and thus fell within the exclusion from 'Business Auxiliary Service'. The Tribunal found no reason to differ from the Commissioner's conclusions and accepted the application of the Circular and the factual findings about the nature of the parties' arrangement.

The activities of blending, bottling and labeling as carried out by the respondent were held to amount to 'manufacture' under Section 2(f) and therefore excluded from 'Business Auxiliary Service'; the demand was rightly dropped.

Application of Board Circular F.No.249/1/2006-CX.4 dated 27.10.2008 on taxable services during production of alcoholic beverages - contract manufacturing / contract bottling arrangement - Whether the Commissioner correctly relied upon the Board Circular dated 27.10.2008 in concluding that the respondent's contract bottling arrangement was not chargeable to service tax as 'Business Auxiliary Service'. - HELD THAT: - The Circular explains that the concept of 'manufacture' in Section 2(f) must be read on its own terms and that processes which amount to manufacture under that definition are excluded from BAS even if the resultant goods are non-excisable; it further distinguishes full contract manufacturing (excluded) from partial activities (such as mere packing or labeling) which would remain taxable. The Commissioner examined the agreements and the director's statement, concluded that the respondent performed the complete process envisaged under the contract bottling arrangement, and applied the Circular to hold the activity outside BAS. The Tribunal affirmed that application and found no substance in the Revenue's challenge to the Commissioner's reliance on the Circular and his factual conclusion on the nature of the arrangement.

Reliance on the Board Circular was appropriate and, on the facts found, supported the conclusion that the respondent's contract bottling activities were not chargeable to service tax under 'Business Auxiliary Service'.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the Commissioner's finding that the respondent's bottling, blending and labeling operations under the contract arrangement amounted to 'manufacture' within Section 2(f) and were therefore excluded from 'Business Auxiliary Service', and that the Board's Circular dated 27.10.2008 was correctly applied in dropping the service tax demand.

Condonation of delay - Low tax effect - Disposal of appeal on threshold limit - Appeal under Section 35C of the Central Excise Act, 1944 - Threshold for tax-effect consideration

Condonation of delay - Discretionary relief - Application for condonation of delay in filing the appeal - HELD THAT: - The Court exercised its discretionary power to condone a delay of 1082 days in filing the appeal. Although the Court recorded that it was not fully satisfied with the reasons advanced in the supporting affidavit, it nevertheless allowed the condonation application because, on consideration of the matter as a whole, the tax effect in the appeal was below the threshold that warranted further pursuit. The order therefore grants relief under the condonation petition while noting reservations about the explanations offered for the delay.

Application for condonation of delay allowed and delay condoned.

Low tax effect - Disposal of appeal on threshold limit - Appeal under Section 35C of the Central Excise Act, 1944 - Whether the appeal should be pursued despite the low tax effect - HELD THAT: - On perusal of the record, particularly the original order dated 30th July, 2007, the Court noted that the Central Excise duty demanded was Rs.55,06,320.00. Treating that amount as falling below the threshold warranting further adjudication by the High Court, the Court determined that the appeal could not be pursued on the ground of low tax effect. Consequently, the appeal was disposed of on that basis without entering into the merits of the substantial questions of law raised by the revenue.

Appeal disposed of on the ground of low tax effect; not pursued on merits.

Substantial questions of law - Left open for consideration - Disposition of the substantial questions of law raised by the revenue - HELD THAT: - Because the appeal was disposed of on the administrative ground of low tax effect, the Court did not decide the substantial questions of law framed by the revenue. The Court expressly left those questions open, refraining from adjudicating upon the merits of the contentions regarding stock shortages, alleged suppression, imposition of penalty and interest, and related legal consequences.

Substantial questions of law not decided and left open.

Final Conclusion: The Court condoned the delay in filing the appeal and, treating the tax effect as below the threshold for further adjudication, disposed of the appeal on that ground; the substantial questions of law pleaded by the revenue were left open and were not decided.

