TaxTMI Updates e-Newsletter
Aug 07,2021

Time limitation under Section 100(2) of CGST Act, 2017 measured from communication of advance ruling - Restaurant service as defined in the tax rate notification - Distinction between sale of goods and supply of restaurant service - Taxation of composite supply versus taxation of individual goods - Applicability of 5% GST without input tax credit to restaurant services

Time limitation under Section 100(2) of CGST Act, 2017 measured from communication of advance ruling - The appeal filed by the Jurisdictional Officer was within time and not barred by limitation. - HELD THAT: - The Appellate Authority examined the date of communication of the Advance Ruling to the Jurisdictional Officer and the date of filing of the appeal. The 30 day limitation under sub section (2) of Section 100 is to be calculated from the date of communication of the order. The Advance Ruling was communicated on 30.03.2021 and the appeal was filed on 28.04.2021, which falls within 30 days of communication. The contention that limitation must be reckoned from the date of passing of the order (09.03.2021) was rejected. [Paras 5]

Appeal not time barred; maintainable.

Restaurant service as defined in the tax rate notification - Distinction between sale of goods and supply of restaurant service - Taxation of composite supply versus taxation of individual goods - Applicability of 5% GST without input tax credit to restaurant services - The outlets/premises of the applicant are not to be treated as providing 'restaurant service'; the earlier Advance Ruling so treating them is set aside and the items sold attract tax as individual goods. - HELD THAT: - The Authority analysed the definition of 'restaurant service' in the relevant notification and the factual character of the applicant's outlets. On the facts, the applicant operates bakery outlets where predominantly ready to eat items are sold over the counter and most items are sold as take away; few customers consume on premises and the outlets do not function as restaurants that prepare and serve meals to order. The submissions of the Jurisdictional and Concerned Officers that the premises are mere bakery outlets with self service/readily available items were accepted. Consequently, the prior Advance Ruling treating the supplies as 'restaurant service' attracting the concessional rate without input tax credit was found to be incorrect. The Authority set aside the AAR's rulings on the specified questions and held that the supplies will be taxable as individual items at their respective GST tariff rates. [Paras 5]

Rulings of the Authority for Advance Ruling on Questions (a), (c), (d)(iii) and (d)(iv) are set aside; items sold by the applicant are taxable as individual goods at their applicable GST rates.

Final Conclusion: The appeal is allowed; the AAR's findings treating the applicant's outlets as providing 'restaurant service' are set aside and the supplies shall be taxed as individual items at the applicable GST tariff rates. The appeal was held to be filed within the prescribed period and is maintainable.

Supply of services to members by RWA/housing society - Taxability of repair and maintenance fund and sinking fund - Exemption for maintenance charges up to Rs. 7,500 per month per member - Entire amount taxable where maintenance charges exceed Rs. 7,500 per month per member - Aggregate turnover threshold for GST registration

Supply of services to members by RWA/housing society - Taxability of repair and maintenance fund and sinking fund - GST applicability on Repair and Maintenance Fund and Sinking Fund collected by the housing co-operative society from its members - HELD THAT: - The Authority found that the applicant, an unincorporated non profit housing co operative society, supplies services to its members under the bye laws and collects consideration for those supplies (paras 5.6-5.7). The funds labelled as 'Repair and maintenance fund' and 'Sinking fund' fall within the scope of 'services' under the GST law and are therefore liable to tax subject to applicable exemptions and threshold conditions (para 5.7). The invoices produced show these heads charged separately; consequently, such amounts are within taxable supply if other conditions for taxation are met (paras 5.9-5.10). [Paras 5]

GST is applicable on Repair and Maintenance Fund and Sinking Fund (answered in the affirmative).

Exemption for maintenance charges up to Rs. 7,500 per month per member - Entire amount taxable where maintenance charges exceed Rs. 7,500 per month per member - Aggregate turnover threshold for GST registration - Whether the Rs. 7,500 per month per member exemption applies to the sinking fund and repair and maintenance fund components and the tax consequence when total charges exceed Rs. 7,500 - HELD THAT: - Relying on Notification No.12/2017 (as amended) and TRU Circular No.109/28/2019, the Authority noted the government intention that maintenance charges (by whatever name called) up to Rs.7,500 per month per member, when for common use of members, are exempt (para 5.7-5.8). The Circular further clarifies that if maintenance charges exceed Rs.7,500 per month per member, the exemption does not apply and the entire amount collected is taxable (para 5.10). Applying these principles to the applicant's sample bills, the Authority held that where the gross monthly amount per member exceeds Rs.7,500 the whole amount (including sinking fund and repair and maintenance fund components) is taxable; where the gross amount is within Rs.7,500 no GST is leviable (paras 5.11-5.12). The threshold for registration (aggregate turnover) is a separate requirement and does not negate the exemption rule (paras 5.2, 5.8). [Paras 5]

The Rs.7,500 per month per member exemption applies to the components only insofar as the gross amount collected per member does not exceed Rs.7,500; if the gross amount exceeds Rs.7,500 the exemption is not available and the entire amount recovered (including the two components) is taxable.

Final Conclusion: The Authority holds that (i) sinking fund and repair and maintenance fund collected by the housing co operative society are services liable to GST; and (ii) the statutory exemption for maintenance charges up to Rs.7,500 per month per member applies only when the gross amount per member does not exceed Rs.7,500, whereas if the gross amount exceeds Rs.7,500 the entire amount (including those components) is taxable.

Summons issued in proceedings under the Central Goods & Services Tax Act, 2017 (Section 70) - challenge to the validity of adjudicatory proceedings to be raised before the competent authority and not in writ proceedings - proceedings under the Act deemed to be judicial proceedings within the meaning of Section 193 and Section 228, Indian Penal Code

Summons issued in proceedings under the Central Goods & Services Tax Act, 2017 (Section 70) - challenge to the validity of adjudicatory proceedings to be raised before the competent authority and not in writ proceedings - Whether the petitioner can challenge the summons issued under Section 70 of the Central Goods & Services Tax Act, 2017 by way of writ petition without first appearing before the competent authority - HELD THAT: - The Court held that objections to the validity of proceedings initiated under Section 70 of the Act must be raised before the competent authority conducting those proceedings. The validity of the summons and the initiation of proceedings cannot be canvassed in the present writ petition as a substitute for participation in the statutory adjudicatory process. Consequently, the petitioner is required to appear before the competent officer and advance all points of objection in the course of those proceedings. The decision reflects the principle that statutory adjudicatory processes must be availed of and challenged within the forum and procedure provided by the statute where appropriate.

The writ petition seeking to quash the summons was dismissed as the proper course is to raise objections before the competent authority in the Section 70 proceedings.

Proceedings under the Act deemed to be judicial proceedings within the meaning of Section 193 and Section 228, Indian Penal Code - Whether proceedings under Section 70 of the Central Goods & Services Tax Act, 2017 constitute "judicial proceedings" for the purposes of Sections 193 and 228 IPC - HELD THAT: - The Court recorded that proceedings under Section 70 of the Act are to be regarded as "judicial proceedings" within the meaning of Sections 193 and 228 of the Indian Penal Code. This characterization underscores the formal legal consequences attached to the proceedings and the applicability of provisions relating to false evidence and related offences in the context of such proceedings.

Proceedings under Section 70 of the Act are deemed judicial proceedings within the meaning of Sections 193 and 228 IPC.

Final Conclusion: The petition challenging the summons issued in the Section 70 proceedings is dismissed; objections to the summons and the validity of the proceedings must be raised before the competent officer in the statutory proceedings, which are held to be judicial proceedings within the meaning of Sections 193 and 228 IPC.

Bail under Section 439 Cr.P.C. - compoundable offence - not required for further investigation - maximum punishment of five years - precedential bail to co-accused - wrongful availment of Input Tax Credit

Bail under Section 439 Cr.P.C. - not required for further investigation - compoundable offence - maximum punishment of five years - precedential bail to co-accused - Whether the accused petitioners should be released on bail in the FIR registered for alleged wrongful availment of Input Tax Credit under the CGST Act, 2017. - HELD THAT: - The Court considered that the complaint has already been filed against the petitioners, they have been in custody since 26.03.2021 and 27.03.2021 respectively, and indisputably are not required for further investigation. The Court noted that the maximum punishment for the offence alleged is five years and that the offence is compoundable though no compromise proceedings have been initiated. The Court also took into account that co-accused persons similarly implicated in the same racket were earlier released on bail by a Coordinate Bench and that that order has attained finality. Without expressing any opinion on the merits of the complaint, and applying these considerations, the Court found it just and proper to enlarge the petitioners on bail subject to conditions to ensure attendance and compliance with statutory safeguards under Section 437(3) Cr.P.C.

Bail granted to the accused-petitioners Manoj Vijay and Ravindra Vijay on furnishing specified personal bond and sureties, with directions to comply with the conditions under Section 437(3) Cr.P.C.

Final Conclusion: The bail applications are allowed and the petitioners are directed to be released on bail on furnishing the prescribed bond and sureties, subject to compliance with statutory conditions; no expression of opinion is made on the merits of the allegations.

Exemption from filing certified copies - exemption from filing duly affirmed affidavits - anticipatory bail under Section 438 Cr.P.C. - conditional interim protection subject to deposit of 10% of alleged liability - compliance with undertaking as condition for interim protection

Exemption from filing certified copies - exemption from filing duly affirmed affidavits - Applications for exemption from filing certified copies of annexures and from filing duly affirmed affidavits were allowed subject to conditions. - HELD THAT: - The Court allowed the petitioner's applications under Section 482 Cr.P.C. for exemption from filing the certified copy of annexures, permitting such exemption subject to just exceptions. The Court also granted exemption from the requirement of filing duly affirmed affidavits on the condition that the applicant shall file the required affidavits within two weeks from the resumption of physical courts. The applications were disposed of accordingly. [Paras 2, 3, 4]

Exemptions permitted subject to the court's stated conditions and timelines; applications disposed of.

Anticipatory bail under Section 438 Cr.P.C. - conditional interim protection subject to deposit of 10% of alleged liability - compliance with undertaking as condition for interim protection - Interim protection was granted to the applicant in anticipatory bail proceedings on condition of depositing specified instalments (together constituting 10% of the alleged liability after adjustment), filing an affidavit of undertaking, joining and cooperating with investigation, with automatic recall if the undertaking is not honoured. - HELD THAT: - Notice was issued in the anticipatory bail application under Section 438 Cr.P.C. The applicant disputed the stated liability but gave a specific undertaking to deposit 10% of the alleged liability after deducting an existing deposit, in instalments and within fixed dates, expressly relying on the Court's reference to the Supreme Court order in C. Pradeep v. The Commissioner of GST and Central Excise, Selam & Anr. . The undertaking was taken on record and the applicant was directed to place an affidavit to that effect within one week. Subject to the fulfillment of the deposit schedule, joining and cooperation with investigation, no coercive steps were to be taken till the next date of hearing. The Court further directed that failure to comply with the undertaking would result in automatic recall of the interim protection granted. [Paras 4, 5, 6, 7]

Interim protection granted on the stated conditions; automatic recall if conditions are not complied with.

Final Conclusion: The High Court allowed the applicant limited procedural exemptions and granted conditional interim protection in the anticipatory bail matter subject to the applicant's recorded undertaking to deposit specified instalments, file the requisite affidavit, and cooperate with investigation, with the protection to cease automatically on failure to comply.

Stay of recovery - conditional deposit for interim relief - maintainability of appeal upon statutory deposit - genuineness of transaction despite subsequent cancellation of registration - interim jurisdiction pending constitution of Tribunal

Stay of recovery - conditional deposit for interim relief - Interim stay of balance recovery subject to deposit of 20% of the tax in dispute. - HELD THAT: - The High Court entertained the petition in view of non-constitution of the Tribunal and granted interim relief by staying the balance recovery of the disputed tax on the condition that the petitioner deposits 20% of the amount of tax in dispute. The order records that 10% has already been deposited in terms of Section-107(6) of the Act and the petitioner expressed willingness to make the additional deposit. The stay is interlocutory and limited to recovery proceedings; no adjudication on the merits of the assessment or the validity of the tax demand was undertaken.

Balance recovery stayed on the petitioner depositing 20% of the disputed tax; interim and interlocutory relief only.

Maintainability of appeal upon statutory deposit - genuineness of transaction despite subsequent cancellation of registration - interim jurisdiction pending constitution of Tribunal - Matters concerning maintainability of the appeal and the substantive question of genuineness of transactions (in light of subsequent cancellation of the seller's registration) were not finally adjudicated and require further consideration. - HELD THAT: - The Court recorded the petitioner's submission that the seller's registration was valid at the time of purchase and that later cancellation would not affect the genuineness of the transactions. The Court did not resolve that contention on merits. It also noted the petitioner's position regarding deposit and the prospect of maintainability of an appeal before the Tribunal once constituted, but left these questions open for adjudication. Respondents were granted time to file a counter affidavit and the petitioner time for rejoinder, signalling that substantive issues will be considered on further pleadings and by the appropriate adjudicatory forum when constituted.

Substantive issues including maintainability and genuineness remitted for fresh consideration; no final decision on merits.

Final Conclusion: The High Court, while granting an interim stay of recovery conditioned on the petitioner depositing 20% of the disputed tax (in addition to an earlier 10% deposit), did not decide the substantive questions on maintainability of the appeal or the genuineness of transactions arising from subsequent cancellation of the seller's registration; those matters remain for further consideration after pleadings and before the appropriate forum.

Zero-rated supplies - unutilized input tax credit - refund of unutilized input tax credit - exports on letter of undertaking - provisional refund (90% provisional, balance within 60 days) - refund mechanism under Section 54 of the CGST Act - entitlement under Section 16(3) of the IGST Act

Refund of unutilized input tax credit - zero-rated supplies - exports on letter of undertaking - provisional refund (90% provisional, balance within 60 days) - Pending refund applications for unutilized input tax credit arising from zero-rated exports were directed to be decided by the adjudicating authority within a stipulated time in accordance with law and an earlier judgment of this Court. - HELD THAT: - The petitioner claimed entitlement to refund of unutilized input tax credit in respect of exports treated as zero-rated supplies, asserting the right to export on letter of undertaking and to claim refund under the statutory refund regime, including entitlement to a provisional refund followed by final adjudication. The Court noted that the petitioner's refund applications (GST RFD-01A) for the period October 2017 to July 2018 remained undisposed. Exercising supervisory jurisdiction, the Court did not decide the merits of the refund claims on the papers but directed the original adjudicating authority to decide the pending refund applications within six weeks in accordance with law and in particular the Court's earlier decision in Medical Bureau vs. Commissioner of Central Goods and Services Tax Delhi North & Ors., dated 10th November, 2020. The direction requires fresh consideration and disposal of the refund claims by the authority rather than an adjudication of entitlement by this Court. [Paras 9]

The adjudicating authority is directed to decide the petitioner's pending refund applications relating to October 2017 to July 2018 within six weeks in accordance with law and the Court's earlier judgment; the writ petition is disposed of accordingly.

Final Conclusion: Writ petition disposed directing the original adjudicating authority to decide the petitioner's pending refund applications for unutilized input tax credit (October 2017 to July 2018) within six weeks in accordance with law and the Court's earlier judgment dated 10th November, 2020.

Summary order. Writ petition seeking quashing of notices/orders under the Bihar Goods and Services Tax Act, 2017 and attachment of bank account dismissed as withdrawn on petitioner's prayer; interlocutory applications disposed of.

