TaxTMI Updates e-Newsletter
Aug 04,2022

Regular bail under Section 439 of the Code of Criminal Procedure - grant of bail in alleged economic offences involving tax evasion - deposit as a condition for grant of bail - protection of constitutionally guaranteed liberty balanced against investigation needs - conditions of bail including surrender of passport and restriction on leaving India

Regular bail under Section 439 of the Code of Criminal Procedure - grant of bail in alleged economic offences involving tax evasion - deposit as a condition for grant of bail - Whether the applicant, accused of offences under the CGST and Gujarat GST Acts and arrested for alleged tax evasion, should be enlarged on regular bail and on what conditions - HELD THAT: - The Court noted that the applicant was arrested on 17.04.2022 in connection with allegations of issuing fake invoices and causing alleged revenue loss of Rs.21.59 crores. It recorded that investigation as to two proprietory firms (of which the applicant was authorised representative) was virtually complete, that the applicant had been extensively interrogated after arrest and that a complaint had been filed. Applying the constitutional principle that liberty should be respected unless detention is necessary and having regard to the balance of interests (as reflected in the decision of the Apex Court cited), the Court concluded that continued detention was not necessary in the circumstances. The Court exercised its discretion to grant regular bail but imposed stringent conditions to protect investigation and public interest: the deposit of Rs.2 crore with the specified tax authority within two months (stipulated to be in two installments with automatic cancellation of bail on default), execution of personal bond with one surety, surrender of passport, prohibition on leaving India without permission, furnishing residence details and other usual conditions. The Court observed that these conditions could be modified by the Sessions Judge in accordance with law and that the order did not express any opinion on the merits of the case. [Paras 8, 9, 10, 11]

Applicant released on regular bail on executing bond and furnishing one surety, subject to conditions including deposit of Rs.2 crore in two instalments within two months and surrender of passport, with automatic cancellation of bail on failure to deposit the sum.

Final Conclusion: Bail application allowed; applicant to be released on regular bail on specified bond and surety subject to conditions including deposit of Rs.2 crore within two months, surrender of passport and other conditions; order without expression on merits.

Regular bail under Section 439 CrPC - economic offences and bail jurisprudence - custodial necessity and investigation progress - deposit as condition for grant of bail - seized documentary and electronic evidence in custody of investigation - Article 21 protection against indefinite detention - conditions to prevent misuse of liberty

Regular bail under Section 439 CrPC - Article 21 protection against indefinite detention - Whether applicants should be enlarged on bail in the criminal proceedings arising from File No. ACST/U-10/EXPIFT IMPEX/2021-22 - HELD THAT: - Having considered the facts and submissions, the Court exercised its discretion to grant regular bail. The Court noted that the offences under the GST enactments are compoundable with maximum punishment up to five years, the applicants had been in custody since December 2021, and adjudication proceedings had not yet commenced. The Court observed that continued detention when adjudication and prosecution appear not likely to be concluded in the near future would violate Article 21 by resulting in indefinite detention. The documentary and electronic material seized in the investigation remained in the custody of the department and the department failed to demonstrate necessity for further custodial interrogation. Taking these factors together, the Court concluded that bail was warranted subject to conditions, including individual deposit of Rs.1 crore within one month, furnishing of bond and surety, surrender of passport, and other usual protective conditions to secure presence and prevent misuse of liberty. [Paras 10, 11, 12]

Applications allowed; applicants released on regular bail on specified conditions including individual deposit of Rs.1 crore within one month, execution of personal bond with surety and ancillary conditions.

Economic offences and bail jurisprudence - Whether allegation of grave or socio-economic offences operates as an absolute bar to grant of bail - HELD THAT: - The Court rejected the submission that alleged economic offence by itself mandates denial of bail. Relying on the principle that there is no statutory bar to grant bail in cases of grave economic offences, the Court held that each bail application must be considered on its facts and on whether the accused's presence can be secured and investigation protected. The Apex Court's observations in P. Chidambaram were cited to the effect that allegations of grave economic offences do not automatically preclude bail; instead the court must balance factors such as nature of offence, progress of investigation, custodial necessity and possibility of prejudice to the prosecution. [Paras 11]

Allegation of economic offence does not constitute an automatic bar to grant of bail; consideration must be fact-specific.

Custodial necessity and investigation progress - seized documentary and electronic evidence in custody of investigation - Whether further custodial detention of the applicants was necessary for the investigation - HELD THAT: - The Court found that the investigation was virtually complete, adjudication had not commenced, and substantial documentary and computer evidence had been seized and were in departmental custody. The prosecution did not point to any continuing necessity for further custodial interrogation or specific risk of evidence tampering that could not be addressed by protective bail conditions. On that basis the Court concluded that further custody was not necessary and that the investigation would not be hampered by release under appropriate conditions. [Paras 10, 11]

Further custodial detention was unnecessary; protective conditions imposed to safeguard investigation and prosecution interests.

Final Conclusion: The High Court allowed the regular bail applications and ordered release of the applicants on execution of bonds and sureties and subject to conditions including individual deposit of Rs.1 crore within one month, surrender of passport, restrictions on travel without permission, furnishing of residence, and other conditions to prevent misuse of liberty; the trial court remains free to modify conditions and to proceed with trial unaffected by the Court's preliminary observations.

Confiscation under Section 130 of the CGST Act - release of goods pending adjudication on payment of fine in lieu of confiscation - proceedings in rem - interim relief under Article 226 of the Constitution of India - distinction between Customs law and domestic GST confiscation regime

Confiscation under Section 130 of the CGST Act - proceedings in rem - interim relief under Article 226 of the Constitution of India - Validity of Ext.P9 (show cause notice under Section 130) and prayer to quash the notice - HELD THAT: - Ext.P9 is a show cause notice issued under Section 130 of the CGST Act. The Court held that the validity or legality of a mere show cause notice need not be gone into in writ proceedings under Article 226 at this stage. Although some High Courts have expressed the view that initial detention should proceed under Section 129 rather than Section 130, that question was unnecessary to decide here because Ext.P9 was issued after physical verification. Consequently, the petitioner's prayer to quash Ext.P9 is rejected. [Paras 5]

Prayer to quash Ext.P9 rejected.

Release of goods pending adjudication on payment of fine in lieu of confiscation - distinction between Customs law and domestic GST confiscation regime - interim relief under Article 226 of the Constitution of India - Entitlement to interim release of detained goods and conveyance pending adjudication under Section 130 of the CGST Act - HELD THAT: - The Court distinguished the Supreme Court's decision in the customs context (Lexus Exports) as not determinative for proceedings under Section 130 of the CGST Act, since Customs law may permit absolute confiscation of prohibited goods whereas domestic GST confiscation does not contemplate absolute confiscation of non-prohibited goods. The Court relied on reasoning in a recent Kerala High Court order in State Tax Officer v. Balakrishnan, which interprets Section 130(2) as permitting release of goods during the course of adjudication on payment of fine in lieu of confiscation. The Court observed that Section 130 allows the competent officer to secure revenue by imposing conditions and that release on deposit and bond does not prejudice revenue. Having regard to these considerations and the view expressed in Balakrishnan (and subsequent compliance direction by a Division Bench), the petitioner was held entitled to interim release subject to conditions to protect revenue. [Paras 6]

Goods and conveyance to be released pending adjudication of Ext.P9 on deposit of a security sum and furnishing a bond for the balance.

Final Conclusion: Writ petition disposed: Ext.P9 is not quashed, but the petitioner is granted interim release of the detained goods and conveyance pending adjudication of the Section 130 notice upon deposit of a specified sum and furnishing a bond to secure the balance.

Taxable services under Section 9(1) of the CGST Act, 2017 - exemption for pure services provided in relation to functions entrusted to a municipality under Article 243W of the Constitution - interpretation of the expression 'in relation to' - functions listed in the Twelfth Schedule to the Constitution - Notification No. 12/2017 - exemption at Sr. No. 3 (Chapter 99) of the Table

Taxable services under Section 9(1) of the CGST Act, 2017 - exemption for pure services provided in relation to functions entrusted to a municipality under Article 243W of the Constitution - Notification No. 12/2017 - exemption at Sr. No. 3 (Chapter 99) of the Table - interpretation of the expression 'in relation to' - Supply of telecommunication (data/voice) services by the applicant to the Greater Hyderabad Municipal Corporation is taxable and does not qualify for exemption under Sr. No. 3 (Chapter 99) of the Table to Notification No. 12/2017. - HELD THAT: - The exemption at Sr. No. 3 in Notification No. 12/2017 applies only to pure services that are provided "in relation to" the functions entrusted to a municipality under Article 243W read with the Twelfth Schedule. The phrase "in relation to" requires a direct and immediate link or association between the service and the municipal function, as explained by the cited precedents which treat "relating to" or "relate" as importing a connection or pertinence to the subject matter. The applicant's provision of data and voice telecommunication services to GHMC for general office and administrative use by employees does not have a direct relation to any specific function enumerated in the Twelfth Schedule. Because the services are not directly connected to the performance or implementation of a municipal function listed under Article 243W/Twelfth Schedule, they fall outside the scope of the exemption and are therefore taxable under the GST law. The Authority applied the principle that exemption must be directly related to the enumerated municipal functions and rejected a broad or incidental reading of "in relation to," concluding that general administrative telecommunications services do not satisfy that test. [Paras 7, 8]

The supply of telecommunication services to the local authority is taxable and not exempt under Notification No. 12/2017 Sr. No. 3.

Final Conclusion: The Advance Ruling holds that the applicant's supply of data/voice telecommunication services to the Greater Hyderabad Municipal Corporation, being for general administrative use and not directly connected to functions listed in the Twelfth Schedule under Article 243W, does not qualify for exemption under Notification No. 12/2017 and is taxable under the GST law.

Benefit of Input Tax Credit (ITC) - commensurate reduction in prices - profiteering under Section 171(1) of the CGST Act, 2017 - methodology for computing profiteering using ratio of ITC to turnover - treatment of post-Completion Certificate (OC) and unsold units for ITC attribution - exclusion of supplies where GST was waived by supplier (builder) from profiteering computation - interest and refund mechanism under Rule 133(3)(b) of the CGST Rules, 2017

Profiteering under Section 171(1) of the CGST Act, 2017 - methodology for computing profiteering using ratio of ITC to turnover - Whether the Respondent contravened Section 171(1) by not passing on additional ITC benefit and the amount of profiteering for the period of investigation - HELD THAT: - The Authority upheld the DGAP's re investigation methodology (as framed in Interim Order No.6/2020) and accepted the comparative computation of ITC ratios for pre GST and post GST periods. Using the ratio of ITC to turnover (pre GST 1.94% and post GST 8.31%), the DGAP determined an increase in ITC availability of 6.37%. The Authority accepted exclusion of turnover in respect of buyers for whom the Respondent had expressly borne GST (post GST bookings) and exclusion of units with no consideration received in the investigation period. Applying the 6.37% recalibration to the relevant turnover, the DGAP calculated the excess realization (profiteered amount) and the Authority found no reason to differ from that calculation. [Paras 16, 18]

Contravention of Section 171(1) established; profiteered amount determined as Rs. 2,26,76,700 for the period 01.07.2017 to 31.12.2018 and to be refunded with interest.

Exclusion of supplies where GST was waived by supplier (builder) from profiteering computation - verification of passing on of ITC by examination of allotment letters, demand notes and buyer confirmations - Whether the Respondent had passed on the ITC benefit to buyers who booked in the post GST period and whether such bookings should be included in profiteering computation - HELD THAT: - DGAP scrutinized allotment letters, demand notes and obtained buyer confirmations by e mail. For 189 buyers who booked on or after 01.07.2017 the records showed that the Respondent had borne GST (deduction in demand notes) and sample confirmations corroborated that the ITC benefit (12%) was passed on. The Authority accepted DGAP's finding that these 189 sales should be excluded from the profiteering computation because the entire GST was waived by the Respondent to those buyers. [Paras 15, 16]

189 post GST bookings where GST was borne by Respondent are excluded from profiteering computation; DGAP's finding that ITC benefit was passed to those buyers is accepted.

