TaxTMI Updates e-Newsletter
Aug 04,2020

Detention of vehicle - transportation of goods for auction - interception on return journey - valid transit/transport documents - misunderstanding of the nature of transaction - release of detained vehicle

Detention of vehicle - valid transit/transport documents - interception on return journey - misunderstanding of the nature of transaction - release of detained vehicle - Detention of the vehicle on its return journey was not justified and the vehicle must be released forthwith. - HELD THAT: - The Court found that the onward transportation of the goods to the auction centre was covered by valid documents and that the goods were in fact auctioned subsequently on 16.07.2020. The detention on the return journey arose from a misunderstanding that the goods had to be auctioned on the same date as the onward transportation. At the time of interception on the return journey the vehicle was not carrying any goods in contravention of the Act. For these reasons the detention of the vehicle under Ext.P5 was unwarranted. The Court directed immediate release of the detained vehicle and instructed the Government Pleader to communicate the gist of the order to the respondent to enable prompt release. [Paras 2, 4]

The vehicle detained by Ext.P5 shall be released forthwith; writ petition disposed of.

Final Conclusion: Petition allowed in part: detention found to be based on a misunderstanding and the vehicle ordered to be released immediately; respondents to be informed to effect prompt release.

Bail in economic offences - cognizable and non-bailable offence under Section 132(5) of the GST Act - custodial interrogation and risk of hampering investigation - retraction of statements recorded under Section 70 of the GST Act - documentary evidence vis-a -vis necessity of custody - conditions of bail requiring cooperation and prohibition on witness tampering

Bail in economic offences - cognizable and non-bailable offence under Section 132(5) of the GST Act - custodial interrogation and risk of hampering investigation - documentary evidence vis-a -vis necessity of custody - conditions of bail requiring cooperation and prohibition on witness tampering - Grant of bail to petitioners accused of large-scale GST evasion and related offences - HELD THAT: - The Court considered the nature and gravity of allegations relating to clandestine manufacture, distribution and large-scale GST evasion and noted the prosecution's concern that release could hamper investigation and lead to tampering with evidence or witnesses. The Court also noted the petitioners' contentions that their firm was registered, paid GST regularly, that statements allegedly recorded under Section 70 were retracted, that documentary evidence predominates and that custodial interrogation was unnecessary. After evaluating the material and submissions, and without entering into detailed discussion of the merits (to avoid prejudicing either party), the Court concluded that the case for granting bail was made out. The Court therefore allowed the first applications under Section 439 Cr.P.C., directing release on furnishing specified personal bonds and sureties and imposing conditions aimed at ensuring cooperation with the trial, prohibiting inducement or intimidation of witnesses, and restricting travel abroad without permission. The Court stayed comment on merits and emphasised that bail is subject to cancellation on breach of conditions. [Paras 21, 22, 23]

Petitions allowed; petitioners to be released on bail on furnishing bonds and sureties and subject to enumerated conditions including cooperation with trial, prohibition on tampering with witnesses, not committing further offences and surrender of passports.

Final Conclusion: The High Court allowed the first bail applications under Section 439 Cr.P.C., releasing the petitioners on specified bonds and sureties and imposing conditions (cooperation with trial, no inducement/threat to witnesses, prohibition on further offences, surrender of passports and requirement of prior permission to leave India); the Court declined to adjudicate merits and reserved the prosecution's right to act if bail conditions are breached.

Detention of goods and vehicles - e-way bill non-production - security for release by bank guarantee - adjudication under Section 130 of the GST Act - consideration of objections to proposed tax and penalty

Detention of goods and vehicles - e-way bill non-production - Detention of the vehicles and goods at the instance of the petitioner was justified. - HELD THAT: - The detention notices record that the vehicles carrying goods were detained because the e-way bill covering interstate movement had not been produced when demanded. Although an e-way bill for the second leg (Cochin to Kasargod) was produced, the petitioner could not satisfactorily explain the absence of the e-way bill for the first leg of the journey. In those circumstances the Court held that the detention of the vehicles and goods could not be said to be unjustified.

Detention upheld as justified on the ground of non-production of the e-way bill for the first leg of movement.

Security for release by bank guarantee - adjudication under Section 130 of the GST Act - consideration of objections to proposed tax and penalty - Release of the vehicles and goods on furnishing a bank guarantee and remand of substantive adjudication to the assessing authority. - HELD THAT: - The Court permitted provisional release of the vehicles and goods if the petitioner furnished a bank guarantee to cover the amounts demanded in the detention notices. The respondents were directed to release the vehicles and goods forthwith upon receipt of such bank guarantee. Thereafter the respondent was directed to proceed with adjudication under Section 130 of the GST Act and to consider the petitioner's objections on the merits to the proposed tax and penalty in those proceedings. The order thus provides for interim relief (release on security) while leaving the merits of tax and penalty to be finally adjudicated by the authority under the statutory provision.

