TaxTMI Updates e-Newsletter
Aug 23,2022

Recall of court order - dismissal for want of locus/representative capacity - perjury - proceedings under Sections 340 and 195 of the Code of Criminal Procedure, 1973 - dissolution of provisional attachment order - obligation on revenue to record statements as per Paramvir Singh Saini

Recall of court order - dissolution of provisional attachment order - The order dated 15.07.2022, disposing the writ petition on the basis that the provisional attachment order had not been extended, is recalled. - HELD THAT: - The Court recorded that the writ petition had earlier been disposed of on 15.07.2022 pursuant to the respondent's statement that the provisional attachment order dated 31.12.2019 had not been extended and therefore stood dissolved. Subsequent inquiries and the affidavit and oral statements placed before the Court revealed material inconsistencies and facts undermining that premise. In view of the developments and the conclusions reached on the authenticity and provenance of the petition and affidavit, the Court held that the earlier disposal cannot continue to operate and accordingly recalled the order of 15.07.2022. [Paras 10]

Order dated 15.07.2022 recalled; earlier disposal set aside.

Dismissal for want of locus/representative capacity - perjury - Writ petition W.P.(C) 10456/2022 is dismissed because it was filed at the behest of a person who did not manage the petitioner's affairs and whose affidavit was inconsistent with his subsequent statement, amounting to perjury. - HELD THAT: - The Court recorded that the affiant, Mr Surat Singh, admitted signing the petition and affidavit but also admitted lack of knowledge about the petitioner's affairs and that management was with another person. The affidavit filed on record stated that it was true to the affiant's knowledge and belief, yet the affiant's contemporaneous statements demonstrate lack of such knowledge, creating an inconsistency that the Court characterised as perjurious. Given that the petition was filed and prosecuted at the behest of a person not managing the petitioner concern and supported by an affidavit inconsistent with the affiant's later statements, the writ petition was dismissed. [Paras 12, 16]

Writ petition dismissed for want of locus and due to perjurious affidavit.

Proceedings under Sections 340 and 195 of the Code of Criminal Procedure, 1973 - Proceedings under Sections 340 and 195 CrPC are to be initiated against the affiant, and the Registry is directed to refer the matter to the concerned Judicial Magistrate. - HELD THAT: - Having concluded that the affiant has perjured himself, the Court exercised its powers to initiate criminal proceedings under Sections 340 and 195 CrPC. The Registrar General was directed to refer the matter to the appropriate Judicial Magistrate so that such proceedings may be triggered in accordance with law. [Paras 13, 14]

Registrar General to refer the matter to the concerned Judicial Magistrate for proceedings under Sections 340 and 195 CrPC.

Obligation on revenue to record statements as per Paramvir Singh Saini - The respondent/revenue is reminded of its obligation to record statements in the manner prescribed by the Supreme Court in Paramvir Singh Saini v. Baljit Singh and Ors. - HELD THAT: - The Court observed that the revenue must adhere to the procedure prescribed by the Supreme Court in Paramvir Singh Saini for recording statements. The observation was made as a reminder that respondents should follow that prescribed manner in this and other cases involving recording of statements, and that such obligation was relevant to the manner in which the revenue conducted inquiries and recorded the affiant's statement. [Paras 15]

Respondent/revenue directed to record statements in the manner prescribed in Paramvir Singh Saini.

Final Conclusion: The Court recalled its earlier order of 15.07.2022 and dismissed the writ petition as having been filed and supported by an affidavit inconsistent with the affiant's own statements; it directed initiation of proceedings under Sections 340 and 195 CrPC against the affiant and reminded the revenue to follow the recording-procedure prescribed in Paramvir Singh Saini.

Supply of service - supply of goods - principal supply - composite supply - educational institution (limited purpose of conduct of examination) - exemption under Entry No.66 (Heading 9992) of Notification No.12/2017-C.T.(Rate)

Supply of service - principal supply - composite supply - Classification of printing of question papers, admit cards, SSLC pass certificate, overprinting of variable data, lamination, fail marks cards, circulars and ID cards supplied to KSEEB as service or goods - HELD THAT: - Having applied Circular No.11/11/2017-GST which explains that where content is supplied by the recipient while the physical inputs belong to the printer, the supply of printing of the recipient-supplied content is the principal element and hence constitutes a supply of service, the Authority found that the manuscript/intangible inputs for question papers, admit cards, certificates, circulars and ID cards are supplied and owned by KSEEB while the physical inputs (paper etc.) belong to the applicant. In such circumstances the printing activity imparts the principal character as a service of printing the content supplied by the Board rather than a supply of goods. The Authority therefore treated these items as a supply of service falling under Heading 9989 for classification purposes and distinguished items where the usage of the product gives essential character. [Paras 14]

The printing of question papers, admit cards, SSLC pass certificate, overprinting of variable data, lamination, fail marks cards, circulars and ID cards for KSEEB constitutes a supply of service.

Supply of goods - usage gives essential character - Classification of answer booklets, other formats used during examinations and envelopes for packing answer booklets supplied to KSEEB as service or goods - HELD THAT: - The Authority examined the nature of the printed items and applied the Circular's test that where the usage of the finished product gives it the essential character, the supply is of goods. It found that answer booklets and other examination formats and the envelopes for packing answer booklets derive their essential character from their usage (and are marketable under the relevant tariff headings) so that printing in those cases is ancillary to the supply of goods. Consequently these supplies fall under the respective headings of Chapter 48 and 49 of the Customs Tariff and are taxable under the specified entries in the rate notifications. [Paras 17, 18]

The printing and supply of answer booklets, other examination formats and envelopes for packing answer booklets to KSEEB constitute a supply of goods.

Educational institution (limited purpose of conduct of examination) - exemption under Entry No.66 (Heading 9992) of Notification No.12/2017-C.T.(Rate) - Whether the printing services (as classified) supplied to KSEEB are exempt under Entry No.66 (Heading 9992) of Notification No.12/2017-C.T.(Rate) - HELD THAT: - Notification No.14/2018 clarified that Central and State Educational Boards are to be treated as educational institutions for the limited purpose of services by way of conduct of examination. Entry No.66 (Heading 9992) exempts services provided to an educational institution by way of services relating to admission to, or conduct of examination by, such institution. Having held that the printing of question papers and related materials (identified in the first issue) constitutes a supply of service to KSEEB and noting the Notification carve-out treating Boards as educational institutions for conduct of examinations, the Authority concluded that those printing services fall within Entry No.66 and are therefore exempt (nil-rated). [Paras 15, 16]

Printing services to KSEEB relating to the conduct of examinations (as classified above) are exempt under Entry No.66 (Heading 9992) of Notification No.12/2017-C.T.(Rate).

Final Conclusion: The Authority ruled that (a) printing of question papers, admit cards, SSLC pass certificate, variable-data overprinting, lamination, fail marks cards, circulars and ID cards for KSEEB is a supply of service and is exempt under Entry No.66 (Heading 9992) of Notification No.12/2017-C.T.(Rate); and (b) printing and supply of answer booklets, other exam formats and packing envelopes are supplies of goods and are taxable under the specified tariff entries.

Cancellation of GST registration for non-filing of returns - Limitation for first appeal and condonation of delay under Section 107(1) and (4) of the Central Goods and Services Tax Act, 2017 - Remand for reconsideration where statutory appellate forum (GST Tribunal) is not constituted - Obligation to furnish returns before reconsideration of cancellation

Cancellation of GST registration for non-filing of returns - Remand for reconsideration where statutory appellate forum (GST Tribunal) is not constituted - Obligation to furnish returns before reconsideration of cancellation - Quashing of the orders cancelling the petitioner's GST registration and remand to the original authority for fresh consideration in accordance with law - HELD THAT: - The High Court set aside the order of respondent No.5 cancelling the petitioner's GST registration and the appellate order of respondent No.3 that affirmed that cancellation. The Court observed that since the cancellation was suo motu on account of non-filing of returns and the GST Tribunal under Section 109 has not been constituted, the petitioner would be left without an effective remedy if the appellate authority's restriction on condoning delay were applied rigidly. In view of these circumstances and relying on the Court's earlier decision in W.P.No.27071 of 2022, the matter was remanded to respondent No.5 for fresh consideration of the petitioner's grievance against cancellation, with liberty for the petitioner to submit all outstanding returns as required by statute. The Court expressly refrained from expressing any opinion on the merits of the cancellation. [Paras 6, 7, 8, 9]

Orders of respondent No.5 dated 07.02.2022 and respondent No.3 dated 27.07.2022 quashed; matter remanded to respondent No.5 to reconsider the cancellation of GST registration and pass appropriate orders after the petitioner submits the returns.

Limitation for first appeal and condonation of delay under Section 107(1) and (4) of the Central Goods and Services Tax Act, 2017 - Remand for reconsideration where statutory appellate forum (GST Tribunal) is not constituted - Whether the appellate authority's reliance on limitation rules to refuse relief should operate where the GST Tribunal is not constituted and the cancellation was suo motu - HELD THAT: - The Court noted that while Section 107(1) prescribes a three month limitation for first appeals and subsection (4) permits one further month on showing sufficient cause, a strict application of these limits by the appellate authority could leave the petitioner remediless because the GST Tribunal envisaged under Section 109 is not in place. In such factual matrix the Court considered it just and proper to remand the matter for fresh consideration rather than permit the appellate limitation technicality to deny any effective remedy. The Court therefore directed reconsideration without expressing any view on the substantive merits of the cancellation. [Paras 7, 8]

Appellate limitation could not be permitted to operate so as to leave the petitioner without remedy in the absence of a constituted GST Tribunal; matter remanded for fresh consideration.

Final Conclusion: The writ petition is allowed by quashing the cancellation order and the appellate order; the matter is remanded to the original cancelling authority to reconsider the petitioner's grievance in accordance with law after the petitioner files the required returns; no opinion expressed on merits and no costs.

Transitional credit through TRAN-1 and TRAN-2 - extension of time for filing transitional credit forms - right of any aggrieved registered assessee to file or revise forms irrespective of prior writs or ITGRC decisions - obligation of GSTN to ensure portal functionality - verification of transitional credit claims by officers within 90 days after filing with reasonable opportunity - reflection of allowed transitional credit in the Electronic Credit Ledger

Right of any aggrieved registered assessee to file or revise forms irrespective of prior writs or ITGRC decisions - Petitioner (and similarly situated registered assessees) permitted to file or revise forms to claim transitional credit irrespective of whether a writ petition was filed earlier or whether the matter was decided by ITGRC. - HELD THAT: - The High Court recorded the directions of the Supreme Court in Union of India v. Filco Trade Centre Pvt. Ltd., under which 'any aggrieved registered assessee' is allowed to file the relevant form or revise an already filed form for availing transitional credit. The court disposed the petition noting the petitioner's expressed intention to avail the benefit extended by that order, thereby placing the petitioner within the class authorised to file or revise TRAN-1/TRAN-2 irrespective of prior litigation before High Courts or prior decisions of ITGRC.

Petitioner may avail the benefit and file or revise the relevant form for transitional credit as permitted by the Supreme Court directions.

Transitional credit through TRAN-1 and TRAN-2 - extension of time for filing transitional credit forms - obligation of GSTN to ensure portal functionality - GSTN to open a common portal for filing TRAN-1 and TRAN-2 for the limited period 01.09.2022 to 31.10.2022 and to ensure absence of technical glitches during that period. - HELD THAT: - The court reproduced the Supreme Court's direction that GSTN shall open a common portal for filing the forms required to claim transitional credit through TRAN-1 and TRAN-2 for the specified two-month window. The direction includes an express requirement that GSTN ensure there are no technical glitches during the period to facilitate filings by assessees who seek to avail the relief.

GSTN must provide portal access for TRAN-1/TRAN-2 filings from 01.09.2022 to 31.10.2022 and ensure its technical functioning during that window.

Verification of transitional credit claims by officers within 90 days after filing with reasonable opportunity - reflection of allowed transitional credit in the Electronic Credit Ledger - Concerned officers are to verify claims of transitional credit within 90 days after the filing window and, after granting reasonable opportunity and passing appropriate orders on merits, allowed transitional credit must be reflected in the Electronic Credit Ledger. - HELD THAT: - The court noted the Supreme Court's procedural directions that, following the filing or revision of forms, the relevant officers are given a 90-day period to verify the veracity of the claimed transitional credit, hold proceedings on merits after granting reasonable opportunity to the parties, and ensure that any allowed transitional credit is thereafter reflected in the Electronic Credit Ledger. The directions also permit the GST Council to issue guidelines to field formations if required for scrutinising claims.

Officers must examine claims within 90 days, afford reasonable opportunity, decide on merits, and ensure allowed transitional credit is posted to the Electronic Credit Ledger.

Final Conclusion: Writ petition disposed recording the petitioner's intention to avail the benefit of the Supreme Court's directions permitting filing/revision of TRAN-1/TRAN-2 between 01.09.2022 and 31.10.2022, with GSTN to ensure portal functionality and officers to verify claims within 90 days and reflect allowed credit in the Electronic Credit Ledger; connected miscellaneous petition closed.

Transition of input tax credit - rectification/revision of TRAN-1 - time limit for transitioning and revision under Rule 117 and Rule 120A - harmonisation of procedural timelines - mandamus to enable portal for revision - mandatory versus directory nature of statutory timelines

Rectification/revision of TRAN-1 - time limit for transitioning and revision under Rule 117 and Rule 120A - harmonisation of procedural timelines - mandamus to enable portal for revision - The end-date for filing TRAN-1 and the timeline for seeking revision of an already filed TRAN-1 cannot practically be identical; Rule 117 and Rule 120A must be read and harmonised so that a period for revision extends beyond the cut-off for initial filing, and the respondents must enable the portal to permit such revision. - HELD THAT: - The Court held that it is unreasonable and impractical to construe the timelines for submission of TRAN-1 and for its revision as coinciding, since the purpose of revision is to correct errors in the original TRAN-1 and therefore requires some additional time beyond the filing cut-off. While earlier precedents have upheld the existence of prescribed time limits for transitional ITC, the Court distinguished those authorities on facts and noted that Rule 120A does not itself prescribe an independent deadline but has to be read with Rule 117. The rules can and should be harmonised to make the regime workable and practical. Applying that principle, the Court granted a mandamus directing the Central authority to enable opening of the portal so the petitioner may file a revised TRAN-1 and secure credit that it claims to be entitled to. [Paras 24, 25, 26, 27]

Writ petition allowed; respondents directed to enable the portal to permit revision of TRAN-1 and facilitation of transition credit within eight weeks from uploading of the order.

Transition of input tax credit - mandatory versus directory nature of statutory timelines - The question whether the time limit prescribed under Rule 117 (and the amended statutory regime) is mandatory or directory was not finally decided and remains pending consideration before an appropriate Bench. - HELD THAT: - The Court observed conflicting decisions on the mandatory versus directory character of the timelines for availing transitional ITC and noted that the question is the subject-matter of proceedings (including Amplexor) in which the issue has been formulated for resolution. Consequently, the Court refrained from conclusively determining that broader question in this petition and proceeded only to address the discrete, practical issue of allowing revision time beyond the cut-off for filing TRAN-1. [Paras 22, 23]

Left open for adjudication in the pending proceedings; not decided in this petition.

Final Conclusion: The writ petition is allowed; respondents are directed to enable the portal so the petitioner may file a revised TRAN-1 and secure the transitional credits claimed, the exercise to be completed within eight weeks from uploading of this order on the Court's website; broader question as to mandatory or directory character of the timelines remains undecided.

Classification as an "educational institution" under Notification No.12/2017 (Rate) - classification as "State Government" for GST purposes - taxability of printing contracts as supply of service where physical inputs belong to the printer - classification under Heading 9989 (publishing, printing and reproduction services) - applicability of Entry No.27 of Notification No.11/2017 (Rate) and resultant tax rate

Classification as an "educational institution" under Notification No.12/2017 (Rate) - KTBS is not an "educational institution" for the purposes of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - The Authority examined the definition of "educational institution" in clause 2(y) of Notification No.12/2017 which covers institutions providing pre-school to higher secondary education, education as part of a curriculum for obtaining a recognized qualification, or approved vocational courses. KTBS is a society registered under the Karnataka Societies Act engaged in preparation, printing and distribution of textbooks and does not itself provide pre-school or higher secondary education, nor does it directly impart education as part of a curriculum. On this basis KTBS does not fall within the notified definition and cannot be treated as an "educational institution" for concessional treatment under the notification. [Paras 11, 12, 15]

KTBS cannot be classified as an "educational institution" for GST purposes.

Classification as "State Government" for GST purposes - KTBS is not to be treated as the "State Government" for purposes of the exemptions relied upon by the applicant. - HELD THAT: - The Authority noted that KTBS is a society under the Karnataka Societies Act which, despite receiving government grants and functioning under the Education Department, is not the State Government. The composition and funding do not convert the society into the State Government within the meaning used for the relevant notifications. Consequently, the applicant's contention that KTBS should be treated as State Government for concessional treatment was rejected. [Paras 12, 15]

KTBS cannot be classified as "State Government" for the purposes of GST treatment claimed by the applicant.

