TaxTMI Updates e-Newsletter
Aug 05,2019

Interim release of seized goods and vehicle - deposit as condition for interim relief - application of confiscation under the GST framework - detention, seizure and confiscation procedure - leave to amend - service of rule and waiver

Interim release of seized goods and vehicle - deposit as condition for interim relief - Direction for immediate release of the seized vehicle and goods upon deposit of tax liability and penalty - HELD THAT: - The writ-application records that the writ-applicant, a registered dealer under the GST Act, deposited a sum stated to cover tax liability and penalty, and produced the payment receipt at Annexure C. Having taken note of this deposit during the pendency of the writ petition, the Court exercised its power to grant interim relief and ordered the respondent to forthwith release the vehicle and the goods. The order is founded on the equitable and provisional nature of interim relief where the statutory dues have been tendered, permitting circulation of goods subject to final adjudication.

Respondent no.2 directed to forthwith release the vehicle and the goods in transit in view of the deposit made by the writ-applicant.

Application of confiscation under the GST framework - detention, seizure and confiscation procedure - Question whether confiscation proceedings can be initiated without prior recourse to the detention/seizure mechanism is left open for consideration - HELD THAT: - The Court noted a broader legal question as to whether the authority may straightaway invoke confiscation proceedings without first following the procedures contemplated for detention/seizure (as part of the statutory scheme dealing with goods in transit). The matter was adverted to but not finally decided; the Court stated that it is examining the larger issue and did not resolve it in the present order.

Larger question on the permissibility of invoking confiscation without prior recourse to the detention/seizure mechanism is not adjudicated and remains for consideration.

Leave to amend - service of rule and waiver - Leave to amend granted; service directions recorded - HELD THAT: - The Court granted leave to amend to the petitioner. It directed that the rule will be returnable on the listed date, recorded that the learned Assistant Government Pleader waived service of the rule on behalf of respondent no.1, and permitted direct service upon respondent no.2, thereby regulating further procedural steps in the litigation.

Leave to amend allowed; rule returnable on the listed date; service of rule waived for respondent no.1 and direct service on respondent no.2 permitted.

Final Conclusion: Leave to amend was permitted; on the petitioner s deposit of tax and penalty, the Court directed immediate release of the seized vehicle and goods; the broader legal question on initiation of confiscation without prior recourse to the detention/seizure procedure was noted but left open for consideration; service directions were recorded.

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - offence under Section 132 of the CGST Act, 2017 - economic offence of huge magnitude - kingpin of crime - seriousness and gravity of offence

Regular bail under Section 439 of the Code of Criminal Procedure, 1973 - economic offence of huge magnitude - kingpin of crime - seriousness and gravity of offence - Whether the petitioner, charged as the main accused in an alleged large-scale tax fraud under the CGST/IGST regime, is entitled to grant of regular bail - HELD THAT: - Petitioner is alleged to have, along with co-accused, effected only paper transactions and bogus billing to claim tax relief without actual sale or transportation of goods, resulting in claims exceeding Rs. 80 crore; the matter is at a preliminary stage. The Court applied the established principle that an accused charged with an economic offence of large magnitude and alleged to be the kingpin of the criminal activity is not ordinarily entitled to bail. Reliance was placed on the decision of the Supreme Court in State of Bihar and another v. Amit Kumar @ Bacha Rai where the rule denying bail to such accused was endorsed. In view of the serious nature and gravity of the allegations and the petitioner's characterization as the main accused in a high-value economic offence, the petition for regular bail was rejected.

Petition for regular bail dismissed; bail not granted to the petitioner in view of the magnitude and gravity of the alleged economic offence and his role as main accused.

Final Conclusion: The High Court dismissed the second petition for grant of regular bail under Section 439 CrPC filed by the petitioner who is alleged to be the main accused in a high-value CGST/IGST fraud; bail was refused on the ground that an accused who is the alleged kingpin in an economic offence of huge magnitude is not entitled to the benefit of bail.

Lapse of input tax credit - refund of unutilised input tax credit (inverted duty structure) - scope of delegation under section 54(3)(ii) of the CGST Act - vested/indefeasible right to input tax credit - statutory provision for lapsing of ITC (Sections 17(4) and 18(4))

Scope of delegation under section 54(3)(ii) of the CGST Act - lapse of input tax credit - Validity of Notification No.20/2018-C.T. (Rate) dated 26.07.2018 and Circular No.56/30/2018-GST dated 24.08.2018 insofar as they provide that accumulated ITC up to 31.07.2018 shall lapse - HELD THAT: - The Court held that section 54(3)(ii) empowers the Central Government, on recommendation of the GST Council, to notify goods or services in respect of which refund of unutilised input tax credit arising from inverted rate structure shall not be available, but does not confer power to prescribe lapsing of already accumulated ITC. The legislature has expressly provided for lapsing of ITC where intended (see Sections 17(4) and 18(4) of the CGST Act); no analogous power to cause forfeiture or lapse of accumulated ITC is found in section 54(3). The Court relied on binding precedents establishing that once credit is validly taken it becomes an indefeasible/vested right available for utilisation (Collector of Central Excise v. Dai Ichi Karkaria Ltd. and Eicher Motors Ltd.), and applied that principle to conclude that the impugned proviso effecting lapsing exceeded the delegated power and was therefore ultra vires. [Paras 5, 24, 25, 26]

Proviso (ii) inserted by Notification No.20/2018 and the Circular to the extent they provide for lapse of accumulated ITC as on 31.07.2018 are quashed and set aside as beyond the scope of section 54(3)(ii) of the CGST Act.

Vested/indefeasible right to input tax credit - refund of unutilised input tax credit (inverted duty structure) - Whether the petitioners (and members represented) are entitled to the accumulated ITC which was sought to be made to lapse by the impugned notification and circular - HELD THAT: - Applying the principle that tax credit validly taken accrues as a right to the taxable person and cannot be defeated by delegated legislation beyond statutory authority, the Court held that the petitioners (and their members) are entitled to the accumulated ITC which had remained unutilised as on the stated date. The Court found the impugned provision to be an impermissible attempt to extinguish that right and, accordingly, directed that the credit be granted. [Paras 6]

Petitioners and members are entitled to the accumulated input tax credit and the impugned provision attempting to lapse that credit is set aside; the credit shall be granted.

Final Conclusion: The proviso (ii) inserted by Notification No.20/2018-C.T. (Rate) dated 26.07.2018 and the related circular insofar as they sought to cause lapse of accumulated ITC standing unutilised after payment of tax for and up to July 2018 on inward supplies received up to 31.07.2018 are ultra vires section 54(3)(ii) of the CGST Act; those provisions are quashed and the petitioners (and their members) are entitled to the said input tax credit.

Affixation of seal - search and seizure - confiscation of goods - power of authorised officer under section 76(2) - release of seized goods on provisional basis - execution of bond and furnishing of security

Affixation of seal - power of authorised officer under section 76(2) - release of seized goods on provisional basis - execution of bond and furnishing of security - Whether the writ applicant should be permitted to seek provisional release of goods seized and premises sealed by invoking section 76(6) of the Act and whether the competent authority should be directed to consider such application. - HELD THAT: - The Court recorded competing submissions: the writ applicant challenged the affixation of the seal and contended that restraint could have been effected by orders preventing removal of goods, while the respondents relied on the power of the authorised officer under sub section (2) of section 76 to affix seal and on the pendency of criminal proceedings with the applicant in judicial custody. The Court did not adjudicate the substantive legality of the sealing or purport to quash the action; instead it granted the writ applicant liberty to make an application under section 76(6) for provisional release of the seized goods upon executing a bond and furnishing security. The competent authority was directed to consider any such application and pass an appropriate order in accordance with law.

Writ disposed; writ applicant granted liberty to apply under section 76(6) for provisional release upon execution of bond and security and competent authority directed to consider and decide the application in accordance with law.

Final Conclusion: The petition is disposed of by granting liberty to the petitioner to apply under section 76(6) for provisional release of the seized goods on furnishing bond and security; the competent authority is directed to consider and decide such application in accordance with law.

Compensation received from transfer of development rights - taxability under the provisions of long term capital gains - Transfer of Development Rights (TDR) - computation of the sale of TDR -

Revenue's appeal dismissed - Tribunal's finding that the amount received on transfer of TDR was not taxable as capital gains upheld, and consequential attempts to tax the value of the flats were held unsustainable or academic in view of that conclusion by HC [2019 (1) TMI 545 - BOMBAY HIGH COURT] - HELD THAT:- SLP dismissed.

Deduction u/s 80M - inter-corporate dividend - dividend declared versus dividend distributed - dividend distributed on or before the due date for furnishing return - declaration of dividend in an earlier year but payment in the relevant year - Tribunal's order allowing the Section 80M deduction was upheld [2019 (1) TMI 1531 - MADRAS HIGH COURT]

HELD THAT:- Considering the tax effect in the present matter, we see no reason to interfere in the matter. The special leave petition is, accordingly, dismissed, leaving all questions of law open.

Deduction under Section 80P(2)(a)(i) of the Income Tax Act - primary agricultural cooperative credit society - ancillary activities authorised by registered by laws and governmental directives - income from sale under the Public Distribution System as income attributable to the business of a credit society - reliance on binding judicial precedent

Deduction under Section 80P(2)(a)(i) of the Income Tax Act - primary agricultural cooperative credit society - ancillary activities authorised by registered by laws and governmental directives - income from sale under the Public Distribution System as income attributable to the business of a credit society - Whether the appellant, being a primary agricultural cooperative credit society, is entitled to deduction under Section 80P(2)(a)(i) of the Income Tax Act in respect of income from sale under the PDS. - HELD THAT: - The Court applied its earlier decision in Kodumudi Growers Cooperative Bank Ltd. v. ITO and examined the society's registered by laws and the governmental directives under which fair price shops were opened. By law provisions (including the classification of main and ancillary activities and the power to purchase in bulk and distribute to members) and the binding nature of Government/Registrar communications establish that distribution under the PDS falls within the authorized activities of a credit society. The assessee produced sample sales bills demonstrating that sales were effected to members and there was no substantiated factual basis for the Revenue's contention that sales to non members predominated. On these facts, the income from the PDS activity is attributable to the business of the credit society and eligible for deduction under Section 80P(2)(a)(i). The Court found no dispute from the Revenue on applicability of the precedent and accordingly held that the Tribunal erred in rejecting the deduction. [Paras 8, 9]

Allowed; the substantial question is answered in favour of the assessee and the appellant is entitled to deduction under Section 80P(2)(a)(i) for the assessment year.

Final Conclusion: The appeal (TCA No.486 of 2019) is allowed; the deduction under Section 80P(2)(a)(i) has been held allowable to the primary agricultural cooperative credit society for the assessment year 2014-15, the connected application has been closed and the related interlocutory challenge has been dismissed as infructuous.

Statutory appeal - expeditious disposal of appeals - stay of recovery pending disposal of appeal - coercive recovery proceedings - notice under Section 221(1) of the Income Tax Act, 1961 - appellate consideration prior to recovery

Statutory appeal - expeditious disposal of appeals - appellate consideration prior to recovery - Appellate authority to consider and pass appropriate orders on the statutory appeals filed by the Society at the earliest. - HELD THAT: - The Court directed the 1st respondent, the Commissioner of Income Tax (Appeals), to consider and dispose of the appeals filed by the petitioner expeditiously. The direction was given in the context of identical earlier decisions of this Court where appellate authorities were directed to first consider appeals (reference to prior similar orders and a Division Bench decision taking note of a Full Bench decision). Having perused the pleadings and on hearing counsel, the Court concluded that the appeals merit early adjudication by the appellate authority and therefore mandated prompt consideration and appropriate orders on the Ext.P2 appeals.

The appellate authority is directed to consider and pass appropriate orders on the appeals filed by the petitioner as expeditiously as possible.

Coercive recovery proceedings - notice under Section 221(1) of the Income Tax Act, 1961 - stay of recovery pending disposal of appeal - Whether coercive steps for recovery under the extant notices should be stayed until the statutory appeals are disposed of. - HELD THAT: - The Court observed that recovery notices under Section 221(1) had been issued by the Income Tax Officer while the appeals were pending. In view of the pendency of the appeals and relying on the course adopted in identical cases, the Court directed that no further steps of a coercive nature shall be taken against the petitioner until the appeals are disposed of by the appellate authority. The restraint is interlocutory and coextensive with the period necessary for adjudication of the appeals.

Further coercive recovery steps shall not be resorted to against the petitioner until the appeals are disposed of.

Final Conclusion: Writ petitions disposed by directing the appellate authority to decide the statutory appeals expeditiously and by restraining coercive recovery proceedings under the pending notices until disposal of those appeals.

Third-party marketing expenses as part of cost for transfer pricing - Arm's length price - Transfer pricing comparability - Inclusion of comparable - Exclusion of comparable - Not-for-profit entity not comparable

Third-party marketing expenses as part of cost for transfer pricing - Arm's length price - Whether reimbursements of third party marketing expenses borne by the assessee on behalf of the AE must be included in the assessee's total cost for calculating the profit level indicator. - HELD THAT: - The Marketing Services Agreement (cl. 3.1) entrusted performance of marketing services to the assessee, with the assessee retaining the right to perform or retain third parties to perform such services. The assessee, having only limited employees, engages third parties to discharge its contractual obligations and does so as principal in performing the services rather than merely acting as a conduit for the AE. Payments to third parties are therefore costs of the assessee and were properly classified in the assessee's financial accounts. The Tribunal rejects the assessee's contention that such amounts are mere pass through items not to be included in total cost for benchmarking and upholds the CIT(A)'s direction to treat the marketing expense compensation as part of total cost for calculating the PLI. [Paras 11, 12]

Assessee's reimbursement claims treated as the assessee's cost for transfer pricing; Ground No.4 dismissed.

Transfer pricing comparability - Inclusion of comparable - Whether Goldmine Advertising Ltd. is a valid comparable for benchmarking the assessee's provision of marketing support services. - HELD THAT: - Goldmine Advertising Ltd.'s annual report and website show it provides digital advertising and marketing services of a nature similar to market support services performed by the assessee. The TPO did not dispute the functional nature of Goldmine but rejected it solely on a service income filter. On functional analysis the lowest common denominator between the assessee and Goldmine is market support services, demonstrating functional similarity. Rejection on the service income filter alone is not tenable in the circumstances. [Paras 13, 14, 15, 16]

Goldmine Advertising Ltd. to be included as a comparable for benchmarking.

Transfer pricing comparability - Exclusion of comparable - Not-for-profit entity not comparable - Whether Media Research Users Council (MRUC) is a comparable for benchmarking the assessee's marketing support services. - HELD THAT: - MRUC is a registered not for profit body whose principal activities are undertaking surveys and providing research primarily for its members; its major income source is membership and subscription fees. The entity lacks a profit motive and operates in a different operational sphere from the assessee. On functional analysis and attendant factors MRUC is not comparable to the assessee which operates as a commercial marketing service provider. Consequently MRUC must be excluded from the comparables list. [Paras 17, 18, 19, 20, 21]

MRUC is not a comparable and is to be excluded from the list of comparables.

Arm's length price - Transfer pricing comparability - Risk adjustment challenge in respect of benchmarking (Ground No.8) was not adjudicated on merits. - HELD THAT: - The assessee's counsel conceded that if Goldmine is included and MRUC excluded, margins would fall within the permissible range making further discussion on risk adjustment academic. The Tribunal therefore refrained from deciding the risk adjustment issue and did not undertake substantive adjudication on that ground. [Paras 22]

Risk adjustment ground left undecided/academic; no substantive adjudication.

Final Conclusion: Appeal allowed in part: the Tribunal upholds inclusion of the assessee's third party marketing expenses as part of its cost for PLI computation, directs inclusion of Goldmine Advertising Ltd. as a comparable and exclusion of MRUC, and leaves the risk adjustment issue undetermined as academic; consequential directions to the Assessing Officer follow.

Deduction of forfeited earnest money from cost of acquisition under section 51 - Excess of forfeited advance over cost of acquisition treated as capital receipt (Travancore Rubber principle) - Non-applicability of subsequent amendment treating forfeited sums as income from other sources to earlier assessment years - Binding effect of co-ordinate bench ITAT decision on identical facts

Deduction of forfeited earnest money from cost of acquisition under section 51 - Excess of forfeited advance over cost of acquisition treated as capital receipt (Travancore Rubber principle) - Non-applicability of subsequent amendment treating forfeited sums as income from other sources to earlier assessment years - Binding effect of co-ordinate bench ITAT decision on identical facts - Whether the forfeited earnest money retained by the assessee should be deducted from the indexed cost of acquisition and the excess treated as a capital receipt not chargeable to capital gains for A.Y. 2010-2011, or taxed as capital gain. - HELD THAT: - The Tribunal accepted the assessee's contention that the amount of earnest money/advance retained on failure of earlier negotiation is deductible from the cost/indexed cost of the capital asset under the scheme of section 51, and that where the forfeited sum exceeds the cost/indexed cost the excess constitutes a capital receipt in the hands of the assessee. The decision applied the principle in Travancore Rubber & Tea Co. Ltd. that the excess of forfeited advance over the cost of acquisition is a capital receipt. The Bench also noted that a later statutory insertion treating forfeited sums as income from other sources was not applicable to the assessment year under consideration. The Ld. CIT(A) had followed the reasoning adopted in a co-owner's case, and the Tribunal in that co-owner's appeal (paras 10-13 of that order) held the identical issue in favour of the assessee; the present appeal was dismissed as covered by that co-ordinate bench decision. [Paras 3, 5]

The forfeited earnest money was properly deducted from cost/indexed cost and the excess held to be a capital receipt not chargeable as capital gains for A.Y. 2010-2011; departmental appeal dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the addition made by the Assessing Officer was deleted and the forfeited earnest money treated in accordance with the Travancore Rubber principle and co-ordinate Tribunal precedent for A.Y. 2010-2011.