Vehicles and goods to be released on furnishing bank guarantee; matter remanded to respondent for adjudication under Section 130 with consideration of petitioner's objections.

Final Conclusion: The detention was held justified for non-production of the e-way bill for the first leg; however, the petitioner was permitted immediate release of the vehicles and goods on furnishing a bank guarantee, and the respondents were directed to adjudicate the tax and penalty claims under Section 130 of the GST Act, considering the petitioner's objections.

Issuance of corporate guarantees as shareholder activity - definition of "international transaction" under Section 92B - arm's length price adjustment for notional guarantee fees - effect of Explanation to Section 92B (Finance Act, 2012) and retrospective operation - scope and application of transfer pricing under Section 92CA - amendment of assessment under Section 155(11A) - deduction under Section 10B

Issuance of corporate guarantees as shareholder activity - arm's length price adjustment for notional guarantee fees - definition of "international transaction" under Section 92B - Deletion of the ALP upward adjustment made for notional guarantee fees - HELD THAT: - The Tribunal deleted the ALP adjustment made by the AO (and confirmed by the CIT(A)) in respect of notional guarantee fees. The Tribunal held that the guarantees issued were in the nature of shareholder/quasi capital activity and, on the facts, did not have a bearing on profits, income, losses or assets of the assessee such as would bring them within the ambit of an "international transaction" under Section 92B. The Bench followed the coordinate bench decisions (including Siro Clinpharm and allied precedents) which reasoned that (i) corporate guarantees that do not cost the guarantor and are issued as shareholder support are conceptually distinct from bank guarantees or commercial services, (ii) the Explanation to Section 92B (Finance Act, 2012) must be read with Section 92B and does not automatically convert every guarantee into an international transaction unless the precondition of bearing on profits/income/losses/assets is satisfied, and (iii) on the present facts there was no material to show a real (as opposed to contingent or hypothetical) impact on the assessee's accounts. For these independent reasons the impugned adjustment was directed to be deleted. [Paras 6]

ALP adjustment for notional guarantee fees of Rs. 10,77,945/ deleted; ground of appeal allowed.

Amendment of assessment under Section 155(11A) - deduction under Section 10B - Reference of the claim for Section 10B deduction (convertible foreign exchange) to AO for verification under Section 155(11A) - HELD THAT: - On the question of disallowance under Section 10B for export receipts not brought into India in convertible foreign exchange the Tribunal found that the veracity and quantum of convertible foreign exchange receipts require factual verification. In view of Section 155(11A) the Tribunal set aside the matter to the file of the Assessing Officer to amend the assessment, if merited, after giving the assessee an opportunity of being heard and permitting it to produce evidence regarding receipts and timing of conversion/receipt in India. The direction contemplates application of the procedural provisions in Section 155(11A) and does not decide the substantive claim on merits. [Paras 8]

Issue remitted to the Assessing Officer for verification and appropriate amendment under Section 155(11A); assessee permitted to adduce evidence.

Final Conclusion: The Tribunal, relying on coordinate bench reasoning, allowed the appeal in part by deleting the ALP adjustment for notional guarantee fees and remitted the Section 10B convertible foreign exchange claim to the Assessing Officer for factual verification and amendment of assessment under Section 155(11A).

Transfer Pricing Adjustment - Arm's Length Price - Comparability Analysis - Inclusion of Loss-making Comparables - Transactional Net Margin Method (TNMM) - Profit Level Indicator - Exceptional/Non-operating Income - Rule 10B(1)(e) and Rule 10B(2) of the Income tax Rules - Pronouncement of Orders - Rule 34(5) of ITAT Rules and COVID 19 extensions