Benefit of Input Tax Credit (ITC) - verification of ITC passed to individual pre GST buyers - Whether the Respondent had passed on ITC benefit to buyers who booked prior to 01.07.2017 and adequacy of DGAP verification - HELD THAT: - The DGAP verified demand notes and the list submitted by the Respondent and conducted sample e mail confirmations. It found that out of 529 pre GST bookings the Respondent had passed on ITC benefit to 478 buyers (with 29 having no post GST consideration and 22 who had not received benefit). However, DGAP's sample check (300 buyers) yielded only 51 confirmations, leaving the verification for the broader class inconclusive. The Authority held that the DGAP verification was inconclusive to establish that all pre GST buyers received the required ITC benefit, while accepting verified shortfalls for specific subsets. [Paras 13, 17]

DGAP's verification is inconclusive to establish universal passing on of ITC to all pre GST buyers; specific shortfalls identified and accounted for in calculations.

Refund with interest under Rule 133(3)(b) of the CGST Rules, 2017 - time bound compliance and recovery mechanism - Relief and mechanism: mode and timeline for passing/returning the profiteered amount and interest, and enforcement directions - HELD THAT: - Relying on Rule 133(3)(b), the Authority directed the Respondent to reduce prices commensurate with ITC benefit and to refund the determined profiteered amount with interest at 18% from the date of profiteering till payment. The Authority ordered payment/passing on of the profiteered amount and interest within three months from receipt of the order and directed the jurisdictional CGST/SGST Commissioner to ensure compliance and report within four months. Publication and publicity measures were also directed to inform eligible buyers. [Paras 19, 20, 21, 23, 25]

Respondent directed to refund/pass on Rs. 2,26,76,700 with interest @18% within three months; enforcement and compliance directions issued to jurisdictional authorities.

Benefit of Input Tax Credit (ITC) - assessee specific quantification of ITC passed (Applicant No.1) - Whether Applicant No.1 received ITC benefit and quantum thereof - HELD THAT: - Applicant No.1 was a post GST buyer. DGAP examined the allotment letter and demand note for Applicant No.1 which indicated that GST was borne by the Respondent. Applicant No.1 confirmed by e mail that the Respondent had borne the GST. DGAP found and the Authority accepted that the Respondent had passed on ITC benefit of Rs. 3,44,130 to Applicant No.1 till 31.12.2018 (the Applicant's lower claimed figure was not supported). [Paras 5, 13]

Applicant No.1 received ITC benefit of Rs. 3,44,130 (as borne by Respondent) and the Applicant's contention of non receipt is rejected.

Final Conclusion: For the tax period 01.07.2017 to 31.12.2018 the Authority finding is that the Respondent contravened Section 171(1) by not passing on the net additional ITC benefit; the profiteered amount is fixed at Rs. 2,26,76,700 (computed by DGAP and accepted by the Authority) which the Respondent shall refund/pass on to the eligible homebuyers along with interest at 18% from the date of profiteering until payment, within three months; compliance and recovery directions are issued to the jurisdictional tax authorities.

Retrospective operation of proviso to section 40(a)(ia) - Disallowance under section 40(a)(ia) - Deposit of tax deducted at source before the due date of filing return - Requirement to substantiate claim of double allowance - Validity of reassessment beyond four years where material facts were disclosed

Disallowance under section 40(a)(ia) - Retrospective operation of proviso to section 40(a)(ia) - Deposit of tax deducted at source before the due date of filing return - Whether amounts could be disallowed under section 40(a)(ia) for Assessment Year 2005-06 where TDS was deposited before the due date of filing the return, having regard to the retrospective operation of the proviso. - HELD THAT: - The Court accepted the concurrent findings of the CIT(A) and the Tribunal that the TDS in question was deposited before the due date for filing the return and that no material was produced to show the deduction had been allowed twice. Relying on the Supreme Court's exposition that the amendments (including the proviso) to section 40(a)(ia) are curative and to be given retrospective effect so as to avoid unintended and disproportionate hardship, the Court held that where TDS deducted during the previous year is deposited on or before the due date for filing the return, disallowance under section 40(a)(ia) is not permissible. The assessing officer's disallowance could not stand in view of the retrospective proviso which permits allowance of such deduction when TDS is so deposited. [Paras 8, 10]

No disallowance under section 40(a)(ia) in AY 2005-06 where TDS was deposited before the due date of filing the return; Tribunal order upholding CIT(A) confirmed.

Requirement to substantiate claim of double allowance - Whether the revenue established that the deduction had been allowed twice and hence required disallowance in AY 2005-06. - HELD THAT: - The Tribunal found, and this Court noted, that the revenue did not place any material before the authorities or this Court to demonstrate that the deduction had in fact been allowed twice. A mere allegation or claim without factual substantiation cannot support an addition. In absence of evidence showing double allowance, no disallowance could be sustained. [Paras 3, 10]

Claim of double allowance not substantiated; no disallowance warranted on that ground.

Final Conclusion: Concurrent findings that TDS was deposited before the due date for filing the return and that no material was produced to show double allowance were upheld; in view of the retrospective operation of the proviso to section 40(a)(ia) no disallowance in AY 2005-06 was permissible and the revenue's appeal is dismissed.

Revisionary power under Section 263 - When two views are possible - Assessment order erroneous and prejudicial to the interest of revenue - Reliance on jurisdictional High Court precedent

Revisionary power under Section 263 - When two views are possible - Reliance on jurisdictional High Court precedent - Validity of the Commissioner's exercise of jurisdiction under Section 263 to reopen an assessment that allowed depreciation where the assessing officer had followed a decision of the jurisdictional High Court and two divergent views existed. - HELD THAT: - The Tribunal's conclusion that the Commissioner's invocation of Section 263 was not justified is affirmed. The Court applied the principle that where two reasonable and divergent views exist, and the assessing officer accepted the assessee's position by following a binding decision of the jurisdictional High Court, the assessment cannot be characterised as "erroneous and prejudicial to the interest of revenue" for the purposes of Section 263. The order of the Commissioner was therefore correctly set aside by the Tribunal; reliance on the jurisdictional High Court's precedent and the existence of conflicting High Court decisions precluded treating the assessment as erroneous under Section 263. The Court noted the applicability of the line of authority exemplified in Malabar Industrial Company and held that the circumstances did not justify exercise of revisionary power.

The exercise of jurisdiction under Section 263 by the Commissioner was not proper and is held to be unjustified; the Tribunal's order setting aside the Commissioner's action is upheld.

Final Conclusion: The appeal is dismissed. Substantial question of law No. 3 is answered against the revenue and in favour of the assessee; questions Nos. 1 and 2 were not adjudicated as unnecessary in view of this conclusion.

Maintainability of proceedings under Section 148 of the Income Tax Act, 1961 - initiation of reassessment proceedings post-amalgamation - interim restraint on completion of reassessment proceedings - requirement of leave of the Court before passing final order

Maintainability of proceedings under Section 148 of the Income Tax Act, 1961 - initiation of reassessment proceedings post-amalgamation - interim restraint on completion of reassessment proceedings - Interim relief to restrain completion of proceedings initiated under Section 148 of the Income Tax Act, 1961 against a company which had been amalgamated prior to initiation of proceedings. - HELD THAT: - The petitioner's counsel submitted that the respondent could not have initiated proceedings under Section 148A/Section 148 against the company which stood amalgamated into another company by orders passed by the High Court under the Companies Act prior to initiation of the assessment proceedings. Reliance was placed on several decisions of the Supreme Court and various High Courts addressing the effect of amalgamation on the maintainability of income tax proceedings. Having heard the submissions and in view of the contention that proceedings were initiated against an entity which had ceased to exist by virtue of earlier amalgamation orders, the Court was inclined to protect the petitioner from final adjudication until the legal questions are canvassed and decided. The respondent was granted three weeks' time to file a reply, the matter was listed after three weeks, and an interim direction was issued that the proceedings under Section 148 shall not be brought to their logical conclusion nor shall a final order be passed without leave of the Court.

Interim order granted restraining completion of proceedings under Section 148 without leave of the Court; respondent directed to file reply within three weeks and matter listed thereafter.

Final Conclusion: Interim protection granted: reassessment proceedings under Section 148 against the amalgamated company shall not be concluded and no final order shall be passed without leave of the High Court; respondent permitted three weeks to file reply and matter to be listed subsequently.

Accrual of income from retention money under mercantile system of accounting - deferred payment contingent on contractual completion - tax deduction at source under Section 194C and its effect on accrual - timing and allowability of claimed TDS vis-a -vis declaration of income - change in method of computation of income

Accrual of income from retention money under mercantile system of accounting - deferred payment contingent on contractual completion - Retention money withheld by contractees did not accrue as income to the assessee in A.Y. 2014-15. - HELD THAT: - On the undisputed contract terms the contractee was entitled to withhold a portion of the contract price until successful completion and certification of the work; the retained amounts were payable only upon satisfaction of contractual conditions and thus constituted deferred, contingent payments. Applying the mercantile system in light of the contractual terms, the Assessing Officer's conclusion that booking the amount in the year of retention made it taxable in A.Y. 2014-15 was unsustainable. The CIT(A) and the Tribunal correctly followed the precedents treating retention money as not accruing to the contractor until contractual obligations were fulfilled and accordingly excluded the retention money from income for A.Y. 2014-15.

Retention money is not income of the assessee in A.Y. 2014-15 as the right to receive it had not accrued until contractual completion; the Tribunal's confirmation of the CIT(A) order is upheld.

Tax deduction at source under Section 194C and its effect on accrual - timing and allowability of claimed TDS vis-a -vis declaration of income - Deduction of tax at source by contractees under Section 194C did not cause retention money to be income in A.Y. 2014-15; however the TDS claimed by the assessee for that year cannot be allowed until the year in which the assessee declares the retention money as income. - HELD THAT: - The Tribunal accepted that deduction of TDS by the contractees and their crediting of the retained amount do not change the accrual position when, by virtue of the contract, the assessee had no vested right to the sums in the year of retention. The CIT(A) had observed that if the assessee maintained that the retention money was not its income for the year, it ought not to claim TDS credit in that year; such TDS credit may be allowed in the year the assessee includes the retention money in its taxable income. The Tribunal's conclusion that TDS deduction by the contractees does not create an accrued right for the assessee was affirmed.

TDS deduction under Section 194C does not convert the retained amount into income in A.Y. 2014-15; the TDS claimed for that year is disallowed for the year and may be allowed when the assessee recognizes the retained amount as income.

Change in method of computation of income - accrual of income from retention money under mercantile system of accounting - The revenue's contention that the assessee changed its method of computation to exclude retention money was not sustained and did not rebut the contractual and accrual analysis. - HELD THAT: - The Court noted the revenue's allegation regarding change in method of computation but found that the tribunal and CIT(A) had considered the undisputed contractual terms and the accounting treatment in the context of accrual. There was no material to show that any purported change in computation justified treating the retention money as income for A.Y. 2014-15. The appellate fora applied the correct legal position in concluding that the retention was contingent and not accrued income.

The plea of change in method of computation did not prevail; it did not alter the conclusion that retention money was not income in A.Y. 2014-15.

Final Conclusion: The appeal by the revenue is dismissed. The orders of the CIT(A) and the Tribunal holding that retention money retained under contract did not accrue as income in A.Y. 2014-15 are affirmed, and the revenue's challenge fails; the question of allowance of TDS claimed is to be addressed in the year the assessee declares the retention money as income.

Treatment of notices issued under Section 148 as show-cause notices under Section 148A - application of the Supreme Court's decision in Union of India v. Ashish Agarwal - requirement to provide information and material relied upon by the Revenue - direction to complete re-assessment proceedings in accordance with Section 148A procedure

Treatment of notices issued under Section 148 as show-cause notices under Section 148A - application of the Supreme Court's decision in Union of India v. Ashish Agarwal - Notices issued under Section 148 shall be treated as show cause notices under Section 148A and the Supreme Court's directions in Union of India v. Ashish Agarwal apply to the matters before this Court. - HELD THAT: - The petitioners challenged notices issued under Section 148 on the ground that, after the Finance Act, 2021, the procedure under Section 148A must precede reassessment. The learned counsel for the petitioners relied on the Supreme Court's decision in Union of India v. Ashish Agarwal, which held that notices issued under the unamended Section 148 shall be deemed to have been issued under the substituted provision and shall be construed as show cause notices in terms of Section 148A(b). The respondent did not dispute applicability of that decision. Having accepted the binding effect of the Supreme Court's ruling, this Court directed that the Section 148 notices issued to the petitioners be treated as show cause notices under Section 148A and governed by the procedure laid down in the cited judgment.

Section 148 notices to the petitioners are to be regarded as show cause notices under Section 148A and the Supreme Court's directions in Union of India v. Ashish Agarwal shall govern these matters.