Interim protection - fixation of special rate - extension of limitation - restraint on coercive recovery - solvency surety condition

Interim protection - restraint on coercive recovery - Petitioner entitled to interim protection restraining coercive action till disposal of its application dated 20-10-2021 for fixation of a special rate. - HELD THAT: - The Court, having considered the submissions and earlier coordinate decisions, found that a prima facie case and balance of convenience were made out in favour of the petitioner. In light of the factual matrix and the decision in M/s. Jyothy Labs Ltd. (coord. bench), the petitioner was granted interim protection and the respondent authorities were restrained from taking coercive steps to enforce the demand-cum-show cause notice until the application for fixation of a special rate is decided. The order of interim protection is subject to the condition regarding continuance of the solvency surety where its tenure has lapsed. [Paras 12, 13]

Respondent Nos. 2 and 3 are restrained from coercive action to enforce the demand-cum-show cause notice until disposal of the petitioner's application dated 20-10-2021, subject to the solvency surety condition.

Fixation of special rate - extension of limitation - Application dated 20-10-2021 for fixation of a special rate held to be within the period of limitation in view of the Supreme Court's extension of limitation. - HELD THAT: - The Court accepted that the occasion to apply for fixation of a special rate arose only after the Supreme Court's final decision on 22-4-2020. Applying the orders in Suo Motu W.P. (C) No. 3/2020 and related M.A., which extended limitation from 15-3-2020 to 2-10-2021 and provided for a 90-day period from 3-10-2021 where limitation expired in that interval, the Court found that the petitioner's application of 20-10-2021 fell within the extended/allowed period. On that basis the petitioner demonstrated a prima facie entitlement to have the application considered rather than summarily rejected on limitation grounds. [Paras 11, 12]

The application dated 20-10-2021 is within the extended limitation period and is not barred on limitation grounds for the purpose of interim consideration.

Fixation of special rate - constructive res judicata - Application remitted to competent authority for decision on merits. - HELD THAT: - Relying on the coordinate bench's approach and the particular circumstances that the need to seek fixation arose only after the Supreme Court's final order, the Court directed the competent authority to decide the petitioner's application for fixation of a special rate on its merits. The interim order preserves the petitioner's right to have the application adjudicated and prevents rejection on the sole ground of non-submission before 30th September of the implicated financial year. [Paras 10, 13]

Principal Commissioner/competent authority to decide the application dated 20-10-2021 on its merits; interim restraint remains until that decision subject to the solvency surety condition.

Final Conclusion: Interim protection granted: respondent authorities restrained from coercive recovery till the petitioner's application dated 20-10-2021 for fixation of a special rate is decided; the application is treated as within the extended limitation and the competent authority is directed to decide it on merits, subject to the petitioner ensuring validity/extension of the solvency surety as ordered.

Reassessment proceedings - third party information - confrontation of adverse material - opportunity to cross-examine - jurisdiction to initiate reassessment - reason to believe - remand for fresh consideration

Jurisdiction to initiate reassessment - reassessment proceedings - Failure of the first appellate authority and the Tribunal to decide the objection raised by the assessee that the assessing authority lacked jurisdiction to initiate reassessment proceedings - HELD THAT: - The Court recorded that the assessee had raised a preliminary objection before the assessing authority contesting jurisdiction to initiate reassessment and that the assessing authority's order was silent on that objection. The first appeal order extracted and noted the ground but did not return a finding on jurisdiction, and the Tribunal likewise failed to deal with the point. The High Court held that the question of jurisdiction goes to the root of the reassessment exercise and observed that, because the matter has been remitted to the original authority, the assessee should be permitted to press the preliminary objection afresh; the assessing authority must satisfy itself as to existence of jurisdiction before giving effect to the remand directions.

The Court found that appellate orders failed to decide the jurisdictional objection and directed that the assessing authority must first address whether jurisdiction existed before proceeding on remand.