Taxability of printing contracts as supply of service where physical inputs belong to the printer - classification under Heading 9989 (publishing, printing and reproduction services) - applicability of Entry No.27 of Notification No.11/2017 (Rate) and resultant tax rate - Printing of textbooks by the applicant (where the printer supplies the physical inputs and the content is supplied by KTBS) constitutes a supply of service under Heading 9989 and is taxable under Entry No.27 of Notification No.11/2017 at the rate indicated in the ruling (18%). - HELD THAT: - Relying on Circular No.11/2017, the Authority accepted that where the content is supplied by the recipient (KTBS) and the physical inputs including paper are supplied by the printer, the printing of such content is the principal supply and constitutes a service falling under heading 9989. Entry No.27 of Notification No.11/2017 (as amended) covers "Other manufacturing services; publishing, printing and reproduction services" and applies to such supplies. Since the activity is a taxable service and no applicable exemption or classification favourable to the applicant (as educational institution or State Government) was found, the current practice of charging 12% was held to be incorrect and the correct taxable treatment is as per Entry No.27, with the tax rate applied in this ruling. [Paras 13, 14, 15]

The printing contracts in question are taxable as service under Heading 9989 and chargeable under Entry No.27 of Notification No.11/2017; the rate charged at present (12%) is incorrect and the supplies are taxable at the rate indicated in the ruling (18%).

Final Conclusion: The Authority ruled that KTBS is neither an "educational institution" nor the "State Government" for the purposes relied upon by the applicant; printing of textbooks where the printer supplies physical inputs is a service under Heading 9989 and, absent any applicable exemption, is taxable under Entry No.27 of Notification No.11/2017 at the rate specified in this ruling.

Appellate jurisdiction under Section 260A of the Income Tax Act - territorial jurisdiction determined by the location of the Assessing Officer who passed the assessment order - transfer of a case under Section 127 of the Income Tax Act does not alter High Court appellate jurisdiction - ITAT Benches exercising jurisdiction over plurality of States - binding effect of High Court decisions within territorial jurisdiction - executive power of transfer confined to Income Tax Authorities and not to judicial forum

Territorial jurisdiction determined by the location of the Assessing Officer who passed the assessment order - The High Court in which an appeal under Section 260A against an order of the ITAT shall be filed is the High Court within whose territorial jurisdiction the Assessing Officer who passed the assessment order is situated. - HELD THAT: - The legal structure under the Income Tax Act commencing with Assessing Officer, the Commissioner of Appeals, ITAT and finally the High Court under Section 260A must be seen as a lineal progression of judicial remedies. Culmination of all these proceedings in question of law jurisdiction of the High Court under Section 260A of the Act is of special significance as it depicts the overarching judicial superintendence of the High Court over Tribunals and other Authorities operating within its territorial jurisdiction.

The power of transfer exercisable under Section 127 is relatable only to the jurisdiction of the Income Tax Authorities. It has no bearing on the ITAT, much less on a High Court. If we accept the submission, it will have the effect of the executive having the power to determine the jurisdiction of a High Court. This can never be the intention of the Parliament.

The jurisdiction of a High Court stands on its own footing by virtue of Section 260A read with Section 269 of the Act. While interpreting a judicial remedy, a Constitutional Court should not adopt an approach where the identity of the appellate forum would be contingent upon or vacillates subject to the exercise of some other power. Such an interpretation will clearly be against the interest of justice. Under Section 127, the authorities have the power to transfer a case either upon the request of an assessee or for their own reasons.

Though the decision under Section 127 is subject to judicial review or even an appellate scrutiny, this Court for larger reasons would avoid an interpretation that would render the appellate jurisdiction of a High Court dependent upon the executive power. As a matter of principle, transfer of a case from one judicial forum to another judicial forum, without the intervention of a Court of law is against the independence of judiciary. This is true, particularly, when such a transfer can occur in exercise of pure executive power. This is a yet another reason for rejecting the interpretation adopted in the case of Sahara.

For the reasons stated above, we hold that the decision of the High Court of Delhi in Sahara [2007 (5) TMI 208 - DELHI HIGH COURT] and Aar Bee [2013 (7) TMI 94 - DELHI HIGH COURT] do not lay down the correct law and therefore, we overrule these judgments.

In conclusion, we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s).

While returning the files to be represented in the appropriate court, certain observations were made stating that the appeals could be filed in the High Court which exercises territorial jurisdiction over the concerned ITAT. These observations are only obiter. In any event they did not preclude the party from filing the appeal before the appropriate High Court where the Assessing Officers exercised jurisdiction. However, we are reiterating for clarity and certainty that the jurisdiction of a High Court is not dependent on the location of the ITAT, as sometimes a Bench of the ITAT exercises jurisdiction over plurality of states.

Order passed by the Assessing Officer, Delhi against which an appeal was decided by CIT (Appeals) – IV, New Delhi against which the ITAT, New Delhi disposed of an appeal against which an appeal was filed in the High Court of Punjab & Haryana which it disposed of by order against which Civil Appeal was filed before this Court. The said Civil Appeal is dismissed by upholding the order passed by the High Court of Punjab & Haryana, with a direction that the appropriate High Court for disposal of the appeal would be the High Court of Delhi as the case was assessed by the Assessing Officer, Delhi.

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Benefit under section 194C(6) - procedure under section 194C(7) - Form No.26Q / Rule 31A compliance - deduction of tax at source - disallowance under section 40(a)(ia) - penalty/fee for non-filing of statement

Benefit under section 194C(6) - procedure under section 194C(7) - Form No.26Q / Rule 31A compliance - deduction of tax at source - Whether failure to file or belated filing of the prescribed statement under Section 194C(7) / Rule 31A disentitles the assessee to the benefit under Section 194C(6) when the assessee has furnished the PAN details of transport contractors and the statutory Form No.26Q was on the Assessing Officer's file without the Assessing Officer disputing its contents. - HELD THAT: - The Court applied the established principle that sub-section (6) of Section 194C confers the substantive exemption from TDS liability while sub-section (7) prescribes the procedural statement to be furnished. Jurisprudence cited by the Tribunal and accepted by this Court holds that non-compliance with the procedural requirement may attract statutory consequences (such as a prescribed fee) but does not, by itself, revive the obligation to deduct tax where the substantive conditions for exemption are fulfilled. On the facts, Form No.26Q in terms of Rule 31A was available on the Assessing Officer's file during assessment and the Assessing Officer did not controvert the correctness of the particulars (including PANs) furnished therein. Earlier authorities were considered, and where forms were absent cases were remanded; here, because the statutory form was filed and its contents were not faulted, the Tribunal and first appellate authority rightly granted relief. The Court therefore found no ground to deny the benefit under Section 194C(6) or to apply disallowance under Section 40(a)(ia) in these circumstances; any consequence for belated filing is limited to the procedural penalty prescribed by law and does not affect the substantive exemption.

Relief granted to the assessee: non-filing or belated filing of the prescribed statement did not disentitle the assessee to the benefit under Section 194C(6) where Form No.26Q showing PAN details was on file and its correctness was not disputed.

Final Conclusion: The revenue's appeal is dismissed; no substantial question of law arises as the Tribunal correctly held that compliance with the substantive condition under Section 194C(6) (as evidenced by PANs and Form No.26Q on file) precluded imposition of TDS liability or disallowance, notwithstanding any procedural lapse which attracts only the prescribed fee or penalty.

Disallowance under section 14A and Rule 8D - Exclusion of strategic investments - Computation of disallowance by reference to own funds and surplus funds - Benchmarking of sale consideration in delisting/reverse book building - Buy-back of shares under Companies Act and question of colorable device

Disallowance under section 14A and Rule 8D - Exclusion of strategic investments - Computation of disallowance by reference to own funds and surplus funds - Whether investments in subsidiary/associated companies which are strategic in nature can be excluded while computing disallowance under Rule 8D for exemption income under section 14A and whether the AO must be directed to consider availability of surplus/own funds. - HELD THAT: - The Tribunal held that exclusion of strategic investments while computing disallowance under Rule 8D is not correct in view of the binding principle in Maxopp Investment Ltd. V/s CIT relied upon by the Bench. Consequently the CIT(A)'s direction to exclude strategic investments was modified. However, other directions given by the CIT(A) regarding consideration of surplus funds and application of Rule 8D were left intact as not requiring interference. The Revenue's contention that Rule 8D(2) makes no distinction between types of investments and that the AO should include subsidiary/associate investments in the computation was accepted only to the extent of rejecting the exclusion of strategic investments; the factual question of whether particular investments were made out of own funds or otherwise was not finally adjudicated by this order and the CIT(A)'s remaining directions stand. [Paras 4]

Ground partly allowed: exclusion of strategic investments under Rule 8D is not permissible; other directions of CIT(A) sustain.

Benchmarking of sale consideration in delisting/reverse book building - Long-term capital loss on sale of shares - Whether the AO was justified in adopting a higher sale price (realised by a retail shareholder in the delisting/exit process) for computing long-term capital gains on the assessee's sale of promoter-held shares of TFSL. - HELD THAT: - The Tribunal agreed with the CIT(A) that the sale by the retail shareholder under the delisting exit process (reverse book building) cannot be benchmarked against the sale by the promoters. The delisting exit price obtained by retail investors under the regulatory exit mechanism is not comparable to the consideration realised by promoters disposing of shares where the book value is negative; the subsequent sale price by promoters may reflect the negative book value and be realistic. The AO failed to establish understatement of sales consideration. The Tribunal found the cited decision in favour of another promoter binding and concurred with the appellate order allowing the assessee's position. [Paras 5]

Grounds dismissed: CIT(A)'s allowance of assessee's treatment of sale consideration and resultant long-term capital loss upheld.

Buy-back of shares under Companies Act and question of colorable device - Long-term capital loss on buy-back - Whether long-term capital loss claimed by the assessee on buy-back of shares of HTSL could be disallowed as a colourable device to evade tax. - HELD THAT: - The Tribunal concurred with the CIT(A) that the buy-back of shares effected in accordance with the Companies Act and buy-back rules, supported by independent valuation, cannot be characterised as a colourable device to evade tax. The Tribunal followed its earlier decision in ITA No.329/Mds/2016 and noted supportive authority of the Bombay High Court in Capgemini India P. Ltd., holding that statutory buy-back procedure is legally permissible and not ipso facto a tax evasion device. Accordingly, the additions made by the AO were deleted and no interference was called for. [Paras 5]

Grounds dismissed: long-term capital loss on buy-back allowed; buy-back not a colourable device.

Final Conclusion: The appeal is partly allowed: the Tribunal disallowed exclusion of strategic investments for Rule 8D computation but upheld the CIT(A)'s findings allowing the assessee's long-term capital loss on sale of promoter shares and on buy-back of shares, sustaining deletion of additions on those issues.

Revisionary jurisdiction under Section 263 - prejudicial to the interests of the revenue - remand for de novo adjudication - classification of receipts as income from other sources - allowability of related expenditure under Section 57(iii) - incubation expenses as non-deductible pre operative expenditure

Revisionary jurisdiction under Section 263 - prejudicial to the interests of the revenue - Validity of the Principal Commissioner's exercise of revisionary jurisdiction under Section 263 in relation to the assessment for AY 2013-14. - HELD THAT: - The Tribunal examined whether the Assessing Officer had examined and verified the critical controversy concerning the nature of the assessee's activities and the characterisation of receipts and expenses. It found that the assessment order for AY 2013-14 merely accepted the returned loss without making any finding whether the assessee carried out incubation (Segment I) activities or only shared/infrastructure services (Segment II), despite earlier directions and issues flagged in the notice. Because the AO did not make the requisite factual and legal examination, the PCIT's conclusion that the assessment was prejudicial to the revenue and the consequent exercise of jurisdiction under Section 263 were sustained. The Tribunal therefore confirmed the revisionary exercise, while taking into account subsequent Tribunal pronouncements which bear on the correct legal characterisation. [Paras 6, 11]

Revision under Section 263 confirmed (with modifications) on the ground that the assessment was rendered without necessary examination and hence was prejudicial to the interests of the revenue.

Remand for de novo adjudication - classification of receipts as income from other sources - allowability of related expenditure under Section 57(iii) - incubation expenses as non-deductible pre operative expenditure - Extent and nature of directions to be given on remand to the Assessing Officer for recomputation of income for AY 2013-14. - HELD THAT: - Having regard to this bench's later detailed adjudication in the assessee's appeals for other years, the Tribunal directed that the assessment be reframed on specified lines. The AO is to determine whether any incubation (Segment I) activities were carried out in AY 2013-14 and, if so, disallow incubation expenses as pre operative in nature. Receipts arising from shared/infrastructure services are to be examined for classification; where held to be 'income from other sources', related expenditure is to be allowed in accordance with Section 57(iii). The remand is for de novo consideration limited to these points, with opportunity of hearing to the assessee and compliance with the directions emerging from the Tribunal's earlier orders which materially affect the assessment. [Paras 11, 12]

Assessment set aside and remitted to the AO to reframe the assessment: disallow incubation expenses if incurred; assess relevant receipts as 'income from other sources' and allow related expenditure under Section 57(iii); proceed after affording hearing.

Final Conclusion: The Tribunal partly allowed the appeal by confirming the PCIT's revision under Section 263 for AY 2013-14, but modified the relief by directing de novo adjudication by the AO to determine whether incubation activities occurred (with disallowance of incubation expenses if established) and to classify receipts and allow related expenditure in accordance with Section 57(iii), in conformity with the Tribunal's findings in the assessee's other years.

Deduction under section 54/54F of the Income tax Act - effect of unregistered agreement and possession on 'purchase' and transfer under section 2(47) read with section 53A of the Transfer of Property Act - reassessment under section 147 of the Income tax Act based on information from audit objection - requirement of registered conveyance for claiming exemption

Reassessment under section 147 of the Income tax Act based on information from audit objection - information from audit as basis for reopening - Validity of reopening the assessment within four years on the basis of audit objection and whether reopening amounted to a mere change of opinion. - HELD THAT: - The Tribunal held that the reassessment notice issued within four years was valid. The reopening was triggered by an audit objection which constitutes 'information' capable of forming the basis for initiation of proceedings under section 147 provided the Assessing Officer applies independent mind. The record did not show any verification undertaken during the original assessment and the Assessing Officer applied mind in issuing notice and framing reassessment. Reliance of the authorities cited in support of reopening on information from other government offices and audit was held appropriate and the Commissioner (Appeals) was correct in upholding reopening. [Paras 3, 4, 11]

Reassessment proceedings were validly initiated and grounds challenging reopening are dismissed.

Deduction under section 54/54F of the Income tax Act - effect of unregistered agreement and possession on 'purchase' and transfer under section 2(47) read with section 53A of the Transfer of Property Act - requirement of registered conveyance for claiming exemption - Whether an unregistered agreement of sale coupled with possession, which has not been converted into a registered sale deed, suffices to claim exemption under section 54/54F. - HELD THAT: - The Tribunal concluded that the term 'purchase' for the purpose of section 54/54F requires absolute acquisition of ownership by registered conveyance. An unregistered agreement of sale, even if coupled with possession and payment of consideration, does not result in transfer of full ownership rights unless it fructifies into a registered sale deed. The Tribunal applied the ratio of the Supreme Court in CIT v. Balbir Singh Maini: post amendments to the Registration Act and section 53A, an unregistered agreement has no effect in law for the purposes of section 53A and therefore cannot be treated as transfer under section 2(47). The assessee had not produced circumstances justifying non registration nor had the agreement been converted into a registered deed till date; consequently the claim of exemption was held not to be allowable. [Paras 6, 7, 8, 9]

Claim of deduction under section 54/54F on the basis of an unregistered agreement and possession is disallowed.

Quantification/verification of deduction claimed - Extent to which addition should be restricted in computation of income after disallowance of exemption. - HELD THAT: - Although the substantive claim for exemption was rejected, the Tribunal directed the Assessing Officer to verify the computation and restrict the addition to the extent of deduction actually claimed by the assessee in the return. This is a limited direction for verification/quantification and not an adjudication on any further factual issue. [Paras 10]

AO to verify and restrict the addition to the extent of the deduction claimed by the assessee; computation remanded for this limited purpose.

Final Conclusion: The appeal is partly allowed: the validity of reassessment is upheld and the claim of deduction under section 54/54F based on an unregistered agreement with mere possession is rejected; the Assessing Officer is directed to verify and restrict the addition to the extent of the deduction claimed by the assessee.

Arm's length price - Transfer Pricing Officer's limited jurisdiction to determine ALP - benefit test and willingness to pay test not substitute for ALP determination - Transactional Net Margin Method (TNMM) and bundled/combined transaction approach - management fees forming part of cost base for benchmarking - disallowance under section 40(a)(i) for non-deduction of tax at source - remand for de novo adjudication - interest under section 234B and 234D consequential - penalty under section 271(1)(c) premature

Arm's length price - benefit test and willingness to pay test not substitute for ALP determination - Transactional Net Margin Method (TNMM) and bundled/combined transaction approach - management fees forming part of cost base for benchmarking - Validity of transfer pricing adjustment treating payment of management fees to an associated enterprise as having an ALP of nil. - HELD THAT: - Assessee adopted a combined transaction approach and benchmarked payments for purchase of software and management fees together using TNMM; TPO accepted the benchmarking for purchase of software (assessee's operating margin 1.53% found to be at arm's length) but, without performing any benchmarking analysis or searching for comparables, treated the management fees as having an ALP of nil on the basis that the assessee failed the so called 'benefit test' and 'willingness to pay test'. The Tribunal held that the TPO's jurisdiction is to determine ALP and not to disallow expenditure by factual findings on benefit/receipt which fall to the AO under section 37; where management fees form part of the cost base accepted in computing the tested party's margin and that margin is accepted as at arm's length, it is improper to separately treat those fees as a nil ALP without applying a prescribed method or identifying comparables. The TPO had not carried out any benchmarking for the management fees and reached an ad hoc nil ALP; such adjustment is vitiated and cannot be sustained. Applying these principles to the facts, the Tribunal set aside the adjustment and allowed the grounds challenging the nil ALP determination. [Paras 11, 12, 16, 17, 18]

Adjustment treating management fees as having an ALP of nil set aside; grounds 2-11 allowed.

