TaxTMI Updates e-Newsletter
Aug 05,2024

Bail - custody period as a factor in bail - offences under the Central Goods and Services Tax Act - sentence ceiling of five years - release on bail subject to trial court's terms and conditions

Bail - custody period as a factor in bail - sentence ceiling of five years - offences under the Central Goods and Services Tax Act - Grant of bail to the petitioner arrested in connection with alleged offences under the Central Goods and Services Tax Act - HELD THAT: - The Court took into account that the petitioner was arrested on 2 November 2023 and had been in custody for nearly nine months at the time of the order. The offences charged carry a maximum sentence of five years' imprisonment. Having regard to the limited maximum punishment and the substantial period of custody already undergone, the Court found it inappropriate to keep the petitioner in continued detention. Accordingly, the petitioner was directed to be released on bail, subject to such terms and conditions as the Trial Court may impose.

Petitioner released on bail; Special Leave Petition disposed of; release to be on terms as may be imposed by the Trial Court.

Final Conclusion: The Special Leave Petition was allowed by directing the release of the petitioner on bail, having regard to the maximum sentence of five years and the period of custody already undergone; the Trial Court to frame appropriate terms and conditions of bail.

Limitation for refund claims under the CGST Act - effect of filing an original refund application on computation of limitation - rectified/continuation refund application and exclusion of period during deficiency communication - application of Notification No.15/2021 proviso to Rule 90(3) of the CGST Rules - inapplicability of Circular No.125/2019 to deny a refund where original claim was timely filed

Limitation for refund claims under the CGST Act - effect of filing an original refund application on computation of limitation - Impugned rejection of the refund application as time-barred was not sustainable; the original refund application filed within two years is relevant for computing limitation. - HELD THAT: - The Court applied its earlier decision in M/s. LA-Gajjar Machineries Private Limited and analogous High Court precedents to hold that where an original refund application is filed within the two year period prescribed by Section 54(1) of the CGST Act and is accompanied by the documents prescribed by Rule 89(2), the period of limitation for filing a refund stops running from the date of such original filing. The proper officer's issuance of deficiency memos and the subsequent rectified filing are to be treated as a continuation of the original application, and the rectified filing date does not displace the timely original filing for the purpose of limitation. Reliance on Circular No.125/2019 to deny the claim was rejected because the original claim was timely filed and the later circular could not be used to defeat the limitation position established by the original filing and related rules and notifications. [Paras 19, 20]

The impugned order rejecting the refund as time-barred is quashed and set aside; the original refund application filed on 17.09.2018 is to be treated as within limitation.

Rectified/continuation refund application and exclusion of period during deficiency communication - application of Notification No.15/2021 proviso to Rule 90(3) of the CGST Rules - The period between filing of the refund claim and communication of deficiencies by the proper officer is to be excluded when computing the two year limitation for a rectified refund application; Notification No.15/2021 (proviso to Rule 90(3)) is applicable to the facts and brings the rectified filing within limitation. - HELD THAT: - Relying on the reasoning in LA-Gajjar and the proviso inserted by Notification No.15/2021, the Court held that the time from filing the refund claim in Form GST RFD-01 till communication of deficiencies in Form GST RFD-03 must be excluded from the two year period specified under Section 54(1). Applying that exclusion to the chronology in this case (including the days between filing and deficiency communications), the Court found that the subsequent rectified filings fell within the extended limitation period. Consequently, the rejection on limitation could not be sustained and Clause 12 of Circular No.125/44/2019-GST could not be relied upon to deny the refund. [Paras 19]

Notification No.15/2021 proviso to Rule 90(3) operates to exclude the period of deficiency communication for computation of limitation, and the rectified filings are within time.

Consideration of refund claims on merits after restoration - Whether the refund application should be restored for consideration on merits and remitted to the proper officer. - HELD THAT: - Having quashed the limitation-based rejection, the Court directed restoration of the petitioner's refund application filed in Form GST RFD-01A and ordered that the proper officer consider the claim afresh on merits. The exercise of consideration is to be carried out in accordance with law within a stipulated time frame, thereby leaving factual and merit-based verification to the proper officer while ensuring timely adjudication. [Paras 20, 21]

The refund application is restored for fresh merits consideration by the proper officer, to be completed within 12 weeks from receipt of the order.

Final Conclusion: The petitions are allowed: the order rejecting the refund application on limitation grounds is quashed and set aside; the original refund application filed on 17.09.2018 is restored and the proper officer is directed to consider the claim on merits in accordance with law within 12 weeks.

Deduction of tax at source (TDS) on judgment debt - Character of arbitral award as judgment debt - Execution of award governed by adjustments permissible under the Code of Civil Procedure - Section 195(1) - obligation to deduct tax on sums payable to non residents

Deduction of tax at source (TDS) on judgment debt - Character of arbitral award as judgment debt - Execution of award governed by adjustments permissible under the Code of Civil Procedure - Whether the judgment debtor can deduct TDS from amounts awarded in an arbitral award which has been reduced to a decree/ordered for payment by the Court. - HELD THAT: - The Court applied the settled principle that once a claim is decreed or an award is made executable and directed to be paid, the sum assumes the character of a judgment debt and must be executed subject only to deductions and adjustments permissible under the Code of Civil Procedure. Relying on the Supreme Court decision in All India Reporter and consistent decisions of this Court (Voith Hydro Ltd; Glencore International) and the Bombay High Court (Islamic Investment Company), the Court held that the Income tax Act does not confer a right to the judgment debtor to deduct TDS from a decretal amount simply because the original cause of action gave rise to taxable receipts. The Court noted that the Supreme Court's brief vacatur in Prateek Infra did not lay down a contrary rule and did not constitute a binding declaration that TDS is mandatorily deductible on decretal/compensation awards. Accordingly, the respondent is not permitted to deduct TDS from the amounts awarded by the arbitral award under execution. [Paras 17, 18, 19]

The respondent cannot deduct TDS from the amount awarded to the petitioner by the arbitral award under execution; Ex. Appl. (OS) 952/2024 is dismissed.

Execution of award governed by adjustments permissible under the Code of Civil Procedure - Revival/modification of the enforcement order and rescheduling of instalments for payment of the award. - HELD THAT: - The Court revived the enforcement petition to the limited extent of directing payment of the decretal instalments in accordance with the earlier order, subject to a modification of the commencement date for instalments. The instalments are to commence from August 2024 with specified monthly due dates, and the earlier direction that payments be made without deduction of TDS was clarified and reiterated. [Paras 20, 21]

Ex. Appl. (OS) 948/2024 is disposed of by directing payments as per the order dated 11 March 2024, modified so instalments commence from August 2024 and shall be made without deducting any TDS.

Final Conclusion: The Court held that sums awarded in an arbitral award, once directed to be paid, assume the character of a judgment debt and therefore the judgment debtor is not entitled to deduct TDS therefrom; consequentially the application seeking direction to deduct TDS was dismissed and the enforcement petition was revived and modified to commence instalments from August 2024, with payments to be made without TDS deduction.

Validity of notice under Section 148 - Requirement of faceless issuance under Section 151A and the CBDT Scheme - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Validity of sanction for reassessment where proceedings initiated after three years under Section 151 - Quashing of reassessment proceedings for non-compliance with statutory procedure

Requirement of faceless issuance under Section 151A and the CBDT Scheme - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Notice and underlying order issued by the Jurisdictional Assessing Officer were invalid for non-compliance with Section 151A and the Scheme requiring faceless issuance. - HELD THAT: - The Court applied the ratio of Hexaware Technologies Ltd. which held that issuance of a notice under Section 148 must comply with the Scheme framed under Section 151A and that the Scheme's automated allocation vests jurisdiction in the officer randomly allocated (the FAO), to the exclusion of concurrent jurisdiction of the JAO. The impugned notice dated 18-4-2022 and the Section 148A(d) order were issued by the JAO and not a FAO as mandated by the Scheme; accordingly the initiation of proceedings without following the faceless procedure was contrary to law. The Court further observed that when an authority acts contrary to the statutory scheme, the action is liable to be quashed without the assessee having to show separate prejudice, since non-observance of the prescribed procedure itself causes prejudice to the assessee. [Paras 3, 4, 5]

Impugned notice and proceedings under Section 148/148A were quashed for non-compliance with Section 151A and the Scheme.

Validity of sanction for reassessment where proceedings initiated after three years under Section 151 - Sanction for initiating reassessment granted by an authority not competent under Section 151 rendered the reassessment invalid where proceedings were initiated after the three-year period. - HELD THAT: - The Court noted that the reassessment was initiated well after the expiry of three years from the end of the relevant assessment year and therefore the sanction required to be accorded by the higher authority specified in Section 151(ii). In the present case the sanction was granted by the Principal Commissioner falling under Section 151(i), a rank not authorised to sanction reassessment beyond three years. Reliance on earlier Division Bench decisions was accepted to conclude that sanction by an unauthorised authority vitiates the reassessment proceedings. [Paras 3, 7, 8]

Reassessment was invalidated for want of sanction by the proper authority as required under Section 151.

Final Conclusion: The writ petition is allowed: the notice, the order under Section 148A(d), the assessment/reassessment order and consequential proceedings relating to Assessment Year 2018-19 are quashed for non-compliance with Section 151A (faceless issuance/Scheme) and for lack of sanction by the competent authority under Section 151; no opinion is expressed on other grounds raised.

Reopening of assessment beyond four years and proviso to section 147 - Application of section 50C to non-owner/developer - Requirement of information with direct nexus to escapement of income - Misinterpretation of valuation provisions

Reopening of assessment beyond four years and proviso to section 147 - Requirement of information with direct nexus to escapement of income - Validity of the notice dated 16.03.2020 under section 148 reopening assessment for A.Y.2013-14 - HELD THAT: - The Court found that the Assessing Officer recorded reasons premised on an assumed escapement of income arising from a difference between market value and registration value, without any information on record having a direct nexus with the alleged escaped income. The petitioner had disclosed relevant facts and replied to the section 133(6) query explaining that the bookings related to 1995 and that the petitioner was not the owner of the land. In these circumstances the proviso to section 147 applies and the Assessing Officer lacked jurisdiction to reopen the assessment beyond four years. The recorded reasons and the AO's approach do not establish the requisite connection between the supposed information and escapement of income to justify reopening. [Paras 11, 12, 13, 14]

Notice under section 148 dated 16.03.2020 quashed for want of jurisdiction and absence of material establishing escapement of income within the meaning of section 147.

