TaxTMI Updates e-Newsletter
Sep 02,2022

Transitional input tax credit - transitional provisions under Section 140 read with Rule 117 - acceptance of TRAN-1 manually or electronically - opening of common portal for filing TRAN-1 and TRAN-2 - verification of genuineness of claim - obligation to comply with judicial directions - reflection of allowed transitional credit in Electronic Credit Ledger

Transitional input tax credit - acceptance of TRAN-1 manually or electronically - obligation to comply with judicial directions - verification of genuineness of claim - Legality of the departmental refusal to process/accept the Petitioner's TRAN-1 pending outcome of a contemplated SLP and the duty of the authority to give effect to earlier court directions permitting filing of TRAN-1. - HELD THAT: - The Court held that the Assistant Commissioner (Opposite Party No.8) could not defer processing or acceptance of the Petitioner's TRAN-1 by relying on an intended administrative action (contemplated SLP). Having earlier directed the authority to permit filing of TRAN-1 electronically or to accept it manually, the High Court required the authority to adhere to that direction and to the subsequent directions of the Supreme Court which ordered opening of the common portal for filing TRAN-1/TRAN-2 for the specified period and laid down the procedure for verification and post-filing scrutiny. The authority remains entitled to verify the genuineness of the claim and pass orders on merits after affording appropriate opportunity, but such verification cannot be used as a pretext to refuse compliance with judicial directions allowing filing. The Court therefore directed the Assistant Commissioner to comply with the earlier High Court order and the Supreme Court's directions concerning filing, verification, and subsequent reflection of allowed transitional credit in the Electronic Credit Ledger.

The departmental stand to withhold processing/acceptance of TRAN-1 pending the outcome of a contemplated SLP was disapproved; the authority is directed to comply with the High Court order and the Supreme Court directions and to process/permit filing and thereafter verify the claim in accordance with law.

Final Conclusion: Writ petition disposed directing the Assistant Commissioner to adhere to the High Court's earlier direction and the Supreme Court's orders regarding opening of the portal/acceptance of TRAN-1 and consequent verification and credit entry; urgent certified copy to be issued.

Regular bail - economic offences and bail jurisprudence - necessity of further custody where documentary evidence is seized - conditional bail with monetary deposit - automatic cancellation of bail on default of condition - personal bond and ancillary bail conditions

Regular bail - economic offences and bail jurisprudence - necessity of further custody where documentary evidence is seized - Applicant entitled to regular bail - HELD THAT: - The Court exercised its discretion to grant regular bail despite allegations of a grave economic offence. The respondent department did not satisfy the Court that further custody of the applicant was necessary; the case primarily rests on documentary material which has been seized and is in departmental custody, and no show cause notice fixing liability has been issued after filing the complaint. The Court noted the applicant's willingness to make a substantial deposit and relied on the principle that even in grave economic offences bail is not to be routinely denied but must be considered on the facts of each case, including securing the accused's presence for trial, as exemplified by the cited authority. On these facts the Court found grounds to release the applicant on bail. [Paras 7, 8]

Grant of regular bail to the applicant

Conditional bail with monetary deposit - automatic cancellation of bail on default of condition - personal bond and ancillary bail conditions - Bail subject to specified conditions including deposit and consequences of default - HELD THAT: - The Court imposed conditions to secure compliance and attendance: the applicant is to execute a personal bond with surety and comply with ancillary conditions including surrender of passport, restrictions on travel, furnishing and not changing address without permission, and not misusing liberty. A monetary condition was imposed that the applicant shall deposit Rs.2 crores with the designated departmental office within six months in six equal installments and file an undertaking; the department is directed to accept the deposit. The Court provided that failure to deposit or missing any installment will automatically cancel the bail, and that the Sessions Judge may take appropriate action on breach or may modify the conditions in accordance with law. The order to deposit and the automatic cancellation provision are integral conditions of the bail granted. [Paras 7, 8, 9]

Bail granted subject to the enumerated conditions including the deposit obligation and automatic cancellation on default

Final Conclusion: Bail application allowed; applicant released on regular bail on execution of personal bond and compliance with specified conditions, including deposit of the directed amount within the stipulated period, failure of which will result in automatic cancellation of bail.

Remand under Section 167 of the Cr.P.C. - police custody after expiry of fifteen days - first remand - investigating agency's statutory right to investigate - distinction between refusal of police remand and remand to judicial custody

Remand under Section 167 of the Cr.P.C. - police custody after expiry of fifteen days - first remand - investigating agency's statutory right to investigate - distinction between refusal of police remand and remand to judicial custody - Validity of an order remanding the accused to police custody by the Sessions Judge after the initial fifteen-day period from arrest had expired where the Magistrate had earlier refused police remand and had not remanded the accused even to judicial custody. - HELD THAT: - The Court examined Section 167 of the Cr.P.C., observing that a Magistrate may remand an accused to police or judicial custody and that an initial remand period is limited to fifteen days in the whole. However, the Court emphasised the statutory right of the Investigating Agency to investigate offences diligently and held that this right cannot be nullified where the investigating agency has acted promptly but the competent court(s) have not decided the remand application within the initial fifteen days. The Court distinguished the Coordinate Bench decision in Kantibhai Devsibhai Patel on the factual ground that, in that case, the accused had been remanded to judicial custody (thus starting the fifteen-day period from first remand), whereas in the present case the learned Magistrate had denied any remand (neither police nor judicial), leaving the accused in custody without remand. In such peculiar circumstances, the completion of fifteen days from arrest without any earlier remand does not create an absolute bar on subsequent police remand; allowing otherwise would unjustifiably impair the Investigating Agency's ability to investigate, enable accused persons to frustrate investigation, and defeat the purpose of Section 167. Applying these principles to the facts, the Court found no illegality in the Sessions Judge's order granting seven days' police remand despite the order coming after fifteen days from arrest, because the Investigating Officer had acted without delay and the initial fifteen-day period had not been effectively invoked by a prior remand order. [Paras 15, 17, 20, 22]

The Sessions Judge's order granting seven days' remand is lawful and is upheld.

Final Conclusion: The Special Criminal Application is dismissed; the order of the Sessions Judge granting seven days' remand is upheld and the earlier interim relief is vacated.

Pre-deposit under section 35F of the Central Excise Act - utilisation of electronic credit ledger (ECRL) - Section 41 of the CGST Act - restriction to payment of self-assessed output tax - binding precedent of High Court over Tribunal

Pre-deposit under section 35F of the Central Excise Act - utilisation of electronic credit ledger (ECRL) - Section 41 of the CGST Act - restriction to payment of self-assessed output tax - binding precedent of High Court over Tribunal - Whether the mandatory pre-deposit required under section 35F of the Central Excise Act can be made by debiting the Electronic Credit Ledger maintained under the CGST Act. - HELD THAT: - The Tribunal examined the interplay between the erstwhile Excise pre-deposit requirement and the GST credit regime. Section 41 of the CGST Act confines utilisation of credit in the electronic Credit Ledger to payment of self-assessed output tax. The Tribunal relied upon the Orissa High Court decision in Jyoti Construction which interpreted section 41 (and its proviso) as precluding debiting the ECRL for making pre-deposit required for filing an appeal under the GST framework; that reasoning was treated as binding on the Tribunal. The interim order of the Tribunal in Dell International was identified as not displacing the High Court view, and other cited authorities concerning debit from erstwhile CENVAT registers were held inapplicable to the present facts where the deposit was attempted via the GST electronic credit ledger. On this basis the Tribunal concluded that the defect of non-payment of mandatory pre-deposit was not cured by the appellant's reversal entry in the ECRL, and therefore payment by debiting the electronic Credit Ledger cannot be accepted as compliance with section 35F of the Excise Act. The Tribunal nevertheless granted the appellant four weeks to make the mandatory pre-deposit by an acceptable mode to remove the defect. [Paras 18, 19, 20, 21, 22]

Mandatory pre-deposit under section 35F of the Excise Act cannot be made by debiting the Electronic Credit Ledger under the CGST Act; the defect is not cured, but the appellant is granted four weeks to make the mandatory pre-deposit.

Final Conclusion: The Tribunal held that payment of the mandatory pre-deposit required under section 35F of the Central Excise Act cannot be effected by debiting the Electronic Credit Ledger under the CGST Act (in view of section 41 and the binding High Court decision), accordingly the pre-deposit made by reversing CGST credit did not cure the defect; the appellant was, however, afforded four weeks to make the required pre-deposit by an acceptable mode.

Immunity from penalty and prosecution under Section 245H(1) - full and true disclosure - cooperation with the Settlement Commission in the proceedings - spirit of settlement - maintenance of books of account under Section 44AA - quashing of part of the Settlement Commission's order

Immunity from penalty and prosecution under Section 245H(1) - full and true disclosure - cooperation with the Settlement Commission in the proceedings - spirit of settlement - maintenance of books of account under Section 44AA - Validity of the Settlement Commission's grant of partial immunity from penalty under Section 245H(1) where the Commission itself recorded lack of full and true disclosure, absence of acceptable cooperation and deliberate non-maintenance of books of account. - HELD THAT: - The High Court examined the Settlement Commission's findings recorded in paragraph 29 that the applicant had not made full and true disclosure, that discrepancies were found in impounded records showing higher actual receipts, that the authorised representative could not reconcile mismatches and admitted error, and that the respondent deliberately failed to maintain books of account as required by Section 44AA. Those findings were held to be inconsistent with the statutory preconditions for immunity under Section 245H(1), which empowers the Commission to grant immunity only when satisfied that the applicant cooperated and made a full and true disclosure in the proceedings. The Court observed that granting immunity despite such recorded adverse findings is contrary to the spirit and object of the settlement scheme in Chapter XIX-A and cannot be sustained. On that basis the Court concluded that the part of the Settlement Commission's order conferring partial immunity from penalty was legally unsustainable. [Paras 29]

The order of the Settlement Commission dated 2nd September, 2016 is quashed insofar as it granted partial immunity from penalty under Section 245H(1); consequential legal effects shall follow.

Final Conclusion: Writ petition allowed in part: the Settlement Commission's order granting partial immunity from penalty under Section 245H(1) is quashed in view of its own findings of non-disclosure, lack of acceptable cooperation and deliberate default in maintaining books of account for the specified assessment years; consequential legal consequences will follow.

Reopening of assessment under section 148 - reason to believe - change of opinion - insight portal information as fresh material - approval under section 151 - judicial review under Article 227

Reopening of assessment under section 148 - reason to believe - Validity of notices issued under section 148 for assessment years 2016-2017 and 2017-2018. - HELD THAT: - The Court applied the settled principle that at the stage of issuance of a notice under section 148 the Assessing Officer must have a "reason to believe" - a subjective satisfaction based on relevant material assessed objectively - but need not have finally or conclusively established escapement of income. Relying on the test explained in Rajesh Jhaveri Stock Brokers P. Ltd., the High Court held that the question is whether there was material on which a reasonable person could form the requisite belief; the ultimate correctness of that material is for the reassessment process and not for preliminary judicial interference. On the facts, the notices disclosed the basis for reopening and therefore were not vitiated for want of "reason to believe." [Paras 8, 11, 13]

Notices under section 148 were validly issued and the challenge thereto is rejected.

Insight portal information as fresh material - change of opinion - Whether the "insight portal" information constituted fresh material justifying reopening, as distinct from mere change of opinion. - HELD THAT: - The Court found that the Assessing Officer did not possess the "insight portal" information at the time of the original scrutiny and assessment, and that the material subsequently received constituted new information capable of giving rise to a reason to believe that income had escaped assessment. Mere change of opinion is impermissible, but where the authority comes into possession of material not earlier available (here, insight portal details indicating the nature of transactions), reopening is permissible. Whether the assertions in the insight portal are ultimately sustained is a matter for the reassessment process. [Paras 9, 11]

The insight portal material was treated as fresh material and not merely a change of opinion; it justified issuance of the reopening notices.

Approval under section 151 - Whether the sanction/approval under section 151 was accorded without due application of mind. - HELD THAT: - The Court examined the reasons and noted that the approval order recited the same basis (insight portal information) relied upon for reopening. On objective assessment of the material placed before the sanctioning authority, the Court concluded that there was application of mind and that the approval could not be invalidated on the ground alleged by the petitioner. The Court rejected the contention that sanction was perfunctory or lacked consideration. [Paras 10]

The approval under section 151 was given after due application of mind and is not vitiated.

Judicial review under Article 227 - Whether the High Court should exercise its supervisory jurisdiction under Article 227 to substitute its own decision for that of the Assessing Officer in the reassessment initiation. - HELD THAT: - The Court reiterated the limited scope of judicial interference under Article 227, noting that it must not usurp the decision-making function of the statutory authority except in exceptional circumstances and with cogent reasons. There were no exceptional circumstances here; the material and reasons for reopening were placed before the authority and considered. The High Court therefore declined to substitute its view for that of the Assessing Officer and held that correctness of the material is a matter for the reassessment proceedings rather than for preliminary quashing under Article 227. [Paras 12]

Extraordinary interference under Article 227 was not warranted and the Court would not take over the authority's decision-making function.

Final Conclusion: The Special Civil Applications are dismissed; the impugned orders dated 9.3.2022 and 17.8.2021 are affirmed and the rule is discharged.

Revenue expenditure - capital expenditure - incidental revenue expenditure on taking leased premises - registration under the Registration Act for leases exceeding one year - no universal formula for revenue v. capital classification; facts to govern

Revenue expenditure - capital expenditure - incidental revenue expenditure on taking leased premises - registration under the Registration Act for leases exceeding one year - Expenditure incurred towards stamp duty and registration charges on a long-term lease held to be revenue expenditure and allowable to the assessee - HELD THAT: - The lessee had taken premises by a written lease for 29 years and 11 months with rent payable monthly; statutory law requires registration of leases exceeding one year and ad valorem stamp duty is payable. The payment of stamp duty and registration charges arose because the assessee took the premises on lease and were incidental to the revenue nature of monthly rent payments. While prior authorities show divergent approaches and the Supreme Court has emphasised that no universal formula exists and each case turns on its facts, on the material before the Court the expenditure was held to be in the nature of revenue and not capital. Consequently the appeal against the assessing authorities and appellate orders was allowed on this ground. [Paras 12]

Stamp duty and registration charges paid in connection with the lease were revenue expenditure; the assessee's appeal is allowed on this point.

Final Conclusion: The appeal is allowed: the expenditure towards stamp duty and registration charges paid in respect of the lease for the Assessment Year 2010-11 is held to be revenue expenditure; the subsidiary question on depreciation/amortization does not survive.