Disallowance under section 40(a)(i) for non-deduction of tax at source - remand for de novo adjudication - Disposition of the claim that payments to the associated enterprise for purchase of licenses, upgrades and maintenance are not royalties and the consequential disallowance under section 40(a)(i). - HELD THAT: - A coordinate bench had earlier remanded similar issues in respect of preceding assessment years for de novo adjudication because additional evidence, not placed before the lower authorities, was material to determine whether the payments constituted royalty. In the present assessment year the assessee did not place the same additional evidence before the Tribunal, but in view of the pending remand for earlier years and in the larger interest of justice the Tribunal directed a similar remand. The matter is to be reconsidered by the Assessing Officer afresh: he shall examine documentary evidence presented by the assessee or obtained by enquiries he deems fit and afford the assessee an opportunity of hearing before passing any order. [Paras 19, 20, 22, 23]

Issue remanded to the Assessing Officer for de novo adjudication with directions to examine relevant documentary evidence and afford hearing; grounds 12-15 allowed for statistical purposes.

Interest under section 234B and 234D consequential - Challenge to levy of interest under sections 234B and 234D. - HELD THAT: - The Tribunal treated the pleas against interest as consequential to the assessment adjustments and recorded that those grounds are allowed for statistical purposes. [Paras 24]

Grounds 16 and 17 allowed for statistical purposes.

Penalty under section 271(1)(c) premature - Challenge to initiation of penalty proceedings under section 271(1)(c). - HELD THAT: - The Tribunal held that initiation of penalty proceedings is premature at this stage and accordingly dismissed the ground raised by the assessee. [Paras 25]

Ground 18 dismissed as premature.

Final Conclusion: Appeal partly allowed: transfer pricing adjustment in respect of management fees set aside; issue on characterization of payments as royalty and consequential disallowance remanded to the Assessing Officer for de novo adjudication with directions to consider relevant evidence and afford hearing; interest grounds allowed for statistical purposes; penalty ground dismissed; overall result: appeal partly allowed for statistical purposes.

Addition of undisclosed receipt as on-money against sale of property - reopening of assessment under section 147 of the Income-tax Act, 1961 - admissibility and evidentiary value of unsigned draft documents found during survey - use of third party admissions (Settlement Commission) against an assessee and requirement of confrontation - inapplicability of deemed value provision for undisclosed on money

Addition of undisclosed receipt as on-money against sale of property - admissibility and evidentiary value of unsigned draft documents found during survey - use of third party admissions (Settlement Commission) against an assessee and requirement of confrontation - reopening of assessment under section 147 of the Income tax Act, 1961 - Whether the addition of Rs. 1,96,37,500/- as undisclosed sale consideration (on money) for the sale of land should be sustained. - HELD THAT: - The Tribunal found that the addition rested primarily on an unsigned draft sale deed located during a survey at the buyer's premises and on an admission by the buyer before the Settlement Commission. The draft sale deed was never signed by the assessee and therefore, standing alone, lacked credence and corroboration. An admission by a third party before the Settlement Commission cannot be used against the assessee unless that material is placed before the assessee to enable confrontation; the Assessing Officer declined to provide the assessee with the buyer's Settlement Commission application/order on the ground of confidentiality, which deprived the assessee of opportunity for meaningful confrontation. The Tribunal relied on authorities holding that loose papers/entries and uncorroborated notes or entries do not possess sufficient evidentiary value to charge a person without supporting evidence ( cited in the order), and that third party disclosures do not bind a non party absent confrontation ( cited in the order). The Tribunal therefore concluded that the material relied upon by the authorities below was insufficient to establish that the assessee received the claimed on money, and that the addition could not be sustained. The Tribunal also noted that the provision regarding deemed value for transfer (section 50C) is not applicable to undisclosed on money and did not change the conclusion that the on money allegation lacked probative support. [Paras 9]

Addition of Rs.1,96,37,500/- as undisclosed sale consideration deleted; appeal allowed.

Final Conclusion: The Tribunal set aside the findings of the authorities below and directed deletion of the addition of Rs.1,96,37,500/- representing alleged on money in respect of the sale of land for Assessment Year 2015 2016; the assessee's appeal is allowed.

Disallowance under Section 14A - Computation under Rule 8D(2)(iii) - Investments yielding exempt income - Investments yielding taxable income or no income - Remand for factual verification and recomputation

Disallowance under Section 14A - Computation under Rule 8D(2)(iii) - Investments yielding exempt income - Investments yielding taxable income or no income - Assessee's challenge to disallowance under Section 14A and computation under Rule 8D(2)(iii) for AY 2010-11 - HELD THAT: - The Tribunal applied the ratio of the Coordinate Bench decision in the assessee's own AY 2009-10 and the relevant observations of the Delhi High Court in Pr. CIT v. Caraf Builders & Constructions (P.) Ltd., holding that for the purpose of computing disallowance under Rule 8D(2)(iii) only the average value of investments that have yielded exempt income during the year should be taken into account. Investments which yielded taxable income must be excluded from that numerical factor, and investments which did not yield any income in the year should not be considered for computing the disallowance. In view of these principles, the Tribunal directed that the Assessing Officer should factually verify the assessee's working (distinguishing investments yielding taxable income and those yielding no income) and recompute the disallowance under Rule 8D(2)(iii) by considering only investments that yielded exempt income during the year.

Partly allow the ground and restore the matter to the Assessing Officer for factual verification and recomputation of the disallowance under Rule 8D(2)(iii) in accordance with the ratio indicated.

Remand for factual verification and recomputation - Challenge to the Assessing Officer's adoption of a higher assessed income figure when giving effect to the ITAT order - HELD THAT: - The Tribunal found that the Assessing Officer had adopted a higher assessed income figure without adequate basis while giving effect to the earlier order, resulting in an excessive determination of taxable income. Rather than deciding the dispute on merits, the Tribunal restored the issue to the file of the Assessing Officer to permit the assessee to furnish explanations and evidence and directed the Assessing Officer to decide the grievance in accordance with law after verification.

Allow the ground for statistical purposes and remit the matter to the Assessing Officer for fresh consideration and rectification of the assessed income as may be warranted on facts and law.

Final Conclusion: The appeal is partly allowed: the Section 14A/Rule 8D(2)(iii) disallowance is remitted to the Assessing Officer for factual verification and recomputation considering only investments yielding exempt income; the challenge to the higher assessed income figure is also remitted to the Assessing Officer for fresh disposal in accordance with law.

Reopening of assessment - Change of opinion - Scope of reassessment under section 147 - no power of review - Escapement of income - Notional rental income from house property

Reopening of assessment - Change of opinion - Scope of reassessment under section 147 - no power of review - Escapement of income - Validity of reopening the assessment under section 147 for AY 2011-12. - HELD THAT: - The Tribunal found that all material facts concerning the Mumbai property, including non-receipt of rent and the subsequent sale resulting in long-term capital gains, were placed before and considered by the Assessing Officer in the original assessment. No new information came into the AO's possession after completion of the original assessment that could justify belief that income had escaped assessment. Relying on the settled principle that section 147 does not empower the AO to review his own order and that reassessment cannot be based on a mere change of opinion, the Tribunal held that the reassessment was initiated by re-consideration of the same facts and therefore was impermissible. The Tribunal applied governing authorities to distinguish reassessment from review and to confirm that reopening on the same set of information is invalid.

Reopening of assessment for AY 2011-12 was invalid as it amounted to a mere change of opinion and not a valid belief of escapement of income.

Notional rental income from house property - Escapement of income - Validity of the addition of notional rental income made in reassessment proceedings. - HELD THAT: - Because the reassessment proceedings were held to be invalid (being based on a mere change of opinion and not on any new material), the consequential computation and addition of notional rental income by the AO could not stand. The Tribunal noted the AO had computed deemed rental income during reassessment, and the CIT(A) had upheld that addition; however, in view of the illegality of reopening, the addition could not be sustained.

The addition of notional rental income made in the reassessment is set aside as the reassessment itself was invalid.

Final Conclusion: The appeal is allowed: the reassessment for AY 2011-12 was held to be invalid as based on a mere change of opinion and, consequently, the notional rental income addition made in the reassessment is quashed.

Addition under section 68 - accrual method of accounting and provision for expenses - verification by enquiries under section 133(6) - presumption of genuineness displaced only by evidence of sham or bogus transactions - burden on revenue to prove transactions bogus

Addition under section 68 - accrual method of accounting and provision for expenses - verification by enquiries under section 133(6) - burden on revenue to prove transactions bogus - Deletion of addition of Rs.99,000 made by AO treating provision for internal audit fees as undisclosed credit under section 68. - HELD THAT: - The assessee made a provision in respect of internal audit fees for the year ended 31.03.2016 which was accounted under the accrual method; the service provider, M/s T. R. Chadha & Co., issued invoice and received payment in the subsequent financial year and thus the creditor's books did not show a matching debit in the earlier year. The assessee produced ledger entries and evidence of subsequent payment; Revenue did not controvert the contention nor produce evidence that the expense was bogus. In these circumstances, mere non-confirmation in the creditor's records for the earlier year, when explained by timing of invoicing and accrual accounting and supported by subsequent payment, does not justify an addition under section 68. The Tribunal accepted the assessee's contemporaneous accounting treatment and absence of any evidence negativing genuineness, and directed deletion of the addition. [Paras 11]

Addition of Rs.99,000 deleted.

Addition under section 68 - accrual method of accounting and provision for expenses - verification by enquiries under section 133(6) - presumption of genuineness displaced only by evidence of sham or bogus transactions - burden on revenue to prove transactions bogus - Deletion of addition of Rs.1,34,880 made by AO treating amounts payable to a deputationist as undisclosed credit under section 68. - HELD THAT: - The assessee established that the amount related to leave and pension contribution and reimbursements payable to an employee on deputation from the State Government, who made claims through her parent organisation; the provision was recorded as at year end and payment was effected in the subsequent year. The assessee placed on record the claims and evidence of subsequent payment. Revenue did not produce material to show that the payments were sham or bogus. Given the explanation consistent with the employer's liability and the absence of any evidence to the contrary, disallowance/addition could not be sustained and the Tribunal directed deletion of the addition. [Paras 12]

Addition of Rs.1,34,880 deleted.

Final Conclusion: Both additions treated as unexplained credits were deleted by the Tribunal on the facts: the sums were recorded as provisions under accrual accounting and subsequently paid, and Revenue failed to prove that the transactions were bogus; appeal allowed.

Exemption under Section 10(23C)(vi) - educational institution existing solely for educational purposes and not for profit - effect of change of name on subsisting approval - fees and surplus not determinative of commercial character - non-mandatory nature of registration under Section 12A for claim under Section 10(23C)(vi) - duty to apply tests laid down in Queens Educational Society - requirement of reasoned order before withdrawal of previously granted exemption

Effect of change of name on subsisting approval - requirement of reasoned order before withdrawal of previously granted exemption - Validity of the rejection of the appellant's application under Section 10(23C)(vi) where a prior approval in the earlier name existed and the change of name was sought to be regularised - HELD THAT: - The Tribunal found that the Tax Authority failed to notice or consider the earlier approval granted by the prescribed authority and did not record any reasons for treating the change of name as a basis to withdraw the previously granted exemption. The appellate bench observed that the prior approval (recorded in the file for the assessment years 2006-07 to 2008-09) and the documents showing the change of name and continuity of objects were on record, but the impugned order made no reference to the former approval and instead relied on reports from subordinate officers without articulating changed circumstances or misuse warranting withdrawal. Denial of the benefit in these circumstances amounts to a de facto withdrawal of exemption which required proper reasons and consideration; mere re-examination without such reasons is unsustainable. [Paras 6, 7, 8]

Impugned rejection set aside for failure to consider prior approval and to record reasons for withdrawal; application not to have been rejected merely on account of change of name.

Fees and surplus not determinative of commercial character - educational institution existing solely for educational purposes and not for profit - duty to apply tests laid down in Queens Educational Society - Whether receipt of fees and generation of surplus rendered the appellant commercial and disentitled to exemption under Section 10(23C)(vi) - HELD THAT: - The Tribunal applied the principle that the dominant nature of activities must be examined to determine whether an institution exists solely for educational purposes and not for profit. It held that an autonomous institution, particularly one established and supported initially by a Government ministry and providing specialised training to professionals, may legitimately generate receipts for self-sustenance; such receipts and incidental surplus do not ipso facto convert an educational institution into a commercial enterprise. The bench noted that the Tax Authority failed to apply the tests articulated by the Supreme Court in Queens Educational Society and related authorities when assessing whether the appellant's activities were educational in nature and not for profit. [Paras 8, 9]

The finding that collection of fees and presence of surplus made the institution commercial was rejected; the Tribunal held the appellant's activities to be predominantly educational and not for profit.

Non-mandatory nature of registration under Section 12A for claim under Section 10(23C)(vi) - requirement of reasoned order before withdrawal of previously granted exemption - Whether registration under Section 12A was a mandatory pre-condition for grant of exemption under Section 10(23C)(vi) and whether reliance on rejection of 12A registration justified denial of 10(23C)(vi) - HELD THAT: - The Tribunal observed that the Tax Authority improperly treated the rejection of registration under Section 12A as a relevant factor, overlooking CBDT Circular No. 14/2015 which clarifies that registration under Section 12AA/12A is not a mandatory pre- or post-condition for grant of exemption under Section 10(23C)(vi). The bench held that the CIT(Exemptions) ought to have considered the application on its own merits in light of the statutory tests and the Circular rather than allowing the 12A registration issue to dictate the outcome. [Paras 7, 8]

Rejection of the application based on absence of 12A registration or its prior rejection was unsustainable; 12A registration is not a mandatory condition for 10(23C)(vi) and could not justify denial without independent reasons.

Final Conclusion: The impugned order rejecting the appellant's application under Section 10(23C)(vi) is set aside for failure to consider the earlier approval, to apply the accepted tests for educational institutions, and for misplacing reliance on 12A registration; the CIT(Exemptions) is directed to issue the exemption certificate under Section 10(23C)(vi) for the relevant assessment years.

Revision under Section 263 - Scope of Section 263(1)(c) - exercise of revisional jurisdiction where appeal pending before CIT(A) - Eligibility for exemption under Section 54F - Applicability of Section 50C - Capital asset versus agricultural land under Section 2(14)(iii)

Revision under Section 263 - Scope of Section 263(1)(c) - exercise of revisional jurisdiction where appeal pending before CIT(A) - Validity of exercise of revisional jurisdiction under Section 263 when the matter (including eligibility for exemption and taxability) stood restored to and was pending before the CIT(A). - HELD THAT: - The Tribunal held that clause (c) of Section 263(1) bars exercise of the Commissioner's revisional power in respect of matters that are the subject-matter of an appeal before the Commissioner (CIT(A)). Where the assessee had challenged the assessment and the ITAT had restored the issue to the file of the CIT(A) for fresh decision, the question of eligibility for exemption and the taxability/liability arising from the sale had not attained finality. In such circumstances the Principal Commissioner's assumption of jurisdiction under Section 263 to set aside the assessment was impermissible. The Tribunal relied on the principle that revision is not maintainable in respect of issues pending determination before the appellate authority and observed that the Revisional Authority proceeded notwithstanding the pendency of appeal and without grappling with Section 263(1)(c). [Paras 11, 12, 13, 14]

Revisional order under Section 263 dated 26.03.2018 was not validly exercised and is set aside.

Eligibility for exemption under Section 54F - Applicability of Section 50C - Capital asset versus agricultural land under Section 2(14)(iii) - Whether the substantive questions concerning characterisation of the land (agricultural land v. capital asset), applicability of Section 50C and entitlement to deduction under Section 54F were open to revisional action while they were pending before the CIT(A). - HELD THAT: - The Tribunal found that the assessee had specifically contested before the CIT(A) the characterisation of the land and the consequent applicability of Sections 50C/50F and claim under Section 54F. Because these matters were restored to the CIT(A) by the ITAT and thus pending adjudication, they formed part of the appeal pending before the appellate authority and could not be re-opened by exercise of revisional jurisdiction. The Tribunal observed that grounds 2 to 5 raised in the revisional petition were covered by the appeal then pending before the CIT(A) and therefore not amenable to Section 263 action at that stage. The Tribunal also noted that if the CIT(A) decides in favour of the assessee, the Revenue remains free to agitate those points before the Tribunal. [Paras 9, 10, 12, 13, 15]

Grounds 2 to 5 raised in the revisional order were issues pending before the CIT(A) and could not be validly disturbed by the Revisional Authority; those grounds are covered by the pending appeal and the revisional action in respect thereof is set aside.

Final Conclusion: The appeal is allowed; the order passed by the Principal Commissioner under Section 263 dated 26.03.2018 (and its consequential effects) is set aside because the matters sought to be revised were pending determination before the CIT(A) after remand by the Tribunal, rendering exercise of revisional jurisdiction impermissible under Section 263(1)(c).