Requirement to provide information and material relied upon by the Revenue - direction to complete re-assessment proceedings in accordance with Section 148A procedure - The reassessment proceedings are to proceed in accordance with the steps and timelines laid down by the Supreme Court, including provision of material relied upon and opportunity to reply, and thereafter completion of proceedings under Section 148A. - HELD THAT: - Relying on the Ashish Agarwal directions, this Court ordered that the assessing officer shall treat the issued notices as show cause notices under Section 148A and follow the procedure specified by the Supreme Court. That includes furnishing to the assessees the information and material relied upon by the Revenue so that the assessees may reply within the prescribed time, and thereafter the assessing officer shall pass orders as required under Section 148A(d) before issuing any fresh notice under the substituted Section 148. The Court recorded that the departmental counsel accepted the applicability of the Supreme Court's directions and disposed of the writ petitions accordingly.

Proceedings shall be completed by the assessing officer in the manner and sequence directed by the Supreme Court, including disclosure of material relied upon, opportunity to reply, passing of orders under Section 148A(d) and thereafter action under the substituted Section 148 if required.

Final Conclusion: Writ petitions disposed of by directing that the Section 148 notices issued to the petitioners be treated as show cause notices under Section 148A and that reassessment proceedings shall be completed in accordance with the Supreme Court's directions in Union of India v. Ashish Agarwal.

Faceless Assessment - mandated Draft Assessment Order under Section 144B - opportunity to show cause before variation prejudicial to assessee - principles of natural justice

Mandated Draft Assessment Order under Section 144B - opportunity to show cause before variation prejudicial to assessee - Faceless Assessment - principles of natural justice - Whether the faceless assessment proceedings complied with the requirements of Section 144B by preparing and serving a Draft Assessment Order and, where a variation prejudicial to the assessee was proposed, by serving a show-cause notice before finalising assessment. - HELD THAT: - The Court examined Section 144B which requires the assessment unit to make in writing a Draft Assessment Order and to send a copy to the National Faceless Assessment Centre; where a variation prejudicial to the assessee is proposed the National Faceless Assessment Centre must serve a notice calling upon the assessee to show cause why the proposed variation should not be made. In the present case, although the final assessment order referred to a Draft Assessment Order, there is no material on record to show that any Draft Assessment Order was prepared and served on the petitioner or that the statutory show-cause opportunity was afforded. The Faceless Assessment Scheme, while intended to reduce human interface, codifies principles of natural justice and contemplates issuance of draft orders and show-cause notices at crucial phases. Non-compliance with these mandatory steps vitiates the assessment process. Accordingly the assessment order and consequential penalty notices could not be sustained and the matter must be reopened for compliance with statutory requirements.

Ext.P13 assessment order and Exts.P14 and P14(a) penalty notices set aside; assessment proceedings for assessment year 2013-'14 remitted for fresh finalisation in accordance with law.

Final Conclusion: Writ petition allowed: the faceless assessment and penalty notices were quashed for failure to comply with Section 144B (no Draft Assessment Order served and no show-cause opportunity where prejudicial variation was proposed); the assessment for assessment year 2013-'14 is to be finalised afresh in accordance with law.

Interest on refund under Section 244A - condonation of delay under Section 119(2)(b) - refund consequent to writ court direction - actus curiae neminem gravabit

Interest on refund under Section 244A - condonation of delay under Section 119(2)(b) - refund consequent to writ court direction - entitlement to interest on the refunded amount for the period 01.02.2000 to 11.02.2008 was rejected - HELD THAT: - The appellant confined its claim before this Court to interest for the period 01.02.2000 to 11.02.2008. The High Court had earlier quashed the CBDT order denying condonation under Section 119(2)(b) and directed the Assessing Officer to process the refund; the Department complied and issued the refund as directed. The Court held that there was no direction in the writ judgment for payment of interest and that the Department merely implemented the High Court's order. The delay in adjudication of the writ petition leading up to issuance of the refund cannot be visited upon the Department as a ground for awarding interest by way of compensation. Consequently, the claim for interest independent of any direction by the Court was unsustainable, and the rejection of interest by the Commissioner and the Single Judge was affirmed. The Full Bench and other authorities relied upon by the appellant were considered distinguishable on the facts and not applicable to a refund ordered and issued pursuant to the writ court's direction. [Paras 8]

Claim for interest for the period 01.02.2000 to 11.02.2008 rejected; appeal dismissed.

Final Conclusion: The appeal is dismissed. The Court affirmed the rejection of the claim for interest on the refund issued pursuant to the High Court's direction, holding that delay in adjudication of the writ petition does not entitle the appellant to interest where no direction for interest was made.

Notice under section 148 - Amalgamating company ceases to exist upon approved scheme of amalgamation - Jurisdictional notice issued in the name of an extinct entity is without jurisdiction - No estoppel against law by participation in proceedings

Notice under section 148 - Amalgamating company ceases to exist upon approved scheme of amalgamation - Jurisdictional notice issued in the name of an extinct entity is without jurisdiction - No estoppel against law by participation in proceedings - Validity of reassessment notices issued under section 148 to the erstwhile/amalgamating company which had ceased to exist on merger. - HELD THAT: - The High Court found as an undisputed fact that the transferor company (Bilfinger Plant Equipment Pvt. Ltd/Bilfinger Neo Structo Pvt. Ltd) had been merged into the present petitioner pursuant to a scheme approved by the Bombay High Court and that the merged entity ceased to exist. Applying the ratio of the Supreme Court in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd and this Court's decisions (including Gayatri Microns Ltd), the Court held that where an amalgamating entity has ceased to exist pursuant to an approved scheme, assessment proceedings and jurisdictional notices issued in the name of that extinct entity are fundamentally illegal and without jurisdiction. The Court further accepted the principle that participation by the amalgamated/transferee entity cannot operate as an estoppel against this legal position. On these grounds the impugned notices issued in the name of the non-existent/amalgamated entity were found unsustainable and liable to be quashed. [Paras 10, 11, 12]

The reassessment notices issued under section 148 in the name of the amalgamating/non-existent company are without jurisdiction and are quashed.

Final Conclusion: Petitions allowed; notices under section 148 issued in the name of the amalgamating/extinct company quashed and set aside for the assessment year 2015-16.

Reopening of assessment beyond four years - failure to disclose truly and fully all material facts - change of opinion - claim of deduction under section 80IB(8A) for scientific and industrial research and development - prior detailed scrutiny and framing of assessment - quashing of reopening notice

Reopening of assessment beyond four years - failure to disclose truly and fully all material facts - change of opinion - claim of deduction under section 80IB(8A) for scientific and industrial research and development - prior detailed scrutiny and framing of assessment - quashing of reopening notice - Validity of notice under section 148 to reopen assessment for Assessment Year 2011-2012 issued beyond four years - HELD THAT: - The Court found that the Assessing Officer issued the notice under section 148 after the four year period and that the reasons recorded for reopening merely reproduced the material relied upon in reopening for Assessment Year 2010-2011. The earlier scrutiny assessment for 2011-2012 had involved detailed queries, the assessee's lengthy replies and framing of assessment under section 143(3). There was no material on record showing any failure by the assessee to truly and fully disclose all material facts during the original assessment proceedings. In these circumstances, and given that the reopening proceeded on the same facts and basis as the quashed reopening for 2010-2011, the Court held that the impugned notice amounted to a change of opinion by the Assessing Officer and lacked jurisdiction to reopen the assessment beyond four years. The Court accordingly applied the principle that reopening beyond four years is permissible only where there is nondisclosure of material facts warranting a reason to believe that income has escaped assessment, which was not established here. The Court therefore quashed the notice under section 148 for AY 2011-2012. [Paras 8, 9, 11, 12, 13]

Impugned notice dated 31.03.2018 under section 148 for Assessment Year 2011-2012 quashed and set aside as being a change of opinion and issued beyond four years without any failure to disclose material facts.

Final Conclusion: The petition is allowed; the reopening notice for Assessment Year 2011-2012 issued under section 148 is quashed and set aside and the rule is made absolute to that extent.

Principle of mutuality - rectification under section 154 - mistake apparent on record - taxation at maximum marginal rate under section 167A - assessees' prior acceptance of assessments in earlier years

Rectification under section 154 - mistake apparent on record - taxation at maximum marginal rate under section 167A - Application under section 154 seeking rectification was not valid because there was no mistake apparent on the record. - HELD THAT: - The Tribunal upheld the view that the order passed by the Centralized Processing Centre, Bengaluru required no rectification under section 154 since the CPC had assessed the identical quantum of income as declared by the assessee and only applied taxation at the maximum marginal rate under the provision invoked. The Court accepted the reasoning of the Commissioner (Appeals) that nothing in the processing order constituted a clerical or apparent mistake susceptible to summary correction under section 154. The Revenue's point about similar treatment in earlier years, accepted by the assessee, reinforced the conclusion that there was no objective error on the face of the record warranting rectification. [Paras 3, 6]

Application under section 154 dismissed for lack of any mistake apparent on the record; no rectification ordered.

Principle of mutuality - assessees' prior acceptance of assessments in earlier years - Claim that the association's entire income was exempt on the basis of mutuality was not accepted and was not sustained as a ground for rectification. - HELD THAT: - The assessee contended that as an AOP formed on principles of mutuality, its income was outside the scope of taxation. The Tribunal, however, noted that the CPC taxed the declared income under section 167A and that similar treatment in preceding assessment years had been accepted by the assessee. The Tribunal agreed with the Commissioner (Appeals) that the mutuality contention did not convert the processing assessment into a document containing an apparent mistake which could be rectified under section 154. The mutuality plea therefore did not provide a basis for setting aside the taxation applied by CPC in the rectification proceeding. [Paras 2, 6]

Claim of exemption by application of mutuality rejected for purposes of the section 154 rectification; substantive contention not sustained in the rectification forum.

Final Conclusion: The appeal is dismissed: the rectification application under section 154 was held invalid as there was no mistake apparent on the record, and the assessee's claim of exemption on the basis of mutuality did not justify rectification of the CPC assessment which applied taxation under section 167A.

Documents "belonging to" a person for the purposes of initiation under section 153C - satisfaction for issuing notice under section 153C of the Act - ownership of draft financials and working papers - disallowance under section 14A to be restricted to exempt income - remand to Assessing Officer for examination of a fresh claim

Documents "belonging to" a person for the purposes of initiation under section 153C - ownership of draft financials and working papers - satisfaction for issuing notice under section 153C of the Act - Validity of initiation of proceedings under section 153C based on draft financials found in possession of a searched entity and whether those documents 'belonged to' the assessee. - HELD THAT: - The Tribunal upheld the learned CIT(A)'s conclusion that the draft Profit & Loss account, Balance Sheet and related schedules seized from the searched entity (Lexcorp) belonged to the assessee notwithstanding that they were in draft form and had been provided to the searched entity for finalisation of accounts. The court distinguished authorities concerning photocopies found with searched persons where originals were with the taxpayer; those cases were factually different. The Tribunal reasoned that documents supplied to a consultant or adviser for preparation or finalisation of accounts remain documents of the taxpayer and, at best, the consultant's output (finalised accounts) may be considered the consultant's product. The Assessing Officer had recorded satisfaction after verifying the seized documents and issued notice under section 153C; no objection to the vires of proceedings under section 153C was taken during assessment. Applying these considerations, the Tribunal found no infirmity in confirmation of proceedings under section 153C and rejected the contention that draft documents were working papers of the searched entity and therefore not belonging to the assessee. [Paras 9]

Grounds challenging initiation of proceedings under section 153C on the basis that the seized draft financials did not 'belong to' the assessee are dismissed; the seized draft financials were held to belong to the assessee and support issuance of notice under section 153C.

Disallowance under section 14A to be restricted to exempt income - remand to Assessing Officer for examination of a fresh claim - Admissibility and treatment of the assessee's fresh claim that the suo moto disallowance under section 14A should be restricted to the exempt dividend income. - HELD THAT: - The Tribunal admitted the additional ground as a legal issue capable of decision on the record, relying on precedents permitting appellate authorities to entertain fresh claims raised by assessee. Noting that the matter was not examined by lower authorities, the Tribunal did not decide the claim on merits but restored the issue to the file of the Assessing Officer for examination and decision in accordance with law. The direction contemplates that the AO will examine the assessee's claim regarding limitation of section 14A disallowance to exempt income and pass appropriate orders. [Paras 14]

Additional ground regarding restriction of section 14A disallowance to exempt income is admitted for consideration and remitted to the Assessing Officer for fresh examination and decision.

