TaxTMI Updates e-Newsletter
Aug 16,2022

Striking off plea for declaration of unconstitutionality - issue of show cause notice and adjudication with a speaking order - prohibition on coercive action pending completion of adjudication - independence of remedy for blocking of input tax credit ledger

Striking off plea for declaration of unconstitutionality - Prayer in the writ petition for a declaration that provisions of Section 16(2)(c) and 16(2)(d) of the Goods and Services Tax Act, 2017 are unconstitutional was struck off. - HELD THAT: - The appellant expressly withdrew the primary prayer for a declaration of unconstitutionality and the Court recorded that submission and struck off that prayer from the writ petition. Consequently the constitutional challenge was not adjudicated on merits by this Court. [Paras 3]

The declaration prayer challenging Section 16(2)(c) and 16(2)(d) is struck off from the writ petition.

Issue of show cause notice and adjudication with a speaking order - Direction to the department to issue a show cause notice, afford time for reply, and adjudicate the matter by a speaking order. - HELD THAT: - The Court directed the respondent department to issue a show cause notice to the appellant within 15 days of receipt of the order, grant the appellant not less than 10 days to file a reply, and thereafter adjudicate the show cause notice on merits by passing a speaking order in accordance with law. The direction follows the parties' contentions that proceedings were in progress and that the department intended to issue show cause notice. [Paras 6]

Respondent directed to issue show cause notice within 15 days, allow not less than 10 days for reply, and adjudicate by a speaking order on merits.

Prohibition on coercive action pending completion of adjudication - Prohibition on the department initiating coercive action against the appellant until adjudication of the show cause notice is completed. - HELD THAT: - As an interim protective measure tied to the directed adjudicatory process, the Court restrained the department from initiating any coercive action against the appellant until the show cause notice is issued, replied to, and adjudicated as directed. This restraint is limited in duration and linked to completion of the specified exercise. [Paras 6]

Department shall not initiate coercive action against the appellant until the adjudication directed is completed.

Independence of remedy for blocking of input tax credit ledger - Blocking of the appellant's input tax credit ledger is an independent issue not decided in this petition; appellant granted liberty to pursue remedies in accordance with law. - HELD THAT: - The Court declined to adjudicate the separate grievance regarding the blocking of the input tax credit ledger within the present writ petition, observing that the matter is independent and must be pursued by the appellant through appropriate legal remedies. No determination was made on the merits of the ledger-blocking action. [Paras 6]

Issue of blocking the input tax credit ledger not adjudicated; appellant given liberty to seek remedies as per law.

Final Conclusion: The appeal and connected application and the writ petition are disposed of: the constitutional declaration prayer is struck off; the department directed to issue and adjudicate a show cause notice within specified timelines and to pass a speaking order; coercive action is restrained pending completion of that exercise; the separate grievance about blocking of the input tax credit ledger was left open with liberty to pursue statutory remedies.

Interim stay of tax recovery subject to security under Rule 51 - deposit as condition for interim relief in revenue matters - scope of security: 10% of tax in dispute vs 10% of entire demand - maintainability of writ petition despite availability of alternative remedy

Interim stay of tax recovery subject to security under Rule 51 - deposit as condition for interim relief in revenue matters - scope of security: 10% of tax in dispute vs 10% of entire demand - Validity and scope of the Single Bench's direction to conditionally stay recovery subject to deposit of 10% of the demand; whether the deposit should be of 10% of the entire demand or 10% of the tax in dispute. - HELD THAT: - The Court upheld the learned Single Bench's exercise of discretion in protecting the appellants' interests by granting interim protection subject to security, construing that direction as made under Rule 51 of the High Court Rules. Rule 51 permits the Court to stay realisation of assessed tax subject to such security as it deems adequate to protect the revenue. However, the Court found that directing deposit of 10% of the entire demand was unduly onerous when the statutory appeal mechanism under Section 107 would require deposit of only 10% of the tax in dispute. In the exercise of appellate supervisory power the Court therefore modified the condition by replacing deposit of 10% of the entire demand with deposit of 10% of the tax in dispute, and granted time for compliance, with the consequence that no coercive action shall be taken if the modified deposit is made within the stipulated period. [Paras 5, 6, 7, 8]

Direction for deposit upheld as a valid exercise under Rule 51 but modified from 10% of the entire demand to deposit of 10% of the tax in dispute; appellants given 30 days to comply and, if complied with, no coercive action to be taken.

Maintainability of writ petition despite availability of alternative remedy - Whether the learned Single Bench was correct in prima facie holding that the writ petitions could not be dismissed at the motion stage on the ground of availability of an alternative remedy and required adjudication on merits. - HELD THAT: - The Court agreed with the learned Single Bench that the appellants had made out a prima facie case warranting continuation of the writ proceedings despite the existence of alternative remedies. On that basis the Single Bench directed the respondents to file affidavits-in-opposition and allowed the writ petitions to proceed to merits. The High Court did not disturb that aspect of the interim order and directed expeditious filing of affidavits and replies within short, specified periods. [Paras 2, 5, 9]

The Single Bench's prima facie view that the writ petitions are maintainable for adjudication on merits is affirmed and respondents directed to file affidavits-in-opposition within the time specified.

Final Conclusion: Appeals partly allowed: the interim conditional stay previously directing deposit of 10% of the entire demand is modified to require deposit of 10% of the tax in dispute within 30 days; no coercive action if complied with; respondents to file affidavits-in-opposition within ten days and appellants to file replies within seven days; connected applications disposed of; no costs.

Production of additional evidence under Rule 112 - sufficient cause - additional evidence at appellate stage - power of the Appellate Authority to make further inquiry under Section 107(11) - endorsement certificate for SEZ supplies - refund of tax on zero-rated supplies - natural justice - opportunity to explain

Production of additional evidence under Rule 112 - additional evidence at appellate stage - power of the Appellate Authority to make further inquiry under Section 107(11) - Acceptance of endorsement certificates filed pending appeal as additional evidence and remit for fresh consideration. - HELD THAT: - The Court examined Rule 112 of the C.G.S.T. Rules and Section 107(11) of the C.G.S.T. Act and held that the Appellate Authority possesses power to permit production of additional evidence at the appellate stage where the appellant was prevented by "sufficient cause" from producing the evidence earlier, or where further inquiry is necessary before disposing of the appeal. The Court referred to precedent recognising a liberal approach to permitting additional evidence at the appellate stage and observed that the discretionary power to admit such evidence must be exercised when the appellant establishes that it lacked opportunity to produce the material earlier or exercised due diligence. Applying these principles to the facts, the Court found that the circumstances invoked by the petitioner fell within the scope of Rule 112 and Section 107(11), and therefore the Appellate Authority ought to have entertained the request to accept the endorsement certificate. [Paras 11, 12, 13, 16]

The request to accept the endorsement certificate as additional evidence is allowed and the impugned order is set aside; the matter is remanded to the Appellate Authority to reconsider after accepting the application for additional evidence in accordance with law.

Sufficient cause - additional evidence at appellate stage - endorsement certificate for SEZ supplies - Whether the petitioner had exercised due diligence and was prevented by sufficient cause from producing endorsement certificates earlier. - HELD THAT: - The Court reviewed the correspondence placed on record showing continuous efforts by the petitioner from June 2020 to January 2021 to obtain endorsement certificates from SEZ recipients and noted that the onset and effects of the Covid pandemic prevented timely procurement of the specified officer's endorsements. The Court held that non-obtainment of the certificates prior to the pandemic could not be held against the petitioner given the statutory two-year window and the unforeseeable national disruption. On these facts the petitioner demonstrated due diligence and sufficient cause for failing to file the certificates with the original refund application. [Paras 9, 10, 13]

Petitioner established sufficient cause and due diligence; the endorsement certificate filed pending appeal should have been considered.

Natural justice - opportunity to explain - additional evidence at appellate stage - Whether the appellant was given an opportunity to explain alleged deficiencies in the endorsement certificates and related submissions before rejection. - HELD THAT: - The Court noted the Appellate Authority's observation that certain certificates did not cover all periods and recipients claimed in the refund applications. The petitioner contended that no opportunity was afforded to explain these perceived deficiencies. The Court accepted that an opportunity to explain would have enabled the petitioner to address the relevance and sufficiency of the certificates and that the absence of such an opportunity militates in favour of rehearing. Consequently the matter requires fresh consideration with an opportunity to the petitioner to explain and supplement if necessary. [Paras 14, 15, 16]

Findings as to deficiency of certificates call for fresh adjudication; matter remitted to Appellate Authority to afford opportunity to explain and then decide afresh.

Final Conclusion: Writ petitions allowed: impugned appellate order dated 30.07.2021 set aside. The endorsement certificate filed pending appeal is to be accepted; the matters are remanded to the Appellate Authority to deal with the appeal afresh in accordance with law, permitting additional evidence and affording the petitioner an opportunity to explain. No order as to costs.

Transitional Credit under GST - Opening of GSTN portal for filing and rectification of TRAN-1 and TRAN-2 - Availability of limited window for claiming transitional credit - Verification of transitional credit claims by tax officers - Reflection of allowed transitional credit in the Electronic Credit Ledger - Binding effect of orders of a superior court

Opening of GSTN portal for filing and rectification of TRAN-1 and TRAN-2 - Availability of limited window for claiming transitional credit - Transitional Credit under GST - Petitions disposed of by permitting petitioners to avail the limited window for filing or rectifying TRAN-1 and TRAN-2 as directed by the Apex Court. - HELD THAT: - The High Court applied the directions issued by the Apex Court in the referenced order dated 22 July 2022, which directed the GST Network to open a common portal for filing/rectification of TRAN-1 and TRAN-2 for a specified two month period. In consequence, the Court held that all petitioners are entitled to avail that window to file or revise the relevant forms to claim Transitional Credit. The Court disposed of the writ petitions in view of those directions without issuing any separate or additional directions of its own.

Petitions disposed; petitioners may file or rectify TRAN-1 and TRAN-2 during the specified window and avail Transitional Credit as per the Apex Court's directions.

Verification of transitional credit claims by tax officers - Reflection of allowed transitional credit in the Electronic Credit Ledger - Verification and post allowance processes were left to the prescribed procedure directed by the Apex Court, including verification by officers and reflection of allowed credit in the Electronic Credit Ledger. - HELD THAT: - The Apex Court's order, applied by this Court, requires that concerned officers have a period of 90 days after the window to verify the veracity of claims and pass appropriate orders on merits after granting reasonable opportunity. The order further directs that allowed Transitional Credit shall be reflected in the Electronic Credit Ledger. The High Court recorded and implemented these procedural directions by disposing the petitions accordingly, leaving the verification, adjudication and ledger entry to the specified process.

Verification of claims and subsequent ledger reflection to be carried out in accordance with the Apex Court's directions within the timelines and procedural safeguards provided therein.

Final Conclusion: In view of the Apex Court's directions dated 22 July 2022, the High Court disposed of the writ petitions, permitting petitioners to file or rectify TRAN 1 and TRAN 2 within the prescribed two month window and directing that verification, adjudication and electronic ledger credit be carried out as ordered by the Apex Court.

Adjustment of IGST against CGST and SGST - refund of IGST - interstate supply versus intrastate supply - obligation to pay substituted tax pending refund - administrative direction for expeditious adjudication of refund claim

Adjustment of IGST against CGST and SGST - refund of IGST - Whether the petitioner is entitled to have the IGST remitted adjusted against the CGST and SGST demands and the manner in which any refund of IGST should be allowed - HELD THAT: - The Court noted that the nature of the transactions (interstate supply) was not in dispute and that the assessing authority held it could not make an adjustment of IGST into CGST and SGST but that the taxable person may claim refund of IGST after payment of CGST and SGST. Having regard to these facts and the parties' positions, the Court did not entertain the challenge to the assessment on that ground but directed a practical course: the petitioner was to pay the CGST and SGST within a stipulated short period and thereafter make a claim for refund of the IGST already paid. The Court required the assessing authority to deal with the refund claim expeditiously, providing a defined timeline for disposal. The direction reflects a procedural accommodation where statutory adjustment was not permitted by the authority, while preserving the petitioner's remedy of refund following payment of the substituted taxes. [Paras 6, 7]

Writ petition disposed directing the petitioner to pay the CGST and SGST within three weeks and thereafter to claim refund of the IGST; respondent No.1 to consider and decide the refund claim expeditiously, preferably within four weeks.

Final Conclusion: The writ petition is disposed of at the admission stage: the petitioner is directed to pay the CGST and SGST within three weeks and then file a refund claim for the IGST paid; the assessing authority shall decide the refund claim as early as possible, preferably within four weeks. No order as to costs.

Set-off of deficits of earlier years against income of subsequent years - computation of income of charitable trusts on commercial/accounting principles - allowability of depreciation for charitable trusts - application of Section 11(1)(a) - income applied for charitable purposes need not be applied in year of receipt - concurrent findings of fact

Set-off of deficits of earlier years against income of subsequent years - application of Section 11(1)(a) - income applied for charitable purposes need not be applied in year of receipt - Whether deficits incurred by the Trust in earlier years or the relevant year could be set off against surplus income of subsequent years under Section 11(1)(a). - HELD THAT: - The Court upheld the concurrent factual finding of the Tribunal and the CIT(A) that expenditure incurred in an earlier year can be met out of income of a subsequent year and that such utilisation would amount to the income being applied for charitable purposes. The authorities below applied prevailing precedents of this Court and other High Courts holding that income of a trust is to be computed on commercial/accounting principles and deficits arising from expenditure exceeding income in a previous year may be set off against surplus in subsequent years. The Tribunal's reliance on decisions treating this issue as settled law, including the Supreme Court affirmation cited by the Tribunal, was affirmed and no error in law was found in allowing the carried forward deficits to be set off against future income. [Paras 6, 8, 9]

Deficits of earlier years can be set off against income of subsequent years and the Tribunal's allowance of carried forward deficits is upheld.