Reasonableness/excessiveness of related-party payment - expenditure to related party under

Reasonableness/excessiveness of related-party payment - evidence of rendition of services - assessment officer's duty to examine related party and comparables - remand for de novo adjudication - Whether the commission payments made to a related concern could be sustained or required remand for fresh adjudication under the tests of section 40A(2) in view of lack of evidence and incomplete examination by the Assessing Officer and the CIT(A). - HELD THAT: - The Tribunal found that MCPL was undisputedly a related party and that the Assessing Officer had concluded the payments were excessive without obtaining critical evidence. The assessee did not produce contemporaneous documentary proof before the authorities or this Tribunal to substantiate rendition of specific services. The Assessing Officer did not summon representatives of MCPL, did not inquire whether MCPL rendered similar services to third parties or the commission rates charged elsewhere, and treated the entire disputed amount as paid to MCPL without examining the claimant's contention about a portion having been paid to a distinct individual. The Tribunal also held that TDS deduction and both entities being subject to maximum marginal rate of tax do not, by themselves, establish the reasonableness of the expenditure. Because these aspects were neither examined by the Assessing Officer nor explored by the CIT(A), and material questions of fact and verification remained open, the Tribunal set aside the CIT(A) order and remitted the matter to the Assessing Officer for de novo adjudication. The assessee was directed to produce all documents and details necessary to prove rendition of services and the Assessing Officer was to examine identity of payees, service agreements, whether MCPL provided similar services to others and comparative commission practices before determining any disallowance under section 40A(2). [Paras 10]

Impugned order set aside and matter remanded to the Assessing Officer for de novo adjudication with directions to examine all aspects relating to rendition of services, identity of payees, comparative dealings and reasonableness of the commission payments; assessee to produce supporting documents.

Final Conclusion: Revenue's appeal allowed for statistical purposes by setting aside the CIT(A) order and remanding the issue of commission payments to the Assessing Officer for fresh adjudication after examination of evidence and verification of all relevant aspects.

Disallowance under section 40A(3) - Rule 6DD(g) - payment in a village not served by any bank - reassessment under section 147/148 - Pr. CIT's revisionary jurisdiction under section 263 - limitation under section 263(2)

Disallowance under section 40A(3) - Rule 6DD(g) - payment in a village not served by any bank - reassessment under section 147/148 - Disallowance under section 40A(3) in respect of cash payments made to residents of villages not served by any bank. - HELD THAT: - The assessee produced Gram Panchayat certificates dated 22-12-2016 showing that the two villages (Pakahrsangvi and Khandgaon) to whose residents cash payments were made were not served by any bank. The Assessing Officer accepted the certificates during reassessment proceedings under section 147/148 and accordingly did not make disallowance in respect of those payments. Clause (g) of Rule 6DD exempts payments made in a village not served by any bank to persons ordinarily residing or carrying on business there from disallowance under section 40A(3). The Principal CIT, despite the availability and acceptance of such certificates before the AO and their production in revision proceedings, directed re-verification of their veracity and treated the AO's order as erroneous and prejudicial. Given that the AO was satisfied on the basis of the certificates and the Principal CIT found nothing amiss in them, there was no infirmity in the AO's decision to refrain from disallowance. Accordingly the revision insofar as it directed re-examination of these payments was unjustified and is set aside. [Paras 4]

Revision under section 263 set aside insofar as it directed fresh examination of disallowance under section 40A(3) for payments to residents of the two villages; AO's treatment upheld.

Pr. CIT's revisionary jurisdiction under section 263 - limitation under section 263(2) - advances from customers not part of reassessment - Validity of invoking section 263 to direct verification of advances from customers totaling Rs.89,60,500. - HELD THAT: - The reassessment proceedings initiated by notice under section 148 and concluded by the AO on 29-12-2016 related solely to alleged contraventions of section 40A(3). Verification of advances from customers related to the original assessment order passed on 21-03-2014 and was not the subject-matter of the reassessment. Section 263(2) prescribes a two-year limitation from the end of the financial year in which the order sought to be revised was passed. The relevant original assessment for the advances issue was passed on 21-03-2014, so the two-year period expired on 31-03-2016. The Principal CIT's order under section 263 was passed on 25-03-2019 and is therefore barred by limitation insofar as it seeks revision on the advances issue. For this reason the direction to verify advances is liable to be set aside. [Paras 6, 7]

Revision under section 263 quashed insofar as it seeks to direct verification of advances from customers; that part of the order is barred by limitation.

Final Conclusion: The appeal is allowed: the Principal CIT's revision under section 263 is set aside insofar as it directed re-examination of disallowances for payments to residents of villages not served by banks (AO's acceptance of Gram Panchayat certificates upheld), and is also set aside insofar as it directed verification of advances from customers because that part of the revision is time barred under section 263(2).

Validity of notice under Section 143(2) - proviso to Section 143(2) - six months limitation from end of financial year - jurisdictional defect vitiating assessment completed under Section 143(3) - assessment under Section 153A/153C read with Section 143(3) quashed for want of valid notice - admission of additional grounds at second appellate stage

Validity of notice under Section 143(2) - proviso to Section 143(2) - six months limitation from end of financial year - Notice under Section 143(2) issued on 13.10.2014 was beyond the statutory time limit prescribed by the proviso to Section 143(2) in respect of return filed on 30.09.2013 and therefore invalid. - HELD THAT: - The assessee filed its return for AY 2013-14 on 30.09.2013. The proviso to Section 143(2), as in force prior to amendment w.e.f. 01.06.2016, bars service of a notice under Section 143(2) after expiry of six months from the end of the financial year in which the return was filed. The assessment record shows the only notice under Section 143(2) was dated 13.10.2014, which is after the statutory cut-off of 30.09.2014. The assessee's affidavit confirming filing date and non-receipt of any earlier notice was admitted. In absence of any material to show a notice was issued within time, the notice dated 13.10.2014 is beyond the limitation imposed by the proviso and is therefore invalid. [Paras 11, 12]

The notice under Section 143(2) dated 13.10.2014 is invalid for being issued beyond the period prescribed by the proviso to Section 143(2).

Jurisdictional defect vitiating assessment completed under Section 143(3) - assessment under Section 153A/153C read with Section 143(3) quashed for want of valid notice - Assessment completed under Section 153A/153C read with Section 143(3) based on the invalid Section 143(2) notice is without jurisdiction and is quashed. - HELD THAT: - Because the assessing officer's jurisdiction to proceed under Section 143(3) depends on a valid preceding notice under Section 143(2), an invalid notice vitiates the subsequent assessment. The Tribunal applied this principle to the present facts and, noting the invalidity of the only Section 143(2) notice on record, held that the assessment completed under Sections 153A/153C read with Section 143(3) could not be sustained. The Tribunal followed the view expressed by a co-ordinate Bench in Harman Singh Dhingra's case on the same issue. [Paras 12, 13]

The assessment order passed under Sections 153A/153C read with Section 143(3) is invalid and is quashed for lack of jurisdiction arising from an invalid Section 143(2) notice.

Admission of additional grounds at second appellate stage - The additional ground challenging the validity of the assessment notice, being a pure legal and jurisdictional issue going to the root, was admitted at the second appellate stage. - HELD THAT: - The Tribunal observed that the additional ground raised a purely legal and jurisdictional contention which affects the core validity of the assessment and therefore admitted the ground under the circumstances. The Bench had earlier directed the Department to obtain a report from the AO but no contrary material was produced; the assessee's affidavit supporting the ground was considered. Given the nature of the contention, admission was appropriate and the ground was decided on merits. [Paras 9, 11]

The additional ground challenging the time-barred service of the Section 143(2) notice is admitted and decided in favour of the assessee.

Final Conclusion: The Tribunal allowed the appeal: the Section 143(2) notice dated 13.10.2014 was held time barred and invalid; consequentially the assessment completed under Sections 153A/153C read with Section 143(3) was quashed and the Commissioner (Appeals) order set aside; additional grounds were admitted and allowed.

Remand to adjudicating authority by appellate tribunal - Bar of limitation in recovery proceedings - Appellate jurisdiction to decide merits versus remand - Requirement to decide limitation before ordering recovery - Duty drawback recovery for alleged over invoicing

Remand to adjudicating authority by appellate tribunal - Appellate jurisdiction to decide merits versus remand - Bar of limitation in recovery proceedings - Requirement to decide limitation before ordering recovery - Whether the appellate tribunal erred in remanding the matters to the adjudicating authority instead of deciding the questions including limitation and whether such remand warranted interference. - HELD THAT: - The Court noted that the CESTAT had set aside the adjudicating authority's order and remanded the matters inter alia for determination of the question of limitation because there was no record that limitation had been considered by the original authority. Although the appellant contended that the Tribunal should itself have decided limitation (relying on precedents where appellate bodies determined issues when materials were on record), the High Court observed that after remand the Commissioner had proceeded to consider the issues and had passed a final order dated 6th October 2021. Given that the remand directions had already been carried out and a detailed view expressed by the original authority, the Tribunal (if seized on appeal) would have the benefit of those adjudicatory findings. In those circumstances it would serve no useful purpose to fault the Tribunal for having remitted the matter, and the impugned orders did not call for interference. [Paras 7, 8, 9, 10, 11]

Tribunal's remand was not interfered with; appeals dismissed.

Final Conclusion: The appeals are dismissed; there is no interference with the CESTAT order remanding the matters as the remand was complied with and a final order was passed upon remand; no order as to costs.

Anti-dumping duty - scope of investigation - exclusion from anti-dumping duty - preconditions for levy under Section 9B(b)(iii) - Directorate General of Anti-Dumping and Allied Duties' final findings - mandamus for refund

Anti-dumping duty - exclusion from anti-dumping duty - Directorate General of Anti-Dumping and Allied Duties' final findings - preconditions for levy under Section 9B(b)(iii) - Levy of anti-dumping duty on unclad/non-clad aluminium foil imported from China PR in light of the exclusions recorded in the DGTR final findings and Notification No.23/2017-Cus.(ADD). - HELD THAT: - The Court held that levy of anti-dumping duty is subject to the preconditions identified in Section 9B(b)(iii), namely a preliminary finding of dumping/subsidy and consequent injury by the Directorate General of Anti Dumping and Allied Duties and a further determination that interim duty is necessary. The DGTR final findings dated 10.03.2017 expressly recorded exclusions accepted by the domestic industry for both clad and unclad/non clad aluminium manganese silicon alloys used in specified heat exchanger applications. Notification No.23/2017 excluded certain aluminium foil items but the language in the notification and the subsequent DGTR clarification of 01.02.2018 together demonstrate that the excluded description covered clad as well as unclad/compatible non clad aluminium foil for the automotive heat exchanger uses identified in the final findings. In these circumstances Respondent No.4 was not justified in demanding anti dumping duty on unclad/non clad consignments where the DGTR had accepted exclusion and no preliminary finding authorising levy on those items existed; differential treatment of identical consignments cleared at other ports without levy underscored the inconsistency. The determinative legal principle applied is that absent compliance with the statutory preconditions under Section 9B(b)(iii) and where the DGTR has excluded the product from the investigation, imposition of ADD is impermissible. [Paras 10, 11, 12, 13, 14]

Levy and collection of anti dumping duty on unclad/non clad aluminium foil imported from China PR under Notification No.23/2017-Cus.(ADD) was held to be incorrect and contrary to Section 9A read with Section 9B(b)(iii) and the DGTR final findings; the petition is allowed on this ground.

Mandamus for refund - anti-dumping duty - Claim for refund of anti dumping duty paid under protest and for cancellation/return of bank guarantees. - HELD THAT: - Having held that the levy of anti dumping duty on the specified unclad/non clad aluminium foil was not justified, the Court directed Respondent No.4 to refund all amounts paid by the petitioner with applicable interest and to return/cancel any bank guarantees furnished by the petitioner. The direction for refund and release of guarantees was made to be complied with within the time specified in the order. [Paras 14, 16]

Respondent No.4 directed to refund amounts paid under protest with applicable interest and to cancel/return bank guarantees within eight weeks of receipt of the order.

Final Conclusion: Petition allowed; imposition of anti dumping duty on unclad/non clad aluminium foil imported from China PR set aside as contrary to the DGTR final findings and Section 9B(b)(iii); respondents directed to refund amounts paid under protest with applicable interest and cancel/return bank guarantees within eight weeks; no order as to costs.

Dismissal for non-prosecution - imposition of conditional deposit while dismissing stay petition - rectification/recall under section 129B read with Rule 20 of the CESTAT (Procedure) Rules - review versus rectification (error apparent on the face of the record) - restoration of appeal and exercise of jurisdiction under Section 130 of the Customs Act, 1962

Dismissal for non-prosecution - imposition of conditional deposit while dismissing stay petition - Legality of the Tribunal's orders which dismissed the stay petition and subsequently dismissed the appeal for non-compliance with a direction to deposit the dues. - HELD THAT: - The Tribunal's order dated 30.04.2015 neither simply dismissed the stay petition nor properly framed a conditional stay; instead it dismissed the stay petition and at the same time directed deposit of the entire dues. The consequence of non-deposit was then treated as a ground for dismissal of the appeal by the Tribunal's order dated 13.07.2015. The High Court held that it was not open to the Tribunal to impose such a deposit condition in the form adopted or to convert non-compliance with that condition into a ground for dismissal without proper exercise of jurisdiction. The orders under challenge were found to be ex facie illegal in the circumstances, having the effect of denying the appellant its statutory right of appeal by penalising it for non-compliance with a condition which should not have been imposed in that manner. For these reasons the Court interfered with and set aside the impugned orders and directed restoration of the appeal to the file of the CESTAT. [Paras 6]

Orders dated 13.07.2015 and 06.01.2017 (stemming from the 30.04.2015 direction) were held to be ex facie illegal and were set aside; the appeal was ordered to be restored.

Rectification/recall under section 129B read with Rule 20 of the CESTAT (Procedure) Rules - review versus rectification (error apparent on the face of the record) - Whether the Miscellaneous Application under Rule 20 / section 129B seeking rectification/recall of the Tribunal's orders should have been dismissed or allowed. - HELD THAT: - The Tribunal rejected the application for rectification on the ground that allowing it would amount to review and that there was no mistake apparent on the face of the record. The High Court disagreed, concluding that the orders dated 30.04.2015 and 13.07.2015 involved an inherent error in the exercise of jurisdiction-namely the unusual imposition of a deposit obligation in the manner recorded and consequent dismissal for non-compliance-and that such error warranted interference. Applying its jurisdiction under Section 130 of the Customs Act, the Court treated the application as meritorious and allowed recall/rectification so as to restore the appellant's statutory right to have the appeal heard on merits. [Paras 2, 6]

Miscellaneous Application C/ROM/21353/2015 for rectification/recall was allowed and the impugned orders were set aside; the appeal was restored to CESTAT for fresh adjudication.

Final Conclusion: Impugned orders dismissing the appeal for non-compliance with the deposit direction were set aside as ex facie illegal; the application for rectification/recall was allowed and the appeal before the CESTAT was restored for disposal expeditiously (preferably within three months).

Principles of natural justice - right to cross-examination - inquiry report reliance on presenting officer without independent application of mind - revocation of customs broker licence - perversity standard of judicial review

Principles of natural justice - right to cross-examination - inquiry report reliance on presenting officer without independent application of mind - The Tribunal correctly held that the inquiry proceeded in breach of the principles of natural justice by refusing the requested cross-examination and by finalising the inquiry report on the brief of the Presenting Officer without independent consideration. - HELD THAT: - The Tribunal examined the inquiry record and found that when the charged Customs Broker sought cross-examination of the investigating officer the inquiry authority summoned the officer but did not issue notice to the Customs Broker or its authorised representative for that hearing. The Tribunal further recorded that the inquiry authority proceeded to finalise the report relying entirely on the presenting officer's brief, did not furnish requested documents before proceeding, and did not apply its own independent mind to matters raised by the Customs Broker. Those factual findings led the Tribunal to conclude that accepting the unchallenged testimony of the investigating officer, in the absence of allowing cross-examination, would be unacceptable and would breach natural justice, rendering the inquiry report legally unsustainable. The High Court reviewed the record, found basis for those conclusions, and upheld the Tribunal's determination that there was a violation of natural justice which vitiated the revocation order. [Paras 7, 8]

Tribunal's finding that the inquiry violated the principles of natural justice by denying cross-examination and by relying on the Presenting Officer's brief without independent application of mind is upheld.

Revocation of customs broker licence - perversity standard of judicial review - The Tribunal's order allowing the appeal against revocation and remanding for a fresh inquiry is not perverse and is to be maintained. - HELD THAT: - Having considered the record and the Tribunal's reasons, the High Court concluded there was nothing perverse in the Tribunal's conclusion that the revocation order could not stand in view of the procedural infirmities. The High Court declined to substitute its view for that of the Tribunal, finding that the Tribunal had adequately considered the material on record and correctly remitted the matter to the Commissioner for a fresh inquiry consistent with principles of natural justice. [Paras 8]

High Court dismisses the appeal; the Tribunal's order allowing the appeal and remanding the matter for fresh inquiry is affirmed.

Final Conclusion: Appeal dismissed. The Customs, Excise & Service Tax Appellate Tribunal's finding of violation of principles of natural justice and its order allowing the appeal and remanding the matter for a fresh inquiry are affirmed.

Provisional release of seized goods pending adjudication - currency as part of "goods" under the Customs law - seizure under section 110 of the Customs Act - provisional release procedure under section 110A - requirement of bond, security and conditions for provisional release - sale proceeds and confiscation - CBIC guidelines on provisional release of seized goods - reason to believe and judicial review of seizure

Reason to believe and judicial review of seizure - show cause notice and completion of investigation - Whether the pendency of investigation at the time of the impugned order was a valid ground to refuse provisional release of the currency. - HELD THAT: - The Tribunal noted that a show cause notice dated 30.12.2020 was issued after the order under challenge and that the notice identifies the appellant as the beneficial owner based on statements and laptop data. The issuance of the show cause notice demonstrates that the investigation has been concluded for present purposes, rendering the department's earlier reliance on an ongoing investigation redundant as a reason to refuse provisional release. The factual correctness of allegations in the show cause notice is not before the Tribunal, which confined its consideration to the narrow question of provisional release. [Paras 5]

The ground of refusal based on an ongoing investigation is redundant in view of the show cause notice and does not justify denial of provisional release.