Electrically operated vehicles - Fitting of battery not a precondition - Classification under HSN 8703 - Applicability of concessional GST rate 5% - Advance ruling under Section 97

Electrically operated vehicles - Fitting of battery not a precondition - Classification under HSN 8703 - Applicability of concessional GST rate 5% - Whether two- or three-wheeled battery powered electric vehicles supplied without the battery pack qualify as 'electrically operated vehicles' and attract the concessional GST rate of 5% under the Notification. - HELD THAT: - The definition in the explanation to Entry No. 242A of Schedule-1 to Notification No. 01/2017-Central Tax (Rate) describes 'electrically operated vehicle' as one that runs solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles; such vehicles are designed to run only on electrical energy and derive propulsion from battery packs and electric motors. The Authority relied on the reasoning in Reva Electric Car Company Pvt. Ltd. which held that vehicles not fitted with batteries at the time of supply remain classifiable as battery-powered road vehicles where they are designed to run on battery power when put to use. The absence of a battery at the time of supply does not alter the essential character of a vehicle that is propelled solely by electrical energy when the battery is fitted and the vehicle is otherwise complete (motor, body, chassis present). Drawing an analogy to vehicles supplied with an empty fuel tank, non-installation of the energy-storage component at the time of supply does not change the nature of the goods where the item is constructed to operate solely on battery-derived electrical energy. On this basis, fitting of the battery at or before the time of supply is not a precondition for classification as an 'electrically operated vehicle' and for applicability of the concessional 5% GST rate under the Notification. [Paras 5, 6]

A two- or three-wheeled battery powered electric vehicle supplied with or without the battery pack is classifiable under HSN 8703 as an 'electrically operated vehicle' and taxable at 5% GST.

Final Conclusion: The Authority ruled that fitting of the battery at or before supply is not mandatory; two- and three-wheeled battery powered electric vehicles supplied with or without the battery pack qualify as 'electrically operated vehicles' and attract the concessional 5% GST rate.

Supply of service (including licence) - Consideration for supply - Regulatory fee versus taxable consideration - Classification under HSN Heading 9973 (licensing services for right to use telecommunication spectrum) - Applicability of rate notification and clarificatory amendment - Reverse charge mechanism - Non speaking order

Supply of service (including licence) - Grant of licence and allocation of spectrum by DoT constitutes a supply of service under GST. - HELD THAT: - The authority held that the terms 'licence' and 'outward supply' are specifically encompassed within the GST definitions and that granting permission to establish, maintain and work telegraphs and allocation of spectrum falls within service classification. Prior service tax entries and clarifications (including Circular No.192/02/2016) recognising periodic payments such as spectrum user charges and licence fees as taxable were noted. The supply is in furtherance of the appellant's business since licence and spectrum enable the appellant to carry on telecommunication services to customers; therefore GST liability attaches. [Paras 7]

Licence and spectrum allocation are taxable supplies of service.

Regulatory fee versus taxable consideration - License Fee (LF) and Spectrum Usage Charges (SUC) are not mere sovereign regulatory exactions but are consideration for taxable supply, and therefore not exempt as a regulatory fee. - HELD THAT: - The authority rejected the appellant's characterization of LF and SUC as sovereign regulatory fees or taxes. It observed that the charges are a percentage of Adjusted Gross Revenue (AGR), fluctuate with revenue and are thus directly connected to the business of the licensee. The grant of permission and allotment of spectrum was treated as a service falling under the relevant HSN, and the nature of the charges (percentage of AGR) indicates they are consideration for that service rather than a compulsory exaction outside the GST net. [Paras 7]

LF and SUC are consideration for taxable services and not non taxable regulatory exactions.

Consideration for supply - Payments of LF and SUC qualify as 'consideration' within the meaning of GST law. - HELD THAT: - Relying on the statutory definition of 'consideration', the authority found that LF and SUC satisfy the elements of consideration since payments are made in respect of and in response to the grant of licence and spectrum. The licence provisions in the Telegraph Act contemplate grant on 'conditions and in consideration of such payments', supporting the finding that these payments are consideration for the supply of a service. [Paras 9]

LF and SUC constitute consideration for supply under GST.

Classification under HSN Heading 9973 (licensing services for right to use telecommunication spectrum) - Applicability of rate notification and clarificatory amendment - The services are classifiable under HSN Heading 9973 (sub heading 997338) and taxable under the rate notification; the later clarificatory amendment is applicable to the disputed period. - HELD THAT: - The authority examined Notification No.11/2017 and the annexed scheme of classification, locating 'Licensing services for right to use other natural resources including telecommunication spectrum' under SAC 997338. It held that rates notified at the heading level apply to sub headings and that the amendment effected by Notification No.27/2018 was clarificatory of legislative intent, not a substantive retrospective imposition. The Authority referred to GST Council minutes and precedent on clarificatory notifications to conclude that the rate structure as discussed covered the disputed period and the appellant's payment under reverse charge at HSN 9973 was appropriate. [Paras 9]

The supply is classifiable under HSN 997338 and the rate notification (including the clarificatory amendment) applies to the period in question.

Non speaking order - Although the impugned order was non speaking in form, the substantive legal position favoured taxation of the payments and the appeal was dismissed on merits. - HELD THAT: - The authority agreed with the appellant that the original adjudication order lacked detailed reasoning. However, after considering the appellant's submissions in appeal, the authority addressed the central legal questions (supply, consideration, classification and applicable rate) and found the payments taxable. Consequently, notwithstanding deficiencies in the impugned order's form, the appeals were dismissed because the substantive findings supported rejection of the refund. [Paras 9, 11]

Impugned order may be non speaking in form, but the substantive conclusion that taxability attaches to the payments stands; refund rejected.

Final Conclusion: Appeals dismissed. The Commissioner (Appeals) held that licence grant and spectrum allotment are taxable supplies (classified under HSN 997338), LF and SUC are consideration for those services, the rate notification (including the clarificatory amendment) applies to the disputed periods, and therefore the refund claims for October 2017 and January 2018 were correctly rejected despite formal deficiencies in the original orders.

Adjustment of refund against outstanding demand - pre-deposit of 20% for stay of demand as per CBDT guidelines - paragraph 4(B) of the Office Memorandum dated 29th February, 2016 - requirement of reasons for directing a pre-deposit in excess of 20% - discretion under Section 245 of the Act - stay of demand - obligation on the Government to follow its own rules and standards

Adjustment of refund against outstanding demand - pre-deposit of 20% for stay of demand as per CBDT guidelines - paragraph 4(B) of the Office Memorandum dated 29th February, 2016 - requirement of reasons for directing a pre-deposit in excess of 20% - discretion under Section 245 of the Act - stay of demand - Adjustment of the petitioner's refund for AY 2019-20 against the disputed demand for AY 2017-18 in excess of 20% of the demand was impermissible in the absence of reasons under paragraph 4(B) of the Office Memorandum. - HELD THAT: - The Court examined the CBDT Office Memorandum dated 29.02.2016 (as modified) which prescribes that an assessing officer shall normally grant stay of demand till disposal of first appeal on payment of 20% of the disputed demand, while paragraph 4(B) permits a higher pre-deposit only where the assessing officer, on relevant grounds, refers the matter and records reasons showing that higher payment is warranted. The Section 245 adjustment order dated 17.03.2020 and the order dated 21.12.2020 granting conditional stay did not set out any specific reasons to justify recovery in excess of 20% under paragraph 4(B). In the absence of such reasons, the respondent could not lawfully retain or have adjusted refunds beyond the 20% benchmark. Applying the principle that the Government must adhere to its own prescribed standards, the Court concluded that only 20% could be validly required as pre-deposit and directed refund of the surplus amount. The Court further clarified that it was not separately granting the relief sought in prayer (c) because the Principal Commissioner had already addressed that aspect by order dated 02.07.2021. [Paras 11, 12, 13]

Respondent directed to refund the amount adjusted in excess of 20% of the disputed demand for AY 2017-18 within four weeks; only 20% pre-deposit can be lawfully required absent reasons under paragraph 4(B).

Final Conclusion: Writ petition disposed of; respondent to refund within four weeks the portion of the AY 2019-20 refund adjusted against AY 2017-18 that exceeds 20% of the disputed demand. The Court did not separately grant prayer (c) as the Principal Commissioner has already provided interim relief.

Eligibility for deduction under Section 10A - commencement of manufacture in a Special Economic Zone - interpretation of sub clauses (i)(a)-(c) of Section 10A - requirement of fulfilment of all conditions in sub section (2) of Section 10A - reopening of assessment under Section 147 - change of opinion

Eligibility for deduction under Section 10A - interpretation of sub clauses (i)(a)-(c) of Section 10A - requirement of fulfilment of all conditions in sub section (2) of Section 10A - commencement of manufacture in a Special Economic Zone - Applicability of Section 10A to the petitioner and the territorial/temporal conditions for entitlement to deduction - HELD THAT: - The Court construed sub section (2) of Section 10A as requiring that an undertaking satisfy all conditions thereunder. Sub clauses (i)(a) and (i)(b) describe distinct temporal spells linked to particular zones (free trade zone; electronic hardware technology park/software technology park) and are to be read together; sub clause (i)(c) is an independent provision applying to undertakings whose manufacture commences on or after 1 April 2001 in a Special Economic Zone. The petitioner commenced manufacture in 2008 and therefore falls squarely within sub clause (i)(c), which mandates that the commencement be in a Special Economic Zone. The Form 56 F filed did not specify that the unit was located in a Special Economic Zone and the Revenue's case is that the unit is not in an SEZ. On the statutory construction adopted, the petitioner cannot claim the benefit under sub clause (i)(b) (software technology park) where commencement occurred after 1 April 2001; entitlement depends on meeting the separate SEZ requirement in sub clause (i)(c).

On construction of Section 10A, petitioner, having commenced manufacture in 2008, must be located in a Special Economic Zone to be eligible for deduction; on the material before the Court the petitioner is not shown to be in an SEZ and is not entitled to the Section 10A benefit as claimed in these proceedings.

Reopening of assessment under Section 147 - change of opinion - Validity of initiation of reassessment proceedings challenged by the petitioner and scope of adjudication in writ proceedings - HELD THAT: - The challenge to the initiation of reassessment under Section 147/148 was predicated on change of opinion and alleged non compliance with the proviso where reassessment is beyond four years. The Court held that the core question raised for jurisdiction related to the interpretation of Section 10A, which the Court has construed. Factual disputes as to disclosure, location and whether material was fully and truly disclosed concern questions of fact and evidence which are to be determined by the Assessing Officer in reassessment proceedings. The High Court declined to undertake factual adjudication in the writ petition where initiation only was impugned; the petitioner remains free to place any contra materials before the Assessing Officer during reassessment.

Writ contesting initiation of reopening was dismissed; the reassessment proceedings may continue and factual issues (location, disclosure and entitlement) are to be determined by the Assessing Officer in the reassessment.

Final Conclusion: The High Court construed Section 10A to require that an undertaking commencing manufacture in 2008 satisfy sub clause (i)(c) (i.e., be located in a Special Economic Zone) to claim the deduction; on the record before the Court the petitioner has not established presence in an SEZ and is not entitled to Section 10A in these proceedings. The petition challenging initiation of reassessment under Section 147/148 is dismissed, and factual issues relating to location and disclosure are left to be decided by the Assessing Officer in the reassessment proceedings.

Dispute Resolution Panel powers under Section 144-C - Mandatory duty to consider objections and issue directions under Section 144-C(5) and (6) - Discretionary powers to make further enquiry under Section 144-C(7) and to confirm/reduce/enhance variations under Section 144-C(8) - Requirement of opportunity of hearing for directions prejudicial to assessee or revenue under Section 144-C(11) - Quasi-judicial duty to decide objections on merits despite non-appearance - Violation of principles of natural justice as ground for judicial interference

Mandatory duty to consider objections and issue directions under Section 144-C(5) and (6) - Quasi-judicial duty to decide objections on merits despite non-appearance - Whether the Dispute Resolution Panel is competent to reject objections solely on the ground of the assessee's non-appearance instead of considering the objections on merits and issuing directions under Section 144-C(5) and (6). - HELD THAT: - The Court examined the scheme of Section 144-C. Sub-section (2) confers a right on an eligible assessee to file objections with the DRP. Once objections are filed, sub-section (5) requires the DRP to issue directions as it thinks fit for the guidance of the Assessing Officer and sub-section (6) mandates that such directions be issued after considering specified materials including the objections and evidence. The use of the word 'shall' in sub-sections (5) and (6) makes consideration of objections and issuance of directions a mandatory duty of the DRP. Sub-section (7) and (8) confer discretionary powers (further enquiry; confirm/reduce/enhance variations) which are distinct from the mandatory duty to consider objections. Sub-section (11) further requires that no direction prejudicial to the assessee be issued without an opportunity of hearing. Consequently, a DRP, being a quasi-judicial body, cannot bypass the statutory duty by rejecting objections merely because the assessee did not appear; the written objections and other materials on record must be considered and the matter decided on merits. The Court found that the DRP in the present matter rejected objections only for non-appearance without any consideration on merits, thereby failing to comply with mandatory provisions and denying the assessee's statutory right. [Paras 18, 23, 24, 27, 30]

The DRP has no power to reject objections solely for non-appearance; it must consider the objections on merits and issue directions in accordance with Section 144-C(5) and (6) (and having regard to the hearing requirement in Section 144-C(11)).

Violation of principles of natural justice as ground for judicial interference - Quash and remand for fresh consideration by DRP and consequential effect on assessment - Income Tax (Dispute Resolution Panel) Rules, 2009 - Rule 7 and Rule 10 on hearing and issuance of directions - Whether the DRP order rejecting the objections and the consequent assessment should be quashed and remitted for fresh consideration in view of the DRP's failure to comply with statutory mandates and principles of natural justice. - HELD THAT: - The Court held that the DRP's rejection of objections without considering the written objections or other material was a patent non-compliance with mandatory statutory provisions and undermined the assessee's valuable statutory right. The Rules governing DRP procedure (including Rule 10 which contemplates issuance of directions on hearing and provides that the panel may issue directions within the specified time) reinforce that objections are to be heard and decided on merits. Where such violation of statutory procedure and principles of natural justice is established, the High Court is entitled to intervene in writ jurisdiction to restore the aggrieved party's rights. Applying these principles to the facts, the Court found the DRP failed to discharge mandatory duties under Sections 144-C(5) and (6) and therefore the DRP order and the consequential assessment were quashed. The matter was remitted with directions that the DRP shall consider the objections afresh in accordance with the Act and Rules, afford opportunity to both parties, and pass an appropriate order expeditiously, after which the Assessing Officer may proceed in accordance with law. [Paras 34, 38, 40, 43, 44]

The DRP order rejecting objections and the consequential assessment are quashed; proceedings are restored and remitted to the DRP to consider the objections afresh in accordance with Sections 144-C(5) and (6), relevant Rules and the requirement of hearing, and thereafter the Assessing Officer may pass orders as per law.

Final Conclusion: The writ petitions are allowed: the DRP's order rejecting the assessee's objections solely for non-appearance and the consequential assessment order are quashed; the DRP is directed to decide the objections afresh in compliance with Sections 144-C(5), (6) and (11) and relevant Rules, affording opportunity to the assessee and the Assessing Officer, after which the Assessing Officer may act in accordance with the fresh directions.

Reopening of assessment under Section 147 of the Income Tax Act - reason to believe - recording of reasons prior to issuance of notice under Section 148 - change of opinion - scope of judicial review under Article 226 - Explanation (2) to Section 147 - Section 40(a) disallowance relevance to reassessment

Reopening of assessment under Section 147 of the Income Tax Act - reason to believe - Explanation (2) to Section 147 - Section 40(a) disallowance relevance to reassessment - Validity and sufficiency of the reasons recorded for reopening the assessment and whether the Assessing Officer had reason to believe that income chargeable to tax escaped assessment. - HELD THAT: - The Court examined the reasons recorded which identified material statements in the Notes to Financial Statements about foreign-currency expenditures (interest, professional fees, consulting fees and other expenses) and the absence of any indication that tax had been deducted thereon. It held that such material on record constituted a legally cognizable basis for a reason to believe that income chargeable to tax may have escaped assessment, and that the Assessing Officer was entitled to investigate whether disallowance under Section 40(a) or adjustments under the explanations to Section 147 were called for. The Court emphasised that reopening within four years falls squarely within the statutory scheme and that materials which reveal a new dimension or unadjudicated information may justify reassessment; the High Court will not travel into disputed factual adjudication at the initiation stage. Consequently the reasons were held to have sum and substance sufficient to permit continuation of reassessment proceedings. [Paras 27, 31, 32, 33]

The reasons for reopening were held sufficient in law to constitute reason to believe; reassessment proceedings were to continue and the writ challenge on this ground was dismissed.