Fair market value of capital asset - cost of acquisition for computation of capital gains - stamp duty valuation versus open market value - cost of improvement / expenditure on development of land - evidentiary value of self-made vouchers and cash payments - prohibition on cash receipts in immovable property transactions under section 269SS - levy of penalty for contravention and requirement of recorded satisfaction before initiating penalty proceedings

Fair market value of capital asset - cost of acquisition for computation of capital gains - stamp duty valuation versus open market value - Admissibility and quantum of the fair market value to be adopted as cost of acquisition as on 1/4/1981 for computation of capital gains - HELD THAT: - The Tribunal found no conclusive contemporaneous evidence before either the Assessing Officer or the first appellate authority establishing the fair market value as on 1/4/1981. The Registration and Stamps Department's stamp-duty figure for 1/4/1981 produced by the Department could not displace the need for a fair market value that the asset would fetch in the open market. In absence of any valuation from either party and without a reference to the DVO, the CIT(A)'s estimate adopting Rs. 350 per sq. yd. based on the Joint Sub-Registrar's 17/2/1987 certification was held to be a reasonable pragmatic estimate, having regard to the property's location within Rajahmundry municipal limits and proximity to RTC Complex. The Tribunal emphasised that stamp-duty values are not synonymous with fair market value as defined in the statute and that, on the material before it, no interference with the CIT(A)'s estimation was warranted. [Paras 8]

Estimate adopted by the CIT(A) of Rs. 350 per sq. yd. as cost of acquisition is reasonable; grounds 2 and 3 of Revenue's appeal dismissed.

Cost of improvement / expenditure on development of land - evidentiary value of self-made vouchers and cash payments - Allowability and quantum of deduction for expenditure on development of land where payments were partly in cash and evidenced by self-made vouchers - HELD THAT: - The Tribunal recorded that the Revenue did not deny that development works had been carried out; its objection related to the genuineness and quantum because many payments were in cash and supported by self-made vouchers. The CIT(A) examined the material, including inspection report, and formed the view that Rs. 2,000 per sq. yd. was a reasonable estimate of development cost (instead of Rs. 400 per sq. yd. adopted by AO), allowing deduction accordingly. The Tribunal found the CIT(A)'s estimation to be justified on the record and the AO had not produced material to disprove the assessee's evidence; mere payments in cash and presence of self-made vouchers did not, on the facts, warrant disallowance of the assessed portion of the claim. [Paras 10, 11]

CIT(A)'s estimate of development cost at Rs. 2,000 per sq. yd. and corresponding deduction is upheld; grounds 4, 5 and 6 of Revenue's appeal dismissed.

Prohibition on cash receipts in immovable property transactions under section 269SS - levy of penalty for contravention and requirement of recorded satisfaction before initiating penalty proceedings - Sustainability of penalty under section 271D for receipt of cash in relation to immovable property (contravention of section 269SS) and requirement of recorded satisfaction for initiation of penalty proceedings - HELD THAT: - The Tribunal noted that section 269SS (as amended w.e.f. 1/6/2015) prohibits receipt of specified sums in cash in relation to immovable property transactions. On the facts, however, the Tribunal found that the cash receipts were recorded in sale deeds and subsequently deposited into bank account and that capital gains were offered to tax; accordingly there was no suppression of receipts. Further, the Tribunal observed that the Assessing Officer had not recorded the requisite satisfaction for initiating penalty proceedings and, following the Supreme Court ratio in the cited authority, concluded that penalty proceedings initiated without such recorded satisfaction cannot be sustained. Applying these principles, the Tribunal quashed the penalty imposed by the JCIT and declined to interfere with the CIT(A)'s decision. [Paras 21, 23, 24]

Penalty under section 271D quashed: cash receipts recorded in sale deeds and deposited, and absence of recorded satisfaction to initiate penalty proceedings rendered the penalty unsustainable; Revenue's appeal dismissed.

Final Conclusion: Both Revenue appeals dismissed and the assessee's cross-objections rendered infructuous and dismissed; the CIT(A)'s decisions on valuation for cost of acquisition, allowance for development expenditure, and quashing of penalty were upheld.

Reopening of assessment - change of opinion - reasons to believe - tangible material - escapement of income - scope of reasons recorded

Reopening of assessment - change of opinion - reasons to believe - escapement of income - Validity of reopening assessment under Section 147/148 when the reasons rely on materials already available during original assessment proceedings. - HELD THAT: - The Tribunal examined whether the notice under Section 148/147 was sustainable where the reasons recorded relied upon the audit report and other materials that were part of the record at the time the assessment under Section 143(3) was framed. Applying the principle that reassessment cannot be a device to review an opinion already formed, the Tribunal followed the Supreme Court's requirement that reopening must be based on "tangible material" showing escapement of income and not on mere change of opinion. The Tribunal also applied the instructive observations from Hindustan Lever regarding the necessity for the reasons recorded to disclose which material facts were not disclosed by the assessee and to manifest the Assessing Officer's mind. Finding that the same material had been considered in the original assessment and no new substantive material was placed before the AO when reasons were recorded, the Tribunal concluded that the reopening amounted to a prohibited change of opinion and thus was invalid. [Paras 6, 8]

Reopening of assessment quashed as based on mere change of opinion; action under Section 147/148 held invalid.

Final Conclusion: The order of the Commissioner (Appeals) quashing the reassessment was upheld and the revenue's appeal is dismissed.

Condonation of delay for filing appeals - search and seizure assessment under section 153A - reliance on statement recorded under section 132(4) - taxation of net profit and not gross receipts - estimation of income from undisclosed turnover - allowance for unaccounted expenditure seized during search - application of average net profit percentage to unaccounted turnover

Condonation of delay for filing appeals - Whether the delay of 31 days in filing the appeals before the Tribunal should be condoned. - HELD THAT: - The assessee explained the delay by reference to office shifting and non-receipt of the CIT(A)'s order due to change of address; affidavits supporting this explanation were placed on record. On consideration of the submissions and the affidavits, the Tribunal found the cause for delay to be sufficient and reasonable and exercised its discretion to condone the delay, enabling adjudication on merits. [Paras 2]

Delay of 31 days condoned and appeals admitted for adjudication on merits.

Taxation of net profit and not gross receipts - estimation of income from undisclosed turnover - reliance on statement recorded under section 132(4) - allowance for unaccounted expenditure seized during search - application of average net profit percentage to unaccounted turnover - Whether the Assessing Officer could tax the entire undisclosed turnover as income merely by relying on admissions in the statement recorded under section 132(4) without estimating profit and allowing unaccounted expenditure, and if not, the correct method of assessment. - HELD THAT: - The Tribunal found there was no dispute as to the existence of unaccounted turnover but emphasised that tax is on income (profit) and not on gross receipts. The AO had taxed amounts equivalent to admissions recorded in the MD's statement without giving deduction for unaccounted expenditure reflected in the seized material. The Tribunal followed precedent that additions in respect of suppressed sales should be confined to an estimate of gross profit on such sales rather than the entire sales figure. Noting that the assessee's declared net profit on accounted turnover averaged 8.18% for the years under consideration and that unaccounted expenditure was available in seized material, the Tribunal held that the same net profit percentage ought to be applied to the unaccounted turnover to estimate taxable income. For these reasons the Tribunal set aside the orders of the revenue authorities and allowed the appeals. [Paras 7, 8, 9, 10, 11]

Entire undisclosed turnover cannot be taxed; taxable income to be estimated by applying the assessee's average declared net profit (8.18%) to unaccounted turnover after allowing relevant unaccounted expenditure; appeals allowed and revenue orders set aside.

Final Conclusion: The Tribunal condoned the delay in filing the appeals and on merits set aside the revenue orders, holding that the Assessing Officer erred in taxing undisclosed turnover as entire income; taxable income is to be estimated by applying the assessee's average net profit percentage (8.18%) to the unaccounted turnover, with allowance for unaccounted expenditure, and accordingly all six appeals are allowed.

Reopening assessment under section 147 of the Income-tax Act - unexplained investments treated as unexplained money under section 69A - onus on assessee to substantiate sources of investment and unexplained credits - remand for de novo assessment - admission of evidence under Rule 46A of the Income-tax Rules

Remand for de novo assessment - onus on assessee to substantiate sources of investment and unexplained credits - admission of evidence under Rule 46A of the Income-tax Rules - reopening assessment under section 147 of the Income-tax Act - Whether the matter should be restored to the file of the Assessing Officer for de novo adjudication. - HELD THAT: - The Tribunal observed that the case was reopened under section 147 on the basis of AIR information regarding investments in mutual funds and that material relevant to explanation of sources (including an ICICI bank statement filed before the appellate authority under Rule 46A) was not placed before the AO. The assessee asserted that investments were from earlier maturities and past savings and sought an opportunity to place cogent evidence; the Revenue raised no objection to restoration. The Tribunal held that the primary onus to substantiate the source of investments and cash credits lies on the assessee and that if cogent evidence is not produced, Revenue is entitled to bring unexplained credits and investments to tax. In the circumstances and in the interest of adjudicating the correct taxable income for the correct assessment year, the Tribunal restored the matter to the file of the AO for de novo assessment, directing that the AO admit and adjudicate the evidence/ explanations tendered by the assessee and afford adequate opportunity of being heard; the Tribunal expressly did not decide the merits and kept all contentions open.

Matter restored to the Assessing Officer for de novo assessment; all contentions kept open and evidence to be admitted and adjudicated in accordance with law.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the appellate order and restoring the case to the file of the Assessing Officer for de novo assessment in respect of AY 2005-06; merits not decided and parties to be afforded opportunity to produce and have evidence adjudicated.

Jurisdiction under section 263 requires the order to be erroneous and prejudicial to the interest of Revenue - Exercise of revisionary power under section 263 where an appeal is pending (Explanation 1 clause (c)) - Sufficiency of inquiry by the Assessing Officer and effect of non-mention in assessment order

Sufficiency of inquiry by the Assessing Officer and effect of non-mention in assessment order - Jurisdiction under section 263 requires the order to be erroneous and prejudicial to the interest of Revenue - Validity of the order under section 263 insofar as it set aside the assessment on account of alleged non-production/examination of sale deeds and alleged unexplained difference in land purchase amounts. - HELD THAT: - The Tribunal found that the Assessing Officer had inquired into purchase of land, required the assessee to furnish details in a specified format and was furnished with sale deed registry amounts together with development and other expenses. The break-up submitted to the Assessing Officer, including registry amounts, stamp duty and development expenses, when aggregated, reconciled with the ledger entries. The Pr. CIT misconstrued the difference by ignoring development and other expenses and committed a calculation error. The Assessing Officer had also called for and examined vouchers/bills for site development and stamp duty and recorded verification in the order sheet. Applying the settled principle that jurisdiction under section 263 can be exercised only if the assessment order is both erroneous and prejudicial to the revenue, and that mere non-mention in the assessment order does not prove lack of enquiry, the Tribunal concluded that the Assessing Officer's order was neither erroneous nor prejudicial in this respect and the Pr. CIT's exercise of power under section 263 on this ground was unjustified.

Order under section 263 quashed insofar as it set aside the assessment on the ground of alleged non-production/examination of sale deeds and alleged difference in land purchase amounts; the Assessing Officer's order on this issue is upheld.

Sufficiency of inquiry by the Assessing Officer and effect of non-mention in assessment order - Jurisdiction under section 263 requires the order to be erroneous and prejudicial to the interest of Revenue - Validity of the order under section 263 insofar as it set aside the assessment in relation to site wages, development expenses and lease rent (including allegation of non-deduction of TDS). - HELD THAT: - The Tribunal recorded that the Assessing Officer had specifically required ledger accounts and proofs of lease rent, site wages and development expenses and that the assessee had filed ledger copies and vouchers in response. The order sheet entries recorded that these documents were produced and checked. Reliance was placed on authorities that where the Assessing Officer has made enquiries and accepted the explanation, the Commissioner cannot invalidate the assessment merely because the assessment order does not elaborate each enquiry. Given that enquiries were made and documentary evidence was examined, the Tribunal held that the assessment was not shown to be erroneous or prejudicial to revenue and that invocation of section 263 on these grounds was unsustainable.

Order under section 263 quashed insofar as it set aside the assessment on account of site wages, development expenses and lease rent; the Assessing Officer's findings on these items are sustained.

Exercise of revisionary power under section 263 where an appeal is pending (Explanation 1 clause (c)) - Applicability of Explanation 1(c) to section 263 where an appeal was pending before the CIT(A) on certain additions. - HELD THAT: - The Tribunal noted that Explanation 1(c) bars exercise of jurisdiction under section 263 where an appeal is pending before the CIT(A) only insofar as the matters in the appeal correspond to the matters sought to be revised. The assessee conceded that the appeal before the CIT(A) did not relate to the specific issues on which the Pr. CIT invoked section 263. Accordingly, Explanation 1(c) was inapplicable to those issues and the Tribunal rejected the ground that the order was void ab initio on that basis.

Explanation 1(c) to section 263 does not preclude the Pr. CIT from exercising jurisdiction in respect of issues which were not the subject matter of the pending appeal before the CIT(A); the ground alleging bar under Explanation 1(c) is rejected.

Condonation of delay in filing appeal - Condonation of delay in filing the appeal to the Tribunal. - HELD THAT: - The Tribunal considered the assessee's application, supported by affidavit, stating lockdown-related office closures and subsequent ill-health of counsel as sufficient cause for delay. The Revenue had no objection. Finding the reasons plausible, the Tribunal exercised its discretion to condone the delay and heard the appeal on merits.

Delay in filing the appeal of 92 days is condoned and the appeal is admitted for hearing.

Final Conclusion: The appeal is partly allowed: the Tribunal quashed the Pr. CIT's exercise of jurisdiction under section 263 in respect of (i) alleged non-production/examination of sale deeds and reconciliation of land purchase amounts, and (ii) site wages, development expenses and lease rent, holding that the Assessing Officer had made sufficient enquiries and the assessment was not shown to be erroneous or prejudicial to revenue; the Pr. CIT's action on other unargued objections is upheld. Delay in filing the appeal was condoned.

Penalty under section 271(1)(c) - show cause notice specifying limb - ambiguity in initiation vitiates penalty proceedings - obligation to arrive at satisfaction at time of initiation

Penalty under section 271(1)(c) - show cause notice specifying limb - ambiguity in initiation vitiates penalty proceedings - Validity of penalty imposed under section 271(1)(c) where the notice and penalty order retained both limbs (concealment of income and furnishing inaccurate particulars) without striking off the inappropriate limb. - HELD THAT: - The Tribunal found from the assessment and penalty records that the A.O. initiated and imposed penalty while retaining both limbs of section 271(1)(c) - concealment of particulars of income and furnishing inaccurate particulars of income - and did not indicate which limb had been selected. The penalty notice under section 274 read with section 271(1)(c) reproduced language suggesting both alternatives and the penalty order similarly treated both limbs, demonstrating an absence of satisfaction as to the precise limb invoked. Reliance was placed on the decision of the Bombay High Court in Ganga Iron & Steel Trading Co. which held that a show cause notice that does not specify whether the allegation is concealment of particulars or furnishing inaccurate particulars vitiates the proceedings. Applying that principle, the Tribunal held that issuance of an ambiguous show cause notice and imposition of penalty without specifying and arriving at satisfaction as to the appropriate limb is legally impermissible and vitiates the penalty proceedings. The Tribunal therefore did not examine the merits of concealment or inaccuracy but quashed the penalty on this legal ground. [Paras 4, 6]

Penalty under section 271(1)(c) set aside and A.O. directed to delete the penalty as the initiation and notice were ambiguous for failing to specify the limb of section 271(1)(c).