Final Conclusion: Appeal is partly allowed for statistical purposes: challenges to initiation of proceedings under section 153C based on ownership of the seized draft accounts are dismissed; the assessee's fresh legal claim on restriction of section 14A disallowance to exempt income is admitted and remanded to the Assessing Officer for adjudication.

Ex parte assessment - assessment under section 144 - dismissal of appeal for non prosecution - service of notice and obligation to update address/Form No.36 - burden of proof on assessee to lead evidence - rejection of books of account for want of bills and vouchers - enhancement of gross profit rate on absence of verifiable purchases/sales - disallowance of expenses for lack of supporting vouchers

Dismissal of appeal for non prosecution - service of notice and obligation to update address/Form No.36 - ex parte assessment - Whether the appeal could be disposed of where the assessee failed to comply with registry defects, did not appear despite repeated notices and adjournments, and notices sent were returned unserved. - HELD THAT: - The Tribunal recorded that the assessee did not comply with defect notices (shortfall in fee and other defects) and repeatedly failed to appear before the Tribunal despite notices issued through RPAD and multiple adjournments. The Registry's notices were returned with postal remark "Incomplete address" and no revised address/Form No.36 was filed by the assessee. In these circumstances the Tribunal held that the assessee's conduct amounted to non prosecution and negligent approach in pursuing the appeal; having considered the material on record and after hearing the Departmental Representative, the Tribunal found no reason to keep the matter pending and proceeded to dispose of the appeal on merits available on record. The Tribunal therefore dismissed the appeal for want of prosecution and on the basis that the assessee had not placed any material to controvert the findings of the lower authorities. [Paras 4, 9]

Appeal dismissed for non prosecution and for failure to comply with notices and registry defects; matter disposed after considering material on record.

Burden of proof on assessee to lead evidence - rejection of books of account for want of bills and vouchers - enhancement of gross profit rate on absence of verifiable purchases/sales - disallowance of expenses for lack of supporting vouchers - assessment under section 144 - Whether the additions made by the A.O. (enhancement of gross profit rate to 1%, 30% disallowance of expenses, and additions in respect of sundry creditors/undisclosed income) could be sustained in the absence of books, bills and other supporting material. - HELD THAT: - The A.O. found that assessee had shown an abnormally low gross profit (0.30%) on sales and, in absence of books of account and verifiable purchase/sales evidence, treated purchase and sales as not verifiable and adopted a gross profit rate of 1% to compute additions. The A.O. also disallowed 30% of the expenses claimed because bills and vouchers were not produced. The CIT(A) confirmed these findings having regard to absence of any explanation or supporting documents from the assessee. The Tribunal noted that when an appeal is filed it is the assessee's duty to lead evidence in support of claims; since no contrary material was placed on record to rebut the findings of the lower authorities, the Tribunal upheld the additions and disallowance made in the ex parte assessment under section 144. [Paras 5, 6, 9]

Additions by way of enhancement of gross profit rate, 30% disallowance of expenses and related additions upheld for lack of verifiable books and supporting vouchers; assessment confirmed.

Final Conclusion: The appeal for A.Y. 2009-10 is dismissed: the Tribunal declined to keep the matter pending in view of the assessee's non compliance and non appearance and, on the material before it, upheld the ex parte assessment under section 144 including enhancement of gross profit rate and disallowance of expenses for want of supporting documents.

Deduction under section 54 - interpretation of 'a residential house' - contiguous residential units treated as one residential house - prospective operation of Finance Act, 2014 amendment to section 54

Deduction under section 54 - interpretation of 'a residential house' - contiguous residential units treated as one residential house - Whether investment in construction of three independent but contiguous residential units on adjoining plots qualifies as acquisition of 'a residential house' for grant of deduction under section 54 for AY 2013-14. - HELD THAT: - The Tribunal accepted the assessee's case that the three units were constructed contiguously within a single compound to serve as one large residential accommodation for the family and that the intention was to acquire one residential house. The Tribunal followed the reasoning of the Hon'ble Delhi High Court in CIT v. Gita Duggal that the statutory expression 'a residential house' is not confined to a single physical unit and a building comprising several independent units, if contiguous and used as a single residential house, satisfies the requirement of section 54/54F. The Tribunal also relied on the decision of the Hon'ble Madras High Court in Tilokchand & Sons to the effect that prior to the amendment w.e.f. 01.04.2015 the word 'a' in section 54(1) could in some circumstances include plural houses and that the 2014 amendment operates prospectively from AY 2015-16; hence reliance by the AO on the amended provision was misplaced for AY 2013-14. The Tribunal noted that the CIT(A) had considered photographs and factual material showing three similar units within a single compound and that the AO's conclusion that three independent houses precluded deduction was not tenable in view of the cited decisions and the facts showing contiguous construction and single residential use. [Paras 6, 7, 8, 9]

Deduction under section 54 was allowable in respect of the three contiguous residential units treated as one residential house; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s allowance of deduction under section 54 for the three contiguous residential units constructed on adjoining plots for AY 2013-14, holding that prior to the prospective amendment applicable from AY 2015-16 the expression 'a residential house' could include multiple contiguous units used as a single residential house.

Goods in transit - treatment as closing stock or work-in-progress - mercantile system of accounting - burden on assessing officer to produce cogent evidence for reopening/addition - inclusion of cost in sales and tax neutrality of duplicative adjustment - reopening of assessment (reassessment) and change of opinion

Goods in transit - treatment as closing stock or work-in-progress - mercantile system of accounting - burden on assessing officer to produce cogent evidence - inclusion of cost in sales and tax neutrality - Deletion of addition of the alleged purchase amount on the ground that goods were in transit and should have been shown as closing stock/work-in-progress. - HELD THAT: - The Assessing Officer disallowed the expenditure treating purchases recorded on 31/3/2010 as goods in transit and held that the amount should have been reflected as closing stock or WIP. The assessee had explained, supported by challans and ledger entries, that materials were supplied on various days in March and invoiced on 31/3/2010, were consumed at the Udaipur site and billed to the main contractor (GHV India Pvt. Ltd.), thereby being included in the assessee's sales. The Commissioner (Appeals) found that the Assessing Officer did not confront or rebut these explanations, made no further enquiry of the supplier despite the contention that supplies were on different dates, and produced no cogent evidence that materials were retained in transit. Further, inclusion of the cost in sales meant that treating the same amount again as closing stock would be tax neutral (and, if adjusted, would affect profit only by corresponding changes in subsequent year). The Tribunal found the Assessing Officer's action hasty, observed absence of any iota of evidence that materials were in transit to the assessee's office, and affirmed the CIT(A)'s deletion of the addition. [Paras 5, 10, 11, 12, 13]

The deletion of the addition was affirmed and the addition was deleted.

Reopening of assessment (reassessment) and change of opinion - burden on assessing officer to produce cogent evidence for reopening/addition - Whether the validity of the reassessment notice was finally adjudicated. - HELD THAT: - The Commissioner (Appeals) treated adjudication on the validity of the notice under Section 148 as academic because the substantive addition was deleted on merits. The Tribunal noted the same position and, in view of its affirmation of the deletion, observed that the question of validity of reopening remained academic and did not require separate adjudication. The Tribunal additionally observed that the alleged audit objection relied upon by the Assessing Officer was without application of mind and did not justify the reassessment outcome. [Paras 7, 13]

Adjudication of the validity of the reopening was treated as academic and no separate adverse finding on validity of the notice was made.

Final Conclusion: The revenue's appeal is dismissed; the Tribunal affirms the deletion of the addition on merits and treats the question of validity of reassessment as academic in light of that deletion.

Long term capital gains exemption - Bogus share transactions and entry operators - Evidentiary value of statements recorded under section 133A/section 131 - Unexplained cash credit under section 68 - Identity, genuineness and creditworthiness of creditors - Opportunity for cross-examination and principle of natural justice

Long term capital gains exemption - Bogus share transactions and entry operators - Evidentiary value of statements recorded under section 133A/section 131 - Deletion of addition disallowing exemption claimed as long term capital gain on sale of shares of Bakra Pratisthan Ltd was not justified. - HELD THAT: - The Tribunal considered the assessing officer's conclusion that the LTCG claimed arose from bogus transactions because the scrip was controlled by an entry operator and because statements and SEBI findings implicated the broker network. The assessee relied on contract notes, demat records, STT-paid sale through registered brokers, bank payments and court-ordered amalgamation to support genuineness. The Tribunal observed that the issue was squarely covered by higher court findings against the assessee's position (including the Calcutta High Court decisions and the Supreme Court view relied upon by the CIT(A)), and found no infirmity in the CIT(A)'s conclusion that the transactions were not genuine. On the facts and in view of the appellate authorities relied upon by the CIT(A), the Tribunal approved and confirmed the CIT(A)'s order and dismissed the assessee's cross-objection. [Paras 11, 12, 13]

Cross-objection dismissed; addition on account of claimed LTCG on Bakra Pratisthan Ltd confirmed.

Unexplained cash credit under section 68 - Identity, genuineness and creditworthiness of creditors - Opportunity for cross-examination and principle of natural justice - Evidentiary value of statements recorded under section 133A/section 131 - Addition treating loan from Gujarat Computer & Software Ltd as unexplained cash credit was unsustainable and deletion by CIT(A) was justified. - HELD THAT: - The Tribunal examined whether the assessee discharged the onus to prove identity, genuineness and creditworthiness of the creditor. The assessee produced confirmations, bank statements of the creditor, audited accounts, PAN, proofs of repayment, interest payments with TDS and evidence of banking channel transactions. Although a director of the creditor had made statements during survey and later reiterated parts of those statements, the Tribunal found no independent documentary corroboration of any cash payments or other material to support the assessing officer's conclusion that loans were accommodation entries. The assessee had sought cross-examination of the director whose statement was relied upon; the director did not appear for oral cross-examination but filed confirmations and documents. Relying on settled principles that survey/statements require corroboration and that a creditor-confirmation together with bank routing, audited accounts and repayments discharges the assessee's onus under section 68, the Tribunal upheld the CIT(A)'s deletion. The Tribunal also noted relevant decisions of the jurisdictional High Court supporting the assessee's position. [Paras 26, 27, 28, 29]

Revenue's appeal dismissed; addition under section 68 in respect of loan from GCSL deleted.

Final Conclusion: For AY.2012-13 the Tribunal (i) dismissed the assessee's cross-objection and upheld the disallowance treating the claimed LTCG from Bakra Pratisthan Ltd as non-genuine, and (ii) dismissed the Revenue's appeal and upheld the deletion of additions treating the loans from Gujarat Computer & Software Ltd as genuine (addition under section 68 deleted).

Dismissal on merits - Perishable goods - expedition of administrative proceedings - Direction to complete proceedings within fixed time

Dismissal on merits - Special Leave Petition dismissed on merits - HELD THAT: - The Supreme Court examined the Special Leave Petition and concluded that it does not merit interference with the decision under challenge. The petition is dismissed on merits, leaving the impugned administrative determination intact insofar as the Court's jurisdiction to entertain further challenge is concerned.

SLP dismissed on merits.

Perishable goods - expedition of administrative proceedings - Direction to complete proceedings within fixed time - Proceedings before the authority to be completed within six months because the goods are perishable - HELD THAT: - Although the petition is dismissed on merits, the Court noted that the goods involved are perishable and, in view of that fact, issued a supervisory direction. The authority is directed to complete the pending proceedings within six months from receipt of the order, subject to the petitioner's cooperation. The Court's direction is procedural and time-bound to address the special nature of perishable goods and does not alter the dismissal of the petition on merits.

Authority directed to complete proceedings within six months from receipt of the order, subject to petitioner's cooperation.

Final Conclusion: The Special Leave Petition is dismissed on merits; however, because the goods are perishable the Court directed the authority to conclude the pending proceedings within six months of receipt of this order, subject to cooperation by the petitioner.

Search and seizure compliance under Section 50 of NDPS Act - Seizure in restricted area and chance recovery - Chain of custody and delay in chemical analysis - Compliance with Standing Orders 1/88 and 1/89 and Section 52A - Identification of psychotropic substance by chemical analysis - Conviction under the NDPS Act for possession and export of psychotropic substance

Search and seizure compliance under Section 50 of NDPS Act - Whether the search and seizure complied with the requirements of Section 50 of the NDPS Act. - HELD THAT: - The Court found that the seizure and related proceedings were carried out in the Customs restricted area after the appellant was intercepted and questioned by Air Intelligence Officers, that two independent witnesses were brought and a mahazar was prepared and signed by the appellant and witnesses. The trial Court's findings that the option prescribed by Section 50 was given and that the search and seizure were recorded in the mahazar were accepted. The Court noted the prosecution witnesses (P.W.1, P.W.2 and P.W.5) corroborated the on spot test, seizure, signing of mahazar and production before the remanding Magistrate, and that the appellant did not object to the seizure at the time. [Paras 15, 16, 20]

The Court held that the requirements of Section 50 were substantially complied with and upheld the seizure and related procedure.