Recording of reasons prior to issuance of notice under Section 148 - change of opinion - scope of judicial review under Article 226 - Whether the reopening was vitiated by failure to record reasons prior to issuance of notice under Section 148(2), or was merely a prohibited change of opinion. - HELD THAT: - The petitioner alleged that reasons were recorded only after issuance of the notice, amounting to procedural infirmity and impermissible change of opinion. The Court noted the respondent's contemporaneous assertion that reasons were recorded by the predecessor officer and communicated to the assessee, and held that a mere assertion by the petitioner without proof did not suffice to displace that record. Further, the Court reiterated that where the Assessing Officer, based on materials, forms a new belief not amounting merely to re-assertion of the original opinion but supported by material and falling within the explanations to Section 147, reassessment is permissible. The Court also cautioned that judicial review under Article 226 at the initiation stage must be restrained and should not undertake a trial on disputed facts. [Paras 26, 30, 33]

Petitioner's challenge that reasons were not recorded prior to issuance of notice and that the action amounted to change of opinion was rejected; the procedural requirement was not shown to have been breached and the writ was dismissed.

Final Conclusion: Writ petitions challenging the reopening of assessment for Assessment year 2002-03 were dismissed; the Court found the recorded reasons legally sustainable to permit reassessment, declined to undertake factual adjudication at the initiation stage, and directed the respondent to continue and conclude the reopening proceedings expeditiously.

Reopening of assessment - approval by specified authority under Section 151 for issuing notice under Section 148 after four years - validity of reassessment proceedings where approval was obtained from an incompetent authority - scope of reassessment under Section 147 and Explanation 3 thereto - competence to make additions in reassessment only on issues forming basis of valid reopening

Approval by specified authority under Section 151 for issuing notice under Section 148 after four years - validity of reassessment proceedings where approval was obtained from an incompetent authority - reopening of assessment - Validity of reassessment proceedings for AY 2010-11 when notice under Section 148 was issued after four years without approval from the competent authority specified for Section 151. - HELD THAT: - The Assessing Officer recorded reasons for reopening based on large cash deposits in the FY 2009-10 bank account (see reasons). The notice under Section 148 was issued on 08.01.2016, which was beyond four years from the end of the relevant assessment year. Sub section (1) of Section 151 requires approval of the Principal Chief Commissioner/Chief Commissioner or Principal Commissioner/Commissioner when more than four years have elapsed. The Assessing Officer's disposal of objections stated that approval was obtained from the Joint Commissioner, not from the competent authority prescribed by Section 151. The Tribunal held that approval by the Joint Commissioner is not the statutorily required approval and therefore the reopening lacked the necessary sanction; consequently the reassessment proceedings were invalid. The Tribunal relied on binding precedent addressing identical circumstances to support quashing of the reassessment and recorded that all consequential additions and proceedings are nullified. [Paras 6, 9, 10, 11, 12]

Reopening for AY 2010-11 is invalid for lack of approval from the competent authority under Section 151; assessment order quashed and related proceedings set aside.

Scope of reassessment under Section 147 and Explanation 3 thereto - competence to make additions in reassessment only on issues forming basis of valid reopening - reopening of assessment - Whether additions made in AY 2011-12 reassessment that were not based on the ground recorded for reopening (cash deposits) are sustainable where the Assessing Officer did not make the addition on the original ground of reopening. - HELD THAT: - The reasons for reopening for AY 2011-12 referred to unexplained cash deposits aggregating to a specified sum. The assessment order, however, contains no addition in respect of those cash deposits; instead the Assessing Officer made additions based on unexplained credits by way of account payee cheques from third parties. The Tribunal examined the legal position under Section 147 and Explanation 3, noting the legislative clarificatory intent but also the settled principle that a valid reopening is a prerequisite to exercise jurisdiction. Where reopening is based on a particular ground and the Assessing Officer fails to make any addition on that ground, courts have held that it is impermissible to sustain additions on wholly different issues which were not the basis for reopening. Applying those precedents, the Tribunal held that because no addition was made on the ground recorded for reopening, the other additions made in reassessment are unsustainable and must be deleted. [Paras 16, 17, 18, 19]

Additions in AY 2011-12 that were not based on the ground recorded for reopening are deleted; the Revenue's appeal is dismissed and the assessee's cross objection is allowed.

Final Conclusion: Both cross objections of the assessee are allowed: the reassessment for AY 2010-11 is quashed for lack of statutory approval and all consequential proceedings stand nullified; for AY 2011-12, additions not founded on the ground for reopening are deleted and the Revenue's appeals are dismissed.

Allowability of promotional and dealer-incentive expenditures (Brand Image expenses) - disallowance under 14A and computation under Rule 8D - ascertained liability versus provision - remand for recomputation in light of judicial precedent and amended Rule 8D

Allowability of promotional and dealer-incentive expenditures (Brand Image expenses) - Disallowance of expenditure of Rs. 20,48,705 as not pertaining to the assessment year and the remaining claimed Brand Image expenses for A.Y. 2013-14. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the bill dated 17.09.2011 for Rs. 20,48,705 pertained to the earlier assessment year and accordingly disallowed that amount; the assessee did not contest that disallowance. The CIT(A) verified supporting lists of dealers and persons who availed foreign trips and allowed the balance of the expenditure for the year on the basis of the records. No contrary material was produced by the revenue to rebut these factual findings, and the Tribunal declined to interfere with the CIT(A)'s conclusion on the timing and genuineness of the expenditures. [Paras 7]

Tribunal declined to interfere with the CIT(A)'s disallowance of Rs. 20,48,705 and upheld allowance of the remaining Brand Image expenditure for A.Y. 2013-14.

Disallowance under 14A and computation under Rule 8D - Claimed deletion of disallowance under section 14A for A.Y. 2013-14 where no exempt income was earned. - HELD THAT: - The Assessing Officer had made a disallowance based on investments shown in the balance sheet despite the assessee having earned no exempt income during the year. The Tribunal agreed with the CIT(A) that in the absence of any exempt income claimed or earned, no disallowance under section 14A was called for and accordingly declined to interfere with the CIT(A)'s deletion of the addition. [Paras 9, 10]

Tribunal upheld deletion of the section 14A disallowance for A.Y. 2013-14.

Ascertained liability versus provision - Allowability of commission payment of Rs. 2,32,976 held to be an ascertained liability for A.Y. 2013-14. - HELD THAT: - The AO treated the amount as a provision and disallowed it. The CIT(A) examined the bills and records showing that bills were raised by the payee, services were rendered for specified invoices, the payment was made, and tax was deducted at source. On that factual matrix the CIT(A) correctly held the payment to be an ascertained liability and allowed the deduction. No contrary material was placed before the Tribunal to disturb that conclusion. [Paras 11]

Tribunal declined to interfere and sustained the CIT(A)'s allowance of the commission payment as an ascertained liability.

Disallowance under 14A and computation under Rule 8D - remand for recomputation in light of judicial precedent and amended Rule 8D - Disallowance under section 14A and Rule 8D for A.Y. 2014-15 was not finally quantified by the Tribunal but remitted to the Assessing Officer for recomputation. - HELD THAT: - For A.Y. 2014-15 the assessee had earned exempt dividend income. The AO applied Rule 8D and made a large disallowance; the CIT(A) restricted the disallowance taking into account an amount disallowed suo motu by the assessee. The Tribunal referred to the Supreme Court decision in Maxopp Investments Ltd. and noted amendment to Rule 8D effective before completion of assessment. In view of those developments and the need to apply the law as existing at the time of assessment, the Tribunal remitted the matter to the Assessing Officer for recomputation of the section 14A disallowance in accordance with the Apex Court judgment and the amended provisions. [Paras 14, 15, 16, 17]

Section 14A disallowance for A.Y. 2014-15 remitted to the AO for fresh computation in light of Maxopp and the amended Rule 8D.

Allowability of promotional and dealer-incentive expenditures (Brand Image expenses) - Validity of disallowance of Brand Image expenses for A.Y. 2014-15. - HELD THAT: - The AO disallowed substantial Brand Image expenses on the ground that the assessee failed to establish recipients, nexus to business advantage and impact on sales. The CIT(A) sustained the disallowance treating the amounts claimed as unreasonable and excessive. The Tribunal, however, examined the record showing purchase and distribution of gold as incentives, lists of dealers who availed trips and other supporting material; it observed that the revenue did not inquire into recipients' books or otherwise test the furnished details but proceeded to conclude the expenses were beyond its purview. As the fact of incurring the expenses and their genuineness were not disputed, the Tribunal declined to accept the CIT(A)'s reasoning and allowed the assessee's appeal on this matter. [Paras 18, 19, 20, 21, 22]

Tribunal allowed the assessee's appeal and reversed the disallowance of Brand Image expenses for A.Y. 2014-15.

Remand for factual and legal examination - Claims for additional depreciation and deductions under sections 35AC and 80G for A.Y. 2014-15. - HELD THAT: - Both parties agreed that the questions relating to additional depreciation and deductions under sections 35AC and 80G required further factual and legal examination. The Tribunal directed that these matters be referred to the file of the Assessing Officer for adjudication afresh in accordance with law. [Paras 23]

Claims for additional depreciation and deductions under sections 35AC and 80G remitted to the Assessing Officer for fresh consideration on facts and law.

Final Conclusion: For A.Y. 2013-14 the revenue's appeal is dismissed and the assessee's cross-objection treated as superfluous. For A.Y. 2014-15 the assessee's appeal against the disallowance of Brand Image expenses is allowed; the section 14A disallowance is remitted to the Assessing Officer for recomputation in light of the Apex Court decision and the amended Rule 8D; claims relating to additional depreciation and deductions under sections 35AC and 80G are remitted to the Assessing Officer for fresh consideration.

Incriminating material found during search - unabated assessment under section 153C - scope of assessment in unabated years where no incriminating documents belong to the assessee - taxability of long term capital gains on part performance/possession - definition of transfer under section 2(47) read with section 53A of Transfer of Property Act - acceptance by revenue of co-owners' offers and effect of finality in co-owners' assessments

Incriminating material found during search - unabated assessment under section 153C - scope of assessment in unabated years where no incriminating documents belong to the assessee - Validity of additions made in assessment year 2011-12 in proceedings under section 143(3) read with section 153C when no incriminating material belonging to the assessee was seized during search. - HELD THAT: - The Tribunal found that the assessee had filed a return for AY 2011-12 before the search and that no assessment for that year was pending when notice under section 153C was issued. The additions in the assessment were not based on any documents or evidence belonging to the assessee seized during the search; instead they rested on copies of draft agreements and documents impounded from a third party during a survey. Relying on the reasoning of the jurisdictional and other High Courts considered by the CIT(A), the Tribunal held that additions in an unabated assessment cannot be sustained in absence of incriminating material belonging to the assessee found in the course of search. No material was shown before the Tribunal to connect the additions to seized incriminating documents; accordingly the order of the CIT(A) deleting the additions was affirmed. [Paras 6, 18, 19, 20]

Additions in respect of AY 2011-12 deleted; appeal dismissed.

Taxability of long term capital gains on part performance/possession - definition of transfer under section 2(47) read with section 53A of Transfer of Property Act - acceptance by revenue of co-owners' offers and effect of finality in co-owners' assessments - Whether the long term capital gain arising from sale/transfer of land was taxable in AY 2011-12 or arose only in AY 2013-14. - HELD THAT: - The Tribunal accepted the factual findings that possession of the land was handed over in November 2010, the land was introduced into the partnership and development activity commenced; the partnership deed and related documents evidenced a binding transaction and part performance. Applying the principle that a transaction allowing possession to be taken or retained in part performance falls within the concept of transfer under section 2(47) (read with the requirements of section 53A), and noting that co-owners had offered and paid tax on similar capital gains in AY 2011-12 which the revenue had accepted and not reopened, the Tribunal held that the capital gains were chargeable to tax in AY 2011-12. The CIT(A)'s deletion of the addition in AY 2013-14 was affirmed. [Paras 8, 21, 23, 24, 25]

Addition of long term capital gain in AY 2013-14 deleted; appeal dismissed.

Final Conclusion: Both appeals filed by the revenue are dismissed: the Tribunal affirms deletion of additions in AY 2011-12 because no incriminating material belonging to the assessee was seized during the search, and affirms deletion of the LTCG addition in AY 2013-14 holding the capital gain taxable in AY 2011-12 on the basis of possession/part performance and accepted co-owners' assessments.

Deduction under section 37(1) of the Income Tax Act - wholly and exclusively for the purpose of business - genuineness of expenditure not determinative for deduction - utilisation of research and development benefits by group companies - apportionment of expenditure where benefit is shared

Deduction under section 37(1) of the Income Tax Act - wholly and exclusively for the purpose of business - genuineness of expenditure not determinative for deduction - utilisation of research and development benefits by group companies - apportionment of expenditure where benefit is shared - Allowability of claimed research and development expenditure under section 37(1) for A.Y. 2005-06 - HELD THAT: - The assessee claimed R&D expenses as a business deduction under section 37(1). The AO admitted the genuineness of the expenditure but found that the R&D facility's outcomes were used by group companies and not exclusively by the assessee. The CIT(A) restricted relief to 50% on the basis that the benefit of the expenditure accrued to the group and not solely to the assessee. The Tribunal noted that section 37(1) permits deduction only where expenditure is incurred wholly and exclusively for the purposes of the assessee's business; mere genuineness does not satisfy this test. The assessee's own submissions acknowledged that products developed through its R&D were manufactured by group concerns and purchased by the assessee, indicating shared benefit. Earlier findings for AY 2004-05 also supported that the sister concern housed R&D activities. In view of these findings, the Tribunal concurred with the authorities below and dismissed the appeal challenging the 50% disallowance. [Paras 9]

Assessee's appeal dismissed; deduction under section 37(1) denied in full beyond the 50% allowance made by the CIT(A).

Deduction under section 37(1) of the Income Tax Act - apportionment of expenditure where benefit is shared - mutatis mutandis application of findings - Allowability of claimed research and development expenditure under section 37(1) for A.Y. 2006-07 - HELD THAT: - An identical ground was raised for A.Y. 2006-07. The Tribunal applied the reasoning and findings recorded in respect of A.Y. 2005-06 mutatis mutandis to the present appeal. Since the earlier conclusion was that the R&D expenditure did not satisfy the 'wholly and exclusively' requirement and that benefits were shared with group concerns, the same result was applied to this year. [Paras 11, 12]

Assessee's appeal dismissed on the same basis as for A.Y. 2005-06.

Final Conclusion: Both appeals dismissed: the Tribunal upheld the CIT(A)'s restriction of the R&D expenditure deduction (50% allowance by CIT(A) sustained) because the expenditure was not incurred wholly and exclusively for the assessee's business and its benefits were shared with group companies.