Final Conclusion: The Tribunal allowed the appeal on the sole legal ground that the show cause notice and penalty order were ambiguous in retaining both limbs of section 271(1)(c) without specifying the appropriate limb or recording requisite satisfaction at initiation, and directed deletion of the penalty.

Error apparent on the face of the record - jurisdiction of review - reformulation of substantial question of law after hearing - exemption under section 10B of the Income Tax Act - beneficial construction of exemption provisions

Error apparent on the face of the record - reformulation of substantial question of law after hearing - jurisdiction of review - Whether the review application disclosed an error apparent on the face of the record by reason of the court having reformulated a substantial question of law after hearing without affording the parties an opportunity to address the reformulated question. - HELD THAT: - The court examined the scope of review under Order 47 Rule 1 CPC and the settled principle that review is confined to correcting an error apparent on the face of the record and is not a rehearing or an appeal. It recorded that the substantial question of law which the court ultimately framed had been argued by the parties at the hearing of the appeal and that the judgment of 30.09.2021 dealt with the issues raised. Relying on the principle that mere repetition of grounds or a request for rehearing is not a ground for review, the court concluded there was no mistake or error apparent warranting review. The review applicant's contention that opportunity was not afforded in respect of the reformulated question was negatived because the court found the substance of that question had been canvassed during the appeal hearing and dealt with in the judgment. [Paras 8, 9, 10, 11]

Review dismissed as there was no error apparent on the face of the record arising from the reformulation of the substantial question of law.

Exemption under section 10B of the Income Tax Act - beneficial construction of exemption provisions - Whether the impugned judgment failed to consider or erroneously applied authorities concerning interpretation of exemption provisions and the definition of "manufacture" for grant of exemption under section 10B. - HELD THAT: - The review applicant alleged non-consideration or misapplication of precedents and argued that a beneficial construction should have been applied to the exemption under section 10B and that the earlier definition of "manufacture" should have continued to apply. The court observed that the contentions regarding precedents and construction were raised and noted in the appeal proceedings and that the judgment had considered the submissions. The court reiterated that disagreement with the outcome on grounds already argued does not establish an error apparent; accordingly, the claimed conflicts with Supreme Court decisions and previous division-bench decisions did not furnish a ground for review. [Paras 6, 10, 11]

Contentions about misapplication or non-consideration of authorities and about construction of the exemption were not accepted as constituting an error apparent; review dismissed.

Final Conclusion: The review application is dismissed on the ground that no error apparent on the face of the record has been demonstrated; the court concluded that the reformulated question was within the scope of matters argued and the judgment of 30.09.2021 dealt with the issues, so review is not maintainable.

Writ jurisdiction - Alternative efficacious remedy - Disputed questions of fact - Tax deduction at source under Section 194J - Penalty under Section 201 - Interim relief pending appeal

Writ jurisdiction - Alternative efficacious remedy - Disputed questions of fact - Tax deduction at source under Section 194J - Penalty under Section 201 - Petitioner's challenge under Article 226 to penalty imposed under Section 201 is not maintainable because disputed questions of fact are involved and an alternative efficacious statutory remedy by appeal is available. - HELD THAT: - The Court examined whether the relationship between the college and Guest Faculty Lecturers falls within professional/technical services under Section 194J and whether the penalty under Section 201 could be assailed in writ jurisdiction. It held that determination of the true nature of the relationship requires resolution of disputed questions of fact which must be left to the adjudicatory authorities under the Income-tax Act. Where such disputed factual issues exist and an effective statutory appeal remedy is available, exercise of writ jurisdiction is inappropriate. The court found no apparent jurisdictional error in the assessing officer's order and declined to invoke exceptions to the rule against interference in writ jurisdiction. [Paras 7, 8]

Writ petitions dismissed on merits for want of maintainability; petitioner directed to avail appeal remedy under Section 246.

Interim relief pending appeal - Alternative efficacious remedy - Continuation of interim protection and direction to file appeal within a limited period. - HELD THAT: - Noting that an interim order had been earlier granted, the Court continued the interim protection for a limited period to enable the petitioner to file an appeal under the Income-tax Act. The continuance was expressly limited to affording the petitioner opportunity to approach the appellate authority and was not intended to influence the appellate decision; the appellate forum remains free to consider admission and interim relief on its own merits. The Court also clarified that if no appeal is filed within the stipulated period, Revenue may execute the assessment order. [Paras 9]

Interim order extended for 45 days to permit filing of appeal; if no appeal is filed, Revenue may execute the impugned order.

Final Conclusion: Writ petitions challenging imposition of penalty under Section 201 were dismissed as not maintainable because disputed factual questions concerning applicability of Section 194J require adjudication in the statutory appeal; interim protection was extended for 45 days to enable the petitioner to file the appeal, failing which Revenue may execute the order.

Natural justice - reopening of assessment under section 148 - procedure under section 148A(d) - disclosure in return and Form 26AS - penalty under section 271D and settlement under Direct Tax Vivad Se Vishwas Act, 2020

Reopening of assessment under section 148 - procedure under section 148A(d) - disclosure in return and Form 26AS - Validity of the notice issued under section 148 and the order passed under section 148A(d) dated 30th July, 2022 in respect of AY 2017-18 - HELD THAT: - The Court found that the Assessing Officer's order under Section 148A(d) did not consider the petitioner's contention that the sale consideration of Rs.56,00,000/- had already been disclosed in the return of income and was reflected in Form 26AS, and that this disclosure had been recognised in an earlier penalty order. The show cause notice under Section 148A(b) did not allege non-accountal of the sale consideration, yet the order under Section 148A(d) proceeded on different grounds without examining the petitioner's documented replies and supporting records. For these reasons the impugned notice and order were set aside and the matter remanded to the Assessing Officer for fresh decision after proper consideration of the petitioner's disclosures and supporting documents. [Paras 7]

Impugned notice under section 148 and order under section 148A(d) set aside; matter remanded to Assessing Officer for fresh decision in accordance with law.

Natural justice - disclosure in return and Form 26AS - penalty under section 271D and settlement under Direct Tax Vivad Se Vishwas Act, 2020 - Procedure to be followed on remand and liberty to the petitioner to file additional material - HELD THAT: - In the interest of ensuring effective adjudication and fair opportunity, the Court granted the petitioner liberty to file an amended or additional reply to the notice under Section 148 within four weeks. Thereafter the Assessing Officer was directed to pass an order under Section 148A(d) within four weeks, taking into account the petitioner's submissions, the Form 26AS, the income-tax return, and the earlier penalty/settlement records. The Court left the substantive rights and contentions of the parties open for fresh consideration by the Assessing Officer. [Paras 8]

Petitioner permitted to file amended/additional reply within four weeks; Assessing Officer to pass fresh order under Section 148A(d) within four weeks thereafter.

Final Conclusion: Writ petition allowed in part: the notice dated 30th July, 2022 under Section 148 and the order dated 30th July, 2022 under Section 148A(d) are set aside and the matter is remitted to the Assessing Officer for fresh decision after allowing the petitioner to file additional/amended replies; other rights and contentions of the parties are left open.

Deemed registration under Section 12AA - calculation of six months period under Section 12AA(2) - effect of appellate remand on time limit for decision - statutory power of the Commissioner to grant or refuse registration - improper substitution of tribunal's satisfaction for satisfaction of the Commissioner

Calculation of six months period under Section 12AA(2) - effect of appellate remand on time limit for decision - Application of the six months limitation in Section 12AA(2) where the Commissioner had earlier decided the application within six months but a later decision was taken after appellate remand. - HELD THAT: - The Court held that the six months period in Section 12AA(2) is to be calculated from the end of the month in which the original application under Section 12A was received. Where the Commissioner passed an order within that six months period, subsequent proceedings (including fresh decisions taken pursuant to appellate remand) are not caught by Section 12AA(2). The legislature intended the time-limit to run from the date the application was received and not to render later decisions void because they were taken after that period in the course of resumed adjudication following appellate directions. Consequently, the Tribunal erred in treating the subsequent decision as invalid on the ground of expiry of the six months period.

Answered in favour of the Revenue; the Tribunal was not justified in applying Section 12AA(2) to the Commissioner's subsequent decision taken after remand.

Deemed registration under Section 12AA - Whether non-disposal of an application for registration within six months results in deemed registration. - HELD THAT: - The Court followed the Full Bench decision in Commissioner of Income Tax vs. Muzafar Nagar Development Authority and subsequent approvals by the Supreme Court, holding that mere non-decision within six months under Section 12AA(2) does not give rise to deemed registration. Earlier Division Bench authority to the contrary was held not to state the correct law. The Supreme Court's later clarification in the civil appeal did not decide the broader question of deemed registration, and subsequent Supreme Court authority in Harshit Foundation approved the Full Bench view. Thus the legal position is that non-disposal within six months does not automatically result in deemed registration.

Answered in favour of the Revenue; non-disposal within six months does not result in deemed registration.

Statutory power of the Commissioner to grant or refuse registration - deemed registration under Section 12AA - Whether the Tribunal was correct in granting deemed registration without appreciating that the power to grant or refuse registration is a statutory power of the Commissioner. - HELD THAT: - Having concluded that deemed registration does not arise merely from non-decision within six months and that the six months period applies to the date of the original application, the Court held that the Tribunal erred in substituting its conclusion to grant registration. The power to grant or refuse registration is vested in the Commissioner under the statutory scheme, and the Tribunal could not grant deemed registration on the basis of a misapplication of Section 12AA(2). The Tribunal's order setting aside the Commissioner's rejection on the ground of lapse of time was therefore incorrect.

Answered in favour of the Revenue; the Tribunal erred in granting deemed registration in place of the Commissioner's statutory power.

Improper substitution of tribunal's satisfaction for satisfaction of the Commissioner - statutory power of the Commissioner to grant or refuse registration - Whether the Tribunal exceeded its jurisdiction by substituting its own satisfaction for that of the Commissioner under Section 12AA. - HELD THAT: - The Court found that by holding that the application had become entitled to registration on the ground that the subsequent decision was beyond six months, the Tribunal in effect substituted its own satisfaction for the Commissioner's statutory satisfaction. Given the conclusions on the proper interpretation of Section 12AA(2) and on deemed registration, the Tribunal's approach amounted to an error of law and jurisdiction. The Tribunal could not supplant the Commissioner's evaluative function by treating the application as deemed granted.

Answered in favour of the Revenue; the Tribunal exceeded its jurisdiction by substituting its satisfaction for that of the Commissioner.

Final Conclusion: The judgment and order of the Income Tax Appellate Tribunal dated 20.09.2013 are quashed; the Commissioner's order dated 23.01.2012 is revived and the appeal is allowed in favour of the Revenue.

Amortization of lease premium - capital expenditure - revenue expenditure - precedent of a Coordinate Bench - binding effect of a pending Supreme Court decision

Amortization of lease premium - capital expenditure - revenue expenditure - precedent of a Coordinate Bench - Whether the lump-sum lease premium paid to leasehold authorities is capital expenditure or revenue expenditure for the purposes of the assessment. - HELD THAT: - The Court noted that the terms and facts of the lease deeds in the present matter are similar to those considered by the learned Coordinate Bench in ITA No. 205/2010. In view of that earlier decision, which held that the expenditure on lease premium constituted capital expenditure, the present appeal was disposed of in terms of the Coordinate Bench's judgment. The Court observed that its disposal is subject to and will abide by the ultimate decision of the Supreme Court in the connected Special Leave Petition(s). No separate re-examination of the factual or legal conclusion reached by the Coordinate Bench was undertaken.

Appeal disposed of by following the Coordinate Bench holding that the lease premium is capital expenditure; outcome to abide by the Supreme Court's decision in the connected SLP(s).

Final Conclusion: The appeal challenging ITAT's treatment of lump-sum lease premium was disposed of by applying the Coordinate Bench precedent that such premium is capital expenditure; the pronouncement is made subject to and will conform with the Supreme Court's eventual determination in the connected SLP(s).

Reliance on third-party information without independent inquiry - corroboration of confession or retracted statement - peak theory/unaccounted investment estimation - estimation of gross profit on unaccounted purchases - effect of administrative appellate decision on revenue additions - concurrent findings of fact

Reliance on third-party information without independent inquiry - corroboration of confession or retracted statement - peak theory/unaccounted investment estimation - estimation of gross profit on unaccounted purchases - effect of administrative appellate decision on revenue additions - concurrent findings of fact - Validity of additions for unaccounted investment (peak) and estimated gross profit where Assessing Officer relied on information from Customs/DRI and on a statement later retracted, and the Customs appellate authority set aside the undervaluation. - HELD THAT: - The Tribunal and CIT(A) found that the Assessing Officer made additions solely on the basis of information received from Customs/DRI and on a statement of the assessee's director which was subsequently retracted, without conducting independent enquiries. The authorities below applied the principle that admissions or confessional statements require substantial corroboration by independent and cogent evidence before sustaining income-tax additions. The Tribunal also took into account that the Customs, Excise & Service Tax Appellate Tribunal allowed the assessee's appeal and directed refund of customs duty, undermining the very basis of the AO's additions. In these circumstances the deletions of additions for unaccounted investment and estimated gross profit were held to be sustainable. Given concurrent findings of fact recorded by both lower authorities on these matters, no substantial question of law arose to warrant interference. [Paras 6, 8, 9, 10]

The deletions of additions on account of unaccounted investment (peak) and estimated gross profit are sustained; the Revenue's appeal is dismissed.

Final Conclusion: The High Court dismissed the Revenue's tax appeal against the Tribunal's order for assessment year 2008-2009, upholding deletion of additions made by the Assessing Officer where such additions were founded on Customs/DRI information and a retracted statement without independent corroboration, and where the foundation was later undermined by an appellate decision of the Customs authority; concurrent factual findings below precluded any substantial question of law.

Coverage of imported goods under DFIA and description of input entries - transferability of DFIA and entitlement to duty-free import - classification/usability of goods as dietary fibre based on technical opinion - confiscation under section 111(o) of the Customs Act, 1962 - provisional release under section 110A of the Customs Act, 1962 - appellate authority/Tribunal's discretion to modify conditions of provisional release

Coverage of imported goods under DFIA and description of input entries - transferability of DFIA and entitlement to duty-free import - classification/usability of goods as dietary fibre based on technical opinion - confiscation under section 111(o) of the Customs Act, 1962 - Imported in-shell walnuts held to be covered by the DFIA description of 'dietary fibre' and not liable to confiscation under section 111(o). - HELD THAT: - The court found that once a DFIA is transferable and the imported goods fall within the description and quantity permitted by the DFIA, the customs authorities cannot impose a restrictive actual-user condition to deny exemption. The Tribunal's conclusion that in-shell walnuts may be used as a source of dietary fibre in manufacture of biscuits/confectionery was supported by the technical opinion of the JNCH laboratory, and no contrary technical evidence was produced by the revenue. Precedents relied upon (including the Madhya Pradesh High Court decision and allied authorities) support the view that a bona fide transferee importing goods covered by the DFIA description is entitled to the exemption. On these combined grounds the seized walnuts were not held to be liable for confiscation under the allegation that they did not fit the 'dietary fibre' description. [Paras 17, 23, 24, 27, 28]

The imported in-shell walnuts are covered by the DFIA description of 'dietary fibre' and are not liable for confiscation under section 111(o).