Provisional release of seized goods pending adjudication - currency as part of "goods" under the Customs law - provisional release procedure under section 110A - requirement of bond, security and conditions for provisional release - CBIC guidelines on provisional release of seized goods - sale proceeds and confiscation - Whether there is legal provision for provisional release of currency seized under the Customs Act and whether the order refusing such release was sustainable. - HELD THAT: - The Tribunal observed that section 110A (provisional release pending adjudication) permits release of goods, documents or things seized under section 110 on taking a bond with security and such conditions as the adjudicating authority may require. Section 2(22) of the Customs Act expressly includes currency within the definition of "goods." Consequently, currency seized under section 110 falls within the class of items that may be provisionally released subject to bond/security and conditions. The Tribunal relied on departmental guidelines (CBIC Circular No.35/2017) which permit provisional release of currency and on precedent where differential treatment of currency seized as goods was held unsustainable. It further noted that section 121 (confiscation of sale proceeds of smuggled goods) was not attracted because there was no allegation that the imported goods were smuggled; the allegation was undervaluation. Authorities and precedents were cited to show that mere departmental belief or statements are insufficient to withhold provisional release when the statutory scheme permits release on conditions. Applying these principles, the Tribunal held the Commissioner erred in refusing provisional release of the seized currency. [Paras 5, 6, 7]

Statute and guidelines permit provisional release of seized currency as "goods" on furnishing bond/security and conditions; the refusal in the impugned order was incorrect and unsustainable.

Final Conclusion: The impugned order refusing provisional release of the seized currency is set aside and the appeal is allowed; the currency is liable to be considered for provisional release in accordance with the statutory scheme, CBIC guidelines and on furnishing such bond, security and conditions as the adjudicating authority may require.

Burden of proof under section 123 of the Customs Act, 1962 - confiscation under section 111(d) of the Customs Act, 1962 - penalties under section 112 of the Customs Act, 1962 - genuineness of commercial transactions - reliance on bank letters and corroborative documents - assumption versus corroborative evidence

Burden of proof under section 123 of the Customs Act, 1962 - genuineness of commercial transactions - reliance on bank letters and corroborative documents - Whether the claimant-appellant discharged the burden of proof under section 123 of the Customs Act, 1962 in respect of the seized gold - HELD THAT: - The Tribunal found that the claimant, proprietor of Agarwal Gold House, produced books of account, purchase invoices and bank statements showing opening stock and subsequent purchases which together accounted for the seized gold. The investigating authority verified the seller Harimanthan Jewellery House Pvt. Ltd., whose director admitted the sale and whose records and purchase trail (including dealings with an authorized bullion dealer) remained uncontroverted. The Tribunal held that mere change in mode of payment or an initial incorrect mention of a different seller during investigation could not, without corroborative evidence, permit rejection of documentary proof. Further, the Tribunal noted that the authorities below failed to take cognizance of a later letter from HDFC Bullion Operations, Mumbai confirming sale to Ambika Jewellers, which corroborated the purchasers' account. On these facts the Tribunal concluded that the burden under section 123 had been discharged and that adverse conclusions based on suspicion or assumptions about payment mode were unsustainable. [Paras 11, 12, 13, 14, 15]

The burden of proof under section 123 was duly discharged by the claimant; the transaction(s) were held genuine on the available documentary and corroborative evidence.

Confiscation under section 111(d) of the Customs Act, 1962 - penalties under section 112 of the Customs Act, 1962 - assumption versus corroborative evidence - Whether the order of confiscation under section 111(d) and consequential penalties under section 112 could be sustained - HELD THAT: - Having held that the claimant discharged the statutory burden and that the investigating and adjudicating authorities failed to controvert the documentary and corroborative evidence, the Tribunal concluded that confiscation based on suspicion and presumption could not stand. The authorities below also erred in ignoring the HDFC Bullion Operations (Mumbai) letter which supported the sellers' account. In absence of evidence to contradict the appellant's proofs and given improper reliance on conjecture about transaction genuineness, the confiscation and the penalties imposed were held to be bad in law. [Paras 13, 15]

The confiscation under section 111(d) and the penalties under section 112 are set aside.

Final Conclusion: Appeals allowed. The Tribunal set aside the order of confiscation of the seized gold and the consequential penalties, granting consequential relief to the claimant-appellant, having found that the burden under section 123 was discharged and that the authorities acted on suspicion without adequately controverting the documentary and corroborative evidence.

Natural justice - reasoned and speaking order - remand for fresh consideration - maintainability of writ petition despite availability of alternative remedy where the impugned order is non-speaking - res judicata not a ground to refuse review of a non-speaking order - power of the Regional Director under Section 140(1) of the Companies Act, 2013

Natural justice - reasoned and speaking order - maintainability of writ petition despite availability of alternative remedy where the impugned order is non-speaking - Impugned order dated 03.09.2021 (dispatched 07.09.2021) is non-speaking, violates principles of natural justice and is amenable to challenge by writ despite existence of alternative remedy. - HELD THAT: - The High Court held that the Regional Director's order merely recited statutory duties of an auditor and concluded that the auditor had acted within powers without addressing or deciding the substantive grounds raised by the petitioner; the order is therefore bereft of reasoning. Where an administrative or quasi-judicial order is non-speaking and fails to consider the specific grievances raised, it constitutes a breach of principles of natural justice and can be challenged under Article 226 notwithstanding the availability of other remedies. Reliance on the Supreme Court's recognition of exceptions permitting writ jurisdiction where orders are unreasoned or natural justice is breached supports maintainability. The court therefore set aside the impugned order for want of reasons and procedural fairness. [Paras 16, 18, 19]

Impugned order dated 03.09.2021 (dispatched 07.09.2021) set aside for being non-speaking and violative of natural justice; writ petition held maintainable on that ground.

Res judicata not a ground to refuse review of a non-speaking order - remand for fresh consideration - power of the Regional Director under Section 140(1) of the Companies Act, 2013 - Review order dated 09.12.2021 dismissing the petitioner's review on the ground of res judicata is unsustainable and the matter is remanded to the Regional Director for fresh, reasoned consideration. - HELD THAT: - The court observed that the review application was dismissed solely on the basis that the matter had been previously adjudicated, without addressing the substance of the petitioner's contentions or rectifying the absence of reasons in the original order. Dismissing a review on a res judicata plea cannot substitute for compliance with the duty to decide afresh where the original order was non-speaking. Consequently, both the original order and the review dismissal were set aside and the application under Section 140(1) was remanded to the Regional Director to be decided afresh by a reasoned and speaking order within one month. The court expressly declined to adjudicate the merits and directed that the authority decide uninfluenced by the High Court's interim view, preserving the statutory appellate remedies in case of any adverse outcome. [Paras 16, 19, 20]

Review order dated 09.12.2021 set aside; matter remanded to the Regional Director to decide the petitioner's application afresh by a reasoned and speaking order within one month.

Final Conclusion: The impugned order dated 03.09.2021 (dispatched 07.09.2021) and the review order dated 09.12.2021 are set aside for being non-speaking; the application under Section 140(1) is remanded to the Regional Director for fresh, reasoned consideration within one month, the High Court not having expressed any view on the merits.

Ousting of civil court jurisdiction by Section 430 of the Companies Act - scope and remedy under Sections 241 and 242 of the Companies Act - jurisdiction of civil courts to decide validity of sale deeds and title - prima facie case, balance of convenience and irreparable injury-tests for interim injunction - limits of Tribunal's power to set aside transfers under Section 242(2)(g)

Ousting of civil court jurisdiction by Section 430 of the Companies Act - scope and remedy under Sections 241 and 242 of the Companies Act - jurisdiction of civil courts to decide validity of sale deeds and title - Suit instituted by the company challenging sale deeds executed by its former Managing Director is maintainable in the civil Court. - HELD THAT: - Section 430 bars civil courts only insofar as the matter is one which the Tribunal or appellate Tribunal is empowered to determine under the Act. Sections 241-242 provide a remedy for a member to approach the Tribunal and permit certain orders (including limited setting aside of transfers made within three months prior to the application under Section 242(2)(g)). In the present case the complaint is by the company itself (not by a member) and the impugned transfers were executed well beyond the three month window contemplated by Section 242(2)(g). The scheme of Sections 241 and 242 does not, therefore, furnish an express or implied bar to civil jurisdiction in respect of the company's suit seeking cancellation of sale deeds and recovery of company property. The authorities relied upon establish that, unless statutory language expressly or impliedly excludes civil jurisdiction, ordinary civil remedies remain available-particularly where disputed questions of title and the validity of sale deeds are raised which the civil court is competent to decide. Applying these principles, the Court found no statutory exclusion of civil jurisdiction and rejected the respondents' maintainability objection. [Paras 21, 23, 31]

The civil suit is maintainable; Cross Objection No.24 of 2022 raising a bar under the Companies Act is dismissed.

Prima facie case, balance of convenience and irreparable injury-tests for interim injunction - jurisdiction of civil courts to decide validity of sale deeds and title - limits of Tribunal's power to set aside transfers under Section 242(2)(g) - Appellant entitled to interim injunctions restraining respondents from alienating or changing the nature of the suit schedule properties pending trial. - HELD THAT: - Applying the established tripartite test for interim relief, the Court found a prima facie case: the properties indisputably belonged to the company, the Managing Director stood in a fiduciary position and there are serious allegations of unauthorised transfers and non accounting of sale proceeds (bank records showed proceeds were not credited to the company). Given the nature of the relief sought (cancellation of sale deeds and restoration of company property), absence of an injunction would permit respondents to alter physical features or create third party interests, causing prejudice that could not be adequately remedied later. On these facts the balance of convenience favoured the appellant and irreparable harm was likely if relief were denied. The Court expressly left the merits open for trial. [Paras 33, 34, 35, 36]

Civil Miscellaneous Appeals are allowed; interim injunctions in favour of the appellant are justified and granted (no expression of opinion on merits).

Final Conclusion: The High Court held the company's suit challenging numerous sale deeds executed by its former Managing Director to be maintainable in the civil Court and allowed the appeals to grant interim reliefs restraining respondents from alienating or altering the suit properties pending trial, while leaving all merits issues open for adjudication in the pending suit.

One Time Settlement (OTS) - Withdrawal under Section 12A of the Insolvency and Bankruptcy Code - Regulation 30A - procedure for withdrawal and Form FA requirement - Commercial wisdom of the Committee of Creditors - Judicial review of commercial decisions of the CoC

One Time Settlement (OTS) - Withdrawal under Section 12A of the Insolvency and Bankruptcy Code - OTS proposal submitted by the appellant was accepted by the Central Bank of India - HELD THAT: - The Tribunal examined the correspondence between the appellant and the Bank and found that the Bank's communication dated 16.10.2020 did not constitute acceptance but sought further particulars (details of the offer, source of funds, payment schedule) and indicated that the Bank "may consider" the offer if full amount was proposed to be paid by 31.03.2021. The appellant thereafter sent a letter of 09.11.2020 but there was no subsequent communication from the Bank accepting the OTS. The record shows that an application under Section 12A was not filed before the Adjudicating Authority and the Resolution Professional stated that he never received any acceptance from the Bank. On this factual and legal basis the Tribunal held that the OTS offer was never accepted by the Bank and consequently the route under Section 12A did not arise. [Paras 9, 15]

OTS proposal of the appellant was not accepted by the Central Bank of India; no occasion arose to proceed under Section 12A.

Regulation 30A - procedure for withdrawal and Form FA requirement - Commercial wisdom of the Committee of Creditors - Judicial review of commercial decisions of the CoC - Whether the Committee of Creditors considered the appellant's OTS proposal and whether the CoC's approval of the resolution plan was vitiated for failure to consider the OTS - HELD THAT: - The minutes of the 8th CoC meeting dated 03.02.2021 record the representation by the suspended board and consideration of the OTS-related correspondence. The CoC noted that Form-FA and other withdrawal formalities were not furnished and that the settlement was yet to be formalized before the NCLT. After deliberation the CoC decided to continue the CIRP and proceeded to consider and approve the resolution plan. The Tribunal applied the statutory framework for withdrawal (Section 12A and Regulation 30A), observing that where an OTS/withdrawal proposal is made after publication of Form-G/EoI, the proviso to Regulation 30A requires specific reasons and compliance with Form FA and bank guarantee requirements. The Tribunal further held that the commercial evaluation and decision to approve the resolution plan fall within the CoC's commercial wisdom and are not amenable to judicial reappraisal merely because the appellant's offer was argued to be better. On these bases the Adjudicating Authority's rejection of I.A. No. 70 of 2021 and approval of the resolution plan were upheld. [Paras 11, 14, 16, 19, 22]

CoC considered the OTS-related material, found the OTS unformalised and proceeded in exercise of its commercial wisdom to approve the resolution plan; that decision is not interfered with.

Final Conclusion: The Tribunal found no merit in the appeals: the OTS offer was not accepted by the Bank and was not properly formalised under Section 12A/Regulation 30A, the CoC considered the matter and validly approved the resolution plan in exercise of its commercial wisdom, and the impugned orders dated 19th April, 2022 are affirmed; both appeals are dismissed.

Operational debt - provision of goods or services - intellectual property rights as supply of service - pre-existing dispute under Section 8(2)(a) - admission of debt

Operational debt - provision of goods or services - intellectual property rights as supply of service - Claim for Minimum Guaranteed Royalties falls within the definition of 'operational debt'. - HELD THAT: - The Tribunal held that granting an exclusive licence to use, manufacture, sell, distribute and advertise products bearing the licensor's trademark amounted to a provision capable of being treated as 'goods and services' for the purposes of Section 5(21). The court relied on authority recognising incorporeal rights (such as trademarks) as movable property and observed that temporary transfer/permission to use intellectual property constitutes provision of service; the Agreement itself contemplated payment of GST on invoices for the use of services. The Larger Bench precedent in Jaipur Trades Export Centre (Company Appeal (AT) (Ins.) No.423/2021) was held decisive in overruling earlier contrary Tribunal decisions and supporting the proposition that licence fees/guaranteed minimum royalties are captured by the statutory expression 'operational debt'. Applying these principles to the contractual terms (exclusive licence, royalties and minimum guaranteed payments), the Tribunal found a direct nexus between the licence, the business operations and the product sold, and concluded that the claim is a right to payment in respect of provision of goods and services within Section 5(21). [Paras 12, 13, 14, 15]

The claim for Minimum Guaranteed Royalties is an 'operational debt' under Section 5(21) of the Code.

Pre-existing dispute under Section 8(2)(a) - admission of debt - There was default in payment and no pre-existing dispute preventing admission of the Section 9 application. - HELD THAT: - The Tribunal noted emails and actions by the corporate debtor (including email admissions to pay, issuance of post-dated cheques and subsequent representations) as constituting an admission of liability and a 'right to payment'. The Demand Notice under Section 8 was sent to the corporate debtor's registered email with annexures, and correspondence did not raise a dispute in the terms contemplated by Section 8(2)(a) read with Section 5(6). The Tribunal rejected the contention that service of the notice was ineffective or that a bona fide pre-existing dispute existed, treating the pleaded contention as not amounting to a statutory pre-existing dispute (referring to Mobilox principle on 'moonshine' disputes). On these findings the Adjudicating Authority's conclusion of default and admission of the Section 9 petition was upheld. [Paras 16, 17, 18]

There was default in payment and no pre-existing dispute; the Section 9 petition was correctly admitted.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority correctly held that the Minimum Guaranteed Royalties constituted an operational debt, and that default existed without a pre-existing dispute, warranting admission of the Section 9 application.

Admissibility of electronic records under Section 65 B - letting in additional evidence at appellate stage - fraud and collusion vitiating an auction sale - maximisation of value in liquidation sales - obligations and duties of the liquidator in conducting e auctions - effect of bidder's negligence or inaction on challenge to auction

Letting in additional evidence at appellate stage - admissibility of electronic records under Section 65 B - I.A. No.121 of 2021 (application to place on record third party reports and an independent auditor's report at the appellate stage) is not maintainable and is dismissed. - HELD THAT: - The Tribunal examined the appellant's request to rely on post adjudication third party reports (Tata Communications report and an Independent Auditor's/Project Pursuit Report) and KPMG material not placed before the Adjudicating Authority. It reiterated that appellate permission to receive additional documents is discretionary and that an appellate court is not to be used to fill lacunae in evidence. The Tribunal further noted the mandatory statutory and evidentiary safeguards for electronic records under Section 65 B of the Evidence Act and the precedents requiring a certificate for admissibility of system generated screenshots and electronic records. Having regard to the fact that these additional materials came into existence after the impugned order and that the appeal could be decided on the existing record, the Tribunal concluded that the interlocutory application was not bona fide and that admitting the material at the appellate stage would not serve the interests of justice in the circumstances of this case. [Paras 5, 6, 7, 8, 9]

I.A. No.121 of 2021 is dismissed; the additional third party reports and post adjudication auditor's report are not admitted for the purposes of this appeal.

Fraud and collusion vitiating an auction sale - maximisation of value in liquidation sales - obligations and duties of the liquidator in conducting e auctions - Whether the e auction and the consequent sale to the third respondent were vitiated by fraud, collusion or material irregularity warranting setting aside the sale or ordering a re auction - rejected. - HELD THAT: - The Tribunal analysed the evidence and surrounding circumstances and found no established fraud or collusion that would invalidate the auction sale. It applied the established principle that a confirmed auction sale will not be set aside save in exceptional cases of proven fraud or material irregularity affecting the outcome. The record of the e auction, as furnished by the auction service provider and the liquidator, showed that bidding continued with automatic five minute extensions and that a higher bid was recorded from the third respondent within the extended period. The Tribunal also noted precedents emphasising that courts and tribunals are custodians of creditors' interest and ordinarily will not reopen a validly conducted auction merely because a slightly higher offer is received thereafter. The liquidator's duties to conduct the auction in terms of the Process Memorandum and the Liquidation Regulations were held to have been discharged, and the liquidator's issuance of the sale certificate and completion of payment were relevant factors militating against reopening the sale.