Condonation of delay - addition under section 69A for undisclosed professional receipts - mercantile system of accounting versus cash system of accounting - tax neutrality of recognition in a subsequent assessment year - change of accounting method under section 145-requirement to demonstrate under estimation

Condonation of delay - Whether delay in filing the appeal was liable to be condoned. - HELD THAT: - The assessee explained that the impugned order had been received by his counsel and the office staff were preparing the appeal, but supervisory staff were occupied with examinations causing the delay; an affidavit from the counsel's staff supported the explanation. The Tribunal found that the assessee was prevented by sufficient cause from filing within time and, on that basis, exercised discretion to condone the delay and admit the appeal for adjudication on merits. [Paras 3]

Delay in filing the appeal was condoned.

Addition under section 69A for undisclosed professional receipts - mercantile system of accounting versus cash system of accounting - tax neutrality of recognition in a subsequent assessment year - change of accounting method under section 145-requirement to demonstrate under estimation - Whether the addition of Rs. 8,70,000 as undisclosed professional receipts under section 69A was justified. - HELD THAT: - The Tribunal accepted the assessee's case that the receipts in question were advances for professional services and that the assessee follows the mercantile system of accounting, not the cash system relied upon by the AO. The assessee had shown advances in the statement of affairs, undertook to declare the amount in AY 2020-21 and had paid advance tax for that year. Applying the principle that a change of accounting method should not be made unless the AO demonstrates under estimation of profits and having regard to precedents recognising that subsequent taxation may render the dispute revenue neutral, the Tribunal found no justification to treat the advances as undisclosed income in AY 2014-15. Consequently the addition was deleted. [Paras 4, 6]

Addition of Rs. 8,70,000 under section 69A deleted; appeal allowed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, accepted that the amounts were advance professional fees accounted on mercantile basis and taxable in AY 2020-21 (with advance tax paid), held the assessment addition under section 69A to be unjustified and deleted it, and allowed the appeal.

Penalty under section 271(1)(c) - Concealment of particulars of income - Furnishing inaccurate particulars of income - Validity of show cause notice under section 274 - Disclosure of transactions in the return of income - Bogus or sham transactions

Penalty under section 271(1)(c) - Disclosure of transactions in the return of income - Concealment of particulars of income - Levy of penalty under section 271(1)(c) when the assessee had disclosed the transactions and claimed a short term capital loss in the return of income. - HELD THAT: - The Tribunal held that the assessee had disclosed the transactions in the computation and the return, and the dealings were through banking channels and the stock exchange. The assessing officer's view that the transactions were bogus arose after scrutiny and confrontation, but disclosure in the return meant there was no concealment of particulars of income. The Tribunal applied the reasoning in similar precedents and concluded that surrender of claimed amounts during assessment proceedings, where full particulars were originally disclosed, did not constitute concealment warranting penalty. On those factual and legal findings, penalty under section 271(1)(c) was not leviable. [Paras 6, 7]

Penalty under section 271(1)(c) cancelled on the ground that the assessee had disclosed the transactions and did not conceal particulars of income.

Validity of show cause notice under section 274 - Furnishing inaccurate particulars of income - Concealment of particulars of income - Validity of the show cause notice where the notice did not specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) was invoked. - HELD THAT: - The Tribunal found that the show cause notice reproduced in the record did not specify whether penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars, and the assessment order referred to both limbs without recording separate satisfaction. Because the assessing officer did not indicate with requisite clarity the specific limb and satisfaction for levy of penalty, the notice and consequent proceedings were held to be vitiated. The Tribunal relied on this defect as a separate and independent ground for cancelling the penalty. [Paras 6, 7]

Show cause notice held invalid for failure to specify the limb of section 271(1)(c); consequential penalty proceedings quashed.

Final Conclusion: The appeal is allowed: the penalty under section 271(1)(c) is cancelled because the assessee had disclosed the transactions in the return and the show cause notice/assessment did not validly or specifically invoke the correct limb of section 271(1)(c), thereby vitiating the penalty proceedings.

Deduction under section 54F - Purchase within prescribed period - Requirement of ownership for applicability of section 54/54F - Agreement of sale coupled with possession as constituting purchase - Effect of non-registration on enforceability under Section 53A - Registration and Other Related Laws (Amendment) Act, 2001 - effect on unregistered agreements

Deduction under section 54F - Purchase within prescribed period - Requirement of ownership for applicability of section 54/54F - Agreement of sale coupled with possession as constituting purchase - Effect of non-registration on enforceability under Section 53A - Registration and Other Related Laws (Amendment) Act, 2001 - effect on unregistered agreements - Claim for deduction under section 54F allowed though the purchase was evidenced by a registered agreement of sale with delivery of possession and not by a registered sale deed. - HELD THAT: - The tribunal examined whether the assessee had 'purchased' a residential house within the statutory period for claiming deduction under section 54F, although no registered sale deed had been executed and the transaction was evidenced by a registered agreement of sale and possession. The tribunal analysed binding authorities: the Constitution Bench decision in CIT v. Balbir Singh Maini, which holds that post-2001 amendments unregistered agreements have no effect for the purposes of Section 53A and thus may not constitute a 'transfer' under Section 2(47)(v); and the Delhi High Court decision in Balraj v. CIT, which construed the term 'purchase' in section 54 (and by parity section 54F) in its ordinary meaning and accepted that an agreement of sale coupled with possession and payment could amount to a purchase for the purposes of section 54. The tribunal concluded that Balbir Singh Maini does not negate the Delhi High Court's ratio on section 54/54F because Balbir Singh Maini addresses the limited question of enforceability under Section 53A and resultant characterization as 'transfer' for capital gains; it does not lay down that becoming absolute owner by registered sale deed is a precondition for claiming deduction under section 54/54F. On the facts, the assessee had executed a registered agreement of sale, paid consideration, taken and held possession, and the vendor confirmed entitlement to specific performance. Applying the Delhi High Court's reasoning that ownership in the absolute registered-title sense is not essential for the statutory requirement of 'purchase', the tribunal held that the assessee satisfied the requirement of purchase within the prescribed period and was therefore entitled to deduction under section 54F. [Paras 7, 8]

Appeal allowed and deduction under section 54F granted to the assessee.

Final Conclusion: The tribunal allowed the assessee's appeal for Assessment Year 2013-14, holding that a registered agreement of sale coupled with payment and possession (and vendor's confirmation of entitlement to specific performance) sufficed for claiming deduction under section 54F; the requirement that the assessee be absolute owner by registered sale deed was held not to be indispensable for section 54F.

Penalty under Section 271AAB(1) - undisclosed income - surrender of income - reasonable opportunity of being heard - no legal consequence of unilateral conditional surrender

Surrender of income - no legal consequence of unilateral conditional surrender - reasonable opportunity of being heard - Effect of a conditional surrender (alleging it was made on condition of no penal action) and whether the assessee availed an effective opportunity of being heard. - HELD THAT: - The Tribunal held that a unilateral belief or condition recorded by the assessee at the time of surrender - that no penalty would be imposed - has no legal sanction and cannot bind the tax authorities. The assessee mistakenly relied on that surrender condition before the authorities and at appellate stages; such reliance is irrelevant and must be discarded. The statutory scheme requires that the assessee be given a reasonable opportunity under Section 274 before any penalty is imposed; in the present facts the assessee was heard but misutilised the opportunity by advancing the conditional-surrender plea. Consequently, it cannot be said that the assessee was deprived of an effective opportunity of being heard. [Paras 7]

The conditional surrender did not preclude imposition of penalty and the assessee had in fact been given a reasonable opportunity of being heard, but relied on an irrelevant contention.

Penalty under Section 271AAB(1) - undisclosed income - Whether penalty under Section 271AAB(1)(c) is attracted on the surrendered amount and the manner in which the finding on 'undisclosed income' should be recorded. - HELD THAT: - Although the Tribunal accepted that Section 271AAB prescribes mandatory rates of penalty where circumstances in clauses (a), (b) or (c) are attracted and that the concept of 'undisclosed income' in the Explanation is self contained, it did not adjudicate the applicability of clause (c) on merits. The Tribunal observed that the AO must confront statements recorded at search, documents, and other relevant material which led to the surrender, and must pass a speaking order addressing these aspects. The matter therefore requires fresh consideration by the assessing officer with an opportunity to the assessee to meet the material. [Paras 7, 8, 10]

The impugned appellate orders are set aside and the assessment file is remanded to the Assessing Officer for a speaking order in accordance with law after affording the assessee a reasonable opportunity; the question of levy of penalty under Section 271AAB(1)(c) is to be reconsidered by the AO.

Final Conclusion: Appeals allowed for statistical purposes; appellate orders set aside and matters remanded to the Assessing Officer to decide afresh by a speaking order after confronting the material relied upon (the assessee to participate fairly), with liberty to the AO to act on the record if trust is abused.

Clubbing provisions under section 64(1A) - taxability of income of trusts vis-a -vis settlor - irrevocable trust vs revocable trust - effect on taxation - application of income - global income of a resident - colourable device and legitimate tax planning

Clubbing provisions under section 64(1A) - taxability of income of trusts vis-a -vis settlor - irrevocable trust vs revocable trust - effect on taxation - application of income - Whether dividend income declared by the assessee but attributable to two trusts for the benefit of his minor children was rightly assessed in the hands of the assessee or required fresh adjudication in light of additional evidence - HELD THAT: - The Tribunal examined the reasons recorded by the AO and sustained by the CIT(A) for taxing the dividend: receipt of the entire dividend into the assessee's bank account, declaration of the entire dividend in the assessee's US tax return, absence of trust bank accounts and trust returns at the relevant time, delayed transfer of share certificates and apparent use of funds by the assessee. The Tribunal held that these factual features, by themselves, do not establish that the dividend accrued to the minor children or that the trusts were colourable devices beyond the framework of law. The Tribunal noted that the shares were held by the trusts and therefore the dividend cannot be said to have accrued to the minor children only if the trusts in law did not hold the shares; on the record, the AO's reliance on clubbing provisions under section 64(1A) was misplaced because dividend arising to trusts cannot be treated as income of minors unless it is shown that income accrued to them. The Tribunal accepted that the assessee furnished explanations and additional documents (amended US returns, Forms 1099-DIV, trust returns, amended dividend certificates, bank statements and company certification) which, if accepted, would meet the defects pointed out by the authorities. As these documents were additional evidence not earlier considered by the AO, the Tribunal found it appropriate to remit the matter to the AO for fresh examination and decision on the taxability of the dividend in the light of the additional evidence, including the question whether the trusts were irrevocable when dividend arose and whether any subsequent transfers amounted only to application of income. [Paras 18, 20, 21]

Order of the CIT(A) and the addition made by the AO set aside and the issue remitted to the AO for fresh examination and adjudication after considering the additional evidence furnished by the assessee.

Final Conclusion: The Tribunal set aside the appellate order and restored the matter to the Assessing Officer for fresh consideration of whether the disputed foreign dividend income is taxable in the hands of the assessee or of the trusts, directing the AO to examine the additional evidence produced by the assessee and decide in accordance with law; appeal treated as allowed for statistical purposes.

Disallowance under section 14A read with Rule 8D - Deemed consideration under section 50C and stamp duty valuation - Verification of pre-registration bank payments for adopting agreement-date value - Prospective amendment to section 50C and purposive construction to avoid absurdity

Disallowance under section 14A read with Rule 8D - Deletion of disallowance under section 14A read with Rule 8D upheld. - HELD THAT: - The Tribunal concurred with the CIT(A)'s finding that the assessee did not earn any exempt income in the year under consideration. In light of that factual finding and following the decision of the Hon'ble Delhi High Court in Cheminvest Ltd., the Tribunal held that no disallowance under section 14A/Rule 8D could be sustained where there is no exempt income for the year. The Revenue was unable to controvert that factual position; accordingly the deletion of the disallowance was affirmed. [Paras 7, 9]

Revenue's appeal on section 14A stands dismissed and the deletion of the disallowance is upheld.

Deemed consideration under section 50C and stamp duty valuation - Verification of pre-registration bank payments for adopting agreement-date value - Prospective amendment to section 50C and purposive construction to avoid absurdity - Whether stamp duty valuation at registration date under section 50C should be displaced by agreement-date consideration if payment (in whole or in part) was made by account-payee cheque/draft or ECS prior to registration - remanded to AO for verification of payments. - HELD THAT: - The CIT(A) confirmed an addition under section 50C on the basis that the stamp authority's market valuation at the date of registration exceeded the agreement price and there was no evidence that the assessee received higher consideration. The Tribunal observed that the statutory amendment (effective AY 2017-18) permitting use of stamp duty value as on the date of the agreement where payment (in whole or in part) was received by account-payee cheque/draft or ECS prior to registration reflects a rational rule to avoid unintended hardship. Applying the well-known principle of construction to avoid absurdity (as in K.P. Verghese) and having noted that the revenue has no evidence that the assessee received consideration over and above the agreement price, the Tribunal directed the Assessing Officer to verify whether the sale consideration was received through banking channels on or before the date of registration. If such pre-registration payments (in whole or in part) are established, the assessee is entitled to the benefit of adopting the agreement-date value. The Tribunal allowed the assessee's grounds for statistical purposes and remanded the matter for verification and appropriate computation. [Paras 11, 15]

Assessee's appeal allowed for statistical purposes; matter remanded to the AO to verify pre-registration receipt of sale consideration by banking channels and to grant benefit if such receipt is established.

Final Conclusion: The revenue appeal against deletion of the section 14A disallowance is dismissed; the assessee's challenge to the section 50C addition is allowed for statistical purposes and remitted to the Assessing Officer to verify whether sale consideration (in whole or in part) was received by account-payee cheque/bank draft/ECS on or before registration, and to grant relief accordingly.

Transfer pricing adjustment - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Arm's length price - Selection of tested party - Limited remand for verification of margins - Opportunity of being heard

Transfer pricing adjustment - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Arm's length price - Selection of tested party - Limited remand for verification of margins - Opportunity of being heard - International transaction of payments for technical assistance remitted to Assessing Officer/Transfer Pricing Officer for limited verification whether the margin of the tested party is at arm's length to the margins of the comparables selected by the assessee. - HELD THAT: - The Tribunal examined the record and preceding coordinate-bench decisions in the assessee's cases for earlier assessment years and found that the assessee had placed on record documentation demonstrating receipt of services and the need for those services. The Tribunal observed that the TPO applied CUP and determined ALP at nil without establishing basic prerequisites for CUP (availability of comparable uncontrolled prices), and that the assessee had adopted TNMM and selected the AE as the tested party in accordance with Rule 10B and relevant guidelines. Relying on earlier Tribunal precedents, the Bench held that in absence of satisfies prerequisites for CUP, TNMM could not be summarily rejected. However, since the TPO had not verified whether the tested party's margin is at arm's length relative to the comparables actually selected by the assessee, the Tribunal restored the transfer pricing issue to the file of the AO/TPO for a limited purpose of verifying margins and directed that the assessee be given a reasonable opportunity of being heard while such verification is carried out. [Paras 5, 7]

Issue restored to AO/TPO for limited verification of whether the tested party's margin is at arm's length vis-a -vis the comparables; matter to be decided afresh after giving the assessee opportunity of being heard.

General grounds requiring no specific adjudication - Grounds No. 1 to 3 (general objections to orders of AO/TPO/DRP and assessment) were not specifically adjudicated by the Tribunal in these appeals. - HELD THAT: - The Tribunal recorded that grounds 1 to 3 were general in nature and required no separate adjudication in view of the decision on the transfer pricing issue and the reliance on earlier coordinate-bench findings; accordingly no specific findings were rendered on those grounds in this order. [Paras 5]

Grounds No. 1 to 3 left without specific adjudication.

Consequential nature of interest determination - Ground No. 5 (levy of interest under section 234B) treated as consequential. - HELD THAT: - The Tribunal noted that the interest issue arises consequentially from the primary assessment adjustments. As the primary transfer pricing issue has been remitted for verification, the interest determination was not independently adjudicated and is consequential on the outcome of the remand proceedings. [Paras 8]

Ground No. 5 treated as consequential and not independently decided.

Prematurity of penalty proceedings - Ground No. 6 (initiation of penalty proceedings under section 271(1)(c)) held to be premature and not adjudicated. - HELD THAT: - The Tribunal observed that penalty proceedings premised on alleged inaccurate particulars are premature in the present appellate context where primary adjustments have been remitted; therefore no adjudication on penalty was undertaken in this order. [Paras 8]

Ground No. 6 not adjudicated as premature.

Final Conclusion: The appeals are allowed for statistical purposes: the transfer pricing adjustment is restored to the file of the Assessing Officer/Transfer Pricing Officer for a limited verification of whether the tested party's margin is at arm's length vis-a -vis the comparables (with a reasonable opportunity to the assessee); ancillary grounds are either consequential, premature, or left without specific adjudication.