Allowability of depreciation for charitable trusts - computation of income of charitable trusts on commercial/accounting principles - Whether depreciation was properly allowable as an expenditure while the Trust had also claimed capital expenditure applied to the objects of the Trust. - HELD THAT: - The Court accepted the view applied by the CIT(A) and the Tribunal, following the decision in Sheth Manilal Ranchhoddas Vishram Bhavan Trust, that 'income' under Section 11(1)(a) is to be computed in accordance with normal accounting rules and that depreciation is allowable while computing such income. On the facts before the authorities, depreciation was correctly treated as an allowable expenditure notwithstanding contemporaneous capital expenditure claimed, and the disallowance by the Assessing Officer was reversed by the lower authorities. The High Court found no legal error in adopting this principle and in the concurrent factual conclusion reached below. [Paras 7]

Depreciation is allowable in computing the trust's income under Section 11(1)(a) and the disallowance by the Assessing Officer was correctly set aside by the lower authorities.

Final Conclusion: The Tax Appeal is dismissed summarily; the High Court upheld the concurrent findings of the Tribunal and the CIT(A) that depreciation is allowable under accounting principles and that deficits of earlier years may be set off against income of subsequent years, and found no substantial question of law warranting interference.

Review jurisdiction - error apparent on the face of the record - Scope of judicial review of notice under Section 148 of the Income Tax Act, 1961 - Prima facie material for reopening assessment - Requirement of full and true disclosure of material facts - Reassessment on discovery of fresh tangible material or apprehended untruthfulness

Review jurisdiction - error apparent on the face of the record - Whether the judgment dated 18-04-2022 suffered from an error apparent on the face of the record so as to warrant review. - HELD THAT: - The Court examined the limited scope of review, reiterating that review is not a rehearing or an appeal and is confined to correction of an "error apparent on the face of the record" which is self-evident and does not require long-drawn reasoning or the choice between two opinions. Reliance on established precedents was placed to emphasise that mere erroneous appreciation of facts or law, which requires re-evaluation, does not constitute such an error. Applying that standard to the review application, the Court held that the grounds raised by the petitioner entailed disputed questions of fact or reappraisal of evidence which cannot be remedied by review; accordingly, no self-evident error was shown in the earlier judgment to justify review. [Paras 7, 8, 9, 10, 20]

No error apparent on the face of the record was made out; the review petition is not maintainable and is dismissed.

Scope of judicial review of notice under Section 148 of the Income Tax Act, 1961 - Prima facie material for reopening assessment - Requirement of full and true disclosure of material facts - Reassessment on discovery of fresh tangible material or apprehended untruthfulness - Whether there was prima facie material before the Assessing Officer to issue the notice under Section 148 and whether the petitioner had made full and true disclosure so as to defeat reassessment. - HELD THAT: - The Court reviewed the Assessing Officer's recorded reasons that, on examination of documents and Form 26AS, discrepancies existed: receipts under Section 194J were not reflected in the petitioner's Profit & Loss account or satisfactorily explained; reimbursements and actual receipts were not disclosed with supporting ledgers, bills and vouchers; and a quantifiable shortfall in receipts vis-a -vis 26AS indicated income escaping assessment. Applying settled law, the Court confined its role to deciding whether prima facie material existed for issuance of a reopening notice and not to finally adjudicate the correctness or sufficiency of that material. The Court concluded that the notice was issued after investigation and after forming a reason to believe based on fresh tangible material and apprehended untruthfulness of previously disclosed facts, and therefore the Assessing Officer had prima facie material to initiate reassessment proceedings. Challenges to reconciliation and disclosure raised by the petitioner involved disputed factual issues that must be determined in reassessment, not on writ review. [Paras 3, 4, 5, 18, 20]

There was prima facie material to issue the notice under Section 148; the finding that the petitioner did not make full and true disclosure for purposes of initiating reassessment is sustained for the limited purpose of permitting reassessment proceedings to proceed.

Final Conclusion: The review application is dismissed. The High Court's earlier conclusion that prima facie material existed to issue the notice under Section 148 and that no "error apparent on the face of the record" was shown is affirmed; the petitioner may raise its factual contentions before the Assessing Officer in the reassessment proceedings.

Issuance of notice in electronic form - authentication of electronic notice under Rule 127A - time limit for issuance of notice under Section 149 - service and authentication of notices under the Act - dispatch of electronic record and entry into computer resource (Section 13 of the Information Technology Act, 2000) - vires of delegated clarification by notification (Explanation to Clause A(a))

Issuance of notice in electronic form - authentication of electronic notice under Rule 127A - dispatch of electronic record and entry into computer resource (Section 13 of the Information Technology Act, 2000) - time limit for issuance of notice under Section 149 - Whether the notice under Section 148 for Assessment Year 2013-2014 was issued on or before 31.3.2021 and thus within the time limit prescribed by Section 149 - HELD THAT: - The Court examined the distinction between signing and issuance of an electronic notice, the procedure prescribed by Rule 127A for authentication of electronic communications, and the principle in Section 13 of the Information Technology Act, 2000 that dispatch occurs when an electronic record enters a computer resource outside the control of the originator. Rule 127A deems an electronically communicated notice authenticated where the name and office of the income-tax authority appear on the email body or attachment and the email is issued from the designated address. The notice in question bore the name and office on the attachment and carried the digital signature dated 31.3.2021. The petitioner did not demonstrate that the notice was not entered into a computer resource outside the control of the originator on 31.3.2021. Receipt of the email on a later date does not alter the point of issuance under the statutory scheme. Applying the foregoing, the Court found that the issuance occurred on 31.3.2021 and therefore within the period prescribed by Section 149 for AY 2013-2014. [Paras 17, 18, 19]

The notice under Section 148 for AY 2013-2014 was issued on 31.3.2021 and is not time-barred.

Vires of delegated clarification by notification (Explanation to Clause A(a)) - effect of finding on challenge to Explanation - Consequences of the finding on petitions challenging the Explanation to Clause A(a) in the impugned notifications - HELD THAT: - The Court took the interlocutory approach of first determining whether the notices were issued before 1.4.2021 because, if so, the challenge to the Explanation to Clause A(a) (which concerned the applicability of pre-amended provisions) would be academic in these matters. Having found that notices were issued on 31.3.2021, the petitioners did not press the writ petitions attacking the Explanation to Clause A(a). The Court therefore dismissed those writ petitions as not pressed, without adjudicating the vires of the Explanation on merits. [Paras 24, 25]

Writ petitions challenging the Explanation to Clause A(a) are not pressed and are dismissed; the Court did not decide the vires of the Explanation on merits.

Final Conclusion: The notices under Section 148 for the assessment year 2013-2014 were held to have been issued on 31.3.2021 by electronic mode and therefore within the time limit; writ petitions challenging those notices are dismissed, and the connected petitions challenging the Explanation to Clause A(a) in the impugned notifications are not pressed and dismissed without adjudication on merits.

Forfeiture of exemption under Section 13(1)(d) for investments or deposits made otherwise than in modes specified in Section 11(5) - diversion of trust funds by way of advances or loans - corpus donations and requirement of investment in specified modes for maintenance of exemption - interpretation and temporal application of Section 11(1)(d)

Diversion of trust funds by way of advances or loans - forfeiture of exemption under Section 13(1)(d) for investments or deposits made otherwise than in modes specified in Section 11(5) - Addition made by treating advances/closing balances as investments/deposits hit by Section 13(1)(d) read with Section 11(5) and taxation of the trust's surplus. - HELD THAT: - The Tribunal examined whether the amounts advanced to M/s Aryabhatt Charitable Trust, M/s A. K. Goel & Sons and Archana Mittal constituted investments or deposits falling within the mischief of Section 13(1)(d) so as to forfeit exemption. The record showed that the assessee had given sundry advances/loans and had not, in substance, made investments in modes specified in Section 11(5). The Tribunal found that the assessee neither deposited nor made investments as envisaged by Section 11(5) and that the factual characterisation of the transactions did not sustain treatment as prohibited investments for the purpose of Section 13(1)(d) for the year under consideration. On that basis the Tribunal concluded that the provisions relied upon by the authorities were not applicable to the assessee's case in the assessment year before it and set aside the additions. [Paras 15, 19, 20]

Addition under Section 13(1)(d) read with Section 11(5) on account of the advances is not sustainable; the appeal is allowed on this ground.

Corpus donations and requirement of investment in specified modes for maintenance of exemption - interpretation and temporal application of Section 11(1)(d) - Whether corpus donations (voluntary contributions directed to form part of corpus) were mandatorily required, as on the relevant assessment year, to be invested or deposited in the modes specified in Section 11(5) to preserve exemption. - HELD THAT: - The Tribunal compared the text of Section 11(1)(d) as it stood with effect from 01.04.1989 and the later amendments. It observed that, for the assessment year in question, there was no absolute mandate that corpus donations had to be invested or deposited necessarily in the forms or modes specified in Section 11(5) maintained specifically for such corpus. On this construction of the statutory scheme as applicable to the relevant period, the requirement contended for by the revenue did not arise and could not be imposed to deny exemption in the facts of the case. [Paras 16, 17, 18, 19]

There was no mandatory requirement, for the assessment year in question, that corpus contributions be invested exclusively in modes specified in Section 11(5); consequently the contention to deny exemption on that ground fails.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the advances in question did not attract forfeiture of exemption under Section 13(1)(d) read with Section 11(5) for the assessment years before it and that corpus contributions were not, for the relevant period, mandatorily required to be invested in the specified modes; the appeal is allowed.

Disallowance under section 14A read with Rule 8D - requirement of recording satisfaction before applying formula - Application of apportionment formula versus assessee's claim of no expenditure attributable to exempt income - Separate books/accounts and non claim of personal account expenditure as a factor in s.14A assessment - Condonation of delay - sufficient cause on medical/age grounds

Disallowance under section 14A read with Rule 8D - requirement of recording satisfaction before applying formula - Separate books/accounts and non-claim of personal account expenditure - Whether the disallowance under section 14A read with Rule 8D for Assessment Year 2011-12 was justified where the Assessing Officer did not record the required satisfaction and the assessee maintained separate personal and trading accounts - HELD THAT: - The Tribunal examined the statutory requirement that the Assessing Officer must record satisfaction, after having regard to the accounts, before applying the apportionment under section 14A(2) read with Rule 8D. Relying on authoritative precedent, the Tribunal observed that mere disagreement with the assessee's claim is insufficient; the AO must articulate the basis for its conclusion. The assessee maintained separate books for investment (personal) and trading activities and had not claimed as deduction the expenditure recorded in the personal account. The AO had considered only the exempt income in the personal account but failed to demonstrate why the assessee's claim as to non attribution of expenses was incorrect or to record satisfaction based on the accounts. In those circumstances and following the cited jurisprudence, the Tribunal found no basis to sustain the disallowance and directed deletion. [Paras 12, 13]

Disallowance under section 14A read with Rule 8D deleted for Assessment Year 2011-12; appeal allowed.

Disallowance under section 14A read with Rule 8D - requirement of recording satisfaction before applying formula - Assessment of trading versus personal account expenses and reasoned basis for rejecting suo motu offer - Whether the disallowance under section 14A read with Rule 8D for Assessment Year 2013-14 was justified where the AO applied apportionment to both trading and personal accounts and rejected the assessee's suo motu offer without basis - HELD THAT: - The Tribunal noted that the AO included salary expenses of the proprietary trading concern in the s.14A computation and rejected the assessee's voluntary allocation of a small amount as expenditure attributable to dividend income without recording any basis for such rejection. The AO's approach would illogically imply that all trading expenses were attributable solely to exempt income despite the assessee having recorded personal account expenses (not claimed as deduction) and the trading account earning only a negligible portion of total exempt income. Absent a recorded satisfaction and reasoned basis after examination of the accounts, application of the Rule 8D formula could not be sustained. On that basis the Tribunal directed deletion of the disallowance. [Paras 16, 17]

Disallowance under section 14A read with Rule 8D deleted for Assessment Year 2013-14; appeal allowed.

Final Conclusion: The Tribunal condoned the delay in filing the appeals on medical/age grounds and, on merits, set aside the disallowances made under section 14A read with Rule 8D for Assessment Years 2011-12 and 2013-14, directing deletion of the additions and allowing the appeals.

Exemption under section 11 for charitable trusts - Effect of re-registration under section 12AA on entitlement to exemption - Principles of consistency and natural justice in grant of exemption

Exemption under section 11 for charitable trusts - Effect of re-registration under section 12AA on entitlement to exemption - Principles of consistency and natural justice in grant of exemption - Whether the assessee-trust is entitled to claim exemption under section 11 for the assessment year 2015-16 despite re-registration being recorded effective from 06.05.2016 - HELD THAT: - The Tribunal examined the factual matrix that the trust had been earlier registered under section 12AA (initially on 11.07.1966), had regularly filed returns as a trust and claimed application of income under section 11 in earlier assessment years, and that re-registration was sought and granted on 06.05.2016 due to administrative transfer of the case to a new Exemption Ward. The CPC had processed the return for AY 2015-16 and denied the claim, and the AO and the first appellate authority upheld denial on the ground that registration effective from 01.05.2016 permitted benefit only from AY 2016-17. The Tribunal, having noted that the department itself had allowed expenses under section 11 for AYs 2012-13 to 2014-15 on the basis of registration, held that in view of consistency of treatment, the prior registration history of the trust and principles of natural justice, the assessee should be given the benefit of section 11 for the year under consideration. On this basis the Tribunal set aside the order of the CIT(A) and directed the AO to allow the deduction/exemption under section 11 for AY 2015-16. [Paras 5]

The Tribunal allowed the appeal and directed the Assessing Officer to give the benefit of section 11 to the assessee for AY 2015-16, setting aside the order of the CIT(A).

Final Conclusion: Appeal allowed. The order of the CIT(A) is set aside and the Assessing Officer is directed to grant the benefit of exemption under section 11 to the assessee for assessment year 2015-16.