The impugned order of the Adjudicating Authority dismissing the interlocutory application is upheld and the challenge to the auction/sale is rejected; the appeal is dismissed.

Effect of bidder's negligence or inaction on challenge to auction - admissibility of electronic records under Section 65 B - Whether the appellant's admitted conduct (frequent logouts, sharing screen via third party app, logging in from multiple browsers and failure to produce a Section 65 B certificate) disentitled it from assailing the auction - held against the appellant. - HELD THAT: - The Tribunal recorded contemporaneous log reports and transcripts showing the appellant admitted frequent logouts, simultaneous login from multiple browsers and use of a third party screen sharing application. The appellant did not produce the requisite Section 65 B certificate to authenticate the screenshots it relied upon. The Tribunal treated the appellant's admissions as substantive evidence adverse to its case and held that a party negligent in observing the auction terms cannot later challenge the auction process for consequences arising from its own inaction. The absence of the mandatory certificate for electronic records rendered the screenshots inadmissible as reliable proof of the appellant's asserted position. [Paras 113, 115, 116, 126, 127]

The appellant's own admissions and failure to comply with evidentiary safeguards defeat its challenge; the screenshots and related electronic material are not accepted as establishing fraud or irregularity.

Final Conclusion: The Tribunal dismissed the interlocutory application to admit additional third party electronic reports and upheld the Adjudicating Authority's finding that the e auction and sale to the successful bidder were not proved to be tainted by fraud or material irregularity; the company appeal is therefore dismissed and the sale stands confirmed.

Waiver of interest - amount of duty - amount in arrears - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - benefit of amnesty - Scheme as a complete code

Waiver of interest - amount of duty - amount in arrears - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Whether the component of interest arising from delayed payment of tax dues falls within the expressions "amount of duty"/"amount in arrears" under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and is therefore eligible for waiver under the Scheme. - HELD THAT: - The High Court declined to decide the substantive question on merits. The Court noted conflicting High Court authorities: the Division Bench of Allahabad High Court held that interest on belatedly filed returns is not covered because no "amount of duty" remained payable, whereas other High Courts have taken the view that interest forms part of "amount in arrears" or "amount of duty" for the Scheme. Given these divergent views, the Court directed the competent authority (respondent No.2) to apply its mind afresh to the specific question whether interest levied for delayed payment of tax dues can be waived under the SVLDRS, 2019, and to issue a clarificatory circular or instruction to remove the existing ambiguity. The Court expressly refrained from expressing any view on the legal merits and left the matter for administrative clarification and decision by the designated authority within a stipulated time. [Paras 5, 6, 7]

The question was remitted to respondent No.2 for fresh consideration and issuance of a clarificatory circular on whether interest on delayed tax payments is waivable under the Scheme of 2019; the Court declined to decide the issue on merits.

Final Conclusion: Petition disposed of by remitting the question whether interest on delayed tax payments is covered by the SVLDRS, 2019 to respondent No.2 for fresh consideration and issuance of a clarificatory circular within sixty days; the Court declined to decide the legal question on merits.

Extended period of limitation under proviso to section 73(1) of the Finance Act, 1994 - willful suppression with intent to evade - overlap of assessment period with earlier show-cause notice / prior adjudication

Extended period of limitation under proviso to section 73(1) of the Finance Act, 1994 - willful suppression with intent to evade - Applicability of the extended period of limitation for the demand recorded in the show cause notice dated 02.12.2016 - HELD THAT: - The show cause notice alleges that the appellant willfully evaded payment of service tax by suppressing value in ST-3 returns and invoked the proviso to section 73(1). The Additional Commissioner accepted the allegation and held the demand recoverable under the proviso, and also recorded liability for interest and penalty. The Commissioner (Appeals) did not address the contention that invocation of the extended period was improper, despite the appellant specifically raising that ground. Because the appellate authority has not examined whether the facts disclose suppression or willful intent sufficient to invoke the extended limitation, the matter cannot be finally determined by this Tribunal. The file is therefore remitted for fresh consideration of whether the facts justify application of the proviso to section 73(1). [Paras 11, 12, 13, 14]

Remitted to the Commissioner (Appeals) to examine afresh the applicability of the extended period of limitation under the proviso to section 73(1) in light of the allegations of willful suppression.

Overlap of assessment period with earlier show-cause notice / prior adjudication - Effect of overlapping period (October 2014 to March 2015) with an earlier show cause notice dated 18.04.2016 - HELD THAT: - A portion of the period for which demand is sought in the subject show cause notice coincides with a period covered by an earlier show cause notice issued on 18.04.2016. The Tribunal observed that this overlap requires reassessment to determine whether the demand for the overlapping period is maintainable or barred by the earlier proceeding. That factual and legal question was not examined by the Commissioner (Appeals) and therefore requires fresh consideration. [Paras 4, 15]

Remitted to the Commissioner (Appeals) to examine the overlapping of the period October 2014 to March 2015 with the earlier show cause notice and decide the consequences.

Final Conclusion: The appeal is allowed in part; the matter is remitted to the Commissioner (Appeals) for fresh consideration of (i) whether the proviso to section 73(1) is attracted on the facts (alleged willful suppression), and (ii) the effect of overlap of October 2014 to March 2015 with an earlier show cause notice; no other relief is granted.

Raising demand based on disparities between ST-3 returns and Form 26AS - burden of proof on the Revenue to establish that amounts in Form 26AS constitute consideration for taxable services - Form 26AS not a statutory document for determining taxable turnover under Service Tax - service tax chargeable on mercantile (accrual) basis while Form 26AS reflects payments on cash/receipt basis - invocation of extended period requires proof of suppression or mala fide intention - demand based on specific invoices requires supporting evidence that amounts were received or bills were not cancelled

Raising demand based on disparities between ST-3 returns and Form 26AS - Form 26AS not a statutory document for determining taxable turnover under Service Tax - service tax chargeable on mercantile (accrual) basis while Form 26AS reflects payments on cash/receipt basis - burden of proof on the Revenue to establish that amounts in Form 26AS constitute consideration for taxable services - invocation of extended period requires proof of suppression or mala fide intention - Whether demand could be sustained solely on differences between ST-3 returns and Form 26AS for the audit period 2013-14 to 2016-17 - HELD THAT: - The Tribunal held that differences between ST-3 returns and Form 26AS alone do not suffice to raise a Service Tax demand. Form 26AS is maintained by the Income Tax department on a cash/receipt basis for TDS purposes and is not a statutory document for determining taxable turnover under Service Tax, which is chargeable on a mercantile (accrual) basis. The Revenue bears the burden of proving that amounts reflected in Form 26AS were received as consideration for taxable services; it is not permissible to presume that the entire differential represents taxable consideration without verification. In the absence of evidence establishing receipt of the extra amounts or that such amounts constituted consideration for taxable services, and given that ST-3 returns were regularly filed and figures in Form 26AS are reflected in Income Tax returns, invocation of the extended period could not be sustained for such differences. The Tribunal relied on co-ordinate decisions to support these propositions and accepted the appellant's contention that the amounts shown in Form 26AS may not have been received by the appellant. [Paras 3]

Demand based solely on differences between ST-3 returns and Form 26AS for the period 2013-14 to 2016-17 is not sustainable; related extended-period invocation cannot be sustained absent proof of suppression or that the Form 26AS entries represented consideration for taxable services.

Demand based on specific invoices requires supporting evidence that amounts were received or bills were not cancelled - burden of proof on the Revenue to establish receipt for specific invoices - Whether the demand of service tax based on four specific invoices could be sustained - HELD THAT: - The Tribunal examined the record and found no document or evidence from the appellant showing non-receipt of the amounts, cancellation of the invoices, or other reasons to displace the presumption of liability. The appellant had previously indicated willingness to pay the tax on those invoices and their written submissions stated that the service tax on those invoices was deposited. No evidence was produced to show that the amounts were not received or that the invoices were cancelled. In view of the absence of evidence to support the appellant's contrary claim, the finding of the lower authorities upholding the demand on these invoices was sustained. [Paras 3]

Demand based on the four invoices is upheld for want of evidence from the appellant to show non-receipt or cancellation; that part of the demand stands.

Final Conclusion: Appeal partly allowed: demands arising solely from discrepancies between ST-3 returns and Form 26AS for 2013-14 to 2016-17 are set aside for want of proof that Form 26AS entries constituted consideration for taxable services and for lack of grounds to invoke the extended period; the demand based on the four specific invoices is sustained.

Continuance of proceedings after adjudication as an insolvent - Abatement of appeal for failure to apply by successor-in-interest - Application under Rule 22 of the CESTAT (Procedure) Rules, 1982

Continuance of proceedings after adjudication as an insolvent - Abatement of appeal for failure to apply by successor-in-interest - Application under Rule 22 of the CESTAT (Procedure) Rules, 1982 - Appeals abate for want of continuance application by the successor in interest after the company was placed under insolvency resolution and no application under Rule 22 was filed. - HELD THAT: - The Bench recorded that the National Company Law Tribunal had appointed an Interim Resolution Professional for the appellant company and directed that notice be served on the Resolution Professional. The Registry sent notice to the Resolution Professional pursuant to the Bench's direction, but no application has been filed by any successor in interest or the Resolution Professional for continuance of the proceedings under Rule 22 of the CESTAT (Procedure) Rules, 1982. Rule 22 mandates that where a company is being wound up or adjudicated insolvent the appeal shall abate unless an application for continuance is made by the successor in interest (or other legal representative) within sixty days, subject to extension for sufficient cause. Sufficient time was afforded for filing such an application, and in the absence of any application by the successor in interest the appeals stand abated by operation of Rule 22. [Paras 3, 4]

Appeals abate for want of an application for continuance by the successor in interest under Rule 22; held accordingly.

Final Conclusion: The appeals are held to have abated by operation of Rule 22 of the CESTAT (Procedure) Rules, 1982 due to non filing of any application for continuance by the successor in interest or Resolution Professional.

Admissibility of computer printouts under Section 36B of the Central Excise Act, 1944 - clubbing of clearances for purpose of SSI exemption (Notification No.8/2003-CE) - requirement of proving financial flow back / mutuality of interest before treating related units as one manufacturer - admissibility of statements and opportunity for cross examination under Section 9D of the Central Excise Act, 1944

Admissibility of computer printouts under Section 36B of the Central Excise Act, 1944 - Computer printouts and data retrieved from seized computer media were inadmissible in absence of compliance with Section 36B. - HELD THAT: - The Tribunal examined the source evidence relied upon by the Department - printouts in File No.109/1 and data retrieved by the Central Forensic Laboratory from the CPU/hard disc seized at the factory. Sub sections (1) and (2) of Section 36B prescribe mandatory conditions (certificate regarding period of use, regular supply of information, proper operation of computer, and that information reproduces ordinary business records) for admitting computer printouts as evidence. The record did not disclose compliance with these statutory pre conditions nor any attestation required by Section 36B. Reliance on photocopies forwarded by the Income Tax Department and on prints obtained from CFL, without the statutory certification, did not satisfy the statutory mandate. Prior authorities were noted to support the mandatory nature of Section 36B. For these reasons the Tribunal held that the computer printouts could not be relied upon to confirm duty demands. [Paras 33, 34, 35, 36]

The computer printouts and retrieved electronic data were inadmissible for proving clandestine clearances or suppression of turnover because Section 36B's procedural requirements were not complied with.

Clubbing of clearances for purpose of SSI exemption (Notification No.8/2003-CE) - requirement of proving financial flow back / mutuality of interest before treating related units as one manufacturer - The Department failed to establish grounds to club clearances of the various family owned units with M/s.VPPL; clearances could not be treated as those of a single manufacturer for denying SSI exemption. - HELD THAT: - The Tribunal analysed the nature of the six units, the Department's pleading and the manner in which demand was raised. The show cause notice simultaneously proposed clubbing but, in practice, duty was demanded separately from each unit, which indicated recognition of independent existence. The statutory notification and administrative circular (Circular No.6/92) permit separate entitlement where distinct firms/companies have independent existence. To justify clubbing, the Revenue must establish that units were sham/dummy (lacking independent machinery, premises or operations) or demonstrate financial flow back and diversion of clearances/raw material between the units. The record showed separate factory premises, PANs, sales tax/CST registrations, director/partner compositions and that units had capacity for independent manufacture. No evidence was produced showing purchases routed through dummy units or flow back of funds to effect clandestine clearance by the main unit. Authorities were cited to the effect that common office, common staff or family relationship, without proof of financial intermingling or lack of independent capacity, is insufficient to club clearances. On this basis the Tribunal concluded the Department did not prove mutuality of interest or flow back required to treat the units as a single manufacturer. [Paras 29, 30, 31, 39, 42]

The clearances of the family owned/related units could not be clubbed with M/s.VPPL; the Department's demand on the ground of wrongful availment of SSI exemption therefore could not be sustained.

Admissibility of statements and opportunity for cross examination under Section 9D of the Central Excise Act, 1944 - Statements relied upon (notably of the sales tax consultant and other staff) could not be given evidentiary weight where the statutory requirement of examination/ opportunity for cross examination under Section 9D was not complied with. - HELD THAT: - The adjudicating authority placed reliance on statements attributed to the sales tax consultant (Mr. Subbiah) and other employees to support allegations such as issuance of two sets of invoices and manipulation of sales journals. The appellants contended that they were not afforded an opportunity to examine or cross examine these persons. Section 9D prescribes conditions under which such statements may be relied upon; in absence of examination/cross examination and independent documentary corroboration (no recovery of the alleged second set of invoices), the recorded statements lacked the requisite evidentiary value. The Tribunal observed that reliance on untested statements, particularly where documentary proof was absent or inadmissible (see Section 36B issue), was not sufficient to sustain the duty and penalty orders. [Paras 8, 37]

Statements of the consultant and other unexamined witnesses could not substantiate the allegations; they were not admissible evidence for confirming duty/penalties in the absence of compliance with Section 9D.

Final Conclusion: On the combined findings - inadmissibility of the principal electronic evidence for non compliance with Section 36B, absence of proof of financial flow back or sham/dummy units to justify clubbing under the SSI notification, and inability to rely on unexamined statements under Section 9D - the Tribunal set aside the adjudicating orders confirming duty and penalties and allowed the appeals, granting consequential relief as per law.

Cenvat credit admissibility on basis of invoices where inputs allegedly not received - burden of proof on Revenue to establish non-receipt of inputs - primacy of statutory records and accounting evidence including RG-23A - requirement of receipt of inputs under Rule 4 and Rule 9 of Cenvat Credit Rules, 2004

Cenvat credit admissibility on basis of invoices where inputs allegedly not received - burden of proof on Revenue to establish non-receipt of inputs - primacy of statutory records and accounting evidence including RG-23A - requirement of receipt of inputs under Rule 4 and Rule 9 of Cenvat Credit Rules, 2004 - Whether the appellants were entitled to avail Cenvat credit on the basis of invoices of registered dealers notwithstanding third party transporter/RTO evidence alleging non movement of goods from the supplier to the dealers. - HELD THAT: - The Tribunal found that the investigation relied principally on third party evidence relating to transporters and RTO/checkpost records to conclude that consignments did not travel from the supplier to the registered dealers. Revenue did not produce any evidence from the appellants' factory to show that the goods covered by the invoices were not received. In contrast, appellants had statutory and accounting records: entries in RG 23A Part I/II, raw material receipt accounts, private stock ledgers, ledger bookings of purchases, and cheque payments for invoices and transportation, and had shown utilisation of the inputs in manufacture of dutiable goods. The Court applied the principle that where statutory records supported receipt and chronological entry of disputed consignments, mere discrepancies in transporter documents are insufficient to deny credit; the burden to prove non receipt rests on Revenue. The Tribunal also noted the Rules' requirement that credit is permissible only after receipt of inputs, but held that in the facts of the case the receipt was duly recorded and not successfully controverted. The decision was supported by earlier Tribunal authorities relied upon in the judgment, including M/s. Lloyds Metal Engg. Co. v. CCE , M/s. Ajay Industrial Corporation v. CCE , M/s. Shree Jagdamba Castings (P) Ltd. v. CCE , and M/s. Malerkotla Steels & Alloys Pvt. Ltd. v. CCE , which held that credit cannot be denied solely on the basis of transporters' admissions or on the ground that the dealer did not receive inputs where the manufacturer's statutory records show receipt and utilisation. [Paras 4, 5, 6]

Allegation of non receipt of inputs was not established by Revenue; impugned orders denying Cenvat credit are unsustainable and are set aside.

Final Conclusion: Impugned orders are set aside and all appeals are allowed; appellants are entitled to consequential reliefs in accordance with law.

Cenvat credit admissibility - interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004 - retrospective versus clarificatory amendment - penalty waiver for disputed or debatable legal position - precedential effect of subsequent judicial quashing of earlier tribunal view

Cenvat credit admissibility - interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004 - precedential effect of subsequent judicial quashing of earlier tribunal view - Cenvat credit on structural steel items (MS Angle, Plates, HR Sheets, CR Sheet, CR coil, Beam, MS Rod, Joist, MS Channel and other steel products used for manufacture of capital goods) is eligible up to 06.07.2009. - HELD THAT: - The Tribunal examined the controversy whether the amendment to Rule 2(k) w.e.f. 07/07/2009 operates retrospectively as held by the Larger Bench in Vandana Global Ltd. and whether that decision continues to bind. Noting that the Larger Bench view has been quashed by the High Court of Chhattisgarh and that the Calcutta High Court has disapproved the Larger Bench decision in Surya Alloy Industries Ltd., the Tribunal held that the items in question fall within the scope of 'input' up to 06/07/2009. For that period the appellant was therefore entitled to Cenvat credit and the adjudicating authority's demand in respect of that period was set aside. [Paras 10]

Allowed in part; Cenvat credit on the specified steel items held admissible up to 06/07/2009 and the appeal is allowed to that extent.