Reopening of assessment - income escaping assessment - change of opinion - acting under dictation by superior officer - information for reopening (scope of 'information') - deduction under Section 80HHC - export of shares

Reopening of assessment - change of opinion - acting under dictation by superior officer - Validity of reassessment issued under Section 148/147 - whether the AO's reopening was impermissible being a change of opinion or on account of acting under dictation. - HELD THAT: - The Court examined the record and found that the Assessing Officer had considered the transaction and the claim for deduction under Section 80HHC at the original assessment stage, had posed detailed queries under Section 142(1), received the assessee's responses including RBI correspondence, and thereafter completed scrutiny assessment under Section 143(3) accepting the claim. Although the audit raised objections later, the Assessing Officer had replied to and resisted those objections before finally issuing the reassessment notice. The material shows that the Assessing Officer issued the notice immediately after a letter from his superior directing 'remedial action', and both the Commissioner (Appeals) and the ITAT concurrently found that the Assessing Officer acted under dictation without independent application of mind. The Court held that where the reopening springs from a mere change of opinion based on the same materials and is induced by direction from a superior, it is impermissible to reopen the assessment under Sections 147/148. Applying these principles to the facts, the Court found no justification for reassessment and declined to interfere with the concurrent factual finding that the AO acted under dictation. [Paras 20, 21, 22, 24, 25]

Reopening was invalid - the reassessment was a product of change of opinion and acting under dictation; reassessment quashed.

Information for reopening (scope of 'information') - income escaping assessment - change of opinion - Whether the reopening was sustainable as being based on 'information' within the meaning permitting reopening (including Explanation 2(c)) and whether reopening within four years made it permissible. - HELD THAT: - The Court considered the scope of 'information' as discussed in Larsen & Toubro and noted that while the term is to be given wide amplitude, the Apex Court also recognised that a mere change of opinion on the same materials does not constitute such 'information'. On the facts, the audit objection did not disclose new factual material overlooked by the AO; instead the AO had addressed the relevant legal and factual points at scrutiny and maintained his view. The Court concluded that the reopening was founded on the AO's second thoughts and directions from his superior rather than on fresh information warranting reassessment. Consequently, the contention that the reopening fell within the expression 'income escaping assessment' under Explanation 2(c) was rejected in the circumstances of this case. [Paras 23, 24, 25, 27, 28]

Reopening could not be sustained as based on permissible 'information'; the objection that it fell within Explanation 2(c) was negatived on these facts.

Final Conclusion: The Tax Appeal is dismissed. The High Court answered the substantial questions (A) and (B) against the Revenue, holding that the reassessment was invalid as resulting from change of opinion and acting under dictation; the Court declined to decide or remit the question on the assessee's entitlement to deduction under Section 80HHC (C) as it would not affect the final outcome. No order as to costs.

Low tax effect - withdrawal of grounds by the assessee - remittance to lower appellate authority for fresh consideration - disposal of appeal without adjudication on merits

Low tax effect - withdrawal of grounds by the assessee - disposal of appeal without adjudication on merits - Whether the Tax Appeal required adjudication on merits once the assessee gave up specified grounds and the tax effect was demonstrably low. - HELD THAT: - The Appellate Tribunal had remitted the matter to the CIT(A) because the assessee could not remain present before the CIT(A). Before this Court could consider the merits, the assessee submitted a statement quantifying the total additions in dispute and the tax effect at 30% and expressly gave up two specific claims - the addition under Section 43B and the addition of brought forward loss - and confined the reliefs pursued before the CIT(A) to deletions of specified additions. In those circumstances the Court accepted the statement and recording that the assessee had relinquished those grounds and, having regard to the low tax effect, declined to adjudicate the merits of the appeal and disposed of the Tax Appeal accordingly. The Court thereby did not proceed to decide the substantive correctness of the disputed additions but treated the appeal as not requiring further determination on merits in view of the assessee's withdrawal and the limited tax impact. [Paras 6]

Appeal disposed of on the basis that the assessee gave up specified claims and the tax effect was low; no adjudication on merits.

Final Conclusion: The Tax Appeal was disposed of after the assessee expressly gave up the claims relating to Section 43B addition and brought forward loss and demonstrated a low tax effect, so the Court did not proceed to adjudicate the merits.

Maintaining writ jurisdiction in presence of alternative remedy - Exceptional circumstances for invoking Article 226 - Availability and requirement of statutory appeal under Section 128 of the Customs Act, 1962 - Principles of natural justice - Futility of premature judicial intervention where alternative remedy is efficacious

Maintaining writ jurisdiction in presence of alternative remedy - Exceptional circumstances for invoking Article 226 - Principles of natural justice - Availability and requirement of statutory appeal under Section 128 of the Customs Act, 1962 - Whether the writ petition under Article 226 was maintainable notwithstanding the availability of an alternative statutory remedy under Section 128 of the Customs Act, 1962. - HELD THAT: - The Court held that where the statute provides an efficacious alternative remedy by way of appeal, invocation of Article 226 is impermissible in the absence of prima facie special circumstances. The appellant had not averred or established any special circumstances before the Single Judge - such as lack of jurisdiction by the authority, a clear breach of natural justice, or other exceptional factors - that would justify bypassing the statutory appellate forum. The question of release of goods based on a BIS certificate and other factual contentions involved mixed questions of fact and law which were not shown to be incapable of being adjudicated on appeal. Consequently, the writ jurisdiction ought not to be invoked merely because the appellant preferred it; the appellant should have availed the appeal remedy under Section 128 and exhausted that remedy before approaching the writ court. [Paras 11, 12, 13, 14, 15]

Writ petition was not maintainable in view of the available and efficacious statutory remedy; absence of prima facie special circumstances militated against exercise of Article 226.

Availability and requirement of statutory appeal under Section 128 of the Customs Act, 1962 - Futility of premature judicial intervention where alternative remedy is efficacious - Relief to be afforded after dismissal - remedial direction regarding statutory appeal and limitation. - HELD THAT: - Having declined to interfere with the order in original and upheld the Single Judge's decision, the Court dismissed the writ appeal. Recognising the statutory appeal route under Section 128, the Court granted the appellant liberty to file an appeal before the Commissioner of Appeals within 30 days from receipt of the order and directed that the Commissioner of Appeals decide the appeal in accordance with law, following statutory procedure scrupulously and without reference to limitation. This constitutes a direction to enable the appellant to pursue the prescribed alternative remedy despite the lapse of time, rather than an adjudication on the merits of the original order. [Paras 16]

Writ appeal dismissed; appellant permitted to file appeal before the Commissioner of Appeals within 30 days and the Commissioner directed to decide it on merits without reference to limitation.

Final Conclusion: The High Court dismissed the writ appeal holding that the appellant must first avail the statutory appeal under Section 128 of the Customs Act, 1962 in the absence of any prima facie special circumstances to invoke Article 226; liberty was granted to file that appeal within 30 days and the Commissioner of Appeals was directed to decide it in accordance with law without reference to limitation.

Relevancy of statements under Section 9D and requirement of examination as witness - Admissibility of confessional statements made to Customs officers as binding on the company - Confession of co-noticees and its evidentiary weight - Right against self-incrimination under Article 20(3) and its application to co-noticees/directors - Cross-examination and the requirements of natural justice

Relevancy of statements under Section 9D and requirement of examination as witness - Admissibility of confessional statements made to Customs officers as binding on the company - Cross-examination and the requirements of natural justice - Whether denial of cross-examination of the directors whose statements were recorded during investigation violated Section 9D/Section 138 principles or principles of natural justice. - HELD THAT: - The Tribunal held that Section 9D prescribes that a statement recorded before a gazetted officer becomes relevant only after the deponent is examined as a witness before the adjudicating authority and the authority, having regard to circumstances, admits the statement in the interests of justice. The statements of Shri Vineet Saluja and Shri Pradeep Sharma, being directors, amount to statements on behalf of the company and operate as confessions or admissions binding the company; such confessional statements made voluntarily to Customs officers fall outside the protective ambit that would mandate examination under Section 9D. Further, where a co-noticee's statement amounts to confession, it need not be treated as a mere statement simplicitor and the co-noticee cannot be compelled to be produced for cross-examination; this stance is consistent with authority recognising limited evidentiary use of confessions of co-accused/co-noticees. The Tribunal also noted Article 20(3) protections against self-incrimination apply to such persons and that there is no material on record showing the confessions were obtained by threat or duress. On these bases, denying cross-examination of the two directors did not contravene Section 9D or principles of natural justice. [Paras 7, 8, 9, 11, 13]

Denial of permission to cross-examine Shri Vineet Saluja and Shri Pradeep Sharma is upheld; their statements are treated as confessions/admissions binding the company and not subject to mandatory cross-examination under Section 9D/principles of natural justice.

Cross-examination and the requirements of natural justice - Consent of witnesses to be cross-examined - Whether the two other witnesses, Ms. N. Rashmi and Shri Amit Mallik, should be permitted to be cross-examined. - HELD THAT: - The Tribunal found that the statements of Ms. N. Rashmi and Shri Amit Mallik do not amount to confessions and, therefore, the question of cross-examination requires fresh consideration. The adjudicating authority is directed to obtain the consent of these two witnesses as to their willingness to be cross-examined; if willing, the authority shall re-decide the request for cross-examination afresh in accordance with law and the requirements of procedural fairness. The Tribunal emphasised that cross-examination cannot be forced against the witness's will. [Paras 13, 14]

Remanded to the adjudicating authority to seek consent of Ms. N. Rashmi and Shri Amit Mallik for cross-examination and to re-decide the request accordingly.

Final Conclusion: Appeal partly allowed and partly dismissed: the adjudicating authority's refusal to permit cross-examination of the two directors is upheld; the matter is remanded for fresh decision on cross-examination of Ms. N. Rashmi and Shri Amit Mallik after obtaining their consent.

Classification of incomplete or unassembled machines - distinction between parts/components and complete machine - manufacture - incidental or ancillary processes - Rules of Interpretation of Customs Tariff including Rule 2(a) and Section XVI Notes - onus on Department to prove manufacture - concessional exemption under Notification No. 12/2012 - Serial No. 399(A) versus 399(B) - penal liability and bonafide belief

Distinction between parts/components and complete machine - concessional exemption under Notification No. 12/2012 - Serial No. 399(A) versus 399(B) - classification of incomplete or unassembled machines - Whether the imported items (laser level transmitter, receivers, control boxes, cables and battery packs) qualify as the agricultural machine "Laser land leveller" under Serial No. 399(A) of Notification No. 12/2012 or are only parts/components falling under Serial No. 399(B). - HELD THAT: - The Tribunal examined the Notification which grants concessional duty to (A) specified machines and (B) parts and components required for manufacture of those machines. The appellants imported a kit of parts which, when connected on site (primarily by simple cabling), are capable of functioning as a Laser land leveller. Applying the Rules of Interpretation (including Rule 2(a)) and Section XVI Notes 3 and 4, an article presented unassembled or incomplete is to be treated as that article if it has the essential character of the finished article and where components together contribute to a clearly defined function. The Tribunal held that mere site cabling required to put the imported parts into operation does not amount to manufacture under Section 2F; reliance was placed on authoritative decisions that incidental assembly or putting together parts into a kit does not ordinarily constitute manufacture and that the Department bears the onus to prove manufacture. Consequently, the imported items, being capable of use as a complete Laser land leveller without any process amounting to manufacture, fall within Serial No. 399(A) and attract the concessional rate. [Paras 10, 11, 12, 13, 14]

The imported items qualify as the machine "Laser land leveller" within Serial No. 399(A) of Notification No. 12/2012 and not merely as parts under Serial No. 399(B); the adjudicating authority's contrary finding is set aside and the concession at the concessional rate is held to have been rightly availed.

Manufacture - incidental or ancillary processes - onus on Department to prove manufacture - Whether the process of site cabling and assembly amounts to "manufacture" so as to disqualify the importer from claiming the exemption. - HELD THAT: - The Tribunal applied the statutory definition of "manufacture" and judicial tests requiring emergence of a new commercial product with different name, character or use. Authorities were cited holding that simple collection or assembly of duty-paid parts into a kit or putting together parts at site does not ordinarily amount to manufacture. On the facts, the activity of cabling was found to be incidental and not transformative; the Department did not discharge the burden to prove that any process performed by the appellant constituted manufacture. Therefore the activity did not attract the manufacture requirement that would trigger applicability of Serial No. 399(B) conditions. [Paras 7, 8, 9, 10, 14]

Site cabling/assembly is not manufacture in the factual matrix of this case; the Department failed to prove otherwise and the parts qualify as the machine without invocation of manufacture-based conditions.

Penal liability and bonafide belief - Whether penalty proceedings against the Director (Mr. Manoj Kumar Sharma) should be sustained. - HELD THAT: - The Director's statement and the material on record showed a bonafide belief in the classification originally adopted and a subsequent change after becoming aware of the Notification; there was no positive evidence of dishonest or mala fide intent. The Tribunal applied settled principles that penalty should not ordinarily be imposed where breach arises from bona fide belief or is venial and where there is no deliberate or conscious disregard of obligation. In view of accepted bonafide conduct and absence of proof of malafide, penal proceedings were not warranted. [Paras 15, 16]

Penal proceedings against the Director are not sustainable and the penalties proposed in the impugned order are to be dropped.

Final Conclusion: The impugned adjudication holding the imports to be parts requiring manufacture-conditions and imposing duty and penalties is set aside; the imported items qualify as the agricultural machine "Laser land leveller" under Serial No. 399(A) of Notification No. 12/2012 for the period 01.11.2011 to 31.03.2016, and the proposed penalties against the Director are discharged. Both appeals are allowed.

Preferential transactions - Undervalued transactions - Fraudulent trading or wrongful trading - Ordinary course of business - Security interest by way of mortgage as third party security - Related party

Preferential transactions - Security interest by way of mortgage as third party security - Ordinary course of business - Whether the mortgages executed by the corporate debtor in favour of banks/financial institutions to secure debt of the holding company fall within the definition of preferential transactions under Section 43 of the I&B Code. - HELD THAT: - The Appellants were lenders to the holding company and the mortgages were created by the corporate debtor to secure indebtedness of that holding company, not to secure an antecedent debt owed by the corporate debtor itself. Section 43(2)(a) requires a transfer of the corporate debtor's property for the benefit of a creditor in respect of an antecedent financial or operational debt of the corporate debtor. Since the interest created was to secure liabilities of a third party (the holding company), clause (a) is not attracted. Further, the mortgages were made in the ordinary course of business/financial affairs of the transferee and transferee banks were consortium lenders securing their advances to the holding company; therefore the transactions fall within the exception in Section 43(3) and cannot be treated as preferences. The Adjudicating Authority's conclusion that the mortgages amounted to preferential transactions was founded on a misreading of Section 43 and incorrect factual premise that the transfers secured antecedent debts of the corporate debtor. [Paras 62, 63, 64, 66, 67]

Section 43 is not attracted and the mortgages cannot be annulled as preferential transactions.

Orders in case of preferential transactions - Preferential transactions - Whether the Adjudicating Authority had power to pass orders under Section 44 predicated on avoidance of preferential transactions. - HELD THAT: - Section 44 empowers the Adjudicating Authority to pass remedial orders only on an application under Section 43. Having held that Section 43 does not apply to the transactions in question, the Adjudicating Authority lacked the statutory foundation to exercise powers under Section 44 in respect of those mortgages. [Paras 68, 69]

No power to pass orders under Section 44 in respect of the mortgages as Section 43 is not attracted.

Undervalued transactions - Ordinary course of business - Whether the mortgages constitute 'undervalued transactions' under Section 45 of the I&B Code. - HELD THAT: - Section 45 applies to gifts or transfers for consideration significantly less than the value provided by the corporate debtor and requires the transaction to concern assets of the corporate debtor in respect of the corporate debtor's own obligations. The mortgages were executed to secure liabilities of the holding company and not to discharge any obligation of the corporate debtor; accordingly neither the definition in Section 45(2)(a) nor (b) is attracted. Given that Section 44/46/48 remedies flow from a valid finding under Section 45, those provisions likewise cannot be invoked. [Paras 70, 71, 72, 73]

Section 45 is not attracted; the transactions are not undervalued transactions.

Fraudulent trading or wrongful trading - Ordinary course of business - Related party - Whether the mortgages amount to fraudulent trading or wrongful trading under Section 66 of the I&B Code. - HELD THAT: - Section 66 requires a finding that the business was carried on with intent to defraud creditors or for a fraudulent purpose, or that directors knew there was no reasonable prospect of avoiding insolvency and failed to exercise due diligence. The Appellants established that the mortgages were created in the ordinary course to secure consortium lending extended to the holding company and were not shown to have been made to defraud the corporate debtor's creditors. There was no material establishing that the transactions were designed to defraud creditors, nor findings on directors' culpability having been upheld on appeal. The Adjudicating Authority's conclusion that the mortgages constituted fraudulent or wrongful trading rested on incorrect premises and insufficient evidence. [Paras 74, 75, 76, 77, 79]

Section 66 is not attracted; the mortgages do not constitute fraudulent or wrongful trading.

Security interest by way of mortgage as third party security - Exercise of rights under the I&B Code - Whether the impugned orders against the appellant banks and financial institutions should be set aside and whether those parties are entitled to exercise their rights under the I&B Code. - HELD THAT: - Because the appellate court found that Sections 43, 45 and 66 do not apply to the mortgages relied upon by the Resolution Professional, the impugned order insofar as it affected the appellant banks and financial institutions cannot stand. The court set aside the Adjudicating Authority's order to that extent and clarified that it has not adjudicated on liabilities of promoters or directors (no appeals before it by them). Consequently, the appellants are free to exercise their rights under the I&B Code subject to no other adverse orders. [Paras 79, 80, 81]

Impugned order dated 16.05.2018 set aside insofar as it relates to the appellant banks/financial institutions; appellants entitled to exercise their rights under the I&B Code.