Application of section 50C to non-owner/developer - Misinterpretation of valuation provisions - Whether the Assessing Officer correctly invoked valuation provisions (section 50C) against the petitioner who was not the owner of the land and had accounted the plots as stock-in-trade under a development agreement - HELD THAT: - The Court held that the Assessing Officer misinterpreted the valuation provision by treating the registration of sale as if the petitioner were the owner and thereby seeking to tax the difference between stamp duty valuation and registered consideration. The petitioner produced a consistent explanation that the land belonged to the society and that amounts were booked as per a development agreement and related to earlier bookings. Since section 50C was not applicable for the year in question to an entity that was not the owner in the asserted manner, the AO's foundational legal premise for addition was incorrect and does not sustain reopening or any addition. [Paras 10, 11, 12]

Assessing Officer's application of valuation provisions misconceived; no sustainable basis to invoke section 50C against the petitioner as owner, and the reasons premised on that misinterpretation fail.

Final Conclusion: Writ petition allowed; impugned notice dated 16.03.2020 under section 148 quashed and set aside.

Jurisdiction to reopen assessment after transfer under Section 127(2) - validity of order under Section 148A(d) for reopening assessment - extinguishment of pre CIRP statutory claims on approval of resolution plan under IBC - bar on continuation/initiation of proceedings in respect of claims not part of approved resolution plan

Jurisdiction to reopen assessment after transfer under Section 127(2) - validity of order under Section 148A(d) for reopening assessment - Assessing Officer at Vadodara had no jurisdiction to pass order under Section 148A(d) or issue notice under Section 148 after transfer of the case under Section 127(2). - HELD THAT: - The court found that once the Principal Commissioner transferred the petitioner's case from Vadodara to the Central Circle 1(1) Ahmedabad by order dated 11.01.2023 under Section 127(2), the respondent Assessing Officer at Vadodara lacked jurisdiction to continue proceedings culminating in the impugned order under Section 148A(d) dated 20.03.2023 and the consequential notice under Section 148. The factual chronology establishing the transfer and the subsequent actions by the Vadodara AO led the Court to conclude that the Vadodara AO could not assume jurisdiction to re open the assessment for the Assessment Year 2019 20. [Paras 6, 7]

Order under Section 148A(d) and notice under Section 148 issued by the Vadodara AO were not tenable for want of jurisdiction and were quashed.

Extinguishment of pre CIRP statutory claims on approval of resolution plan under IBC - bar on continuation/initiation of proceedings in respect of claims not part of approved resolution plan - Approval of the resolution plan by NCLT extinguished past statutory claims not provided for in the plan and, therefore, the Assessing Officer had no jurisdiction to re open assessment in respect of such pre CIRP dues for Assessment Year 2019 20. - HELD THAT: - Relying on the principles in Ghanashyam Mishra & Sons and this Court's reasoning in Surya Exim Ltd., the Court held that once a resolution plan is approved by the adjudicating authority under section 31 of the IBC, claims not part of that plan stand extinguished and proceedings in respect of such claims cannot be initiated or continued. The NCLT's final order approving the resolution plan extinguished statutory dues pertaining to the period prior to CIRP commencement and approval; accordingly, reopening the assessment for AY 2019 20 on the basis of alleged escaped income that related to the pre CIRP period was impermissible. [Paras 6, 7]

Reopening of assessment in respect of pre CIRP statutory dues for AY 2019 20 was barred by the NCLT approval of the resolution plan and the consequent extinguishment of such claims; the impugned order and notice were quashed.

Final Conclusion: Writ petition allowed; the impugned order under Section 148A(d) and the consequential notice under Section 148 for Assessment Year 2019 20 are quashed and set aside on grounds of want of jurisdiction and because the NCLT approved resolution plan extinguished the pre CIRP statutory claims; no costs.

Reopening of assessment - reason to believe - reliance on statement recorded under Section 133A - tax the right person - corroborative material - prima facie escapement of income - scope of inquiry at reasons to believe stage

Reopening of assessment - reliance on statement recorded under Section 133A - tax the right person - scope of inquiry at reasons to believe stage - Validity of notice under Section 148 re opening assessment of the petitioner company relying on statement of its director/partner recorded during survey - HELD THAT: - The Court held that the Assessing Officer was entitled to assume jurisdiction to reopen the company's assessment for A.Y. 2012 13. The reasons recorded disclose that the partner/director Shri Jignesh Shah admitted that the work giving rise to brokerage belonged to the company though it was shown in the firm's books; on these admissions and attendant material the Assessing Officer formed a prima facie belief that income of the company had escaped assessment. The Court relied on the principle that the Assessing Officer must tax the 'right person' and is not precluded from taxing the person truly liable merely because another (wrong) person had earlier been assessed. Questions as to the evidentiary weight of the statement, requirement of corroboration, and sufficiency of material are matters for the assessment proceedings; their scrutiny, including cross examination and verification of documents, was to be left to the Assessing Officer during reassessment. On this basis the notice was held not to be vitiated. [Paras 8, 9, 10]

Notice under Section 148 as against the petitioner company is valid and interference is declined; petition dismissed.

Reopening of assessment - prima facie escapement of income - corroborative material - Validity of notice under Section 148 re opening assessment of the petitioner partnership firm in respect of alleged bogus bad debts and unsecured loans - HELD THAT: - The Court found that the Assessing Officer had recorded reasons showing prima facie infirmities in the firm's claim of bad debts and in the genuineness of unsecured loans, including absence of ledger evidence for the relevant period, failure to produce documents after specific requests, and suspicious timing and pattern of bad debt claims. Those materials and the partner's statements furnished a sufficient basis for forming a reason to believe that income had escaped assessment and to reopen the assessment. The Court held that detailed examination of the genuineness of entries, veracity of documents and the need for corroboration are matters for the reassessment process and not for summary quashing of the notice. [Paras 8, 9, 10]

Notice under Section 148 as against the petitioner firm is valid and interference is declined; petition dismissed.

Final Conclusion: Both petitions challenging notices dated 25th March, 2019 for A.Y. 2012 13 were dismissed. The High Court held that the Assessing Officer had prima facie reason to believe escapement of income in respect of both the company and the firm and was justified in issuing the reopening notices; matters of evidentiary weight and corroboration are to be tested in reassessment proceedings.

Intimation under Section 245 - set off/adjustment of refunds against demand - discretionary nature of power under Section 245 - requirement to record reasons under Section 245(2) - effect of stay of recovery under Section 220(6)

Intimation under Section 245 - set off/adjustment of refunds against demand - discretionary nature of power under Section 245 - Adjustment of refunds without prior intimation under Section 245 was unlawful and such adjustments are to be set aside. - HELD THAT: - Section 245 permits the Revenue to set off a refund against a tax demand only after giving an intimation in writing to the person of the proposed action; the power is discretionary and prior intimation is a mandatory pre condition to any adjustment. The affidavit in reply admitted that no intimation under Section 245 was issued before the adjustments were effected. Earlier Division Bench decisions of this Court (cited in the judgment) establish that failure to give the mandatory prior intimation renders the adjustment illegal; where an assessee has pending stay proceedings the officer must afford the assessee the opportunity to point out developments (such as a stay or tribunal orders) before making any adjustment and, if objections are overruled, record reasons and communicate them. In the present case the unilateral adjustment of refunds for the specified assessment years without the required prior intimation and without recording reasons under Section 245(2) was therefore contrary to law and set aside. [Paras 12, 20, 24, 26, 30]

Adjustments of the refunds made without prior intimation under Section 245 declared unlawful; Rule made absolute and adjustments to be rectified.

Effect of stay of recovery under Section 220(6) - set off/adjustment of refunds against demand - Pending stay applications and undisposed rectification applications could not be left pending indefinitely and required prompt disposal; adjustments made despite pending stay/rectification could not be sustained without compliance with Section 245. - HELD THAT: - The Court recorded that stay applications in respect of AY 2018-2019 and rectification applications for the relevant years had not been disposed of and that there was no justification in the affidavit in reply for keeping them pending. Prior authorities establish that stay orders must be honoured and, where appropriate, an order granting stay may expressly state whether it permits adjustment; in any event, the existence of pending stay/rectification proceedings is a material fact that must be considered before any adjustment under Section 245 is effected. Given the admitted non compliance with the statutory intimation procedure and the pendency of stay/rectification proceedings, the Court directed prompt disposal of the matters and restoration/payment of refunds in accordance with law. [Paras 5, 25, 26, 28, 29]

Stay and rectification applications to be disposed of expeditiously; refunds to be processed and paid within four weeks and rectification applications decided preferably within eight weeks.

Final Conclusion: Rule made absolute; adjustments of refunds without prior intimation under Section 245 set aside; all refunds to be processed and paid within four weeks and rectification applications to be decided on priority, preferably within eight weeks; no order as to costs.

Payment of interest on delayed tax refund - calculation of interest up to date of compliance - public money and duty to minimize interest liability - contempt for disobedience of court order

Payment of interest on delayed tax refund - calculation of interest up to date of compliance - public money and duty to minimize interest liability - contempt for disobedience of court order - Respondents directed to compute and pay the balance interest on the refund up to 1st March 2024 and to make payment on or before 1st March 2024, failing which contempt proceedings may follow. - HELD THAT: - The Court rejected the department's request for two months to pay the remaining interest, observing that interest on delayed refunds is paid from public funds and officers must act to minimize such liability. Having noted that a partial refund and computations were already made, the Court fixed the cut-off for interest computation at 1st March 2024 and directed immediate payment of the balance interest by that date. The Court warned that non compliance would be treated as willful disobedience warranting initiation of contempt proceedings. [Paras 2, 3]

Balance interest to be calculated up to 1st March 2024 and paid by the Respondents on or before 1st March 2024; failure to comply may attract contempt proceedings.

Final Conclusion: Petition disposed; respondents directed to pay the balance interest by 1st March 2024 and warned that failure to comply will invite contempt proceedings.