Interest under section 234C - Advance tax liability in respect of capital gains arising after instalment due dates - Second proviso to section 234C - relief for unforeseen/windfall income - Applicability of section 234C to income chargeable under section 115JB - Liability to pay advance tax arises only after event giving rise to income

Interest under section 234C - Advance tax liability in respect of capital gains arising after instalment due dates - Second proviso to section 234C - relief for unforeseen/windfall income - Whether interest under section 234C could be levied where capital gains arose after the earlier advance-tax instalment dates and the assessee paid the tax relating to such gains in the remaining instalments (including by 31st March) for AY 2018-19 - HELD THAT: - The Tribunal examined the second proviso to section 234C and relevant authorities and concluded that where capital gains (windfall/unanticipated income) arise after the dates on which earlier advance-tax instalments fall due, interest under section 234C is not attracted provided the tax payable in respect of such unexpected income is paid in the remaining instalments due thereafter or, where no instalments remain, by 31st March of the financial year. The tribunal distinguished authorities and circulars dealing with book-profit tax under section 115JB as not governing the proviso dealing with capital gains. Applying the proviso to the facts, the assessee paid advance tax for the capital gains which arose in the fourth quarter on 15-03-2018 and 31-03-2018 (or as part of remaining instalments), and therefore there was no liability to pay interest under section 234C on account of those gains. [Paras 11, 12, 13]

Interest of Rs.12,31,304/- charged under section 234C was deleted and the ground of appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2018-19, holding that interest under section 234C could not be levied on the advance-tax shortfall attributable to capital gains that arose after earlier instalment due dates where the tax in respect of those gains was paid in the remaining instalments (or by 31st March).

Timing of transfer for charging capital gains (incident of tax) - deeming of transfer under Section 2(47)(v) of the Income-tax Act - allowing of possession in part performance - Section 53A of the Transfer of Property Act - part performance and requisite conditions - possession contingent on statutory sanction (IOD) and its effect on part performance - application of documentary and contemporaneous evidence to determine actual possession

Timing of transfer for charging capital gains (incident of tax) - deeming of transfer under Section 2(47)(v) of the Income-tax Act - allowing of possession in part performance - Section 53A of the Transfer of Property Act - part performance and requisite conditions - possession contingent on statutory sanction (IOD) and its effect on part performance - Whether the transaction recorded by the sale cum development agreement attracted Section 2(47)(v) read with Section 53A so as to constitute a transfer in AY 2011 12 and thereby give rise to long term capital gains chargeable in that year. - HELD THAT: - The Tribunal examined the contractual terms and the statutory requirements of Section 53A TOPA and Section 2(47)(v). Section 53A requires, among other things, that the transferee must have, in part performance of the contract, taken possession of the property (or continued in possession) and that the transferee has performed or is willing to perform his part. The sale cum development agreement made possession contingent upon the purchasers obtaining statutory sanction (IOD) from the Municipal Corporation; possession was therefore not to be handed over until the IOD was issued. The IOD in the present case was issued only on 15.04.2013. There was no material before the Assessing Officer or CIT(A) to show that the transferee had taken possession prior to the IOD; to the contrary, the assessee produced contemporaneous bills (electricity and property tax receipts) indicating occupation/possession continued by him until after the relevant date. The AO and CIT(A) therefore misinterpreted the agreement by treating mere receipt of consideration and the agreement itself as constituting part performance giving rise to transfer in AY 2011 12. On the facts and contractually stipulated condition precedent, the essential elements of Section 53A were not satisfied in AY 2011 12 and hence Section 2(47)(v) was not attracted for that year. [Paras 11, 12]

No transfer occurred in AY 2011 12 under Section 2(47)(v) read with Section 53A; the addition of long term capital gain in AY 2011 12 is therefore untenable and is deleted.

Final Conclusion: The Tribunal allowed the appeal, holding that on the true construction of the sale cum development agreement and on the material on record the conditions for part performance under Section 53A were not satisfied in AY 2011 12 (possession was contingent on IOD issued only on 15.04.2013); consequently Section 2(47)(v) did not apply in that year and the addition of long term capital gains was deleted.

Unexplained credit under section 68 - deemed income under section 43CA - benefit under section 43CA(3) where agreement entered on earlier date - valuation disparity between stamp duty value and agreement consideration

Unexplained credit under section 68 - Whether the addition made by the Assessing Officer on account of unexplained credit under section 68 was rightly sustained. - HELD THAT: - The Tribunal examined the assessee's farming activities, extent of landholding and the detailed material placed on record regarding agricultural receipts. The CIT(A) had considered the evidence and prior years' accepted figures in restricting the addition and recorded reasons in paras 5.2 to 5.10 of the impugned order. Having regard to the assessee's substantial agricultural income and the CIT(A)'s consistent approach following earlier assessments, the Tribunal found no infirmity in the CIT(A)'s conclusion and upheld the deletion of the unexplained credit addition. [Paras 7]

Deletion of the addition under section 68 as sustained by the CIT(A) is upheld; Revenue's ground is dismissed.

Deemed income under section 43CA - benefit under section 43CA(3) where agreement entered on earlier date - valuation disparity between stamp duty value and agreement consideration - Whether the assessee was entitled to benefit under section 43CA(3) notwithstanding that the agreement fixing consideration was executed on an earlier date and the stamp duty valuation exceeded the agreement consideration. - HELD THAT: - The Assessing Officer invoked section 43CA(1) treating the difference between stamp duty valuation and agreement consideration as deemed income because the agreement value was lower. The CIT(A) examined the statutory provision and the Explanatory Note to the Finance Act, 2013 and held that subsection (3) does not require that an agreement fixing the consideration entered on an earlier date must be registered to attract the benefit. The Tribunal agreed with the CIT(A)'s interpretation that the legislative intent and the Explanatory Note do not mandate registration of earlier agreements for applicability of section 43CA(3), and therefore the assessee was entitled to the relief allowed by the CIT(A). [Paras 8]

Benefit under section 43CA(3) as allowed by the CIT(A) is confirmed; Revenue's challenge to disallow that benefit is dismissed.

Final Conclusion: Both the Revenue's appeal and the assessee's cross-objection are dismissed: the Tribunal upholds the CIT(A)'s deletion of the unexplained credit addition and confirms the CIT(A)'s grant of relief under section 43CA(3), rendering the assessee's remaining grounds infructuous.

Mandatory claim in return of income under section 80A(5) - claim of deduction under Chapter-VI (including section 80-IA) - requirement of audit report for deduction under section 80IA(7) - revised return under section 139(5) as prerequisite for post-return claims - statutory interpretation of plain and unambiguous language

Mandatory claim in return of income under section 80A(5) - claim of deduction under Chapter-VI (including section 80-IA) - requirement of audit report for deduction under section 80IA(7) - revised return under section 139(5) as prerequisite for post-return claims - Whether a deduction under section 80-IA, not claimed in the original return and supported by an audit report filed belatedly during assessment proceedings without a valid revised return, can be allowed. - HELD THAT: - The Tribunal held that section 80A(5) is plain and unambiguous: a claim for deduction under the provisions enumerated in Chapter-VI must be made in the return of income, and failure to do so bars grant of the deduction. The assessee did not claim section 80-IA relief in the original return, did not file a revised return within the time permitted under section 139(5), and furnished the audit report under section 80IA(7) belatedly during assessment proceedings. In these circumstances the provisos relied upon by the assessee (authorities allowing belated claims before appellate fora) were distinguishable because they did not deal with the clear statutory bar in section 80A(5). The Tribunal, following the plain statutory language and relevant High Court authority, concluded that the assessing officer and the appellate authority were correct in rejecting the belated claim; the decision in Goetze and other precedents were noted but the statutory requirement controlled the outcome. [Paras 6, 7]

Deduction under section 80-IA cannot be allowed where it was not claimed in the return, no valid revised return under section 139(5) was filed, and the audit report under section 80IA(7) was not furnished by the due date; appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal for A.Y. 2011-12, holding that the statutory bar in section 80A(5), together with non-furnishing of the required audit report and absence of a valid revised return, precluded allowance of the section 80-IA deduction claimed belatedly during assessment proceedings.

Revision under section 263 - Erroneous and prejudicial to the interests of Revenue - Explanation 2 to section 263 - lack of inquiry versus inadequate inquiry - Section 14A read with Rule 8D - disallowance for expenses relating to exempt income - Application of mind by the Assessing Officer - Scope of revisional powers of the Commissioner of Income Tax

Section 14A read with Rule 8D - disallowance for expenses relating to exempt income - Application of mind by the Assessing Officer - Erroneous and prejudicial to the interests of Revenue - Assessment framed under section 143(3) was erroneous and prejudicial to the interests of Revenue for alleged failure to make enquiries/disallowance under section 14A read with Rule 8D. - HELD THAT: - The Tribunal examined the assessment record and found that the AO issued notices under section 142(1) specifically querying disallowance under section 14A and Rule 8D and the assessee responded. The AO considered the assessee's replies and material on record and accepted the assessee's position when framing assessment under section 143(3). Judicial precedents were applied to distinguish lack of inquiry from inadequate inquiry and to emphasise that an order is not 'erroneous' under section 263 merely because the Commissioner disagrees with the extent of inquiries made by the AO. In the present facts the AO had made enquiries and applied his mind; therefore the order could not be branded as erroneous and prejudicial to revenue merely on the ground that the Commissioner would have conducted further enquiry or taken a different view. [Paras 8]

There is no error in the assessment under section 143(3) with respect to disallowance under section 14A read with Rule 8D; the assessment is not erroneous and prejudicial to the interests of Revenue.

Explanation 2 to section 263 - lack of inquiry versus inadequate inquiry - Scope of revisional powers of the Commissioner of Income Tax - Revision under section 263 - Validity of the revisional order passed by the Principal CIT invoking Explanation 2 to section 263 without having raised it in the show-cause notice and without specifying the enquiries that should have been made. - HELD THAT: - The Tribunal noted that the Principal CIT relied on Explanation 2 in his order but had not invoked that explanation in the original show-cause notice, thereby denying the assessee an opportunity to meet that specific plea. Further, the Principal CIT failed to specify what additional enquiries ought to have been conducted by the AO. In absence of particularised findings identifying enquiries which were omitted and given that the AO had in fact made enquiries and recorded the assessee's responses, the revisional exercise could not be sustained. The Commissioner cannot, by general assertion of inadequate inquiry, substitute his view for a plausible view taken by the AO or initiate revision without materials showing non-application of mind or omission of necessary enquiries. [Paras 8]

The revisional order is unsustainable because Explanation 2 was not raised in the show-cause notice and the Principal CIT did not specify the enquiries which should have been made; accordingly the section 263 order is quashed.

Final Conclusion: The appeal is allowed: the Tribunal holds that the assessment for AY 2017-18 under section 143(3) is not erroneous or prejudicial to the interests of Revenue in respect of section 14A/Rule 8D, and the revisional order under section 263 is quashed for the reasons stated.

Section 69A - Explanation of bank credits as recorded in books - Application of Section 115BBE to unexplained money - Ex parte assessment under section 144 - Banking channel evidence and affidavits as proof of source - Remand for verification

Section 69A - Explanation of bank credits as recorded in books - Whether the provisions of Section 69A could be invoked where the impugned receipts are reflected by credit entries in the assessee's bank passbook and the entries amount to amounts recorded in books of account. - HELD THAT: - The Tribunal held that Section 69A applies only where the assessee is found to be owner of money or valuables which are not recorded in the books of account maintained for any source of income and where the assessee offers no explanation or an unsatisfactory explanation. A credit entry in the bank passbook representing receipt of money through banking channels cannot be equated with the assessee being found to be owner of unexplained money that is not recorded in books of account. In the facts of this case the Tribunal expressed the opinion that the first condition for invoking Section 69A was not satisfied and therefore Section 69A could not properly be invoked merely on the basis of bank passbook credits without considering the explanations and banking evidence furnished by the assessee.

Section 69A could not be invoked on the recorded bank passbook entries alone; the condition for invoking Section 69A was not satisfied.

Explanation of bank credits - Banking channel evidence and affidavits as proof of source - Capital contribution treated as loan - Whether the specific credit entries and the capital contribution to the partnership firm were satisfactorily explained so as to negate the additions made by the AO under Section 69A and the consequential application of Section 115BBE. - HELD THAT: - The Tribunal examined each credited amount relied upon by the AO and the CIT(A). For specified entries (payments from Ashok; loan/refinance proceeds from Lingfin (Bangalore) Pvt. Ltd./Axis Bank; funds from Raghu Shetty by banking transfer intended as the assessee's capital contribution; unsecured loans from Venka Reddy, Ashwin, M. Krishna Mohan Reddy and Ankitha) the assessee produced confirmations, affidavits and banking evidence showing transfers through banking channels and, where necessary, supplemental affidavits supplying PAN and address details before the Tribunal. The Tribunal found that these items were supported by banking channel evidence and credible confirmations/affidavits and that the CIT(A)'s dismissal on the ground that confirmations were on plain paper without full particulars did not outweigh the direct evidence of bank transfers. Consequently those credits, including the capital contribution treated as unexplained by the AO, were held satisfactorily explained and the corresponding additions could not be sustained.

The Tribunal accepted the explanations and banking evidence for the listed credit entries and the capital contribution; the additions in respect of those amounts were displaced.

Remand for verification - Whether the balance credited amounts (interest and an unclear residual credit) were sufficiently explained, and if not, what further action was required. - HELD THAT: - The Tribunal accepted that Rs.17,000 represented interest credited to the SB account and was explained. However, the basis for the remaining sum of Rs.11,132 as treated by the AO was not clear from the assessment order and the material on record. The Tribunal therefore did not decide the matter on merits and remitted this residual item to the Assessing Officer for verification, permitting the assessee liberty to substantiate the entry before the AO.