Final Conclusion: The Tribunal allowed all appeals by holding that the mortgages executed by Jaypee Infratech Ltd. as third party security to secure debt of its holding company do not constitute preferential transactions, undervalued transactions or fraudulent/wrongful trading under the I&B Code; the impugned Adjudicating Authority order is set aside insofar as it relates to the appellant banks and financial institutions, who may exercise their rights under the Code.

Preventive detention - Article 22(5) of the Constitution - Section 3(3) of the COFEPOSA Act - Supply of relied-upon documents pari passu with grounds - Subjective satisfaction of the detaining authority regarding likelihood of release on bail - Judicial review of subjective satisfaction - Guidelines in Hand Book on Compilation of Instructions on COFEPOSA matters (Do's and Don'ts)

Article 22(5) of the Constitution - Section 3(3) of the COFEPOSA Act - Supply of relied-upon documents pari passu with grounds - Guidelines in Hand Book on Compilation of Instructions on COFEPOSA matters (Do's and Don'ts) - Compliance with statutory requirement to supply grounds of detention and relied-upon documents and effect of non-compliance with administrative guidelines - HELD THAT: - The Court held that Section 3(3) of the COFEPOSA Act requires that grounds of detention and the documents relied upon be communicated "as soon as may be" but ordinarily not later than five days (and in exceptional circumstances up to fifteen days for reasons to be recorded). There is no absolute statutory obligation to serve the relied-upon documents on the same day as the detention order; the expression "as soon as may be" must be read with the statutory time limit. In the present case the detention orders and grounds were served on 18.05.2019 and the relied-upon documents were furnished between 20.05.2019 and 22.05.2019, within the five-day period. The copies were voluminous and their compilation took time. Consequently the statutory mandate of Section 3(3) and Article 22(5) was complied with. Administrative guidelines in the Hand Book (Do's and Don'ts) exhort that grounds and relied-upon documents be served together as quickly as possible, but they are executive instructions and cannot override or curtail the statutory provision; compliance with the statutory time limit is determinative. The High Court erred in quashing the detention orders solely on the ground that the documents were not served pari passu on the same day. [Paras 21, 23, 24]

The detention orders were not vitiated for non-supply of the relied-upon documents; statutory requirements of Article 22(5) and Section 3(3) COFEPOSA were satisfied and non-compliance with Hand Book guidelines alone did not invalidate the orders.

Preventive detention - Subjective satisfaction of the detaining authority regarding likelihood of release on bail - Judicial review of subjective satisfaction - Whether detention orders were invalid for failing to record an express satisfaction that the detenues were likely to be released on bail and, if released, would indulge in prejudicial activities - HELD THAT: - The Court applied settled principles (including Kamarunnisa and its progeny) that a detention order in respect of a person already in custody can be valid if the detaining authority (i) is aware of the subsisting custody, (ii) has reason to believe from reliable material that there is a real possibility of release on bail and that on release the person would probably indulge in prejudicial activities, and (iii) records satisfaction to that effect. Such satisfaction is subjective and normally entitled to deference, but it must be based on material. In the present case the grounds record awareness of custody, recount antecedent activities and the role of the detenues in a large smuggling syndicate, and express the detaining authority's satisfaction as to the detenues' propensity to continue smuggling. Although the orders did not use the specific phrase that the detenues were "likely to be released on bail," the Court held that the absence of that exact formulation did not demonstrate non-application of mind because the subjective satisfaction is evident from the materials and reasons recorded. The High Court erred in striking down the orders for lack of an express statement of likelihood of release on bail. [Paras 31, 35, 37, 43]

The detention orders are not vitiated for want of an express recital that the detenues were likely to be released on bail; the detaining authority applied its mind and formed subjective satisfaction on material available, and that satisfaction is not susceptible to being set aside.

Final Conclusion: The High Court's order quashing the COFEPOSA detention orders was set aside; the Supreme Court found statutory requirements regarding communication of grounds and documents satisfied and upheld the detaining authority's subjective satisfaction, allowing the Union of India's appeals and dismissing the detenues' appeals.

Challenge to show cause notice - adjudication proceedings under section 13 of the FEMA - prematurity of judicial review - extension of time to file reply - liberty to file representation

Challenge to show cause notice - prematurity of judicial review - Maintainability of the petition challenging the show cause notice dated 15/01/2019 and related procedural posture. - HELD THAT: - The petition attacked a show cause notice issued under the Foreign Exchange Management (Adjudication Proceedings & Appeal) Rules, 2000 proposing initiation of adjudication under section 13 of the FEMA. The Court noted the Respondent's contention that judicial review at this stage would be premature because the statutory scheme provides an opportunity to the Petitioner to reply to the notice before adjudication is commenced. The Petitioner had already filed a representation in response to the notice and sought withdrawal of the petition, reserving the right to file a further representation. The Court did not adjudicate the substantive merits of the challenge to the show cause notice but dealt with the petition's procedural posture by permitting withdrawal with liberty to pursue the statutory process and file further representation within the timeframe allowed by the Court.

Petition not decided on merits as premature; withdrawal permitted with liberty to file further representation.

Extension of time to file reply - liberty to file representation - Permission to extend time and to file a further representation to the show cause notice. - HELD THAT: - By earlier order the Court extended the time to file a reply to the show cause notice until 18/04/2019 and recorded that the Respondent would accept the reply on record despite the original time having expired. On the hearing, the Petitioner was granted liberty to file a further representation/reply to the impugned notice within two weeks from the date of the order. The Court confined its action to procedural relief, leaving the Adjudicating Authority to consider the Petitioner's submissions in accordance with law.

Time extension and liberty to file further representation granted; Adjudicating Authority to consider the submissions.

Final Conclusion: The petition was disposed of as withdrawn with the Court granting procedural relief - earlier extension for filing reply was noted and the Petitioner was given liberty to file a further representation within two weeks; the Court did not decide the substantive challenge to the show cause notice, leaving consideration to the Adjudicating Authority under the statutory scheme.

Realisation of export proceeds - penalty for non-realisation of export proceeds - contravention of Section 18(2) and 18(3) of FERA, 1973 - bank realisation certificates as contemporaneous evidence - pre-deposit / stay/waiver applications before the Appellate Tribunal - remand for fresh decision where primary evidence not considered

Realisation of export proceeds - bank realisation certificates as contemporaneous evidence - penalty for non-realisation of export proceeds - Whether the appellants had realised the export proceeds and, on the basis of the bank certificates and other documents, the penalty imposed for alleged contravention of Section 18(2) and 18(3) of FERA, 1973 could be sustained. - HELD THAT: - The Appellate Tribunal was directed by the High Court to reconsider the appellants' waiver/pre-deposit applications because the Tribunal had not considered the bank certificates which prima facie indicated realisation of export proceeds. On review of the record and after hearing counsel, the Tribunal noted that the appellants produced lists and supporting documents showing realisations, produced a contemporaneous RBI letter and bank realisation certificates (EXH-D) and that item no.3 was realised during adjudication itself. No contrary evidence or submissions were placed on record by the respondent. In these circumstances the Tribunal accepted the documentary evidence of realisation and, in the interest of justice, set aside the impugned order and allowed the appeals. [Paras 12, 13]

Documentary proof established realisation of the export proceeds; the penalties imposed in the adjudication order were not to be sustained and the appeals are allowed by setting aside the impugned order.

Final Conclusion: The Appellate Tribunal, after considering the bank realisation certificates and related documents (which were not controverted), held that the export proceeds had been realised and accordingly set aside the impugned adjudication order and allowed the appeals; no costs.

Jurisdiction of Single Member Bench - repeal of Appellate Board under FERA - transfer of pending appeals to Appellate Tribunal under FEMA - constitution of Benches and powers of Chairman under SAFEMA - effect of omission of limitation on single member authority - binding effect of Supreme Court decision in UOI v. Premier Ltd.

Jurisdiction of Single Member Bench - repeal of Appellate Board under FERA - constitution of Benches and powers of Chairman under SAFEMA - binding effect of Supreme Court decision in UOI v. Premier Ltd. - Whether a Single Member Bench of the Appellate Tribunal has jurisdiction to hear and decide the appellants' appeals originating under FERA and proceeding under FEMA. - HELD THAT: - The Appellate Board constituted under Section 52 of FERA stood dissolved on the repeal of FERA by Section 49(1) of FEMA and appeals pending under the repealed Act were transferred to the Appellate Tribunal constituted under FEMA (Section 49(5)(b)). The Appellate Tribunal for FEMA matters is the Tribunal constituted under SAFEMA and, under Section 12(6A) of SAFEMA, the Chairman may constitute Benches of one or two Members which may exercise the Tribunal's powers and functions. The earlier FERA provision limiting the competence of a single Member in relation to penalties (as relied upon by the appellants) is no longer operative after repeal and subsequent statutory scheme. The omission (by Finance Act, 2017) of the erstwhile limiting provision and the Chairman's constitution and allocation of cases to Single Member Benches support the Tribunal's competence. Further, the Supreme Court in UOI v. Premier Ltd. confirms that appeals arising from orders under FERA filed after 1.6.2000 lie before the Appellate Tribunal under FEMA, reinforcing that FEMA/SAFEMA provisions govern constitution and jurisdiction of the Tribunal. Having regard to these statutory provisions and the Supreme Court ruling, the contention that a Single Member Bench lacks jurisdiction to decide the present appeals founded on the FERA limitation is unsustainable. [Paras 5, 6, 7, 8, 9]

The miscellaneous petitions challenging the jurisdiction of the Single Member Bench are dismissed; the appellants must comply with the pre deposit direction of this Bench's order dated 5.12.2018 within the time granted and report compliance.

Final Conclusion: The Tribunal held that, on repeal of FERA and by virtue of FEMA and SAFEMA, Benches (including Single Member Benches) constituted by the Chairman are competent to exercise the Appellate Tribunal's jurisdiction; the challenge to Single Member jurisdiction is rejected and the miscellaneous petitions are dismissed, subject to the pre deposit directions issued by the Bench.

Hawala transactions - contravention of Section 3(b) and 3(c) of FEMA, 1999 - burden of proof in civil adjudication under FEMA - evidentiary value of statements of accused and independent witnesses - CFSL report as corroborative evidence - retraction of statements and its evidentiary effect - cross-examination and principles of natural justice in adjudication

Contravention of Section 3(b) and 3(c) of FEMA, 1999 - hawala transactions - CFSL report as corroborative evidence - evidentiary value of statements of accused and independent witnesses - Appellants committed contraventions of Section 3(b) and 3(c) of FEMA, 1999 by receiving and distributing payments under instructions of persons resident outside India. - HELD THAT: - The adjudicating authority's findings that the appellants received and distributed payments under instructions from persons abroad are supported by multiple consistent statements of the appellants, independent statements of at least 26 other persons who received money on such instructions, and a CFSL report showing international calls/messages to the appellant's phones. The Appellant Shri Shamsher Singh repeatedly confirmed earlier statements in eight statements recorded between 03.08.2011 and 14.09.2011 admitting his role in making and receiving payments and distributing compensatory payments under foreign instructions; the other appellant's statements corroborate receipt, destruction of a fax listing payees and that seized cash was for distribution. Given the clandestine nature of hawala business, direct documentary proof is often unavailable, and corroborative oral testimony together with CFSL findings suffices on the preponderance of probabilities in civil adjudication under FEMA. The adjudicator therefore correctly concluded contraventions of the statutory provisions based on the totality of evidence. [Paras 5, 8]

Findings of contravention of Section 3(b) and 3(c) of FEMA, 1999 are upheld and the impugned order sustaining those findings is not interfered with.

Retraction of statements and its evidentiary effect - evidentiary value of statements of accused and independent witnesses - Retraction letters purportedly sent by the appellants do not vitiate the earlier confessional statements in the absence of proof of dispatch/receipt and where earlier statements were repeatedly confirmed. - HELD THAT: - The retraction claimed by Shri Shamsher Singh and Shri Dimple Thakur was made long after the original statements (Shamsher Singh's purported retraction after 43 days and following eight statements) and there is no proof that the retraction letters were actually received by the Directorate as the adjudicating authority recorded. Earlier statements were consistent, repeatedly confirmed, and corroborated by independent witnesses and CFSL findings. On these facts the tribunal rightly found the retractions unavailing. [Paras 5, 7]

Retractions are rejected as ineffective to overturn the earlier consistent and corroborated statements.

Cross-examination and principles of natural justice in adjudication - burden of proof in civil adjudication under FEMA - Denial of cross-examination did not amount to violation of natural justice in the adjudication proceedings under FEMA in the facts of this case. - HELD THAT: - The tribunal applied settled principle that natural justice in adjudicatory proceedings requires an opportunity to be heard and to place one's case; it is not invariably co-extensive with criminal procedure rights such as cross-examination. The appellants had opportunity to make submissions and to place affidavits; the adjudicator's refusal of cross-examination was not shown to have deprived the appellants of a fair adjudicatory opportunity given the documentary and testimonial record relied upon. [Paras 6]

No interference with the adjudicating authority on the ground of denial of cross-examination; natural justice requirements were satisfied.

Rejection of claimed explanation for seized cash - evidentiary value of post-facto affidavits - The explanation offered by the appellants for the seized cash (that it belonged to the mother in law from an earlier advance) is implausible and rejected. - HELD THAT: - Affidavits filed in 2013 claiming that the seized cash was part of an advance for a land sale were inconsistent with the admitted non-occurrence of the sale, contradicted by earlier documents (e.g., the Will) and the contemporaneous statements admitting that the cash was for hawala distribution. Given these contradictions and the corroborative evidence of illicit payments, the adjudicator reasonably rejected the post facto affidavits as lacking truth. [Paras 7]

The claimed innocent source for the seized cash is disbelieved and does not affect the finding of contravention.

Final Conclusion: The appeals are dismissed; the adjudicating authority's findings of contravention of Section 3(b) and 3(c) of FEMA, 1999, the rejection of retractions and of the asserted innocent source of seized cash, and the conclusion that natural justice was satisfied despite denial of cross examination are affirmed.

Identification of person named in seized documents - delay in issuance of show-cause notice and prejudice - reliance on seized documents and third-party statements in enforcement proceedings - burden of proof to establish identity in enforcement proceedings - mitigation of penalty on health and equity grounds - appropriation of pre-deposit as full and final penalty - FEMA enforcement procedure

Delay in issuance of show-cause notice and prejudice - reliance on seized documents and third-party statements in enforcement proceedings - Whether the long delay in issuing the show-cause notice and the prosecution's conduct justified interference in the enforcement proceedings - HELD THAT: - The Tribunal recorded that the Enforcement officers recorded the appellant's statement on 29/04/2003 but the complaint was filed only on 04/12/2012 and the show-cause notice issued on 04/01/2013, a lapse of about ten years. The order notes absence of explanation for the long delay and that no subsequent investigative steps (such as recording further statements or attempting to apprehend the principal accused) were shown to have been taken by the Enforcement authorities. The Tribunal treated the unexplained delay and the prosecutorial inertia as material circumstances that militated against upholding a severe penalty without closer scrutiny of prejudice to the appellant. [Paras 4, 12, 17, 18]

Delay of nearly ten years in issuing the show-cause notice was unexplained and constituted a material circumstance warranting interference with the quantum of penalty.

Identification of person named in seized documents - burden of proof to establish identity in enforcement proceedings - Whether the identity of the appellant as the person named in the seized documents was established sufficiently to sustain the enforcement action - HELD THAT: - The Tribunal observed that the seized documents showed the name 'Moidu Haji Annara' but, according to the appellant's recorded statement, the documents did not carry his father's name, house name or full address and he denied knowledge of the principal accused. The adjudicating authority had placed the burden on the appellant to produce documents to show existence of other persons of the same name at the place, but the Tribunal noted absence of any independent steps by the Enforcement to verify identity (for example, enquiry with local village authorities) and that there was no whisper of attempts to apprehend or record statement of the principal accused. On this record the Tribunal found that the identity of the person referred to in the seized documents was not established in a legally acceptable manner. [Paras 10, 11, 13]

Identity of the appellant as the person referred to in the seized documents was not established satisfactorily; findings based solely on the seized entries were inadequate.

Mitigation of penalty on health and equity grounds - appropriation of pre-deposit as full and final penalty - Whether reduction or mitigation of the penalty previously imposed was justified and what order should be made regarding the deposited amount - HELD THAT: - The Tribunal took into account the appellant's advanced age, serious medical condition (Parkinson's disease and symptoms of Alzheimer's disease) and the totality of the peculiar facts including unexplained delay, failure of seizure from his premises, and the inadequacy of identity evidence. Considering these circumstances the Tribunal held that it was appropriate to reduce the penalty. The Tribunal directed that 25% of the penalty amount already deposited (as ordered earlier) be appropriated by the respondent and that this appropriation shall stand as the full and final penalty, thereby disposing the appeal on that basis. [Paras 16, 19, 20]

Penalty reduced; the respondent to appropriate 25% of the amount already deposited and that appropriation to be the full and final penalty.

Final Conclusion: The appeal is allowed in part. On the facts-unexplained delay in prosecution, inadequacy of proof of the appellant's identity in the seized documents, absence of seizure from his residence and his serious ill-health-the Tribunal reduced the penalty by directing appropriation of 25% of the amount already deposited and treating that appropriation as the full and final penalty; appeal and pending applications disposed of with no costs.