Comparability Analysis - Inclusion of Loss-making Comparables - Arm's Length Price - Transactional Net Margin Method (TNMM) - Profit Level Indicator - Rule 10B(1)(e) and Rule 10B(2) of the Income tax Rules - Inclusion of Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. as comparables for determining ALP and consequential recomputation of margin. - HELD THAT: - The Tribunal examined the profitability profile of the three companies and found that they showed profits in FYs 2009-10, 2010-11, 2012-13 and 2013-14 and losses only in FY 2011-12, indicating cyclical fluctuations rather than persistent loss making status. Relying on the principle that a single year loss does not ipso facto justify exclusion, and applying the tests under Rule 10B (including the need to examine whether material differences can be eliminated), the Tribunal held that the TPO/DRP erred in excluding these entities merely because they incurred losses in FY 2011-12. The Tribunal also noted documentary evidence showing only a share purchase agreement in respect of Sabero Organics Gujarat Ltd., and that no merger affecting functional comparability had been established. In view of these findings the Tribunal directed inclusion of the three companies in the comparable set, computation of the arithmetic mean margin including them, and passing of consequential assessment order after giving the assessee a reasonable opportunity of hearing. The Tribunal observed that, given this direction, other grounds (including treatment of certain recoveries as non operating) become academic.

Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. to be included as comparables; AO/TPO to compute arithmetic mean margin including them and pass consequential order after hearing the assessee.

Pronouncement of Orders - Rule 34(5) of ITAT Rules and COVID 19 extensions - Delay in pronouncement of the Tribunal's order beyond 90 days excused in view of COVID 19 related extensions and judicial orders. - HELD THAT: - The Tribunal recorded that hearing concluded on 09.01.2020 but the order was pronounced after expiry of 90 days. Having regard to the nationwide lockdown and extensions, and orders of the Supreme Court and the Bombay High Court extending limitation and court working timelines during the COVID 19 period, the Tribunal held that the exception under Rule 34(5)(c) is attracted and the delay in pronouncing the order is justified.

Delay in pronouncement is excused under the COVID 19 extensions; order pronounced under Rule 34(4).

Final Conclusion: The appeal is allowed: the three specified companies are to be included as comparables and the AO/TPO directed to recompute the arithmetic mean margin and pass consequential order after giving the assessee an opportunity of hearing; the Tribunal's delayed pronouncement is excused in view of COVID 19 related extensions.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Distinction between assessment (quantum) proceedings and penalty proceedings - Voluntary surrender of claimed income and its effect on levy of penalty - Deletion of penalty where assessee files supporting evidence establishing genuineness

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Distinction between assessment (quantum) proceedings and penalty proceedings - Voluntary surrender of claimed income and its effect on levy of penalty - Deletion of penalty where assessee files supporting evidence establishing genuineness - Deletion of the penalty imposed under section 271(1)(c) in respect of alleged bogus long-term capital gain - HELD THAT: - The Tribunal held that the imposition of penalty under section 271(1)(c) could not follow automatically from an addition made in assessment proceedings. Relying on the settled principle that assessment (quantum) proceedings and penalty proceedings stand on different footing, the Tribunal observed that voluntary surrender of a claim in assessment does not ipso facto establish concealment or furnishing of inaccurate particulars of income warranting penalty. The assessee had filed the relevant supporting evidence during scrutiny in support of the genuineness of the long-term capital gain. In these circumstances, and having regard to a coordinate-bench decision to similar effect, the Tribunal found no justification for sustaining the penalty and therefore deleted the levy.

Impugned penalty under section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: The appeal was allowed by deleting the penalty imposed under section 271(1)(c) in respect of the assessment for Assessment Year 2015-16, the Tribunal finding that the assessment addition did not, by itself, justify a penalty where supporting evidence of genuineness was filed.

Arm's length principle - non-discrimination clause of the DTAA (Article 24(3)) - disallowance under section 40(a)(i) for failure to deduct tax at source - obligation to deduct tax at source under section 195 - binding effect of Transfer Pricing Officer's arm's length finding

Disallowance under section 40(a)(i) for failure to deduct tax at source - arm's length principle - non-discrimination clause of the DTAA (Article 24(3)) - binding effect of Transfer Pricing Officer's arm's length finding - Deletion of the addition made under section 40(a)(i) for non-deduction of tax on payments to non-resident associated enterprises. - HELD THAT: - The Tribunal held that where the arm's length principle has been applied and the Transfer Pricing Officer has found the transactions with associated enterprises to be at arm's length, no further profit can be attributed to the non-resident even if it has a permanent establishment in India. The Tribunal followed its coordinate-bench decisions in the assessee's own cases and the reasoning of the jurisdictional High Court in Herbalife (regarding the scope of 'other disbursements' and the non-discrimination provision), concluding that the consequence of disallowance under section 40(a)(i) for payments to non-residents attracts Article 24(3) of the Indo Japan DTAA and is discriminatory where comparable payments to residents would not be disallowed. Applying these principles and the TPO's unchallenged arm's length findings, the Tribunal deleted the disallowance sustained by the AO and CIT(A). [Paras 11, 12, 13, 14]

Addition of Rs. 13,09,82,982 made under section 40(a)(i) for AY 2006-07 deleted.