The matter in respect of the unexplained residual sum was remitted to the AO for verification with liberty to the assessee to substantiate the credit.

Final Conclusion: The Tribunal partly allowed the appeal for Assessment Year 2017-18: Section 69A could not be invoked merely on bank passbook credits; specific bank credits and the capital contribution were accepted as satisfactorily explained on the basis of banking evidence and affidavits and corresponding additions were deleted; one residual credit remained remitted to the AO for verification.

Reassessment under section 147 r.w.s. 148 - reopening of assessment - reason to believe - reason to suspect - independent application of mind - client code modification (CCM) - borrowed satisfaction

Reassessment under section 147 r.w.s. 148 - reason to believe - reason to suspect - independent application of mind - client code modification (CCM) - borrowed satisfaction - Validity of reopening assessment under section 147 r.w.s. 148 based on information from the Investigation Wing and CCM data - HELD THAT: - The Tribunal found that the Assessing Officer recorded reasons for reopening which show the reopening was effected solely on information received from the Directorate of Investigation without independent application of mind by the AO. The reasons relied on investigative CCM data and used tentative language ('probably'), demonstrating at best a reason to suspect rather than a reason to believe that income had escaped assessment. The Tribunal applied settled tests that 'reasons to believe' must have a live nexus with objective material and cannot rest on mere suspicion, rumour or borrowed satisfaction from the investigation wing. As the AO had not formed his own prima facie belief on the basis of cogent material and the reopening proceeded on information not independently corroborated or applied to the assessee's records, the requirement for initiating reassessment under section 147/148 was not fulfilled. Having quashed the reopening on this ground, the Tribunal did not decide the merits of the addition based on CCM. [Paras 9, 11]

Reopening under section 147 r.w.s. 148 was invalid as it rested on borrowed information and suspicion without the AO's independent application of mind; reassessment proceedings quashed.

Final Conclusion: The reassessment initiated under section 147 r.w.s. 148 for Asstt. Year 2010-11 was quashed because the AO acted on information from the Investigation Wing without forming an independent reason to believe; appeal allowed.

Reopening of assessment - failure to furnish reasons to believe - right to object to reasons for reopening - assumption of jurisdiction vitiated - quashing of reassessment

Reopening of assessment - failure to furnish reasons to believe - right to object to reasons for reopening - assumption of jurisdiction vitiated - quashing of reassessment - Validity of assessments framed under section 143(3) r.w.s.147 where the Assessing Officer did not furnish the copy of the 'reasons to believe' to the assessee despite specific request. - HELD THAT: - The Tribunal found on a perusal of the assessment record that the assessee had specifically requested a copy of the 'reasons to believe' relied upon for reopening and that the Assessing Officer did not furnish those reasons prior to completion of assessment. The failure to communicate the reasons deprived the assessee of the statutory right to file objections to the reopening and to have those objections adjudicated by the AO by a speaking order. This procedural omission goes to the root of the jurisdiction assumed under section 147 and, on the authority of GKN Driveshafts (India) Ltd. and the High Court decisions cited, vitiates the reassessment proceedings. Because the AO's assumption of jurisdiction was thus invalid, the Tribunal quashed the assessments without adjudicating the merits of the additions, leaving substantive grounds open for fresh consideration if lawfully reopened. [Paras 11, 12, 13, 14, 15]

Assessments framed under section 143(3) r.w.s.147 are quashed for want of valid assumption of jurisdiction due to non-communication of the 'reasons to believe'.

Final Conclusion: All appeals are allowed: the reassessments for assessment years 2009-10, 2010-11 and 2012-13 are quashed because the AO did not furnish the 'reasons to believe' relied upon for reopening, thereby vitiating the assumption of jurisdiction; substantive grounds were left open.

Admissibility of fresh evidence under Rule 46A(4) of the Income Tax Rules, 1962 - power of the Commissioner (Appeals) to direct production of documents and examine witnesses for disposal of appeal - deductibility of guarantee fee as business expenditure under section 37(1) of the Income-tax Act - coterminous powers of the first appellate authority with the Assessing Officer under section 251(1)(a) - allowability of belated statutory employee contributions where paid before the due date of filing return under section 43B - characterisation of belated EPF/ESI remittances as income under section 2(24)(x) read with section 36(1)(va)

Admissibility of fresh evidence under Rule 46A(4) of the Income Tax Rules, 1962 - power of the Commissioner (Appeals) to direct production of documents and examine witnesses for disposal of appeal - deductibility of guarantee fee as business expenditure under section 37(1) of the Income-tax Act - coterminous powers of the first appellate authority with the Assessing Officer under section 251(1)(a) - Whether the Commissioner (Appeals) was justified in deleting the Assessing Officer's disallowance of excess guarantee fee after directing production of documents without affording a fresh opportunity to the Assessing Officer under Rule 46A. - HELD THAT: - The Tribunal examined the facts that the assessee had claimed guarantee fees and that the Assessing Officer had disallowed an amount as excess on the basis that certain fees related to earlier loans or periods. The Commissioner (Appeals) directed the assessee to produce details of tax deducted on the guarantee fee and to substantiate that guarantee fees were not claimed twice; the assessee produced the same TDS documentation already before the Assessing Officer and additional explanations regarding timing (calendar-year accounting of the Korean holding company) and TDS remittance. Rule 46A(4) expressly preserves the power of the Commissioner (Appeals) to direct production of documents or examine witnesses to enable disposal of the appeal. Given that the Commissioner (Appeals) did not admit new material not previously filed but considered and evaluated documents and explanations already on record, and because the appellate authority's powers are coterminous with those of the Assessing Officer under section 251(1)(a), the Tribunal concluded that the Commissioner (Appeals) rightly exercised jurisdiction to accept the assessee's submissions and delete the disallowance. The Tribunal thus found no infringement in the procedure invoked by the Commissioner (Appeals) and upheld deletion of the addition. [Paras 5]

Deletion of the disallowance of the excess guarantee fee sustained; Revenue's ground dismissed.

Allowability of belated statutory employee contributions where paid before the due date of filing return under section 43B - characterisation of belated EPF/ESI remittances as income under section 2(24)(x) read with section 36(1)(va) - Whether belated remittance of employee contributions to EPF and ESI, disallowed by the Assessing Officer, should be allowed as a deduction where payments were made before the due date for filing the return of income. - HELD THAT: - The Assessing Officer treated belated remittances of employee contributions as income under the relevant provisions and disallowed the amounts. On appeal the Commissioner (Appeals) followed the jurisdictional High Court decision in CIT v. Industrial Security & Intelligence India Pvt. Ltd. and the Supreme Court decision in CIT v. Alom Extrusions Ltd., directing allowance of deduction to the extent payments were made before the due date for filing the return of income pursuant to the protective principle in section 43B. The Tribunal examined a later Single Judge decision relied upon by Revenue which was rendered inconclusive by subsequent procedural orders before the High Court, and therefore found the Commissioner (Appeals) correctly followed binding precedent. Accordingly the Tribunal upheld the deletion and directed allowance to the extent payments were made before the return-filing due date. [Paras 11]

Deletion of the disallowance of delayed EPF and ESI remittances upheld; Revenue's ground dismissed.

Final Conclusion: Both grounds of the Revenue's appeal are dismissed: the Tribunal upholds the Commissioner (Appeals)' deletion of the excess guarantee fee disallowance (having properly directed and considered documents under Rule 46A(4) and by virtue of appellate powers), and upholds the deletion of disallowance of belated EPF/ESI remittances to the extent payments were made before the due date of filing the return of income.

Classification of goods under customs/central excise tariff - Medicaments and therapeutic or prophylactic properties - Use of authoritative pharmacopoeia and test reports in classification - Application of precedent on ayurvedic medicaments (Amrutanjan principle)

Classification of goods under customs/central excise tariff - Medicaments and therapeutic or prophylactic properties - Use of authoritative pharmacopoeia and test reports in classification - Application of precedent on ayurvedic medicaments (Amrutanjan principle) - Whether 'Axe Brand Universal Oil' is classifiable under Chapter 30 as a medicament having therapeutic or prophylactic properties or under Chapter 33 as a cosmetic/perfumery preparation. - HELD THAT: - The Tribunal examined the declared ingredients of the product and the extract from the Ayurvedic Pharmacopeia showing that key ingredients (pudhina, eucalyptus/niligiri oil, etc.) have recognised therapeutic uses. Reliance on earlier decisions holding similar balms and oils (for example Amrutanjan, Vicks, Tiger Balm) to be classifiable as medicaments under Chapter 30 was found appropriate. The authority's contention that the laboratory report was inconclusive did not outweigh the material on record showing traditional therapeutic uses and established precedents recognising that substances known to ayurvedic and western science, in pharmaceutical quality, can render a product a medicament. Applying the legal principle in Amrutanjan that ingredients known to ayurveda and refined to pharmaceutical quality are not excluded from being ayurvedic medicaments, the Tribunal upheld the Commissioner (Appeals) conclusion that the product falls within the medicament heading and is not to be classified under Chapter 33. [Paras 6, 7, 8]

The product is classifiable under Chapter 30 as a medicament and the Commissioner (Appeals) order classifying the goods under CTH 30049011 is upheld; the departmental appeal is dismissed.

Final Conclusion: The departmental appeal challenging classification was dismissed; the order of the Commissioner (Appeals) classifying 'Axe Brand Universal Oil' under CTH 30049011 (Chapter 30) is upheld.

Classification of imported goods - sufficiency of chemical testing by Customs Chemical Examiner - applicability of IS specification testing parameters - standard of proof: reasonable doubt and preponderance of probability - confiscation of restricted goods - validity of absolute confiscation and penalty - waiver of detention and demurrage charges

Classification of imported goods - sufficiency of chemical testing by Customs Chemical Examiner - applicability of IS specification testing parameters - standard of proof: reasonable doubt and preponderance of probability - confiscation of restricted goods - validity of absolute confiscation and penalty - Whether the imported consignment is Superior Kerosene Oil (SKO) and whether the absolute confiscation and penalty imposed thereon are sustainable in view of the chemical test report. - HELD THAT: - The Tribunal found that the chemical examiner was asked to report whether the sample conformed to the declared description (Low Aromatic White Spirit) but instead reported only that tested parameters met the requirement of Kerosene under IS-1459. The IS specification for SKO requires eight parameters to be tested; the chemical examiner tested only three, and the Adjudicating Authority relied effectively on one parameter (distillation/final boiling point) to hold the goods to be SKO. The Tribunal held that relying on a single parameter (distillation) - without testing parameters relevant to kerosene such as acidity, burning quality (char value/bloom on glass chimney), colour, copper strip corrosion and sulphur content - is inadequate to conclude the product is SKO. Applying the principles of reasonable doubt and preponderance of probability, the Tribunal distinguished the Gujarat High Court decision relied upon by Revenue (where 14 of 21 parameters were tested) and concluded that the limited testing here does not satisfy those standards. Consequently, the test report is not conclusive and cannot sustain classification of the goods as SKO nor the consequent absolute confiscation and penalty. [Paras 4, 5]

Impugned finding that the goods are Superior Kerosene Oil is set aside; the claimed classification as Low Aromatic White Spirit is to be maintained, and the absolute confiscation and penalty are vacated.

Waiver of detention and demurrage charges - Whether detention and demurrage charges should be waived and the goods released in view of the Tribunal's findings. - HELD THAT: - The Tribunal, having held that the Department failed to establish that the goods are SKO, directed that the Department give effect to the Tribunal's precedent which granted waiver of detention and demurrage where goods were kept under seizure for an extended period through no fault of the importer. The Tribunal referenced and applied that approach, directing that the Department vacate confiscation and grant consequential relief including waiver of detention and demurrage and delivery of the goods in accordance with law. [Paras 4, 5]

Detention and demurrage charges to be waived and appropriate steps taken for release/delivery of the goods with consequential relief in accordance with law.

Final Conclusion: Appeal allowed: the Tribunal set aside the orders of confiscation and penalty, directed that the classification claimed by the appellant be maintained, ordered waiver of detention and demurrage in accordance with the Tribunal's direction, and directed the Department to give effect to this order and release the goods with consequential relief as per law.

Maintainability of appeal against seizure of currency before the Tribunal - attempted export of currency - confiscation of currency - FEMA (Export and Import of Currency) Regulations, 2015 - permissible limit for export of Indian currency - application of Section 113 and Section 114 of the Customs Act, 1962 - exercise of judicial discretion in redemption versus absolute confiscation

Maintainability of appeal against seizure of currency before the Tribunal - Appeal against seizure of currency is maintainable before the Tribunal. - HELD THAT: - The Tribunal examined the scope of 'goods' under the Customs Act, 1962 and noted that currency and baggage are separately listed, with currency and negotiable instruments recognised distinctly. Reliance was placed on earlier orders of the Principal Bench and tribunal authorities to conclude that appeals concerning seizure of currency fall within the appellate jurisdiction of the Tribunal. Consequently, the preliminary objection on maintainability was rejected. [Paras 5]

The appeal is maintainable before the Tribunal.

Attempted export of currency - FEMA (Export and Import of Currency) Regulations, 2015 - permissible limit for export of Indian currency - application of Section 113 and Section 114 of the Customs Act, 1962 - confiscation of currency - Currency carried by the appellant in excess of the permissible limit constituted an attempted export contrary to the FEMA Regulations and rendered the currency liable for confiscation under the Customs Act. - HELD THAT: - The Tribunal accepted the factual finding that Indian currency above the prescribed limit under Regulation 3 of the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 was in the appellant's possession. Noting that the Regulations permit only a limited amount of Indian currency to be taken out of India, the Tribunal held that the appellant's act amounted to an attempt to export currency in excess of that limit. The Tribunal further observed that, for the purpose of confiscation under the Customs Act, the appellant's knowledge or ignorance of the law was immaterial and that the ingredients of Section 113(d) (goods attempted to be exported contrary to prohibitions) were satisfied, thereby engaging confiscation provisions and Section 114. [Paras 6, 7]

The currency in excess of the permissible limit was an attempted export and, in principle, liable for confiscation under the Customs Act.