Contravention of FEMA - deemed liability under Section 42(1) - penalty under Section 13 - regulated versus restricted versus prohibited transactions under FEMA - proportionality in imposition of penalty - reporting requirement under TISPRO (Schedule I, para 9(1)(A)) - refund of inward remittance under TISPRO (Schedule I, para 8)

Contravention of FEMA - reporting requirement under TISPRO (Schedule I, para 9(1)(A)) - Whether the three inward remittances into India breached FEMA and the TISPRO reporting/issuance requirements - HELD THAT: - The Tribunal recorded that foreign exchange was brought into India through normal banking channels and that no misutilisation or loss to the exchequer was shown; yet the Adjudicating Authority had held the appellants to have contravened provisions of FEMA and the TISPRO regulations in relation to the three remittances. The impugned adjudication found failures including non-reporting within the prescribed time and non-issuance of shares within 180 days; the Tribunal accepted that contraventions had been alleged and recorded by the Adjudicating Authority but treated many of the obligations invoked as regulatory in nature. The Tribunal noted the factual matrix (funds received and used in India; no benefit received by remitters; attempts made to obtain post-facto approvals) while observing that certain formal requirements (mode of remittance, identity of remitter versus intended investor, and reporting) had not been complied with and that RBI/FIPB had declined approvals in the past. [Paras 36, 51, 55, 59]

The Tribunal proceeded on the basis that contraventions as recorded in the impugned order were made out in respect of the remittances, but characterised many of the infringements as regulatory/technical breaches deserving proportionate treatment.

Proportionality in imposition of penalty - penalty under Section 13 - Whether imposition of penalty and its quantum under the adjudication was justified and proportionate - HELD THAT: - Applying the principles governing quasi criminal penalty proceedings, the Tribunal held that the exercise of discretion to impose penalty must be judicial, guided by proportionality, and sensitive to whether breaches are prohibited, restricted or regulated. The Tribunal found that many of the alleged violations fell in the category of regulatory/technical non compliances and that there was no allegation of misutilisation, loss to the exchequer or contumacious conduct. In the absence of aggravating features, imposition of maximum permissible penalty (three times the sum involved) was held to be excessive. The Tribunal therefore exercised its discretion to reduce the penalty amounts markedly, treating the pre deposit already made as adequate in the circumstances. [Paras 59, 72, 86, 91, 92]

The Tribunal reduced the aggregate penalty from Rs. 98.35 crores to Rs. 15 crores (the amount already deposited) and fixed reduced individual penalties as set out in its order.

Deemed liability under Section 42(1) - contravention of FEMA - Whether the individuals arrayed (directors and other persons) were liable under Section 42(1) of FEMA - HELD THAT: - The Tribunal applied settled precedent that liability under Section 42(1) can be imposed only on persons who were in charge of and responsible for the day to day conduct of the company at the time of contravention; mere designation as a director is not sufficient. The Respondent bore the initial burden to prove that each individual was in overall operational control when the contraventions occurred. The Tribunal found that the Adjudicating Authority had not made specific findings identifying individual roles or day to day control for many noticees, and in several instances the persons penalised were not associated with the company at the relevant time. Applying the legal tests from authoritative decisions, the Tribunal set aside or reduced penalties on multiple individuals: (i) deleted the penalty as against certain directors who were not in charge at the relevant time; (ii) reduced the penalties in respect of others after examining their roles and conduct. [Paras 80, 82, 83, 84, 85]

Penalties on a number of individual appellants were set aside or reduced: some individuals were relieved of penalty entirely, others had their penalty substantially reduced in light of absence of proof of day to day control or culpable conduct.

Refund of inward remittance under TISPRO (Schedule I, para 8) - Whether appellants are entitled to seek refund of inward remittances if shares cannot be issued - HELD THAT: - The Tribunal noted that TISPRO (Schedule I, para 8) provides for refund of inward remittances where shares are not issued within 180 days, and recorded that appellants remain entitled to pursue representations to the RBI for issuance of shares or for refund. The Tribunal observed that appellants may move RBI/other authorities and that the alternative plea for refund shall be considered subject to the regulatory provisions and deposit of penalty. [Paras 93, 94, 95]

Appellants may seek refund or pursue issuance of shares with RBI; refund/remedy under TISPRO will be available subject to compliance and after penalty deposit.

Final Conclusion: The Tribunal accepted that regulatory contraventions concerning the three remittances had been recorded but, applying established law on deemed liability and principles of proportionality for quasi criminal penalties, reduced the aggregate penalty to Rs. 15 crores (treated as the penalties for all appellants), set aside or reduced penalties on several individual noticees for lack of proof of day to day control, and permitted appellants to seek issuance of shares or refund of inward remittances from RBI in accordance with TISPRO after compliance with the order.

Admissibility of unsigned document - onus of proof in quasi criminal FERA proceedings - production of primary evidence and secondary evidence rule - failure to comply with judicial/tribunal directions and adverse inference under Illustration (g) of Section 114, Indian Evidence Act, 1872 - violation of principles of natural justice by denial of effective cross examination - improper shifting of burden under Sections 71 and 72 of FERA, 1973

Admissibility of unsigned document - production of primary evidence and secondary evidence rule - onus of proof in quasi criminal FERA proceedings - Validity and evidentiary value of the unsigned purported fax (page 31 of seized file 'D') relied upon by the Enforcement Directorate and whether the respondent discharged the burden of proving that document as original or by lawful secondary evidence. - HELD THAT: - The Tribunal held that proceedings under FERA are quasi criminal in character and the Directorate, as prosecutor, bore the initial duty to make out the alleged contravention beyond reasonable doubt by producing primary evidence. The unsigned plain paper fax, which the respondent could not establish as original or satisfactorily prove by admissible secondary evidence, lacked necessary authentication and therefore could not be relied upon to sustain the charge. The adjudicatory finding emphasises established authorities that unsigned/anonymous communications (including uncorroborated faxes or photocopies) are of doubtful evidentiary value and cannot substitute for properly proved primary documents; where originals are unavailable the party relying thereon must prove admissible secondary evidence, which was not done here. [Paras 26, 28, 31]

The purported fax message could not be admitted as reliable primary evidence and the respondent failed to discharge the burden of proof with respect to that document.

Failure to comply with judicial/tribunal directions and adverse inference under Illustration (g) of Section 114, Indian Evidence Act, 1872 - Relevance of the Enforcement Directorate's repeated non production of the original fax and related file despite multiple Tribunal directions and whether adverse inferences arise. - HELD THAT: - The Tribunal recorded that multiple earlier orders (including a final Division Bench direction dated 13.01.2016) had commanded production/inspection of the complete fax and the file containing the arrest memo, but the respondent repeatedly failed to comply or explain non production. The non compliance with binding Tribunal directions and unexplained suppression of the original record warranted drawing an adverse inference under Illustration (g) to Section 114, Indian Evidence Act, given the respondent's failure to produce the documents it relied upon. [Paras 21, 22, 23, 30]

The Directorate's persistent non production despite Tribunal orders justified an adverse inference and impaired the respondent's case on the relied documents.

Violation of principles of natural justice by denial of effective cross examination - Whether the appellants were denied principles of natural justice by limited allowance for cross examination of prosecution/search witnesses and thereby deprived of effective opportunity to challenge the seizure and provenance of the document. - HELD THAT: - The Tribunal noted that the appellants sought to cross examine multiple members of the search party and independent seizure witnesses but were permitted to examine only two officers. Given the critical nature of the provenance and authenticity of the disputed document, denial of broader cross examination curtailed the appellants' ability to test the seizure account and the claim of plantation, thereby engaging principles of natural justice applicable to quasi criminal FERA proceedings. [Paras 9, 19, 26]

Restriction of cross examination on witnesses central to proving seizure and authenticity of the document amounted to denial of effective opportunity and was a prejudicial breach of natural justice.

Improper shifting of burden under Sections 71 and 72 of FERA, 1973 - Whether the Special Director rightly shifted the initial burden of proof onto the appellants under Sections 71 and 72 of FERA, 1973 when the respondent had not proved its relied documents. - HELD THAT: - The Tribunal found that the Special Director erred in presuming facts and shifting the initial burden onto the appellants despite the Directorate's failure to authenticate or produce primary evidence. Sections 71 and 72 (as invoked) could not be legitimately applied where the respondent had not first established the existence and admissibility of the primary documents and relevant corroboration; consequently, the imposition of penalties on that footing was unsustainable. [Paras 28, 29, 31]

The adjudicating authority wrongly shifted the burden to the appellants; the respondent had not discharged its onus under the statutory and evidentiary regime.

Final Conclusion: For the reasons stated - failure by the Enforcement Directorate to produce or authenticate the primary document relied upon, inadequate secondary proof, repeated non compliance with Tribunal directions (warranting adverse inference), and denial of effective cross examination - the impugned order dated 20.05.2005 imposing penalties is set aside and the appeals are allowed.

Reason to believe - provisional attachment under Section 5(1) PMLA - adjudication and notice under Section 8(1)-8(2) PMLA - proceeds of crime - attachment of property equivalent in value - requirement to record and communicate reasons

Reason to believe - provisional attachment under Section 5(1) PMLA - requirement to record and communicate reasons - Validity of the provisional attachment where the authorized officer did not record separate, cogent reasons to believe prior to passing the attachment order. - HELD THAT: - Section 5(1) PMLA requires that the officer must have "reason to believe" (with reasons recorded in writing) that (a) a person is in possession of proceeds of crime and (b) such proceeds are likely to be concealed or dealt with so as to frustrate confiscation proceedings, before provisionally attaching property. The Tribunal held that the statutory twin conditions are condition precedent to jurisdiction to order attachment. The officer in this case did not record independent, cogent reasons in the file prior to the attachment; instead the provisional order largely reproduced charge-sheet language and statements. Authorities require that reasons be honest, reasonable and based on material (not mere suspicion or mechanical reproduction). Where reasons are not properly recorded, the attachment is vitiated to the extent it relies on such defective reasoning. The Tribunal therefore found the provisional attachment, insofar as it concerned immovable properties shown to have been acquired prior to the alleged scheduled offence and where no valid reasons were recorded, unsustainable. [Paras 49, 51, 53, 59]

Provisional attachment was invalid in respect of immovable properties because no valid reasons to believe were recorded as required by Section 5(1); the attachment in that respect is set aside.

Proceeds of crime - attachment of property equivalent in value - Whether the immovable properties attached were 'proceeds of crime' or could be attached as 'equivalent value' in India. - HELD THAT: - The definition of "proceeds of crime" under Section 2(1)(u) applies to property derived or obtained as a result of criminal activity. The Tribunal emphasised that where the property is held within the country, attachment of 'value of any such property' or 'equivalent value' requires specific investigation and findings that the proceeds have been dissipated, spent or moved abroad and cannot be traced; mere conjecture or the possibility of influence is insufficient. On the material before it, the Tribunal found the impugned order and the respondent's case admitted that the immovable properties (the flats and certain plots) were acquired prior to the alleged scheduled offence and were reflected in income-tax returns. In absence of a proper investigation and specific recorded reasons linking those immovables to proceeds of crime, they do not qualify as proceeds and cannot be attached as equivalent value. [Paras 74, 75, 76, 77]

The immovable properties were not proceeds of crime and could not be validly attached as equivalent value on the record before the authority; they are to be released.

Adjudication and notice under Section 8(1)-8(2) PMLA - requirement to record and communicate reasons - level playing field - Obligations of the Adjudicating Authority under Section 8(1)-(2) PMLA and whether the person affected must be furnished with the reasons to believe and material on which attachment was based. - HELD THAT: - Section 8(1) requires the Adjudicating Authority to serve a notice calling upon the person to indicate sources of income and to show cause; Section 8(2)(c) requires the Authority to take into account all relevant material before recording a finding. The Tribunal held that where the respondent has recorded reasons in the file at the stage of attachment, those reasons must accompany the complaint and be made available to the noticee with the Section 8(1) notice so that an effective reply can be filed; this is part of ensuring a level playing field and transparent adjudication. The Adjudicating Authority must consider the reply, hear parties and take into account relevant material; a seven-line finding which ignores documentary proof and fails to engage with the core pleadings does not satisfy Section 8. [Paras 62, 63, 71, 72]

Where reasons to believe exist in the file, they must be supplied with the Section 8(1) notice and the Adjudicating Authority must meaningfully consider the materials and the reply before recording a finding; failure to do so vitiates confirmation of attachment.

Provisional attachment under Section 5(1) PMLA - movable versus immovable property - Appropriate interim disposition of attached movable and immovable properties in light of the defects found. - HELD THAT: - Balancing the need to secure alleged proceeds pending trial and the deficiencies in the respondent's case, the Tribunal differentiated between movables and immovables. On the evidence, immovable properties were shown to have been acquired prior to the alleged offence and no valid reasons were recorded; accordingly they must be released. Movable properties (fixed deposits etc.) were ordered to remain attached until final adjudication. To secure the public interest and possible future confiscation, the Tribunal directed the appellants to furnish indemnity bonds and undertakings for specified sums within a time-frame, creating a security mechanism without sustaining the defective attachment of immovables. [Paras 78, 79]

Movable property attachments to continue; immovable properties released forthwith, subject to appellants furnishing indemnity bonds and undertakings as directed.

Final Conclusion: The appeals were partly allowed. The Tribunal set aside the confirmation of attachment in respect of immovable properties which were shown to have been acquired prior to the alleged scheduled offences and where no valid reasons to believe were recorded; those immovables are released subject to indemnity bonds and undertakings. Attachment of specified movable properties shall continue pending final adjudication. The Adjudicating Authority must ensure that reasons to believe (if recorded) and relevant material accompany the Section 8(1) notice and that the Authority meaningfully considers the reply before confirming attachment.

Provisional attachment - proceeds of crime - burden of proof under PMLA - equivalent value of proceeds of crime - interim preservation of property pending trial - retrospective operation of statutory amendments

Provisional attachment - burden of proof under PMLA - proceeds of crime - Validity of the provisional attachments confirmed by the Adjudicating Authority and whether the respondent discharged the statutory burden to justify attachment under PMLA. - HELD THAT: - The Tribunal found that the respondent failed to discharge the initial burden of proof necessary to sustain provisional attachments: the attachments were based largely on allegations in the CBI charge sheet and apprehension rather than independent material establishing that the impugned properties were acquired from tainted funds. The Tribunal emphasised that unless charges under Section 3 of PMLA are framed, the burden remains on the respondent to demonstrate involvement in money laundering; mere allegations and presumption are insufficient. Consequently, the Tribunal held that many issues raised by the appellants were not considered or decided by the respondent/Adjudicating Authority and that the PAOs and confirmations were passed without adequate application of mind. [Paras 62, 63, 64]

Attachments were found unsustainable in part; the appeals were partly allowed by modifying the impugned orders and releasing the majority of attached properties for lack of adequate proof.

Interim preservation of property pending trial - equivalent value of proceeds of crime - Whether certain properties should continue to be preserved/attached as interim measures pending final adjudication by the Special Court. - HELD THAT: - Balancing the statutory object of preserving proceeds of crime pending final adjudication under PMLA against deficiencies in the respondent's proof, the Tribunal directed limited interim measures. Ramky is to maintain a 50 metre inward buffer zone inside the Pharma City and the attachment in respect of that buffer area shall continue until finally determined by the Special Court. Ramky is restrained from disposing of or constructing on the buffer zone. The Tribunal restored possession of the 16 unsold plots to Ramky subject to a prohibition on disposal, construction or creation of third party interests; Ramky may apply to the respondent for relaxation of that prohibition if no charges are framed by the Special Court. These directions were imposed to preserve alleged proceeds while enabling release of other properties. [Paras 75, 76]

Limited interim attachments and prohibitory conditions maintained (50 mts inward buffer to remain attached; 16 unsold plots returned to Ramky subject to restrictions) while other attached properties were released.

Provisional attachment - indemnity bond - Relief in respect of Fixed Deposit Receipts (FDRs) attached in the name of Jagati Publications Pvt. Ltd. - HELD THAT: - Recognising the potential hardship and absence of conclusive material establishing that the invested amount was tainted, the Tribunal ordered release of the FDRs attached (limited to the sum attached) subject to Jagati Publications furnishing an indemnity bond for the same amount and an undertaking to deposit the sum if the final adjudication is adverse. The direction was framed without prejudice to the respondent's rights and to preserve the State's ability to recover if the allegations are ultimately upheld. [Paras 81, 82]

FDR attachment released on condition that Jagati Publications furnishes an indemnity bond and undertaking to deposit the amount if final orders adverse to it are passed.

Retrospective operation of statutory amendments - Applicability of PMLA amendments (and related retrospective effect) to the allegations arising from events predating amendments. - HELD THAT: - The Tribunal noted submissions and authorities on the presumption against retrospective operation of statutes affecting substantive rights. While observing that the argument on retrospectivity raised some force because many alleged acts occurred prior to 2009, the Tribunal declined to decide the controversy solely on that ground and proceeded to adjudicate the appeals on merits to the extent necessary. The Tribunal left the ultimate determination of such legal and factual issues to the Special Court and to proceedings on the charge sheet. [Paras 66, 72, 73]

Question of retrospective application of PMLA amendments not finally decided; Tribunal declined to set aside attachments solely on retrospectivity grounds and left substantive adjudication to the Special Court.

Final adjudication by Special Court - burden of proof under PMLA - Extent to which merits of predicate offences and CBI allegations were to be examined at appellate stage under PMLA. - HELD THAT: - The Tribunal emphasised that it would not express any opinion on the merits of the CBI allegations; those allegations and the charge sheet must be tested in the Special Court. Given the respondent's failure to establish prima facie that the properties were proceeds of crime, the Tribunal modified the attachment orders subject to the Special Court's ultimate decision or quashing of the charge sheet prior to trial. The Tribunal thereby preserved the jurisdiction of the Special Court to decide guilt and confiscation while correcting interlocutory errors in the attachment process. [Paras 74, 82]

Merits of the predicate offences and CBI allegations were left for final adjudication by the Special Court; appellate modifications are interim and without prejudice to those proceedings.