Prematurity of penalty proceedings - Ground relating to initiation of penalty proceedings under section 271(1)(c) treated as premature. - HELD THAT: - The Tribunal recorded that the challenge to initiation of penalty proceedings was premature and therefore required no specific adjudication at this stage. [Paras 15, 16]

Ground relating to penalty proceedings left undecided as premature.

Final Conclusion: The appeal is partly allowed: the disallowance under section 40(a)(i) for failure to deduct tax at source on payments to certain non-resident associated enterprises for AY 2006-07 is deleted; the challenge to initiation of penalty proceedings is considered premature and not adjudicated.

Allowability of employer's contribution to ESI where payment made before end of financial year - delayed deposit of statutory employee welfare contributions and tax deductibility - deduction under section 37(1) for expenditure on employee welfare - precedential effect of High Court decisions and dismissal of SLP by the Supreme Court

Allowability of employer's contribution to ESI where payment made before end of financial year - delayed deposit of statutory employee welfare contributions and tax deductibility - precedential effect of High Court decisions and dismissal of SLP by the Supreme Court - Deletion of disallowance made on account of late deposit of ESI contribution - HELD THAT: - The Tribunal found that the assessee deposited the ESI contribution before the end of the relevant financial year and therefore well before the due date for filing the return under section 139(1). The Tribunal held the issue to be covered in favour of the assessee by a series of decisions of the jurisdictional High Court and by earlier orders of this Tribunal. The Tribunal noted that a decision relied upon by the CIT(A) was misunderstood due to a typographical mistake and that the consistent line of judicial authority supports allowability of such payments as business expenditure. The Tribunal also observed that the Supreme Court had dismissed the SLP filed by the Revenue in the relevant precedent relied upon, reinforcing the precedent in favour of the assessee. Applying these authorities, the Tribunal concluded that the disallowance made by the assessing officer was not sustainable and therefore deleted the addition.

Disallowance of Rs. 1,34,632 on account of late deposit of ESI is deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal in respect of the ESI disallowance for assessment year 2014-15 and deleted the addition, applying the consistent line of High Court and Tribunal decisions and noting dismissal of the Revenue's SLP by the Supreme Court.

Penalty under section 271AAB - undisclosed income - search under section 132 - statement under section 132(4) - incriminating material - voluntary disclosure - acceptance of return in assessment under section 153A read with section 143(3)

Penalty under section 271AAB - undisclosed income - incriminating material - search under section 132 - statement under section 132(4) - voluntary disclosure - Whether penalty under section 271AAB could be levied where the disclosure made by the assessee in response to notice under section 153A was not supported by incriminating material found in the course of search and the statement under section 132(4) did not refer to such material. - HELD THAT: - The Tribunal examined Explanation (c) to section 271AAB which requires that "undisclosed income" be evidenced by money, bullion, jewellery, other valuables, or entries/documents/transactions found in the course of a search. The authorities below levied and confirmed penalty on the basis that the disclosure flowed from incriminating material and the assessee's statement under section 132(4) and return indicated such disclosure. The Tribunal, however, found on the record that no incriminating documents or assets were identified during the search as supporting the undisclosed income claimed to have been disclosed; the 132(4) statement did not reference any seized material relating to the disclosed income; and the lower authorities did not point to or rely upon any specific incriminating material linking seized items to the disclosed amounts. The Tribunal also observed that other co group cases subject to the same search had the penalty deleted. Relying on precedents holding that penalty u/s 271AAB attracts only where undisclosed income is established by incriminating material found during search, the Tribunal concluded that the penalty could not be sustained where disclosure was voluntary and not evidenced by seizure material. [Paras 14, 15, 16, 18, 21]

Penalty under section 271AAB deleted because the disclosure was not shown to be based on incriminating material found during the search; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2012-13 and A.Y. 2013-14 and set aside the penalty imposed under section 271AAB, holding that penalty under that provision is unsustainable where the disclosed income is not evidenced by incriminating material found in the search.