Principles of natural justice - opportunity of hearing before revisional authority under Section 264 - validity of assessment where assessee failed to respond to statutory notices - remand for fresh hearing by revisional authority

Validity of assessment where assessee failed to respond to statutory notices - opportunity of hearing before assessment under Section 142(1) and 143(2) - Assessment order challenged on grounds of denial of opportunity to explain cash deposits during demonetisation period was not vitiated where notices were served but the assessee failed to avail the opportunities. - HELD THAT: - The Court examined the sequence of notices issued under the assessment proceedings and the petitioner's conduct in not replying. The record shows notices were served, including a letter with a last date for response; notwithstanding these opportunities the petitioner did not file the requisite explanation and only filed a reply after the assessment order had been passed. On these facts the Court held that the petitioner cannot successfully contend that he was denied an opportunity of hearing in the assessment proceedings, since the opportunity was afforded but not availed by the assessee. The conclusion rests on the factual finding that service was effected and the petitioner did not respond within the time framed by the department. [Paras 8]

Assessment order is not vitiated for lack of opportunity where notices were served and the assessee failed to avail the opportunities.

Principles of natural justice - opportunity of hearing before revisional authority under Section 264 - remand for fresh hearing by revisional authority - Revisional order under Section 264 passed without affording the assessee an opportunity of hearing was held to violate the principles of natural justice and was set aside and remanded for fresh consideration after hearing. - HELD THAT: - Although Section 264 does not expressly mandate hearing, the Court held that the power to revise has civil consequences and must be exercised consistently with principles of natural justice. The Revisional Authority passed the impugned order without hearing the petitioner; this was found to be a procedural defect rendering the revisional order unsustainable. Accordingly, the Court set aside the revisional order and directed the revisional authority to issue a single notice of hearing to the petitioner and to pass a fresh order after affording that hearing, with the proviso that no further opportunity shall be granted if the petitioner fails to appear. [Paras 9]

Impugned revisional order set aside for violation of natural justice; matter remanded to revisional authority to afford a single hearing and pass fresh order in accordance with law.

Final Conclusion: Writ petition allowed in part: the assessment order was upheld on the ground that the assessee failed to avail opportunities to respond, but the revisional order was set aside for non-compliance with principles of natural justice and remitted for fresh hearing and decision by the revisional authority.

Competent sanctioning authority for reopening beyond three years - requirement of sanction by Principal Chief Commissioner of Income Tax - notice under Section 148 of the Income Tax Act - order under Section 148A(d) of the Income Tax Act - applicability of proviso to Section 151 of the Income Tax Act

Competent sanctioning authority for reopening beyond three years - requirement of sanction by Principal Chief Commissioner of Income Tax - notice under Section 148 of the Income Tax Act - order under Section 148A(d) of the Income Tax Act - applicability of proviso to Section 151 of the Income Tax Act - Sanction issued by the Principal Commissioner of Income Tax (PCIT) for issuance of notice under Section 148 and for passing order under Section 148A(d) dated 22 April 2022 is invalid for Assessment Year 2018-2019 - HELD THAT: - The Court held that the impugned sanction recorded on 22 April 2022 was issued by the PCIT and not by the Principal Chief Commissioner of Income Tax (PCCIT). As the notices and order dated 22 April 2022 relate to Assessment Year 2018-2019 and were issued beyond a period of three years, the sanctioning authority prescribed by law for such reopening is the PCCIT. The proviso to Section 151, which might affect the sanctioning hierarchy, was inserted with effect from 1 April 2023 and therefore does not apply to the present matter. Relying on the Court's prior decisions referred to in the judgment, the sanction issued by the PCIT was found to be invalid, and consequently the notices and order issued pursuant to that sanction were unsustainable. [Paras 2, 4, 5]

The sanction by the PCIT is invalid; the notice under Section 148 and the order under Section 148A(d), both dated 22 April 2022, are quashed and set aside.

Final Conclusion: The impugned notice dated 22 March 2022 and the impugned notice and order dated 22 April 2022 issued pursuant to an invalid sanction are quashed and set aside; all rights and contentions are kept open.

Non-speaking order - violation of principles of natural justice - treatment of return as invalid under Section 139(9) of the Income Tax Act - remand for fresh consideration - opportunity to be heard

Non-speaking order - violation of principles of natural justice - Validity of the impugned order dated 29.12.2022 treating the returns as invalid - HELD THAT: - The impugned order at Annexure-D did not address or advert to the question whether the petitioner was carrying on a Business or engaged in a Profession and contained no reasons for treating the returns as invalid. The absence of reasons rendered the order non-speaking and in breach of the principles of natural justice. For that reason the order could not stand and required setting aside so that the matters in dispute may be considered with reasons and after affording appropriate opportunity to the petitioner. [Paras 6, 7]

Impugned order set aside as non-speaking and violative of natural justice

Remand for fresh consideration - opportunity to be heard - treatment of return as invalid under Section 139(9) of the Income Tax Act - Course to be followed after setting aside the impugned order - HELD THAT: - Having set aside the non-speaking order, the matter was remitted to the respondent No.1 for reconsideration afresh in accordance with law. The petitioner was granted liberty to file additional pleadings and documents and the respondent was directed to provide a sufficient opportunity of hearing and to examine the material on record before proceeding further. The remand is for fresh adjudication on the merits (including the question whether the petitioner is carrying on Business or Profession) and not for limited computation. [Paras 6, 7]

Matter remitted for fresh consideration; petitioner permitted to file additional documents and to be afforded opportunity of hearing

Final Conclusion: The petition is allowed; the order dated 29.12.2022 is set aside and the matter is remitted to the Assistant Director of Income Tax, CPC Bengaluru for fresh consideration in accordance with law after affording the petitioner adequate opportunity to file documents and be heard.

Violation of principles of natural justice - notice under Section 148A(b) and right to reply - non-receipt of statutory notice due to inactive e-mail - quashing of assessment order and consequential notices - remand for fresh consideration from the stage of issuance of notice under Section 148A(b) - maintainability of writ petition despite availability of alternative remedy where proceedings were ex parte

Maintainability of writ petition despite availability of alternative remedy where proceedings were ex parte - Petition was maintainable despite existence of an alternative remedy by way of appeal. - HELD THAT: - The Court found that the respondents' contention on non-maintainability could not be accepted because the impugned proceedings were effectively ex parte: the petitioner did not receive the notice under Section 148A(b) and therefore was not afforded a reasonable opportunity to submit replies or documents. Where an assessment process proceeds without providing sufficient and reasonable opportunity to the affected party, invoking remedies by way of appeal would be inadequate to remedy the denial of the right to be heard; consequently, the writ petition challenging such proceedings is maintainable. (See para 6.) [Paras 6]

Petition held maintainable.

Violation of principles of natural justice - notice under Section 148A(b) and right to reply - non-receipt of statutory notice due to inactive e-mail - quashing of assessment order and consequential notices - Impugned notices, assessment order and consequential proceedings were quashed on grounds of denial of opportunity and violation of natural justice. - HELD THAT: - The Court accepted the petitioner's submission that the notice under Section 148A(b) dated 14.03.2022 was not received because it had been sent to an e-mail address which had been inactive and closed for more than five years. As a result the petitioner could not file replies or participate in proceedings which culminated in the assessment order under Section 148A(d). The inability to file a response was held to be for bona fide reasons and unavoidable circumstances. Given the lack of service and absence of opportunity to be heard, the proceedings were found violative of the principles of natural justice, warranting quashing of the impugned notices and orders. The Court therefore quashed Annexures A1 to A6, B2, B3 and C. (See paras 3, 4, 7 and Order at para 8.) [Paras 3, 4, 7, 8]

Impugned notices and orders quashed for breach of natural justice.

Remand for fresh consideration from the stage of issuance of notice under Section 148A(b) - opportunity to file objections, documents and personal hearing - Matter remitted to the assessing authority for fresh consideration beginning from issuance of the notice under Section 148A(b), with liberty to the petitioner to file objections and be heard. - HELD THAT: - Given the quashing of the impugned orders for denial of opportunity, the Court directed that the proceedings be reopened from the stage of issuance of the notice under Section 148A(b) dated 14.03.2022. The petitioner was granted liberty to file objections, documents and replies to that notice, and the assessing authority was directed to provide personal hearing and proceed in accordance with law. This remand contemplates fresh consideration consistent with statutory procedure and observance of the right to be heard. (See paras 7-8.) [Paras 7, 8]

Matter remitted for fresh consideration from the stage of the Section 148A(b) notice; petitioner entitled to file objections and be given personal hearing.

Final Conclusion: Writ petition allowed; impugned notices and orders for Assessment Year 2018-19 (Annexures A1-A6, B2, B3 and C) quashed for failure to afford opportunity and breach of natural justice, and the matter is remitted to the assessing authority to proceed afresh from issuance of the Section 148A(b) notice dated 14.03.2022, with liberty to the petitioner to file objections and be personally heard.

Admissibility of statement recorded under section 133A - Corroboration requirement for additions based on statements - Retraction by omission in return - Power to examine on oath under section 132(4) - Statement not on oath not binding

Admissibility of statement recorded under section 133A - Statement not on oath not binding - Addition cannot be sustained solely on a statement recorded under section 133A without corroborative evidence - HELD THAT: - The Tribunal noted that section 133A permits recording of statements useful or relevant to survey proceedings but does not provide for examination on oath; statements recorded under section 133A therefore do not carry the automatic evidential weight of statements recorded on oath under section 132(4). Reliance upon judicial pronouncements in Paul Mathews & Sons and CIT v. S. Khader Khan Son was placed to the effect that power to examine on oath is specifically conferred by section 132(4) in search/seizure cases and is not available under section 133A. Applying these principles, the Tribunal observed that the impugned addition of the declared sum rested solely on the partner's statement recorded during survey and there was no independent or corroborative material showing existence of errors or omissions in books, records or documents. In absence of such corroboration, the statement recorded under section 133A could not by itself sustain an addition to income. [Paras 4, 5, 6, 7]

The addition founded solely on the statement recorded under section 133A and unsupported by corroborative evidence is reversed.

Retraction by omission in return - Corroboration requirement for additions based on statements - Omission of the admitted amount in the return constitutes retraction of the admission recorded under section 133A and corroboration cannot be inferred from mere prior admission - HELD THAT: - The Tribunal held that an admission made in a statement under section 133A can be retracted by non-inclusion of the admitted sum in the return of income; there is no statutory requirement that such retraction must be in writing. Given that the assessee offered the other amounts admitted during survey in the return but omitted the impugned sum because no error or omission was found in records, that omission amounted to a retraction such that the department needed independent corroborative material to sustain an addition. Consequently, absence of evidence of errors/omissions in records meant the earlier admission could not be the sole basis for assessment. [Paras 6, 7]

The omission of the impugned amount from the return is a valid retraction of the section 133A admission; therefore the addition cannot be sustained without corroboration.