Assessment not pending at the time of search - Additions not based on incriminating material seized during search - Client code modification and profit/loss shifting - Findings of fact not to be interfered with lightly - Application of precedent in tax search and seizure cases

Additions not based on incriminating material seized during search - Client code modification and profit/loss shifting - Assessment not pending at the time of search - Whether the additions made by the Assessing Officer on account of client code modifications and alleged profit/loss shifting could be sustained where the assessment was not pending on the date of search and the additions were not based on any incriminating material seized during the search. - HELD THAT: - The Tribunal and the Commissioner (Appeals) found that the additions were not founded on any incriminating material discovered during the search and that no assessment or reassessment proceedings were pending on the date of the search. The Revenue did not disclose or indicate any seized incriminating material on which the Assessing Officer relied. In those circumstances, and having regard to the special auditor's report and the responses, the appellate authorities concluded that the AO's conclusion regarding non-genuine client code modifications could not be sustained. The High Court held that the factual findings recorded by the CIT(A) and the ITAT are not perverse and therefore are not liable to be disturbed, following the legal position applied in earlier precedents dealing with search-related additions. [Paras 4, 6, 7]

The additions made by the Assessing Officer on account of client code modifications and alleged profit/loss shifting were deleted; the assessments/additions could not be sustained in the absence of incriminating seized material and where no assessment was pending at the time of search.

Application of precedent in tax search and seizure cases - Findings of fact not to be interfered with lightly - Whether any substantial question of law arises for consideration warranting interference with the concurrent factual findings of the CIT(A) and ITAT. - HELD THAT: - The Court observed that the present facts are similar to prior decisions of this Court in which the Revenue's appeals were dismissed. The Revenue failed to advance any persuasive legal point or to identify incriminating material that would distinguish this case from earlier precedents. In view of the settled legal position applied by the appellate authorities and the absence of any arguable or substantial question of law, interference with the concurrent findings of fact was not warranted. [Paras 5, 6, 8]

No substantial question of law arises; the Revenue's appeal is liable to be dismissed.

Final Conclusion: The Revenue's appeal is dismissed. The deletions made by the CIT(A) and confirmed by the ITAT are upheld because the additions were not based on any incriminating material seized during the search and no assessment was pending on the date of search; no substantial question of law arises for consideration.

Faceless assessment under Section 144B(7) - requirement of issuance of prior show-cause notice and draft assessment order - right to personal hearing (including by video conferencing) on request - assessment to be non est if not made in accordance with prescribed procedure - violation of principles of natural justice

Faceless assessment under Section 144B(7) - requirement of issuance of prior show-cause notice and draft assessment order - right to personal hearing (including by video conferencing) on request - violation of principles of natural justice - Impugned assessment finalized without issuance of draft assessment order, without considering request for personal hearing/adjournment and in breach of principles of natural justice; validity of such assessment order and consequent notices. - HELD THAT: - The Court held that Section 144B(7) mandates that for faceless assessments a prior show-cause notice and draft assessment order must be served and that the assessee may request a personal hearing, which, if approved under prescribed standards and procedures, must be granted. The Division Bench decision in Sanjay Aggarwal [reproduced by the Court] establishes that the Revenue is required to consider and, where appropriate, grant requests for personal hearing and that absence of standards/procedures does not absolve the Revenue of the obligation to deal with such requests. In the present case the Assessing Officer passed the final assessment order without dealing with the petitioner's requests for adjournment and personal hearing and without serving the draft assessment order, resulting in a breach of the principles of natural justice. Consequentially, the impugned assessment order, demand notice and penalty notices could not stand and the matter had to be remitted for fresh consideration after affording the procedural safeguards mandated by Section 144B(7). The Court directed that the Assessing Officer shall serve a copy of the draft assessment order, grant an opportunity of personal hearing by video conferencing, and thereafter pass a reasoned order in accordance with law. [Paras 5, 6, 7, 8]

Impugned assessment order dated 13th May, 2021, the demand notice and penalty notices set aside; matter remanded to the Assessing Officer to serve the draft assessment order, grant personal hearing by video conferencing and thereafter pass a reasoned order in accordance with law.

Final Conclusion: The writ petition succeeds: the faceless assessment, demand and penalty notices for Assessment Year 1995-96 are set aside for failure to comply with the procedural mandates of Section 144B(7) and remitted for fresh adjudication after service of the draft assessment order and grant of personal hearing by video conferencing.

Reliance on earlier ITAT order - exemption under section 10B - incorrect claim of deduction - imposition of penalty for deliberate misrepresentation - concurrent findings - recomputation of market value of inputs

Reliance on earlier ITAT order - concurrent findings - Whether the ITAT was justified in placing reliance on its earlier order in ITA No.72/PNJ/2012 without undertaking a fresh inter se factual discussion and thereby upholding deletion of penalty. - HELD THAT: - The Court accepted that the ITAT, in the substantive proceedings recorded in ITA No.72/PNJ/2012 (order dated 8/3/2013), had examined the correctness of the assessee's claim of exemption and directed limited verification by the Assessing Officer for determination of market value of inputs. The ITAT in the penalty matter relied upon those conclusions and held that there was no error in claiming the deduction; accordingly the penalty was improper. Subsequent dismissal by this Court of the Revenue's Tax Appeals against the ITAT's order (by judgment dated 7/5/2021) confirmed that the deduction claimed in the return was correct. The court further explained that an erroneous claim, by itself, does not automatically attract penalty; penalty is appropriate only where the claim is founded on deliberate misrepresentation or suppression of material facts and the deduction is denied. Here, the deduction was ultimately upheld and there was no finding of deliberate misrepresentation. In view of the concurrence of the lower authorities' findings, absence of perversity, and the later appellate confirmation, the ITAT's reliance on its earlier order without a re examination of inter se facts did not warrant interference. [Paras 11, 12, 13, 14]

The ITAT's reliance on its earlier order was justified and the deletion of the penalty stands; the substantial question is answered against the Revenue.

Final Conclusion: The substantial question of law, as re framed, is answered against the Revenue. The concurrent orders deleting the penalty are upheld and the Revenue's appeal is dismissed.

Fringe Benefit Tax under Section 115WE - Revision under Section 263 for order erroneous and prejudicial - Requirement that Assessing Officer must apply mind and record discussion in assessment proceedings - Remand to appellate forum for fresh consideration on merits

Fringe Benefit Tax under Section 115WE - Requirement that Assessing Officer must apply mind and record discussion in assessment proceedings - Remand to appellate forum for fresh consideration on merits - Whether the Tribunal adequately considered the assessee's claim in respect of fringe benefits and whether the matter requires remand for fresh adjudication on merits. - HELD THAT: - The Tribunal's order (paragraph 6.4) recorded that the order of assessment under Section 115WE was silent on discussion regarding three items of expenditure (vehicle maintenance, travel and conveyance, and pooja expenses) and that no show cause notice or replies were placed on the record to demonstrate that the Assessing Officer had investigated or applied his mind to these issues. The Tribunal relied on the absence of discernible discussion to uphold the Commissioner's action under Section 263 as justified. The High Court examined the Tribunal's order and found that the Tribunal did not adjudicate the assessee's fringe benefit claim on merits but dismissed the appeal on the ground that no material showed the Assessing Officer applied his mind. Because the Tribunal failed to consider the claim substantively, the High Court concluded that the impugned order could not stand. Accordingly, the Court quashed the Tribunal's order and remitted the matter to the Tribunal for de novo consideration and decision on the merits of the fringe benefit claim, thereby enabling a substantive examination of whether the impugned amounts attracted tax under the relevant provision. [Paras 5]

Impugned order quashed and matter remitted to the Tribunal to decide afresh on the merits the claim relating to fringe benefits for the Assessment Year 2008-09.

Final Conclusion: The appeal is allowed to the extent that the Tribunal's order is quashed and the matter is remitted to the Tribunal for fresh adjudication on the merits of the assessee's fringe benefit claim for Assessment Year 2008-09; the appeal is disposed of.

Deduction under section 36(1)(viii) - specified entity - eligible business - development of housing in India - long term finance for construction or purchase of houses - recognition of interest on Non-Performing Assets (NPA) - binding precedent of the jurisdictional High Court - remand for fresh consideration

Deduction under section 36(1)(viii) - specified entity - eligible business - development of housing in India - long term finance for construction or purchase of houses - Whether the assessee's claim for deduction under Section 36(1)(viii) was examined correctly by the Tribunal and required fresh adjudication. - HELD THAT: - The High Court observed that the assessee falls within the definition of a specified entity and that development of housing in India is an eligible business for the purpose of Section 36(1)(viii). However, the statutory scheme requires satisfaction of the condition that the specified entity must be engaged in the business of providing long term finance for construction or purchase of houses in India for residential purposes. The Tribunal did not examine whether the assessee had in fact engaged in providing such long term finance and therefore did not apply the legislative test required to allow the deduction. Because this determinative factual and legal requirement was not considered by the Tribunal, the High Court held that the question of entitlement to deduction under Section 36(1)(viii) must be decided afresh by the Tribunal after examining the said condition.

Tribunal's order on the claim under Section 36(1)(viii) quashed and remitted to the Tribunal for fresh adjudication on whether the assessee provided long term finance for housing and therefore qualifies for the deduction.

Recognition of interest on Non-Performing Assets (NPA) - binding precedent of the jurisdictional High Court - Whether interest on accounts classified as Non-Performing Assets should be recognised as income and whether the Tribunal correctly applied binding precedent. - HELD THAT: - The High Court noted that the assessee classified certain advances as NPAs in accordance with Reserve Bank of India directives and that interest on such accounts is not to be recognised as income until actually received. The Tribunal failed to take into account the binding decision of the jurisdictional High Court in Canfin Homes Ltd, which is material to the treatment of interest on NPAs. Because the Tribunal did not apply the binding precedent and did not decide the matter in accordance with the law laid down by the High Court, the question of recognition of accrued interest on NPAs requires reconsideration by the Tribunal in light of the binding authority.

Tribunal's conclusion on accrued interest relating to NPAs set aside; matter remitted to the Tribunal to decide afresh applying the binding jurisdictional precedent concerning recognition of NPA interest.

Remand for fresh consideration - Whether the Tribunal adjudicated issues not properly before it and omitted adjudication of certain grounds raised by the assessee. - HELD THAT: - The High Court found that the Tribunal both failed to deal with grounds Nos.16 to 20 raised in the memorandum of appeal and proceeded to adjudicate certain issues without properly addressing all grounds pleaded by the assessee. This omission caused prejudice to the assessee. In consequence, the Tribunal's order could not be sustained and the matter required remand for comprehensive consideration of the grounds that were urged but left undecided.

Tribunal's order quashed insofar as it omitted consideration of grounds raised by the assessee; remitted to the Tribunal for decision afresh, including adjudication of the omitted grounds.

Final Conclusion: The Tribunal's order dated 09.06.2017 is quashed. The matters concerning entitlement to deduction under Section 36(1)(viii), the treatment of interest on NPAs and the grounds left undecided are remitted to the Tribunal for fresh adjudication in accordance with the legal principles identified by the High Court and the binding jurisdictional precedent.

Summary order. Tax Case Appeal dismissed as infructuous as the Income Tax Appellate Tribunal has disposed of the main appeal; substantial questions of law raised in the appeal are left open for decision in an appropriate appeal.

Deduction under Section 80 IA - Assessment Order - Rectification Order - Dismissal for non-prosecution - Appellate remedy before the Income Tax Appellate Tribunal - Tribunal's power to adjudicate disputed facts on merits

Deduction under Section 80 IA - Assessment Order - Rectification Order - Appellate remedy before the Income Tax Appellate Tribunal - Whether the writ petition challenging the assessment and rectification orders should be entertained or the disputed factual and computation issues should be adjudicated by the Appellate Authority/Tribunal. - HELD THAT: - The High Court found that the core controversies raised by the petitioner-claim to deduction under Section 80 IA and alleged errors in computation-are matters of disputed fact and calculation which are appropriate for determination by the appellate fora. The petitioner had earlier filed an appeal before the Commissioner of Income Tax (Appeals) which was dismissed for non-prosecution, and a further appeal before the Income Tax Appellate Tribunal (ITA No.2038/CHY/2018) is pending. Given these circumstances, the Court declined to adjudicate the merits of the assessment and rectification orders in writ jurisdiction and directed that the petitioner is at liberty to raise all disputed facts and objections before the Tribunal, which shall consider the matter on merits and in accordance with law.

Writ petition disposed of; petitioner permitted to press all contested facts and objections before the Income Tax Appellate Tribunal for adjudication on merits.

Final Conclusion: The writ petition challenging the assessment order dated 30.12.2011 and rectification order dated 18.01.2012 is disposed of; the petitioner may pursue its appellate remedies before the ITAT, which shall consider the disputed claim under Section 80 IA and computation issues on merits. No costs.

Application of Order 7 Rule 11(d) of the Code of Civil Procedure - demurrer test - Prohibition on suits in respect of benami property and exceptions under Section 4(1) and Section 4(3) of the Benami Transactions (Prohibition) Act - When factual dispute requires adjudication on evidence and cannot be decided at plaint-rejection stage - Remand to trial court for fresh adjudication where prima facie facts require evidence

Application of Order 7 Rule 11(d) of the Code of Civil Procedure - demurrer test - Prohibition on suits in respect of benami property and exceptions under Section 4(1) and Section 4(3) of the Benami Transactions (Prohibition) Act - When factual dispute requires adjudication on evidence and cannot be decided at plaint-rejection stage - Whether the trial Court rightly rejected the plaint under Section 4(1) of the Benami Transactions (Prohibition) Act and Order 7 Rule 11(d) CPC, or the appellate Court was justified in setting aside that order and remitting the suit for fresh adjudication. - HELD THAT: - The Court examined the plaint averments which alleged that the disputed property was joint family property and was in the name of one member. Section 4(1) of the Benami Act bars suits to enforce rights in respect of property held benami, but Section 4(3) contains exceptions (for coparceners, trustees or fiduciaries) which may bring a pleaded case outside the bar. Under the demurrer test applicable to Order 7 Rule 11(d), rejection is permissible only where the plaint on its face, without doubt or dispute, shows the suit is barred by law. Where the plaint raises a factual contention (for example, that the property is joint family property or held in a fiduciary capacity) which, if proved, would fall within an exception to Section 4, such disputed questions cannot be resolved at the stage of considering an application under Order 7 Rule 11(d) and require adjudication on evidence. The lower appellate Court correctly applied this principle, following the approach that such matters are to be determined after evidence is led, and therefore properly set aside the trial Court's order and remitted the case for fresh trial. [Paras 10, 11]

Appellate Court rightly set aside the trial Court's rejection of the plaint and remitted the suit for fresh adjudication because the applicability of Section 4 exceptions involved disputed facts requiring evidence.

Final Conclusion: Appeal dismissed; impugned order of the appellate Court setting aside the trial Court's order and remitting the suit for fresh trial is affirmed. No order as to costs.

Condonation of delay - waiver of costs - directions for filing counter affidavit - supply of paper book - case listing and further proceedings

Condonation of delay - 16 days' delay in filing CM No.22561/2021 is condoned. - HELD THAT: - The Court considered the application for condonation of delay in filing the subsequent application and, for the reasons set out in that application, exercised its discretion to excuse the short delay. No adverse observation was recorded against the petitioner; the application for condonation was allowed and disposed of accordingly.

Delay of 16 days is condoned and CM No.22562/2021 stands disposed of.

Waiver of costs - Costs imposed by the Court on 24 May 2021 are waived in respect of Respondent No.2 without admission of the averments in the waiver application. - HELD THAT: - Respondent No.2's application seeking waiver of costs was noticed and accepted by counsel for the petitioner on the record. The petitioner expressly did not admit the averments in the application but consented to the waiver. Having recorded that consent, the Court allowed the application and waived the previously imposed costs.

The costs imposed by the order dated 24 May 2021 are waived; CM No.22561/2021 stands disposed of.

Directions for filing counter affidavit - supply of paper book - case listing and further proceedings - Respondent No.2 directed to file/re-file counter affidavit within one week; petitioner to supply another set of paper book to respondent No.1/UOI within two working days; respondent No.1 to file counter within two weeks thereafter; rejoinder, if any, to be filed before next date; matter listed on 25 August 2021. - HELD THAT: - The Court issued procedural directions to ensure the record is complete and that the parties file pleadings in a time-bound manner. Specific timelines were fixed for re-filing of the counter affidavit by respondent No.2, for supply of the paper book by the petitioner to respondent No.1/UOI, and for filing of the counter affidavit by respondent No.1/UOI, with leave to file rejoinders prior to the next listing. The matter was retained on the roster for the date already fixed.