Prohibited goods - old and used tyres being reuseable - interim release of imported goods subject to verification of reuseability - assessment and clearance under the Customs Act, 1962 subject to verification

Interim release of imported goods subject to verification of reuseability - assessment and clearance under the Customs Act, 1962 subject to verification - Grant of interim directions for assessment and release of imported old and used tyres subject to specified conditions. - HELD THAT: - The Court directed interim relief in favour of the writ applicants by following the approach adopted by a coordinate Bench in a prior order. The respondents were directed to permit assessment and clearance of the imported tyres in accordance with law, subject to conditions: deputation of a Customs surveyor to verify whether the tyres are reuseable with or without retreading; prohibition on clearing goods found not reuseable; and filing of an undertaking that the imported goods will be sold in a manner allowing reuse. The Court ordered that identical interim directions be issued in all captioned matters and required respondents to ensure compliance by the returnable date.

Interim directions granted to permit assessment and clearance subject to verification of reuseability and specified conditions.

Prohibited goods - old and used tyres being reuseable - Final determination whether old and used tyres which are reuseable fall within the ambit of prohibited goods was not decided on merits and is to be adjudicated in the main matter. - HELD THAT: - The Court observed that the question is squarely raised and prima facie appears to be covered by earlier coordinate Bench orders, but declined to finally decide the substantive issue in the present interim proceedings. The main Special Civil Application No.8492 of 2015 remains pending for final hearing. The Court issued notice to the Union of India and listed the matter for final disposal on the specified returnable date, indicating an intention to decide the controversy 'once and for all' in the pending main matter.

Substantive issue remitted for final adjudication in the pending main matter; notice issued and matter listed for final hearing.

Final Conclusion: Interim relief was granted permitting assessment and release of the imported tyres subject to verification of reuseability and compliance with specified conditions, while the substantive question whether reuseable old and used tyres constitute 'prohibited goods' is left for final determination in the pending main proceeding; notice issued and matter listed for final disposal.

Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 - admission of liability and payment plan - evidence not placed before adjudicating authority - dismissal of insolvency petition

Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 - admission of liability and payment plan - evidence not placed before adjudicating authority - Whether the Adjudicating Authority rightly dismissed the application under Section 9 of the IBC on the ground of a pre-existing dispute despite communications from the corporate debtor admitting liability and proposing a payment plan. - HELD THAT: - The Tribunal examined the correspondence and documents on record and found that correspondence from the corporate debtor and related communications revealed an arrangement/understanding involving the operational creditor, the corporate debtor and a third party which pre-dated the demand notice. The Adjudicating Authority relied on an email dated 12.11.2016 to conclude that there was a pre-existing dispute prior to service of the demand notice dated 22.08.2018. A ledger entry and additional material (marked as document 'X' before this Tribunal) showing a receipt of funds was not placed before the Adjudicating Authority; having regard to the material actually before the Adjudicating Authority, the Tribunal accepted the conclusion that a dispute existed earlier. While the corporate debtor later acknowledged liability and proposed an instalment repayment schedule, those communications did not negate the existence of the earlier dispute which was relevant under Section 9. On this basis the Adjudicating Authority's finding that the petition was barred by a pre-existing dispute was maintained. [Paras 14, 17, 18, 19, 20]

The Adjudicating Authority correctly dismissed the Section 9 petition on the ground of a pre-existing dispute; the appellate challenge is without merit and is dismissed.

Final Conclusion: The appeal is dismissed; the order of the Adjudicating Authority dismissing the Company Petition under Section 9 of the IBC on account of a pre-existing dispute is affirmed. No order as to costs.

Regulation 6 and Regulation 9 of the FEMA ODI Regulations - exercise of regulatory discretion - non-speaking order - interim direction for outward remittance - delegation of decision-making to Enforcement Directorate

Interim direction for outward remittance - Regulation 6 and Regulation 9 of the FEMA ODI Regulations - exercise of regulatory discretion - non-speaking order - delegation of decision-making to Enforcement Directorate - Permission to remit USD 54.99 million to the petitioner's overseas wholly owned subsidiary and the validity of respondent's refusal communicated on 30.12.2019 - HELD THAT: - The Court held that where an Indian party does not satisfy eligibility under Regulation 6 it may approach RBI under Regulation 9, and on a prima facie reading the petitioner was entitled to approach RBI under Regulation 9. The impugned communication of 30.12.2019 was cryptic and non speaking and, in the facts of the case, RBI's discretion under the Regulations must be exercised on cogent materials by RBI itself and cannot be treated as automatically delegated to the Enforcement Directorate. The petitioner established a prima facie case: earlier permissions had been granted by RBI for substantial commitments and the communications relied on from the Enforcement Directorate merely recorded investigations or requests for information without clear demonstration of material change warranting denial. In these circumstances the Court found irreparable injury if permission were withheld and reiterated interim directions permitting the remittance subject to specified court undertakings and asset encumbrance conditions. [Paras 9, 11, 14, 15, 16]

Respondent directed to permit transmission of USD 54.99 million forthwith before 31.07.2020, subject to undertakings from the petitioner concerning deposit if ordered by the Court and maintenance of unencumbered assets, the interim directions of 19.06.2020 being reiterated.