Final Conclusion: The Tribunal allowed the appeal, holding that the addition of the impugned sum for AY 2014-15, being founded only on a statement recorded under section 133A and lacking corroborative evidence (and notwithstanding the assessee's retraction by omission in the return), could not be sustained and is consequently reversed.

Condonation of delay - Sufficient cause for extension of limitation - Statutory limitation under section 249(2) - Inordinate delay and want of diligence - Burden on applicant to explain delay - Liberal approach tempered by reasonableness - Dismissal in limine for being time barred

Condonation of delay - Sufficient cause for extension of limitation - Burden on applicant to explain delay - Inordinate delay and want of diligence - Dismissal in limine for being time barred - Whether the delay of approximately 2086 days in filing the appeal before the CIT(A) was supported by sufficient cause and whether the CIT(A)'s dismissal of the appeal in limine on limitation grounds should be upheld. - HELD THAT: - The assessment order for AY 2013-14 was passed on 22/03/2016 and communicated on 30/03/2016; an appeal before the CIT(A) was filed on 15/01/2022, resulting in a delay of about 2086 days beyond the period prescribed by section 249(2). The assessee furnished no application, affidavit, or corroborative evidence explaining the delay; there was no pleading of inadvertence or lack of knowledge, nor any step taken during the intervening period to demonstrate vigilance. Even after excluding the two years of COVID 19 relief, a substantial unexplained delay remained. Relying on established principles that a liberal approach to condonation must be tempered by reasonableness and that the burden lies on the applicant to demonstrate a sufficient cause, the Tribunal found the explanation absent and the conduct of the assessee indicative of negligence and non vigilance. The Tribunal applied the cited precedents and concluded that, in the absence of any satisfactory explanation or supporting evidence, the appellate authority was correct to dismiss the appeal in limine as time barred and that condonation could not be granted. [Paras 7, 9, 10, 11]

The CIT(A)'s order dismissing the appeal in limine for being barred by limitation is upheld and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s dismissal of the assessee's appeal as time barred for AY 2013-14, finding no sufficient cause on record to condone the inordinate delay of approximately 2086 days and dismissing the appeal accordingly.

Treatment of sale proceeds as capital gains - treatment of sale proceeds as business income - adventure in the nature of trade - intent to engage in trading activity - sale of developed plots versus realisation of capital investment

Treatment of sale proceeds as capital gains - treatment of sale proceeds as business income - adventure in the nature of trade - intent to engage in trading activity - sale of developed plots versus realisation of capital investment - Income arising from sale of the agricultural land (divided into plots and sold) is to be treated as capital gains and not as business income. - HELD THAT: - The Tribunal found as undisputed that the assessee divided the land into smaller extents and sold them and that the land was situated within the municipal limits. The assessee, however, had not carried on any real estate business nor shown an intention to engage in trading activity; this was a single transaction. Applying the principle in Kasturi Estates (sale of developed plots may still be realisation of a capital investment where there is no material evidence of trading intent), the Tribunal concluded there was no material to treat the transaction as an adventure in the nature of trade. On that basis the Tribunal held that the receipts from the sale should be treated as capital gains and not as business income, and directed the Assessing Officer to compute the income accordingly. [Paras 7, 8]

The addition treating the receipts as business income is set aside and the entire sale consideration shall be treated as capital gains; the appeal is allowed.

Final Conclusion: Tribunal allowed the appeal, holding that sale proceeds from the divided agricultural land are assessable as capital gains (not business income) and directing the Assessing Officer to treat the entire sale consideration as capital gains for AY 2018-19.

Treatment of cash deposits as unexplained credit under section 68 - application of section 68 read with section 115BBE - onus on assessee to explain source of credits - double addition / double taxation of same receipt - rejection of books of account - assessment cannot rest on suspicion, conjecture and surmise

Treatment of cash deposits as unexplained credit under section 68 - double addition / double taxation of same receipt - onus on assessee to explain source of credits - rejection of books of account - assessment cannot rest on suspicion, conjecture and surmise - Sustainability of addition treating cash deposits during demonetisation as unexplained income where corresponding cash sales were recorded, purchases accepted and books of account were not rejected. - HELD THAT: - The Tribunal examined whether cash deposits of Rs. 1,36,90,000/- treated as unexplained credit under section 68 read with section 115BBE could be sustained despite the assessee having recorded corresponding cash sales in the trading account and having declared resulting profits in the return. The assessee produced books of account, VAT returns, purchase documents (including import bills of entry and evidence of payment through banking channel and customs duty), and month wise purchase and sales registers to show that purchases, reduction in stock and profits corresponded with the cash sales. The Assessing Officer and CIT(A) rejected the explanation primarily on the basis of a sudden increase in cash sales in the relevant year; however, no specific defect was found in the books of account and the books were not rejected under the provisions that permit such action. The Tribunal held that the issue was essentially one of fact requiring cumulative appraisal of evidence and that the assessee had discharged the explanatory onus under section 68 by demonstrable direct and circumstantial evidence. Where the same receipts had already been assessed as sales/profits, treating the identical amounts again as unexplained credits under section 68 would amount to a double addition. The Tribunal reiterated the principle that an assessment cannot be founded merely on suspicion, conjecture or surmise and that wide powers of the Revenue do not permit assessment on pure guesswork. Having regard to the acceptance of purchases and stock movements and the absence of rejection of books, the Tribunal concluded that the addition was based on conjecture and was unsustainable. [Paras 10, 11, 12]

Impugned addition treating the cash deposits as unexplained income is vacated and directed to be cancelled; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2017-18, setting aside the addition of cash deposits treated as unexplained income where corresponding cash sales were recorded, purchases and stock movements were accepted and the books of account were not rejected, holding that the addition rested on suspicion and would amount to double taxation.

Strict compliance versus substantial compliance - conditional refund of 4% Additional Duty of Customs (SAD/ADC) - role of Chartered Accountant's certificate as verification and rebuttable presumption - prevention of unjust enrichment / double benefit - procedural discrepancies not to defeat substantive exemption

Strict compliance versus substantial compliance - role of Chartered Accountant's certificate as verification and rebuttable presumption - procedural discrepancies not to defeat substantive exemption - prevention of unjust enrichment / double benefit - Whether the refund claim of SAD/ADC paid on imported goods must be rejected for absence of prescribed declarations and perceived documentary discrepancies, or whether substantial compliance and CA certification suffice to allow the refund subject to verification and prevention of unjust enrichment. - HELD THAT: - The Tribunal applied the principle that clear statutory prerequisites essential to the object of the statute must be strictly complied with, while procedural or directory requirements may be met by substantial compliance (para 4). The post import conditional refund mechanism aims to prevent double benefit to buyers who might claim CENVAT credit; the declaration requirement serves that object (para 6). However, where the claimant is a trader not registered to issue Cenvatable invoices and the invoices do not enable a buyer to take credit, the statutory purpose is not defeated. A Chartered Accountant's certificate, when furnished, creates a rebuttable presumption of compliance and permits the revenue to test and verify the claim rather than reject it summarily (para 5). The Tribunal relied on the precedent of a larger Bench (Novo Nordisk) holding that substantive benefit of an exemption should not be denied on mere procedural or technical infractions and that refund may be admissible despite absence of the declaration on invoices, subject to the test of unjust enrichment (para 6). The particular deficiency noted here - non mention of period particulars in the CA certificate - was held to be readily verifiable by the department (for example by inquiry to the CA or physical verification) and therefore insufficient to warrant outright rejection of the claim (para 7). Following the determinative reasoning and binding precedent, the impugned order was set aside and the appeal allowed, with consequential relief, while preserving the department's power to verify and guard against enrichment (para 8). [Paras 4, 5, 6, 7, 8]

Impugned order rejecting the refund claim was set aside and the appeal allowed; appellant entitled to refund subject to departmental verification and the safeguard against unjust enrichment.

Final Conclusion: The Tribunal allowed the appeal, holding that procedural deficiencies and absence of prescribed invoice declarations did not justify denial of the SAD/ADC refund where substantial compliance and a CA certificate were furnished; the department may verify the claim and guard against unjust enrichment.

Determination of Fe content on Wet Metric Tonne basis - conversion of Fe percentage from Dry Metric Tonne to Wet Metric Tonne using the formula Fe x (100-M)/100 - classification of iron ore fines based on Fe content - export duty applicability and exemption under Notification No. 15/2016-Customs - finalisation of provisional assessment and refund of excess duty

Determination of Fe content on Wet Metric Tonne basis - conversion of Fe percentage from Dry Metric Tonne to Wet Metric Tonne using the formula Fe x (100-M)/100 - classification of iron ore fines based on Fe content - Fe percentage for classification and levy of export duty is to be determined on Wet Metric Tonne (WMT) basis by converting DMT figures where necessary. - HELD THAT: - The Tribunal examined whether Fe% must be taken on Dry Metric Tonne (DMT) or on Wet Metric Tonne (WMT). It followed earlier CESTAT decisions and the principle in Union of India v. Gangadhar Narsingdas Aggarwal and CBEC guidance that for the period prior to the Supplementary Note effective 01.05.2022 the Fe content for classification and duty assessment is to be determined on WMT (i.e., on 'as presented' basis). The Tribunal directed that where test reports state Fe on DMT, the universally recognised conversion formula Iron content = Fe x (100 - M) / 100 (where M is moisture%) shall be applied to arrive at Fe on WMT. Applying that method to the appellant's lab certificate (Fe 62.22% DMT; moisture 7.24%) yields Fe on WMT of 57.71%, which falls below the threshold attracting higher duty. The Tribunal therefore held that the proper basis for classification and duty determination for the shipments in question is WMT and not DMT, and that the assessing authority erred in relying on DMT figures without conversion to WMT. [Paras 12, 13, 14]

Fe% to be determined on WMT basis by applying the formula Fe x (100-M)/100; on that basis the Fe% in the present shipment is below 58% and the higher export duty is not leviable.