Provisional release under section 110A of the Customs Act, 1962 - appellate authority/Tribunal's discretion to modify conditions of provisional release - The Tribunal was entitled to set aside the conditions imposed by the adjudicating authority and order unconditional release of the seized goods. - HELD THAT: - Section 110A vests discretion in the adjudicating authority to prescribe security and conditions for provisional release; that discretion can also be exercised by the appellate authority or Tribunal. Having examined the matter and the supporting technical opinion, the Tribunal exercised its appellate discretion to dispense with the bond/bank guarantee and undertaking and order unconditional release. The High Court found no error, perversity or legal infirmity in the Tribunal's exercise of discretion in ordering unconditional release. [Paras 31, 32, 33]

The Tribunal rightly exercised its discretion under section 110A to order unconditional release and set aside the conditional provisional release.

Delay in passing appellate orders - The delay of approximately ten months in passing the Tribunal's order does not raise a substantial question of law. - HELD THAT: - The court noted that no specific ground was taken regarding the delay and that the Customs Act prescribes no statutory limitation within which an appellate order must be passed after conclusion of hearing. Accordingly, the alleged delay did not, in the facts of the case, constitute a substantial question of law warranting interference. [Paras 8, 30]

The delay in passing the Tribunal's order is not a substantial question of law and does not vitiate the order.

Final Conclusion: The appeal is dismissed. The High Court upholds the Tribunal's decision that the imported in-shell walnuts are covered by the DFIA description of 'dietary fibre' and not liable for confiscation, and that the Tribunal properly exercised its discretion under section 110A to order unconditional release; the delay in the Tribunal's order does not raise a substantial question of law.

Refund claim arising from payment made in concluded adjudication proceedings - finality of concluded proceedings and bar on reopening except by appeal - limitation for consequential relief following deemed or de facto closure - effect of administrative public notice and departmental circular on concluded orders - penalty reduction under the amended provision of section 28 subject to discharge of duty and interest - irrelevance of existence of protest to entitlement to consequential relief

Refund claim arising from payment made in concluded adjudication proceedings - finality of concluded proceedings and bar on reopening except by appeal - limitation for consequential relief following deemed or de facto closure - Maintainability of the appellant's refund claim filed after payment made pursuant to proceedings that were concluded by acceptance of reduced penalty and discharge of duty and interest. - HELD THAT: - The appellant had discharged duty and interest in response to a show cause notice and availed the reduced penalty provision then newly incorporated in section 28, thereby bringing the proceedings to a close. That closure, even if not embodied in a speaking adjudication order, amounted to conclusion of proceedings in law or de facto. Once proceedings are so concluded and not challenged by appeal, reopening them by permitting a refund claim would amount to interference with finality of those proceedings. Excess paid, if any, is recoverable only by pursuing consequential relief through the appellate process; limitation governing such consequential relief is distinct and the existence or absence of a prior 'protest' is not material to entitlement to consequential relief. Consequently the refund claim filed after the relevant time was not maintainable as it sought to upset concluded and unchallenged proceedings.

Refund claim is not maintainable because it seeks to disturb concluded proceedings that were closed by discharge of duty, interest and acceptance of reduced penalty; the proper remedy for any excess lies in consequential relief through appeal.

Effect of administrative public notice and departmental circular on concluded orders - Whether public notice No.30/2015-20 and CBEC circular No.45/2016 could be applied to reopen or treat as pending adjudications already concluded by the parties' compliance. - HELD THAT: - The public notice prescribed a mode of surrender to be exercised within nine months and indicated that penal consequences would not follow; the CBEC circular adopted that public notice and directed that 'pending cases' be disposed of accordingly. However, the lower authorities erred in treating proceedings that had been concluded by payment and acceptance of the reduced penalty as 'pending' for the purpose of applying the circular. Concluded proceedings remain final unless set aside in the appropriate appellate forum; administrative instructions applicable to pending cases do not operate to reopen or nullify finalised adjudications.

The public notice and circular do not justify reopening or treating as pending adjudications which were already concluded by the parties' compliance; the lower authorities were incorrect to refuse the settled position of finality and to allow the refund claim on that basis.

Final Conclusion: The appeal is dismissed. The claim for refund is not maintainable because it seeks to disturb concluded proceedings that were closed by discharge of duty and interest and acceptance of the reduced penalty; any remedy for excess payment lies in consequential relief pursued through the appellate process, and administrative notices or circulars applicable to pending cases do not reopen finalised adjudications.

Admissibility of electronic records under Section 138C - Reliability of computer printouts and mirror images - Re-determination of transaction value under Rule 3(1) and Rule 5 of the Customs Valuation Rules - Comparability of contemporaneous imports for valuation - Retracted confessional statements and evidentiary value - Market survey and quotations as admissible evidence - Imposition of penalty in absence of sustainable valuation findings

Admissibility of electronic records under Section 138C - Reliability of computer printouts and mirror images - Printouts and mirror images of data taken from seized hard disks and pen drive are inadmissible as evidence for the purpose of confirming undervaluation because Section 138C requirements were not complied with. - HELD THAT: - The Tribunal held that Section 138C prescribes mandatory conditions and a certificate for admission of computer printouts and other electronic records. In the present case the investigating officers did not obtain or produce the certificate required by Section 138C(4), the mirror imaging and printouts were not made or proved to have been taken in the presence of any authorised person of the appellant, and the seizure memo did not identify the computers/hardware from which data was said to have been retrieved. Reliance on Anvar P.V. and the parimateria nature of Section 138C led the Tribunal to conclude that the electronic materials cannot be admitted as evidence where the statutory safeguards are not followed; consequently the adjudicating authority could not lawfully base its valuation findings on those printouts. [Paras 5, 6, 11, 12, 14]

Electronic printouts and mirror images relied upon by revenue are inadmissible and cannot sustain the demand.

Retracted confessional statements and evidentiary value - Statements of the director that were subsequently retracted do not furnish reliable corroboration for undervaluation in absence of independent evidence. - HELD THAT: - The Tribunal noted that the director's early statements were exculpatory, later inculpatory statements were retracted by affirming affidavits, and there was no independent corroboration such as proof of payment over and above declared invoice prices or investigative confirmation from persons named in alleged emails. In these circumstances the retracted statements cannot be relied upon to establish undervaluation. [Paras 6]

Retracted statements lack evidentiary value and cannot support the demand.

Market survey and quotations as admissible evidence - Comparability of contemporaneous imports for valuation - The market enquiry consisting of quotations/offers for single-piece sales and the contemporaneous imports relied upon by revenue are not reliable or comparable evidence to reject declared transaction values. - HELD THAT: - The Tribunal found the market survey consisted of three quotations/offers for single pieces obtained in the absence of the appellants, with no identification of persons issuing the proforma invoices and no opportunity given to cross-examine those persons. Further, the imports cited as contemporaneous involved much smaller quantities (10,000-50,000) whereas the appellant imported in bulk (lakhs of pieces), and there was no evidence that the contemporaneous consignments were comparable in quality or other attributes. Consequently the quotations and cited imports could not justify rejection of the declared prices. [Paras 7, 9, 10]

Market survey quotations and the contemporaneous imports relied upon are not admissible comparators and cannot sustain valuation enhancement.

Re-determination of transaction value under Rule 3(1) and Rule 5 of the Customs Valuation Rules - Re-determination of transaction value under Rule 3(1) and re-determination under Rule 5 for the consignments in dispute is unsustainable given the inadmissibility of the electronic evidence and lack of independent corroboration. - HELD THAT: - Because the primary basis for rejecting the declared transaction value was the electronic printouts and related email correspondence (which are inadmissible for non compliance with Section 138C) and because no independent enquiries corroborated alleged wire transfers or payments, the Tribunal held that the adjudicating authority could not validly re-determine value under Rule 3(1) or apply Rule 5 on the available material. In addition, where prior testing and market survey had led to an earlier, accepted valuation for certain consignments, subsequent enhancement on the present inadequate basis was also held unsustainable. [Paras 5, 10]

Value re-determinations under Rule 3(1) and Rule 5 are not sustainable and the demands based thereon are set aside.

Imposition of penalty in absence of sustainable valuation findings - Penalty imposed on the director and the firm cannot stand as the foundational charges of undervaluation are not sustained. - HELD THAT: - Since the Tribunal has held that the evidential basis for undervaluation - electronic printouts and retracted statements - is inadmissible or unreliable and re-determination of value is unsustainable, there remains no legal foundation to uphold the penalty orders against the appellant firm and its director. The Tribunal therefore set aside the penalties imposed. [Paras 10, 11]

Penalties and consequential orders are set aside as the underpinning valuation findings fail.

Final Conclusion: The impugned adjudication order confirming differential duty, interest and penalties is set aside. The Tribunal held that electronic printouts and mirror images were inadmissible for non compliance with Section 138C, retracted statements and uncorroborated market quotations were unreliable, and therefore the re determination of transaction value and penalties could not be sustained for the period 2006 to 2010; both appeals are allowed with consequential reliefs.

Transaction value - arm's length price - admissibility of foreign bank records under section 138C(4) of the Customs Act - presumption under section 139(ii) of the Customs Act - related parties under rule 2(2) of the Valuation Rules - redetermination of value under rule 4 of the Valuation Rules - assessment under rule 3 of the Valuation Rules - Project Import Regulation registration and assessment under Chapter Heading 98.01 - confiscation under section 111(d) and 111(m) of the Customs Act

Importer - Section 2(26) of the Customs Act - Identity of the importer of the consignments - HELD THAT: - The Bench examined the statutory definition of 'importer' and the documentary record. Bills of Entry for the consignments were filed by PMC and, in respect of 26 consignments, customs duty was paid by PMC. MEGPTCL did not 'hold itself out' as the importer for clearance of the goods. Pre-existing project ownership or opening of Letters of Credit by MEGPTCL did not convert MEGPTCL into the importer where PMC filed the Bills of Entry and performed clearance formalities. The Tribunal applied precedent that the person who files the Bill of Entry and pays duty is to be treated as the importer and held that PMC alone was the importer for the imports in question. [Paras 40, 41, 42, 43, 44]

PMC is the importer; MEGPTCL is not the (de-facto) importer for the consignments imported prior to the 2017 amendment.

Admissibility of foreign bank records under section 138C(4) of the Customs Act - presumption under section 139(ii) of the Customs Act - Admissibility of documents seized from foreign bank branches relied upon for re determination of value - HELD THAT: - The documents relied upon by the Directorate of Revenue Intelligence were obtained from foreign branches of Indian banks. The Bench applied section 138C(4) which mandates production of a certificate identifying the document and the manner of its production when computer/foreign records are tendered. The requisite certificate was not produced and many documents lacked seals, attestation or identifiable initials. Further, documents were not signed or authenticated so as to attract the statutory presumption under section 139(ii). Consequently the documents could not be admitted as evidence and could not form a basis for re determination of transaction value. [Paras 51, 52, 53, 54, 55]

The foreign bank records and related documents are inadmissible for purposes of valuation; the Department cannot rely on them to redetermine value.

Related parties under rule 2(2) of the Valuation Rules - arm's length price - Whether EFI, PMC and MEGPTCL were related and whether any such relationship affected transaction price - HELD THAT: - The Tribunal considered the contractual arrangements, corporate separateness and the evidence of authorization of signatures. It accepted that authorization of a PMC employee by EIF to sign contracts did not, without more, satisfy any clause of rule 2(2) to establish a 'related' party relationship that influenced price. Although the adjudicating authority observed EIF and MEGPTCL could be considered related for the relevant period, it found no evidence that such relationship influenced the transaction price; the procurement followed an International Competitive Bidding process and was evaluated independently. The record did not establish influence on pricing sufficient to discard declared transaction value. [Paras 62, 63, 64, 65, 66]

Either no displacing relationship was proved that affected price, and in any event the declared transaction value was not shown to be influenced by any relationship.

Nature of contract between PMC and EIF - EPC/EPC contract - inclusion of costs like extended warranty, type tests and liquidated damages - Whether the contract between PMC and EIF was an EPC contract and whether added elements justified the price differential vis-a -vis OEM invoices - HELD THAT: - The Tribunal analysed tender documents, pre bid minutes and consortium minutes which allocated obligations (design, testing, delivery schedules, extended warranty, type testing and liquidated damages) to PMC and to EIF as part of the Consortium's execution obligations. The scope of work in the tenders was broad and contractual minutes showed EIF agreed to meet delivery schedules and warranty/type test requirements. The adjudicating authority's acceptance that extended warranty, type testing, stringent delivery schedule and potential liquidated damages formed part of the assessable value was supported by contemporaneous documents and professional opinions. Therefore, the contract between PMC and EIF could not be equated with mere OEM supply contracts and the additional contractual elements could legitimately contribute to the price charged to PMC. [Paras 73, 74, 75, 76, 77]

The PMC-EIF contract was in the nature of an EPC (or project) contract and additional contractual liabilities and services could lawfully form part of the transaction value.

Rule 3 of the Valuation Rules - redetermination of value under rule 4 - transaction value - Whether the declared transaction value could be rejected and redetermined by reference to OEM invoices under rule 4 - HELD THAT: - Having found the Department's primary documentary basis inadmissible, and on the merits, the Bench reviewed the Valuation Rules scheme. Rule 3 (transaction value) applies unless the transaction value is in doubt; rules 4-9 are alternative methods where transaction value is to be discarded. The Department did not bring contemporaneous evidence showing the declared transaction value was influenced by relationship or not at arm's length. Comparative market data submitted by respondents (including contemporaneous project costs and expert/consultant opinions) supported the declared value. The Tribunal followed binding principles that where actual transaction value is available and not shown to be suspect, it must be accepted and cannot be discarded merely because OEM invoices differ; additional contractual obligations and services must be included in assessable value. Accordingly the value declared by PMC was accepted and could not be redetermined on the basis advanced by the Department. [Paras 90, 93, 100, 101, 104]

Declared transaction value accepted under rule 3; redetermination under rule 4 was not permissible on the record.

Project Import Regulation registration and assessment under Chapter Heading 98.01 - assessment of contract as a whole - Whether imports registered under PIR / Heading 98.01 must be assessed consignment wise or on the contract/project as a whole - HELD THAT: - Relying on analysis in prior Tribunal decisions and the PIR/Heading 98.01 scheme, the Bench observed that PIR registration contemplates assessment of goods imported under a registered project contract as a whole; PIR does not contemplate separate valuation assessments for each individual consignment forming part of a registered contract. The adjudicating authority's conclusion that the contract must be assessed together (and not consignment wise) was affirmed as consistent with the regulatory scheme governing project imports. [Paras 110, 111, 112, 113]

Where imports are under PIR / Heading 98.01 and a registered contract, assessment is of the contract/project as a whole rather than mandatory separate consignment wise valuation.