Timelines and directions for filing and exchange of documents are issued; matter listed on 25 August 2021.

Final Conclusion: The Court condoned the 16 day delay, granted the waiver of costs sought by Respondent No.2 without any admission of the averments, directed time bound filing and exchange of pleadings and documents, and listed the matter for further hearing on 25 August 2021.

Detention by Customs - requirement of RFCL certificate for release - demurrage charges - liability for demurrage where delay not attributable to importer - Port Trust Rules - free retention period and condonation certificate under Rule 9 - refund of charges in the interest of justice

Detention by Customs - requirement of RFCL certificate for release - Detention of the imported Ammonium Sulphate by Customs was incorrect and based on a misconception arising from the purported requirement of an RFCL certificate for release. - HELD THAT: - The Court found that Customs had detained the goods pending production of a certificate from the Regional Fertilizer Control Laboratory (RFCL). The Ministry of Agriculture subsequently clarified that Customs had not been directed to withhold release of the fertilizer until laboratory analysis was returned and that the RFCL certificate is not a precondition for release but pertains to enforcement under the Fertilizer Control Order at the time of distribution. In view of the Ministry's clarification, the initial detention by Customs was held to be incorrect and attributable to a misconception for which the importer cannot be blamed. [Paras 8, 10]

Detention by Customs was wrongful and the importer cannot be faulted for the delay caused thereby.

Demurrage charges - liability for demurrage where delay not attributable to importer - Port Trust Rules - free retention period and condonation certificate under Rule 9 - refund of charges in the interest of justice - Whether the demurrage charges paid to the Port Trust must be refunded where the goods were detained by Customs and the delay was not the importer's fault. - HELD THAT: - Although the Port Trust acted under its rules in levying demurrage where no certificate under Rule 9 was produced to show delay was not due to the importer, the Court held that the underlying cause of detention was an error by Customs later rectified by the Ministry of Agriculture. The Port Trust was not directly responsible for the detention but the procedural error by Customs resulted in penalising the importer. Exercising equitable jurisdiction in the interest of justice, the Court directed refund of the demurrage paid, observing that procedural delay for which the importer was not responsible should not prejudice the importer. [Paras 9, 10, 11]

Respondents 1 and 2 are directed to refund the demurrage paid by the petitioner.

Final Conclusion: Writ petition allowed; respondents directed to refund the demurrage paid within eight weeks as the detention was caused by Customs' incorrect requirement and the importer was not at fault.

Mandatory pre-deposit requirement for entertaining appeals - pre-deposit under Section 129E of the Customs Act, 1962 - entitlement to appropriation/adjustment of duty paid towards pre-deposit - jurisdictional propriety of appellate forum (CESTAT) for verification of pre-deposit and original records

Pre-deposit under Section 129E of the Customs Act, 1962 - entitlement to appropriation/adjustment of duty paid towards pre-deposit - Whether the amounts said to have been paid by the petitioners before the SIIB could be treated as the statutory pre-deposit required for entertaining an appeal under Section 129E. - HELD THAT: - The appellate order recorded that the records showed only payment of self-assessed duty with interest and execution of a provisional delivery bond (PD bond) for the sum referred to by the petitioners, and that there was lack of clarity and documentary proof that the alleged payment of Rs. 11.36 lakhs constituted the statutory pre-deposit. Section 129E imposes a mandatory pre-deposit threshold for entertaining appeals. The Commissioner (Appeals) examined the available records, observed that the departmental reassessed duty and absence of bank guarantee remained outstanding, and concluded that the petitioners had not established entitlement to adjustment of the amounts paid as the pre-deposit prescribed under Section 129E. Given the mandatory nature of the statutory pre-deposit, the petition to treat the SIIB deposit as pre-deposit could not be allowed on the material before the appellate authority. [Paras 6]

The petition to treat the amount deposited before the SIIB as the pre-deposit under Section 129E was not accepted and the appeals/miscellaneous petitions were dismissed for noncompliance with Section 129E.

Jurisdictional propriety of appellate forum (CESTAT) for verification of pre-deposit and original records - mandatory pre-deposit requirement for entertaining appeals - Whether the High Court should entertain the writ petitions challenging the appellate authority's finding on pre-deposit, or the petitioners must first seek remedy before the CESTAT. - HELD THAT: - The High Court held that the appellate authority had examined records and formed an opinion on the absence of clarity regarding the alleged deposit, which involves scrutiny of original documents and factual adjudication. The CESTAT under Section 129A(1) is the competent forum to call for files, verify records and determine entitlement to adjustment or any error in the appellate authority's findings. The High Court declined to undertake an elaborate factual re adjudication in writ proceedings when an efficacious alternative remedy before the statutory appellate tribunal remained available and unexhausted. [Paras 6]

Writ petitions were not entertained on merit; petitioners were directed to pursue their remedy by preferring an appeal before the CESTAT in the prescribed manner.

Final Conclusion: Writ petitions dismissed; the High Court declined to re adjudicate disputed factual entitlement to pre deposit and directed the petitioners to approach the CESTAT for verification of records and appropriate adjudication in accordance with the Act.

Export obligation - declaration and agreement on grant of export licence - judicial interference in contractual/export obligations - relief under Foreign Trade Policy - automatic extension of export obligation due to ban - invocation of bank guarantee

Export obligation - declaration and agreement on grant of export licence - judicial interference in contractual/export obligations - Petitioner's entitlement to relief from the High Court to dilute or set aside the export obligations agreed at the time of grant of licence. - HELD THAT: - The Court held that the export obligations were part of the declaration and agreement entered into by the petitioner at the time the export licence was granted and that the petitioner is bound to fulfil those obligations. The High Court cannot dilute or grant relief in respect of agreed export obligations merely on the petitioner's contentions of difficulty; instead the petitioner must approach the competent authorities empowered under the Foreign Trade Policy and statutory scheme for any relief. The court therefore declined to interfere with the agreed obligations or to accede to the petitioner's request for judicial relief in that regard. [Paras 3]

Writ petition dismissed insofar as it sought dilution or judicial modification of the agreed export obligations.

Relief under Foreign Trade Policy - automatic extension of export obligation due to ban - invocation of bank guarantee - Whether the petitioner was entitled to relief on account of the ban on export of non basmati rice and whether the petitioner had available non penal relief under the Foreign Trade Policy. - HELD THAT: - The respondents averred that a ban on rice exports was in force from 2007 until 2011 but the petitioner had not fulfilled export obligations even before the ban and could have availed itself of the automatic extension and other relief mechanisms provided in the Foreign Trade Policy (including remedy of paying customs duty plus interest to absolve default). The Court noted that any grievance or difficulty arising from the ban or other reasons ought to have been pursued before the competent authorities under the policy; the petitioner had not established acceptable grounds for interference by this Court and had not shown that statutory mechanisms were exhausted. The Court therefore refused to grant relief or to restrain invocation of the bank guarantee under the interim order. [Paras 5, 6]

Petition dismissed; petitioner must pursue available reliefs under the Foreign Trade Policy and cannot rely on the High Court to grant substantive relief in place of the statutory mechanisms.

Final Conclusion: The writ petition seeking to set aside or dilute export obligations was dismissed; the petitioner is bound by the agreed obligations and must seek any relief from the competent authorities under the Foreign Trade Policy rather than from this Court; connected miscellaneous petitions closed.

Violation of Regulation 5(1)(i)(n) (security and access control) - penalty under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009 - requirement of enquiry and procedural safeguards under Regulation 12 - liability of Customs Cargo Service Provider for unauthorised access by third parties - unauthorised access

Violation of Regulation 5(1)(i)(n) (security and access control) - penalty under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009 - liability of Customs Cargo Service Provider for unauthorised access by third parties - Whether the penalty imposed on the appellant under Regulation 12(8) for alleged breach of Regulation 5(1)(i)(n) is sustainable. - HELD THAT: - The Show Cause Notice and the adjudicating order rested on the fact that two persons who had appeared during the examination later absconded and that the appellant did not verify their identity cards. There was no allegation that those persons had gained unauthorised access to the premises or that the appellant abetted or facilitated the alleged smuggling. Regulation 12 prescribes the procedure for inquiry, report and adjudication, and the order under challenge was passed invoking Regulation 12(8) for contravention of Regulation 5(1)(i)(n). The Tribunal noted that mere presence of persons at the time of examination who subsequently absconded does not, on the material on record, amount to unauthorised access or establish a breach of access-control duties by the appellant. In absence of any finding that the appellant permitted unauthorised entry or otherwise contributed to the alleged smuggling, the imposition of penalty cannot be sustained.

The penalty imposed under Regulation 12(8) for alleged violation of Regulation 5(1)(i)(n) is set aside.

Final Conclusion: The impugned Order-in-Original imposing a penalty on the appellant is quashed and the appeal is allowed.

Customs broker due diligence under CBLR, 2018 - Verification of Importer Exporter Code (IEC) and KYC obligations - Misuse or lending of IEC and its legal consequences - Liability of Customs broker for misdeclaration and restricted imports - Presumption of administrative verification where IEC is quoted

Customs broker due diligence under CBLR, 2018 - Verification of Importer Exporter Code (IEC) and KYC obligations - Whether the appellant violated Regulation 10(a) of CBLR, 2018 by not obtaining proper authorisation from the IEC holder prior to filing the bill of entry. - HELD THAT: - The Tribunal found on the material before it that the appellant had obtained a written authorisation from the IEC holder M/s. U.V. Infotech and had collected KYC documents from the party presented through Shri Dhurv Bhavsar. Statements show the appellant verified prior clearances and submitted documents in line with Circular No.9/2010 Cus. The authority's conclusion that the authorisation was insufficient because the IEC holder was not the ultimate owner was not supported by law or evidence of deceit by the appellant. The Tribunal relied on precedent recognizing that where an IEC is validly quoted and customary checks are performed, a broker is not bound to investigate familial or commercial arrangements among parties beyond the KYC verification required by regulation. Applying these principles, the finding of violation of Regulation 10(a) was held unsustainable. [Paras 7]

No violation of Regulation 10(a) established; finding against the appellant set aside.

Customs broker due diligence under CBLR, 2018 - Verification of Importer Exporter Code (IEC) and KYC obligations - Whether the appellant violated Regulation 10(n) of CBLR, 2018 by failing to verify the correctness of IEC, GSTIN and identity/functioning of the client at the declared address. - HELD THAT: - The Tribunal recorded that the appellant collected KYC documents including identity proofs, GST registration, IEC details and verified earlier import clearances of the IEC holder. The appellant took documents from a representative who presented himself as authorised; that representative failed to disclose the familial/beneficial relationship with the actual owner. The Tribunal considered authorities holding that a CHA is not required to conduct exhaustive inquiries into the genuine beneficial ownership beyond prescribed KYC checks and a valid IEC. In these circumstances the department failed to establish lack of due diligence or deliberate non compliance with Regulation 10(n). [Paras 7]

No violation of Regulation 10(n) established; finding against the appellant set aside.

Customs broker due diligence under CBLR, 2018 - Presumption of administrative verification where IEC is quoted - Whether the appellant violated Regulation 10(o) of CBLR, 2018 by not informing change of address or by giving a false address while extending its licence to Mumbai. - HELD THAT: - The Tribunal found the Nerul address provided related to the appellant's authorised Power of Attorney holder and was not a fictitious address. The Ghatkopar address belonged to the manager; the Nerul address being genuine and linked to the authorised signatory meant there was no material non disclosure or prejudice to revenue. Accordingly, the Commissioner's finding of breach of Regulation 10(o) was not sustainable on the facts. [Paras 7]

No violation of Regulation 10(o) established; finding against the appellant set aside.

Liability of Customs broker for misdeclaration and restricted imports - Misuse or lending of IEC and its legal consequences - Whether the penalty imposed on the appellant for alleged violations (including alleged clearance of restricted/used goods and misuse of IEC) was sustainable. - HELD THAT: - The adjudicating authority imposed monetary penalty after recording violations but did not make out the foundational breaches of the broker regulations. The Tribunal observed that although the imported goods were found to be used/refurbished and import of such goods may require permissions, the case against the broker rested on an absence of proven culpability in respect of KYC/authorisation and on familial/associational arrangements between IEC holders and beneficial owners. Absent clear evidence that the appellant knowingly facilitated misuse of IEC or wilfully ignored mandatory checks, imposition of penalty could not be sustained. The Tribunal therefore concluded that the department had not established the alleged regulatory violations which were the basis for the penalty. [Paras 7]

Penalty set aside; impugned adjudication quashed for lack of proven violations.

Final Conclusion: The Tribunal concluded that the department failed to prove violations of Regulations 10(a), 10(n) and 10(o) of CBLR, 2018 by the appellant; the penalty imposed was unsustainable. The impugned order is set aside and the appeal is allowed with consequential reliefs, if any.

Scheme of Arrangement by way of demerger - Dispensation of meetings of shareholders and creditors - Maintainability under Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Service of scheme on regulatory and revenue authorities

Dispensation of meetings of shareholders - Dispensation of meetings of secured creditors - Dispensation of meetings of unsecured creditors - Dispensation of convening, calling and holding of statutory meetings of shareholders and creditors for each applicant company was allowed in respect of the Scheme - HELD THAT: - The Tribunal examined the affidavits and records filed for each applicant company and recorded that the requisite consents of shareholders and creditors had been placed on record. For Applicant Company No.1, 4 of 5 shareholders holding more than 95% in value and the sole unsecured creditor gave affidavits of consent. For Applicant Company No.2, 9 of 15 shareholders holding more than 95% in value, the sole secured creditor and 9 of 10 unsecured creditors (holding the requisite percentage) furnished consent affidavits. For Applicant Company No.3, both shareholders gave consent affidavits and there were no secured or unsecured creditors. Having regard to these filings and that there were no secured creditors where so noted, the Tribunal dispensed with the requirement of convening meetings of shareholders, secured creditors and unsecured creditors as applicable and allowed the joint application accordingly. [Paras 5, 6, 7, 14]

The meetings of shareholders and creditors as specified in the Scheme are dispensed with and the joint application is allowed.

Maintainability under Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Territorial jurisdiction of Registrar of Companies - The application under Sections 230-232 read with the Rules was entertained as maintainable and within the Tribunal's territorial jurisdiction - HELD THAT: - The Tribunal noted the applicants' representation that the application is maintainable under Rule 3(2) of the Rules and that the registered offices of all applicant companies fall within the territorial jurisdiction of this Bench and under the Registrar of Companies, NCT, New Delhi. On perusal of the application and accompanying documents, the Tribunal proceeded to entertain the application and issue directions relating to the Scheme. [Paras 3, 4, 8, 9]

The application is maintainable and is entertained by the Tribunal.

Service of scheme on regulatory and revenue authorities - Disclosure of identifying details to Income Tax authorities - Directions given for service of the proposed Scheme on specified authorities and for disclosure of sufficient income tax related details - HELD THAT: - The Tribunal directed the applicants to serve notice of the proposed Scheme on the Regional Director (MCA), the Registrar of Companies, the Official Liquidator and specified Income Tax offices. The Tribunal further directed that notices to the Income Tax authorities must disclose sufficient details such as PAN, ward numbers and assessing officers so that an appropriate reply may be filed. These directions were issued as part of the order disposing of the joint application. [Paras 14]

Applicants to serve the Scheme on the listed authorities and to furnish requisite income tax identifying particulars to the Income Tax authorities.

Final Conclusion: The Tribunal entertained the joint application under Sections 230-232 and, having recorded requisite consents, allowed the application by dispensing with the convening of the statutory meetings of shareholders and creditors as applicable, and directed service of the Scheme on specified regulatory and revenue authorities with prescribed disclosure to the Income Tax Department.