Final Conclusion: The petitioner's application for permission to remit USD 54.99 million was allowed on an interim basis; the RBI's cryptic refusal was held prima facie unsustainable as a non speaking delegation to the Enforcement Directorate and the remittance was permitted subject to the petitioner furnishing specified undertakings and preserving unencumbered assets.

Permission under Regulation 9 of FEMA - Automatic route under Regulation 6 and investigation bar - Effect of pending enforcement agency inquiries on overseas direct investment - Interim permission to remit subject to judicial undertakings - Obligation to deposit remitted funds if court so directs

Permission under Regulation 9 of FEMA - Automatic route under Regulation 6 and investigation bar - Effect of pending enforcement agency inquiries on overseas direct investment - Whether the petitioner was prima facie entitled to seek RBI approval under Regulation 9 despite investigations referred to in Regulation 6 and whether RBI's earlier refusal on the basis of the Enforcement Directorate's reservations was sustainable. - HELD THAT: - The Court examined Regulations 6 and 9 of the FEMA notifications. Regulation 6 contains an eligibility norm which disqualifies an Indian party from making direct investment under the automatic route where it is "under investigation by any investigation / enforcement agency or regulatory body". Regulation 9, by contrast, provides an application route to the Reserve Bank where an Indian party does not satisfy the eligibility norms of Regulation 6 and does not itself contain an absolute bar tied to pending investigations. Given that the petitioner had previously obtained permissions from RBI for substantial overseas commitments (including the corporate guarantee and loans) as recently as 2018, and that the impugned refusal by RBI was recorded to be on account of "reservations expressed by the Enforcement Directorate", the Court found that, prima facie, the petitioner was correct in approaching RBI under Regulation 9. On the material placed before it the Court was not persuaded that RBI ought to allow the petitioner to go into default of its overseas obligations simply because some inquiry by enforcement agencies was said to be pending; the facts showed prior permissions had been granted while such proceedings were extant. For these reasons the petitioner established a prima facie case for relief and the balance of convenience and risk of irreparable injury (downgrading of credit rating and likelihood of default) favoured interim relief. (Paras 8-12) [Paras 9, 11, 12]

Petitioner was prima facie entitled to seek and obtain RBI approval under Regulation 9 despite the existence of enforcement agency inquiries; RBI's earlier refusal on the sole ground of the Enforcement Directorate's reservations was not held to be an absolute bar to grant of interim relief.

Interim permission to remit subject to judicial undertakings - Obligation to deposit remitted funds if court so directs - Unencumbered assets undertaking - What interim relief and conditions should be granted to permit remittance to the petitioner's overseas subsidiary pending further proceedings. - HELD THAT: - Balancing the petitioner's prima facie entitlement and the risk of irreparable harm against the respondent's concerns arising from enforcement agency communications, the Court granted specific interim relief while imposing protective conditions. The respondent was directed to permit immediate transmission of USD 75 million and further transmission of USD 15 million by 30.06.2020. These permissions were made conditional upon (i) an undertaking from the petitioner's Board that, if the Court later directs, the petitioner will forthwith deposit the remitted amount in court, and (ii) an undertaking that the petitioner has unencumbered assets of at least USD 100 million and will not sell, alienate, transfer or encumber those assets until further order. The directions were framed to protect any future judicial or enforcement claims while allowing the petitioner to meet its renegotiated overseas obligations and avoid immediate default. (Para 13) [Paras 13]

RBI directed to permit remittance of USD 75 million forthwith and USD 15 million by 30.06.2020, subject to the specified undertakings regarding deposit of funds if directed and preservation of unencumbered assets.

Final Conclusion: The writ petition succeeded to the extent of obtaining interim permission to remit USD 90 million (USD 75 million immediately and USD 15 million by 30.06.2020) to the petitioner's overseas subsidiary; permission was granted under Regulation 9 of FEMA on a prima facie finding, subject to the petitioner's board undertaking to deposit the funds if directed by the Court and to maintain and not encumber unencumbered assets of specified value until further orders.