Confiscation under section 111(d) and 111(m) of the Customs Act - penalty under sections 112 and 114AA - Liability to confiscation and imposition of penalties where over valuation allegation was not established - HELD THAT: - Because the Department failed to establish over valuation (documentary evidence inadmissible and transaction value not shown to be tainted), allegations necessary to sustain confiscation or penalties were not proved. The Tribunal noted authority that confiscation under section 111 must be linked to dutiable or prohibited goods or breach of machinery provisions; absent proven overvaluation or fraud, confiscation and penalty claims could not be sustained. Consequently the adjudicating authority properly dropped proceedings seeking confiscation and penalties. [Paras 26, 114, 115, 116, 117]

Confiscation and penalties alleged in the show cause notice could not be sustained; proceedings were rightly dropped.

Final Conclusion: The Tribunal finds no infirmity in the adjudicating authority's order dropping the show cause proceedings: PMC is the importer; the foreign bank records relied upon are inadmissible; the declared transaction value stands as not shown to be influenced by related party considerations; the PMC-EIF arrangements were project/EPC in nature so relevant contractual costs may be included in assessable value; where imports are registered under PIR the project/contract is to be assessed as a whole; and confiscation/penalty claims were not established. The appeal is dismissed and the adjudicating authority's order dated 17.10.2017 is upheld.

Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - requirement to serve statutory notices under Section 230(5) where meetings are not convened - service of notices to sectoral regulators at the time of filing Second Motion under Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - Whether the Tribunal would dispense with convening meetings of shareholders and creditors for the proposed merger between the Transferor and Transferee companies. - HELD THAT: - The Tribunal, having considered the order of the NCLAT which set aside the Tribunal's earlier order and observed that where the merger is of a wholly owned subsidiary into its holding company, no allotment of shares would arise, there is no dilution of shareholding, the net worth of the Transferee is positive and unsecured creditors' liabilities are unaffected, applied that reasoning to the present case. In view of the NCLAT's findings recorded in paragraph 6 of its judgement dated 18.01.2022 and the setting aside of the earlier order, the Tribunal exercised its power to dispense with the meetings of shareholders and creditors of the Applicant Companies. [Paras 7]

Meetings of shareholders and creditors dispensed with.

Requirement to serve statutory notices under Section 230(5) where meetings are not convened - service of notices to sectoral regulators at the time of filing Second Motion under Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Whether notices in terms of Section 230(3) and Section 230(5) of the Companies Act, 2013 must be served where the Tribunal has dispensed with convening meetings, and whether the Applicant Companies' prayer for immediate service should be granted. - HELD THAT: - Section 230(3) and (5) require service of notice to creditors, members and specified authorities in relation to a meeting called pursuant to Section 230(1). Since the Tribunal has dispensed with convening any meetings under Section 230(1) in this matter, the statutory obligation to serve notices under Sections 230(3) and 230(5) does not arise at this stage. Separately, Rule 16(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 contemplates service to sectoral regulators and objectors at the time of filing the Second Motion, when the next hearing is intimated. Applying these provisions, the Tribunal rejected the Applicants' prayer for directions to serve the notices at the present stage and held that service in accordance with Rule 16(2) should be effected at the appropriate stage (Second Motion). [Paras 10, 11]

Prayer for immediate service of notices under Section 230(5) rejected; requirement to serve regulators/objectors arises at the Second Motion in accordance with Rule 16(2).

Dispensation of meetings under Section 230 in merger of a wholly owned subsidiary with its holding company - Whether the modifications to the Scheme placed on record should be taken on record by the Tribunal. - HELD THAT: - The Applicant Companies placed a modified Scheme on record as part of the application (pages 128-146). The Tribunal examined the modified Scheme and, in exercise of its administrative control over the record, accepted and took the modified Scheme on record as part of the filing. [Paras 8]

Modified Scheme taken on record.

Final Conclusion: The application is disposed of: meetings of shareholders and creditors are dispensed with in view of the NCLAT judgment; the modified Scheme is taken on record; and the prayer for immediate service of notices under Section 230(5) is declined, with statutory service to regulators and objectors to be effected at the Second Motion in accordance with Rule 16(2).

Distribution of accumulated cash profits - waterfall mechanism under Section 53 of the IBC - liquidator's duty to distribute accumulated profits - compliance with Regulation 32 and 42 of the IBBI (Liquidation Process) Regulations, 2016 - locus and maintainability under Section 61 of the IBC - distinction between sale proceeds and existing cash balances - abuse of process and imposition of costs

Distribution of accumulated cash profits - waterfall mechanism under Section 53 of the IBC - distinction between sale proceeds and existing cash balances - Validity of the Adjudicating Authority's order permitting distribution of accumulated cash profits lying in the corporate debtor's bank accounts to stakeholders under the waterfall mechanism. - HELD THAT: - The Tribunal found that the impugned order merely authorised distribution of accumulated cash profits already lying in the corporate debtor's bank accounts and did not direct distribution of sale proceeds. The accumulated profits were custodial liquid assets and, in view of Regulation 41 (account designation) and the Code's waterfall mechanism, the liquidator was under a duty to take steps for distribution rather than allow large cash balances to remain idle. The Tribunal examined the distribution chart and payments made under relevant heads (including provision for liquidation costs and workmen dues) and concluded that distribution was carried out in accordance with law. Consequently there was no error in the Adjudicating Authority permitting distribution subject to filing of stakeholders list and asset memorandum. [Paras 7, 24]

The order permitting distribution of accumulated cash profits was upheld; no interference with the Adjudicating Authority's permission to distribute the funds in accordance with Section 53.

Compliance with Regulation 32 and 42 of the IBBI (Liquidation Process) Regulations, 2016 - liquidator's duty to distribute accumulated profits - Whether the liquidator acted contrary to Regulations 32 and 42 or required prior completion of Chapter VI/VII procedures before seeking permission to distribute accumulated profits. - HELD THAT: - The Tribunal rejected the submission that the liquidator could not seek distribution absent compliance with Chapter VI and VII procedures for sale of assets. It emphasised that the amount in question was accumulated profit in bank accounts, not proceeds from sale of liquidation assets, and that Regulation 41 contemplates custodian duties over such accounts. Given the accumulation and the estimated liquidation costs being lower than the cash balance, the liquidator's application for clarification and distribution was appropriate and did not contravene the liquidation regulations as applied to sale proceeds. [Paras 11, 24]

Distribution of accumulated cash profits did not offend Regulation 32/42 where amounts were existing cash balances; the liquidator's application and the Adjudicating Authority's grant were proper.

Locus and maintainability under Section 61 of the IBC - Maintainability of the appeals by the appellants claiming to represent employees and as an ex-director after the liquidation order and while representatives of employees and shareholders were on record. - HELD THAT: - The Tribunal observed that appeals under Section 61 lie only by an aggrieved person. After liquidation (Regulation 33(7)), employees are deemed discharged and representatives for employees and shareholders were already arrayed in the Adjudicating Authority's proceedings. The Tribunal accordingly found the appellants' locus doubtful and noted there was little justification for third parties to pursue the present appeals once the impugned distribution had been carried out and the liquidation order approved. [Paras 19, 23]

Appellants' locus to maintain the appeals was doubtful; their challenges lacked sustainment in the circumstances.

Suppression of pendency of appeals - liquidator's duty to disclose - Allegation that the liquidator suppressed the pendency of earlier appeals before the Appellate Tribunal when seeking distribution permission. - HELD THAT: - The Tribunal examined the record and noted that the liquidator had disclosed the pendency of Company Appeals (AT)(Ins) Nos. 832/2020 and 846/2020 in its rejoinder and related filings before the Adjudicating Authority and had explained actions taken in light of directions and hearings before the NCLAT. The appellants' allegation of suppression was therefore found to be unfounded and contrary to the documented pleadings. [Paras 16, 23]

Allegations of suppression of the pendency of appeals by the liquidator were rejected as baseless.

Abuse of process and imposition of costs - Whether the appeals amounted to abuse of process warranting imposition of costs. - HELD THAT: - Having found that the impugned order had been implemented, that the liquidation order had been approved by this Tribunal earlier, and that the appellants pursued the appeals despite the finality of distributions and without adequate locus, the Tribunal concluded the appeals constituted an abuse of process. The Tribunal also noted prior conduct by the same appellants in related litigation and the absence of merit in their contentions on the distribution. [Paras 26, 27]

Both appeals dismissed as devoid of merit; exemplary costs imposed on the appellants to be deposited in the Prime Minister's National Relief Fund.

Final Conclusion: Both appeals are dismissed. The Tribunal upheld the Adjudicating Authority's permission to distribute accumulated cash profits in accordance with the waterfall under Section 53, rejected allegations of suppression and procedural impropriety by the liquidator, found the appellants' locus doubtful, and treated the appeals as an abuse of process, imposing exemplary costs to be deposited in the Prime Minister's National Relief Fund.

Debt and default under the Insolvency and Bankruptcy Code - claim and financial debt as inclusive concepts under IBC - limitation - last payment/acknowledgement rule and exclusion of limitation period - personal guarantor to corporate debtor (PGCD) liability under IBC - recovery certificate not being a mandatory pre-condition for initiation of CIRP - interest component as part of financial debt and time value of money

Debt and default under the Insolvency and Bankruptcy Code - claim and financial debt as inclusive concepts under IBC - There existed a financial debt which was due and unpaid and the Adjudicating Authority correctly held that default had occurred. - HELD THAT: - The Tribunal examined the statutory definitions of 'debt', 'claim', 'default' and 'financial debt' under the IBC and noted that the loan facilities advanced by the banks (later merged into SBI) and the compromise accepted by the DRT acknowledged the existence of principal and interest. The financial creditor produced bank statements with a certificate under the Bankers' Books Evidence Act which were not disputed. On these facts and in law the Adjudicating Authority rightly found that there was a financial debt due and payable and that default had occurred, warranting admission under Section 95(1). [Paras 29]

Application under Section 95(1) was correctly admitted as there was an existing financial debt and default.

Limitation - last payment/acknowledgement rule and exclusion of limitation period - The application under Section 95(1) was within the period of limitation and not time-barred. - HELD THAT: - The Tribunal set out the timeline of events, noting the DRT compromise order dated 20.09.2019 and the last payment by the corporate debtor on 31.12.2019, with the application filed on 03.11.2021. Having regard to the Supreme Court precedents that the date of last payment or a decree/judgment gives rise to a fresh cause of action and that acknowledgement/last payment can extend limitation, and further taking into account the exclusion of limitation by the Suo Moto order for the period 15.03.2020 to 28.02.2022, the Tribunal concluded the Section 95(1) application was filed within the permissible period and the Adjudicating Authority did not err on limitation grounds. [Paras 30]

The Section 95(1) application was filed within limitation and is maintainable.

Personal guarantor to corporate debtor (PGCD) liability under IBC - Guarantees furnished by the appellants as Managing Director/Director are enforceable as personal guarantees and attract proceedings under the IBC against personal guarantors. - HELD THAT: - The Tribunal referred to the statutory amendments bringing personal guarantors within the IBC regime and the Supreme Court's treatment of such guarantors (as in Lalit Kumar Jain). The amended framework permits insolvency proceedings against personal guarantors to corporate debtors; accordingly, guarantees given by the appellants were enforceable in their personal capacity and the Adjudicating Authority correctly proceeded against them as personal guarantors. [Paras 31]

Guarantees executed by the appellants are enforceable as personal guarantees and subject to proceedings under the IBC.

Recovery certificate not being a mandatory pre-condition for initiation of CIRP - Financial creditor was not obliged to obtain a Recovery Certificate from the DRT before initiating CIRP and could directly approach the Adjudicating Authority. - HELD THAT: - The Tribunal examined the DRT compromise order which granted the financial creditor the entitlement to apply for a Recovery Certificate but did not make it a mandatory pre-condition. The Tribunal further relied on its earlier precedent reasoning that SARFAESI/DRT proceedings do not bar initiation of insolvency proceedings and that IBC is a complete code with overriding effect. Consequently, the financial creditor's direct filing before the Adjudicating Authority was permissible and the Adjudicating Authority committed no error in admitting the application without a recovery certificate. [Paras 32]

There was no legal requirement to obtain a Recovery Certificate from the DRT before filing the IBC application; direct initiation of CIRP was permissible.

Interest component as part of financial debt and time value of money - The Adjudicating Authority's inclusion of the interest component as part of the claimed financial debt was correct and not contrary to the DRT final order. - HELD THAT: - The compromise and the DRT's final order expressly provided for interest and consequences on failure of the compromise, and the original DRT order had specified future interest at a stated rate. The financial creditor's Form C and ledger exhibited principal and interest components, and the Tribunal observed that interest forms part of 'financial debt' as it reflects the time value of money. Given the DRT's order and the undisputed accounting, the Adjudicating Authority was justified in treating the interest component as part of the debt. [Paras 33]

The inclusion of interest in the debt claim was proper and consistent with the DRT order and the definition of financial debt.

Final Conclusion: No ground was made out to interfere with the Adjudicating Authority's admission of the Section 95(1) applications or with the initiation of insolvency proceedings against the corporate debtor and the personal guarantors; the appeals are dismissed and connected interlocutory applications are closed.

Due diligence in submission of claim during CIRP - belated admission of claim after approval of resolution plan - finality of claims for a successful resolution applicant - enforceability of rights under tripartite agreement between homebuyer, corporate debtor and bank - distinction between homebuyer as financial creditor and bank as lender under tripartite arrangements

Due diligence in submission of claim during CIRP - belated admission of claim after approval of resolution plan - finality of claims for a successful resolution applicant - Whether the appellant exercised due diligence in submitting its claim and whether the claim could be admitted belatedly after the resolution plan was approved by the CoC and placed before the Adjudicating Authority. - HELD THAT: - The tribunal found that although the appellant filed Form C by e-mail before the last date, it failed to contemporaneously furnish supporting documents and thereafter did not comply with repeated requests by the IRP to provide hard copies when electronic transmission via google drive failed. From 05.02.2019 until 01.07.2019 there was no further follow up by the appellant, and therefore the claim could not be processed or verified. Given Regulation 12(2) of the CIRP Regulations and the lapse of the prescribed period for submitting proof, together with the fact that the resolution plan had been approved by the CoC and filed for approval, admitting a belated claim would undermine the finality required by Section 31 and the rationale in the cited Supreme Court authority that a successful resolution applicant must know all claims against the corporate debtor. The tribunal held that indulgence at this stage would jeopardise the CIRP and is not warranted where the creditor remained slack and failed to supply required documentation despite prompts. [Paras 14, 15, 16, 17, 18]

The appellant did not exercise due diligence in substantiating its claim and there are no sufficient grounds to admit the belated claim after approval of the resolution plan; the Adjudicating Authority did not err in rejecting belated admission.