Finalisation of provisional assessment and refund of excess duty - remand for finalisation on basis of WMT determination - Provisional assessments to be set aside and remanded for finalisation on the basis of Fe determination on WMT, with consequential refund if any excess duty was paid. - HELD THAT: - Having held that Fe% must be calculated on WMT and having accepted the appellant's converted WMT figure which brings Fe below the chargeable threshold, the Tribunal set aside the impugned assessment and finalisation order and remanded the matter to the adjudicating authority to finalise the provisional assessment in accordance with these directions. The adjudicating authority was directed to finalise the provisionally assessed shipping bill within one month of receipt of the Tribunal's order and to refund any excess duty paid on finalisation within one month thereafter. [Paras 15]

Impugned orders set aside; matter remanded for fresh finalisation on WMT basis and any excess duty paid to be refunded within the timelines directed.

Final Conclusion: The Tribunal allowed the appeal, holding that Fe content for classification and export duty applicable to the shipments must be determined on Wet Metric Tonne basis (converting DMT figures by the formula Fe x (100-M)/100), set aside the impugned assessment and finalisation order, and remanded the matter for finalisation in accordance with these directions with refund of any excess duty paid.

Anticipatory bail - bill of entry - dutiable event - import - imported goods - definition of importer - premature action by Customs - custodial interrogation - co-operation with investigation

Bill of entry - dutiable event - import - premature action by Customs - Whether, in absence of filing of bill of entry, the Customs action to treat the goods as misdeclared and to invoke penal consequences is premature. - HELD THAT: - The Court examined the statutory scheme defining import, imported goods and the definition of importer, and noted that entry of goods on importation is completed only on presentation of the bill of entry to the proper officer. Relying on the principle that the dutiable event involves both arrival at customs barriers and the filing of bill of entry, the Court found that in the present matter no bill of entry had been filed and the goods were diverted to a different destination. The materials and the respondent's reply show only suspicion and statements of probability regarding involvement of the applicant. In these circumstances the Court held that prima facie the action of the Customs Authority to treat the import as misdeclared and to invoke penal consequences was premature. [Paras 9, 10, 11, 12, 13]

Action by Customs to treat the goods as misdeclared and to found penal consequences is premature in absence of filing of bill of entry; prima facie conclusion of smuggling on the available material cannot be sustained.

Anticipatory bail - custodial interrogation - co-operation with investigation - Whether the applicant should be granted anticipatory bail and whether custodial interrogation is necessary. - HELD THAT: - On the facts that the goods were seized and are in possession of the Customs Authority, that no bill of entry had been filed, and that the respondent's case at present rests on suspicion and probability, the Court concluded there was no prima facie need for custodial interrogation of the applicant. The Court accepted the applicant's offer to cooperate and to produce documents, and applied the principle of minimising unnecessary custodial detention. Accordingly, anticipatory bail was allowed subject to conditions including attendance at Customs office on specified days, cooperation with investigation and non-interference with witnesses or evidence. [Paras 12, 13]

Anticipatory bail granted; custodial interrogation not required; applicant to be released on bail in event of arrest and to comply with conditions of cooperation and attendance.

Final Conclusion: Application for anticipatory bail is allowed: in view of absence of bill of entry and the prima facie nature of the allegations the Court held Customs action to be premature and unnecessary custodial interrogation was declined; bail is granted subject to specified conditions of attendance, cooperation and non-interference.

Binding effect of adjudicating authority's approval of a resolution plan - extinguishment of claims under an approved resolution plan - operational creditors' claims extinguished for failure to submit proof of claim - treatment of sub-judice claims in a resolution plan - Section 151 CPC-inherent power to dismiss infructuous suits

Production of resolution plan and related documents - duty to obtain record from NCLT - Application for production of Resolution Plan, list of operational creditors and related documents disposed of on grounds that necessary documents were supplied and no requisition was made to obtain full copy from NCLT. - HELD THAT: - The plaintiff sought directions to the defendant to place on record the Resolution Plan (in full), lists of undisputed documents and operational creditors and to specify payments made. The defendant had furnished printouts of Clause 1 and Clause 3 of the Resolution Plan and the list of operational creditors on 08.07.2024; the plaintiff later contended Clause 3 was not supplied in full but admitted no requisition had been made since the last hearing and made no effort to procure the Resolution Plan from the NCLT. The Court found that documents necessary for adjudication of IA No. 2769/2022 had been supplied to the plaintiff and noted the plaintiff's failure to seek the plan from the NCLT, accordingly disposing of the application for production of documents. [Paras 6]

Application disposed of as documents needed for adjudication were supplied and plaintiff failed to obtain full plan from NCLT.

Extinguishment of claims under an approved resolution plan - operational creditors' claims extinguished for failure to submit proof of claim - treatment of sub-judice claims in a resolution plan - binding effect of adjudicating authority's approval of a resolution plan - Suit dismissed on account of the Resolution Plan approved by the NCLT having extinguished the plaintiff's claim as an operational creditor which was not part of the plan. - HELD THAT: - The defendant moved for dismissal under Order VII Rule 11 CPC and for exercise of inherent powers under Section 151 CPC, contending that the NCLT-approved Resolution Plan treated operational creditors' claims (including sub-judice claims) as "operational debt" with liquidation value NIL, and prescribed that failure to submit claims prior to the Closing Date would result in immediate, irrevocable and unconditional extinguishment and waiver of such claims. The plaintiff was not listed among the operational creditors and had not filed a claim. The Court analysed Clauses 3.3.1, 3.3.2, 3.3.3, 3.3.6 and 3.3.7 of the Resolution Plan which (i) provided that sub-judice and other operational claims would be deemed owed as of the Closing Date but with liquidation value NIL, (ii) required extinguishment of obligations and legal proceedings relating to pre-Closing Date claims not included or not submitted, and (iii) restrained operational creditors from continuing proceedings pending Closing. Reliance on the NCLT's observation in paragraph 27 of its order (which addressed financial creditors under Clause 3.2) did not assist the plaintiff who is an operational creditor governed by Clause 3.3. The Court applied the principle in Ghanshyam Mishra that approval of a resolution plan binds the corporate debtor and its creditors and extinguishes claims not part of the plan. The Court rejected the plaintiff's reliance on Elecon (which concerned liquidation) as inapplicable. Exercising its power under Section 151 CPC to address subsequent events rendering litigation infructuous, the Court held that the subsequent approval and implementation of the Resolution Plan had made the relief claimed in the Suit unsustainable. [Paras 23, 24, 28, 30, 31]

Application allowed; Suit dismissed as the plaintiff's claim stood extinguished pursuant to the approved and implemented Resolution Plan and the Suit had become infructuous.

Final Conclusion: The application for production of documents was disposed of as adequate material had been supplied and the plaintiff had not sought the plan from the NCLT; independently, the Court exercised its inherent power to dismiss the Suit as the NCLT approved and implemented Resolution Plan extinguished the plaintiff's operational creditor claim which was not part of the plan, and the Suit was therefore dismissed with no order as to costs.

Stay of arbitral award - temporary injunction restraining interference with possession - challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - vacation court advancement / expedited hearing - opportunity of hearing / audi alteram partem

Stay of arbitral award - temporary injunction restraining interference with possession - opportunity of hearing / audi alteram partem - vacation court advancement / expedited hearing - Validity of the Commercial Court's interim order of 18-10-2023 which stayed operation of the arbitral award subject to a 5% security deposit and granted a temporary injunction restraining the petitioner from disturbing the respondent's possession. - HELD THAT: - The High Court examined whether the vacation Court's advancement and the interim order were passed in such haste or without affording the petitioner an opportunity to be heard so as to merit interference. The court found that the petitioner had filed objections to the interlocutory applications and was heard on 17-10-2023 before the vacation Bench; the record shows consideration of the petitioner's submissions and specific findings by the trial Court on maintainability of injunction and on the question of possession. Given that the order impugned was interim in nature and that both parties' contentions were considered by the Court seized of the Section 34 challenge, the High Court declined to disturb the exercise of discretion by the trial Court. The High Court nevertheless left all substantive contentions open for determination by the concerned Court on merits. [Paras 10, 11]

Writ petition dismissed; no interference with the trial Court's interim exercise of discretion; substantive contentions to be determined by the concerned Court.

Final Conclusion: The petition is dismissed; the High Court found no infirmity in the vacation Court's consideration of objections or in its interim exercise of discretion and left substantive issues open for determination by the concerned Court; interim order subsisting stands dissolved.

IBC moratorium under Section 14 - operative effect of welfare statutes (Slum Act) over insolvency protection - obligation arising from Letter of Intent to provide rehabilitation units and transit rent - preferential right of owner to self-redevelop - equity and public interest in slum rehabilitation

IBC moratorium under Section 14 - operative effect of welfare statutes (Slum Act) over insolvency protection - equity and public interest in slum rehabilitation - Whether the pendency of a CIRP and the moratorium under the IBC can operate so as to prevent or defeat the operation of proceedings under the Slum Act for declaration of slum rehabilitation area, acquisition and redevelopment and thereby postpone the statutory rights of slum dwellers. - HELD THAT: - The Court rejected the contention that Section 14 moratorium can be used to block or displace the operation of the Slum Act so as to indefinitely deny slum dwellers transit rent, redevelopment or other statutory protections. While recognising the purpose of Section 14 of the IBC to protect the assets of a corporate debtor, the Court held that the IBC cannot be invoked to defeat or override welfare statutes enacted to protect individual citizens. The Court relied on its prior decisions in which identical submissions were repelled and explained that permitting the moratorium to prevail would unjustly privilege corporate wrongdoing and allow a defaulting developer to use the CIRP process as a shield against obligations under the Slum Act. The Court distinguished the limited transactional effect of Section 14 emphasised in P Mohanraj, noting that P Mohanraj does not suggest that the operation of a statute can be stayed by Section 14, and reiterated that public interest and equity in slum rehabilitation must prevail in such circumstances. [Paras 16, 17, 18, 19]

The IBC moratorium under Section 14 cannot be allowed to defeat or postpone the statutory operation of the Slum Act and the statutory rights of slum dwellers; the petition's contention to that effect is repelled.