Seizure in restricted area and chance recovery - Whether the recovery was a chance recovery or a result of prior information/offloading in contravention of statutory safeguards (Section 42(1) context). - HELD THAT: - The Court observed that the seizure occurred inside the Customs restricted area after the appellant had passed immigration and held valid travel documents; the Air Intelligence Officer was lawfully keeping watch over passengers and questioned the appellant on suspicious behaviour. The finding records that the appellant was moving after immigration clearance, was intercepted in the restricted area, and admitted concealment in his sandals; the Court treated the incident as a legitimate interception in a restricted area rather than an impermissible forcible off boarding or a camouflage of prior information as a 'chance recovery'. [Paras 15, 16, 20]

The Court treated the seizure as properly made in the restricted area and rejected the submission that it was a disguised non compliant exercise to evade Section 42(1).

Chain of custody and delay in chemical analysis - Identification of psychotropic substance by chemical analysis - Whether the chain of custody and the delay in forwarding samples for chemical examination vitiated the prosecution case, and whether the substance was correctly identified. - HELD THAT: - The Court acknowledged a delay between seizure (15.10.2012) and receipt of samples by the laboratory (04.12.2012) but accepted the prosecution evidence that the seized articles were sealed, produced before the remanding Magistrate and thereafter kept in Customs custody. The Court considered that the samples were drawn on the spot, packed and sealed, and that remnants and seals remained intact when received by the Chemical Examiner. On identification, the Chemical Examiner's report confirmed the substance as Ketamine Hydrochloride (a psychotropic substance) and not Methaqualone. The Court held that the delay alone, in the factual matrix where custody and seals were preserved, did not require discarding the prosecution case. [Paras 7, 18, 19]

The Court found the chain of custody sufficiently proved despite delay and accepted the chemical analysis identifying the seized substance as Ketamine Hydrochloride.

Compliance with Standing Orders 1/88 and 1/89 and Section 52A - Whether the statutory and administrative procedures in Standing Orders 1/88 and 1/89 and Section 52A were breached so as to vitiate the prosecution. - HELD THAT: - The Court examined the nature and quantity of the seized material, the manner of sampling and sealing, and the storage in Customs godown. It held that the Standing Orders' instructions regarding on the spot sampling, number of samples, sealing, preparation of mahazar and production before the Magistrate were substantially followed. Section 52A procedures (for disposal/inventory where disposal is contemplated) were not applicable because there was no disposal or destruction of bulk material; the seized quantity was not of the kind requiring Section 52A formalities. The Court therefore concluded there was no material breach warranting acquittal. [Paras 22, 23, 24, 25, 26]

The Court held that the Standing Orders were substantially complied with and Section 52A was not applicable in the facts of this case.

Conviction under the NDPS Act for possession and export of psychotropic substance - Whether the evidence sufficed to sustain conviction under the NDPS Act and whether the sentence and fine required modification. - HELD THAT: - After evaluating witness testimony, mahazar, on spot sampling, production before the remanding Magistrate and chemical analysis confirming Ketamine, the Court affirmed the trial Court's finding of guilt and confirmed conviction under the NDPS provisions. However, applying mitigating considerations (including that the appellant was a carrier and of poor background), the Court exercised its sentencing discretion: it confirmed substantive imprisonment for the offence but reduced the period of imprisonment in default of payment of the statutory fine. [Paras 19, 20, 27, 29]

Conviction affirmed; substantive sentence of imprisonment confirmed, but default sentence for non payment of fine reduced.

Final Conclusion: The High Court upheld the conviction under the NDPS Act and accepted the identification of the seized substance as Ketamine, finding substantial compliance with Section 50, the Standing Orders and chain of custody requirements despite delay in laboratory submission; however, the Court reduced the default imprisonment for non payment of the fine, otherwise confirming the substantive sentence.

Time limit of ninety days for submission of inquiry report - mandatory nature of timelines in the Customs Brokers Licensing Regulations - directory versus mandatory character of Regulation 17(5) of CBLR 2018 (pari materia to Regulation 20(5) CBLR 2013) - effect of non-compliance with prescribed timelines on revocation proceedings - CBIC Circular No. 09/2010 overall nine months timeline

Time limit of ninety days for submission of inquiry report - mandatory nature of timelines in the Customs Brokers Licensing Regulations - directory versus mandatory character of Regulation 17(5) of CBLR 2018 (pari materia to Regulation 20(5) CBLR 2013) - effect of non-compliance with prescribed timelines on revocation proceedings - The CESTAT erred in holding that the timeline under Regulation 20(5) CBLR 2013 (pari materia Regulation 17(5) CBLR 2018) is directory; the timeline is mandatory and non-compliance vitiates the proceedings. - HELD THAT: - The Court examined the statutory scheme of Regulation 17 of CBLR 2018 (pari materia to Regulation 20 of CBLR 2013) which prescribes sequential timelines including issuance of show cause notice and submission of an inquiry report within ninety days. The Court reviewed consistent precedent of coordinate benches of this Court and other High Courts holding that the various time-limits in the CBLR regime are sacrosanct and mandatory, and that non-compliance renders subsequent proceedings invalid. The Court distinguished the contrary view of the Bombay High Court and rejected the principle that meritorious allegations can cure failure to adhere to mandatory timelines, observing that reasons based on merits cannot override a clear statutory limitation. Applying these principles to the facts, the Court found a delay of 28 days in submission of the inquiry report beyond the ninety day period prescribed by Regulation 17(5). As there was no acceptable explanation by the Revenue for the delay and given the binding precedents, the Court concluded that the Tribunal's characterization of the timeline as merely directory was incorrect and that the impugned revocation, forfeiture and penalty thereby stood vitiated. [Paras 11, 12, 13, 14, 15]

The appeal is allowed; the CESTAT order is set aside, and the proceedings of revocation of the customs broker licence, forfeiture of security deposit and imposition of penalty are quashed for non-compliance with the mandatory timeline.

Final Conclusion: The Court answered the confined question of law in favour of the appellant: the ninety-day timeline for submission of the inquiry report under Regulation 17(5) CBLR 2018 (pari materia to Regulation 20(5) CBLR 2013) is mandatory; the Tribunal erred in treating it as directory and the impugned revocation, forfeiture and penalty are set aside. The appellant's licence renewal application is to be processed in accordance with law and there shall be no order as to costs.

Transaction value - customs valuation rules - valuation under Section 14 of the Customs Act - speaking order under Section 17(5) of the Customs Act - remand for disclosure of basis and opportunity to rebut

Transaction value - customs valuation rules - speaking order under Section 17(5) of the Customs Act - remand for disclosure of basis and opportunity to rebut - Whether acceptance by the importer of an enhanced value by means of a consent letter absolves the Revenue from complying with the requirements of Section 14 of the Customs Act read with the Customs Valuation Rules before enhancing assessable value, and whether the matter required remand for furnishing the basis of reassessment and issuance of a speaking order after opportunity to rebut. - HELD THAT: - The Tribunal found that although a written acceptance by the importer may waive the procedural requirement of issuing a speaking order under Section 17(5), it does not relieve the Revenue of the substantive obligation to satisfy the tests and procedures under Section 14 and the Customs Valuation Rules before enhancing the assessable value. The record showed that the only reason cited for reassessment was the importer's admission; no cogent basis for rejecting the transaction value or for the determination of the enhanced value under the Valuation Rules was recorded. The assessing orders failed to specify reasons for discarding the declared transaction value or under which valuation rule the enhanced value was determined. In these circumstances the Tribunal held that the Revenue must disclose the basis for reassessment to the importer and afford a sufficient opportunity to rebut that basis, and thereafter pass a speaking order applying the statutory valuation framework. [Paras 9, 10, 11, 12, 13]

Impugned orders set aside and matter remanded to the original assessing authority to communicate the basis for reassessment to the importer, afford opportunity to rebut and thereafter pass a speaking order in accordance with Section 14 and the Customs Valuation Rules.

Final Conclusion: Appeals disposed of by setting aside the Commissioner (Appeals) orders and remitting the matter to the Assessing Authority for disclosure of the basis of enhanced valuation, opportunity to the importer to rebut and the passing of a reasoned speaking order in accordance with the statutory valuation provisions.

Undervaluation of imported goods - transaction value determinability under Rule 3(1) of CVR, 2007 - parallel invoices and manipulated documents under Explanation 1(iii)(f) to Rule 12 - comparability and adjustment of value under Rules 4 and 5 of the Customs Valuation Rules, 2007 - relevance of antecedents and prior settlement for proving present undervaluation - admissibility of evidence procured through private investigators / third party communications (WeChat)

Undervaluation of imported goods - transaction value determinability under Rule 3(1) of CVR, 2007 - Whether the Revenue established undervaluation so as to reject the declared transaction value of the respondents' imports and re determine value. - HELD THAT: - The Tribunal upheld the adjudicating authority's conclusion that Revenue failed to produce clinching evidence to displace the transaction value accepted at import. The materials relied upon by Revenue - including one alleged parallel invoice, limited contemporaneous import data of small importers, and other investigatory snippets - were examined and found insufficient to prove extra payments or a systematic scheme of under invoicing. The Tribunal relied on the principle that burden lies on Revenue to establish undervaluation and that mere comparison of invoices or suspicion is inadequate absent evidence of payments beyond normal banking channels, contemporaneous identical imports of same quality and commercial level, or other compelling proof. Applying these principles, the Tribunal found no basis to reject the declared values and declined to re determine value. [Paras 11, 14, 16, 21, 22]

Revenue has not proved undervaluation; declared transaction value cannot be rejected and re determination is unwarranted.

Parallel invoices and manipulated documents under Explanation 1(iii)(f) to Rule 12 - Whether the parallel invoices retrieved established presentation of fraudulent or manipulated documents warranting rejection of declared value. - HELD THAT: - The Tribunal accepted the Commissioner's finding that the two invoices bearing the same invoice number differed materially (presence of bank details, signatures, account particulars in one and absence in the other) and that investigation did not demonstrate any payment made on the basis of the lower value document. The adjudicating authority treated the lower value document as a proforma/unsigned paper and found no evidence of differential payment. The Tribunal held that a single discrepant invoice, without corroborative evidence of extra payments or systematic manipulation, could not justify discarding the declared invoice. [Paras 11]

The parallel invoice did not establish a manipulated document sufficient to reject the declared invoice; it was not a basis for undervaluation.

Comparability and adjustment of value under Rules 4 and 5 of the Customs Valuation Rules, 2007 - Whether contemporaneous imports by other importers could be used to enhance the respondents' declared value given differences in quantity, quality and commercial level. - HELD THAT: - The Tribunal sustained the Commissioner's analysis that the imports cited by Revenue (Shree Ram Granite, Stone Shippers, Sambhav Rocks) were not comparable on crucial grounds: the cited importers imported negligible quantities compared to the respondents' bulk trader volumes, some imports were by EOUs with different tax treatment, and test reports and supplier clarification indicated differences in bond/material (iron bond vs copper/cobalt bond and differing diamond grades) affecting price. Precedents were noted for the rule that comparison requires identical goods at substantially the same commercial level and quantity. In absence of contemporaneous import data of identical quality and comparable commercial level, the Commissioner's rejection of comparability was legally tenable. [Paras 12, 13, 14, 15, 16]

Imports relied upon by Revenue were not comparable in quality, quantity or commercial level and therefore could not be used to enhance the respondents' declared value.

Relevance of antecedents and prior settlement for proving present undervaluation - Whether the respondent's antecedent settlement and prior case of undervaluation could, by themselves, sustain a finding of undervaluation in the present proceedings. - HELD THAT: - The Tribunal agreed with the Commissioner that antecedent proceedings or a prior settlement, without demonstration that the goods and circumstances are identical or directly relevant, cannot constitute evidence proving undervaluation in a separate proceeding. While antecedents may justify suspicion and investigation, propensity alone cannot substitute for the evidentiary threshold required to establish present undervaluation; Revenue must still produce contemporaneous and relevant evidence for the current case. [Paras 17, 18]

Prior settlement or antecedents do not, by themselves, prove undervaluation in the present case and cannot sustain re determination of value.