Admissibility of operational creditor's claim in CIRP despite apparent limitation where decree in favour of creditor remains enforceable - requirement of Micro and Small Enterprises Facilitation Council order for payment of interest under the MSME Act - directory nature of time limit for submission of claims in CIRP and inadmissibility of claims not prima facie enforceable as on initiation - non-justiciability before NCLT of allegations against resolution professional pending IBBI adjudication - non-maintainability before Adjudicating Authority of challenge seeking reconsideration of One Time Settlement in lieu of a COC-approved resolution plan

Admissibility of operational creditor's claim in CIRP despite apparent limitation where decree in favour of creditor remains enforceable - The claim of Nilkanth Cotton Fibers was admissible and the RP was directed to admit it notwithstanding the RP's view that the debt was time-barred. - HELD THAT: - The invoices related to supplies in May-June 2015 but the applicant had obtained a decree and judgment in Commercial Civil Suit No. 112/2016 dated 17.12.2016 which was not shown to have been set aside or modified. The claim form expressly referred to that judgment and the period for execution of that decree had not expired. On that basis, rejecting the claim as time-barred and barred by limitation was held to be untenable. The Tribunal therefore directed admission of the claim in accordance with the Code and Regulations. [Paras 4, 5, 6]

IA No. 249/2020 allowed and the RP directed to admit the applicant's claim.

Requirement of Micro and Small Enterprises Facilitation Council order for payment of interest under the MSME Act - Interest claimed by an operational creditor under the MSME Act is not admissible in the CIRP unless the Micro and Small Enterprises Facilitation Council has granted or ordered payment of such interest. - HELD THAT: - Sections 15-18 of the MSME Act require disputes relating to amounts due (including interest under section 16) to be referred to the MSME Facilitation Council, which may conduct conciliation or arbitration and decide the reference. The Tribunal held that, in the absence of an appropriate order from the Council granting interest, the RP was correct in not admitting the interest component. Accordingly the IA seeking admission of interest was dismissed. [Paras 11, 12, 13, 14]

IA No. 659/2020 dismissed; interest not admissible without MSME Council order.

Directory nature of time limit for submission of claims in CIRP and inadmissibility of claims not prima facie enforceable as on initiation - A claim submitted after the 90-day period from initiation of CIRP cannot be summarily rejected by the RP as long as it is not abnormally delayed or submitted after approval of the resolution plan; however a claim that is prima facie not an enforceable debt as on initiation is not admissible. - HELD THAT: - The Tribunal reiterated that the 90-day time limit for submission of claims is directory and the RP cannot reject claims merely for being filed after that period unless abnormally delayed or filed after plan approval. In the present case the claim was filed prior to approval of the plan, so rejection on the ground of belated submission was unsustainable. Separately, the RP's rejection on the ground that the debt was outstanding for more than three years and not shown to be enforceable as on the date of initiation of CIRP was sustained because the applicant failed to demonstrate that the claim remained enforceable against the corporate debtor at that relevant date. [Paras 18, 19, 20]

IA No. 667/2020 dismissed because the claim was not shown to be prima facie enforceable as on CIRP initiation though rejection for mere belated submission was unsustainable.

Directory nature of time limit for submission of claims in CIRP and inadmissibility of claims not prima facie enforceable as on initiation - IA No. 707/2020 was dismissed for the same reasons as in IA No. 659/2020. - HELD THAT: - The parties agreed that IA No. 707/2020 was identical to IA No. 659/2020 and the Tribunal disposed of IA No. 707/2020 by applying the reasoning in IA No. 659/2020 regarding the MSME Council requirement for interest claims. [Paras 21, 22]

IA No. 707/2020 dismissed for identical reasons as IA No. 659/2020.

Non-justiciability before NCLT of allegations against resolution professional pending IBBI adjudication - Applications challenging the appointment/continuance and conduct of the RP were not adjudicated on merits by the Tribunal and were disposed of with liberty to pursue the complaint before the IBBI. - HELD THAT: - Multiple IAs alleged ineligibility, mala fides and breaches by the RP and sought his removal or restraint. The Tribunal noted that a resolution plan had been approved by the COC and an application under Section 30(6) read with Section 31 was pending. Allegations of mala fides or professional misconduct against an RP are to be adjudicated by the IBBI, and appropriate action taken thereafter by the Adjudicating Authority. As the complainant had already made a complaint to the IBBI, the Tribunal declined to adjudicate the IAs on merits and disposed of them, leaving the applicant free to take steps after the IBBI's decision. [Paras 30, 31, 32, 33]

IA Nos. 265/2020, 266/2020, 462/2020 & 466/2020 disposed of with liberty to pursue the complaint before the IBBI.

Non-maintainability before Adjudicating Authority of challenge seeking reconsideration of One Time Settlement in lieu of a COC-approved resolution plan - An application seeking directions to the COC to reconsider a One Time Settlement proposal was held not maintainable before the Adjudicating Authority under the IBC. - HELD THAT: - The applicant sought a direction to lenders/COC to consider its OTS proposal which allegedly offered a higher realisation than the approved resolution plan. The Tribunal observed that the IBC contains no provision empowering the Adjudicating Authority to direct lenders to consider OTS proposals; consideration of OTS is a commercial decision for lenders. The scope and consequences of an OTS differ from a COC-approved resolution plan, and the Tribunal declined to entertain the IA as not maintainable. [Paras 36, 37, 38, 39, 40]

IA No. 817/2020 (and IA No. 816/2020 by parity) dismissed as not maintainable.

Final Conclusion: The Tribunal directed admission of the operational creditor's claim in IA No. 249/2020 as the decree in its favour remained enforceable; dismissed interest claims under the MSME Act where no MSME Council order granted interest; held that late claims filed before plan approval cannot be summarily rejected though claims not prima facie enforceable at CIRP initiation are inadmissible; declined to adjudicate complaints against the RP pending IBBI action and disposed those IAs with liberty to pursue IBBI remedies; and dismissed as not maintainable challenges asking the Adjudicating Authority to direct lenders/COC to reconsider One Time Settlement proposals (IA Nos. 817/2020 and 816/2020).

Admission of a Section 7 insolvency petition - declaration of moratorium under Section 14 - appointment of Interim Resolution Professional and vesting of management with IRP - effect of settlement deed and liberty to revive on breach - public announcement and constitution of Committee of Creditors

Admission of a Section 7 insolvency petition - effect of settlement deed and liberty to revive on breach - Admission of the petition filed under Section 7 of the IBC and revival basis arising from breach of settlement deed. - HELD THAT: - Having regard to the order of the Appellate Tribunal remitting the matter for admission and the expressed admission of debt and liability in the settlement deed executed by the corporate debtor, this Tribunal adjudged that the Section 7 petition is maintainable and should be admitted. The earlier dismissal as withdrawn was without prejudice and contained liberty to revive if the corporate debtor failed to comply with the settlement terms; the petitioner established breach sufficient to restore the proceeding and justify admission under the Code. [Paras 2, 4, 5, 9]

The petition under Section 7 is admitted and the corporate insolvency resolution process is initiated against the corporate debtor.

Declaration of moratorium under Section 14 - Declaration and scope of the moratorium consequent to admission of the Section 7 petition. - HELD THAT: - Upon admission, the Tribunal declared the moratorium in terms of sub-section (1) of Section 14 of the Code. The order expressly prohibited institution or continuation of suits or proceedings against the corporate debtor, transfer or disposition of assets, actions to enforce security interests (including proceedings under SARFAESI), and recovery of property from the corporate debtor during the moratorium. The order also noted the protections for supply of essential goods or services and the exceptions envisaged by Section 14(3) and applicable notifications. [Paras 10, 11, 12]

A moratorium is declared from the date of the order until completion of the CIRP or approval of a resolution plan or liquidation, subject to the statutory exceptions.

Appointment of Interim Resolution Professional and vesting of management with IRP - public announcement and constitution of Committee of Creditors - Appointment of an Interim Resolution Professional (IRP) and directions regarding his powers, duties and further steps. - HELD THAT: - The Tribunal appointed the proposed IRP after vetting his credentials and directed that his term be governed by the Code. From the date of appointment, the powers of the Board stand suspended and management vests in the IRP who is to exercise powers under Section 18 and other relevant provisions, take custody and control of assets, prepare inventory, cause public announcement under the Regulations calling for claims, collate claims, determine operational position, constitute the Committee of Creditors and file a report of constitution within thirty days, convening the first CoC meeting within seven days of that filing. The IRP was also directed to file fortnightly progress reports to the Tribunal. [Paras 13]

Mr. Rajesh Kumar Loomba is appointed as Interim Resolution Professional with specified directions relating to management vesting, public announcement, claims collation, constitution of the Committee of Creditors and reporting.

Final Conclusion: The Tribunal, following the NCLAT remit and on finding breach of the settlement deed and admission of liability, admitted the Section 7 petition, declared the statutory moratorium, and appointed an Interim Resolution Professional with directions to take control of the corporate debtor, invite and collate claims, constitute the Committee of Creditors and proceed with the corporate insolvency resolution process.

Initiation of liquidation - commercial wisdom of the Committee of Creditors - exclusion of lockdown period for CIRP timelines - appointment of liquidator - liquidation costs - sale as a going concern - liquidator's fees - liquidation commencement date

Initiation of liquidation - commercial wisdom of the Committee of Creditors - Whether the corporate debtor should be ordered to be liquidated under the Insolvency and Bankruptcy Code in view of rejection of the lone resolution plan and absence of any other plan within the permitted time. - HELD THAT: - The Tribunal found that only one resolution plan was received and after discussions and addendums the plan by the JFC Consortium was put to vote and rejected by the Committee of Creditors with 100% voting share. In consequence, and having regard to the absence of any other resolution plan within the time permitted under Section 30(6), the conditions of Section 33(1)(a) of the Code are satisfied. The Tribunal noted the NCLAT observation that a decision of the CoC recommending liquidation after proper evaluation and in absence of any plan is a business decision within the commercial wisdom of the CoC not amenable to judicial review, and proceeded to pass an order of liquidation accordingly. [Paras 4, 5, 6, 7, 17]

Order for liquidation of Lakshmi Energy & Foods Limited under Section 33(1) of the Code is passed.

Exclusion of lockdown period for CIRP timelines - Whether the CIRP period had expired and whether the application under Section 33(1) was filed after expiry of the permissible period, having regard to lockdown exclusion and earlier extension. - HELD THAT: - The Tribunal recorded the admission date of the Section 7 petition and the prescribed CIRP period; it noted a prior extension of 90 days and applied Notification No. IBBI/2020-21/GN/REG059 to exclude the lockdown period from timeline computation. After excluding the lockdown period from 23.03.2020 to 31.07.2020, the Tribunal calculated that the CIRP expired on 07.10.2020 and observed that the present application filed on 11.12.2020 was therefore in the context of the CIRP having expired on that date, permitting initiation of liquidation proceedings under Section 33. [Paras 10]

Timeline computation applying lockdown exclusion results in CIRP expiry on 07.10.2020; Section 33 application proceeds accordingly.

Appointment of liquidator - Whether the Resolution Professional should be appointed as Liquidator. - HELD THAT: - Section 34(1) provides that where liquidation is ordered the Resolution Professional shall, subject to written consent, act as Liquidator. The Tribunal recorded that the Resolution Professional had filed written consent and that the credentials check disclosed nothing adverse. On that basis the Tribunal appointed Mr. Kuldip Kumar Bassi as Liquidator. [Paras 11]

Mr. Kuldip Kumar Bassi is appointed as Liquidator.

Liquidation costs - sale as a going concern - liquidator's fees - liquidation commencement date - What directions should be given to the Liquidator concerning liquidation costs, sale as going concern, fees and claim submission. - HELD THAT: - The Tribunal noted non-compliance by the CoC with Regulation 39B regarding meeting liquidation costs and directed the Liquidator to take action under Regulation 2A of the Liquidation Process Regulations for contributions. As there was no CoC recommendation on sale as a going concern, the Liquidator was directed to consider Regulation 32A of the Liquidation Process Regulations. The Tribunal observed that the Liquidator's fee is governed by the Liquidation Process Regulations and directed compliance with Regulation 4. The Liquidator was directed to publish the public announcement in Form B and call for claims with the last date 30 days from the liquidation commencement date, and to file the preliminary and fortnightly progress reports in accordance with the Liquidation Process Regulations. [Paras 12, 13, 14, 15, 17]

Liquidator directed to take steps regarding liquidation costs, consider sale as a going concern, charge fees as per regulations, publish the public announcement and call for claims, and file reports as prescribed.

Final Conclusion: The Tribunal, being satisfied that no viable resolution plan exists and that timelines permit initiation of liquidation, ordered Lakshmi Energy & Foods Limited to be liquidated under Section 33 of the Code, appointed the Resolution Professional as Liquidator and issued directions relating to liquidation costs, sale as a going concern, liquidator's fees, publication of the liquidation commencement notice and filing of requisite reports.

Pre-existing dispute - plausible dispute - Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation bar - maintainability of a section 9 petition - effect of contemporaneous communications as raising a dispute - dismissal of section 9 petition for being time-barred

Pre-existing dispute - plausible dispute - effect of contemporaneous communications as raising a dispute - Existence of a pre-existing dispute between the Operational Creditor and the Corporate Debtor - HELD THAT: - The Tribunal examined the correspondence between the parties and found that the Corporate Debtor, by email dated 04.02.2016, raised a specific discrepancy in the SMS counts shown in the invoices for Oct-Nov 2015 as compared to its own records. The Bench held that the exchange of emails evidences a dispute as to the quantum of services/delivery (SMS count), and applying the principle in Mobilox Innovations Pvt. Ltd. v. Kirusa Software (plausibility test), the contents of the 04.02.2016 email constitute a plausible pre-existing dispute which affects the maintainability of the Section 9 petition. The Tribunal therefore concluded that a pre-existing dispute existed prior to institution of the petition. [Paras 22, 23, 25]

A pre-existing plausible dispute was held to exist between the parties, rendering the Section 9 petition not maintainable on that ground.

Limitation bar - Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - dismissal of section 9 petition for being time-barred - Whether the claim in the Section 9 petition is barred by limitation - HELD THAT: - The Tribunal noted the last payment by the Corporate Debtor was on 01.12.2015 and the invoices in dispute relate to 2015-2016. The petition was filed on 07.05.2019. The Bench observed that the effect of the Corporate Debtor's email of 04.02.2016 (which raised the dispute) would extend limitation only up to February 2019 and that, on the material before it, the petition was filed beyond the permissible period. Consequently, the claim was held to be time-barred and the petition was dismissed on the ground of limitation. [Paras 21, 24, 25]

The petition was held to be barred by limitation and was dismissed accordingly.

Final Conclusion: The Company Petition under Section 9 IBC was dismissed. The Tribunal found a pre-existing plausible dispute (email dated 04.02.2016) between the parties and held the petition to be time-barred; accordingly the petition is rejected and dismissed with no costs.