Final Conclusion: The Tribunal partly allowed the appeals: holding that the respondent had not discharged the requisite burden to sustain broad provisional attachments, it set aside and released the majority of attached properties, while directing limited interim preservation measures - continued attachment of the 50 metre inward buffer-zone, restoration of possession of 16 unsold plots to Ramky subject to prohibitions on disposal/construction/creation of third party interests, and release of Jagati's FDRs on furnishing an indemnity bond. The Tribunal declined to adjudicate finally on the CBI allegations or retrospective operation of amendments and left those matters to the Special Court/ordinary proceedings.

Condonation of delay - Limitation - Requirement to explain delay with specific dates and reasons - Elasticity of law of limitation for substantial justice - Careful drafting of condonation applications - Rejection of condonation where unexplained delay exceeds a year

Condonation of delay - Requirement to explain delay with specific dates and reasons - Careful drafting of condonation applications - Rejection of condonation where unexplained delay exceeds a year - Application for condonation of delay in filing appeal was liable to be rejected for failure to explain delay beyond 14.08.2015 up to the actual filing date 07.10.2016. - HELD THAT: - The Court found that the condonation application only sought to account for delay up to 14.08.2015 and made no effort to explain the subsequent period until the appeal was actually filed on 07.10.2016. While recognising that the law of limitation is elastic and meant to secure substantial justice, the Court held that such elasticity does not mandate condonation where the applicant adopts a lackadaisical or haphazard approach and fails to furnish dates and reasons for the entire period of delay. The Court relied on the principle that applications for condonation must be drafted with care and proper explanation, as emphasised in the cited authority, and agreed with the Commissioner's conclusion that unexplained delay of more than a year warranted rejection of the condonation plea. Consequently, the merits of the appeal could not be considered. [Paras 6, 8, 9, 10]

Condonation of delay rejected; appeal not admitted for adjudication on merits for want of explanation for the delay.

Final Conclusion: The petition challenging rejection of the condonation application is dismissed; the condonation of delay was rightly refused and the merits of the appeal were not considered.

Obligation under Rule 6(3) of the Cenvat Credit Rules, 2004 - Option under Rule 6(3)(ii) and computation under Rule 6(3A) - Payment of six per cent under Rule 6(3)(i) as alternative to maintaining separate accounts - Requirement to maintain separate accounts for inputs and input services - Effect of reversal of wrongly availed CENVAT credit with interest

Option under Rule 6(3)(ii) and computation under Rule 6(3A) - Payment of six per cent under Rule 6(3)(i) - Effect of reversal of wrongly availed CENVAT credit with interest - Whether demand under Rule 6(3)(i) for payment of six per cent of exempted turnover could be sustained when the assessee reversed the proportionate CENVAT credit attributable to exempted services under Rule 6(3)(ii) read with Rule 6(3A) along with interest - HELD THAT: - The assessee did not maintain separate accounts and thus had options under Rule 6(3): (i) pay six per cent of the value of exempted services, or (ii) pay the amount determined under sub rule (3A) (i.e. reverse credit attributable to exempted services), or (iii) maintain separate accounts with corresponding adjustments. On being pointed out by audit, the assessee reversed the proportionate common credit attributable to input services used for exempted services (trading) and paid interest. The Tribunal held that where the credit wrongly availed is reversed along with interest in terms of the option under Rule 6(3)(ii) read with Rule 6(3A), Rule 6(3)(i) (payment of six per cent) does not apply because such reversal amounts to not taking the credit at all. The Tribunal relied on the coordinate bench decision in M/s MERCEDES BENZ INDIA (P) LIMITED VS COMMISSIONER OF CENTRAL EXCISE, PUNE-I , which held that revenue cannot demand an amount greater than the CENVAT credit attributable to exempted services when the assessee has complied with reversal under sub rule (3)(ii), and that the statutory scheme does not provide for automatic application of clause (i) where an assessee has exercised clause (ii). Applying that reasoning, the confirmed demand based on six per cent of trading turnover was held unsustainable where actual reversal under Rule 6(3)(ii)/(3A) with interest had been made. [Paras 10, 11, 12]

Demand under Rule 6(3)(i) cannot be sustained where the assessee has reversed the CENVAT credit attributable to exempted services under Rule 6(3)(ii) read with Rule 6(3A) along with interest; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order insofar as it confirmed demand under Rule 6(3)(i); the appeal is allowed and the demand quashed, with consequential benefits, where the assessee had reversed the attributable CENVAT credit with interest under Rule 6(3)(ii)/(3A).

Clubbing of clearances - separate legal personality of a limited company - benefit of exemption under Notification No. 175/86 - exclusion of chassis value for valuation of final product - prospective effect of penal provisions for interest and penalties - confiscation under repealed/omitted rules - binding effect of earlier departmental treatment

Clubbing of clearances - separate legal personality of a limited company - benefit of exemption under Notification No. 175/86 - binding effect of earlier departmental treatment - Whether clearances of the proprietorship concerns could be clubbed with those of the appellant private limited company for denial of exemption under Notification No. 175/86 for the period 1989-90 to 1992-93. - HELD THAT: - The Tribunal applied the CBEC clarification embodied in Circular No.6/92 and the settled precedents to hold that a private limited company is a separate legal entity and is entitled to a distinct exemption limit under Notification No.175/86 for periods prior to 01.04.1993. The earlier departmental treatment treating M/s IEC as a manufacturer (vide show cause dated 16.12.1993) militated against subsequently holding that IEC was not an independent unit and thereby clubbing its clearances with the appellant. Decisions of this Tribunal and the Apex Court cited in the order support that clearances of limited companies could not be clubbed with other units for the period before 01.04.1993. Applying these principles, the appellant was held entitled to the benefit of Notification No.175/86 for the relevant period and the clubbing finding in the adjudication was set aside. [Paras 6]

Clearances of the proprietorship firms cannot be clubbed with the appellant private limited company for 1989-90 to 1992-93; appellant entitled to benefit of Notification No.175/86.

Exclusion of chassis value for valuation of final product - Whether the value of chassis should have been included while computing aggregate clearance value for SSI exemption. - HELD THAT: - The Tribunal found that Notification No.241/86 read with the CBEC circular dated 04.09.1986 requires exclusion of chassis value from the value of the final product. The departmental computation in the earlier show cause proceeding had excluded chassis value as evidenced in the annexure to that notice. In absence of any change in the appellant's method of valuation or substantiation by the department, inclusion of chassis value in the adjudication was held to be incorrect and contrary to the applicable notification and circular. [Paras 6]

Inclusion of chassis value by the department was incorrect; chassis value must be excluded for computing the aggregate clearance value for the SSI benefit.

Prospective effect of penal provisions for interest and penalties - Whether interest under Section 11AB and penalty under Section 11AC (and corresponding rules) could be imposed for periods prior to their insertion/effective dates. - HELD THAT: - Sections 11AB and 11AC were inserted w.e.f. 28.09.1996. The Tribunal held that Section 11AC (penalty) is prospective and inapplicable to the period in dispute, so penalty under that provision could not be invoked. Similarly, Section 11AB (interest) being penal/compensatory in character applies only where clearances occurred after its effective date; for clearances prior to 28.09.1996 the statutory scheme does not sustain the interest demand. The Tribunal relied on the reasoning in Dev Ashish and concluded that the adjudicated interest and penalty demands were not sustainable for the relevant period. [Paras 6]

Interest under Section 11AB and penalty under Section 11AC cannot be imposed for the clearances in 1989-90 to 1992-93; such penal statutory provisions have prospective effect from 28.09.1996.

Confiscation under repealed/omitted rules - Whether confiscation of land, building, plant and machinery and imposition of redemption fine under erstwhile Rule 173Q(2) could be sustained in an order passed after omission of that rule. - HELD THAT: - Rule 173Q(2) was omitted by notification dated 12.05.2000. The impugned order of 11.07.2008 invoked the omitted rule to order confiscation. The Tribunal followed authority holding that once a rule is omitted, subsequent orders cannot be founded on that non-existent provision. Accordingly, confiscation and any redemption fine based on the omitted rule could not be sustained. [Paras 6]

Confiscation and any redemption fine under the omitted Rule 173Q(2) could not be sustained in the order passed after its omission.

Binding effect of earlier departmental treatment - Whether the department could change its stance by treating IEC as not being an independent manufacturer after earlier treating it as such in show cause proceedings. - HELD THAT: - The Tribunal noted that the department had earlier issued a show cause notice to M/s IEC treating it as a manufacturer; having taken that position, it could not subsequently adopt a contrary stance to justify clubbing of IEC's clearances with the appellant. This prior departmental treatment supported the conclusion that IEC was an independent manufacturer and bolstered the finding that clubbing was inappropriate. [Paras 6]

Earlier departmental treatment of IEC as a manufacturer precludes later treating it as non-existent for the purpose of clubbing clearances.

Final Conclusion: The Tribunal set aside the adjudication order: the appellant private limited company was entitled to the benefit of Notification No.175/86 for 1989-90 to 1992-93; inclusion of chassis value, the interest and penalty demands under Sections 11AB/11AC, and confiscation under the omitted rule were unsustainable; appeals allowed.

Eligibility for input tax credit - classification of ethanol under Chapter 29 - excisability of alcohol-containing products - precedent of the Appellate Tribunal - stare decisis and reliance on respondent's own case - consistency with jurisdictional High Court decision

Eligibility for input tax credit - classification of ethanol under Chapter 29 - excisability of alcohol-containing products - Whether the respondents were entitled to avail input credit on ethanol purchased from a supplier who had paid excise duty on the product which, according to the department, contained alcohol and was not classifiable under Chapter 29, and therefore not excisable. - HELD THAT: - The Tribunal found the controversy to be conclusively covered by earlier orders in the respondent's own case and by Tribunal precedents. The department's contention that the product was not classifiable under Chapter 29 and hence not excisable, thereby disentitling the respondents to credit, was negatived in those earlier decisions. The Tribunal noted that the same issue had been upheld by the Hon'ble Jurisdictional High Court in proceedings concerning similar facts, reinforcing the applicability of the prior Tribunal rulings. In view of the binding precedents and the final orders in the respondent's own case, the departmental appeal lacked merit and required dismissal. [Paras 2, 4, 5]

The departmental appeal is dismissed as devoid of merit, following the Tribunal's earlier decisions and the corroborative decision of the jurisdictional High Court.

Final Conclusion: The appeal by the department was dismissed; the respondent's entitlement to the input credit on ethanol stands upheld in view of the Tribunal's earlier orders and the supporting decision of the jurisdictional High Court.

Dismissal for non-prosecution - recall of dismissal and restoration of appeals - adjournment in the interest of justice - last chance adjournment - representation without Vakalatnama - delay in disposal of appeals - exercise of discretion to dismiss

Dismissal for non-prosecution - representation without Vakalatnama - last chance adjournment - delay in disposal of appeals - exercise of discretion to dismiss - The appeals were dismissed for non-prosecution by the Tribunal. - HELD THAT: - The Tribunal recorded a protracted history of repeated listings and non-appearances by the appellants, an earlier dismissal for non-prosecution and subsequent recall and restoration in the interest of justice. The Bench granted successive adjournments including an explicit 'last chance' adjournment, yet on the next listed date the proxy counsel appeared without a Vakalatnama and sought further adjournment to procure one. The Tribunal found that the appellants had adequate time to execute necessary Vakalatnama and that continued requests for adjournment, coupled with the age of the appeals and prior opportunities, demonstrated a conscious intention to delay disposal. Exercising its discretion and having regard to the foregoing, the Tribunal concluded that further indulgence was not warranted and dismissed the appeals for non-prosecution.

Appeals dismissed for non-prosecution.

Final Conclusion: Having recorded repeated non-appearances, prior dismissal and restoration, and a last-chance adjournment unavailed by the appellants, the Tribunal exercised its discretion to dismiss the appeals for non-prosecution.

Admissibility of statements recorded during investigation - right to cross-examination and compliance with section 9D - evidentiary standard for establishing clandestine manufacture and removal - reliance on third party documents and entries - confirmation of demand and imposition of penalty

Admissibility of statements recorded during investigation - right to cross-examination and compliance with section 9D - Statements recorded from third parties during investigation which were not tested by cross examination cannot be treated as admissible evidence. - HELD THAT: - The Tribunal held that the department's case was built primarily on statements of various deponents recorded during investigation and entries in third party records. The adjudicating authority denied the assessee's request for cross examination without adequate reasons, contrary to settled law requiring that when adverse material in the form of statements is relied upon, the assessee must be afforded an opportunity to cross examine. Following precedent, the Tribunal found denial of cross examination to be a breach of natural justice and concluded that such statements must be excluded from consideration unless the statutory procedure under section 9D (examination in chief and cross examination) is complied with, because otherwise their evidentiary value for proving the truth of their contents is lost. [Paras 12, 13, 14, 16]

The untested statements are not admissible and must be kept out of consideration.

Reliance on third party documents and entries - evidentiary standard for establishing clandestine manufacture and removal - In the absence of admissible statements and corroborative positive evidence, entries in third party records cannot sustain findings of clandestine manufacture or removal or the resulting demand and penalties. - HELD THAT: - The Tribunal applied established principles that allegations of clandestine removal are serious and must be proved by positive, tangible and affirmative evidence - such as disproportionate procurement/consumption of raw materials, freight payment records, recovery of sale proceeds, or other corroborative material. Where the department's case rests on third party entries explained only by untested statements, those entries cannot be treated as conclusive. The factual inquiries at the assessee's premises (searches and stock verifications) did not disclose discrepancies or incriminating material; no evidence of excess procurement of raw materials or identification of buyers or realization of sale proceeds was produced. Therefore the demands and penalties founded on the challenged material are unsustainable. [Paras 11, 14, 17, 18, 19]

Third party documents unsupported by admissible statements or other positive evidence cannot sustain confirmation of demand or penalties for clandestine removal.

Confirmation of demand and imposition of penalty - The confirmed demands of duty and penalties against the appellants are set aside for lack of admissible and sufficient evidence. - HELD THAT: - Having excluded the untested statements and the third party entries dependent on them, the Tribunal found that nothing substantial remained to support the Department's allegations. The searches at the assessee's factory revealed no variation in stocks or incriminating documents; no enquiries established procurement of requisite raw materials or identification of buyers. Consequently, the Tribunal held the impugned order confirming demands and imposing penalties unsustainable and set it aside, allowing the appeals with consequential relief. [Paras 20]

Impugned orders confirming demands and imposing penalties are set aside and the appeals are allowed.

Reliance on third party documents and entries - Revenue's appeal against the adjudicating authority's dropping of a part of the demand (merged with supplier's record) is rendered infructuous and is rejected. - HELD THAT: - The adjudicating authority had dropped a portion of the demand on the ground that it stood merged with a confirmed demand based on the records of the raw material supplier; that order was not challenged by Revenue and attained finality. As the Tribunal set aside the remainder of the impugned order and allowed the appeals, the Revenue's challenge to the dropping of that part became infructuous and was therefore rejected. [Paras 9, 21]

Revenue's appeal against the dropped part of the demand is rejected as infructuous.

Final Conclusion: The Tribunal held that the Department's case, being founded on untested investigational statements and dependent third party entries without independent corroboration, failed to meet the high evidentiary threshold required to establish clandestine manufacture and removal; accordingly the confirmations of duty and imposition of penalties were set aside and the appeals allowed, and Revenue's appeal against the part of the demand that was dropped is rejected as infructuous.

Extended period of limitation - suppression of facts - valuation under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Cost Accounting Standard-4 (CAS-4) - audit under Rule 22 of the Central Excise Rules, 2002

Extended period of limitation - suppression of facts - audit under Rule 22 of the Central Excise Rules, 2002 - Cost Accounting Standard-4 (CAS-4) - Whether the demands raised in the show cause notices for the period 01.04.2005 to 31.03.2010 are time barred and whether invocation of the extended period of limitation was justified. - HELD THAT: - The Tribunal examined the sequence of departmental and CERA audits carried out during the disputed period and the material on record showing repeated audit intimation letters and audit visits. The majority concluded that the audits put the department on notice of the appellant's valuation methodology and costing certificates, and there is no credible finding that documents called for at audit were withheld; moreover, the appellants cooperated when the department queried compliance with CAS 4 and appointed a Cost Accountant and furnished the certificate. The Show Cause Notices did not initially quantify demands (quantification was supplied only by corrigenda nearly ten months later). On these facts the majority held there was no justification for invoking the extended period as suppression with intent to evade duty was not established. The dissenting Member (Judicial) considered the CAS 4 certificates issued by an unqualified internal manager to be a material misstatement and suppression that would justify invoking the extended period, but the Third Member agreed with the majority view and the demand was held time barred. [Paras 9, 10, 11, 12, 15]

The demands in the impugned Orders are barred by limitation and the appeals are allowed.

Final Conclusion: On the majority view, repeated departmental and CERA audits and the materials placed on record negatived any finding of suppression with intent to evade duty; invocation of the extended period was unjustified and the impugned orders are set aside, allowing the appeals with consequential relief as per law.