Admissibility of evidence procured through private investigators / third party communications (WeChat) - Whether communications gathered by a private person (WeChat conversations) and evidence from a private investigator were admissible and could be relied upon to prove undervaluation. - HELD THAT: - The Tribunal endorsed the Commissioner's view that evidence produced from a private person's investigatory activities - including alleged WeChat conversations obtained by an independent private individual not functioning as a formal informer under established procedure - lacks the necessary legal sanction and reliability. The Tribunal observed that engagement of private persons for such investigatory evidence is impermissible and that such material, being unconnected and of doubtful provenance, cannot be used to sustain an allegation of undervaluation. [Paras 19, 20]

Evidence obtained through the private investigator and alleged WeChat communications is not legally admissible to prove undervaluation and cannot be relied upon.

Final Conclusion: The Tribunal found that Revenue failed to produce adequate and admissible evidence to reject the declared transaction values or to re determine value; comparisons relied upon lacked requisite identity in quality, quantity and commercial level; parallel invoice and private investigator materials were insufficient or inadmissible; accordingly the Revenue's appeal was dismissed and the adjudicating authority's order was upheld.

Anti-dumping duty exclusion for hot rolled flat products plated or coated with zinc - Chemical analysis as admissible evidence of product composition - Interest charged on anti-dumping duty - Penalty under section 114A of the Customs Act, 1962

Anti-dumping duty exclusion for hot rolled flat products plated or coated with zinc - Chemical analysis as admissible evidence of product composition - Whether the imported goods described as 'hot rolled painted steel plates' were plated with zinc and therefore excluded from levy of anti-dumping duty under the Notification relied upon by the department. - HELD THAT: - The Tribunal examined the factual controversy whether the goods were plated/coated with zinc so as to fall within the exclusion in Notification No. 17/2017-Cus. (ADD). During the pendency of the appeal the assessee obtained permission to have samples chemically tested. The Metal Lab test report dated 22.1.2022 establishes that the goods are plated with zinc. On that factual finding the Tribunal concluded that the goods are covered by the exclusion and that the demand of anti-dumping duty (and the consequential interest) confirmed by the adjudicating authority therefore could not be sustained. The Tribunal set aside the impugned order and allowed the assessee's appeal with consequential reliefs, treating the chemical analysis as determinative evidence on composition. [Paras 6]

Impugned demand of anti-dumping duty and interest set aside; assessee's appeal allowed.

Penalty under section 114A of the Customs Act, 1962 - Whether penalty under section 114A should be imposed on the assessee in respect of the same subject-matter. - HELD THAT: - Having held that the demand of anti-dumping duty and interest could not be sustained because the goods were plated with zinc and therefore excluded, the Tribunal found that the department's separate appeals seeking imposition of penalty under section 114A did not survive. The Tribunal accordingly dismissed the departmental appeals. [Paras 7]

Departmental appeals seeking penalty under section 114A dismissed.

Final Conclusion: On the admitted chemical test report establishing that the goods were plated with zinc, the Tribunal set aside the demand of anti-dumping duty and interest and allowed the assessee's appeal; consequentially the department's appeals for penalty under section 114A were dismissed.

Classification under Heading 2825 40 00 - separate chemically defined compound - impurities and permissible additions - General Rules of Interpretation - Rule 1 - General Rules of Interpretation - Rule 2(b) - General Rules of Interpretation - Rule 3(a) (specific heading prevailing over residuary) - specific heading versus residuary heading - eligibility under Notification No. 50/2017-Customs (Sr. No. 180) contingent on classification

Classification under Heading 2825 40 00 - separate chemically defined compound - impurities and permissible additions - General Rules of Interpretation - Rule 1 - General Rules of Interpretation - Rule 2(b) - General Rules of Interpretation - Rule 3(a) (specific heading prevailing over residuary) - specific heading versus residuary heading - Whether the imported I MAS POs (Nickel Hydroxide compound containing Nickel Hydroxide 78-80%, Cobalt Hydroxide 2-2.5%, Graphite 12-18% and moisture) is classifiable under sub heading 2825 40 00. - HELD THAT: - The product is predominantly Nickel Hydroxide, which is a separate chemically defined compound; the minor constituents (cobalt hydroxide and graphite) fall within the scope of permissible impurities/additions under Chapter Note 1 to Chapter 28 and the Explanatory Notes where such additions do not alter the character of the basic product or render it particularly suitable for a different or specific use. Application of Rule 1 of the General Rules of Interpretation requires classification according to the heading terms and relevant Chapter Notes; Rules 2(b) and 3(a) support treating references to a material as including mixtures and give precedence to a specific heading over a general/residuary heading. The residuary entry relied upon by the jurisdictional Commissionerate (Heading 2853) is a general/descriptive provision and cannot displace the specific tariff entry for Nickel Hydroxide. The US ruling cited is of limited assistance because it does not explain why the product was not classified under the specific Nickel Hydroxide heading. Considering composition, Explanatory Notes and GIRs, the additives enhance performance but do not change the nature or primary function of the product as Nickel Hydroxide. Therefore the compound is properly classified under the specific sub heading 2825 40 00 pursuant to the Chapter Notes and GIRs. [Paras 8, 9]

The imported Nickel Hydroxide compound is classifiable under sub heading 2825 40 00.

Final Conclusion: The Authority rules that the goods described (I MAS POs - Nickel Hydroxide compound with stated minor constituents) are classifiable under sub heading 2825 40 00; the applicant's claim that, consequent to this classification, the goods would be eligible to avail benefits under Notification No. 50/2017 Customs (Sr. No. 180) is noted.

Novation of contract - insufficiently stamped instrument - summary nature of Section 7 proceedings - documents in Part V of Form I as evidence of financial debt - curable defect of stamp insufficiency

Novation of contract - Redeemable Non-Convertible Debenture Subscription Agreement and Debenture Trust Deed executed on 1.3.2014 were not novated by the minutes of meeting dated 31.1.2018 and therefore the NCDs remained outside the purported settlement. - HELD THAT: - The record of the minutes dated 31.1.2018 does not mention the Debenture Subscription Agreement or the Jodhpur Project for which the NCDs were raised; it refers to different projects and specific adjustments limited to certain liabilities (not the NCDs). Subsequent conduct of the corporate debtor - requests for resetting interest after 31.1.2018, extension of redemption schedule to tranches in 2019, and the balance sheet disclosure treating the NCDs as redeemable in April-December 2019 - all indicate that the NCDs were kept out of the alleged larger settlement. Further events, including communications cancelling the purported settlement, reinforce that there was no novation of the NCD Subscription Agreement and Debenture Trust Deed. Applying these facts, the Tribunal concluded that there was no novation and the documents continued to evidence a debt in default as per the Debenture Trust Deed. [Paras 7, 18, 19, 20, 21]

The purported settlement did not novate the NCD Subscription Agreement or Debenture Trust Deed; the NCDs remained distinct and in default.

Insufficiently stamped instrument - summary nature of Section 7 proceedings - documents in Part V of Form I as evidence of financial debt - curable defect of stamp insufficiency - The Adjudicating Authority correctly admitted the Section 7 application despite the two documents being insufficiently stamped, because stamping insufficiency was a curable/technical defect and the application could be decided on other evidentiary material in the Form I/records. - HELD THAT: - The corporate debtor did not dispute execution of the Debenture Subscription Agreement or Debenture Trust Deed, instead relied on the plea of novation. Under the framework of Section 7 and Rule 4/Form I and relevant authorities, the Adjudicating Authority need only be satisfied from records or other evidence that a debt and default exist; several categories of documents in Part V of Form I are accepted sources to evidence financial debt. The defect of insufficient stamping was treated as a technical deficiency which can be cured and does not per se interdict the existence of a due financial debt. Applying Innoventive and related reasoning, the Tribunal held that the insufficiency in stamping did not preclude admission of the Section 7 petition and that the documents could be relied upon for establishing debt and default for the limited purpose of the summary Section 7 proceeding. [Paras 25, 26, 27, 28, 29]

Insufficiency of stamp duty on the impugned instruments did not bar the Adjudicating Authority from admitting the Section 7 application; the defect was curable and the documents, together with other records, could be relied upon to establish debt and default.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly admitted the Section 7 application: the NCD Subscription Agreement and Debenture Trust Deed were not novated by the alleged settlement and the insufficiency of stamping was a curable/technical defect that did not preclude admission of the petition.

Willful disobedience of an order of the Tribunal - willful breach of an undertaking given to the Tribunal - contempt jurisdiction of a Tribunal under Section 425 of the Companies Act - standard of proof in contempt proceedings (quasi criminal standard) - remedial effect of non compliance - recall of settlement order and revival of Corporate Insolvency Resolution Process - arbitration clause in a settlement agreement and its interplay with contempt remedy

Willful breach of an undertaking given to the Tribunal - arbitration clause in a settlement agreement - Whether Respondent Nos. 1 & 2 committed willful breach of the Settlement Agreement dated 08.03.2019. - HELD THAT: - The Tribunal examined the terms of the Settlement Agreement (including the payment schedule and Clause 11 providing for arbitration in disputes arising from the agreement) and the conduct of the parties. Although the respondents failed to perform the payment obligations, they invoked the arbitration remedy and filed an application under Section 11 of the Arbitration and Conciliation Act before the Delhi High Court. Having regard to availability of the contractual remedy for disputes under Clause 11.2, the Tribunal concluded that the respondents did not commit a willful breach of the Settlement Agreement. The Tribunal therefore declined to hold the respondents guilty of willful breach of the settlement agreement.

Respondent Nos. 1 & 2 not guilty of willful breach of the Settlement Agreement dated 08.03.2019.

Willful disobedience of an order of the Tribunal - standard of proof in contempt proceedings (quasi criminal standard) - contempt jurisdiction of a Tribunal under Section 425 of the Companies Act - remedial effect of non compliance - recall of settlement order and revival of Corporate Insolvency Resolution Process - Whether Respondent Nos. 1 & 2 willfully disobeyed the Tribunal's order dated 11.03.2019 and are liable for contempt and consequent sanction, and what consequential relief follows from such disobedience. - HELD THAT: - The Tribunal applied the statutory definition of civil contempt (willful disobedience of a court/tribunal order or willful breach of an undertaking) and the settled principle that contempt proceedings attract a quasi criminal standard of proof. The respondents admitted non compliance with the Tribunal's order and relied on explanations including Board non ratification, financial inability, and invocation of arbitration. The Tribunal examined the contemporaneous conduct (including affidavits, the filing and dismissal of an interlocutory application for extension, presentation and dishonour of post dated cheques, and subsequent communications) and found the excuses not bona fide. The Tribunal rejected the contention that mere inability to pay or subsequent invocation of arbitration absolved the respondents of responsibility for obeying the Tribunal's direction. Applying the authorities on wilfulness, it concluded that the respondents' conduct established conscious and deliberate disobedience of the order dated 11.03.2019. Consequentially, the Tribunal held the order of 11.03.2019 to be rendered inoperative by non compliance and revived the Corporate Insolvency Resolution Process as permitted by the original order's clause enabling revival on non compliance. The Tribunal imposed a penal consequence under the Contempt of Courts Act, considering and rejecting the apology tendered as insufficient to purge contempt.

Respondent Nos. 1 & 2 found guilty of willful disobedience of the Tribunal's order dated 11.03.2019; contempt established, fine imposed and the order dated 11.03.2019 declared inoperative with revival of CIRP.

Final Conclusion: Contempt proceedings were allowed in part: Respondent Nos. 1 & 2 were held not guilty of willful breach of the settlement agreement but were held guilty of willful disobedience of this Tribunal's order dated 11.03.2019; a fine of Rs. 2,000 was imposed and, pursuant to the order dated 11.03.2019, that order was declared inoperative and the Corporate Insolvency Resolution Process revived.

Resolution plan approval - performance security / performance guarantee in CIRP - time-bound nature of CIRP - rejection of resolution plan and order for liquidation - issuance and cancellation of bailable and non-bailable warrants - Section 74(3) of the IBC - punishment for contravention of the resolution plan

Resolution plan approval - performance security / performance guarantee in CIRP - time-bound nature of CIRP - rejection of resolution plan and order for liquidation - Validity of the Adjudicating Authority's rejection of the application for approval of the Resolution Plan and the consequent order for liquidation on account of the Resolution Applicant's non-compliance and non-appearance. - HELD THAT: - The Tribunal held that the Resolution Plan, though approved by the Committee of Creditors on 07.11.2018, was pursued belatedly before the Adjudicating Authority only after the Resolution Applicant was impleaded on 03.03.2021. The provision for a performance security was introduced into the CIRP Regulations after the CoC approval; however, following the Adjudicating Authority's direction (03.03.2021) the Resolution Applicant failed to deposit the performance guarantee, did not attend proceedings despite service, and remained non-responsive. The Adjudicating Authority recorded that after more than three years there was no willingness by the Resolution Applicant to proceed with implementation and, having failed to secure the Applicant's presence even after issuing bailable and non-bailable warrants, concluded that the plan was incomplete and liable to be rejected. The Tribunal found that the CIRP is time bound and cannot continue indefinitely, and that the Adjudicating Authority was justified in drawing the inference of non-seriousness and in refusing approval of the plan and ordering liquidation; no error was found in that part of the order. [Paras 10, 11]

The Adjudicating Authority's rejection of CA 734 of 2018 and the order for liquidation are upheld.