Third party information - confrontation of adverse material - opportunity to cross-examine - Whether reassessment initiated on the basis of material allegedly obtained from a third party could be sustained where the assessee was not furnished the material and was not afforded opportunity to cross-examine the third party - HELD THAT: - The Court noted that the reassessment was initiated on the basis of records said to have been received from Central Excise authorities (seized from a third party) and that the first appellate authority had remanded the matter because the assessee had not been confronted with that adverse material nor given a chance to cross-examine the third-party source. The High Court observed that the remand on this ground was accepted by the first appellate authority and confirmed by the Tribunal, but the broader questions framed in the revision regarding the propriety of relying on third-party material without confrontation and cross-examination were left unanswered by the orders under challenge. Consequently, the Court left those questions open for decision by the assessing authority on remand (subject to the jurisdictional point being decided first).

Questions concerning reliance on third-party material and the absence of confrontation/cross-examination were not finally decided and are to be considered on remand after jurisdiction is determined.

Reason to believe - remand for fresh consideration - Whether there was relevant material on record to constitute a "reason to believe" that turnover had escaped assessment and the appropriateness of remanding the matter without deciding the validity of initiation - HELD THAT: - The Court observed that the assessing authority issued reassessment notice without stating the facts or circumstances constituting a reason to believe. Although the first appellate authority remanded the matter on the procedural ground of non-confrontation, neither the first appellate authority nor the Tribunal addressed the separate contention about absence of cogent material to form a reason to believe. The High Court therefore declined to answer those substantive questions, noting that they remain to be examined by the original authority in the remanded proceedings, and that the authority should also take into account subsequent developments relied upon by the assessee regarding disposal of related proceedings before the appellate tribunal.

The Court left undecided the question whether relevant material existed to form a reason to believe and directed that such issues be examined by the assessing authority on remand, after resolving jurisdiction.

Final Conclusion: The revisions are disposed of by leaving the substantive questions unanswered; the matter is remitted to the assessing authority to first decide the jurisdictional objection and thereafter to consider, in light of that finding and subsequent developments, the admissibility and sufficiency of third-party material (and the reason to believe) while affording the assessee opportunity to confront adverse material and to cross-examine where appropriate.

Revision of assessment - stock variation assessment - non-speaking order - appeal under Section 51 of the TNVAT Act - condonation of delay - input tax credit reversal - personal hearing and consideration of objections

Appeal under Section 51 of the TNVAT Act - condonation of delay - Appropriateness of writ jurisdiction when an appellate remedy under Section 51 existed and the petitioner had exceeded the limitation for filing that appeal. - HELD THAT: - The Court held that the statutory appellate remedy under Section 51 of the TNVAT Act was the appropriate forum for challenging the assessment order rather than relief by writ. Although the petitioner approached this Court after the period for appeal had expired, the Court noted that the petitioner had attempted to file representations and that delay arose from circumstances including loss of the order and the COVID-19 lockdown. In view of these circumstances the Court directed that if the petitioner files an appeal, the appellate authority should condone the delay and decide the appeal on merits. The Court expressly refrained from expressing any opinion on the merits of the assessment itself. [Paras 6, 8, 9]

Writ petition dismissed; direction that petitioner may file an appeal under Section 51 within 30 days of receipt of this order and the appellate authority is directed to condone delay and decide the appeal on its merits.

Revision of assessment - stock variation assessment - personal hearing and consideration of objections - non-speaking order - Validity of the departmental revision procedure and sufficiency of the reasons in the impugned order concerning stock variation and related penalty. - HELD THAT: - On the materials before it, the Court observed that the Enforcement Wing conducted a VAT audit, a pre-revision notice was issued, and the successor officer issued a fresh revision notice, considered the petitioner's multiple replies and representations and afforded personal hearing. The Court recorded that on the question of input tax credit the department dropped the demand after consideration; as to stock variation, the departmental finding was sustained because the petitioner did not produce stock records despite repeated requests and opportunities. The petitioner's contention that the successor officer could not confirm the predecessor's proposals without issuing a fresh notice (relying on a departmental circular) was not accepted on the facts of this case. The Court did not pronounce the impugned order to be legally unsustainable on the ground of being non-speaking and left the merits to be examined by the appellate authority. [Paras 2, 3, 6, 8]

Court did not set aside the impugned assessment order on these grounds and declined to adjudicate the merits; factual record showed issuance of fresh revision notice, consideration of objections and reasons for confirmation of proposed tax on stock variation.