Enforceability of rights under tripartite agreement between homebuyer, corporate debtor and bank - distinction between homebuyer as financial creditor and bank as lender under tripartite arrangements - Whether the tripartite agreement and DRT-issued DRCs vested enforceable rights in the appellant bank entitling it to be treated as a secured financial creditor and to file/establish the claim in place of the homebuyers. - HELD THAT: - The tribunal examined the tripartite terms and observed that liability to repay the loan remained on the individual homebuyers and that the agreement contemplated delivery of sale deeds to the bank only when registered and executed. Mere permission to mortgage, without registration of a charge as required under the Companies Act framework, and possession of enforceable rights under a tripartite agreement do not automatically convert the bank into a financial creditor of the corporate debtor. Further, the claimant was required to act upon those rights and establish the claim before the resolution professional, which it failed to do. Reliance on DRCs was not sufficient where the claim was not properly presented and substantiated during the CIRP. The tribunal treated the decision in the earlier appellate authority as instructive that a tripartite agreement alone does not change the character of the homebuyer's liability into a claim by the bank against the corporate debtor for purposes of inclusion in the CoC. [Paras 19, 20, 21]

The tripartite agreement and the DRCs did not, in the circumstances, establish enforceable rights that entitled the appellant to be treated as a secured financial creditor; the Adjudicating Authority rightly rejected the claim.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority correctly refused belated admission of the appellant's claim and correctly found that the tripartite agreement did not establish the appellant as a financial creditor entitled to inclusion in the CIRP or CoC.

Limitation under Article 137 of the Limitation Act, 1961 - Suspension of limitation under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Effect of repeal of SICA on accrual of right to apply under the Insolvency and Bankruptcy Code, 2016 - Pre-existing dispute defence to an application under Section 9 of the Code - Requirement of cogent evidence to establish a pre-existing dispute

Limitation under Article 137 of the Limitation Act, 1961 - Suspension of limitation under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Effect of repeal of SICA on accrual of right to apply under the Insolvency and Bankruptcy Code, 2016 - Whether the application under Section 9 of the Code was barred by limitation. - HELD THAT: - The Tribunal applied the settled principle that limitation for filing an application under Section 7 or 9 of the Code is three years as per Article 137 counted from the date of default. However, the Corporate Debtor had been declared a sick unit and, by virtue of Section 22 of SICA, remedies for recovery including suits for money remained suspended while the reference before BIFR subsisted; the period of such suspension is excluded while computing limitation. SICA was repealed with effect from 01.12.2016, and only thereafter the right to pursue recovery under the Code accrued to the Operational Creditor. Counting limitation from the date SICA ceased to operate and the IBC became available, the Section 9 application filed on 29.05.2017 fell within the three year period. The Tribunal therefore held that the application was not time barred. [Paras 13, 14, 15]

Application under Section 9 is not barred by limitation; the cause of action accrued after repeal of SICA and the filing was within three years.

Pre-existing dispute defence to an application under Section 9 of the Code - Requirement of cogent evidence to establish a pre-existing dispute - Whether a pre-existing dispute existed which rendered the Section 9 application unsustainable. - HELD THAT: - The Corporate Debtor alleged a prior dispute concerning quality of supplied material and asserted oral admissions and requests to remove scrap. The Tribunal examined the record and found no contemporaneous or credible evidence of a pre-existing dispute having been pursued by the Corporate Debtor (no suit or other proceedings, and only bald averments without particulars or dates). Reliance on the principle that a bona fide pre-existing dispute, supported by evidence, can defeat an application under Section 9 was considered, but the Appellant failed to discharge the evidentiary burden required to establish such a dispute. Consequently the objection was held to be unsubstantiated. [Paras 16, 17, 18, 19]

No pre-existing dispute proved; the defence is rejected for want of cogent evidence.

Final Conclusion: Appeal dismissed; the Section 9 application was held to be within limitation (accrual post repeal of SICA) and the plea of a pre existing dispute was not established, with no order as to costs.

Maintainability of a Section 9 application after change in minimum default threshold - prospective operation of notification raising minimum amount of default - pre-existing dispute under Section 8(2)(a) of the Code - effect of non receipt of reply and non appearance leading to ex parte admission - remedy to seek recall of ex parte admission

Maintainability of a Section 9 application after change in minimum default threshold - prospective operation of notification raising minimum amount of default - Whether the Adjudicating Authority lost jurisdiction to entertain the Section 9 application filed before the notification raising the minimum default amount came into force. - HELD THAT: - The Tribunal held that the notification issued on 24.03.2020 raising the minimum amount of default to Rs. one crore is prospective in nature and does not operate retrospectively to deprive the Adjudicating Authority of jurisdiction over applications filed before the notification. Relying on the reasoning in Madhusudan Tantia (Para 56 reproduced), the notification contains no express language making it retrospective and applying it to pending Section 9 applications would produce anomalous results. Accordingly, the change in the threshold during the pendency of the application did not render the earlier filed Section 9 application incompetent or oust the Adjudicating Authority of jurisdiction. [Paras 7, 8]

The contention that the application under Section 9 was not maintainable because the minimum default threshold was later raised is rejected; the notification is prospective and does not affect the pending application.

Pre-existing dispute under Section 8(2)(a) of the Code - effect of non receipt of reply and non appearance leading to ex parte admission - remedy to seek recall of ex parte admission - Whether a pre-existing dispute under Section 8(2)(a) barred admission of the Section 9 application. - HELD THAT: - The Tribunal found no evidence on record to establish a pre-existing dispute. The Corporate Debtor was served with the demand notice and failed to invoke Section 8 within the statutory period or to file a reply to the Section 9 application, despite filing appearances and being afforded opportunities. The Appellant's reliance on invoices said to relate to a different company did not rebut the Operational Creditor's case; the record showed continued payments by the Appellant until December 2017 and no documentary proof of an existing dispute. The Tribunal also observed that the Appellant could have applied to recall the ex parte admission but did not do so. Given the absence of material establishing a pre-existing dispute, the Adjudicating Authority properly relied on the Operational Creditor's evidence to admit the application. [Paras 6, 8]

No pre-existing dispute was established; the ex parte admission was justified in view of the Corporate Debtor's failure to reply or seek recall, and the Section 9 application was rightly admitted.

Final Conclusion: The appeal is dismissed for lack of merit; the impugned order admitting the Section 9 application is upheld, without any order as to costs.

Approval of Resolution Plan under Section 31 - Compliance with Section 30(2) of the Insolvency and Bankruptcy Code - Priority payment of insolvency resolution process costs - Payment to operational creditors in accordance with Section 30(2)(b) - Management and control of the corporate debtor post approval - Implementation, supervision and monitoring of the Resolution Plan - Regulation 38 - treatment of stakeholders' interests in the Resolution Plan - Form H certification and Regulation 39(4) compliance - Deference to the commercial wisdom of the Committee of Creditors - Ceasing of moratorium on approval of Resolution Plan

Compliance with Section 30(2) of the Insolvency and Bankruptcy Code - Priority payment of insolvency resolution process costs - Payment to operational creditors in accordance with Section 30(2)(b) - Management and control of the corporate debtor post approval - Implementation, supervision and monitoring of the Resolution Plan - Form H certification and Regulation 39(4) compliance - Whether the Resolution Plan approved by the Committee of Creditors satisfies the requirements of Section 30(2) of the Code and the relevant CIRP Regulations, and is fit for approval under Section 31. - HELD THAT: - The Tribunal examined the Resolution Plan against the mandatory criteria in Section 30(2) and the CIRP Regulations. The Plan expressly provides that insolvency resolution process costs shall be paid in priority to other creditors, satisfying the requirement of clause (a) (paragraph 6). The Plan proposes payment to operational creditors which, as shown in the Plan, constitutes 55.13905% of the operational debt, and thus the Tribunal recorded compliance with clause (b) subject to the Plan's terms (paragraph 7). Provisions for management and control of the corporate debtor post approval are contained in Clauses 5.1-5.8 of the Plan, addressing clause (c) (paragraph 8), while clause 4.22 of the Plan provides for supervision and monitoring of implementation, addressing clause (d) (paragraph 9). The successful resolution applicant submitted declarations that the Plan does not contravene any law and conforms to additional requirements specified by the Board, addressing clauses (e) and (f) (paragraph 10). The Resolution Professional filed a Form H compliance certificate under Regulation 39(4) certifying that the Plan meets the requirements of Section 30(2), and the Tribunal accepted the RP's certification and explanations regarding compliance with Regulations 38 and 39 (paragraphs 11-12). The Tribunal noted the CoC's unanimous or near unanimous commercial endorsement and the Supreme Court's authority recognizing the primacy of CoC commercial wisdom, which informed the exercise of its power under Section 31 (paragraphs 13-14). On the cumulative satisfaction of the statutory criteria and regulatory certification, the Tribunal concluded there was no impediment to approval (paragraph 15). [Paras 11, 12, 13, 14, 15]

The Resolution Plan fulfils the requirements of Section 30(2) and the CIRP Regulations, the RP's Form H certification is accepted, and the Plan is approved under Section 31.

Final Conclusion: The application for approval of the Resolution Plan is allowed; the approved Plan shall become effective from the date of this order, the moratorium shall cease to have effect from this date, and the RP shall forward the CIRP records and approved Plan to the IBBI as directed.

Initiation of corporate insolvency resolution process by financial creditor - real estate project proviso requiring minimum number of financial creditors (100 or 10%) - maintainability of Section 7 petition by a single allottee - definition of financial debt - inapplicability of precedent confined to Section 9 to a Section 7 petition

Initiation of corporate insolvency resolution process by financial creditor - real estate project proviso requiring minimum number of financial creditors (100 or 10%) - maintainability of Section 7 petition by a single allottee - The Section 7 petition filed by a single allottee in a real estate project is not maintainable for want of the minimum number of financial creditors prescribed in the proviso. - HELD THAT: - The Tribunal found that the applicants are allottees under a real estate project and therefore the proviso to Section 7(1) applies. The proviso requires, for financial creditors who are allottees in a real estate project, that an application be filed jointly by not less than one hundred such creditors or not less than ten percent of the total number of such creditors in the same class, whichever is less. The petition was filed by a single allottee and there was no material to show that the applicants constituted the requisite ten percent or one hundred allottees. Applying the statutory threshold to the facts, the Tribunal concluded that the applicants do not satisfy the proviso and hence are not eligible to initiate CIRP under Section 7 in this case. [Paras 21, 22, 23, 26]

The petition is not maintainable under Section 7(1) proviso for real estate projects and must be rejected.

Definition of financial debt - The amount claimed (corpus fund transferred to the corporate debtor's loan account) does not qualify as a financial debt under the definition applicable to Section 7. - HELD THAT: - The Tribunal examined the nature of the transaction and the absence of any separate agreement characterising the claimed sum as a financial debt. The transfer of corpus funds into the corporate debtor's loan account, in the circumstances pleaded and on the material on record, was held not to constitute a financial debt as defined in Section 5(8). Consequently, the claimed amount could not be treated as a debt sufficient to sustain an application under Section 7. [Paras 25]

The transaction does not qualify as a financial debt, and therefore does not support a Section 7 petition.

Inapplicability of precedent confined to Section 9 to a Section 7 petition - Reliance on the Supreme Court's decision in Mobilox Innovations (which concerns Section 9) was misplaced and not determinative of the present Section 7 petition. - HELD THAT: - The Tribunal noted that the corporate debtor relied on Mobilox Innovations Pvt. Ltd. v. Kirusa Software (P) Ltd. as authority. However, Mobilox addresses principles in the context of Section 9 claims, whereas the present petition is filed under Section 7. The Tribunal therefore held that the precedent was wrongly relied upon and does not govern the maintainability analysis under Section 7 and its proviso applicable to real estate allottees. [Paras 24]

The Mobilox reasoning was held inapplicable to the Section 7 petition and did not assist the applicants.

Final Conclusion: The Company Petition under Section 7 was rejected: the applicants, being single allottees, did not satisfy the proviso requiring a minimum number of allottees for real estate projects and the claimed transfer did not qualify as a financial debt; reliance on a Section 9 precedent was held misplaced.

Insolvency Resolution Process of Personal Guarantor - co-extensive liability of surety - voidable contract caused by coercion - debt registered with Information Utility - moratorium during insolvency resolution process

Insolvency Resolution Process of Personal Guarantor - co-extensive liability of surety - Maintainability of initiation of insolvency resolution process against the personal guarantor prior to crystallisation of recoverable amount from the corporate debtor - HELD THAT: - The Tribunal held that the Code permits initiation of the insolvency resolution process against a personal guarantor even if amounts recoverable from the corporate debtor in its CIRP (by resolution plan or liquidation) are yet to be ascertained. The legislative scheme contemplates concurrent proceedings to enable a comprehensive picture of assets and to assist creditors and the committee of creditors in negotiating settlements; moreover, the surety's liability is co-extensive with that of the principal borrower, so crystallisation of the corporate debtor's recoverable amount is not a precondition to proceedings against the guarantor. [Paras 5]

Proceedings against the personal guarantor are maintainable despite pending CIRP proceedings of the corporate debtor.

Voidable contract caused by coercion - Allegation that the personal guarantor was coerced into executing the guarantee and that the guarantee is void - HELD THAT: - The Tribunal found the coercion contention implausible and unconvincing, reasoning that it was unlikely the guarantor would not be alerted when signing numerous documents related to another's loan and that no contemporaneous legal action was taken to rescind the contract. Under contract law a contract induced by coercion is voidable at the option of the aggrieved party, and absent any action to avoid the agreement the guarantee remains valid and enforceable. [Paras 5]

The contention of coercion is rejected and does not render the guarantee void.

Debt registered with Information Utility - Objection to the debt on the ground of lack of supporting vouchers and challenge to the statements of account - HELD THAT: - The Tribunal recorded that the financial creditor had registered the debt with an Information Utility and annexed the registration. Relying on the statutory bar in section 99(3) of the Code, the debtor is not entitled to dispute the validity of a debt registered with an information utility. Consequently, the objection that vouchers and supporting documents were not placed on record does not sustain dismissal of the petition. [Paras 5]

The challenge to the debt based on absence of vouchers or supporting documents is unsustainable where the debt is registered with an Information Utility.

Insolvency Resolution Process of Personal Guarantor - moratorium during insolvency resolution process - Admission of the petition under Section 95 and initiation of the individual insolvency resolution process against the personal guarantor, with declaration of moratorium - HELD THAT: - After considering the report of the Resolution Professional and the records, and finding that requirements of Section 95 were satisfied (including default and absence of disqualifying proceedings under Chapter II), the Tribunal admitted the petition under Section 100 and initiated the Insolvency Resolution Process against the personal guarantor. The moratorium was declared to commence from the date of this order for the period and subject to the consequences prescribed by the Code; directions were given to the Resolution Professional regarding public notice, claims registration, preparation of list of creditors, repayment plan procedures and convening of creditors' meeting as per the statutory timetable. [Paras 6]

The petition is admitted, the individual insolvency resolution process is initiated against the personal guarantor and moratorium is declared with consequential directions to the Resolution Professional.