Nomination of stakeholders' representatives - application of Regulation 31A(3) and Regulation 31A(4) of the IBBI (Liquidation Process) Regulations, 2016 - liquidator's duty to facilitate nomination - majority nomination by number of stakeholders - scope and limited advisory role of the Stakeholders' Consultation Committee - conflict of interest in inclusion in Stakeholders' Consultation Committee

Nomination of stakeholders' representatives - application of Regulation 31A(3) and Regulation 31A(4) of the IBBI (Liquidation Process) Regulations, 2016 - liquidator's duty to facilitate nomination - majority nomination by number of stakeholders - Validity of the liquidator's inclusion of Respondent No. 2 as the shareholders' representative in the Stakeholders' Consultation Committee in light of Regulation 31A(3) read with Regulation 31A(4). - HELD THAT: - Regulation 31A(3) places on the liquidator a duty to facilitate stakeholders of each class to nominate their representatives but is silent as to the criteria or process for such nomination. The liquidator, having invited nominations, ought to have informed stakeholders in advance whether the representative would be chosen by unanimity, by a numerical majority, or by value of shareholding. The applicant submitted nomination letters representing 3 out of 5 shareholders and communicated that nomination to the liquidator. The liquidator treated the class as having 'failed to nominate' because two shareholders (holding a larger shareholding by value) did not participate, and proceeded under Regulation 31A(4) to include the stakeholder with the highest shareholding. The Tribunal found this approach untenable: Regulation 31A(3) does not prescribe a value-based criterion and the liquidator could not reject a nomination communicated by a majority of shareholders in number where no criteria had been declared. Consequently, Regulation 31A(4) did not apply once a nomination by a majority in number had been validly communicated. For these reasons the liquidator's inclusion of Respondent No. 2 was held not to be in accordance with Regulation 31A(3) read with Regulation 31A(4), and the applicant's nomination was to be accepted as the representative of the shareholders-in-class. [Paras 24, 25, 26, 27, 28]

The liquidator's nomination of Respondent No. 2 under Regulation 31A(4) is set aside; the liquidator is directed to accept the applicant as the shareholders' representative for constitution of the Stakeholders' Consultation Committee.

Scope and limited advisory role of the Stakeholders' Consultation Committee - conflict of interest in inclusion in Stakeholders' Consultation Committee - Relevance of alleged conflict of interest of a stakeholder and its bearing on inclusion in the Stakeholders' Consultation Committee. - HELD THAT: - The Tribunal noted that the scope of the SCC is limited to advising the liquidator on matters relating to sale under Regulation 32. The liquidator had submitted that alleged or potential conflicts of interest of a stakeholder are not material to the limited role of the SCC, and that pending arbitration proceedings arising from distinct causes of action did not bear upon the liquidation proceedings. The Tribunal's decision to substitute the shareholders' representative was founded on the defective nomination process rather than a finding that conflict of interest disqualified Respondent No. 2; the record does not show that the Tribunal accepted conflict of interest as a ground independently displacing the nomination made under Regulation 31A(3). [Paras 17, 27, 28]

Allegations of conflict of interest did not form the determinative basis for removal; the Tribunal's direction to accept the applicant was grounded on the liquidator's improper application of the nomination provisions, not on a separate adjudication disqualifying Respondent No. 2 for conflict.

Final Conclusion: Application allowed. The Tribunal set aside the liquidator's inclusion of Respondent No. 2 under Regulation 31A(4) and directed the liquidator to accept the applicant as the representative of the shareholders-in-class for constitution of the Stakeholders' Consultation Committee; the IBBI was advised to issue guidelines clarifying criteria and process for nomination under Regulation 31A(3).

Pre-existing dispute - admission of documents post-filing to establish dispute - powers under Section 60(5) of the Insolvency and Bankruptcy Code - statutory timelines under Section 8(2) of the IBC - interest of justice and equity

Pre-existing dispute - admission of documents post-filing to establish dispute - interest of justice and equity - Application by the corporate debtor to place on record documents said to show a pre-existing dispute and proof of payment. - HELD THAT: - The Tribunal considered the corporate debtor's explanation that relevant documents proving payment and showing a pre-existing dispute were not filed earlier because the concerned accountant had left the company, and that non-filing was neither wilful nor wanton. The operational creditor opposed on grounds of statutory timelines and alleged fabrication, and relied on authorities emphasising that a dispute must be pre-existing and that timelines under Section 8(2) are material. The Tribunal, weighing the facts and arguments and noting that copies of the documents have been served on the operational creditor, exercised its discretion under the relevant provisions in the interest of justice and equity to allow the corporate debtor to place the documents on record. The Tribunal did not adjudicate the ultimate existence or merits of any dispute; it merely received the documents into the record for consideration in the main proceedings. [Paras 5, 6]

The IA is allowed and the documents submitted by the corporate debtor are taken on record; IA No. 203/2020 disposed of accordingly.

Final Conclusion: The Tribunal allowed the corporate debtor's application to file and place on record documents said to show a pre-existing dispute and proof of payment, taking those documents on record and disposing of IA No. 203/2020; the Tribunal did not decide the substantive existence of the dispute.

Twin conditions for bail under Section 45 PMLA - revival by amendment - application of Section 439 Cr.P.C. for grant of bail - flight risk, tampering with evidence and influencing witnesses - medical grounds for bail - economic offences and gravity of offence

Twin conditions for bail under Section 45 PMLA - revival by amendment - application of Section 439 Cr.P.C. for grant of bail - Validity and applicability of the twin conditions in Section 45(1) PMLA and whether the 2018 amendment revived those conditions for grant of bail - HELD THAT: - The court recorded the Supreme Court's decision in Nikesh Tarachand Shah declaring the twin conditions in Section 45(1) PMLA unconstitutional and held that those conditions were void ab initio. The mere substitution of the phrase by Act No.13 of 2018, inserting the words "under this Act", did not revive or resurrect the twin conditions which had been declared unconstitutional; revival cannot be effected prospectively without curing the constitutional vice or by a validating retrospective law. The High Court relied on precedent of other High Courts which construed the 2018 amendment as not restoring the twin conditions and concluded that bail applications must therefore be considered under Section 439 Cr.P.C. and the established bail jurisprudence, not under the struck-down twin conditions. [Paras 29, 31, 34, 36]

The twin conditions in Section 45(1) PMLA are not to be applied and the petitioner's bail application is to be considered under Section 439 Cr.P.C.

Flight risk, tampering with evidence and influencing witnesses - medical grounds for bail - economic offences and gravity of offence - Whether the petitioner should be released on bail on merits and medical grounds despite the grave economic allegations - HELD THAT: - Applying the established tripod considerations - flight risk, tampering with evidence and influencing witnesses - the Court examined available material and concluded that: (a) there was no substantial material to demonstrate that the petitioner was a flight risk given his long-standing ties, parliamentary status, past travel with returns, and prior court-permitted travel; (b) the primary evidence is documentary and digital and already in custody of investigating agencies, searches and seizures have been conducted, and there were no specific allegations of tampering with evidence over the years save a contested assertion about aiding one person to travel; (c) credibility and veracity of prosecution witnesses and approver statements are matters for trial and cannot be determinatively evaluated at bail stage; and (d) while the offence is grave, gravity does not automatically preclude bail and must be weighed with other factors. The petitioner's serious and chronic medical conditions were accepted as relevant; balancing these factors the Court found bail on merits and medical grounds appropriate and imposed conditions to allay risks of absconding or witness interference. [Paras 37, 38, 41, 42, 43]

Petitioner granted regular bail on merits and medical grounds subject to conditions.

Final Conclusion: The High Court held that the twin conditions in Section 45(1) PMLA are not applicable and directed that the bail application be decided under Section 439 Cr.P.C.; on merits and medical grounds the petitioner was released on bail subject to specified conditions (personal bond, surety, deposit of passport/permission to travel, availability for investigation and non-interference with witnesses).

Refund of CENVAT credit under transitional provisions - application of Section 142(3) of the CGST Act, 2017 - reverse charge service tax paid under erstwhile law - rejection of refund on the basis of sub section 8(a) of Section 142

Refund of CENVAT credit under transitional provisions - application of Section 142(3) of the CGST Act, 2017 - reverse charge service tax paid under erstwhile law - Whether the appellant is entitled to refund of service tax paid under the Reverse Charge Mechanism after the appointed day under the transitional provisions of the CGST Act, 2017. - HELD THAT: - The Tribunal held that claims for refund of amounts paid under the erstwhile law (including CENVAT/service tax paid under reverse charge) filed on or after the appointed day are to be disposed of in accordance with the provisions of the existing law, by virtue of sub section (3) of Section 142 of the CGST Act, 2017. The Commissioner (Appeals) had rejected the refund relying on sub section 8(a) of Section 142, but the appellant did not fall within the scope of that provision as there were no assessment or adjudication orders determining the liability under the erstwhile statute. The authorities below also did not dispute the appellant's entitlement to CENVAT credit under the erstwhile statute. Applying Section 142(3), the Tribunal concluded that the refund claims merit consideration under the existing law and that the appellant is entitled to the benefit of refund of service tax paid under reverse charge.

Impugned order rejecting the refund set aside; appeals allowed and the refund claims to be considered under Section 142(3) of the CGST Act, 2017.

Final Conclusion: The Tribunal allowed the appeals, set aside the order rejecting the refund applications and directed that the refund claims for service tax paid under the Reverse Charge Mechanism be considered and disposed of in accordance with the erstwhile law under Section 142(3) of the CGST Act, 2017.

Suo motu re-credit - proportionate reversal of Cenvat credit - Rule 6(3A) and Rule 6(6) of the Cenvat Credit Rules, 2004 - exempted storage and warehousing of agricultural produce - definition of "agricultural produce" under section 65B(5) - time-limit for adjustment of excess reversal - entitlement to re-credit upon subsequent tax payment and interest

Suo motu re-credit - proportionate reversal of Cenvat credit - Rule 6(3A) - time-limit for adjustment of excess reversal - entitlement to re-credit upon subsequent tax payment and interest - Validity of the suo motu re-credit of the amount reversed in excess for the period 01.07.2012 to 31.03.2013 and whether the one year time limit for adjustment under the Cenvat Credit Rules applied to that re-credit. - HELD THAT: - The appellants had earlier treated storage and warehousing of rice as exempt and had proportionately reversed common input credit; subsequently they paid service tax and interest for the relevant earlier period and, on 29.03.2014, took suo motu re credit of the amount that was not required to have been reversed. The Tribunal examined whether that re credit was an adjustment under Rule 6(3A) (and thereby subject to the one year adjustment limit) or a correction/entitlement distinct from such an adjustment. Applying the decision of the Hon'ble High Court of Madras in M/s. ICMC Corporation Ltd. , which recognises that an assessee may take suo motu credit if otherwise eligible, the Tribunal held that the re credit in the present case was a correction of an excess reversal and not an adjustment under Rule 6(3A). Consequently the statutory one year time limit for adjusting excess reversal did not apply to the re credit taken after the appellants discharged the tax and interest liability for the earlier period. On these findings the Tribunal concluded that the Department had no basis to disallow the suo motu re credit or to recover the amount or levy penalty on that ground.

The suo motu re credit taken on 29.03.2014 in respect of excess reversal for 01.07.2012 to 31.03.2013 was permissible and not barred by the one year adjustment limit; the impugned demand, interest and penalty on that ground were unsustainable.

Final Conclusion: Appeal allowed; the impugned order confirming recovery and penalty on the ground that the suo motu re credit was impermissible or time barred is set aside, and the re credit taken by the appellants is held valid with consequential reliefs, if any.

Deemed manufacture - adoption of any other treatment to render the product marketable - marketability as determinative of manufacture - merely packing / repacking - finality of administrative order - binding effect of prior adjudication and consistency in Revenue's stand

Deemed manufacture - adoption of any other treatment to render the product marketable - merely packing / repacking - marketability as determinative of manufacture - Compression of carbon dioxide received through pipelines and subsequent filling into cylinders does not amount to manufacture under Chapter Note 9 to Chapter 28 of the Tariff Act in the facts of this case. - HELD THAT: - The Tribunal considered whether the appellant's operations-compression and filling of CO2 into customer-owned cylinders bearing buyers' identification-fell within the residual limb of the chapter note as "adoption of any other treatment to render the product marketable." The Principal Commissioner, after examining the factual matrix and earlier adjudications in the appellant's own case, held that the activity was at best packing and did not constitute labelling, relabelling or repacking nor satisfy the residual requirement. The Principal Commissioner further concluded that the 2008 textual amendment substituting 'or' for 'and' was irrelevant to the appellant's facts because the activity did not fall within the first two limbs and the residual limb did not apply. The Tribunal accepted that the earlier appellate findings in the appellant's own case had attained finality and that no material change in process or law rendered the earlier ratio inapplicable. Applying that determinative reasoning to the show cause notices for the periods in dispute, the Tribunal held the impugned demands could not be sustained. [Paras 30, 31, 32]

Impugned demands premised on treating compression and filling into cylinders as manufacture are unsustainable and are set aside.

Finality of administrative order - binding effect of prior adjudication and consistency in Revenue's stand - preclusion of Revenue from taking a contrary stand - The Department is precluded from taking a contrary stand in these appeals because a later order in the appellant's own case for a subsequent period, holding the activity not to be manufacture, attained finality. - HELD THAT: - The Tribunal treated the Principal Commissioner's order for the subsequent period-which held that the process did not amount to manufacture-as final because the Department did not file an appeal. In that factual and legal posture the Revenue cannot legitimately advance a contrary contention in appeals concerning earlier periods on the same core issue. The Tribunal relied on the settled principle that once the Department permits an adjudication in the appellant's own case to attain finality, it is precluded from adopting an inconsistent position in subsequent proceedings absent change in law or facts. Applying that principle, the Tribunal held the Revenue's changed stand unsustainable and directed setting aside of the impugned orders. [Paras 26, 27, 31]

Department precluded from agitating manufacture for the periods in issue; reliance on the final administrative order is upheld.

Final Conclusion: The impugned orders confirming demands, interest and penalties are set aside and all fifteen appeals are allowed, the Tribunal holding that the appellant's compression-and-filling activity does not amount to manufacture on the facts and that the Revenue is precluded from taking a contrary stand in view of a subsequent final order.

CENVAT credit on duty actually paid - Duty paid versus duty payable - Classification by manufacturer binding on recipient - Burden on Revenue to prove supplier's goods were exempt

CENVAT credit on duty actually paid - Duty paid versus duty payable - Burden on Revenue to prove supplier's goods were exempt - Classification by manufacturer binding on recipient - Whether CENVAT credit availed by the recipient can be denied on the ground that the supplier was not liable to pay excise duty on the inputs supplied. - HELD THAT: - The Tribunal held that Rule 3 of the Cenvat Credit Rules (formerly Section 57A(1)) enables availment of credit in respect of duty actually paid and not duty 'payable', and therefore the factual state of payment by the supplier is the determinative factor. Where the supplier has paid duty and the recipient has received genuine invoices and availed credit, the recipient is not required to re-assess or determine whether the supplier ought to have been exempt; that obligation of assessment lies with the supplier and the jurisdictional assessing authority. The revenue must produce cogent evidence to establish that the supplier's product fell within the exemption (here notification for goods manufactured from PVC waste and scrap) before credit at the recipient's end can be denied. Classification made by the manufacturer/supplier and assessment at the supplier's end cannot be reopened by the officer in charge of the recipient; accordingly, the supplier's classification under Chapter heading 3904 (which does not, on its face, limit the heading to PVC manufactured from scrap) cannot be displaced merely at the recipient's end. The Tribunal applied settled precedents, noting the decisions relied upon by the parties, and concluded that in the absence of any independent or detailed evidence about the supplier's manufacturing process (the impugned finding rested solely upon a letter from the jurisdictional officer which did not establish use of scrap), the Revenue failed to discharge its onus. Allowing credit in respect of identical inputs from six other suppliers but denying credit against invoices of one supplier without adequate justification produced an impermissible disparity. On these grounds the impugned order denying credit and imposing equivalent penalty was set aside and the appeal allowed. (The Tribunal discussed earlier authoritative decisions, including Sarvesh Refractories (P) Ltd. vs. Commissioner of Central Excise & Customs and the Madras High Court decision in CCE, Chennai-I v. CEGAT, Chennai , as reflected in the record, to support the legal propositions applied.) [Paras 8, 9, 10]

CENVAT credit cannot be denied to the recipient merely because the supplier was allegedly not liable to pay duty; the denial of credit and the penalty imposed are set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; the order denying CENVAT credit and imposing penalty in respect of inputs supplied by M/s. Shiv Industries is set aside, the Tribunal holding that credit on duty actually paid cannot be denied in the absence of cogent evidence that the supplier's goods were exempt and that the supplier's classification and payment cannot be re-opened at the recipient's end.