Obligation arising from Letter of Intent to provide rehabilitation units and transit rent - preferential right of owner to self-redevelop - Whether the RP, claiming to protect the corporate debtor's asset, can assert or preserve free-sale development rights or a fresh preferential right to self-redevelop despite the developer's breach of the Letter of Intent and failure to perform statutory obligations. - HELD THAT: - The Court held that acquisition of an LoI by the developer created consequential obligations to provide rehabilitation units and interim benefits (such as transit rent) to eligible slum dwellers; those obligations are condition precedent to any free-sale benefit. The RP's argument that the asset must be preserved for the corporate debtor without addressing how preservation will serve the statutory beneficiaries was criticised as missing the cardinal point. The Court further rejected the submission that Truly Creative (or its successors) should be granted a renewed preferential right to self-redevelop once the LoI has been cancelled: an owner's preferential right to self-develop is only relevant where the owner has not previously been given or availed itself of the right to develop, which is not the case here. [Paras 21, 22, 23]

The RP cannot claim preservation of free-sale development rights or a new preferential right to self-redevelop in a manner that defeats the statutory obligations under the LoI; Truly Creative is not entitled to retain the free-sale benefit after breaching the LoI.

Equity and public interest in slum rehabilitation - abuse of process - Whether the Writ Petition filed by the Resolution Professional was maintainable or amounted to an abuse of the process of the Court warranting dismissal. - HELD THAT: - The Court characterised the Petition as a complete abuse of process, noting the RP's conduct in seeking to delay proceedings and treating the Court as obliged to wait for respondent affidavits, as well as the Petition's attempt to paper over the developer's defaults. The Court recorded displeasure at the RP's approach, observed that relevant respondents (SRA and State) did not consider an affidavit necessary, and found no merit in the RP's submissions. Having examined the arguments and legal position, including the interplay between the IBC and the Slum Act, the Court found the Petition unsustainable. [Paras 3, 4, 24]

The Petition is dismissed as an abuse of process and has no merit.

Final Conclusion: The Writ Petition filed by the Resolution Professional is dismissed as an abuse of the process of the Court; the IBC moratorium under Section 14 cannot be used to defeat or postpone the operation of the Slum Act or the statutory rights of slum dwellers, and the RP's claims to preserve free-sale development rights or a fresh preferential right to self-redevelop after breach of the LoI are rejected.

Dependency of PMLA prosecution on predicate offence - Quashing of predicate offence bars money laundering proceedings - Finality of Supreme Court quash order - Standalone nature of PMLA offence (contention)

Dependency of PMLA prosecution on predicate offence - Quashing of predicate offence bars money laundering proceedings - Finality of Supreme Court quash order - Validity of ECIR/PMLA proceedings against the petitioner after quash of the predicate criminal proceedings by the Supreme Court - HELD THAT: - The Court examined whether proceedings under the Prevention of Money Laundering Act, 2002 could be sustained against the petitioner when the predicate criminal proceedings (C.C. No.14 of 2019) were quashed by the Hon'ble Supreme Court by order dated 23.04.2024. The respondent relied on the contention that PMLA is a standalone offence and prosecution under it can proceed irrespective of the accused's status in the predicate offence. The Court, however, followed the binding principle in Vijay Madanlal Choudhary v. Union of India to hold that an offence under Section 3 of the PMLA is dependent on illegal gain of property resulting from a scheduled offence and that authorities cannot prosecute on a notional basis without a registered scheduled offence pending enquiry/trial. Where the criminal case constituting the scheduled offence is quashed by a competent court, there can be no offence of money laundering against the person in respect of that property. Applying that principle to the present facts, and having regard to the Supreme Court's quash order which specifically quashed the proceedings against the petitioner, the Court concluded that the ECIR proceedings recorded in ECIR No.CEZO I/35/2020 could not be sustained insofar as the petitioner is concerned. [Paras 7, 8]

ECIR No.CEZO I/35/2020 dated 22.06.2020 quashed insofar as the petitioner is concerned.

Final Conclusion: The petition is allowed and the Enforcement Directorate proceedings recorded in ECIR No.CEZO I/35/2020 dated 22.06.2020 are quashed in respect of the petitioner, in view of the Supreme Court's quash of the predicate criminal proceedings and the principle that PMLA prosecution cannot survive after quashing of the scheduled offence.

Sabka Vishwas (Legal Dispute Resolution) Scheme 2019 - eligibility for SVLDRS benefit despite delayed payment - technical glitch on portal - substantial justice over procedural irregularity - bona fide payment made after extended deadline

Sabka Vishwas (Legal Dispute Resolution) Scheme 2019 - eligibility for SVLDRS benefit despite delayed payment - Whether payment made on 1st July 2020 could be treated as payment under the SVLDR Scheme and entitle the petitioner to issuance of Form SVLDRS 4. - HELD THAT: - The Court noted that the petitioner was otherwise eligible to declare dues under the SVLDR Scheme and the only controversy was whether payment made on 1st July 2020 fell within the Scheme. Having regard to the object of the SVLDR Scheme as a one time measure to liquidate past disputes and encourage disclosure, the Court held that procedural irregularity in the nature of the challan used does not defeat substantial justice where the payment was received by the Government. The petitioner regenerated a challan after the extension of the payment date to 30th June 2020 and, because the regenerated challan showed expiry as 1st July 2020, acted under a bona fide belief that payment on that date was permissible. The Court accepted that the delay was due to a technical glitch on the portal and that no mala fide could be attributed to the petitioner. In these circumstances, denying the benefit of the Scheme would be contrary to its object and result in injustice to an otherwise eligible declarant. The Court distinguished the Supreme Court decision relied upon by respondents on its facts, observed that respondents had not refunded the payment (thus having accepted it), and placed reliance on coordinate bench decisions to direct acceptance of the declaration and issuance of Form SVLDRS 4. [Paras 8, 10, 11, 12, 13]

Payment made on 1st July 2020 was to be treated as payment under the SVLDR Scheme in the facts of this case and respondents were directed to issue Form SVLDRS 4.

Final Conclusion: Communications rejecting the SVLDR declaration were quashed; revenue directed to issue Form SVLDRS 4 to the petitioner within four weeks of upload of the order.

Non-taxability of income from legal profession - person liable to pay service tax - liability on recipient - exemption under Notification No.25/2012-ST - liability in respect of senior advocates - recipient obligation - relegation to adjudicating authority for receipts other than advocacy

Non-taxability of income from legal profession - person liable to pay service tax - liability on recipient - exemption under Notification No.25/2012-ST - Income from practice of advocacy is not liable to the service tax demand raised in the impugned order and must be excluded. - HELD THAT: - The Court treated the legal position recorded in W.P. No. 26096/2022 (paragraphs 5 to 10) as determinative: Rule 2 of the Service Tax Rules and the exemption Notification operate such that individual advocates and firms of advocates are exempt from service tax in specified circumstances and, where applicable, the obligation to pay service tax falls on the recipient of legal services. Relying on those observations, the Court concluded that the demand insofar as it relates to income from the legal profession cannot be sustained and directed exclusion of such income from the demand. [Paras 5, 6]

Order set aside insofar as it relates to income from legal profession; such income excluded from the demand.

Relegation to adjudicating authority for receipts other than advocacy - adjudicatory consideration of agricultural receipts - Receipts other than income from advocacy (notably certain agricultural receipts indicated in the accounts) require fresh consideration by the adjudicating authority and are not finally decided by this Court. - HELD THAT: - The respondents pointed out that the income and expenditure accounts for the relevant years indicate certain agricultural receipts which may fall outside the scope of the non-taxability finding. The Court therefore set aside the impugned order and remitted the matter to the adjudicating authority for hearing after issuance of show cause notice, permitting the petitioner to file a fresh reply in respect of receipts other than from advocacy. The Court did not adjudicate on the taxability of those receipts and left all contentions open for the adjudicating authority to decide. [Paras 3, 6]

Matter relegated to adjudicating authority for fresh hearing on receipts other than from legal practice; petitioner permitted to file fresh reply.

Final Conclusion: Impugned order set aside to the extent it demands service tax on income from legal practice; matters relating to other receipts (including indicated agricultural receipts) remitted to the adjudicating authority for fresh consideration after show cause notice, with liberty to the petitioner to file a fresh reply.

Rebate of excise duty - fraudulent CENVAT credit and use of fake invoices - merchant exporter complicity and collusion in paper transactions - recovery of erroneously granted rebate and imposition of penalty - appellate order versus revisionary assessment on the basis of investigation - requirement of proof of duty payment on input goods for rebate claim

Rebate of excise duty - fraudulent CENVAT credit and use of fake invoices - merchant exporter complicity and collusion in paper transactions - recovery of erroneously granted rebate and imposition of penalty - Validity of the Revisional Authority's order setting aside the Commissioner (Appeals) and restoring the order-in-original which denied rebate and imposed recovery and penalties on the petitioners. - HELD THAT: - The High Court upheld the Revisional Authority's conclusion that a syndicate fabricated paper transactions and bogus central excise invoices, enabling processors to irregularly avail Cenvat credit which was then used to show duty payment on processed fabrics and to support rebate claims by the merchant exporter. The Revisional Authority's order is founded on investigation records, admissions by persons involved, seized documents (including blank invoice books and forged transport documents) and banking-trace evidence showing flow-back of payments, all indicating that goods and genuine duty payments did not pass through the chain as alleged. The Court found that the Commissioner (Appeals) erred in sustaining rebate merely because the exported finished goods physically left the exporter and earlier range-level verifications had certified duty particulars; a limited pre-export verification could not, the Revisional Authority correctly held, detect a multi-party conspiracy exposed only by a comprehensive investigation across the group of firms. Given the investigation's findings that the petitioners participated in and benefited from the fabricated transactions, the Revisional Authority was justified in confirming recovery of sanctioned rebate and restoration of penalties. The Court therefore refused to interfere with the revisionary order restoring the order in original. [Paras 5, 6, 7, 8]

The Revisional Authority's order setting aside the Commissioner (Appeals) and restoring the order-in-original to deny rebate and confirm recovery and penalties is upheld.

Appellate order versus revisionary assessment on the basis of investigation - requirement of proof of duty payment on input goods for rebate claim - Whether the precedents relied upon by the petitioners entitled them to rebate despite the investigative findings of a syndicate-level fraud. - HELD THAT: - The Court considered the petitioners' reliance on prior decisions that permitted rebate where there was no evidence of the exporter's complicity or knowledge of fraud and where duty payment on the exported goods was otherwise established. The Court distinguished those authorities on facts: here the comprehensive DGCEI investigation, corroborated by admissions and documentary evidence, established that the exporter and associated firms formed part of a conspiracy and that the apparent duty payments were the product of paper transactions. Thus the factual predicates for applying the cited precedents were absent. The High Court concluded that the earlier decisions are not applicable to the present facts where investigation disclosed collusion and fabricated documents supporting the rebate claims. [Paras 6, 7]

The precedents relied upon by the petitioners do not apply to these facts and cannot sustain the Commissioner (Appeals) order; the Revisional Authority was correct to restore the order in original.