Final Conclusion: The Tribunal admitted the petition under the Code, initiated the insolvency resolution process against the personal guarantor, rejected the guarantor's challenges (maintainability, coercion, and dispute of debt where registered with an Information Utility), declared the moratorium and directed the Resolution Professional to take statutory steps for notices, claims, creditors' list, repayment plan and creditors' meeting.

Operational Creditor's claim of default - Absence of a bona fide dispute - Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Requirement of consent and disclosures by IRP - Deposit to meet IRP's expenses - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Operational Creditor's claim of default - Absence of a bona fide dispute - Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Section 9 petition was maintainable and liable to be admitted because the operational debt was due and payable and no dispute had been raised by the corporate debtor. - HELD THAT: - The Tribunal found that the operational creditor provided freight-forwarding and logistics services to the corporate debtor since 2007 and invoices became payable after 17.09.2016. The corporate debtor failed to make payments despite repeated oral and written demands and did not file any reply or raise any objection after service of the demand notice and the petition, remaining ex parte. Part payments in the running ledger were noted but did not negate the existence of default. In the absence of any pleaded or substantiated dispute by the corporate debtor, the requisite preconditions for admission under Section 9 were satisfied and the claim was held to be established as due and payable by the corporate debtor. [Paras 2, 3, 4]

Application under Section 9 admitted and default established against the corporate debtor.

Appointment of Interim Resolution Professional - Requirement of consent and disclosures by IRP - An Interim Resolution Professional was to be appointed and such appointee must file consent in Form 2 and make statutory disclosures. - HELD THAT: - The applicant did not propose an IRP; the Tribunal therefore appointed Mr. Rakesh Kumar Jindal as the Interim Resolution Professional subject to there being no disciplinary proceedings pending against him. The appointed IRP was directed to file specific consent in Form 2 and to make the disclosures mandated by the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 before assuming functions, ensuring compliance with the statutory requirements for appointment. [Paras 5]

Mr. Rakesh Kumar Jindal appointed as IRP, subject to filing of consent and required disclosures.

Deposit to meet IRP's expenses - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Operational creditor to deposit specified funds with the IRP and the moratorium under Section 14 follows upon admission of the application. - HELD THAT: - The Tribunal directed the applicant to deposit a sum of Rs. 2 lacs with the Interim Resolution Professional to meet out expenses for performance of IRP's functions, to be adjusted by the Committee of Creditors as accounted by the IRP and refundable to the applicant accordingly. Consequent to admission under Section 9(5), the moratorium envisaged under Section 14(1) was declared to operate in relation to the corporate debtor, with the protections and restrictions of Sections 14(2) to 14(4) applying during the moratorium. [Paras 6, 7]

Applicant directed to deposit funds with IRP; moratorium under Section 14 declared.

Final Conclusion: The Section 9 petition was admitted as the operational debt was found due and payable with no dispute raised by the corporate debtor; an IRP was appointed subject to statutory consent and disclosures, the applicant was directed to deposit funds to meet IRP's expenses, and the moratorium under the Code was declared to operate in respect of the corporate debtor.

Initiation of Insolvency Resolution Process against Personal Guarantor - Liability of surety co-extensive with principal borrower - Coercion and voidable contract - Information Utility registration precludes dispute on debt validity - Admission of petition under Section 95/100 of the IBC with interim moratorium

Initiation of Insolvency Resolution Process against Personal Guarantor - Liability of surety co-extensive with principal borrower - Whether initiation of Individual Insolvency Resolution Process against the personal guarantor is maintainable even though amounts recoverable from the corporate debtor in its CIRP are not yet crystallized. - HELD THAT: - The Tribunal held that the Code envisages initiation of insolvency resolution against a personal guarantor to enable a comprehensive view of assets available during and after insolvency of the corporate debtor, thereby assisting creditors and the Committee of Creditors in negotiations. There is no provision barring initiation against a personal guarantor until the recoverable amount from the corporate debtor is finally ascertained. The Tribunal further applied the settled principle that a surety's liability is co-extensive with that of the principal borrower, and therefore initiation against a guarantor is lawful notwithstanding unresolved CIRP outcomes. [Paras 5]

Proceedings against the personal guarantor are maintainable and the petition under Section 95 is admissible.

Coercion and voidable contract - Whether the personal guarantor's plea that he was coerced into executing the guarantee renders the guarantee void and bars initiation of insolvency proceedings. - HELD THAT: - The Tribunal found the coercion/contention implausible and unconvincing, observing that it is unlikely the guarantor would not have been alerted when signing numerous loan-related documents and noting absence of any prior legal action to avoid the contract. Under contract law, a contract induced by coercion is voidable at the option of the aggrieved party; absent timely steps to avoid the contract, the agreement remains valid and enforceable. Consequently, the plea of coercion did not negate the enforceability of the guarantee. [Paras 5]

The contention of coercion is rejected and does not render the guarantee void or bar the petition.

Information Utility registration precludes dispute on debt validity - Whether the respondent can dispute the validity of the debt when the financial creditor has registered the debt with an Information Utility. - HELD THAT: - The Tribunal relied on Section 99(3) of the Code and the fact that the debt was registered with the Information Utility (NESL) as annexed to the financial creditor's application. It held that when a debt is so registered, the debtor is not entitled to raise a dispute as to the validity of that debt, rendering the respondent's challenge to vouchers and supporting entries unsustainable in the context of the report under Section 99. [Paras 5]

The respondent's challenge to the bank statements and supporting vouchers is not maintainable where the debt is registered with an Information Utility.

Final Conclusion: The petition under Section 95(1) of the IBC is admitted under Section 100, the Insolvency Resolution Process is initiated against the personal guarantor, moratorium is declared for 180 days from the date of this order, and the Resolution Professional is directed to take steps for notice, claim registration, preparation of creditors' list and formulation of a repayment plan in accordance with the Code.

Limitation under Article 137 of the Limitation Act - Acknowledgement of debt and reckoning of limitation under Section 19 of the Limitation Act - Pecuniary threshold for initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code - Operational debt and default under the Insolvency and Bankruptcy Code - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Appointment and duties of Interim Resolution Professional

Limitation under Article 137 of the Limitation Act - Acknowledgement of debt and reckoning of limitation under Section 19 of the Limitation Act - Application under Section 9 is within limitation. - HELD THAT: - The Authority applied Article 137 of the Limitation Act to Section 9 applications and held that limitation is three years from the date when the right to apply accrues. The last payment by the corporate debtor on 16.03.2017 was treated as an acknowledgement of liability such that limitation is to be reckoned from that date. The petition filed on 01.03.2020 therefore falls within three years and is not time-barred. [Paras 5, 6]

Limitation defence rejected; the Section 9 petition is time barred.

Pecuniary threshold for initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code - Pecuniary threshold applicable at the time of filing is satisfied. - HELD THAT: - The Authority noted that the Ministry's notification increasing the minimum default to one crore was issued on 24.03.2020 and the present petition was filed on 01.03.2020. As such the notification is prospective and not applicable to the petition. The petition therefore meets the pecuniary threshold applicable prior to the notification. [Paras 7]

Pecuniary requirement under Section 9 is satisfied for the petition as filed.

Operational debt and default under the Insolvency and Bankruptcy Code - There exists an operational debt and default by the corporate debtor. - HELD THAT: - The corporate debtor's defence that supplied goods were defective and that inspection/quality reports were not provided was not supported by evidence. No agreement was produced to negate interest or liability. The Authority drew an adverse inference against the respondent and concluded that the corporate debtor had admitted liability to the stated sum. On this basis the debt was held to be an operational debt and default was established within the meaning of the Code. [Paras 8, 9]

Operational debt and default established; Section 9 application is meritorious on this ground.

Admission of application and initiation of CIRP under Section 9(5) - Appointment and duties of Interim Resolution Professional - Application admitted and CIRP ordered; IRP appointed and directed to perform statutory duties. - HELD THAT: - Having found limitation satisfied, pecuniary threshold met and operational debt/default established, the Authority admitted the application under Section 9(5) and ordered initiation of the Corporate Insolvency Resolution Process. The operational creditor had not proposed an IRP, accordingly the Tribunal appointed Mr. Ramkripal Sharma as Interim Resolution Professional and directed him to submit acceptance, disclosures and perform duties under the Code, Rules and Regulations. The operational creditor was directed to deposit funds to meet IRP expenses and provide the paper book to the IRP. [Paras 9, 10, 11]

Application admitted; CIRP initiated; IRP appointed with directions for disclosure, acceptance and funding.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Moratorium declared and scope of prohibitions specified. - HELD THAT: - Consequent to admission, the Authority declared the moratorium under Section 14 and specified prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests, recovery of property in possession of the corporate debtor, and suspension or termination of licenses on grounds of current dues. The order also noted statutory exceptions including supplies or transactions as may be notified and the non application of moratorium to sureties under the Amendment Act, 2018. [Paras 12, 13]

Moratorium imposed with specified statutory exceptions.

Final Conclusion: The Section 9 application was admitted: the petition was held timely, met the pecuniary threshold as filed, and established an operational debt and default; CIRP is ordered to commence, an Interim Resolution Professional is appointed with directions for acceptance, disclosures and funding, and the statutory moratorium is declared with its prescribed scope and exceptions.

Pre-deposit requirement under Section 35F as made applicable to the Finance Act, 1994 - restoration of appeal on condition of making pre-deposit - exercise of writ jurisdiction to set aside appellate order rejecting appeal for non-deposit - opportunity to make pre-deposit to enable decision on merits

Pre-deposit requirement under Section 35F as made applicable to the Finance Act, 1994 - exercise of writ jurisdiction to set aside appellate order rejecting appeal for non-deposit - restoration of appeal on condition of making pre-deposit - Ext.P3 order rejecting the petitioner's appeal for failure to make the mandatory pre-deposit was set aside and the appeal was restored subject to the petitioner making the pre-deposit within a stipulated time. - HELD THAT: - The Court accepted that the appeal before the First Appellate Authority had been dismissed for non-compliance with the mandatory pre-deposit obligation under Section 35F as applicable to the Finance Act, 1994. Having considered relevant precedent recognising that an opportunity may be afforded to make the pre-deposit so that the appeal can be decided on merits, the High Court exercised its writ jurisdiction to set aside the impugned appellate order and restore the appeal. The restoration was conditional: the petitioner was directed to make the pre-deposit in terms of Section 35F within one month, failing which the benefit granted would lapse. The order thus balances enforcement of the statutory pre-deposit requirement with the discretion to permit compliance and enable adjudication on merits. [Paras 4]

Ext.P3 set aside; Ext.P2 restored to file of the First Appellate Authority on condition that the petitioner makes the pre-deposit under Section 35F within one month.

Final Conclusion: Writ petition allowed; impugned order rejecting the appeal for non-deposit set aside and the appeal restored on condition that the petitioner makes the requisite pre-deposit within one month, so that the First Appellate Authority may decide the appeal on merits.

Beneficial/exemptive provision - refund as a concession or benefit - strict compliance with statutory conditions for refund - limitation for refund claims under a statutory scheme - filing before a non-departmental authority and condonation - exercise of writ jurisdiction under Article 226 for remedial relief

Beneficial/exemptive provision - refund as a concession or benefit - strict compliance with statutory conditions for refund - limitation for refund claims under a statutory scheme - Characterisation of Section 104 and the legal consequence for limitation and entitlement to refund. - HELD THAT: - The Court held that Section 104 is a beneficial provision granting an exemption/refund as a concession and does not operate by rendering the charging provisions (Sections 66/66B) unconstitutional or ultravires. Consequently, entitlement to refund arises only upon compliance with the conditions specified in Section 104 and the Notification; the concession must be construed strictly. The mere fact of subsequent legislative insertion does not expand the general three-year limitation applicable where a charge is held ultra vires; where a refund is conferred as a legislative benefit, the specific time-limit prescribed by the grant of benefit governs. The petitioner's argument that the refund attracted the broader limitation because the levy was unconstitutional was rejected as inapposite to the factual and legal matrix of this case. [Paras 18, 19, 20, 21]

Section 104 is a beneficial/statutory concession and claimants must comply with the specific conditions and time-limit therein; the petitioner is not entitled to extend limitation on the ground that the levy was rendered unconstitutional.

Filing before a non-departmental authority and condonation - exercise of writ jurisdiction under Article 226 for remedial relief - Whether filing the refund claim before PIPDIC (the authority to whom payment was made) satisfied the conditions of Section 104 or rendered the claim time-barred, and the appropriate relief. - HELD THAT: - Although Section 104 does not specify the forum for filing, the petitioner had filed its claim with PIPDIC (to whom service tax was paid) before Presidential assent and repeatedly followed up when there was no response. The Court found that the petitioner showed diligence and that the error in approaching PIPDIC - an entity different from the Departmental authority - was not a hyper-technical bar to relief. While the impugned order adopting a plausible view to reject the claim was not without foundation, the High Court exercised its writ jurisdiction to set aside that order in the interest of justice and directed the respondents to process the petitioner's refund request on merits. The Court therefore remitted the claim for fresh consideration, taking into account the petitioner's timely approach to PIPDIC and subsequent steps taken to pursue the claim with the Department. [Paras 23, 24, 25, 26, 27]

Impugned rejection set aside; respondents directed to process and decide the refund claim on merits within four weeks from uploading of the order.

Final Conclusion: Writ petition allowed. The order rejecting the refund claim is set aside and the respondents are directed to process and decide the petitioner's refund claim on merits within four weeks from the date of uploading of this order.

Refund of service tax - limitation under Section 11B of the Central Excise Rules, 1944 - application of Mafatlal principle to refund claims - benefit of precedent to non-parties

Limitation under Section 11B of the Central Excise Rules, 1944 - refund of service tax - Whether the refund claims filed by the appellant are barred by the time limit prescribed under Section 11B of the Central Excise Rules, 1944. - HELD THAT: - The appellant filed refund claims on 27.01.2020 for service tax paid in the periods listed above. The tribunal found that the claims were filed after the one year period prescribed by Section 11B. The appellant had admittedly paid the service tax and never challenged the levy earlier. The tribunal applied the binding precedent in Mafatlal Industries Limited to hold that refunds of tax paid are subject to the limitation prescribed by Section 11B even where the tax is subsequently held not to have been payable. Consequently the refund claims were held to be time barred.

The refund claims are barred by limitation under Section 11B and therefore liable to be rejected.

Benefit of precedent to non-parties - refund of service tax - Whether the appellant, as a member of FICCI, is entitled to the benefit of the decision in Calcutta Club Limited though it was not a party to that litigation. - HELD THAT: - The appellant relied on the Supreme Court decision in Calcutta Club Limited and contended that, as a member of FICCI (a party to that litigation), it should derive the benefit. The tribunal rejected this contention, reasoning that the parties to Calcutta Club litigated their own cases and not on behalf of their members; membership of a federation that was a party does not automatically extend the benefit of that judgment to non parties. The tribunal therefore declined to treat the date of the Calcutta Club decision as the relevant starting point for limitation for the appellant's claims.