Clandestine manufacture and removal - admissibility of statements and third-party documents - right to cross-examination and principles of natural justice - onus on revenue to prove clandestine removal by tangible corroborative evidence - penalty liability of an employee vis-a -vis proprietor/undertaking

Admissibility of statements and third-party documents - right to cross-examination and principles of natural justice - Admissibility of decoded entries and documents recovered from Shri Subodh Gupta where cross-examination was not allowed - HELD THAT: - The Tribunal held that the primary evidence relied upon by revenue (31 spiral pads and nine loose paper files decoded by Shri Subodh Gupta) could not be relied upon because cross examination of Shri Subodh Gupta was not permitted despite his appearance before the adjudicating authority. Applying the principle that if revenue elects to rely on statements of persons, those persons must be made available for cross examination, the Tribunal held such material inadmissible in adjudication when cross examination is denied. Consequently, the decoded entries and documents recovered from Shri Subodh Gupta were excluded from consideration. [Paras 15, 16]

Documents and decoded information emanating from Shri Subodh Gupta were held inadmissible for want of cross examination and could not be relied upon.

Onus on revenue to prove clandestine removal by tangible corroborative evidence - clandestine manufacture and removal - Whether clandestine manufacture and removal by M/s Mayank Metals, M/s Shivam Metals and M/s Vasudev Udyog was established - HELD THAT: - The Tribunal examined whether revenue had led independent, corroborative material (such as evidence of excess raw material procurement, excess production, transport/dispatch particulars, realization of sale proceeds or excess power consumption) to substantiate clandestine manufacture and clearance by these third parties. Finding no such investigations or tangible corroboration and noting that the third parties had denied transactions on cross examination, the Tribunal concluded that clandestine manufacture and removal by these units was not established. [Paras 15]

The demand and penalties confirmed against M/s Mayank Metals, M/s Shivam Metals and M/s Vasudev Udyog were set aside as clandestine removals were not proved.

Clandestine manufacture and removal - admissibility of statements and third-party documents - Whether clandestine manufacture and duty evading clearances by M/s Sandeep Manufacturing Strips (SMS) were established - HELD THAT: - The Tribunal found that the case against SMS principally rested on the decoded entries and third party material traced to Shri Subodh Gupta and on the alleged clandestine supplies from the three ingot manufacturers. With those third party supplies held not proved and the decoded records excluded for want of cross examination, revenue failed to establish any alternate source of non duty paid raw material or other corroborative indicia of clandestine manufacture and clearance. In absence of requisite tangible evidence, the serious charge of clandestine manufacture could not be sustained. [Paras 16]

The demand and penalties confirmed against SMS were set aside as clandestine manufacture and clearances were not proved.

Penalty liability of an employee vis-a -vis proprietor/undertaking - right to cross-examination and principles of natural justice - Liability of Shri Subodh Gupta and other employee appellants where adjudication relied on statements/documents but cross examination was denied - HELD THAT: - Shri Subodh Gupta denied the statements attributed to him and asserted coercion; he appeared before the adjudicating authority but was not made available for cross examination by other parties. Given the Tribunal's exclusion of his statements and the lack of independent corroboration, the material basis for penalty against him and other employees collapsed. The Tribunal also noted that mere employment without specific corroborative evidence of involvement in clandestine activity is insufficient to sustain penalties. [Paras 15, 16]

Penalties and demands upheld against Shri Subodh Gupta and the employee appellants were set aside for lack of admissible evidence and failure to establish culpability.

Admissibility of statements and third-party documents - clandestine manufacture and removal - Resultant orders - setting aside of the impugned Orders in Original - HELD THAT: - In light of the exclusion of the key decoded material and the failure of revenue to produce independent corroborative evidence of clandestine procurement, manufacture or transport, the Tribunal found the impugned Orders in Original unsustainable. The Tribunal applied the combined principles requiring availability for cross examination of persons whose statements are relied upon and the requirement that clandestine removal be proved by tangible corroboration. [Paras 15, 16, 17]

Both impugned Orders in Original were set aside and all seven appeals were allowed.

Final Conclusion: The Tribunal excluded the decoded records and statements of the third party witness for want of cross examination, found no independent corroborative evidence to prove clandestine procurement, manufacture or clearance, and accordingly set aside the impugned orders confirming demands and imposing penalties for the period 20.09.2008 to 13.07.2010, allowing all appeals.

Restoration of registration - Cancellation of registration for failure to furnish returns - Remand for verification by Registering Authority - Substantial question of law - Interference with Tribunal order

Substantial question of law - Interference with Tribunal order - Proposed substantial questions of law raised by the State challenging the Tribunal's order refusing interference - HELD THAT: - The Court examined the two substantial questions of law framed by the appellant and concluded that neither amounted to a substantial question of law. The Tribunal had not laid down any novel legal proposition but had remitted the matter to the Registering Authority to verify factual compliance (submission of returns and payment of tax dues). Since the Tribunal's order confined itself to remand for verification and did not call for judicial reappraisal of legal principles, there was no ground for interference by this Court. [Paras 4]

Both proposed substantial questions of law are not sustainable and do not warrant interference with the Tribunal's order.

Restoration of registration - Cancellation of registration for failure to furnish returns - Remand for verification by Registering Authority - Validity of the Tribunal's direction to remit to the Registering Authority for verification before restoring registration certificates - HELD THAT: - The Tribunal allowed the second appeals, quashed the orders of lower authorities and directed the Registering Authority to give an opportunity of hearing and verify whether the appellant had submitted all returns and paid tax dues before restoring registration certificates which were cancelled with effect from 31.03.2014. The High Court found that the Tribunal's direction was a limited remand for factual verification and restoration, not a substantive legal determination on the merits; accordingly the High Court saw no reason to set aside the remand direction. [Paras 3, 4]

The Tribunal's order remitting the matter for verification by the Registering Authority and directing restoration subject to such verification is upheld; no interference is warranted.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's order remitting the matters to the Registering Authority for verification before restoration of registration stands affirmed and the connected application is disposed of.

Admitted tax liability - interest under Section 8(1) of the U.P. Trade Tax Act, 1948 - non furnishing of declaration form - exemption dependent on statutory declaration - Section 8(1 B) of the Act - no scope for legitimate expectation or bona fide plea to avoid interest

Admitted tax liability - interest under Section 8(1) of the U.P. Trade Tax Act, 1948 - non furnishing of declaration form - exemption dependent on statutory declaration - Section 8(1 B) of the Act - no scope for legitimate expectation or bona fide plea to avoid interest - Whether tax on purchases became an admitted tax liability attracting interest under Section 8(1) where requisite Form III C(2) was not furnished and exemption claimed was dependent on that form. - HELD THAT: - The Court applied the principles in decisions of the Division Bench which hold that where an exemption or concession is dependent upon furnishing a prescribed declaration form and the requisite form is not furnished by the time of assessment (or thereafter in appeal), the tax payable at the normal rate becomes the admitted tax for purposes of Section 8(1). The Revenue is entitled to treat such assessed tax as admittedly payable and to levy interest under Section 8(1) from the due date of the return in which the turnover was disclosed and the exemption claimed but tax at the normal rate was not paid. The fact that purchases were made from registered dealers or that the sellers had promised to issue the statutory form does not negate the admitted nature of the liability vis a vis the revenue; any remedy against the selling dealer is a separate civil remedy. Earlier single Judge decisions to the contrary were distinguished on their facts where prior assessments had allowed similar claims. The Tribunal's conclusion that interest under Section 8(1) was leviable was therefore upheld. [Paras 9, 11]

The Tribunal was correct in treating the assessed tax as an admitted liability and in upholding levy of interest under Section 8(1); the revision is dismissed.

Final Conclusion: The High Court dismissed the revision, holding that where an exemption depends on a statutory declaration form not furnished by assessment time, the tax assessed at the normal rate is an admitted liability attracting interest under Section 8(1) of the U.P. Trade Tax Act, 1948; factual contentions about purchases from registered dealers or promises to furnish forms do not absolve the dealer before the revenue.

Collusion between dealers - validity and effect of statutory Form III-A - liability of the selling dealer where sale is claimed to be to a registered dealer for resale - proof of sale by issuance of sale letters under the Motor Vehicles Act - distinguishing precedent in M/s Gaurav Traders

Distinguishing precedent in M/s Gaurav Traders - collusion between dealers - Whether the ratio of M/s Gaurav Traders applies where there is collusion between the selling dealer and the purchasing dealer. - HELD THAT: - The Court held that the precedent relied on by the assessee (M/s Gaurav Traders) is distinguishable because the Tribunal and the Court found material facts establishing collusion between the assessee and the purchasing dealer. Unlike cases where a defective or missing Form III-A does not fasten liability on a selling dealer absent collusion or a farzi form, here the assessee issued sale letters under the Motor Vehicles Act and thus the facts support a finding of collusive arrangement to evade tax. The Court therefore rejected the submission that the selling dealer could avail the protection of Gaurav Traders when collusion is shown, and treated the ratio as inapplicable on the admitted facts of this case. [Paras 6, 10, 11, 13]

Ratio in M/s Gaurav Traders is distinguished and does not apply because collusion between the dealers was established.

Proof of sale by issuance of sale letters under the Motor Vehicles Act - validity and effect of statutory Form III-A - liability of the selling dealer where sale is claimed to be to a registered dealer for resale - Whether the assessee was entitled to benefit of Form III-A where the assessee itself issued sale letters to consumers and forms were accepted apparently to avoid tax. - HELD THAT: - The Court accepted the Tribunal's unchallenged finding that the assessee had issued sale letters on Forms 20-21 under the Motor Vehicles Act in respect of the scooters. That factual finding negatived the claim that the goods were sold to the purchasing dealer for resale in the same form and condition. The issuance of sale letters evidenced direct sale to consumers and demonstrated that the Form III-A issued by the purchasing dealer was used as a device to evade tax. Consequently, in the factual matrix of collusive transactions the assessee could not claim the statutory benefit of Form III-A, and the Tribunal correctly rejected the claim. [Paras 6, 7, 8, 9, 11]

Benefit of Form III-A denied to the assessee because issuance of sale letters by the assessee and the collusive circumstances showed the forms were used to avoid tax.

Validity and effect of statutory Form III-A - Whether absence of independent material showing that Form III-A was not issued by the purchasing dealer or was stolen prevents denial of its benefit where collusion is established. - HELD THAT: - The Court held that where collusion between the selling and purchasing dealers is established by the facts, the absence of separate material showing the form was forged or stolen is immaterial; the collusive use of otherwise genuine forms to evade tax suffices to deny the benefit. The fact that the assessment against the purchasing dealer was set aside by its first appellate authority further supports the position that the statutory protection could not be allowed to the selling dealer in these circumstances. [Paras 9, 11, 12, 13]

Even without independent proof that Form III-A was forged or stolen, the benefit of the form is forfeited when collusion to evade tax is proved.

Final Conclusion: The revision is dismissed: the Tribunal did not err in rejecting the assessee's claim to the benefit of Form III-A for A.Y. 1998-99 (UP) because factual findings established collusion and direct sale to consumers, rendering the ratio of M/s Gaurav Traders inapplicable and precluding the statutory benefit.

Commencement of statutory provision - revised assessment - alternate remedy rule - relegation to statutory appeal - tax litigation and writ jurisdiction - condonation of delay - exclusion of time under Section 14 of the Limitation Act

Commencement of statutory provision - revised assessment - The challenge to the impugned revised assessment on the ground that Section 3(4)(b) of the TNVAT Act was wrongly treated as commencing from 01.04.2012 (instead of 01.04.2006) - HELD THAT: - The Court found that the writ petitioner was unable to produce any material to demonstrate that Section 3(4)(b) came into force with effect from 01.04.2006. The Assessing Officer proceeded on the basis that sub section (4) of Section 3, including clause (b), came into force with effect from 01.04.2012, which is reflected in the statute as per the current edition. In the absence of material to the contrary, the petitioner's attack on the impugned assessment for having 'missed' an earlier commencement date could not be sustained and the legal challenge on that specific ground therefore fails. [Paras 7]

The objection that the Assessing Officer erred in treating Section 3(4)(b) as coming into force from 01.04.2012 is rejected and the impugned revised assessment is not set aside on that ground.

Alternate remedy rule - relegation to statutory appeal - tax litigation and writ jurisdiction - condonation of delay - exclusion of time under Section 14 of the Limitation Act - Whether the writ petition should be entertained notwithstanding availability of a statutory appeal and whether the petitioner should be relegated to the appellate remedy under the TNVAT Act - HELD THAT: - The Court observed that the alternate remedy rule, though discretionary, must be applied with greater rigour in matters of fiscal laws and revenue, following the principle in Satyawati Tondon and subsequent authority. Given that factual disputes turning on merits could be agitated before the Appellate Deputy Commissioner, the Court held that the writ petitioner should be relegated to the statutory appellate remedy under Section 51 of the TNVAT Act. The Court further clarified that all conditions for filing the appeal will apply and, if there is delay, the petitioner may apply for condonation of delay and for exclusion of time spent in the writ proceedings under Section 14 of the Limitation Act; such applications are to be considered by the Appellate Authority on their merits. [Paras 9, 11, 12, 13]

The writ petition is dismissed and the petitioner is relegated to file an appeal before the jurisdictional Appellate Deputy Commissioner under Section 51, with liberty to seek condonation of delay and exclusion of time where appropriate; all grounds may be raised before the Appellate Authority.

Final Conclusion: Writ petition dismissed. The petitioner is relegated to the statutory appellate remedy under Section 51 of the TNVAT Act and may seek condonation of delay and exclusion of time before the Appellate Authority; no order as to costs.

Classification of goods for trade tax purposes - all metal castings - treatment of processed or semi-finished metal castings - unclassified goods - rule of consistency in recurring assessment years

Classification of goods for trade tax purposes - all metal castings - treatment of processed or semi-finished metal castings - Aluminium brake shoe castings manufactured and sold by the assessee are covered by the taxing entry "all metal castings" in notification entry no. 4 Schedule-II Part-A of the U.P. VAT Act, notwithstanding some machining or processing performed by the assessee. - HELD THAT: - The Tribunal's finding that the goods were metal castings was accepted. The Court held that the taxing entry "all metal castings" embraces castings whether in raw, rough or processed form so long as the commodity continues to be identifiable as a metal casting. The level of machining or processing effected by the assessee to make the castings ready for use as brake shoes did not, on the material before the Court, transform the goods into a different taxable category or render them unclassified. The Court relied on the principle articulated in Vasantham Foundry wherein it was observed that rough or basic castings remain castings, and only where subsequent processing produces distinct products that are no longer castings would they cease to be covered by the declared entry; applying that reasoning, the processing in the present case was insufficient to exclude the goods from the entry "all metal castings." [Paras 4, 7, 9]

The brake shoe castings were held to be covered by notification entry no. 4 Schedule-II Part-A as "all metal castings" and not liable as unclassified goods.

Rule of consistency in recurring assessment years - res judicata principle in recurring assessments - Earlier finalised assessments treating the same goods as covered by the taxing entry bind subsequent proceedings and support applying the same classification in the present year. - HELD THAT: - The Court noted that in earlier assessment years the same goods had been treated as falling under the taxing entry "all metal castings" and those orders had attained finality. Applying the principle that where a fundamental factual position permeates different assessment years and has been allowed to remain unchallenged, it is inappropriate to permit a change in subsequent years, the Court held that the rule of consistency (as explained in M/s Radasoami Satsang ) favoured the assessee. Consequently, the prior final decisions in favour of the assessee reinforced the classification adopted in the present year. [Paras 8, 9]

The rule of consistency was applied; earlier final orders classifying the goods as metal castings were held to support the same classification in the assessment year before the Court.

Final Conclusion: Revision dismissed; the Tribunal's order allowing the assessee and treating the brake shoe castings as covered by notification entry no. 4 Schedule-II Part-A (taxed as "all metal castings") is upheld, and the revenue's contention that processed castings are unclassified is rejected.

Purchases from unregistered dealers - liability of registered purchaser under Section 3 AAAA - Taxation of sale of used or obsolete machinery - classification and rate applicable - Supply of tender forms - characterization as sale - Leasing or temporary transfer of machinery - transfer of right to use as taxable sale - Supply of materials to contractors adjusted in bills - transfer of property in goods in execution of works contract as sale

Purchases from unregistered dealers - liability of registered purchaser under Section 3 AAAA - Imposition of tax on purchases made by the registered assessee from unregistered dealers under Section 3 AAAA. - HELD THAT: - The Court applied the plain statutory mandate that a registered dealer who makes purchases from an unregistered dealer without payment of tax remains liable to pay tax on such purchases. The assessing authority's levy on purchases of Rs. 40,161/- from unregistered petty dealers was held to be in accordance with the clear provision of the Act; the fact that the vendors were below the registration threshold and could not have charged tax did not absolve the registered purchaser of statutory liability to pay tax. The question was answered against the assessee and in favour of the revenue. [Paras 5]

Levy under Section 3 AAAA on purchases from unregistered dealers sustained against the assessee.

Taxation of sale of used or obsolete machinery - classification and rate applicable - Whether sale of old, discarded or obsolete machinery supplied by the assessee could be taxed at the higher rate as if they were new machinery. - HELD THAT: - The Tribunal and assessing officer taxed the sales at the higher rate on the basis that the assessee did not produce vouchers or documentary proof of the goods being old. The High Court noted that the assessment record itself acknowledged the machinery as old (mill roller, turbine, reduction gear box, roller bearing, gear compressor etc.). Absence of vouchers might cast doubt on the claimed value but cannot substitute as evidence that the goods were new. Revenue failed to adduce any evidence to show the machineries were new; on the admitted finding that the goods were old, there was no basis to subject them to the higher rate. Accordingly the higher rate levy was set aside. [Paras 7, 8, 9, 10, 11]

Taxation at the higher rate was not justified; conclusion in favour of the assessee.