Filing of half yearly return - manual filing of returns - electronic submission of returns - harmonious construction of sub rules - qualification of an enabling sub rule by a subsequent proviso - entitlement to benefit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Filing of half yearly return - manual filing of returns - electronic submission of returns - entitlement to benefit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether a petitioner who failed to submit half yearly returns electronically within the statutory period can tender belated manual returns to avail benefits reserved for persons who had filed returns under the Sabka Vishwas Scheme, 2019. - HELD THAT: - The Court held that Sub rule (3) to Rule 7, introduced with effect from 01.10.2011, qualifies Sub rule (1) of Rule 7. Sub rule (1) prescribes the form of the half yearly return, while Sub rule (3) clarifies the manner of submission after the amendment. Read harmoniously, the mandated form under Sub rule (1) had to be submitted electronically from 01.10.2011 onward. Consequently, a person who did not file the return electronically within the period specified by law cannot, by tendering a belated manual return, place themselves in the category of persons who had filed returns for the purpose of claiming benefits under the Sabka Vishwas Scheme. The petitioner, having not complied with the electronic filing requirement within the prescribed period, cannot be permitted to file manual returns belatedly to secure scheme benefits. [Paras 3, 4]

Petition dismissed; belated manual returns cannot be accepted for securing benefits reserved for those who had filed returns electronically within the statutory period.

Final Conclusion: The High Court dismissed the writ petition, holding that the post 2011 rule requires electronic submission of the half yearly return and that a failure to file electronically within the statutory period cannot be cured by belated manual filing to obtain benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Best judgment assessment - Outer time limit of five years for assessment - Reference to annual return for determining limitation - Deemed withdrawal under Section 62(2) conditional on filing within 30 days - Assessing officer may proceed after detection of default

Best judgment assessment - Reference to annual return for determining limitation - Outer time limit of five years for assessment - Assessing officer may proceed after detection of default - Scope and temporal effect of Section 62 read with Section 44 of the Act - HELD THAT: - The Court held that the reference to Section 44 in Section 62 is for the limited purpose of fixing the five-year outer limitation within which a best judgment assessment must be completed. That reference does not postpone the initiating or completing of steps for a best judgment assessment until after 31st December following the financial year. An assessing officer may proceed to assess on best judgment immediately upon detection of the assessee's failure to furnish returns (including after service of notice under Section 46); the five-year period specified in Section 62(1) is an outer statutory limit and not a rule prescribing the earliest date from which assessment procedures may commence.

Section 62 read with Section 44 fixes only the outer five-year limit for best judgment assessment; it does not bar initiation or completion of such assessment prior to 31st December and an assessing officer may proceed once default is detected.

Deemed withdrawal under Section 62(2) conditional on filing within 30 days - Availability of benefit under Section 62(2) where returns are filed after 30 days from service of assessment order - HELD THAT: - It was admitted before the Court that the petitioner filed the relevant returns after the 30-day period from service of the assessment orders under Section 62(1). The Court applied the statutory condition in Section 62(2) and held that, because a valid return was not furnished within the 30-day period, the petitioner is not entitled to the benefit of deeming the best judgment assessment withdrawn (save for payment of interest or late fee under Section 47).

Petitioner is not entitled to have the best judgment assessment deemed withdrawn under Section 62(2) because the returns were not filed within the 30-day period.

Final Conclusion: Writ petition dismissed; assessment orders upheld. Recovery proceedings stayed for six weeks to enable the petitioner to approach the Appellate Authority, subject to production of the writ petition and this judgment to the respondents.

Forfeiture of excess central sales tax - application of State sales-tax machinery to Central Sales Tax under section 9(2) and 9(2A) - refund of tax where tax-included price and reverse-working under section 8A - doctrine of unjust enrichment in refund claims - penalty and prosecution provisions under the Central Sales Tax Act

Forfeiture of excess central sales tax - application of State sales-tax machinery to Central Sales Tax under section 9(2) and 9(2A) - penalty and prosecution provisions under the Central Sales Tax Act - Excess central sales tax deposited by the assessee cannot be forfeited by the assessing authority under the Central Sales Tax Act - HELD THAT: - The Court held that the Central Sales Tax Act does not confer power to forfeit amounts collected in contravention of section 9A; the Central Act contains its own penal code (sections 10 and 10A) and is a self-contained code. Reliance on the Supreme Court's precedent in Khemka & Co. and subsequent decisions establishes that State Act provisions creating substantive forfeiture or penalty cannot be read into the Central Act merely through the procedural machinery of section 9(2). Section 9(2) and 9(2A) permit use of State machinery for assessment, collection and certain procedural matters, but do not enlarge substantive powers under the Central Act to include forfeiture where no express provision exists. In the facts, the Tribunal correctly set aside the first appellate order confirming forfeiture of the excess collection because the CST Act contains no forfeiture provision akin to the State VAT Act's section relied upon by revenue, and the appropriate remedy for contravention under the Central Act is prosecution under its penal provisions and not application of State forfeiture provisions. [Paras 14]

Order confirming forfeiture of the excess CST was set aside; excess tax cannot be forfeited under the CST Act.