Input tax credit reversal - personal hearing and consideration of objections - Whether the department's proposal to reverse input tax credit required confirmation after consideration of the petitioner's explanations. - HELD THAT: - The Court noted that the departmental officer, on considering the petitioner's explanations and documentary submissions, withdrew the proposal to reverse input tax credit. This factual outcome was recorded by the Court and indicates that the department responded to the petitioner's submissions on ITC, leaving other contested items (such as stock variation) to be considered in the appellate process. [Paras 3, 8]

The departmental proposal to reverse input tax credit was dropped after consideration of the petitioner's explanations; the Court declined to examine further and directed appellate redress for remaining disputes.

Final Conclusion: The writ petition is dismissed; the petitioner is permitted to file an appeal under Section 51 of the TNVAT Act within 30 days of receipt of this order, and the appellate authority is directed to condone the delay and decide the appeal on merits; no opinion expressed on the substantive correctness of the impugned assessment.

Inter-State sale - deeming fiction under Section 3 of the Central Sales Tax Act, 1956 - prior contract of sale - stock transfer - burden of proof on revenue to establish contract occasioning movement - internal transfer not constituting a sale

Inter-State sale - prior contract of sale - deeming fiction under Section 3 of the Central Sales Tax Act, 1956 - burden of proof on revenue to establish contract occasioning movement - stock transfer - Whether an inference of inter-State sale could be raised when there was no clear evidence of a prior contract of sale occasioning the movement of goods from Bareilly to Delhi - HELD THAT: - The Court held that the deeming fiction in Section 3 of the Central Sales Tax Act, 1956 operates only where the movement of goods from one State to another is occasioned by an identifiable contract of sale or purchase. Mere movement of goods from the factory in U.P. to the branch in Delhi, even if some quantities were subsequently sold at Delhi, does not ipso facto establish an inter-State sale. Following the principle in Kelvinator of India Ltd. Vs. The State of Haryana , at the time of transfer from the factory to the branch there must be a visible contract of sale; absent such contract, the transfer may be an internal movement and not an inter-State sale. The Franchise Agreement (Clause 6) on its face did not create a binding prior order guaranteeing sale from Bareilly to Delhi and in fact contemplated discretionary supplies by the company's Delhi sales department. The revenue failed to discharge the burden to produce credible material showing a specific prior contract that occasioned the movement. Suspicion, proximity of branch premises to the franchise or subsequent onward sale of parts of the consignment do not substitute for evidence of a contract of sale at the time of movement. Consequently the Tribunal's findings that no inter-State sale was established were upheld and the revision allowed. [Paras 9, 11, 14, 15]

Answered in the negative; no inter State sale could be inferred in absence of evidence of a prior contract of sale occasioning the movement.

Final Conclusion: Revision allowed; the conclusion of inter State sale was negatived for A.Y. 2004-05 (Central) as the revenue failed to prove a prior contract of sale occasioning the movement of goods from Bareilly to Delhi.

Reassessment barred by limitation - assessment under Section 24 of the Tamil Nadu VAT Act (assessment of sales shown in accounts at low prices / undervaluation) - requirement of comparison with prevailing market price / identically placed manufacturers - revenue neutrality arising from tax remitted by subsequent dealer

Reassessment barred by limitation - Sections 24 and 27 limitation periods - Validity of revision/assessment notices and final orders insofar as they were issued after expiry of prescribed limitation periods - HELD THAT: - The Court examined the dates of deemed assessment and the limitation periods as framed under Section 24 (six years from expiry of the year to which tax relates) and Section 27(1) (six years from date of original assessment). The revision notices in the matters before the Court were issued after the expiry of the applicable limitation periods recorded in the judgment. The Additional Advocate General did not dispute those dates. Consequently, the Court held that the impugned orders of assessment in respect of the listed matters are barred by limitation. [Paras 10, 11, 12]

The impugned orders of assessment insofar as they are time barred are set aside and the respective writ petitions are allowed on this ground.