Issuance and cancellation of bailable and non-bailable warrants - Propriety of dismissal of applications for cancellation of bailable and non-bailable warrants issued to the Resolution Applicant. - HELD THAT: - The Tribunal observed that the Adjudicating Authority's order dismissing I.A. Nos. 5026, 5027 and 5028 did not advert to the grounds advanced by the Resolution Applicant for cancellation of the warrants and was therefore unsustainable. The Tribunal allowed those applications and cancelled the bailable and non bailable warrants issued against the Appellant. [Paras 12]

I.A. Nos. 5026 of 2021, 5027 of 2021 and 5028 of 2021 are allowed and the bailable and non bailable warrants are cancelled.

Section 74(3) of the IBC - punishment for contravention of the resolution plan - Validity of the Adjudicating Authority's direction to initiate complaint proceedings under Section 74(3) of the IBC against the Resolution Applicant. - HELD THAT: - The Tribunal held that Section 74(3) penalises a knowing and wilful contravention of the terms of an approved resolution plan. In the present case the Resolution Plan was never approved by the Adjudicating Authority; accordingly there could be no contravention under Section 74(3). The direction in paragraph 20 of the impugned order to take steps for filing a complaint under Section 74(3) was therefore unwarranted and set aside. [Paras 13, 14]

The direction to initiate proceedings under Section 74(3) of the IBC against the Resolution Applicant is set aside.

Final Conclusion: Appeal partly allowed: the Tribunal upholds the Adjudicating Authority's rejection of the Resolution Plan and order for liquidation, but quashes the dismissal of the applications to cancel warrants (cancelling the warrants) and sets aside the direction to file a complaint under Section 74(3); parties to bear their own costs and liquidator to proceed in accordance with law, with the Appellant permitted to participate in the liquidation process.

Insolvency Resolution Process Costs - fees of the Resolution Professional not being a 'claim' under the Code - jurisdiction of the Liquidator to verify 'claims' - Adjudicating Authority power under Section 60(5) of the Code read with Regulation 33(2) of the CIRP Regulations to fix RP fees - role of CoC in fixing Resolution Professional costs

Insolvency Resolution Process Costs - fees of the Resolution Professional not being a 'claim' under the Code - jurisdiction of the Liquidator to verify 'claims' - The Liquidator does not have jurisdiction to determine the fees payable to the Resolution Professional and the fees of the RP do not constitute a 'claim' as defined under the Code. - HELD THAT: - The Tribunal observed that the fees and expenses of the RP fall within the expression Insolvency Resolution Process Costs and, by virtue of the statutory scheme, the Liquidator's function is limited to verification and adjudication of 'claims' as defined under the Code. Regulation 34 and related provisions treat the fee of the RP as an insolvency resolution process cost rather than a creditor's claim. Consequently, the Liquidator cannot determine or verify the RP's fee as if it were a claim. The Tribunal further rejected the contention that disciplinary action or adverse findings by the IBBI affect the forum for determination of the RP's fees, noting the distinction drawn by the Supreme Court that grievance or disciplinary mechanisms under the Code address penal consequences and do not oust the Adjudicating Authority's jurisdiction to determine amounts payable as part of CIRP costs. [Paras 9, 10]

Liquidator lacks jurisdiction to determine RP fees; RP fees are not 'claims' under the Code and therefore cannot be adjudicated by the Liquidator.

Adjudicating Authority power under Section 60(5) of the Code read with Regulation 33(2) of the CIRP Regulations to fix RP fees - role of CoC in fixing Resolution Professional costs - In the absence of a Committee of Creditors, the Adjudicating Authority is empowered to fix the fees payable to the Resolution Professional and must do so expeditiously. - HELD THAT: - The Tribunal relied on the statutory framework and the Supreme Court's reasoning in the cited authority to hold that where the CoC no longer exists or has not fixed the RP's fees despite directions, the Adjudicating Authority has jurisdiction under Section 60(5) of the Code read with Regulation 33(2) to determine the fees forming part of insolvency resolution process costs. The Tribunal noted prior Orders of the Adjudicating Authority directing the CoC to reconsider the fee and observed that, given the subsequent liquidation and absence of a decision by the CoC, the appropriate remedy is for the Adjudicating Authority to adjudicate the fee claim. The Tribunal refrained from expressing any view on the quantum or merits of the claimed amounts and prescribed an expeditious timeframe for the Adjudicating Authority to decide. [Paras 11, 12]

Adjudicating Authority shall determine the RP's fees in the absence of a functioning CoC; matter remanded to the Adjudicating Authority with direction to decide the fees within four weeks.

Final Conclusion: Appeal allowed; the Impugned Order is set aside. The matter is remanded to the Adjudicating Authority to determine the fees payable to the Resolution Professional (in accordance with law and prior orders) within four weeks. No order as to costs.

Appropriation of pre-deposit - finality of adjudication where no appeal is filed - entitlement to reasons / designated committee's report - SVLDRS determination under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - show cause notice for period 2007-08 to 2011-12

Appropriation of pre-deposit - show cause notice for period 2007-08 to 2011-12 - Whether credit could be given to the claimed pre-deposit of Rs.36,72,679/- in the SVLDRS determination. - HELD THAT: - The Court recorded that the petitioner had asserted payment of the sum in its reply to the show cause notice and produced challans (paragraph 11). The order-in-original explicitly considered the claim and found there was nothing on the challans to establish that the payments were made against the demand in the show cause notice and that no return or correspondence indicated appropriation against that demand (paragraph 12, quoting para 27 of the OIO). That finding by the adjudicating authority was never challenged by the petitioner and therefore attained finality; the consequence is that the claimed pre-deposit could not be appropriated in favour of the petitioner for the present determination (paragraph 13). The Court declined to treat the absence of explicit appropriation in the OIO as a ground to override the adjudicator's unappealed finding. [Paras 11, 12, 13]

The SVLDRS determination did not err in denying credit for the claimed pre-deposit because the adjudicating authority had found no basis for appropriation and that finding was final in the absence of an appeal.

Finality of adjudication where no appeal is filed - Whether the matter should be remanded to the designated committee for fresh consideration of the claimed payments. - HELD THAT: - The petitioner sought remand relying on authority where errors in an order-in-original were under challenge (Code Engineers). The Court distinguished that case on facts: here the petitioner had accepted (by not appealing) the adjudicating authority's specific finding rejecting appropriation of the payments (paragraph 14). Given that acceptance and the finality of that finding, remand would serve no purpose and was therefore refused. [Paras 14]

Prayer for remand to the designated committee was refused because the petitioner had accepted the adjudicating authority's finding by not challenging it, rendering remand futile.

Entitlement to reasons / designated committee's report - SVLDRS determination under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether the designated committee must disclose the reasons/report used to arrive at the SVLDRS-3 determination to the declarant. - HELD THAT: - The Court observed that Form SVLDRS-3 issued to the petitioner did not state reasons and that the rationale first surfaced in an affidavit filed in court (paragraph 9). The practice of not communicating reasons to a declarant was criticised as unreasonable and unfair. The Court directed that in every case a copy of the designated committee's report/opinion giving detailed reasons must be provided simultaneously on the website or, if technically infeasible, sent by email or courier within 48 hours to the declarant, and the Central Board of Indirect Taxes & Customs was to ensure compliance (paragraph 9). [Paras 9]

Designated committees must provide declarants with the detailed report/opinion explaining the basis of SVLDRS-3 determinations, by website publication or by email/courier within 48 hours.

Final Conclusion: Writ petition dismissed. The Court upheld the SVLDRS determination as not erroneous on the ground of appropriation of the claimed pre-deposit because the adjudicating authority had found no basis for appropriation and that finding was unchallenged; remand was refused. Separately, the Court mandated that designated committees must furnish detailed reasons/reports in every SVLDRS-3 case to the declarant promptly (website or email/courier within 48 hours).

Dominant nature of transaction - sale of goods versus rendition of service - incidental services to sale - composite contract and indivisible contract - inclusive definition of service under Section 65B(44) - alternate remedy and bar of statutory appeal

Alternate remedy and bar of statutory appeal - undisputed facts - Maintainability of the writ petition in view of the availability of a statutory appeal. - HELD THAT: - The Court declined to apply the bar of alternate remedy and rejected the respondent's contention that the petitioner must be relegated to the statutory first appeal. This conclusion was reached because the relevant facts are undisputed and fully reflected in the record and in the impugned order, so that there was no purpose in sending the matter to the appellate forum for factual determination. In these circumstances the Court exercised its constitutional jurisdiction to decide the matter on merits rather than remanding the petitioner to the appeal remedy. [Paras 3]

The contention of non-maintainability founded on availability of statutory appeal is rejected and the writ petition is entertained.

Dominant nature of transaction - sale of goods versus rendition of service - incidental services to sale - composite contract and indivisible contract - inclusive definition of service under Section 65B(44) - Whether the transaction carried on by the petitioner is essentially a sale of a wig (product) or a rendition of service. - HELD THAT: - On the admitted facts the manufacture and supply of the wig is the integral component of the transaction: the petitioner manufactures wigs (remitting central excise duty) and offers turnover as sale, while the activities of measuring the head, preparing and sterilizing the scalp, fitting, colouring and optional maintenance are performed only to enable use of the product. The Court applied the legal distinction between composite and indivisible contracts as explained by the Supreme Court and noted that where the dominant or intrinsic nature of the transaction is the supply of goods, ancillary services do not convert it into a service transaction. Although the respondent relied on the inclusive statutory definition of service, none of the exceptions or factual circumstances operated to make the ancillary fitment and preparatory acts the dominant component. The Court therefore held that the primary activity is manufacture and supply of the wig and that fitment/preparatory/maintenance activities are incidental to that product supply. [Paras 8, 9, 11, 12, 14]

The dominant nature of the transaction is sale of the wig; the ancillary preparatory, fitment and maintenance activities are incidental and do not convert the transaction into a service.

Final Conclusion: The impugned assessment order is set aside; the writ petition is allowed and the petitioner succeeds on the merits. No costs.

Business Auxiliary Service - sale of goods - no double taxation where service tax is discharged by principal - service tax liability on gross value collected from the customer - Cenvat/commission billing mechanism

Business Auxiliary Service - sale of goods - no double taxation where service tax is discharged by principal - service tax liability on gross value collected from the customer - Whether the appellant's activity of purchasing SIM cards from BSNL and selling them to customers, retaining a trade discount/commission, constituted a taxable Business Auxiliary Service or was a sale of goods not liable to service tax. - HELD THAT: - The Tribunal held that the appellant acted as a purchaser and seller of SIM cards and received a commercial margin rather than rendering a taxable Business Auxiliary Service. The determinative reasoning, following a consistent line of Tribunal decisions cited in the order, is that BSNL collected service tax on the full value charged to the customer and the element of commission/discount paid to distributors is included in that taxed value; hence taxing the distributor on that commission would amount to double taxation. The Tribunal applied the ratio of earlier Bench decisions holding that where distributors purchase SIM cards (paying full value) and sell them on a profit margin, the transaction is essentially a sale of goods and not a service. The order also noted the practical and verifiable nature of tax discharge by the principal (BSNL) on the gross value received from customers and observed that the cited precedents led to the conclusion that there was no merit in classifying the distributor's activity as a Business Auxiliary Service. Following these precedents, the impugned demand and penalties based on the finding of Business Auxiliary Service were set aside and the appeal was allowed. [Paras 5, 7]

Impugned order holding the appellant liable to service tax and penalties as provider of Business Auxiliary Service set aside; appeal allowed.

Final Conclusion: The Tribunal set aside the adjudicating authority's demand and penalties, concluding that the appellant's transactions in SIM cards constituted sale of goods (with BSNL having discharged service tax on the gross customer value) and not a taxable Business Auxiliary Service; appeal allowed and the miscellaneous application dismissed as infructuous.