Supply of tender forms - characterization as sale - Whether amounts received for providing tender forms constituted sale for the purposes of tax in the assessment year under challenge. - HELD THAT: - Although the assessee contested the characterization, it had admitted the sale of tender forms and deposited tax thereon at assessment. Given the long passage of time (revision relates to A.Y. 2000-01) the Court treated the issue as academic in the present proceedings. Reliance was placed on Section 29 of the Act to note that where tax was admitted and paid at assessment, refund claims would not lie in these circumstances. The Court returned the question as currently academic and left it open for the assessee to raise in a year where liability remains live and not already taxed and paid. [Paras 12, 13, 14]

Issue returned as academic; not finally adjudicated in these proceedings and may be raised in a year where the liability is live.

Leasing of plant and machinery - transfer of right to use as taxable sale - Whether amounts received by the assessee for leasing equipment to another mill (and later returned) constituted taxable sale or transfer attracting trade tax. - HELD THAT: - The Court examined the nature of the transactions and observed that the assessee had leased out plant and machinery and received lease rent; the fact that leasing was done pursuant to directions of the federation or that some amount was later refunded did not negate the taxable character of receipts for leasing. The Tribunal's finding that a refund was made after six months from delivery was recorded and not shown to be perverse. On these facts the receipts from leasing were taxable. The Court therefore sustained the tax treatment affirmed below. [Paras 15, 16, 17, 18, 19]

Leasing receipts treated as taxable transfer; question answered against the assessee.

Supply of materials to contractors adjusted in bills - transfer of property in goods in execution of works contract as sale - Whether supply of cement and iron to contractors, adjusted against payments to them, amounted to transfer of property in goods and thus sale under the Act. - HELD THAT: - The Court relied on binding authority (three-Judge Bench decision) holding that where materials supplied to contractors are adjusted in bills, there is a passing of property in such supplies by virtue of the adjustment, satisfying the definition of sale. Applying that principle, the supplies adjusted in the contractors' bills were held to amount to transfer of property and therefore taxable as sale under the Act. The question was answered against the assessee and in favour of the revenue. [Paras 20, 21, 22]

Supplies adjusted in contractors' bills constitute sale; assessment sustained against the assessee.

Final Conclusion: The revision is partly allowed: the levy under Section 3 AAAA on purchases from unregistered dealers is upheld; the higher-rate taxation of sales of old/used machinery is set aside in favour of the assessee; the tender-form issue is returned as academic and left open for future raise; receipts from leasing machinery and supplies adjusted in contractors' bills are held taxable, and those aspects are sustained in favour of the revenue.

Imposition of penalty - Opportunity of being heard - Revisionary assessment to the best of judgment - Availability of statutory appellate remedy - Pre-deposit and limitation in statutory appeal

Imposition of penalty - Opportunity of being heard - Revisionary assessment to the best of judgment - Validity of the penalty and adequacy of opportunity before passing the revisional assessment order. - HELD THAT: - The revisional notice expressly proposed assessment under the best-of-judgment provision and stated a proposal to impose penalty; the assessing authority mistakenly cited a different sub provision in the final order but the notice clearly recorded the proposal to impose penalty under the correct penal provision. The dealer filed a substantive reply to the revisional notice. On these facts the Court held that the dealer was afforded the opportunity contemplated by law and that there was no procedural denial of hearing that would vitiate the penalty or the revisional assessment. The Court therefore declined to interfere with the revisional assessment on the ground of lack of opportunity, while noting the clerical error in citation of the penal provision in the assessment order. [Paras 5, 6, 9, 11]

Penalty and revisional assessment were not set aside for lack of opportunity; error in citation of the penal provision did not render the action without power.

Availability of statutory appellate remedy - Pre-deposit and limitation in statutory appeal - Whether the writ petition should be entertained notwithstanding availability of the statutory appeal and related conditions. - HELD THAT: - The Court applied the principle that writ jurisdiction is to be exercised with restraint where effective statutory remedies exist, particularly in tax matters, and relied on the requirement that statutory appeals be preferred before the appellate authority. The Court observed that the statute provides for pre deposit and contains limitation rules, and that power to condone delay vests in the appellate authority. In light of these considerations and the authorities cited, the Court refused to exercise discretionary writ jurisdiction and directed that the petitioner may pursue the available statutory appeal subject to pre deposit and limitation conditions (including condonation applications where applicable). [Paras 13, 15, 16, 17]

Writ petition dismissed for non-interference with the assessment; petitioner permitted to file the statutory appeal subject to pre deposit and limitation.

Final Conclusion: Writ petition dismissed; no interference with the revisional assessment or penalty, with liberty to the petitioner to prefer the statutory appeal before the appellate Deputy Commissioner subject to the statutory conditions of pre deposit and limitation; no order as to costs.

Penalty under proviso to Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 - requirement of opportunity of showing cause before imposition - Setting aside assessment orders for non-compliance with statutory procedural requirement - Reconsideration and personal hearing on remand for fresh decision on imposition of penalty

Penalty under proviso to Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 - requirement of opportunity of showing cause before imposition - Penalty imposed under Section 27(4) was set aside for failure to afford the assessee a reasonable opportunity of showing cause as required by the proviso. - HELD THAT: - The Court noted that the proviso to Section 27(4), which mandates that no penalty under that provision shall be levied without giving an opportunity of showing cause, was applicable. On the material before it, the Court found that although a provisional notice was issued, there was nothing to show that the writ petitioner was given the required reasonable opportunity of showing cause prior to imposition of the 100% penalty. The impugned assessment orders imposing penalty were therefore set aside solely on the ground of non-adherence to the procedural requirement in the proviso, without expressing any opinion on the merits of the underlying assessment. [Paras 8, 9, 11]

Impugned Assessment Orders dated 28.06.2019 (for 2011-12, 2012-13 and 2015-16) are set aside for non-compliance with the proviso to Section 27(4).

Reconsideration and personal hearing on remand for fresh decision on imposition of penalty - Setting aside assessment orders for non-compliance with statutory procedural requirement - Matter remanded for personal hearing and reconsideration; directions issued for further objections, redone assessment and communication of revised orders within a time limit. - HELD THAT: - Having set aside the impugned orders on procedural grounds, the Court directed that the respondent afford the writ petitioner a personal hearing and permitted the petitioner to file further objections, particularly regarding the imposition of penalty. The Court ordered that if the petitioner avails the personal hearing and files additional objections with supporting documents, the respondent shall consider all objections, redo the assessment and pass fresh revised assessment orders expeditiously and in any event within eight weeks from the date of the personal hearing. The Court also provided that failure by the petitioner to attend the fixed personal hearing would result in automatic revival of the impugned orders. [Paras 10, 11]

Proceedings remanded: personal hearing fixed; respondent to reconsider objections, redo the assessment and pass revised assessment orders within eight weeks, and communicate them to the petitioner; failure to attend will revive the set-aside orders.

Final Conclusion: The Court set aside the three revised assessment orders dated 28.06.2019 (for 2011-12, 2012-13 and 2015-16) solely for non-compliance with the proviso to Section 27(4) requiring an opportunity of showing cause, and remanded the matters for personal hearing and reconsideration with directions for fresh decisions to be taken and communicated within a specified timeframe.

Mandamus to permit downloading 'C' forms - application of precedent in rem - inter-state purchase of High Speed Diesel on concessional tax - direction to implementing authorities to give effect to judicial precedent

Mandamus to permit downloading 'C' forms - application of precedent in rem - Writ petitioner entitled to mandamus directing the Revenue to permit downloading of 'C' forms for inter state purchase of High Speed Diesel - HELD THAT: - The Court held that the present petition is squarely covered by the earlier order in the batch arising from the Ramco Cements matter and the subsequent Single Judge order in Southern Cotspinners, which applied the Ramco Cements rationale to all pending assessments. There being no dispute on the factual matrix or on applicability of those precedents, the petitioner confined its prayer to the mandamus limb and the Court directed the Revenue/Department/Respondents to take necessary action to permit downloading of 'C' forms forthwith, within five working days from receipt of the order. The writ petition was therefore allowed insofar as the mandamus relief is sought, adopting the in rem effect of the earlier decision and requiring implementation by assessing authorities. [Paras 6, 7]

Writ petition allowed in part by issuing mandamus to the Revenue to permit downloading of 'C' forms and to take necessary action within five working days.

Challenge to circular dated 31.05.2018 - certiorarified mandamus - Challenge to the impugned circular letter was not adjudicated and the petitioner restricted the relief sought to the mandamus limb - HELD THAT: - Although the petition originally assailed the circular dated 31.05.2018 (seeking certiorarified mandamus), the petitioner chose to abridge that prayer and proceeded only with the mandamus relief. The Court therefore confined its decision to granting the mandamus and did not decide the validity of the impugned circular; the certiorari facet remains unadjudicated by this order. [Paras 5]

Certiorari challenge to the circular left open; court decided only the mandamus limb as restricted by the petitioner.

Final Conclusion: Petition allowed in part: mandamus issued directing the Revenue/Department to permit downloading of 'C' forms for inter state purchase of High Speed Diesel in accordance with the Ramco Cements precedent, to be implemented within five working days; challenge to the impugned circular was not decided.

Maintainability of suit for cancellation of sale deed - jurisdictional bar under Section 331 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 - recorded tenure holder - cancellation for fraud and misrepresentation - exclusive jurisdiction of Revenue Court - distinction between void document and cancellable deed

Maintainability of suit for cancellation of sale deed - jurisdictional bar under Section 331 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 - recorded tenure holder - cancellation for fraud and misrepresentation - exclusive jurisdiction of Revenue Court - distinction between void document and cancellable deed - Suit by the plaintiff (a recorded tenure holder) for cancellation of the sale deed dated 15.06.2006 and for injunction was maintainable in the Civil Court notwithstanding Section 331 of the Act. - HELD THAT: - The plaintiff, a private company, claimed title under five sale deeds dated 17.10.1998 and sought cancellation of subsequent sale deeds dated 15.06.2006 on the ground of fraud and misrepresentation; it did not seek declaration of tenure-holder status or declaration of title. The Court applied the settled principle that statutory ouster of civil jurisdiction must be strictly construed and that where a recorded tenure holder with prima facie title and possession seeks cancellation of a later deed obtained by fraud or impersonation, the Civil Court may entertain the suit. The Court relied on earlier decisions distinguishing cases where an instrument is void in law (for which revenue authority may have exclusive cognizance) from cases where cancellation of a deed binding on third parties is sought; in the latter, civil jurisdiction is not ousted. The Court held that Section 331 does not deprive a recorded tenure holder of the right to approach the Civil Court for cancellation of a deed obtained by fraud, and that the plaintiff need not be relegated to the Revenue Court since its prima facie title was not under cloud. The decision in Kamla Prasad (2007) was distinguished on facts because there the plaintiff disclaimed exclusive ownership and a declaration of title was necessary, which is not the position here. [Paras 7, 8, 9, 10, 11]

The suit for cancellation and injunction was maintainable in the Civil Court; Section 331 did not bar the suit.

Maintainability of suit for cancellation of sale deed - Civil Appeal No. 5980 of 2019 was dismissed as being squarely covered by the decision in Civil Appeal No. 5979 of 2019. - HELD THAT: - The Court applied the reasoning and conclusion reached in the earlier part of the judgment to dispose of the second appeal without separate adjudication, recording that the issue was identical and already decided. [Paras 13, 14]

Appeal dismissed as covered by the earlier decision; no order as to costs.

Final Conclusion: The appeals are dismissed. A recorded tenure holder in possession seeking cancellation of a subsequent sale deed obtained by fraud may maintain a suit for cancellation and injunction in the Civil Court; Section 331 of the U.P. Act does not oust civil jurisdiction in such circumstances.

Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - recall of order of issuance of process - maintainability of complaint where firm/company not made a party - delay and laches in seeking recall of process - no power of review by Magistrate - remedy under Section 482 CrPC (Adalat Prasad principle)

Recall of order of issuance of process - delay and laches in seeking recall of process - no power of review by Magistrate - remedy under Section 482 CrPC (Adalat Prasad principle) - Application to recall the Magistrate's order issuing process was not maintainable and was barred by unexplained delay. - HELD THAT: - The Court examined the application filed nearly nine years after issuance of process and held that a Magistrate has no inherent power to review or recall an order issuing process. Relying on the principle in Adalat Prasad, where the Supreme Court observed that relief against vitiated issuance of process lies under Section 482 CrPC and not by way of review under Section 203 CrPC, the petitioner's delayed application to recall the order was held not maintainable. The unexplained delay of over nine years and the absence of the correct remedy rendered the application liable to be rejected. [Paras 16]

Application for recalling the order of issuance of process is not maintainable and was rightly rejected for delay and because the correct remedy is under Section 482 CrPC.

Section 138 of the Negotiable Instruments Act - Section 141 of the Negotiable Instruments Act - maintainability of complaint where firm/company not made a party - Complaint under Section 138 N.I. Act held maintainable against the partner though the firm was not separately prosecuted or made a party. - HELD THAT: - The Court considered whether absence of the partnership firm as a party and lack of a separate notice to the firm defeated prosecution of the partner. Having independently scrutinised the complaint and the decisions relied upon, including Anil Hada, the Court agreed with the Sessions Court that the legal fiction in Section 141 can render persons vicariously liable and that non-prosecution of the firm does not automatically exonerate the individual accused. The complaint averments identified the accused as a working partner and showed that cheques were issued by the partnership through him; on that basis the Magistrate and the Sessions Court correctly held the complaint to be maintainable against the petitioner. [Paras 17, 18]

The complaint is maintainable against the petitioner as partner despite the firm not being made a party; the Sessions Court's conclusion upholding maintainability is affirmed.

Final Conclusion: Writ petition dismissed. The order refusing to recall the Magistrate's issuance of process was correctly held not maintainable (delay and appropriate remedy under Section 482 CrPC), and the complaint under Section 138 N.I. Act is maintainable against the petitioner as partner though the firm was not separately prosecuted.

Professional misconduct in disciplinary proceedings - Code of Ethics - independence of statutory auditor vis-a -vis internal auditor - Wednesbury unreasonableness - Disciplinary proceedings of professional bodies and scope of judicial review - Role of complainant in disciplinary proceedings and limitation of remedy under Section 22G

Professional misconduct in disciplinary proceedings - Disciplinary Committee's evaluation of validity of trustee resolution - The Disciplinary Committee did not err in holding that the trustee (Mr Vipin Mahajan) was entitled to participate in the meeting appointing the auditor and in declining to treat that appointment as misconduct by respondent no.3. - HELD THAT: - The Court confined the inquiry to whether respondent no.3 misconducted himself by accepting an appointment made at a meeting where Mr Vipin Mahajan participated as a trustee. The Disciplinary Committee had found the earlier resolution of removal (dated 03.03.2003) to be invalid for lack of the requisite quorum and noted a subsequent resolution dated 11.08.2004 annulling that removal. The petitioner produced no material showing that the judicial determination upholding the annulling resolution had been stayed by a superior court or that the Committee's conclusion was perverse. Given the limited scope of the disciplinary inquiry and absence of proof of perversity or stay, the Committee's reliance on the trustee's participation was sustainable. [Paras 18, 23, 24, 25, 26]

Allegation that respondent no.3 misconducted himself by accepting appointment in a meeting where Mr Vipin Mahajan participated is rejected; Disciplinary Committee's conclusion upheld.

Code of Ethics - independence of statutory auditor vis-a -vis internal auditor - Requirement of material evidence to establish auditor's conflict - The contention that respondent no.3 committed professional misconduct by acting as internal auditor and subsequently accepting appointment as auditor was not established on the material before the Disciplinary Committee. - HELD THAT: - The Court acknowledged the principle in paragraph 290.173 of the Code of Ethics that a statutory auditor cannot be the internal auditor because independence would be compromised. However, the Disciplinary Committee found no material showing that respondent no.3 had been placed in a position of commenting on his own internal audit work or that he had conducted a statutory/tax audit as alleged. The record showed respondent no.3 had signed Form 10B under the Income Tax Rules to enable the Trust to seek Section 12A(b) benefit, but there was no documentary evidence of the scope of audit or that he had issued a statutory audit report. The petitioner failed to produce evidence to demonstrate that respondent no.3 had violated the Code of Ethics in the manner alleged. [Paras 19, 27, 28, 30, 31]

Allegation of misconduct for acting as internal auditor and then as statutory auditor is not proved; Disciplinary Committee's conclusion upheld.

Wednesbury unreasonableness - Disciplinary proceedings of professional bodies and scope of judicial review - Role of complainant in disciplinary proceedings and limitation of remedy under Section 22G - The petition alleging the Disciplinary Committee's orders were perverse, unreasonable or liable to be set aside on Wednesbury grounds is rejected; the complainant has no appeal under Section 22G against acquittal of charges. - HELD THAT: - The Court reiterated the limited scope of judicial interference under Article 226 in disciplinary proceedings against members of a professional body and applied the Wednesbury test. The petitioner failed to demonstrate that the Committee's findings were so unreasonable that no reasonable authority could reach them. The Court further noted the nature of disciplinary proceedings where the complainant functions as an informant and that Section 22G confers an appellate remedy only on a member of ICAI who is aggrieved by a penalty, not on the complainant seeking reversal of an acquittal; thus the absence of a statutory appeal for the complainant is a recognized limitation. [Paras 32, 34, 35]

No interference with the Disciplinary Committee's orders; petition dismissed.

Final Conclusion: The High Court found no legal error or perversity in the Disciplinary Committee's orders absolving respondent no.3 of certain alleged charges and reprimanding him on the narrow ground found proved; the petition is dismissed and the Committee's conclusions are upheld.