Exercise of judicial discretion in redemption versus absolute confiscation - redemption of seized currency on payment of fine - Absolute confiscation was not warranted in the facts; the Tribunal exercised judicial discretion to allow redemption on payment of a reasonable fine and to reduce the penalty imposed under Section 114. - HELD THAT: - Although the statutory tests for confiscation were held to be satisfied, the Tribunal applied the principle that discretion under the Customs Act must be exercised judicially, weighing all surrounding facts and implications. Observing that the appellant was an individual traveller, there was no allegation of business dealing or deliberate evasion, and the circumstances differed from the cases relied upon by the department, the Tribunal found absolute confiscation disproportionate. Balancing punishment with the offence and invoking the Apex Court's guidance on judicial exercise of discretion, the Tribunal directed redemption of the seized currencies on payment of a reasonable fine and reduced the monetary penalty earlier imposed under Section 114. [Paras 8, 9]

Absolute confiscation set aside; redemption permitted on payment of a fine and penalty reduced.

Final Conclusion: The appeal is partly allowed: the Tribunal held the appeal to be maintainable, affirmed that currency carried in excess of the FEMA-prescribed limit amounted to attempted export and was, in principle, liable to confiscation, but on exercise of judicial discretion ordered redemption of the seized Indian currency and foreign currency on payment of a fine and reduced the penalty under Section 114.

Right to personal hearing - setting aside of order for failure to afford effective hearing - remand for fresh adjudication after hearing - direction to re-adjudge within specified time-frame

Right to personal hearing - setting aside of order for failure to afford effective hearing - remand for fresh adjudication after hearing - Order passed against the appellant was set aside and the matter remanded to the original authority for fresh decision after affording the appellant personal hearing. - HELD THAT: - The Commissioner recorded that the appellant did not appear on three specified dates for personal hearing. The appellant's counsel explained that the appellant had changed address and the CHA did not inform him of the hearing dates. The Tribunal, without adjudicating the merits of the value, confiscation, duty, and penalties imposed, held that in the interest of justice the order insofar as it affects the present appellant should be set aside and the matter remanded for fresh consideration. The remand expressly requires that the appellant be afforded opportunity of personal hearing before the Commissioner prior to passing any fresh order. The Tribunal directed that the Commissioner hear the appellant on the tentatively fixed date, permitting the Commissioner to reschedule if necessary, and required the appellant's cooperation in attending hearings. [Paras 3, 4, 5]

Appeal partly allowed; impugned order set aside insofar as it relates to the appellant and the matter remanded to the Commissioner for fresh adjudication after affording personal hearing.

Final Conclusion: The appeal is partly allowed: the order against the appellant is set aside and the matter remitted to the original authority for fresh adjudication after granting the appellant an opportunity of personal hearing, with directions to re-adjudge the matter within three months.

Anticipatory bail - necessity of arrest - tampering with evidence - cooperation with investigation - conditions of bail

Anticipatory bail - necessity of arrest - tampering with evidence - conditions of bail - Applicant entitled to anticipatory bail in the event of arrest. - HELD THAT: - The Court found that a deficit in the exported consignment of gold had been identified but the deficit material was recovered and the same was informed to the Customs Officer. The father of the applicant, who was a director and the person primarily looked after company affairs, had already been arrested and was under investigation; searches had been conducted and relevant documents were seized and are with the Customs Officer. The respondent did not contend there was evasion of customs duty. Given that the records and material evidence are in the custody of the investigating authority and the primary responsible person is already under investigation, the Court held that arrest and detention of the applicant do not appear necessary. While the prosecution raised a general apprehension of possible tampering with evidence or witnesses if the applicant were released, the Court balanced that concern against the facts on record and granted anticipatory bail subject to specified conditions requiring cooperation and prohibiting inducement to witnesses and leaving the country without court permission. [Paras 4]

Anticipatory Bail Application allowed; applicant to be released on bail on execution of P.R. bond and compliance with conditions including cooperation with investigation, non-interference with witnesses, and not leaving India without prior permission.

Final Conclusion: Anticipatory bail granted to the applicant in respect of the specified crime; release subject to a P.R. bond, sureties and conditions to ensure cooperation with the investigation and prevention of interference with evidence or witnesses.

Term of office of members of a tribunal - Consistency of administrative notification with statutory provision - Section 413 of the Companies Act 2013 - Locus standi of a Bar Association to challenge appointments - Interference with ongoing selection process - Extension of tenure versus statutory removal procedure

Section 413 of the Companies Act 2013 - Term of office of members of a tribunal - Consistency of administrative notification with statutory provision - Validity of the notification appointing NCLT members for a three-year term vis-a -vis the five-year term prescribed by Section 413(1) of the Companies Act 2013. - HELD THAT: - Section 413(1) prescribes a five-year term for the President and every other Member of the Tribunal. The impugned notification dated 20 September 2019 by which members were appointed for three years is not in consonance with the statutory term prescribed by Section 413(1). The Court recognised this incongruity and recorded that appointment by administrative notification must be consistent with the governing statute. [Paras 15, 17, 25]

The notification prescribing a three-year term was not in consonance with Section 413(1) of the Companies Act 2013.

Locus standi of a Bar Association to challenge appointments - Interference with ongoing selection process - Whether the Court should entertain the Bar Association's prayer to modify the tenures of the appointed members and direct extension of their terms from three to five years at this stage. - HELD THAT: - Although the statutory position favours a five-year term, the Court declined to grant the relief sought by the Bar Association to extend the tenures of all 23 appointees. The Court took into account that the members themselves had not challenged the appointments, that the challenge was raised belatedly near the end of the three-year term, that a fresh selection process had been initiated and was at an advanced stage, and that the Selection Committee and Union Government had already taken steps (including extending the tenure of certain members) after obtaining performance reports. Granting the relief would interfere with the ongoing selection process and would require evaluation of individual members' suitability in proceedings to which they were not parties - an exercise the Court found inappropriate in the present context. [Paras 20, 22, 24, 26, 28]

Relief to modify/extend the tenures of the 23 persons appointed on 20 September 2019 is refused; the ongoing selection process shall be permitted to continue and conclude.

Extension of tenure versus statutory removal procedure - Whether challenges to fitness of incumbent members should be entertained by invoking the removal procedure instead of directing extensions. - HELD THAT: - The petitioner relied on the removal procedure under Section 417 as an alternative, but the Court observed that entertaining such a plea by the Bar Association when the members themselves have not moved the Court would be inappropriate. The present dispute concerned the duration of tenure, not removal; evaluating individual fitness would be consequential and inappropriate in a petition where those members are not parties. [Paras 21, 22]

The Court rejected the submission that removal procedure should be invoked in this petition and declined to assess individual members' fitness in these proceedings.

Consistency of administrative notification with statutory provision - Term of office of members of a tribunal - Obligation of the Union Government in future appointments to the NCLT regarding term of office. - HELD THAT: - Having found that the three-year appointment was not consonant with Section 413, and mindful of the need to avoid recurrence, the Court directed that future appointments to the NCLT must conform to the statutory provisions embodied in Section 413 of the Companies Act 2013. This direction is prospective and binds the Union Government in subsequent appointments. [Paras 27]

The Union Government is directed henceforth to make appointments to the NCLT in compliance with Section 413 of the Companies Act 2013.

Final Conclusion: The Court held that the impugned three-year appointments were not consistent with Section 413(1) of the Companies Act 2013 but declined to order retrospective extension of the tenures of the 23 appointees, permitting the ongoing selection process to continue; it directed that future appointments to the NCLT must conform to the statutory five-year term.

Dispensation of meetings in schemes of amalgamation - consent of all shareholders to waive convening and holding of meetings - consent of unsecured creditors to waive convening and holding of meetings - dispensation of meetings where there are nil creditors verified by auditor's certificate - service of notice under Section 230(5) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 in Form CAA-3

Dispensation of meetings in schemes of amalgamation - consent of all shareholders to waive convening and holding of meetings - Meetings of shareholders of the Transferee Company and the Transferor Companies were dispensed with. - HELD THAT: - The Tribunal examined the application under Sections 230-232 of the Companies Act, 2013 which sought dispensation of shareholder meetings for sanctioning the Scheme of Amalgamation. The Board resolutions approving the Scheme were placed on record and all equity shareholders of the Transferee and Transferor companies, holding 100% of the shares in each company, furnished affidavits consenting to waive convening and holding of meetings. In view of unanimous written consents from all shareholders, the requirement to convene separate meetings of shareholders was held unnecessary and accordingly dispensed with.

Shareholder meetings for the proposed Scheme of Amalgamation are dispensed with.

Dispensation of meetings in schemes of amalgamation - consent of unsecured creditors to waive convening and holding of meetings - Meetings of unsecured creditors of the Transferee Company and specified Transferor Companies were dispensed with. - HELD THAT: - The applicants filed affidavits from all unsecured creditors of the Transferee Company and Transferor Companies Nos. 3, 4, 5, 6, 7, 8 and 9, each consenting to waive meetings for consideration and approval of the Scheme. The Tribunal accepted these unanimous consents as sufficient to dispense with convening separate meetings of those unsecured creditors and directed that meetings need not be held.

Meetings of unsecured creditors of the Transferee Company and Transferor Companies Nos. 3, 4, 5, 6, 7, 8 and 9 are dispensed with.

Dispensation of meetings in schemes of amalgamation - dispensation of meetings where there are nil creditors verified by auditor's certificate - Meetings of secured and unsecured creditors of Transferor Companies No. 1 and No. 2 were dispensed with on account of nil creditors as verified by the auditor's certificate. - HELD THAT: - The record showed that Transferor Companies No. 1 and No. 2 had no secured or unsecured creditors. This position was supported by the auditor's certificate filed with the application. The Tribunal held that where there are no creditors, the question of holding separate meetings for secured or unsecured creditors does not arise and accordingly dispensed with such meetings.

Meetings of secured and unsecured creditors of Transferor Companies No. 1 and No. 2 are dispensed with.

Service of notice under Section 230(5) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 in Form CAA-3 - Directions issued for service of statutory notices and filing of affidavit of service in respect of the Scheme of Amalgamation. - HELD THAT: - Although meetings were dispensed with in the circumstances recorded, the Tribunal directed compliance with the statutory mandate to serve notice under Section 230(5) along with the Scheme and accompanying statement on specified regulatory and governmental authorities (Regional Director, Registrar of Companies, Official Liquidator, Income Tax Department and others). The notice is to be sent by hand delivery/special messenger, post and email within two weeks, specifying a thirty-day period for filing representations. The applicants were further directed to file an affidavit of service to report compliance with these directions.

Applicants to serve statutory notices as directed and to file affidavit of service reporting compliance.

Final Conclusion: The Tribunal allowed the application under Sections 230-232 of the Companies Act, 2013: meetings of shareholders and specified unsecured creditors were dispensed with on the basis of unanimous affidavits of consent; meetings for creditors were dispensed with for Transferor Companies shown to have nil creditors as per the auditor's certificate; and the applicants were directed to serve statutory notices under Section 230(5) (read with Rule 8(2)) and to file affidavits of service.

Impleadment of parties - Necessary party - Proper party - Discretionary impleadment - Dominus litis

Impleadment of parties - Necessary party - Proper party - Discretionary impleadment - Dominus litis - Whether the applicants in I.A. Nos. 584 and 585 of 2022 are necessary or proper parties to be impleaded as respondents in Company Appeal (AT)(CH)(INS) No. 269 of 2022 - HELD THAT: - The Tribunal examined the scope and limits of impleadment under the Code and procedural practice and held that impleadment is a matter of judicial discretion and confined to persons who are necessary or proper parties. A necessary party is one without whom no effective order can be passed; a proper party is one whose presence is required for a complete and final decision though an order can technically be made in their absence. Mere incidental affectation or interest in the fruits of litigation does not qualify a person for impleadment. The Appellant in the main appeal is the erstwhile liquidator who has challenged the impugned order; the applications for impleadment did not establish that the applicants possess an enforceable legal right which is indispensable for the constitution of the appeal. Having considered the conspectus of facts and the role of the applicants, the Tribunal concluded that they are neither necessary nor proper parties and that the appeal can be disposed of on merits on the available record without their presence. [Paras 29, 31, 32]

I.A. Nos. 584 and 585 of 2022 are without merit because the applicants are not necessary or proper parties and therefore cannot be impleaded in the main Company Appeal.

Final Conclusion: I.A. Nos. 584 and 585 of 2022 in Company Appeal (AT)(CH)(INS) No. 269 of 2022 are dismissed; no costs.

Voluntary liquidation - dissolution of corporate person under section 59 of the Insolvency and Bankruptcy Code, 2016 - compliance with IBBI (Voluntary Liquidation Process) Regulations, 2017 - liquidator's duty to preserve records - public announcement and claims process in liquidation - distribution of realised assets to members in proportion to shareholding - no objection certificate from tax authorities

Voluntary liquidation - dissolution of corporate person under section 59 of the Insolvency and Bankruptcy Code, 2016 - compliance with IBBI (Voluntary Liquidation Process) Regulations, 2017 - public announcement and claims process in liquidation - distribution of realised assets to members in proportion to shareholding - no objection certificate from tax authorities - liquidator's duty to preserve records - Whether the Company may be dissolved under section 59 of the Insolvency and Bankruptcy Code, 2016 following completion of the voluntary liquidation process and compliance with applicable regulations. - HELD THAT: - The Tribunal examined the steps taken by the liquidator and the company: board resolution and declaration of solvency, filing of statutory forms with the Registrar of Companies, appointment of the liquidator, public announcement for claims with no claims received, opening and closing of a liquidation bank account, preparation and submission of preliminary and final reports to ROC and IBBI, auditors' certificate of receipts and payments, distribution of realisations among equity shareholders in proportion to shareholding, and obtaining a No Objection Certificate from the Income Tax authorities. The ROC did not file any report or raise objections despite service. Having regard to these facts and the liquidator's certifications of compliance with the IBBI (Voluntary Liquidation Process) Regulations, 2017 and the provisions of section 59 of the Code, the Tribunal found no legal impediment to dissolution. The Tribunal also directed the liquidator to preserve relevant reports, registers and books of account for at least eight years after dissolution, either personally or with an information utility, in accordance with the liquidator's obligations under the regulatory framework. [Paras 5]

Application to dissolve the company under section 59 of the IBC is allowed; the company is dissolved with effect from the date of the order, subject to preservation of liquidation records as directed.