Assessment under Section 24 of the Tamil Nadu VAT Act (assessment of sales shown in accounts at low prices / undervaluation) - requirement of comparison with prevailing market price / identically placed manufacturers - revenue neutrality - Whether the Assessing Authority validly invoked Section 24 for valuation/undervaluation and made a lawful reassessment on merits - HELD THAT: - The Court considered the material relied upon by the Enforcement wing and the Assessing Authority. It found no specific materials in the show cause notice or the assessment order explaining what evidence established willful or conscious undervaluation. Although the order referenced general pricing components (advertisement, promotion, transport, royalty), there was no finding or material showing these factors were omitted by the petitioner in fixing price. Section 24 requires that prices be shown to be 'abnormally low' compared to the prevailing market price, which entails comparison with identically placed manufacturers/dealers; no such comparative exercise was undertaken. Further, the AAG conceded that the wholesaler had remitted VAT on the full turnover, indicating revenue neutrality in the transactions examined. On these bases the Court concluded that the ingredients of Section 24 were neither pleaded nor established and that the assessment lacked the requisite enquiry and material to support a finding of undervaluation. [Paras 21, 22, 23, 24, 25]

The invocation of Section 24 and the resultant findings of undervaluation are unsustainable; the impugned orders are set aside for lack of requisite material, comparative analysis and because the exercise appears revenue neutral.

Final Conclusion: The writ petitions are allowed: the assessment orders under challenge are set aside as barred by limitation and, on the merits, the requirements of Section 24 for reassessment on account of alleged undervaluation were not satisfied; connected miscellaneous petitions are closed and no costs awarded.

Legislation by incorporation - interpretation of exemption notification - definition of "total employment" by explanation - directory versus mandatory character of statutory condition - substantial compliance - justiciability of "conditions and restrictions" incorporated by reference

Legislation by incorporation - definition of "total employment" by explanation - interpretation of exemption notification - Whether the 'Explanation' to the Restrictive Notification forms a mandatory part of the 'Conditions and Restrictions' incorporated into proviso (ii) of Clause 2 of the Exemption Notification and, if so, whether non-fulfilment of the Explanation ousts the claim to full exemption. - HELD THAT: - Proviso (ii) to Clause 2 of the Exemption Notification incorporates the 'Conditions and Restrictions' contained in the Restrictive Notification by reference, which is a recognised mode of legislation by incorporation and makes those conditions justiciable as part of the Exemption Notification. The 'Explanation' in the Restrictive Notification operates as a definitional provision specifying that "total employment" includes only employees who contribute to the Employees' Provident Fund. Nothing in the language of the Restrictive Notification or the Exemption Notification converts that definitional provision into an independent substantive condition that, if unmet, necessarily defeats the entitlement to exemption. The Explanation thus informs the computation of 'total employment' and the percentage test rather than adding a separate precondition to entitlement. [Paras 16, 17, 21, 23, 24]

The 'Explanation' is a definitional provision incorporated into proviso (ii) and is to be read as defining 'total employment' for application of the percentage test; it does not, by its language alone, impose an independent mandatory condition which, if unmet, automatically ousts entitlement to full exemption.

Directory versus mandatory character of statutory condition - substantial compliance - justiciability of "conditions and restrictions" incorporated by reference - Whether, on the facts of the case where no provident fund contributions were made by employees and the Employees' Provident Fund Act's applicability to the unit was doubtful, the Explanation must be strictly applied to deny full exemption or whether it must be treated as directory and satisfied by substantial compliance. - HELD THAT: - The Explanation, being definitional, is to be applied so as to preserve the functionality and purpose of the Exemption Notification. Strict application where the number of employees contributing to provident fund is indeterminate would produce an absurdity defeating the exemption's objective of encouraging new units. Absent any provision prescribing a consequence for non-compliance with the Explanation, and in view of precedent construing similar preconditions as directory where their strict insistence would frustrate the exemption, the Explanation must be treated as directory. Where, on the record, the assessee satisfied the percentage requirement (computed on the operative measure of total employment) and there was no credible material proving breach of the employment condition, substantial compliance suffices and the proviso excludes the restrictive Clause 2. [Paras 30, 31, 34, 35, 36]