Benefit of the Calcutta Club decision cannot be extended to the appellant merely by virtue of its membership of FICCI; the appellant is not entitled to the limitation benefit as a non party.

Final Conclusion: The appeals are dismissed; the adjudicating authority's rejection of the refund claims is upheld on the grounds that the claims were time barred under Section 11B and the appellant, not being a party to the Calcutta Club litigation, cannot claim benefit of that decision.

Refund of pre-deposit made under section 35F of the Central Excise Act, 1944 - adjustment/appropriation of pre-deposit against confirmed demand - partial confirmation of demand - interest payable under Section 35FF of the Central Excise Act, 1944 - mandate to refund within prescribed time and departmental circulars

Refund of pre-deposit made under section 35F of the Central Excise Act, 1944 - adjustment/appropriation of pre-deposit against confirmed demand - partial confirmation of demand - mandate to refund within prescribed time and departmental circulars - interest payable under Section 35FF of the Central Excise Act, 1944 - Entitlement of the appellant to refund of the pre-deposit paid at the time of filing appeal before CESTAT despite partial confirmation of demand and payment of interest thereon. - HELD THAT: - The Tribunal found that the appellant had indisputably deposited the pre-deposit under section 35F while preferring the appeal and that the adjudicating authorities erred in withholding and ultimately adjusting that deposit against a subsequently confirmed portion of demand. Reliance on departmental circulars established a clear mandate to refund pre-deposits where the appellate authority decides in favour of the appellant or where remand/partial decisions are involved: the Board's instructions require refund (with interest) within prescribed time limits and direct that adjustments should not be withheld in anticipation of a later confirmation. The Tribunal examined Circular Nos.802/35/2004, 1053/02/2017 (Master Circular), 984/08/2014 and related instructions and held that even Circular No.984/08/2014 does not authorise automatic set off of a section 35F pre-deposit merely because part of the demand was later confirmed; rather, the departmental instructions contemplate refund (and payment of interest) where appropriate, and any recovery of confirmed demand may be effected separately through recovery proceedings. The Tribunal therefore concluded that the refund claim had been wrongly rejected and that the appellant was entitled to refund of the pre-deposit along with interest at the applicable rate from the date of deposit until realisation, while leaving the Department free to recover the confirmed demand by appropriate proceedings.

Refund of the pre-deposit allowed with interest; departmental adjustment/appropriation of the deposit was held erroneous and Department may pursue recovery of the confirmed demand separately.

Final Conclusion: The appeal is allowed: the pre-deposit paid under section 35F is to be refunded to the appellant with interest under Section 35FF from date of deposit until realisation; the Department remains entitled to recover the partially confirmed demand by appropriate recovery proceedings.

Imposition of penalty for failure to pay service tax - extended period of limitation - liability of commission from network marketing companies to service tax - pre show cause notice payment and bar to further proceedings - Tribunal precedent in Charanjeet Singh Khanuja - application of Section 80 of the Finance Act, 1994

Imposition of penalty for failure to pay service tax - pre show cause notice payment and bar to further proceedings - Tribunal precedent in Charanjeet Singh Khanuja - Whether the penalties imposed by the First Appellate Authority should be sustained. - HELD THAT: - The Tribunal accepted the appellant's contention that, in light of the Tribunal's decision in Charanjeet Singh Khanuja and the existence of conflicting views during the relevant period as to whether commissions from network marketing companies attracted service tax, the extended period of limitation was not appropriately applicable. The appellant had paid the service tax (and interest) relating to the disputed commission component prior to issuance of the Show Cause Notice. Having regard to these circumstances the Tribunal held that proceedings should have been concluded before issuance of the Show Cause Notice and that imposition of penalties was not warranted. The Tribunal accordingly set aside the penalties which had been imposed by the First Appellate Authority. [Paras 5]

Penalties imposed by the First Appellate Authority are set aside.

Confirmation of service tax demand - liability of commission from network marketing companies to service tax - Whether the service tax demand confirmed in the Order in Original should be disturbed. - HELD THAT: - The Tribunal did not interfere with the Service Tax demand as confirmed in the Order in Original. While the Tribunal found reason to set aside penalties for the reasons stated, the confirmation of the assessed service tax in the adjudication order was left intact. [Paras 5]

Service Tax as confirmed in the Adjudication order is not interfered with.

Final Conclusion: The appeal is allowed to the extent of setting aside the penalties imposed by the First Appellate Authority; the Service Tax demand confirmed in the adjudication order is sustained, and consequential relief is granted as per law.

Validity of show cause notice - classification of goods - Garbage Compactor as special purpose motor vehicle - classification of fabricated bodies mounted on duty paid chassis - separability and inseparability - applicability of Chapter Note to Chapter 87 (building/fabrication on chassis amounts to manufacture) - entitlement to exemption under Notification No.6/2006 CE for motor vehicles/special purpose vehicles

Validity of show cause notice - Whether the show cause notice is tenable where no contemporaneous physical examination report or related verification documents exist in the records - HELD THAT: - The Tribunal recorded that the show cause notice was founded on an alleged physical examination of the manufacturing process but, upon enquiry, no such physical verification report, panchanama or related documents were present in the Commissionerate records. In that factual backdrop the Tribunal held that the entire basis for issuance of the show cause notice failed and that the appeal could be disposed on this short point. The Tribunal nevertheless proceeded to examine the matter on merits but noted that the Commissioner drew upon subsequent division report and a Chartered Engineer's certificate when adjudicating. [Paras 4]

Absence of any contemporaneous physical verification report vitiates the foundational basis of the show cause notice; appeal may be disposed on that ground.

Classification of goods - Garbage Compactor as special purpose motor vehicle - entitlement to exemption under Notification No.6/2006 CE for special purpose vehicles - Whether the vehicles described as Garbage Compactors are classifiable under Chapter Heading 87.05 and eligible for exemption under Notification No.6/2006 CE - HELD THAT: - Having regard to the manufacturing process as described by the jurisdictional division and the Chartered Engineer's certificate, the Tribunal accepted that the compactor equipment is mounted part by part on the duty paid chassis such that no separately marketable article emerges prior to its becoming an integrated vehicle. Relying on earlier tribunal and appellate decisions and the Chapter Note treating building/fabrication on chassis as manufacture for the relevant headings, the Tribunal concluded that the vehicles in question are 'special purpose motor vehicles' within Chapter 87.05 and satisfy the condition for exemption under Notification No.6/2006 CE (subject to the condition that the chassis is duty paid). [Paras 4]

Garbage Compactors are classifiable under CH 87.05 and correctly cleared without payment of duty by claiming Notification No.6/2006 CE.

Classification of fabricated bodies mounted on duty paid chassis - separability and inseparability - applicability of Chapter Note to Chapter 87 (building/fabrication on chassis amounts to manufacture) - entitlement to exemption under Notification No.6/2006 CE for motor vehicles - Whether the tipper bodies fabricated and mounted on duty paid chassis are distinct excisable goods classifiable under Chapter 87.07 or are inseparable parts resulting in classification of the final product as motor vehicle eligible for exemption under Notification No.6/2006 CE - HELD THAT: - The Tribunal examined the manufacturing description (including the division's report and Chartered Engineer's certificate) and found that the tipper bodies were fabricated in an integrated, piece by piece manner on the chassis such that the body becomes inseparable from the chassis and the end result is a motor vehicle. The Tribunal applied the Chapter Note (treating building/fabrication on chassis as manufacture for the relevant headings) and precedent considering post insertion of the Chapter Note, concluding that where the body is built on a duty paid chassis and becomes an inseparable part, classification under CH 87.07 as an independent body is incorrect and the exemption under Notification No.6/2006 CE (Sr. No.39 with its conditions) is properly availed. [Paras 4]

Tipper bodies fabricated/mounted in an integrated manner on duty paid chassis are inseparable and correctly classified as part of the motor vehicle; exemption under Notification No.6/2006 CE is correctly claimed.

Final Conclusion: The revenue appeal is dismissed: the show cause notice lacked a contemporaneous physical verification report and, on the merits, the Commissioner's findings that the garbage compactors are special purpose vehicles (CH 87.05) and that the tipper bodies fabricated in an integrated manner on duty paid chassis form inseparable parts of motor vehicles (and were correctly cleared under Notification No.6/2006 CE) are upheld.

Entry Tax leviable on value at time of entry - Value of goods as purchase price declared in Form F - Equalized List Price (ELP) not recognised for levy under Entry Tax Act - Taxable quantum and taxable market value under Entry Tax Act - Interpretation of taxing statute - no implication of provisions not expressed

Entry Tax leviable on value at time of entry - Value of goods as purchase price declared in Form F - Equalized List Price (ELP) not recognised for levy under Entry Tax Act - Whether entry tax could be levied on Equalized List Price (ELP) or correctly levied on the stock transfer price shown in Form F at the time of entry into the local area. - HELD THAT: - The Court held that the Entry Tax Act levies tax on the entry of goods into a local area for consumption, use or sale and that the value of goods for this purpose is the purchase price as defined by reference to the VAT Act and as declared at the time of entry. The appellant's internal nomenclature of Equalized List Price (ELP) for nationwide uniform retail pricing is not recognised by the Entry Tax Act or the VAT Act and cannot be adopted as the basis for charging entry tax. Entry tax is charged at the point of entry and not at the subsequent point of sale or consumption; hence the stock transfer price declared in Form F, which records the value at the time of entry, was rightly treated as the value of the goods for levy of entry tax. The Court also noted that a taxing statute must be interpreted according to what is clearly expressed and cannot be read to import a novel concept of ELP into the statutory scheme. [Paras 10, 11, 12, 13, 14]

The authorities were correct in levying entry tax on the stock transfer price declared in Form F; ELP is alien to the Entry Tax Act and cannot be adopted as the taxable value.

Taxable quantum and taxable market value under Entry Tax Act - Interpretation of taxing statute - no implication of provisions not expressed - Whether the assessing and appellate authorities erred in failing to examine definitions of taxable quantum, taxable market value and value of goods in the Entry Tax Act and VAT Act when rejecting the appellant's claim. - HELD THAT: - The Court examined the statutory definitions including value of goods and the components of taxable quantum under the Entry Tax Act and concluded that the authorities acted consistently with those definitions in treating the declared purchase/stock transfer price as the value for entry tax. The Court emphasised the settled principle that courts may not import provisions into a taxing statute to supply assumed deficiencies and relied on this principle to reject the appellant's contention that ELP should supplant the statutory measures of value. [Paras 11, 14]

There was no error in the authorities' application of the statutory definitions; the rejection of the ELP-based claim was legally sustainable.

Final Conclusion: The appeal is dismissed; the levy of entry tax based on the stock transfer price declared in Form F for the period 1.4.2013 to 31.3.2014 was upheld and the claim based on ELP was rejected.

Non-appearance of complainant under Section 256 of the Code of Criminal Procedure and resultant acquittal - Judicial discretion in passing order of acquittal under Section 256 Cr.P.C. - Duty to record reasons when declining to adjourn and dispensing with acquittal

Non-appearance of complainant under Section 256 of the Code of Criminal Procedure and resultant acquittal - Judicial discretion in passing order of acquittal under Section 256 Cr.P.C. - Duty to record reasons when declining to adjourn and dispensing with acquittal - Whether the learned Magistrate rightly exercised judicial discretion and lawfully acquitted the accused under Section 256 Cr.P.C. on account of the complainant's repeated non-appearance. - HELD THAT: - Section 256(1) Cr.P.C. mandates that where the complainant summoned does not appear on the appointed date the Magistrate shall, notwithstanding anything contained, acquit the accused unless he thinks it proper to adjourn the hearing to some other day, in which event reasons ought to be recorded. The learned Magistrate had repeatedly adjourned the matter on three earlier occasions but on the date of dismissal found no reason to adjourn further; he recorded that the complainant had failed on repeated occasions to produce witnesses, that the complainant's conduct amounted to dragging and harassing the accused and that long-drawn proceedings ought to be stopped. These findings reflect application of judicial discretion and give specific reasons why adjournment was not appropriate on that date. The High Court examined the record, the Magistrate's conclusions and the statutory dictate, and held that the Magistrate had complied with Section 256 by applying his judicial mind and recording reasons justifying dismissal and acquittal. There was no shown irregularity or absence of judicial discretion warranting interference with the order of acquittal.

The acquittal under Section 256 Cr.P.C. by the learned Magistrate is upheld as a valid exercise of judicial discretion supported by recorded reasons.

Final Conclusion: The appeal is dismissed; the judgment and order of acquittal dated 07.09.2001 passed by the learned Metropolitan Magistrate under Section 256 Cr.P.C. are upheld and the trial court records are to be returned for information and necessary action.

Condonation of delay - exclusion of period of limitation - extension of limitation in view of Suo Motu Writ Petition (C) No.3 of 2020 - vicarious liability for advocate's negligence - liberal approach to condonation applications

Exclusion of period of limitation - extension of limitation in view of Suo Motu Writ Petition (C) No.3 of 2020 - Application of the Supreme Court's order on extension/exclusion of limitation period to the computation of delay in filing the intra-court appeal - HELD THAT: - The Court applied the order of the Hon'ble Supreme Court dated 8 March 2021 in Suo Motu Writ Petition (C) No.3 of 2020 and held that the appellant was entitled to exclusion of the period from 15th March 2020 to 14th March 2021 for computing limitation and thereafter a further period of 90 days from 15th March 2021. The Court noted the appellant's submission claiming exclusion up to 28th February 2022 but expressly relied on the Supreme Court's framework to determine the exclusion and availability of the additional 90 days, treating the stated period as forming part of the computation for condonation purposes and thereby reducing the effective delay to be explained. [Paras 5, 7]

The period of limitation was accordingly computed after excluding the pandemic period as per the Supreme Court's order and allowing the statutory extra 90 days thereafter.

Condonation of delay - vicarious liability for advocate's negligence - liberal approach to condonation applications - Whether the delay in filing the intra-court appeal ought to be condoned in the facts where the advocate was ill and the appellant had taken prompt steps to instruct filing - HELD THAT: - The Court examined the material placed on record, including the receipt of the Single Judge's order on 18.04.2019, the appellant's prompt internal decision to prefer an appeal and communication dated 6.05.2019 to the advocate, and the supplementary affidavit with medical prescriptions for the advocate. While some prescriptions were old and the advocate had defaulted in filing, the Court observed the settled legal position that a party should not be made to suffer for the advocate's fault where the party has taken prompt and appropriate steps. The respondent's contention that the advocate was engaged in contempt proceedings was not treated as sufficient to reject the appellant's explanation. Applying the well-established principle favouring a liberal approach in condonation applications and finding that the delay was not attributable to the appellant, the Court found the explanation satisfactory. [Paras 6, 8, 9]

The application for condonation of delay was allowed and the delay in filing the appeal was condoned.

Final Conclusion: The application for condonation of delay in APOT 106 of 2021 (GA 1 of 2021) is allowed; the period of limitation is to be computed after excluding the pandemic period as per the Supreme Court order with the additional 90 days, the delay is condoned and the appeal is directed to be listed on 9 September 2022.