Final Conclusion: The Tribunal allowed the liquidator's application and ordered dissolution of M/s. Nuberg Zirax Engineering Private Limited under section 59 of the IBC, having satisfied itself of compliance with the Voluntary Liquidation Process Regulations and related statutory requirements, and directed retention of liquidation records for eight years.

Preferential transaction - undervalued transaction - ordinary course of business exception under section 43(3) of the IBC - avoidance application under Sections 43 and 45 of the IBC - role and cessation of the Resolution Professional upon approval of the Resolution Plan - jurisdiction to entertain avoidance applications after approval of the Resolution Plan - proviso to Section 23 and its effect on RP's mandate - Form H and parallel avoidance proceedings under Section 26

Preferential transaction - undervalued transaction - ordinary course of business exception under section 43(3) of the IBC - Whether the transactions alleged in the auditor's report constitute preferential or undervalued transactions recoverable under Sections 43 and 45 of the IBC. - HELD THAT: - The Tribunal held that the auditor's report by itself is not proof of the allegations; the report is based on information furnished to the auditor and its conclusions require supporting material. The Court noted that transfers to related parties are not ipso facto preferential where they are made in the ordinary course of business, which is expressly excluded from the definition of preference under Section 43(3). The sale of flats at lower prices was explained by disputes with the developer, a fact not controverted by the applicant. In the absence of sufficient supporting material demonstrating that the transactions effected a preference as defined in Section 43(2), the Tribunal found the allegations of preferential and undervalued transactions to be unsupported. [Paras 4, 5]

Alleged preferential and undervalued transactions were not established on the materials before the Tribunal.

Role and cessation of the Resolution Professional upon approval of the Resolution Plan - jurisdiction to entertain avoidance applications after approval of the Resolution Plan - proviso to Section 23 and its effect on RP's mandate - Form H and parallel avoidance proceedings under Section 26 - Whether the Resolution Professional can prosecute an avoidance application after approval of the Resolution Plan and whether the Tribunal retains jurisdiction to decide the application post approval. - HELD THAT: - The Tribunal analysed the scope of Section 23 (as amended by the proviso) and related provisions and concluded that the RP's managerial mandate does not extend beyond the approval of the Resolution Plan. The RP ceases to be in office once an order under Section 31 approving the Resolution Plan is passed and the successful resolution applicant takes charge. The Tribunal relied on the principle that avoidance applications form part of the CIRP activities to be collected, determined and submitted within prescribed timelines and that such applications do not survive the CIRP once it ends. Consequently, an avoidance application pending undecided at the time the Resolution Plan is approved cannot thereafter be adjudicated by the Tribunal. Applying this principle to the facts, the Tribunal found the application came up after approval of the Resolution Plan and therefore was not maintainable. [Paras 6, 7, 8, 9]

The RP cannot prosecute the avoidance application after approval of the Resolution Plan and the Tribunal has no jurisdiction to adjudicate the application post approval; the application is not maintainable.

Final Conclusion: The application under Sections 43 and 45 was dismissed: the alleged preferential/undervalued transactions were not supported by sufficient material, and in any event the avoidance application was not maintainable after approval of the Resolution Plan since the RP's mandate ceases on such approval.

Initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016 - Test of corporate insolvency and solvency for admission of section 9 petition - Misuse of insolvency process and protection against mala fide initiation - Allegation of collusion between parties affecting maintainability of petition - Duty of Adjudicating Authority to guard against inappropriate admission of CIRP

Initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016 - Test of corporate insolvency and solvency for admission of section 9 petition - Duty of Adjudicating Authority to guard against inappropriate admission of CIRP - Whether the Company Petition under section 9 seeking initiation of CIRP against the Corporate Debtor should be admitted. - HELD THAT: - The Operational Creditor produced the work order, invoice, demand notice in Form 3 and affidavits asserting non-payment and non-receipt of any payment after the demand notice (paras 3-6, 13). The Corporate Debtor admitted the liability by letter dated 05.08.2019 and filed a reply stating inability to pay (paras 7, 8, 14). The Tribunal examined the Corporate Debtor's financial records, including paid-up capital, corporate guarantee exposure and reserves and surplus across balance sheets (para 15). On the facts before it, the Adjudicating Authority found that the Corporate Debtor was not insolvent and possessed sufficient reserves and capacity to meet the claimed operational debt; therefore the object of the Code-resolution of insolvency-would not be served by admitting the petition (paras 15-16). The Tribunal further noted the risk of misuse of the insolvency process and the need for caution to prevent mala fide invocation of CIRP, relying on the principle that the Authority must guard against dragging a company into CIRP for purposes other than insolvency resolution (para 17). The admission by the Corporate Debtor raised suspicion of possible collusion, undermining the petition's bona fides (para 18). In light of the solvency indicators and the potential for misuse/collusion, the Tribunal concluded that admission was not warranted and declined to admit the petition under section 9. [Paras 14, 15, 16, 17, 18]

The Company Petition under section 9 is rejected and C.P.(IB) No. 691/KB/2020 is dismissed; the Operational Creditor remains free to pursue other remedies.

Final Conclusion: The Tribunal dismissed the section 9 petition on the basis that the Corporate Debtor was not insolvent on the material before it and because admission would risk misuse of the insolvency process (including possible collusion); the Operational Creditor may pursue remedies under other law.

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor's demand notice and compliance with Section 8 - affidavit under Section 9(3)(b) stating absence of payment or dispute - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and duties of IRP - threshold limit for initiating CIRP - ex parte proceedings for non appearance of corporate debtor

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor's demand notice and compliance with Section 8 - affidavit under Section 9(3)(b) stating absence of payment or dispute - threshold limit for initiating CIRP - ex parte proceedings for non appearance of corporate debtor - The Section 9 petition filed by the operational creditor was complete and fit for admission to initiate CIRP against the corporate debtor. - HELD THAT: - The Tribunal found that the operational creditor supplied goods and raised invoices supported by delivery challans. A demand notice in the prescribed form was issued and delivered to the corporate debtor, and an affidavit was filed under Section 9(3)(b) asserting that no payment was made nor any notice of dispute received. The corporate debtor did not appear despite service and directions, and the matter proceeded ex parte. The petition met the statutory threshold for initiation of CIRP and was within limitation. On these findings the Adjudicating Authority held that the petition was complete and warranted admission under Section 9.

The petition under Section 9 is admitted and the corporate debtor is placed into CIRP.

Appointment of Interim Resolution Professional and duties of IRP - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of an IRP was made and moratorium declared upon admission of the corporate debtor to CIRP, with directions regarding IRP duties and interim funds. - HELD THAT: - Having admitted the petition, the Tribunal appointed an IRP from the IBBI panel to conduct the CIRP and directed the IRP to perform functions under the Code, including public announcement and calling for claims. The moratorium under the Code was declared, prohibiting institution or continuation of suits, transfer or encumbrance of assets, enforcement of security interest, and recovery of property in possession of the corporate debtor for the duration of CIRP or until approval of a resolution plan or liquidation order. The operational creditor was directed to provide an initial advance to the IRP for smooth conduct of the process, and the IRP was permitted to seek further interim funds as per rules.

An IRP is appointed and moratorium is declared with directions governing IRP's functions and interim funding.

Final Conclusion: The Section 9 application by the operational creditor is allowed; the corporate debtor is admitted into CIRP, an IRP is appointed and statutory moratorium is declared, with directions for public announcement, claim submission and interim funding.

Financial debt - default under Section 7 of the Insolvency and Bankruptcy Code - initiation of Corporate Insolvency Resolution Process - summary adjudication of default - appointment of Interim Resolution Professional - public announcement under Section 13(2) - moratorium under Section 14

Financial debt - default under Section 7 of the Insolvency and Bankruptcy Code - summary adjudication of default - The applicant has established existence of a financial debt and occurrence of default for purposes of admission under Section 7 of the Code. - HELD THAT: - The Tribunal examined the loan agreement, correspondence between the parties and admissions recorded on the record. The material on file, together with the corporate debtor's counsel having stated that the claim is admitted, sufficiently demonstrates that credit was availed and repayment default occurred. The Tribunal applied the summary adjudicatory standard required under the Code to ascertain occurrence of default and found the Section 7 requirements satisfied, entitling the financial creditor to pursue CIRP. [Paras 5, 6, 11, 12, 13]

Application under Section 7 is maintainable and admitted on the ground that financial debt and default have been established.

Appointment of Interim Resolution Professional - The proposed Interim Resolution Professional is eligible and is appointed as IRP. - HELD THAT: - The financial creditor proposed a named insolvency professional who submitted the requisite declaration in Form 2 and confirmed absence of pending disciplinary proceedings. The proposal complied with the requirements of Section 7(3)(b), Section 16 and Rule 9(1) of the Rules. Having recorded satisfaction with these requirements, the Tribunal appointed the proposed professional as Interim Resolution Professional. [Paras 8, 9, 10, 14]

Mr. Manoj Kulshrestha is appointed as Interim Resolution Professional.

Public announcement under Section 13(2) - Public announcement of the admission is directed to be made by the Interim Resolution Professional. - HELD THAT: - Pursuant to admission under Section 7 and in exercise of powers under Section 13(2), the Tribunal directed the Interim Resolution Professional to make the public announcement immediately, observing the timeline prescribed by the IBBI Regulations for publication. [Paras 15]

Interim Resolution Professional to make immediate public announcement in terms of Section 13(2) and applicable regulations.

Moratorium under Section 14 - Moratorium under Section 14 is declared upon admission of the application, and its statutory prohibitions are imposed. - HELD THAT: - Upon admission of the Section 7 application, the Tribunal declared moratorium and recorded the operative consequences flowing from Section 14(1)(a)-(d). The order also recorded statutory exceptions including transactions notified by the Central Government, supply of essential goods or services and the position of contractual sureties in terms of the Code and its amendments. [Paras 16, 17, 18]

Moratorium is declared with the statutory prohibitions and stated exceptions.

Final Conclusion: The Section 7 petition is admitted; CIRP is initiated against the corporate debtor, Mr. Manoj Kulshrestha is appointed as Interim Resolution Professional, a public announcement is directed and moratorium under Section 14 is declared.

Search and seizure under Section 17(1) of the PMLA - freezing orders under Section 17(1-A) of the PMLA - reason to believe - proceeds of crime - money-laundering - requirement of recording reasons for preventive measures - effect of subsisting stay of proceedings on investigative action

Effect of subsisting stay of proceedings on investigative action - freezing orders under Section 17(1-A) of the PMLA - Whether the Enforcement Directorate could initiate search, seizure and freezing action under the PMLA while a subsisting stay of proceedings by the Supreme Court dated 14th December, 2015 remained in force. - HELD THAT: - The impugned freezing orders bear the ECIR number dating to 2012 and the supporting summons pre-date the Supreme Court's stay of 14th December, 2015. There is no material to show that any fresh ECIR or new show-cause proceedings were initiated after 2012. In those circumstances, and having regard to the continuing stay of the proceedings identified in the Transfer Petition order of the Supreme Court, the High Court concluded that the ED could not properly have initiated action against the petitioners during the subsistence of that stay. The Court treated the stay as operative and relevant to the permissibility of ED measures traced to the matters stayed by the Supreme Court, and accordingly restrained action taken pursuant to the freezing orders. [Paras 6, 9, 21]

ED was not entitled to initiate or proceed with the impugned action traceable to the stayed proceedings; the freezing orders are stayed and respondents are directed not to act in furtherance thereof.

Search and seizure under Section 17(1) of the PMLA - freezing orders under Section 17(1-A) of the PMLA - reason to believe - proceeds of crime - requirement of recording reasons for preventive measures - money-laundering - Whether the freezing orders under Section 17(1-A) of the PMLA complied with the statutory pre-requisites in Section 17(1) and contained the necessary written reasons and particularized satisfaction required for search/seizure and freezing. - HELD THAT: - Section 17(1) requires that an authorised officer have information and a written "reason to believe" that money-laundering, possession of proceeds of crime, relevant records, or property related to crime exist; only upon satisfying these pre-requisites can powers under Section 17(1) be exercised. Section 17(1-A) is an alternative measure where seizure is not practicable, but the Court held that it is contingent on satisfaction of Section 17(1)'s conditions, a concluded attempt or reasoned expectation that seizure is impracticable, and recording of the reasons why freezing is necessary to prevent transfer or dissipation. The impugned orders contained only formulaic language and did not set out the particularized "reason to believe," the factual basis connecting the material in possession to the conclusion of money laundering or proceeds of crime, nor reasons why seizure was impracticable. Reliance on alleged incriminating material without a written, graded statement of reasons failed to discharge the statutory onus. Consequently the orders did not meet the statutory requirements for action under Sections 17(1) and 17(1-A) and are unsustainable. [Paras 14, 15, 18, 19, 21]

The freezing orders are invalid for want of the required particularized "reason to believe" and failure to comply with the conditions of Section 17(1) before invoking Section 17(1-A); the orders are stayed.

Final Conclusion: The High Court held the impugned freezing orders dated 13th July, 2022 unsustainable: (i) ED could not initiate or proceed with measures traceable to proceedings which were under a continuing Supreme Court stay of 14th December, 2015; and (ii) the orders failed to satisfy the statutory pre-requisites and required written reasons under Sections 17(1) and 17(1-A) of the PMLA. The freezing orders are stayed and respondents are directed not to act on them.