Final Conclusion: The petition is dismissed; the High Court declines to interfere with the Revisional Authority's order restoring the order in original which denied the rebate, confirmed recovery of sanctioned rebate and restored penalties in view of the investigation's findings of a syndicate level fraud and the petitioners' complicity.

Refund of accumulated CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 - natural justice - notice under the second proviso to Section 35A(3) of the Central Excise Act, 1944 - post-audit note as departmental internal document - duty erroneously refunded - remand for fresh decision by Commissioner (Appeals)

Natural justice - post-audit note as departmental internal document - notice under the second proviso to Section 35A(3) of the Central Excise Act, 1944 - Whether withholding the departmental post-audit note and not issuing a separate show cause notice under the second proviso to Section 35A(3) before passing an order reducing refund violated principles of natural justice. - HELD THAT: - The Tribunal examined whether the Commissioner (Appeals) was obliged to supply the departmental post audit note to the appellant and issue a separate show cause within the time stipulated by Section 11A before passing an order requiring repayment of refund. The Bench noted that a departmental post audit note, being internal correspondence between wings of the department, need not invariably be furnished to an appellant; the department may use such a note in whole or in part in framing its appeal. Nevertheless, if the audit note materially forms part of the appeal memorandum or is relied upon by the Commissioner (Appeals) and is not incorporated in the appeal papers, it should normally be made available to the appellant unless the Commissioner (Appeals) records valid reasons for withholding it. A plain reading of the second proviso to Section 35A(3) shows that where the Commissioner (Appeals) is of the opinion that duty has been erroneously refunded, no order to recover such duty should be passed without giving the appellant notice within the time limit of Section 11A to show cause against the proposed order. The Tribunal further observed that the factual matrix - including whether the audit note was enclosed with the appeal memorandum, whether its allegations were part of the appeal, and whether a formal show cause was required and issued - was not sufficiently placed before the Tribunal because the appellant did not file cross objections and failed to attend the hearings before the Commissioner (Appeals). Given these lacunae and that the issues involve mixed questions of fact and law not addressed below, the Tribunal concluded that the matter required fresh consideration by the Commissioner (Appeals) applying the principles of natural justice. [Paras 5, 7, 8, 9]

Matter remanded to the Commissioner (Appeals) for fresh decision after affording the appellant a reasoned, time bound opportunity (oral and written) to meet the allegations, and for the lower authority to record reasons if the audit note is withheld; fresh decision to be rendered within ninety days.

Final Conclusion: The impugned orders are set aside and the appeals are remanded to the Commissioner (Appeals) for de novo disposal in accordance with the principles of natural justice; the Commissioner (Appeals) shall afford the appellant a reasonable and time bound opportunity to be heard and decide the matter within ninety days.

Eligibility of input service credit for reverse charge under Section 66A - burden of proof for admissibility of CENVAT credit - nexus requirement between input services and manufacture of final products - scope of 'input service' prior to amendment w.e.f. 01/04/2011

Eligibility of input service credit for reverse charge under Section 66A - Credit of service tax paid under Section 66A was not barred per se and could be availed as CENVAT credit where the services qualified as input services. - HELD THAT: - The impugned order's proposition that service tax paid under Section 66A (reverse charge) is outside the definition of 'input service' was reviewed in light of Board clarifications. The adjudicating officer's categorical exclusion was found incorrect because the Board had clarified that service tax paid under Section 66A can be availed as input credit, subject to the condition that the services are used as input services by a manufacturer or provider of taxable output service. The OIO itself records that there is no bar on utilisation of such credit, though the question of distribution/settlement of credit may be a matter for the ISD distributor's end. The Tribunal accordingly accepted that the mere fact of reverse charge payment under Section 66A does not preclude claiming CENVAT credit where statutory conditions are satisfied. [Paras 5]

Service tax paid under Section 66A is not ipso facto ineligible for CENVAT credit; eligibility depends on satisfaction of conditions for input services.

Burden of proof for admissibility of CENVAT credit - Responsibility to establish admissibility of CENVAT credit lies with the recipient (manufacturer/provider of output service) and scrutiny of credit validity is to be carried out by the jurisdictional officer of the recipient. - HELD THAT: - Rule 9(5) (Cenvat Credit Rules, 2004) places the burden of proof regarding admissibility on the manufacturer/provider taking the credit, irrespective of whether the invoice originates from an ISD. The Tribunal relied on this rule and on precedents discussed in the OIO to hold that input service distributors are administrative offices and that examination of the validity of credit taken must be done by the recipient's jurisdictional authority. The appellant's contention that the ISD's registration jurisdiction alone could be called upon to resolve eligibility was rejected, and the plea on jurisdiction therefore failed. [Paras 6]

The recipient must discharge the burden of proving admissibility; jurisdictional scrutiny of claimed credit lies with the recipient's jurisdictional officer.

Nexus requirement between input services and manufacture of final products - scope of 'input service' prior to amendment w.e.f. 01/04/2011 - Denial of credit for lack of demonstration that input services were used in or in relation to manufacture could not be sustained on the record; given the pre-01/04/2011 expansive scope of 'input service' and absence of cogent reasons in the impugned order, credit was allowable. - HELD THAT: - The impugned order failed to set out specific facts or service wise reasons showing that the services covered by the ISD invoice were not used in or in relation to manufacture at the appellant's factory. Mere non-response to a revenue query was held insufficient. The Tribunal noted Circular No. 33/33/94-CX which disavows a strict 1:1 correlation between an input and a final product under the CENVAT scheme. Further, the demand related to 2009, i.e., before the amendment to the definition of 'input service' effective 01/04/2011, when the terms 'input' and 'input service' had broader scope. In absence of detailed reasoning in the impugned order and considering the broader pre-amendment scope, the Tribunal accepted the appellant's plea and found entitlement to credit. [Paras 7, 8]

Credit could not be denied for lack of demonstrated nexus where the order did not record cogent reasons and the broader pre-01/04/2011 scope of 'input service' applied; appellant entitled to credit.

Final Conclusion: Appeals allowed. The impugned order denying CENVAT credit, and imposing demand, interest and penalty, is set aside; appellant is entitled to consequential relief as per law.

Distribution of Cenvat credit by input service distributor - pro rata distribution on the basis of turnover - option to distribute (use of 'may') versus mandatory distribution (use of 'shall') - availability and utilisation of Cenvat credit at a single unit - imposition of demand, interest and penalty in adjudication

Distribution of Cenvat credit by input service distributor - option to distribute (use of 'may') versus mandatory distribution (use of 'shall') - availability and utilisation of Cenvat credit at a single unit - Whether the appellant was obliged under Rule 7 of the Cenvat Credit Rules to distribute service tax credit of input services among its manufacturing units for the period April 2009 to March 2012, or could utilise the entire credit at its Gummidipoondi unit. - HELD THAT: - The Tribunal applied the ratio of the Bombay High Court in Oerlikon Balzers Coating (supra) which examined Rule 7 as it existed both prior to and after the 2012 amendment. Rule 7, in both its pre-2012 and post-2012 forms relevant to the dispute, employed the expression 'may distribute the Cenvat credit', thereby granting the assessee the option whether to distribute input service credit among its units. The Tribunal noted that the Rule was only made mandatory by the substituted wording 'shall distribute the Cenvat credit' with effect from 01.04.2016. Consequently, for the period under consideration the appellant was entitled to avail and utilise the entire service tax credit at its Gummidipoondi unit without pro rata distribution to the Pune and Gurgaon units.

Appellant entitled to utilise the entire service tax credit at Gummidipoondi for the period April 2009 to March 2012; no obligation to distribute under Rule 7 for that period.

Imposition of demand, interest and penalty in adjudication - availability and utilisation of Cenvat credit at a single unit - Whether the demand of Cenvat credit, interest and penalty confirmed by the adjudicating authority could be sustained in view of the appellant's entitlement to retain and utilise the credit at the Gummidipoondi unit. - HELD THAT: - Having held that Rule 7 did not mandate distribution of input service credit during the impugned period and that the appellant was entitled to utilise the credit at a single unit, the Tribunal found the recovery of Cenvat credit, and the consequent imposition of interest and penalty in the impugned order, unsustainable. The Tribunal thus set aside the adjudicating authority's order and allowed consequential relief as per law.

Demand, interest and penalty confirmed by the impugned order set aside; appellant entitled to consequential relief.

Final Conclusion: The appeal is allowed: for the period April 2009 to March 2012 Rule 7 did not obligate distribution of input service credit, the appellant could utilise the entire service tax credit at its Gummidipoondi unit, and the demand, interest and penalty in the impugned order are set aside.

Penalty under Rule 26 of Central Excise Rules, 2002 - onus of proof on revenue to establish duty evasion - evidence required to impose penalty - blameworthy conduct - person includes company

Onus of proof on revenue to establish duty evasion - evidence required to impose penalty - Sufficiency of evidence produced by the Revenue to impose penalties on the appellants for alleged receipt of clandestinely removed ingots - HELD THAT: - The Tribunal held that the department bears the burden to establish, by methods known to law, that duty was evaded and to satisfactorily demonstrate the role of parties alleged to be involved. Only when sufficient direct or circumstantial evidence is disclosed may adverse inferences be drawn against noticees. In the present case the case against the appellants was founded on third party documents and statements recovered from the main noticee without corroborative material at the appellants' end (such as goods receipt registers, transport trip sheets, consignment notes, VAT assessments, books of account or transporter statements). The adjudication proceeded by grouping the thirteen consignee appellants together and relying on generalities in a single paragraph, without examining specific acts or blameworthy conduct of each appellant. Given the denials recorded and absence of corroborative evidence, the Revenue failed to prove the charge necessary to sustain imposition of penalties. [Paras 4, 6]

Penalties imposed on the appellants were unsustainable for want of sufficient evidence and the impugned order, insofar as it relates to the appellants, is set aside.

Penalty under Rule 26 of Central Excise Rules, 2002 - person includes company - Validity of imposing penalty under Rule 26 on companies and firms - HELD THAT: - The impugned adjudicating order relied on the proposition that 'person' under the Central Excise Act includes companies or associations and therefore penalty under Rule 26 can be imposed on companies. The Tribunal noted that while the adjudicating authority adverted to this legal position (citing a precedent), the ultimate imposition of penalty still required proof of blameworthy conduct by each penalised entity. The question of whether a company falls within 'person' as a matter of law was not sufficient, in the absence of evidence, to sustain penalty. The Tribunal's disposal focused on lack of proof rather than re litigating the statutory definition. [Paras 5, 6]

Even assuming a company may be a 'person' for imposition of penalty, penalties could not be sustained here because the Revenue failed to prove each appellant's culpability.