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 (pre 1.4.2011) - onus of proof for availment of Cenvat credit - penal provisions under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 (pre 1.4.2011) - Entitlement to Cenvat credit on services (Insurance, Membership fees, Travel Foreign Ticket) under the unamended inclusive definition of 'input service'. - HELD THAT: - For the period prior to April 2011 the unamended inclusive definition of 'input service' in Rule 2(l) includes services comprising "activities relating to business". The Tribunal found that the disputed services were used or availed to meet business requirements and that their costs (including service tax) were treated as business expenditure in the assessee's books. On that basis the services in question fall within the scope of 'input service' and merit Cenvat benefit, as considered in the first appellate decision and endorsed by the Tribunal (see para. 3). [Paras 3]

Cenvat credit allowed on Insurance, Membership fees and Travel Foreign Ticket as 'input service' for the disputed period.

Onus of proof for availment of Cenvat credit - Denial of Cenvat credit in respect of Rent a Cab and Travel expenses (Foreign) due to non submission of documentary evidence establishing business use. - HELD THAT: - Although the inclusive definition of 'input service' could cover the disputed services, the assessee bears the onus to substantiate entitlement by producing invoices and supporting documents. The Tribunal recorded that the appellant did not place such documentary evidence before the original or first appellate authority and the appellant's counsel conceded non submission. In absence of proper substantiation that the Rent a Cab and Travel (Foreign) services were used for business, denial of Cenvat benefit on these services cannot be faulted (see para. 4). [Paras 4]

Denial of Cenvat credit on Rent a Cab and Travel Expenses (Foreign) sustained; assessee liable to pay the adjudged demand with interest.

Penal provisions under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 - Validity of imposition of penalty equal to the tax demand under Section 11AC read with Rule 15 where the irregularity arose from audit scrutiny and statutory records were maintained. - HELD THAT: - The authorities imposed penalty on the basis of Section 11AC read with Rule 15. The Tribunal noted it was undisputed that statutory records reflecting Cenvat availment were maintained and that the irregularities were detected during departmental audit. On those facts there was no element of suppression or intent to defraud revenue; invocation of penal provisions without proper corroboration was therefore not justified (see para. 5). [Paras 5]

Imposition of penalty set aside; appeal allowed to that extent.

Final Conclusion: The appeal is partly allowed: Cenvat credit is permitted for Insurance, Membership fees and Travel Foreign Ticket; denial of credit sustained for Rent a Cab and certain Travel (Foreign) expenses for want of documentary proof and the adjudged demand with interest stands; the penalty imposed under Section 11AC/Rule 15 is quashed.

Permissive rectification of VAT return after expiry of revision period - rectification to reflect correct classification for issuance of Form F - bona fide mistake negating culpable liability and tax evasion - issuing statutory form on judicial direction and ministerial compliance by VATO

Permissive rectification of VAT return after expiry of revision period - rectification to reflect correct classification for issuance of Form F - bona fide mistake negating culpable liability and tax evasion - Petition for rectification of the DVAT return for fourth quarter 2015-16 and issuance of Form 'F' to the petitioner was allowed notwithstanding expiry of the statutory period for revising the return. - HELD THAT: - The Court held that the petitioner had made a bona fide, inadvertent classification error in the DVAT-16 return which did not indicate any attempt to evade tax or any culpable liability. Relying on a Coordinate Bench decision in H.M. Sales Corporation Vs. Commissioner of Trade and Taxes where similar facts warranted permitting rectification despite the revision period having lapsed, the Court concluded that the petitioner should be permitted to rectify the return and have its clarification accepted. The Court directed the VATO to pass an appropriate order giving effect to the rectification within two weeks and to permit the petitioner to download the Form 'F' within one week thereafter. The Court rejected the respondents' contention that the remedy lay only in revision under the statute, treating the contemporaneous factual parity and bona fides as sufficient to warrant judicially directed rectification. [Paras 11, 12]

Return for fourth quarter 2015-16 is to be rectified; VATO to pass order within two weeks and petitioner to be permitted to download Form 'F' within one week thereafter.

Final Conclusion: Writ petition allowed: rectification of the DVAT return for the specified quarter permitted on the ground of a bona fide mistake; VATO directed to give effect to the rectification and enable issuance/download of Form 'F' within the time-frame specified by the Court.

Interim relief - injunction against coercive action - e-commerce transactions for personal use - security by bank guarantee - adjournment and listing for joint hearing

Interim relief - e-commerce transactions for personal use - security by bank guarantee - injunction against coercive action - Petitioner's entitlement to continue trading through e commerce and online purchase system during the pendency of the writ petition subject to provision of bank guarantee to secure the State's interest. - HELD THAT: - The Court granted interim relief permitting the petitioner to trade through e commerce and the online purchase system during the pendency of the writ petition, on condition that the petitioner furnishes a bank guarantee to the satisfaction of the concerned authorities in the prescribed form to secure the interest of the State. The Court noted that a bank guarantee has already been submitted by the petitioner and the opposite parties did not dispute that position; consequently no further bank guarantee would be required if already furnished. The direction operates as a protective injunction against coercive steps for enforcement of demands in respect of goods brought for individual consumers and transacted through e commerce for personal use, subject to the security condition stated above.

Interim permission to continue e commerce trading granted, subject to furnishing of bank guarantee if not already submitted; protection against coercive action in the meantime.

Adjournment and listing for joint hearing - Procedural directions for further proceedings including filing of counter affidavit, rejoinder and listing of the matter. - HELD THAT: - The Court directed the opposite parties to file a counter affidavit within four weeks and permitted the petitioner to file a rejoinder within one week thereafter. The Court ordered that the present petition be listed along with Writ Petition No. 29277 (MB) of 2016 in the first week of September 2021 for joint hearing. The Additional Chief Standing Counsel did not dispute the factual position relied upon by the petitioner, and sought time to file the counter affidavit, which the Court granted.

Counter affidavit to be filed in four weeks, rejoinder in one week thereafter, and matter to be listed with Writ Petition No. 29277 (MB) of 2016 in the first week of September 2021.

Final Conclusion: The writ petition was granted interim relief permitting the petitioner to continue e commerce operations for personal consumer transactions subject to a bank guarantee to the satisfaction of authorities (if not already furnished); the Court directed filing of a counter affidavit in four weeks, rejoinder in one week and listed the matter for joint hearing in the first week of September 2021.

Error apparent on the face of the record - representation under Section 84 of the TNVAT Act - writ of mandamus to direct disposal of representation - disposal of representation on merits - opportunity of hearing before decision - direction to decide within stipulated time

Representation under Section 84 of the TNVAT Act - error apparent on the face of the record - writ of mandamus to direct disposal of representation - disposal of representation on merits - opportunity of hearing before decision - direction to decide within stipulated time - Direction to the respondent to consider and decide the petitioner's representation dated 30.12.2019 on merits after affording an opportunity of hearing, within six weeks. - HELD THAT: - The petitioner, a registered dealer, filed a representation under Section 84 of the TNVAT Act challenging assessment orders for the assessment years 2009-10, 2010-11, 2011-12, 2013-14 and 2014-15 as containing errors apparent on the face of the record. Although the petitioner relied on authority addressing the concept of an error apparent on the face of the record, the High Court declined to adjudicate the merits. Instead, the Court exercised its supervisory jurisdiction to mandate that the respondent consider the representation and pass appropriate orders on merits and in accordance with law, after hearing the petitioner, within a specified time frame. The Court therefore granted relief in the form of a direction for disposal of the representation rather than deciding the substantive tax disputes themselves. [Paras 5]

The respondent is directed to consider the representation dated 30.12.2019 and pass appropriate orders on merits after giving the petitioner an opportunity of hearing within six weeks of receipt of this order.

Final Conclusion: Writ petition disposed directing the respondent to consider and decide the petitioner's representation under Section 84 of the TNVAT Act on merits after hearing, within six weeks; merits of assessment orders not adjudicated.

Power to direct interim compensation under Section 143A of the Negotiable Instruments Act - Liability of authorised signatory/director for interim compensation - Doctrine on identity of the drawer and person signing on behalf of a company - Delay and laches in seeking judicial relief - Non-compliance with an interim court direction - Precedential scope of N. Harihara Krishnan - Reliance on interim orders of a coordinate High Court

Power to direct interim compensation under Section 143A of the Negotiable Instruments Act - Liability of authorised signatory/director for interim compensation - Non-compliance with an interim court direction - Delay and laches in seeking judicial relief - Validity and enforceability of the Magistrate's order directing the accused (petitioners) to deposit 20% interim compensation under Section 143A where petitioners are directors and an authorised signatory and where there was delay and non-compliance. - HELD THAT: - The Court found on the record that the petitioners are directors of the company accused and that petitioner No.1 signed the cheques as an authorised signatory of that company. The petitioners did not raise the contention before the trial Court that they were not the drawer; instead they sought a direction for a minimum deposit thereby accepting liability before the trial Court. The impugned order dated 19.09.2019 directed payment of interim compensation within 60 days, but the petitioners delayed nearly two years in approaching this Court and have not complied with the trial Court's direction. In view of these factual findings and the conduct of the petitioners, the Court declined to exercise discretionary relief under Article 226 to quash the interim compensation direction under Section 143A. [Paras 6, 7, 9, 14, 15]

Petition to quash the interim compensation order was rejected and the petition dismissed.

Precedential scope of N. Harihara Krishnan - Doctrine on identity of the drawer and person signing on behalf of a company - Whether the decision in N. Harihara Krishnan renders assistance to petitioners and supports quashing the interim compensation order. - HELD THAT: - The Court examined the Supreme Court's observations in N. Harihara Krishnan concerning the distinction between an authorised signatory and the drawer and the consequences of joinder of a company after limitation. The Court held that the Supreme Court's observations do not aid the petitioners in the present factual matrix, because in this case the company has been joined as accused, the petitioners are directors and petitioner No.1 signed the cheques as authorised signatory. The factual position and procedural posture here distinguish the said precedent and the judgment therefore does not support setting aside the interim compensation order. [Paras 10, 11, 12]

N. Harihara Krishnan held not to be applicable or supportive of the petitioners' challenge to the interim compensation order.

Reliance on interim orders of a coordinate High Court - Whether the ex parte interim order passed by the Bombay High Court assists the petitioners. - HELD THAT: - The Court observed that the interim order of the Bombay High Court (dated 26.10.2020) relied upon by the petitioners remains an interim ex parte direction and no final decision has been rendered by that Court. Consequently, the Bombay High Court's interim order does not furnish a basis to interfere with the trial Court's order in the present proceedings. [Paras 13]

The Bombay High Court interim order does not assist the petitioners.

Final Conclusion: Given that the petitioners are directors and petitioner No.1 signed the cheques as authorised signatory, that they did not raise the non-drawer contention before the trial Court but sought a minimal deposit, and in view of their delay and non-compliance with the interim direction, the High Court declined to interfere with the Magistrate's order and dismissed the petition.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable statutory presumption - reverse onus / burden to rebut - proof beyond reasonable doubt versus preponderance of probabilities - offence under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable statutory presumption - reverse onus / burden to rebut - proof beyond reasonable doubt versus preponderance of probabilities - offence under Section 138 of the Negotiable Instruments Act - Complainant failed to prove beyond reasonable doubt that the cheque was issued towards a legally enforceable debt and the acquittal does not call for interference. - HELD THAT: - The cheque and signature were admitted, thereby attracting the statutory presumption under Section 139 of the Negotiable Instruments Act and shifting the burden on the accused to rebut on preponderance of probabilities. The trial Court examined the materials and found the presumption rebutted: the complaint and legal notice did not specify the date of the alleged loan; Exs. P1 and P2 were produced only at trial and their execution was disputed; the complainant, though a partner in a finance company, advanced large loans in his personal capacity in cash without bank records or income tax disclosure; prior complaints (Exs. D1, D3) indicated the complainant conducted private money lending; the attesting witness was a partner of the complainant and his evidence was weak; the complainant's conduct-delay of two years in issuing notice and inconsistent statements-made the large loan claim improbable and rendered the accused's explanation (loan of a smaller amount and cheque taken as security) a probable defence. Considering these factors, the presumption under Section 139 was successfully rebutted and the Magistrate rightly concluded that the ingredients of Section 138 were not established beyond reasonable doubt. [Paras 13, 16, 18, 21, 22]

The acquittal is upheld as the presumption under Section 139 was rebutted and the prosecution failed to prove a legally enforceable debt.

Final Conclusion: The appeal is dismissed and the judgment of acquittal is confirmed; the matter is remitted to the trial Court with a copy of this judgment.

Compounding of offence under the Negotiable Instruments Act - Section 147 of the Negotiable Instruments Act - graded costs in compounding as per Damodar S. Prabhu - condition precedent to acquittal upon payment of costs - release of deposit by Trial Court after compliance with conditions - settlement by free consent and volition

Compounding of offence under the Negotiable Instruments Act - Section 147 of the Negotiable Instruments Act - settlement by free consent and volition - Joint application under Section 147 permitting compounding of the offence punishable under Section 138 of the N.I. Act. - HELD THAT: - The Court, after hearing parties and perusing the joint application, found that the parties had amicably settled the matter out of their free consent and volition without coercion, fraud or misrepresentation. In view of Section 147 which makes offences under the N.I. Act compoundable, and having been satisfied as to the genuineness of the compromise, the Court allowed the joint application and permitted compounding of the offence on the terms agreed between the parties. [Paras 6, 8, 9, 10]

The joint application for compounding is allowed and the parties are permitted to compound the offence.

Graded costs in compounding as per Damodar S. Prabhu - condition precedent to acquittal upon payment of costs - Imposition of graded cost as condition for allowing compounding and effect of non-payment. - HELD THAT: - The Court applied the guideline in Damodar S. Prabhu regarding imposition of graded costs where compounding is sought before a revisional or appellate forum, and directed that compounding be permitted only on payment of graded cost. The Court fixed the graded cost payable by the petitioner and made the acquittal and setting aside of earlier conviction conditional on deposit of the graded cost within the specified time; non-deposit would preclude the benefit of the order. [Paras 11, 12, 13]

Compounding is allowed subject to the petitioner depositing the graded cost and the acquittal will operate only after such deposit within fifteen days; failure to deposit will render the order inoperative.

Release of deposit by Trial Court after compliance with conditions - Direction to Trial Court to release the amount deposited there in favour of the complainant after identification and after payment of the graded cost by the petitioner. - HELD THAT: - Having permitted compounding subject to payment of graded cost, the Court directed that the sum deposited in the Trial Court by the petitioner be released in favour of the respondent after his due identification and in accordance with law, but only after the petitioner has paid the graded cost as ordered. Registry was directed to transmit a copy of the order to the Trial Court and Sessions Judge's Court. [Paras 13]

The Trial Court is directed to release the deposited amount to the complainant after due identification and after the petitioner has paid the graded cost as ordered.

Compounding of offence under the Negotiable Instruments Act - condition precedent to acquittal upon payment of costs - Setting aside of convictions and acquittal of the petitioner subject to compliance with the graded cost payment. - HELD THAT: - Upon acceptance of the joint compounding application and subject to the condition of payment of graded cost, the Court set aside the conviction and sentence recorded by the Trial Court and the confirmation thereof by the Sessions Judge, and acquitted the petitioner. The acquittal is expressly made to enure only after deposit of the graded cost in its entirety within the time stipulated. [Paras 12, 13]

The judgments of conviction and sentence are set aside and the petitioner is acquitted, but the acquittal will take effect only after payment of the graded cost as directed.

Final Conclusion: The revision petition is disposed of by permitting compounding of the offence under the N.I. Act on the parties' joint application; compounding and consequent setting aside of convictions and acquittal are made conditional upon the petitioner depositing the graded cost in accordance with the Court's direction, and the Trial Court is directed to release the deposited amount to the complainant after compliance with those conditions.