Deduction of pre-deposit after extending relief under Section 124(2) - definition of "tax dues" and "amount in arrears" under Section 123 and Section 121(c) of the Scheme - validity of Circular No.1072/05/2019/CX dated 25.09.2019 insofar as it alters the statutory definition - beneficial construction of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Deduction of pre-deposit after extending relief under Section 124(2) - beneficial construction of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether amounts paid as pre-deposit or as deposit during enquiry, investigation or audit must be deducted after applying the relief under Section 124(1) and in terms of Section 124(2) of the Scheme, rather than being first adjusted while determining "tax dues". - HELD THAT: - The Court examined the Scheme and noted that Section 124(2) expressly provides that amounts paid as pre-deposit or as deposit during enquiry, investigation or audit shall be deducted when issuing the statement indicating the amount payable by the declarant. A literal and contextual reading shows that the relief under Section 124(1) must be computed on the defined "tax dues" and the statutory deduction of pre-deposit is to follow at the stage of issuing the statement of amount payable. Interpreting "recoverable" as meaning "outstanding" (i.e., net of deposits) would produce an incongruous result and place a declarant who made deposits in a worse position than one who did not, contrary to the scheme's intent to provide relief and allow a fresh beginning. The Court aligned with prior High Court decisions holding that the deposit is to be appropriated after grant of relief under Section 124. Consequently, the Designated Committee's practice of first reducing tax dues by pre-deposits and then applying the relief was held contrary to the Scheme's mandate. [Paras 22, 24, 26, 28, 29]

Pre-deposits/deposits made during enquiry, investigation or audit must be deducted after extending relief under Section 124; the Designated Committee's first-adjustment approach is not in accordance with the Scheme.

Definition of "tax dues" and "amount in arrears" under Section 123 and Section 121(c) of the Scheme - validity of Circular No.1072/05/2019/CX dated 25.09.2019 insofar as it alters the statutory definition - Whether Clause 2(iv) of Circular No.1072/05/2019/CX dated 25.09.2019 validly redefines "tax dues" (or "amount in arrears") so as to mandate that pre-deposits be first adjusted in determining tax dues. - HELD THAT: - Section 121(c) uses the term "recoverable" to define "amount in arrears" and Section 123(e) makes an "amount in arrears" a component of "tax dues." The impugned Circular treats "tax dues" as the outstanding amount net of deposits, thereby altering the statutory concept of "recoverable." Reliance on precedents establishes that a clarificatory circular cannot modify the effect of the statute or issue directions contrary to statutory provisions. The Court held that the Circular, insofar as it effects a change by equating "recoverable" with "outstanding" and directing adjustment of pre-deposits before applying relief, is contrary to the Scheme and cannot be given effect. [Paras 25, 26, 29]

Clause 2(iv) of the Circular, to the extent it directs that tax relief be granted on the outstanding (net) duty by first adjusting pre-deposits, alters the Scheme's effect and is not sustainable; it cannot be given effect.

Final Conclusion: Both writ petitions are allowed. The Designated Committee is directed to re-compute the amounts payable in conformity with the Scheme (applying relief on the tax dues and deducting pre-deposits thereafter), issue revised SVLDRS-3 forms within four weeks, and the petitioners shall deposit the recomputed amounts within two weeks of receipt, upon which their declarations shall be deemed satisfied.

Management or Business Consultant service - taxability of mediation/arbitration fees - advisory versus executive function distinction - reverse charge mechanism - scope of "management" in relation to taxable service

Management or Business Consultant service - taxability of mediation/arbitration fees - advisory versus executive function distinction - reverse charge mechanism - Whether fees paid to a mediator for settling commercial disputes between the appellant and its supplier constitute taxable "management or business consultant" services and hence liable to service tax under the reverse charge mechanism. - HELD THAT: - The Tribunal examined the statutory definition of management or business consultant and the settled judicial and authoritative exposition that management consultancy signifies advisory work in relation to managing an organisation (control, guide, administer, direct affairs) rather than executionary tasks. Reference was made to the CBEC circular and to authoritative definitions and precedents which distinguish advisory/consultative functions from operational or executionary roles. Mediation, as defined in Black's Law Dictionary and the Mediation Training Manual of the Supreme Court's Mediation and Conciliation Project Committee, is an assisted negotiation by a neutral third party to help disputing parties reach a mutually acceptable solution; it employs communication and negotiation skills and addresses factual, legal and interest-based aspects of disputes. On the facts and contract, M/s Cotunace acted as a mediator/arbitrator-performing executionary mediation to settle a contractual dispute pursuant to BIFR directions-and did not render advice or assistance in relation to the appellant's management or its financial management, human resources, marketing, production or similar managerial functions. The Tribunal noted precedent treating mediation/arbitration fees as outside the ambit of management consultancy and stressed that mere financial impact of a service does not convert it into management consultancy. Applying the advisory-versus-executive distinction and the authorities cited, the Tribunal concluded that mediation services performed by M/s Cotunace are not taxable as management or business consultancy services, and therefore amounts paid under reverse charge were not exigible to service tax. [Paras 8, 10, 11, 14, 15]

Fees paid to M/s Cotunace for mediation/arbitration to settle the dispute with GCT do not constitute "management or business consultant" services and are not liable to service tax under the reverse charge mechanism; the refund claim is admissible if otherwise in order and the appeal is allowed.

Final Conclusion: The Tribunal held that mediation/arbitration services rendered by M/s Cotunace were executionary dispute-resolution services and not advisory management consultancy; service tax paid under reverse charge on such fees is not exigible and the appellants are entitled to refund if otherwise in order, accordingly allowing the appeal.

Taxability of liquidated damages - agreement to the obligation to refrain from an act as supply - deemed supply under para 5(e) of Schedule II - contractual nexus and consideration - remand for fresh adjudication in light of CBIC circular

Remand for fresh adjudication in light of CBIC circular - Impugned order set aside and matter remanded to the original adjudicating authority for fresh decision in light of CBIC Circular No.178/10/2022-GST dated 03.08.2022. - HELD THAT: - The Tribunal observed that the CBIC circular, which interprets para 5(e) of Schedule II (and parallels Section 66E(e) of the Finance Act, 1994) on the scope of services described as 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act', was not before the adjudicating authority. Given that the circular articulates the departmental stance and addresses the precise controversy raised in the show cause notice concerning amounts recovered as 'liquidated damages', the Tribunal held that the adjudicating authority should reconsider the matter afresh after taking the circular and the parties' arguments into account. For these reasons the impugned order was set aside and remitted for fresh adjudication. [Paras 4, 5, 7, 8]

Impugned order set aside and matter remanded to the original adjudicating authority to decide afresh in light of the CBIC circular.

Taxability of liquidated damages - agreement to the obligation to refrain from an act as supply - contractual nexus and consideration - Whether amounts recovered as 'liquidated damages' constitute consideration for a taxable supply under para 5(e) of Schedule II was not finally adjudicated and is to be reconsidered. - HELD THAT: - The Tribunal recorded the CBIC's analysis that para 5(e) covers contractual arrangements where one party agrees, for consideration, to refrain from, tolerate or do an act, and that taxability depends on the existence of an express or implied agreement and a necessary nexus between the alleged supply and the consideration. The circular distinguishes payments that are merely compensation for breach (mere flow of money not constituting consideration for tolerating or refraining from an act) from payments that are consideration for an independent or ancillary supply (which would be taxable if the principal supply is taxable). Because the adjudicating authority had not had the benefit of this circular, the Tribunal did not decide the taxability of the specific amounts labelled 'liquidated damages' on merits but remitted the question for fresh consideration applying the circular's legal framework. [Paras 4, 5, 7]

Taxability of the payments described as 'liquidated damages' not finally decided; remanded to the adjudicating authority for fresh consideration applying the CBIC circular's guidance.

Final Conclusion: The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority to decide afresh the question of taxability of amounts characterized as 'liquidated damages' in light of CBIC Circular No.178/10/2022-GST and the parties' submissions.

Process amounting to manufacture - definition of manufacture under Section 2(f) of the Central Excise Act, 1944 - exemption from service tax where process amounts to manufacture - packaging service - manufacturing process under the Factories Act, 1948 - manufacture of gas under the Gas Cylinder Rules, 2004 - waiver of penalty under Section 80 of the Finance Act, 1994

Process amounting to manufacture - definition of manufacture under Section 2(f) of the Central Excise Act, 1944 - packaging service - manufacturing process under the Factories Act, 1948 - manufacture of gas under the Gas Cylinder Rules, 2004 - Activities performed by the appellant in respect of LPG cylinders, including bottling/filling and related operations, amount to a process of manufacture and therefore are not taxable as packaging service. - HELD THAT: - The Tribunal examined the statutory definitions and relevant regulatory provision and concluded that filling LPG into cylinders falls within the concept of "manufacture". Section 2(f) of the Central Excise Act includes any process incidental or ancillary to completion of a manufactured product. The Factories Act definition of "manufacturing process" and Rule 2(xxxii) of the Gas Cylinder Rules, 2004 (defining "manufacture of gas" as filling of a cylinder with compressed gas) support this classification. The Tribunal relied on the Supreme Court's reasoning that LPG bottling is a technical, complex and essential process that renders the product marketable and usable by the end consumer, and noted that excise duty is paid by IOCL on clearances of filled cylinders. On this combined reading, the activities undertaken by the appellant are processes amounting to manufacture and therefore fall outside the scope of taxable "packaging service" in the relevant regime. [Paras 7, 8, 9]

Demand of service tax under the head of packaging service is set aside as the activities constitute manufacture.

Exemption from service tax where process amounts to manufacture - manufacture of gas under the Gas Cylinder Rules, 2004 - Revenue's contention that Chapter notes treating packaging of natural gas as manufacture excludes LPG was rejected. - HELD THAT: - The Tribunal considered the chapter notes to Chapter 27 and the revenue's argument that those notes apply only to natural gas and not to LPG. Having held that the filling/bottling process falls within the statutory concept of manufacture (including Rule 2(xxxii) and the broader definitions in the Central Excise and Factories Acts, and the Supreme Court's observations on LPG bottling), the Tribunal found the revenue's restricted reading unsustainable and declined to withhold the exemption on that basis. [Paras 10]

Argument that the chapter note applies only to natural gas and excludes LPG is not accepted; demand on packaging services must be set aside.

Waiver of penalty under Section 80 of the Finance Act, 1994 - Penalty in respect of the confirmed works contract service demand is waived under Section 80, although the demand itself was raised based on audit and not disputed on merits by the appellant. - HELD THAT: - The Tribunal noted that the appellant did not contest the works contract service demand on merits and that the demand arose from audit of IOCL records in a self-assessment regime. In view of the particular circumstances of the case and in the interest of justice, the Tribunal exercised its discretion under Section 80 of the Finance Act, 1994 to waive the penalty. The Tribunal did not, however, reverse the underlying demand on merits. [Paras 10]

Penalty is waived by invoking Section 80; consequential relief to follow as per law.

Final Conclusion: The appeal is partly allowed: service tax demand as "packaging service" against the appellant for filling/bottling LPG is set aside as the activities amount to manufacture; the revenue's submission that the chapter note applying to natural gas excludes LPG is rejected; penalty in respect of works contract service is waived under Section 80, with consequential reliefs as per law.

Clandestine removal - requirement of tangible corroborative evidence for clandestine manufacture and clearance - burden of proof on the Revenue to establish clandestine clearance - admissibility and evidentiary value of proprietor's admission - authentication of seized private documents / handwriting examination - proof of transportation and discovery of unaccounted finished goods - corroborative indicia: excess raw material, deployment of labour, electricity consumption, receipt of sale proceeds, statements of buyers

Clandestine removal - requirement of tangible corroborative evidence for clandestine manufacture and clearance - burden of proof on the Revenue to establish clandestine clearance - admissibility and evidentiary value of proprietor's admission - authentication of seized private documents / handwriting examination - proof of transportation and discovery of unaccounted finished goods - Whether the Department established clandestine removal on the basis of the notebook entries and the proprietor's statement - HELD THAT: - The Tribunal examined the Department's case which rested solely on entries in a seized notebook and the proprietor's statement. It noted that the notebook's author was not identified and no handwriting or document authentication was carried out. The Court reiterated the settled principle that clandestine manufacture and clearance is a serious charge which must be substantiated by tangible corroborative evidence - such as excess raw material, instances of actual removal of unaccounted finished goods, discovery of finished goods outside the factory, proof of transportation, links between recovered documents and factory activities, receipts of sale proceeds, and indicators like abnormal deployment of labour or electricity consumption. In the absence of any such independent corroboration or sample-based verification, the proprietor's admission and the unverified notebook entries could not, by themselves, establish clandestine removal. The Tribunal also observed that some entries (referring separately to 'tractor' and 'tractor trolley') raised further doubts and could not be accepted without verification of the author and contents. Applying these principles to the facts, the Tribunal found the Revenue failed to discharge its burden of proof. [Paras 7, 8, 10, 11]

Findings of clandestine removal unsustained for lack of tangible corroborative evidence; impugned order set aside and appeal allowed.

Final Conclusion: The appeal is allowed: the Department's allegation of clandestine removal was not proved by the notebook entries and proprietor's statement alone, and in absence of corroborative evidence the impugned orders are set aside with consequential relief as permissible by law.