Penalty waiver for disputed or debatable legal position - interpretation of Rule 2(k) of the Cenvat Credit Rules, 2004 - Penalty cannot be sustained for the amount relating to the period post 07/07/2009 where the appellant has reversed the disputed credit and the question involved interpretation of law. - HELD THAT: - The appellant conceded and reversed the Cenvat credit claimed for the period from 07/07/2009 onwards and sought waiver of penalty on the ground that the issue was debatable and involved interpretation of law. The Tribunal found merit in this submission, observing that where the matter concerns interpretation and there existed contrary judicial views, imposition of penalty was not appropriate. Consequently, the imposition of penalty in respect of the disputed credit was set aside. [Paras 11]

Penalty set aside in relation to the post 07/07/2009 disputed credit; appellant's request for waiver of penalty accepted.

Final Conclusion: Appeal disposed of by allowing Cenvat credit claimed on the specified steel items up to 06/07/2009 and by quashing the penalty in respect of the disputed credit for the post-07/07/2009 period, the appellant having reversed that amount.

Cenvat credit on inputs sent for job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - liability for central excise duty where the principal manufacturer pays duty on finished goods - effect of non-obtaining permission under Rule 4(6) of the Cenvat Credit Rules, 2004 - prohibition on double recovery / duplicate duty demand - penalty protection where demand is unsustainable

Cenvat credit on inputs sent for job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - effect of non-obtaining permission under Rule 4(6) of the Cenvat Credit Rules, 2004 - Whether Cenvat credit can be denied to the Daman unit where inputs were sent to job workers under Rule 4(5)(a) and the principal manufacturer has discharged excise duty on the finished goods - HELD THAT: - The Tribunal accepted the appellants' legal contention that inputs were sent to job workers under Rule 4(5)(a) and that the principal manufacturer at Daman had in fact paid duty on the finished goods. It held that where the principal manufacturer discharges excise duty on finished goods, the mere procedural lapse of not seeking prior permission under Rule 4(6) does not disentitle the principal to input-stage Cenvat credit. The Tribunal observed that Rule 4(6) is a facility to avoid physical return of goods but its non-observance is a procedural lapse which does not cause revenue loss where duty has been paid by the principal. Applying these principles to the admitted facts, the denial of Cenvat credit to the Daman unit was not sustainable. [Paras 4]

Cenvat credit allowed to the Daman unit; the denial of credit in the impugned order is set aside.

Liability for central excise duty where the principal manufacturer pays duty on finished goods - prohibition on double recovery / duplicate duty demand - penalty protection where demand is unsustainable - Whether central excise duty can be demanded from the Vadodara unit (job worker/manufacturer) when the principal manufacturer at Daman has paid duty on the finished goods, and whether penalties sustaining those demands should stand - HELD THAT: - The Tribunal found that on the admitted facts the principal manufacturer at Daman had discharged duty on the finished goods allegedly produced at the job worker's premises. Consequently, there could be no fresh duty demand on the job worker at Vadodara without resulting in double recovery. The Tribunal declined to traverse the contested factual minutiae of transport movements because the legal position - that payment of duty by the principal precludes re recovery from the job worker in these circumstances - was dispositive. Since the demand could not be sustained on merits, associated penal consequences were also held unsustainable and were ordered to be dropped. [Paras 4, 5]

Duty demand against the Vadodara unit set aside; consequential penalties and penal actions quashed.

Final Conclusion: Appeals allowed: the demand of Cenvat credit denial on the Daman unit and the duty demand on the Vadodara unit are unsustainable; impugned orders are set aside and all consequential penal actions are dropped.

Classification of goods - Chewing tobacco vs Jarda scented tobacco - Tariff classification - BIS specifications - Trade parlance test - Burden of proof for classification - Reliance on laboratory reports

Classification of goods - Chewing tobacco vs Jarda scented tobacco - Tariff classification - Product manufactured by the appellant is classifiable as Chewing Tobacco under sub-heading 24039910 and not as Jarda Scented Tobacco under sub-heading 24039930. - HELD THAT: - The Tribunal examined the material relied upon by the revenue, the CRCL test reports and the BIS specifications for chewing tobacco and zarda (jarda) scented tobacco. The CRCL reports relied upon by the revenue referred principally to calcium content and a 'pleasant odour' but did not record the mandatory BIS parameters (moisture content, nicotine, total ash, acid insoluble ash) required to characterise zarda scented tobacco. The Chemical Examiner conceded that IS 5643/1999 contains no direct standard for zarda and that the BIS Table 1 characteristics were not reflected in the laboratory reports. In these circumstances the test reports were held to be inadequate to establish that the product was jarda scented tobacco. The Tribunal further held that the presence of a pleasant odour or perfumery compounds/'additive mixture' does not ipso facto amount to use of 'jarda scent' and that established Supreme Court authorities require classification to be informed by trade parlance where technical definitions are absent. On the facts (packaging, description and market treatment) the product is treated in trade parlance as chewing tobacco and the appellant's classification under 24039910 is correct. [Paras 11, 12, 13, 14, 15]

Classification recorded by the appellant as Chewing Tobacco under sub heading 24039910 is upheld and classification as Jarda Scented Tobacco under 24039930 is rejected.

Reliance on laboratory reports - Burden of proof for classification - BIS specifications - CRCL test reports which do not apply or record the relevant BIS parameters and which were sought to be used for tariff classification are insufficient; the revenue failed to discharge the burden of proof to justify re classification. - HELD THAT: - The Tribunal found that the CRCL reports were based principally on calcium content and an asserted 'pleasant odour' without testing or reporting the BIS specified characteristics for zarda (moisture, nicotine, ash parameters). The record also showed repeated requests by the assessing authorities to the laboratory to state the tariff classification, which the CRCL explicitly stated it should not do. Given these defects, the Tribunal held reliance on those reports for changing classification was misplaced and that, in absence of proper evidentiary material or market enquiry, the revenue had not discharged its burden to establish the product as jarda scented tobacco. [Paras 9, 10, 11]

CRCL reports relied upon by the revenue are held to be inadequate and cannot support the re classification; revenue failed to prove the change of classification.

Trade parlance test - Tariff classification - Where tariff entries lack technical definitions, classification must have regard to trade parlance and market treatment; revenue ought to have conducted market enquiries but did not. - HELD THAT: - The Tribunal invoked settled principles that, absent a technical definition in the tariff, words in a fiscal schedule are to be construed in the sense understood in the trade. The BIS glossary describes zarda as a scented/flavoured variety of chewing tobacco, but that does not supplant the need to determine how the product is treated in practice. The revenue produced no market enquiries or evidence showing that the product was treated as zarda scented tobacco in the market. The Tribunal thus applied the trade parlance test (packaging, description, presentation, sales and consumption) and found the product treated and sold as chewing tobacco. [Paras 14, 15, 16]

Trade parlance and market treatment support classification as chewing tobacco; revenue's failure to conduct market enquiries is a fatal lacuna.

Consequences of incorrect classification - Burden of proof for classification - Impugned demand of differential duty, interest, penalty and appropriation based on classification as Jarda Scented Tobacco is unsustainable and set aside. - HELD THAT: - Because the Tribunal concluded that the product is correctly classifiable as chewing tobacco and that the revenue failed to prove otherwise, the consequential determination, demand and recovery (including appropriation of amounts deposited under protest), interest and penalties premised on the re classification could not stand. The Tribunal therefore set aside the adjudicating authority's order and allowed the appeal with consequential relief as per law. [Paras 7, 17]

Impugned order confirming the demand, interest, penalty and appropriation is set aside; appeal allowed.

Final Conclusion: The appeal is allowed. The Tribunal holds that the product is classifiable as Chewing Tobacco under sub heading 24039910; the CRCL reports relied upon by the revenue were inadequate and the revenue failed to discharge the burden of proof to show the product was Jarda Scented Tobacco; the adjudicating authority's demand, interest, penalty and appropriation based on the re classification are set aside with consequential relief as per law.

Distribution of input service credit by Input Service Distributor (ISD) - Admissibility of Cenvat credit to unit manufacturing an ingredient of final product - Prospective application of amended Rule 7C of the Cenvat Credit Rules - Extended period of limitation - requirement of positive act, fraud or suppression - Onus on department to prove misrepresentation or suppression to invoke extended limitation

Distribution of input service credit by Input Service Distributor (ISD) - Admissibility of Cenvat credit to unit manufacturing an ingredient of final product - Prospective application of amended Rule 7C of the Cenvat Credit Rules - Whether the Cenvat credit distributed by the ISD to the appellant unit manufacturing Kiwam (an essential ingredient of chewing tobacco) was admissible and whether amended Rule 7C (w.e.f. 01.04.2016) could be invoked for the period in demand. - HELD THAT: - The Tribunal examined Rule 7C in its pre amendment and post amendment forms. Prior to amendment the provision used the word 'may' enabling an ISD an option to distribute credit; the amendment (w.e.f. 01.04.2016) employs 'shall' making distribution mandatory prospectively. The Tribunal held the amended provision is not applicable to the impugned period (demand up to 30.03.2016/30.06.2016) and therefore the mandatory language of the amended Rule 7C could not be read into the earlier period. Applying the pre amendment rule and the factual finding that the appellant's unit manufactured Kiwam, an inseparable and essential ingredient of the ISD's final product (chewing tobacco), the Tribunal concluded the input service (CSA service for sale promotion of tobacco) was a common input service used for both units and thus the ISD's distribution of credit to the appellant could not be denied. The Tribunal relied on earlier decisions holding that where a common input service is used by multiple units and the provision allowed distribution, proportionate credit cannot be denied and that procedural deficiencies should not defeat substantive benefit where revenue neutrality exists. The adjudicating authority's sole reliance on the post amendment wording of Rule 7C was held to be incorrect for the period under consideration. [Paras 7, 8, 9, 10, 11]

The Cenvat credit distributed by the ISD to the appellant unit manufacturing Kiwam is held to be admissible; the amended Rule 7C (w.e.f. 01.04.2016) is not applicable to the period in demand and cannot be invoked to deny credit.

Extended period of limitation - requirement of positive act, fraud or suppression - Onus on department to prove misrepresentation or suppression to invoke extended limitation - Whether the Show Cause Notice issued in 2019 for demands relating to 2014-15 and 2015-16 was within time or barred by limitation because extended period could not be invoked. - HELD THAT: - The Tribunal noted the appellant had been regularly filing ER 1 returns containing requisite invoice details and there was no evidence of suppression, fraud or collusion on the part of the appellant. Reliance was placed on settled law that invocation of extended limitation requires proof of a positive act of fraud, suppression or misstatement; mere filing deficiencies or absence of particular documents in ER returns do not satisfy that threshold. As the department initiated action on audit records without establishing any deliberate concealment or positive misrepresentation by the appellant, the foundational requirement for invoking the extended period of limitation was absent. [Paras 4, 12, 13, 14]

The Show Cause Notice issued beyond the normal limitation period is barred as the department failed to prove suppression, fraud or a positive act warranting invocation of the extended period.

Final Conclusion: The impugned order of the Commissioner (Appeals) is set aside; the Cenvat credit as distributed to the appellant unit manufacturing Kiwam is held admissible for the periods in dispute, and the Show Cause Notice issued after expiry of the normal limitation period is time barred; appeal allowed.

Dismissal for default - non-prosecution of appeal - power to dismiss appeal for appellant's default under Rule 20 of the CESTAT (Procedure) Rules, 1982 - adjournment discretion of the Appellate Tribunal under Section 35C(1A) of the Central Excise Act, 1944

Dismissal for default - non-prosecution of appeal - power to dismiss appeal for appellant's default under Rule 20 of the CESTAT (Procedure) Rules, 1982 - adjournment discretion of the Appellate Tribunal under Section 35C(1A) of the Central Excise Act, 1944 - Appeal dismissed for non-prosecution/default for failure of the appellant to appear or engage counsel despite adjournment. - HELD THAT: - The appellant failed to appear when the appeal was called on for hearing. Earlier the appellant's counsel informed the Bench of lack of instructions and sought to withdraw; the Bench thereupon issued notice and adjourned the matter to a later date. Despite the adjournment, the appellant neither engaged counsel nor appeared in person. The Tribunal noted the appellant's apparent lack of seriousness in prosecuting an appeal filed in 2012 and applied the relevant procedural provisions. Under the Tribunal's power to grant adjournments (Section 35C(1A) of the Central Excise Act, 1944) and the specific provision dealing with appellant's default (Rule 20 of the CESTAT (Procedure) Rules, 1982), the appeal was held liable to be dismissed for default. The Tribunal exercised its discretion to dismiss the appeal for non-prosecution rather than keep the long-pending appeal pending any further. [Paras 3, 4]

Appeal dismissed under Rule 20 of the CESTAT (Procedure) Rules, 1982 for non-prosecution/default.

Final Conclusion: The appeal was dismissed for default/non-prosecution under Rule 20 of the CESTAT (Procedure) Rules, 1982 after the appellant failed to appear or engage counsel despite adjournment and notice.

Extended period of limitation - reason to believe - formation of reasons to believe recorded in writing - nexus between the material and formation of belief that tax has not been paid - notice under Section 59(2) of the DVAT Act

Extended period of limitation - reason to believe - formation of reasons to believe recorded in writing - nexus between the material and formation of belief that tax has not been paid - Validity of invoking the extended six-year limitation under the proviso to sub section (1) of Section 34 of the DVAT Act for reopening assessment for FY 2011-2012. - HELD THAT: - The Court held that invocation of the extended period is a jurisdictional precondition which requires the Commissioner to form bona fide reasons to believe, recorded in writing, that tax has not been paid due to concealment, omission or failure to disclose material particulars and that such reasons must have a rational nexus with the formation of belief. The intelligence input dated 19.08.2015 was not acted upon until an internal note prepared on 03.08.2017 and approved on 09.10.2017; this delay undermines the respondent's contention that the intelligence report was the trigger. More critically, the Commissioner merely appended his signature to the note without an independent application of mind explaining how the material brought to notice established concealment or non payment of tax by the assessee. The notice issued on 11.10.2017 under Section 59(2) did not inform the assessee that it was issued on the basis of a formed belief of concealment or omission, nor did it bear the Commissioner's independent satisfaction. The Court relied on the coordinate bench's decision in Moral Alloys Pvt. Ltd. as confirming that reasons must be live, relevant and connected to tax non payment; in the absence of such recorded and cognisable reasons, the jurisdictional precondition to invoke the extended limitation was not satisfied. [Paras 8, 9, 10, 11, 13]

Invocation of the extended period was invalid; the assessment orders passed under the extended limitation are set aside.

Final Conclusion: The writ petition is allowed; the impugned assessment orders dated 13.09.2018 (passed under Sections 32/33) for Financial Year (FY) 2011-2012 are set aside for failure by the revenue to record independent, contemporaneous reasons satisfying the jurisdictional requirement for invoking the extended period of limitation.

Liability under Section 141 of the Negotiable Instruments Act - Requirement of specific averment that the person was in charge of and responsible for conduct of the company's business - Quashing of complaint under Section 482 CrPC - High Court's power to consider unimpeachable or incontrovertible evidence to prevent abuse of process - Directors not signatory to cheques and vicarious liability

Liability under Section 141 of the Negotiable Instruments Act - Requirement of specific averment that the person was in charge of and responsible for conduct of the company's business - Directors not signatory to cheques and vicarious liability - Whether the complaint contains the basic averments required to fasten liability on the applicants under Section 141 of the Negotiable Instruments Act. - HELD THAT: - The Court applied the principles in S.M.S. Pharmaceuticals and subsequent authorities to hold that a complaint must specifically aver that, at the time of the offence, the person was in charge of and responsible for the conduct of the company's business; mere office holding as director is insufficient. Examining the complaint as a whole, the Court found categorical averments that accused Nos.2 to 6 (which include the applicants) were directors, were jointly and severally responsible for day to day operations, were involved in the settlement and knew of the consent terms and post dated cheques, and that the annual report (signed by certain directors) acknowledged the settlement. Those averments, read together, satisfy the basic requirement to make out prima facie liability under Section 141 and were therefore sufficient to justify issuance of process. [Paras 19, 21, 22, 23, 25]

The complaint contains prima facie basic averments sufficient to invoke Section 141 against the applicants and to justify issuance of process.

Quashing of complaint under Section 482 CrPC - High Court's power to consider unimpeachable or incontrovertible evidence to prevent abuse of process - Whether, despite the presence of basic averments, the proceedings ought to be quashed because the applicants produced unimpeachable evidence or totally acceptable circumstances showing they could not have been in charge or responsible at the relevant time. - HELD THAT: - The Court recognised that the High Court may, in exceptional cases, quash proceedings notwithstanding basic averments where unimpeachable, incontrovertible evidence or totally acceptable circumstances demonstrate a director could not have been concerned with the issuance of cheques. Applying that test, the Court found the applicants did not place on record unimpeachable documents to substantiate their asserted resignation in October 2018; the statutory notice reply did not advance that stand and instead contested liability on merits. There was therefore no incontrovertible material to conclude prosecution would be an abuse of process. [Paras 17, 18, 24, 26, 27]

No unimpeachable or incontrovertible evidence was shown to warrant quashing; the application under Section 482 CrPC is accordingly dismissed.