Evidence required to impose penalty - blameworthy conduct - Appropriateness of bunching multiple appellants together and deciding penalty on generalities - HELD THAT: - The Tribunal criticised the adjudicating authority for bundling the cases of multiple appellants and issuing a collective finding in a single paragraph without considering individual evidence or specific culpability. It held that penalties cannot rest on assumptions or presumptions drawn from third party documents alone where the alleged recipients have denied transactions and where no corroborative documentary or witness evidence links the consignments to the appellants. The lack of individualized findings on the role of each appellant rendered the collective imposition of penalty unsustainable. [Paras 6]

The approach of disposing of all appellants' cases by generalised findings was impermissible; the collective penalties are set aside for lack of individualized proof.

Final Conclusion: The impugned order imposing penalties under Rule 26 of the Central Excise Rules, 2002 on the appellants is set aside insofar as it relates to them, because the Revenue failed to discharge the burden of proving duty evasion or each appellant's blameworthy conduct by adequate corroborative evidence; appellants are entitled to consequential reliefs as per law.

Reliance on electricity consumption as sole basis for clandestine manufacture - requirement of corroborative evidence for establishing clandestine removal - inadmissibility of stock-shortage based on eye-estimation without weighment - legitimacy of Cenvat credit where supplier's liability was set aside in connected proceedings - imposition and quantification of penalty on corporate and director

Reliance on electricity consumption as sole basis for clandestine manufacture - requirement of corroborative evidence for establishing clandestine removal - Whether demand of duty quantified solely on estimated electricity consumption can be sustained - HELD THAT: - The Tribunal examined the Department's computation which presumed a fixed low electricity consumption per MT and found no corroborative evidence of unaccounted procurement, manufacture, removal, transportation, or receipt of sale proceeds. In view of settled precedent recognising that electricity consumption cannot be the sole or imaginary basis for fixing production and duty liability, the Tribunal concluded that demand founded primarily on electricity-consumption estimates is not sustainable. Accordingly the major portion of the demand calculated on that basis was set aside and the equivalent penalty was also vacated. [Paras 11, 12]

Demand and penalty founded on electricity-consumption estimates set aside

Requirement of corroborative evidence for establishing clandestine removal - Whether demand based on ledger pages and documents recovered from the Director can be confirmed - HELD THAT: - The documents recovered from the briefcase of the Director and his recorded statement admitting the transactions mutually corroborated each other. The Tribunal found no retraction and held that these materials furnish sufficient basis for liability in respect of the transactions recorded in those ledger pages and documents. On this discrete foundation the related duty, education cess and equivalent penalty were confirmed. [Paras 13, 14]

Demand and equivalent penalty based on ledger pages/documents accepted and confirmed

Reliance on electricity consumption as sole basis for clandestine manufacture - Whether demand in respect of risers and runners quantified on the basis of electricity consumption is sustainable - HELD THAT: - The Tribunal treated the allegation concerning risers and runners as linked to the same electricity-consumption methodology used for ingots. Having held that electricity-consumption alone cannot support a finding of clandestine manufacture or removal, the Tribunal set aside the demands and equivalent penalty relating to risers and runners. [Paras 15]

Demand and penalty in respect of risers and runners set aside

Inadmissibility of stock-shortage based on eye-estimation without weighment - Whether demand based on alleged shortage in raw material assessed by eye-estimation is sustainable - HELD THAT: - The officers conducted physical verification by eye-estimation without any weighment recorded in the panchnama and the SCN was silent on the methodology used to arrive at the shortage. Citing authorities and the absence of contemporaneous weighment or corroborative material, the Tribunal found the shortage allegation unsustainable and set aside the related demand and equivalent penalty. [Paras 16]

Demand and penalty based on alleged shortage set aside

Legitimacy of Cenvat credit where supplier's liability was set aside in connected proceedings - Whether Cenvat credit denial could be sustained where the supplier (KFPL) was exonerated in connected proceedings - HELD THAT: - The demand sought to deny Cenvat on the basis that supplies from the sister concern were paper transactions without actual movement. The Tribunal noted that in connected proceedings the Tribunal had held that KFPL had generated and cleared scrap (Final Order No.A/70724-70725/2018-EX(DB) dated 05/04/2018), thereby establishing receipt of scrap by the appellant. On that basis, and in the absence of contrary evidence of non-receipt, the Tribunal held the Cenvat credit to have been legitimately availed and set aside the demand and related penalty. [Paras 17, 19, 20]

Demand and penalty for alleged inadmissible Cenvat credit set aside

Imposition and quantification of penalty on corporate and director - Extent of penalty liability on the Director in view of partial setting-aside of the demand - HELD THAT: - Given that significant portions of the demand were vacated, the Tribunal exercised its discretion to reduce the personal penalty imposed on the Director. While the equivalent penalties corresponding to the set-aside demands were quashed, the Tribunal confirmed penalties where demands were sustained and reduced the personal monetary penalty on the Director to a specified lesser amount. [Paras 21]

Personal penalty on the Director reduced; equivalent penalties adjusted in accordance with set-aside and sustained demands

Final Conclusion: The Tribunal set aside the major demand and equivalent penalties that were premised solely on estimated electricity consumption, as well as demands based on eye-estimated stock shortages and the Cenvat-credit disallowance (the latter following the connected order in favour of the supplier). Demands and penalties founded on ledger documents and admissions of the Director were upheld. Consequent adjustment of penalties was made, including reduction of the Director's personal penalty.

Adjustment of refund towards amnesty settlement - Amnesty Scheme as a self-contained code and functus officio - application of judicial precedent permitting adjustment under amnesty - treatment of revenue recovery notices where settlement is effected

Adjustment of refund towards amnesty settlement - application of judicial precedent permitting adjustment under amnesty - Respondents were obliged to consider and allow adjustment of the refund due to the assessee towards the Amnesty Scheme settlement and to treat the opted assessment years as finally settled upon such adjustment. - HELD THAT: - The appellant's request for adjustment of a refund towards the Amnesty settlement was received before the last date for payment under the Scheme. In light of the Division Bench decision relied upon by the appellant, the respondents could lawfully permit adjustment of the refund for satisfying the Amnesty amount. The respondents' refusal to act on the request in the absence of a specific court direction was held not legally sustainable. The Court directed deduction of the Amnesty amount from the refund, treatment of the opted assessment years as finally settled, and utilisation of any remaining refund balance for outstanding dues in other years or future amnesty settlements. [Paras 5, 7, 8]

Allow adjustment of the Amnesty amount from the refund and treat the opted assessment years as finally settled; direct utilisation of the balance refund as indicated.

Amnesty Scheme as a self-contained code and functus officio - treatment of revenue recovery notices where settlement is effected - The Single Judge's conclusion that the authority became functus officio after passing an order under the Amnesty Scheme and therefore could not consider an alternate mode of payment was set aside. - HELD THAT: - The learned Single Judge had characterised the Amnesty Scheme as a complete code and treated the authority as functus officio once an amount under the Scheme was determined. This court concluded that such a characterization could not preclude consideration of an application to adjust a refund towards the Amnesty amount, particularly where a binding precedent permitted such adjustment and the request was made within the Scheme's timeline. Consequently, the finding that precluded any further option of payment was reversed and the impugned revenue recovery notices were set aside to the extent settlement was effected by adjustment. [Paras 4, 7, 8]

Set aside the Single Judge's functus-officio conclusion and permit adjustment and settlement as directed.

Final Conclusion: Writ Appeal allowed; impugned judgment set aside. Respondents directed to deduct the specified Amnesty amount from the refund due to the appellant, treat the assessment years opted under the Amnesty Scheme as finally settled, and apply any remaining refund balance against other outstanding dues or applicable future amnesty settlements.

Requirement of specific averment that a person was "in charge of, and responsible to, the company for the conduct of the business" - Offences by Companies - vicarious liability of directors - managing director deemed to be in charge of and responsible for conduct of company's business - pari materia with Section 141 of the Negotiable Instruments Act - cognizance of complaint

Requirement of specific averment that a person was "in charge of, and responsible to, the company for the conduct of the business" - pari materia with Section 141 of the Negotiable Instruments Act - Complaint lacked the specific averments required by sub section (1) of Section 50 to fasten liability on directors (accused 3 to 7). - HELD THAT: - The Court held that sub section (1) of Section 50 is pari materia with Section 141 of the NI Act and therefore the complaint must specifically aver that, at the relevant time, the persons accused were "in charge of, and responsible to, the company for the conduct of the business of the company." Paragraph 9 of the complaint merely pleaded that accused 3 to 7 were directors and were "conducting the business" and "looking after the day to day affairs," but did not aver that they were in charge of and responsible to the company at the time of the offence as required by the statutory formulation. Reliance was placed on the larger Bench decision in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which was held to require such specific averments and to negate any deemed liability of a director merely by virtue of directorship. In consequence, vicarious liability under Section 50(1) could not be attracted against accused 3 to 7 in the absence of the statutory averment. [Paras 6, 7]

Complaint quashed as against accused 3 to 7 for failure to allege the statutory averments under Section 50(1).

Managing director deemed to be in charge of and responsible for conduct of company's business - Offences by Companies - cognizance of complaint - Complaint was maintainable and ought to proceed against the first accused company and the second accused who was the managing director. - HELD THAT: - The Court observed that by virtue of the office, a managing director is regarded as being in charge of and responsible for the conduct of the company's business and therefore falls within the scope of Section 50(1). The averments in the complaint identifying accused No.2 as Managing Director were sufficient to attract liability against him. The Court found no recorded reason to quash the complaint as against the first accused (the company) or the second accused (the managing director) and held that proceedings should continue against them. [Paras 5, 8]

Complaint shall proceed according to law against the first accused (company) and the second accused (Managing Director).

Final Conclusion: The High Court order is modified: the complaint is quashed only as against accused 3 to 7 for failure to make the specific averments required by Section 50(1), while the complaint shall proceed against the first accused (company) and the second accused (Managing Director); appeals are partly allowed on these terms.