Refund of tax where tax-included price and reverse-working under section 8A - doctrine of unjust enrichment in refund claims - refund procedure and entitlement under the Central Sales Tax Act - The assessee was entitled to refund of the excess central sales tax deposited where the contract price was fixed inclusive of tax and the assessee did not in fact collect tax separately from the buyer - HELD THAT: - Applying section 8A, turnover for CST is to be determined by reverse-working where price is inclusive of tax; the correct rate applicable (4% w.e.f. 01.04.2007) produces a tax liability less than the amount deposited by the assessee who incorrectly used higher pre-amendment rates in reverse calculation. The Court accepted the Tribunal's factual finding that the assessee received only the fixed inclusive price and did not separately collect or pass on the excess tax to the buyer; hence the doctrine against unjust enrichment (as explained in Mafatlal) does not mandate forfeiture here. Given absence of power to forfeit under the CST Act and the factual conclusion that the tax was not collected from the purchaser, the assessee is entitled to refund of the excess deposit with consequential rectification of minor TDS credit. [Paras 14, 15]

Assessee entitled to refund of the excess CST deposited; Tribunal's allowance of refund upheld.

Final Conclusion: Appeal dismissed. Re-framed substantial questions answered in favour of the assessee: (i) excess CST deposited by the assessee cannot be forfeited under the Central Sales Tax Act; and (ii) the assessee is entitled to refund of the excess deposit. Respondents directed to issue refund order within three months with simple interest at 6% p.a.

Wilful defaulter - RBI Master Circular on Wilful Defaulters dated 01.07.2015 - In-house identification and review procedure - Right to make representation to the Review Committee within 15 days - Requirement of a reasoned order - Compliance with Supreme Court directions in State Bank of India v. M/s Jah Developers Pvt. Ltd. & Ors.

Wilful defaulter - RBI Master Circular on Wilful Defaulters dated 01.07.2015 - Requirement of a reasoned order - Compliance with Supreme Court directions in State Bank of India v. M/s Jah Developers Pvt. Ltd. & Ors. - Validity of the impugned communication declaring the petitioners as wilful defaulters - HELD THAT: - The impugned communication dated 16.03.2020 is deficient. It merely records that the account was declared a wilful defaulter and that the petitioners' names were reported to RBI and published on the bank's website, and that photographs were published. The procedure adopted by the respondent is contrary to the mandate of the Master Circular (01.07.2015) as construed by the Supreme Court in State Bank of India v. M/s Jah Developers Pvt. Ltd. & Ors. The First Committee's order was not communicated to the petitioners, and no opportunity was afforded to make a representation to the Review Committee as incorporated into the Revised Circular by the Supreme Court. Further, the communication is not a reasoned order as required; consequently there is clear non-compliance of the directions which require service of the First Committee's order, an opportunity to represent within 15 days to the Review Committee, and a reasoned order from the Review Committee. [Paras 14, 15, 16]

The impugned order dated 16.03.2020 declaring the petitioners as wilful defaulters is illegal, non-est, and is struck down; any consequential steps including reporting to RBI and publication are withdrawn.

In-house identification and review procedure - Right to make representation to the Review Committee within 15 days - Requirement of a reasoned order - Procedure to be followed by the bank on remand for fresh consideration - HELD THAT: - The respondent is permitted to serve on the petitioners the order of the First Committee. Upon receipt, the petitioners are entitled to make a detailed representation on facts and law within 15 days to the Review Committee. The Review Committee must consider that representation and pass an appropriate speaking (reasoned) order in accordance with the Master Circular and the Supreme Court's directions. This restores the procedural safeguards mandated for declaration of wilful default and requires fresh consideration by the competent committee with compliance of the prescribed steps. [Paras 17]

Respondent may furnish the First Committee's order; petitioners may represent within 15 days; Review Committee to consider and pass a reasoned order.

Final Conclusion: The communication declaring the petitioners wilful defaulters is quashed for non-compliance with the Master Circular and the Supreme Court's directions; the bank may now serve the First Committee's order, the petitioners may represent within 15 days, and the Review Committee must pass a reasoned order on such representation.