Classification by essential character under Rule 3(b) of the General Rules for Interpretation - preference for the most specific heading under Rule 3(a) of the General Rules for Interpretation - last-in-numerical-order rule under Rule 3(c) of the General Rules for Interpretation - role of quantitative composition and chemical examiner reports in classification - limits on adjudication beyond grounds set out in the show-cause notice - extended period and bona fide disclosure as bar to invocation of extended liability

Classification by essential character under Rule 3(b) of the General Rules for Interpretation - preference for the most specific heading under Rule 3(a) of the General Rules for Interpretation - last-in-numerical-order rule under Rule 3(c) of the General Rules for Interpretation - Whether the product Zymegold Plus is classifiable as a fertilizer under CETH 3101 or as a plant growth regulator under CETH 3808 - HELD THAT: - The Tribunal held that classification must begin with Rules 3(a) and 3(b) of the General Rules for Interpretation - the most specific description is preferred and mixtures are to be classified by the material giving them their essential character. The adjudicating authority erred in jumping directly to Rule 3(c). HSN Explanatory Notes (including the note on seaweed/algae) and chapter notes indicate seaweed used as fertilizer falls under Heading 3101 or 3105. The product's major constituent is seaweed extract and, applying Rule 3(b), the essential character is that of a fertilizer. Earlier decisions considering similar seaweed-based formulations and the inconclusive nature of chemical examiner reports supported treating such products as fertilizers rather than PGRs. Having applied these principles, the Tribunal concluded Zymegold Plus is classifiable as a fertilizer under CETH 3101. [Paras 6, 7, 8, 9, 12]

Zymegold Plus is classifiable as a fertilizer under CETH 3101; classification under Chapter 38 by reliance on Rule 3(c) was incorrect.

Role of quantitative composition and chemical examiner reports in classification - Whether the mere detection of trace quantities of plant hormones in chemical reports converts the product into a plant growth regulator - HELD THAT: - The Tribunal examined the composition tables and chemical reports and found that putative plant-regulator ingredients (6-BA, 4-CPA) were present only in minute traces (0.26% and 0.53%) prior to 03.07.2010 and absent thereafter. The chemical examiner reports and literature were inconclusive as to percentage composition. Citing precedent, the Tribunal held that mere presence of such substances in small traces does not alter the essential character of a fertilizer; quantitative composition is material to classification and inconclusive reports cannot override the essential-character test. [Paras 8, 9]

Trace detection of plant hormones without established quantitative composition does not make the product a plant growth regulator.

Limits on adjudication beyond grounds set out in the show-cause notice - Whether the adjudicating authority could base classification on Rule 3(c) despite the show-cause notice not invoking that rule - HELD THAT: - The appellants contended that the adjudicating authority went beyond the grounds in the show-cause notice by invoking Rule 3(c). The Tribunal acknowledged the settled principle that the revenue should not argue points not raised in the show-cause notice (Ballarpur and Champdany authorities) and observed that, on merits, the correct approach was to apply Rules 3(a) and 3(b). The Tribunal also noted that international rulings had persuasive value in understanding trade classification. In any event, because the merits favoured the appellants when proper interpretative rules were applied, the challenge on scope did not alter the outcome. [Paras 10]

Adjudication based on Rule 3(c) was incorrect where Rules 3(a) and 3(b) apply; the Tribunal decided the issue on merits in favour of the appellants.

Extended period and bona fide disclosure as bar to invocation of extended liability - Whether extended period of limitation could be invoked given the appellants' prior disclosure of product composition - HELD THAT: - The appellants had disclosed product ingredients and classification to the Department in 2006. The Tribunal accepted that disclosure and bona fide belief in the classification negated allegation of fraud, suppression or misstatement necessary to invoke extended liability. Although this point did not alter the result on classification (since classification was decided for the appellants), the Tribunal agreed that extended-period demands could not be sustained in the circumstances. [Paras 11]

Extended period of limitation could not be invoked in view of prior disclosure and bona fide belief in classification.

Final Conclusion: Appeals allowed: the product Zymegold Plus is to be classified as a fertilizer under CETH 3101, the reliance on Rule 3(c) was misplaced, trace amounts of plant-regulator substances do not change the essential character, and extended-period demands are not sustainable in view of prior disclosure; consequential relief to follow as per law.

Unjust enrichment - deposit under protest - non-applicability of the time bar under Section 11B of the Central Excise Act - refund of pre-deposit - presumption under Section 20 of the Central Excise Act - power of Commissioner (Appeals) under Section 35A

Unjust enrichment - deposit under protest - presumption under Section 20 of the Central Excise Act - Whether the doctrine of unjust enrichment could bar refund of amounts deposited by the appellant during investigation. - HELD THAT: - The Tribunal held that the impugned sum was deposited during investigation and therefore constituted a deposit under protest; in such circumstances the doctrine of unjust enrichment is not applicable. The Reviewing Authority's invocation of the presumption under Section 20 for the first time and requirement of proof of non-subsummation was held to be unsustainable because neither the show cause nor earlier orders raised unjust enrichment; the Tribunal relied on a consistent line of authority to the effect that amounts deposited during investigation are deposits under protest and not subject to the unjust enrichment bar (including decisions referred to in the order such as Pricol Ltd. , Eveready Industries and related authorities). On these grounds the Tribunal concluded that there was no legal basis to deny the refund on the ground of unjust enrichment. [Paras 8, 9, 10, 11, 12]

Refund cannot be denied on the ground of unjust enrichment; the Reviewing Authority's order invoking unjust enrichment is set aside.

Non-applicability of the time bar under Section 11B of the Central Excise Act - deposit during investigation - Whether the time bar in Section 11B applies to the refund claim for amounts deposited during investigation. - HELD THAT: - The Tribunal observed that amounts deposited during investigation are deposits under protest and are not deposits 'with reference to duty' such as would attract the limitation of Section 11B. The finding of the Commissioner (Appeals) that the balance deposited amount was not time barred was accepted, and the Tribunal noted that the question is no longer res integra in view of authoritative precedents (including decisions discussed in the order and the Supreme Court's treatment of similar deposits). The Reviewing Authority did not challenge the non-applicability of Section 11B and the Tribunal upheld the Commissioner (Appeals) direction to refund with interest. [Paras 13]

Section 11B time bar does not apply to the deposit made during investigation; refund with interest directed.

Power of Commissioner (Appeals) under Section 35A - remand - Whether the Commissioner (Appeals) validly remanded the matter to the original adjudicating authority under his power. - HELD THAT: - The Tribunal examined the statutory power of the Commissioner (Appeals) under Section 35A and concluded that the provision permits the Commissioner (Appeals), after inquiry, to pass such order as he thinks just and proper, but does not vest an unqualified power of remand. On that basis the Tribunal found the remand order unsustainable in the circumstances of this case where the Commissioner (Appeals) had already directed refund which was complied with and the subsequent review raised a new ground. [Paras 14]

The remand by the Commissioner (Appeals) is not sustainable.

Final Conclusion: The review order invoking unjust enrichment and the remand are set aside; the appeal is allowed and the Department is directed to comply with the Commissioner (Appeals) order dated 16.07.2019 and refund the deposited amount with interest within two months.

Taxability of insulated glass - plain glass-panes exclusion - classification as unclassified commodity - interpretation of taxing entry 'all goods and wares made of glass' vis-a -vis exclusions - application of precedent M/s Hindustan Safety Glass Works

Taxability of insulated glass - plain glass-panes exclusion - classification as unclassified commodity - interpretation of taxing entry 'all goods and wares made of glass' vis-a -vis exclusions - Insulated glass manufactured and sold by the assessee falls within the exclusion 'plain glass-panes' and is taxable as an unclassified commodity at 10% rather than as 'all goods and wares made of glass' at 16%. - HELD THAT: - The Court confined the dispute to insulated (double glazed dual sheet / DGDS) glass and treated laminated glass as having attained finality in earlier proceedings. The taxing entry under Notification No.1273 dated 25.4.2001 uses language materially similar to the earlier notification considered in M/s Hindustan Safety Glass Works, Allahabad, where this Court held that certain glass products more akin to glass-panes fall within the exclusion 'plain glass-panes' and therefore outside the description 'all goods and wares made of glass'. The Trade Tax Tribunal examined the manufacturing process and use of the assessee's insulated glass, concluded it to be DGDS akin to plain glass-panes, and applied the earlier interpretation. No contrary material was shown to justify a different view. Applying the prior decision and construing the exclusionary language consistently, the Tribunal's conclusion that insulated glass is an unclassified commodity taxable at the lower rate was upheld.

Revision dismissed; Tribunal's order holding insulated glass excluded as 'plain glass-panes' and taxable as an unclassified commodity at 10% is upheld.

Final Conclusion: The revenue's revision is dismissed; the Trade Tax Tribunal's decision that insulated glass is excluded by the term 'plain glass-panes' and is taxable as an unclassified commodity at 10% for A.Y. 2002-2003 (U.P.) is affirmed.

Classification of goods for value added tax - uniformity of tax treatment for identical or similar commodities - prevention of arbitrariness in levy and rate fixation - treatment of toffee/candy as sweetmeat/sugar product for taxation - challenge to tribunal's classification of commodity

Classification of goods for value added tax - treatment of toffee/candy as sweetmeat/sugar product for taxation - uniformity of tax treatment for identical or similar commodities - Validity of the Tribunal's conclusion that the assessee's products (toffee/candy) are taxable under Entry No.137 of Schedule II Part A (sweetmeat/sugar product) and whether the revision against that classification is maintainable. - HELD THAT: - The Tribunal examined the nature of the product, including sugar content and manufacturing process, and concluded that the goods manufactured and sold by the assessee were toffees falling within Entry No.137 of Schedule II Part A. The Court observed that once the revenue has, in practice, subjected the same or similar commodity of other dealers to a lower rate, it cannot adopt a contradictory classification for the present dealer; differential treatment would introduce uncertainty and arbitrariness into the taxation regime. In the absence of material justifying a different view and having regard to the revenue's stand in a separate, closely analogous matter (where revision was dismissed), no ground exists to interfere with the Tribunal's classification. The Court therefore declined to disturb the Tribunal's factual and classificatory conclusion.

Revision dismissed; Tribunal's classification of the assessee's products as toffee/sugar product taxable under the said entry is upheld and cannot be treated differently from similar commodities.

Final Conclusion: The revision is dismissed and the Tribunal's order holding the products to be toffee/sugar products within the scheduled entry is maintained; differential treatment by the revenue towards other dealers precludes a contrary classification in this case.

Classification as a sugar product under Entry No. 137 Schedule II Part A - decision under Section 59 of the Act - chemical analysis evidence of sugar content - uniform tax treatment / consistency in classification

Classification as a sugar product under Entry No. 137 Schedule II Part A - chemical analysis evidence of sugar content - decision under Section 59 of the Act - uniform tax treatment / consistency in classification - Tribunal correctly held that the assessee's commodity 'toffee' qualifies as a sugar product and is taxable under Entry No. 137 Schedule II Part A, and the revision by the Revenue is not maintainable. - HELD THAT: - The Tribunal found that the assessee purchased toffees from the manufacturer M/s Perfetti Van Melle India Pvt. Ltd. and, relying on a decision of the Commissioner under Section 59, treated commodities with sugar content exceeding 70% as sugar products falling under Entry No. 137 Schedule II Part A. The Court noted earlier proceedings in which chemical analysis (including reanalysis) established sugar content around or above 90% in similar toffees and where challenges by the Revenue were not allowed to succeed; the Revenue had not consistently pressed the classification issue against the manufacturer and the Tribunal's finding in those matters has attained finality (including non-entertainment of revision and dismissal of SLP). Given identical commodity and manufacturer, the State cannot be permitted to adopt a different classification for the trader; uniform tax treatment is required. Although a Commissioner's decision under Section 59 is not strictly binding on the assessee, it supports the classification threshold of more than 70% sugar content. No material was shown to justify a different view on facts or law in respect of the present dealer. Consequently the revision, which was delayed, lacked merit. [Paras 4, 11, 12, 13, 15]

Revision dismissed; toffees of the assessee classified as sugar products under Entry No. 137 Schedule II Part A and taxed accordingly for A.Y. 2008-09.

Final Conclusion: The revision filed by the Revenue is dismissed as delayed and without merit; the Tribunal's classification of the assessee's toffees as sugar products subject to Entry No. 137 Schedule II Part A for A.Y. 2008-09 stands affirmed.