Slitting and cutting as manufacture - classification by chapter notes - no change in identity of product - limitation and bonafide belief - personal penalty attributable to unsustainable demand

Slitting and cutting as manufacture - no change in identity of product - classification by chapter notes - Conversion of jumbo paper rolls into smaller rolls/sheets by slitting and cutting amounts to manufacture under section 2(f) of the Central Excise Act, 1944. - HELD THAT: - The Tribunal held that slitting and cutting of already manufactured paper jumbo rolls into smaller rolls or sheets does not amount to manufacture because the paper remains the same product and there is no change in its identity, only its size. The adjudicating authority's reliance on differing chapter headings was rejected: absent a specific chapter note treating slitting/cutting as manufacture (the Tribunal noted that Chapter Note 13 expressly makes slitting/cutting of thermal paper amount to manufacture, but no analogous note exists for the paper in question), the process cannot be treated as manufacture. The Tribunal followed prior decisions holding that mere slitting/cutting of an already manufactured item is not manufacture and applied that ratio to the facts of the case. [Paras 4]

Slitting and cutting of jumbo paper rolls into smaller rolls or sheets does not constitute manufacture and the finding of manufacture is set aside.

Limitation and bonafide belief - Whether the demand raised beyond the normal period is barred by limitation. - HELD THAT: - The Tribunal found that the appellant had consistently described in invoices and returns that conversion of jumbo rolls into smaller rolls/sheets 'does not amount to Manufacture as per Section 2(f) of Central Excise Act, 1944' and had a bona fide belief in that position. There was therefore no suppression or mis-declaration with intent to evade duty, and consequently the demand insofar as raised beyond the normal limitation period is barred. [Paras 5]

The demand raised beyond the normal period is hit by limitation.

Personal penalty attributable to unsustainable demand - Sustainability of the personal penalty imposed on the director where the demand itself is unsustainable. - HELD THAT: - Given the Tribunal's conclusions that the activity does not amount to manufacture and that the demand is barred by limitation, the personal penalty imposed on the director could not be sustained. The penalty was therefore set aside as consequential to the unsustainable demand. [Paras 6]

The personal penalty imposed on the director is not sustainable and is set aside.

Final Conclusion: The appeals are allowed: the finding that slitting/cutting of jumbo paper rolls into sheets amounts to manufacture is set aside; the demand beyond the limitation period is barred; and the personal penalty on the director is quashed.

Refund of pre-deposit under Section 35FF - pre-deposit treated as payment made during investigation/audit - non-application of Section 11B to refund of pre-deposit - Board Circular No. 984/8/2014-CX clarifying pre-deposit treatment - interest on refund from date of reversal

Refund of pre-deposit under Section 35FF - non-application of Section 11B to refund of pre-deposit - Board Circular No. 984/8/2014-CX clarifying pre-deposit treatment - interest on refund from date of reversal - Whether the amount deposited during investigation/audit and later reversed in the cenvat register should be treated as pre-deposit for the purpose of appeal and be refundable with interest under Section 35FF without invoking the refund procedure under Section 11B. - HELD THAT: - The Tribunal applied Board Circular No. 984/8/2014-CX (paras 3, 3.2, 5 and 5.2) which clarifies that payment made during investigation or audit prior to filing of appeal is to be treated as pre-deposit to the extent required under Section 35F, and from the date of filing of the appeal such deposited amount shall be deemed to be the pre-deposit. Paragraph 5 and 5.2 of the Circular further state that where the appeal is allowed the appellant is entitled to refund of the deposited amount with interest under Section 35FF and that refund of such pre-deposit is not to be processed under the refund provisions of Section 11B or Section 27 of the Customs Act. On a plain reading of Section 35FF and in light of the Board Circular, the Tribunal concluded that Section 11B does not apply to refunds arising from successful appeals of pre-deposits treated under Section 35F, and accordingly the adjudicating authority's rejection of the refund claim on the ground of limitation under Section 11B was contrary to law. The Tribunal therefore set aside the impugned order and directed grant of refund with interest from the date of reversal. [Paras 5, 6]

Impugned order set aside; adjudicating authority directed to refund the amount deposited during investigation (treated as pre-deposit) with interest from the date of reversal until the date of grant of refund.

Final Conclusion: The appeal is allowed; the adjudicating authority is directed to grant refund of the amount deposited during investigation (treated as pre-deposit) together with interest from the date of reversal, the impugned order rejecting the refund under Section 11B being set aside.

Limitation under proviso to Section 23(5) of MVAT Act - Jurisdictional invalidity of assessment made after six years - Date of creation/effectiveness of a digitally signed order - Assessment under Section 23(5) MVAT Act

Limitation under proviso to Section 23(5) of MVAT Act - Jurisdictional invalidity of assessment made after six years - Assessment under Section 23(5) MVAT Act - Assessment order passed under Section 23(5) of the MVAT Act after the expiry of six years from the end of the year containing the transaction is without jurisdiction and liable to be quashed. - HELD THAT: - The proviso to Sub section (5) of Section 23, as inserted w.e.f. 1st April 2015, bars making an order of assessment under that sub section if the notice under Section 23(5) is issued on or after 1st April 2015 and the order is proposed to be made after the expiry of six years from the end of the year containing the transaction. The transactions in question relate to the period 1st April 2014 to 31st March 2015; accordingly the six year limitation period ran until 31st March 2021. The impugned assessment was signed after that date and therefore was made after the expiry of the six year period. An assessment made beyond that statutory period is without jurisdiction. Applying this principle, the Court concluded that the impugned assessment had to be quashed. [Paras 5, 6]

The assessment order under Section 23(5) was made after the expiry of six years from the end of the year containing the transaction and is without jurisdiction; the impugned order is quashed and set aside.

Date of creation/effectiveness of a digitally signed order - The date on which the digital signature is affixed controls the date of the order's creation/effectiveness for limitation and jurisdictional purposes. - HELD THAT: - The Court accepted that although the impugned order bore an antecedent date, the order came into existence only on the date and time it was digitally signed. The digital signature on the impugned order was affixed on 19th April 2021, which placed the making of the order beyond the six year limitation period applicable to notices issued on or after 1st April 2015. The authenticity of the digital signing date was decisive in determining whether the assessment was within the statutory time limit. [Paras 4, 5]

The digital signature date (19th April 2021) is the operative date of the order; since that date is after the limitation period, the order was made without jurisdiction.

Final Conclusion: The assessment order dated nominally 30th March 2021 but digitally signed on 19th April 2021, assessing the period 1st April 2014 to 31st March 2015 under Section 23(5) MVAT Act, was made after the statutory six year period and therefore lacked jurisdiction; the impugned order is quashed and the petition disposed of with no order as to costs.

Conviction under Section 20(b)(ii)(C) of the NDPS Act - sentence reduction on account of mitigating circumstances (advanced age, illiteracy, lack of criminal record) - application of the sentencing factors for imposing punishment higher than the minimum under Section 32B of the NDPS Act - procedural compliance with provisions governing search and seizure under Sections 42, 50 and 55 of the NDPS Act

Conviction under Section 20(b)(ii)(C) of the NDPS Act - procedural compliance with provisions governing search and seizure under Sections 42, 50 and 55 of the NDPS Act - Conviction under Section 20(b)(ii)(C) of the NDPS Act upheld. - HELD THAT: - The trial court convicted the appellant for possession of commercial quantity of cannabis recovered from her residence; samples were prepared, weighed and seized and a chargesheet was filed. The High Court examined the merits, noted compliance with the statutory provisions relating to search and seizure and upheld the conviction. The Court, on hearing the appeal limited to quantum, did not disturb the finding of guilt recorded by the courts below. [Paras 2, 11]

Conviction affirmed.

Sentence reduction on account of mitigating circumstances (advanced age, illiteracy, lack of criminal record) - application of the sentencing factors for imposing punishment higher than the minimum under Section 32B of the NDPS Act - Sentence reduced from 15 years' rigorous imprisonment to 12 years' rigorous imprisonment and default imprisonment in lieu of fine reduced. - HELD THAT: - Although the offence is serious and the statute prescribes a substantial minimum sentence, the courts imposing punishment higher than the minimum must have regard to the factors enshrined in Section 32B. The trial Judge and the High Court did not adequately consider those factors or the appellant's personal circumstances. The Supreme Court accepted that the appellant was a senior citizen, poor, illiterate, with no previous criminal record and residing in a house where other persons (not convicted) also lived; these mitigating circumstances, taken in totality, warranted reduction of the sentence while upholding conviction. [Paras 16, 17, 18, 19]

Sentence modified to 12 years' rigorous imprisonment and the period of default imprisonment in lieu of fine reduced; appeal disposed of accordingly.

Final Conclusion: Conviction under Section 20(b)(ii)(C) of the NDPS Act is affirmed, but having regard to the appellant's advanced age, illiteracy and lack of criminal antecedents and the failure to apply the factors for enhancing sentence, the sentence is reduced and the appeal is disposed of with the modified sentence.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption of existence of legally enforceable debt or liability - onus on accused to probabilise non-existence of debt - conviction under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption of existence of legally enforceable debt or liability - onus on accused to probabilise non-existence of debt - Whether the cheque was issued for discharge of a legally enforceable debt and whether the petitioner rebutted the statutory presumption under Section 139 of the Act. - HELD THAT: - The Court examined the materials on record and found that the accused admitted issuing the cheque. Once issuance was proved, the statutory presumption under Section 139 arose in favour of the complainant, including a presumption that the cheque was given for discharge of a legally enforceable debt. The accused was required to rebut that presumption by adducing cogent evidence or by probabilising circumstances showing non-existence of debt. The petitioner failed to produce any finance agreement, receipt, loan document or contemporaneous record to show the cheque was delivered merely as security; did not call for company or RTO records to substantiate non-delivery of the vehicle; and offered only letters and denials which did not explicitly and distinctly establish non-delivery or absence of liability. The Court held that bare denial was insufficient and that no preponderance of probabilities was made out to displace the statutory presumption. In view of the above, the findings of the courts below affirming conviction under Section 138 were held not to be infirm. [Paras 8, 9]

The conviction and sentence under Section 138 of the Negotiable Instruments Act were affirmed as the petitioner failed to rebut the statutory presumption that the cheque was issued for discharge of a legally enforceable debt.

Final Conclusion: The revisional application was dismissed; the appellate court's judgment confirming the trial court's conviction and sentence under Section 138 NI Act was affirmed, bail bonds were cancelled and the petitioner was directed to surrender to serve the sentence.

Quashing of final report - exercise of power under Section 482 Cr.P.C. - abuse of process of court - cryptic non-speaking order - guidelines in State of Haryana v. Bhajan Lal - restoration for fresh adjudication

Quashing of final report - cryptic non-speaking order - exercise of power under Section 482 Cr.P.C. - Validity of the High Court order quashing the final report filed under Section 173 Cr.P.C. - HELD THAT: - The Supreme Court held that the High Court's order quashing the final report was brief and cryptic, failing to advert to material facts or to the nature of allegations which had led to the investigation. The High Court's conclusion appears to rest on the observation that the cheque leaf belonged to the de facto complainant and contained her signature and that there was no allegation of threat; however, the complaint alleged possession of the cheque by the accused, forging of the signature and an attempt to extract money. The High Court did not apply the established guidelines governing exercise of inherent jurisdiction under Section 482 Cr.P.C., notably the principles in State of Haryana v. Bhajan Lal, and therefore its order could not be sustained on the face of the record. [Paras 7]

The High Court's order quashing the final report is set aside.

Restoration for fresh adjudication - exercise of power under Section 482 Cr.P.C. - Remedy and further course of action following setting aside of the quashing order. - HELD THAT: - The Supreme Court restored the criminal miscellaneous petition to the file of the High Court for fresh consideration. The parties are to be permitted to place their respective contentions before the High Court, which must adjudicate the petition afresh and in accordance with law, applying the correct legal principles while exercising jurisdiction under Section 482 Cr.P.C. The Supreme Court left all contentions open for determination by the High Court. [Paras 8, 9]

Crl.M.C. No.1792 of 2019 (D) restored to the High Court for fresh decision in accordance with law; all contentions left open.

Final Conclusion: The appeal is allowed; the High Court order dated 07.10.2020 quashing the final report is set aside and the petition is restored to the High Court for fresh adjudication in accordance with law; no order as to costs.

Quashing of criminal complaint under Section 482 Cr.P.C. - Section 138 of the Negotiable Instruments Act - Prima facie inquiry - Resignation of director and liability for company acts - Admissibility and role of DIR-12/DIR-11 as documentary evidence - Limitations on High Court's inherent jurisdiction - no appreciation of evidence or trial on merits

Prima facie inquiry - Resignation of director and liability for company acts - Admissibility and role of DIR-12/DIR-11 as documentary evidence - Limitations on High Court's inherent jurisdiction - no appreciation of evidence or trial on merits - Whether the complaint under Section 138 N.I. Act against petitioner no.3 could be quashed on the ground that he had resigned as director prior to the dates of the impugned cheques. - HELD THAT: - The High Court examined the complaint and the documentary material placed on record. The complaint, read with the annexed documents (including the purported resignation notice and the DIR-12 placed by the complainant), prima facie discloses that at the time the offence under Section 138 N.I. Act was committed the petitioners were alleged to be in charge of and responsible for the conduct of the company's business. Where such specific allegations are supported by documents on record, the contention that petitioner no.3 had ceased to be a director at the relevant time is a defence which requires trial and cannot be conclusively adjudicated in a quashing petition. The Court reiterated the settled principle that while exercising jurisdiction under Section 482 Cr.P.C. it must not undertake appreciation of evidence or conduct a trial; it may, however, consider materials on record for the limited purpose of deciding whether the accusation is prima facie sustainable. Applying that principle to the present material, the Court found the dispute as to the date of resignation to be a matter for trial and not a ground for quashing the complaint at the threshold. [Paras 8, 9, 11]

The petition to quash the complaint filed under Section 138 N.I. Act insofar as it relates to petitioner no.3 is dismissed; the defence as to resignation date must be raised at trial.

Final Conclusion: CRR 1 of 2018 dismissed. The proceedings under Section 138/141 N.I. Act before the learned Metropolitan Magistrate, 20th Court at Calcutta are directed to be disposed of expeditiously, preferably within six months from the date of this order.