The Explanation is directory in character; substantial compliance with the incorporated conditions was established on the facts, the restrictive limit of 5% did not apply, and the assessee was entitled to full exemption under the Exemption Notification.

Final Conclusion: The Revisional Court answered the question of law in the negative, holding that the Explanation to the Restrictive Notification is definitional and directory, that substantial compliance with the incorporated conditions was made out, and that the assessee is entitled to full exemption under the Exemption Notification for A.Y. 1997-98; the revision is allowed and deposited tax is to be refunded subject to the rule against unjust enrichment.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments for directors not in charge of the conduct of business - liability of managing director and signatory of the cheque - discretion under Section 205 of the Code of Criminal Procedure to dispense with personal attendance and representation of a corporation under Section 305 Cr.P.C. - inherent power of the High Court under Section 482 Cr.P.C. to quash proceedings to prevent abuse of process and secure ends of justice

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments for directors not in charge of the conduct of business - liability of managing director and signatory of the cheque - Whether the complaint under Sections 138/141 of the Negotiable Instruments Act could be sustained against the Appellants who were non executive independent directors in the absence of specific averments showing they were in charge of and responsible for the conduct of the company's business at the relevant time - HELD THAT: - The Court affirmed that Section 141 creates vicarious criminal liability but that liability attaches only to those who, at the time of the offence, were in charge of and responsible for the conduct of the business of the company; mere designation as a director is insufficient. Managing or joint managing directors and the signatory of the cheque are ordinarily covered by the provision by virtue of their office or act of signing. For other directors, including non executive independent directors, the complaint must contain specific averments demonstrating how they were in charge of or responsible for the conduct of the company's business or that the offence was committed with their consent, connivance or due to their negligence. The materials on record established that the Appellants were independent non executive directors and were neither managing directors nor signatories of the cheque, and the complaint contained only bald, formal averments devoid of particulars to bring them within Section 141. [Paras 41, 42, 43, 46, 49]

Proceedings under Sections 138/141 as against the Appellants could not be sustained and were quashed in their regard.

Discretion under Section 205 of the Code of Criminal Procedure to dispense with personal attendance and representation of a corporation under Section 305 Cr.P.C. - inherent power of the High Court under Section 482 Cr.P.C. to quash proceedings to prevent abuse of process and secure ends of justice - Whether the Magistrate's refusal to dispense with the personal attendance of the Appellants (when the company had appeared through an authorised officer) warranted exercise of the High Court's inherent jurisdiction to quash proceedings - HELD THAT: - Section 205 confers discretion to the Magistrate to permit appearance by pleader and to dispense with personal attendance unless personal presence becomes necessary; Section 305 permits a corporation to appoint a representative whose appearance satisfies certain procedural requirements. Summoning an accused cannot be routine and orders must show application of mind. Given that the company had appeared through an authorised officer and the Appellants were non executive independent directors (not shown to be in charge of the company's business), there was no justification for compelling their personal attendance; the High Court ought to have exercised its inherent jurisdiction where denial of relief amounted to an abuse or where the interests of justice required quashing. [Paras 16, 21, 47, 48, 49]

The refusal to dispense with personal attendance was unsustainable in the circumstances, and the High Court should have exercised its Section 482 Cr.P.C. jurisdiction to grant relief to the Appellants.

Final Conclusion: The appeal is allowed; the High Court's order is set aside and Criminal Case No. AC/121/2017 under Sections 138/141 of the Negotiable Instruments Act is quashed insofar as it relates to these Appellants, while proceedings may continue against the company, its managing director/additional managing director and the cheque signatory.