Final Conclusion: The application under Section 482 CrPC to quash the complaint was dismissed: the complaint contains prima facie averments satisfying Section 141 NI Act against the applicants, and no unimpeachable evidence was produced to justify quashing the proceedings.

Interpretation of an arbitration clause in a lease agreement - arbitrability of disputes arising from non-renewal of lease - appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act - prima facie test for existence of an arbitration agreement - competence-competence principle - status quo pending arbitral proceedings

Interpretation of an arbitration clause in a lease agreement - arbitrability of disputes arising from non-renewal of lease - prima facie test for existence of an arbitration agreement - competence-competence principle - The dispute arising out of non-renewal of the lease falls within the scope of the arbitration clause and is prima facie arbitrable; the High Court erred in holding otherwise. - HELD THAT: - The Court construed the lease deed as a whole, reading Clause 4(xiii) with Clause 3, and held that the use of the word "shall" and the renewal mechanism indicate that if the lessee complied with the renewal procedure the matter of renewal, including disputes as to renewal/non-renewal, period and quantum of rent, falls within the arbitration clause. Reliance upon the principles in Vidya Drolia & Ors. v. Durga Trading Corporation was applied: courts at the referral stage apply a prima facie test and, except in manifest cases of non-existence or non-arbitrability, the Arbitral Tribunal is the preferred forum to decide questions of arbitrability. The Division Bench's restricted reading - that the arbitration clause could be invoked only after the lessor accepted the lessee's proposal and only in respect of disputes as to period or quantum where acceptance had occurred - was rejected. Consequently, the Court held that the dispute over non-renewal is for the Arbitrator to decide and the High Court erred in setting aside the Section 9 interim order on the ground of absence of an arbitrable dispute. [Paras 15, 16, 17, 18, 19]

The arbitration clause covers the dispute as to renewal/non-renewal and related issues; the High Court's finding of non-arbitrability is set aside and the matter is referable to arbitration.

Appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act - status quo pending arbitral proceedings - An Arbitrator is to be appointed to adjudicate the disputes between the parties and the interim status quo is continued for a limited period. - HELD THAT: - Having concluded that the disputes are arbitrable, the Court exercised its power to appoint an arbitrator to enable the arbitration to proceed. The Court appointed Justice Bhaskar Bhattacharya as Arbitrator and directed expedition of the arbitral proceedings, preferably to be completed within three months from communication of the order. The Court also ordered that the status quo previously granted shall continue for three months or until further orders of the Arbitral Tribunal, whichever is earlier. [Paras 20, 21]

Justice Bhaskar Bhattacharya is appointed as Arbitrator to adjudicate the disputes with a request for completion preferably within three months; the Court's status quo order shall continue for three months or until further orders of the Arbitral Tribunal.

Final Conclusion: The appeals are allowed, the High Court's judgment and order setting aside the Commercial Court's interim protection and dismissing the Section 11 petition are set aside; the disputes are referable to arbitration, an Arbitrator is appointed and the interim status quo is continued for a limited period.

Presumption under Section 139 of the Negotiable Instruments Act - offence under Section 138 of the Negotiable Instruments Act - rebuttal of presumption by preponderance of probabilities - part-payment and indorsement under Section 56 and Section 15 of the Negotiable Instruments Act - duty to disclose receipts in the notice of demand

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by preponderance of probabilities - offence under Section 138 of the Negotiable Instruments Act - Whether the Sessions Court judgment convicting the accused under Section 138 could be sustained and whether the Appellate Court was justified in acquitting the accused on the ground that the complainant had recovered Rs.3,90,000 prior to issuance of the cheque thereby rebutting the presumption under Section 139. - HELD THAT: - The trial court findings show the accused issued cheque No.215535 dated 16.06.2011 and the accused admitted signature and issuance. Exh.42 (letter dated 15.06.2011) is proved by the complainant and admits the accused's liability for Rs.14,72,799 and that the cheque was in discharge of that liability. The cheque was presented and dishonoured; notice (Exh.49) and reply (Exh.53) are on record. The Sessions Court drew presumption under Section 139 and convicted after considering that part recoveries (Rs.40,500 and Rs.3,90,000) were received by the complainant post-dishonour or after filing. The Appellate Court's acquittal rested on a finding that Rs.3,90,000 was recovered prior to issuance of the cheque; however there is no material in the cross-examination or elsewhere establishing the date of that recovery. Reading the complainant's admissions conjunctively shows the recoveries were after issuance/presentation and, in respect of Rs.3,90,000, after filing of the complaint. The accused did not lead defence evidence nor elicit in cross-examination any material to rebut the statutory presumption on the preponderance of probabilities. In these circumstances the presumption under Section 139 was not displaced and the conviction under Section 138 was correctly restored by the High Court.

Appellate Court's acquittal on the basis that Rs.3,90,000 was recovered prior to issuance of the cheque is unjustified; presumption under Section 139 remains attracted and conviction under Section 138 is restored.

Part-payment and indorsement under Section 56 and Section 15 of the Negotiable Instruments Act - duty to disclose receipts in the notice of demand - Effect of part-payments received by the payee/holder (including receipts from third parties) on presentation, maintainability of prosecution and appropriate course of action for holder after part-payment. - HELD THAT: - Where part-payment of the amount represented by a cheque is received before presentation, the holder should indorse on the instrument (or annex a slip) under Section 56 (and as contemplated by Section 15) specifying the amount received and present the cheque for the balance; failure to indorse and presenting the cheque for the original higher amount will ordinarily vitiate a Section 138 prosecution for the full amount. In the present case, the amounts of Rs.40,500 and Rs.3,90,000 were not paid by the drawer but recovered by the complainant from third parties, and those recoveries occurred after presentation/dishonour or after filing; the notice (Exh.49) explicitly disclosed the Rs.40,500 recovery and claimed the balance. Where part-payments are received after dishonour but before notice, a prudent course is to secure a fresh negotiable instrument for the balance or indorse appropriately; where part-payments occur after filing, the offence is already completed and proceedings continue, but any conviction/compensation should account for amounts received by the payee until that time. The source of repayment (whether from the drawer or third parties) is immaterial for accounting the amounts received towards compensation.

Holder must indorse or obtain a fresh instrument when part-payment is received prior to presentation; part-payments received after dishonour/after filing do not per se defeat prosecution but must be considered in assessment of compensation; the practice adopted by the complainant in this case (disclosing Rs.40,500 in the notice and trial court adjusting recoveries in compensation) was appropriate.

Final Conclusion: The Sessions Court's conviction and sentence in Summary Criminal Case No.2816/2011 are restored; the Appellate Court's acquittal is quashed because there was no material to show the Rs.3,90,000 was recovered prior to issuance/presentation of the cheque and the statutory presumption under Section 139 remained unrebutted. The High Court directs that any amounts deposited on account of compensation be paid to the complainant; no order as to costs.

Service of notice under section 138 of the Negotiable Instruments Act - presumption of service under section 27 of the General Clauses Act and section 114 of the Evidence Act - elements of the offence under section 138 of the Negotiable Instruments Act - proof of sending notice by post (postal receipt and cover)

Elements of the offence under section 138 of the Negotiable Instruments Act - service of notice under section 138 of the Negotiable Instruments Act - proof of sending notice by post (postal receipt and cover) - presumption of service under section 27 of the General Clauses Act and section 114 of the Evidence Act - Whether the prosecution under section 138 NI Act could succeed in the absence of proof of service of the statutory notice upon the accused. - HELD THAT: - The offence under section 138 requires proof of (i) issuance of a cheque in discharge of liability, (ii) return of the cheque unpaid, (iii) a notice giving a clear 15 days' time for repayment, and (iv) proof of service of that notice on the accused (paragraph 9). The record here contains no proof of service of the legal notice dated 1st June 2012; the complainant did not produce the postal receipt or postal cover which are necessary to invoke the statutory presumption of service under section 27 of the General Clauses Act and section 114 of the Evidence Act (paragraphs 10 and 13). Reliance on the principle in C.C. Alavi Haji is inapposite without evidence of dispatch and correct addressing, because the presumption of service arises only upon proof of posting in accordance with the rules of evidence. In the absence of such proof the essential statutory requirement of service remained unestablished and the prosecution failed to prove the offence (paragraph 14). [Paras 9, 10, 13, 14, 15]

Conviction and sentence under section 138 NI Act set aside for want of proof of service of the statutory notice; petitioner discharged of liability under his bail bonds and Criminal Revision allowed.

Final Conclusion: The High Court quashed the conviction and sentence under section 138 of the Negotiable Instruments Act for failure to prove service of the statutory notice, discharged the petitioner from his bail bond obligations and allowed the criminal revision; copy of the order to be transmitted to the trial court.

Compounding of offence under Section 138 of the Negotiable Instruments Act - Settlement between accused and complainant as basis for compounding - Quashing of conviction and sentence upon compounding - Exercise of inherent jurisdiction under Section 482 CrPC and Section 147 Negotiable Instruments Act - Compounding fee - retention of deposited amount as fee and refund of balance

Compounding of offence under Section 138 of the Negotiable Instruments Act - Settlement between accused and complainant as basis for compounding - Exercise of inherent jurisdiction under Section 482 CrPC and Section 147 Negotiable Instruments Act - Prayer for compounding the offence punishable under Section 138 of the Negotiable Instruments Act was allowed and consequent quashing of conviction and sentence. - HELD THAT: - The Court examined the application for compounding filed under Section 147 of the Negotiable Instruments Act read with Section 482 CrPC, noting that the parties have amicably settled and the amount due has been paid to the complainant. The complainant affirmed no objection to compounding. Taking into account settlement between the parties and the precedent relied upon by learned counsel, the Court exercised its power to compound the offence. On allowing compounding, the Court set aside and quashed the conviction and sentence imposed by the trial court and affirmed by the appellate court. [Paras 5, 6]

Compounding allowed; conviction and sentence quashed and set aside.

Compounding fee - retention of deposited amount as fee and refund of balance - Refund of excess compounding deposit - Disposition of deposit made for compounding: 25% to be retained as compounding fee and balance to be refunded to the petitioner. - HELD THAT: - The petitioner had deposited an amount with the Himachal Pradesh Legal Services Authority in compliance with an earlier order. The petitioner sought that a part be treated as compounding fee and the excess refunded. Considering the deposit of Rs. 50,000 with the Legal Services Authority and the settlement, the Court directed that 25% of the deposited amount be retained as the compounding fee and the remaining balance be returned to the petitioner/accused. [Paras 3, 5]

Out of the amount deposited with the Legal Services Authority, 25% retained as compounding fee and balance refunded to the petitioner.

Final Conclusion: The petition is allowed; the offence under Section 138 NI Act is compounded on account of amicable settlement, the conviction and sentence are quashed and set aside, 25% of the deposit is retained as compounding fee and the balance is directed to be refunded to the petitioner; pending applications stand disposed of.

Compounding of offence under Section 138 Negotiable Instruments Act - Priority of compensatory remedy over punitive sanctions in cheque-dishonour cases - Exercise of inherent jurisdiction under Section 482 Cr.P.C. to facilitate early compounding - Guidance of Damodar S. Prabhu on early compounding and court's duty to encourage settlement - Temporary restraint on coercive measures pending compounding application

Compounding of offence under Section 138 Negotiable Instruments Act - Priority of compensatory remedy over punitive sanctions in cheque-dishonour cases - Direction to the accused to apply for compounding and to the trial court to consider amicable settlement in light of Damodar S. Prabhu rather than immediate continuation of coercive measures. - HELD THAT: - The High Court declined to quash the complaint outright but accepted the submission that cheque-bounce proceedings are predominantly compensatory in nature and that early compounding should be encouraged. Relying on the reasoning in Damodar S. Prabhu that compounding and settlement ought to be availed of at earlier stages to prevent undue delay and relieve court arrears, the Court directed the accused to move an application for compounding through compromise within one month and allowed a structured opportunity for settlement. The direction embodies the principle that where parties are willing to compound, courts should facilitate early resolution prioritising recovery over punishment, subject to the trial court's application of law and scrutiny of genuineness of compromise.

Accused directed to apply for compounding within one month; trial court to consider such application and facilitate early settlement in accordance with Damodar S. Prabhu.

Exercise of inherent jurisdiction under Section 482 Cr.P.C. to facilitate early compounding - Temporary restraint on coercive measures pending compounding application - Remand to trial court for fresh consideration in accordance with Apex Court guidance - Interim procedural regime and remand to the trial court to act on any compounding application within specified timelines, with prohibition on coercive steps during the prescribed period. - HELD THAT: - Using its supervisory jurisdiction, the High Court prescribed a timetable: appearance before the trial court through counsel within one month, an endeavour period not exceeding four months for compounding efforts, and a direction that the trial court shall pass necessary orders in accordance with the law laid down in Damodar S. Prabhu within three months. During this period (or until decision earlier), no coercive measures shall be adopted against the accused. The Court made clear that if compounding is not effected or if the trial court decides the matter requires trial, the trial court remains free to proceed and take lawful steps to secure attendance. The order remands the substantive consideration of compounding to the trial court for fresh adjudication guided by the Apex Court's principles rather than deciding the merits of compounding itself.

Trial court directed to consider any compounding application and pass orders in conformity with Damodar S. Prabhu within the stipulated timeline; coercive measures stayed during that period; if compounding fails, normal trial process may resume.

Final Conclusion: The petition under Section 482 Cr.P.C. is disposed of by directing the accused to seek compounding within prescribed timelines and by remanding the matter to the trial court to consider and decide any compromise application in accordance with the authoritative guidance in Damodar S. Prabhu; coercive measures are stayed for the limited period, and the trial court may proceed if compounding is not effected.

Presumption under Section 118 of the Negotiable Instruments Act - rebuttable presumption - admission of signature - onus of proof shifts - promissory note as instrument evidencing debt and authority to fill blanks - civil suit for recovery not barred by prosecution under Section 138 of the Negotiable Instruments Act

Presumption under Section 118 of the Negotiable Instruments Act - admission of signature - rebuttable presumption - onus of proof shifts - promissory note as instrument evidencing debt and authority to fill blanks - Validity and execution of the suit promissory note and the plaintiff's entitlement to decree for recovery of the claimed amount. - HELD THAT: - The trial Court found that the appellant did not deny the signature on the promissory note (Ex.A1) though he denied delivering it to the respondent. Admission of signature gives rise to the statutory presumption under Section 118 of the Negotiable Instruments Act that the instrument was executed for valuable consideration and in due course the holder was authorised to fill blanks. That presumption is rebuttable, but the appellant bore the onus to rebut it by preponderance of probabilities. The appellant's defence that the promissory note and cheques were handed to Sri Rajalakshmi Finance and that the respondent was set up was not supported by particulars, dates, rate of interest, payment details, or evidence from independent witnesses. He did not examine any person from the finance company or other independent witnesses to establish his version. In the absence of such evidence the presumption stood unrebutted and the onus shifted to the appellant therefore remained undischarged. Consequently, the trial Court's appreciation of oral and documentary evidence and its decree in favour of the plaintiff were held to be justified. The pendency of a criminal complaint under Section 138 was held not to bar the civil suit for recovery, as the civil remedy and criminal proceedings are distinct. [Paras 11, 12]

The trial Court's finding that the promissory note was duly executed and that the plaintiff is entitled to recovery was affirmed; the appellant failed to rebut the statutory presumption and the decree was confirmed.

Final Conclusion: The civil appeal is dismissed; the judgment and decree of the trial Court are confirmed and the decree-holder's claim for recovery is upheld.

Vicarious liability under Section 141 of the Negotiable Instruments Act - knowledge / mens rea for Section 141 liability - strict construction of penal provision - requirement of specific averments in complaint to fasten criminal liability - quashing of proceedings under Section 482 Cr.P.C.

Vicarious liability under Section 141 of the Negotiable Instruments Act - strict construction of penal provision - requirement of specific averments in complaint to fasten criminal liability - The petitioner is not liable to be punished under Section 141 of the Negotiable Instruments Act. - HELD THAT: - The Court held that Section 141 does not render every director of a company criminally liable; only those persons who, at the time the offence was committed, were in charge of and responsible for the conduct of the business of the company can be held liable. The provision being penal and creating vicarious liability must be strictly construed and cannot be satisfied by a bald or cursory allegation that a director was "in charge of" the company. The complaint did not contain specific averments that the petitioner was at the helm of affairs or actively managed the day-to-day business at the time of the transactions; indeed, the petitioner was inducted as a director only after the death of the Managing Director and authorized signatory. Absent specific allegations and proof that the petitioner was in charge of and responsible for the company's business when the offence occurred, criminal liability under Section 141 cannot be fastened. [Paras 9, 10, 11, 16, 17]

Proceedings against the petitioner under Section 141 are quashed.

Knowledge / mens rea for Section 141 liability - requirement of specific averments in complaint to fasten criminal liability - The petitioner did not have the requisite knowledge of issuance of the impugned cheques and the complaint fails to establish such knowledge. - HELD THAT: - The Court noted that at the time of borrowal and issuance of the post-dated cheques the petitioner was neither a director nor an authorized signatory. On receipt of the statutory notice the petitioner replied denying knowledge of the loan and cheque issuance and stated that he became a director only after his father's death. The respondents did not file any rejoinder denying those averments. Section 141's proviso exempts persons who prove lack of knowledge or that they exercised all due diligence; moreover, allegations of knowledge must be specifically pleaded. In the absence of such specific averments in the complaint and in view of the petitioner's reply which remained uncontroverted, the Court found that the requisite knowledge to fasten liability was not established. [Paras 12, 13, 14, 15]

Proceedings against the petitioner for want of requisite knowledge are quashed.

Final Conclusion: The High Court allowed the Criminal Original Petitions and quashed the complaints insofar as they relate to the petitioner, directing the trial court to proceed against the other accused within six months.