TaxTMI Updates e-Newsletter
Sep 05,2020

Permission to file/upload statutory appeal on the GST Web Portal under section 107 of the GST Act, 2017 - deposit of admitted tax, interest, fee, penalty and 10% pre deposit of remaining disputed tax - access to appellate portal upon compliance with undertaking - hearing by virtual mode due to Covid 19 - direction for expeditious disposal of appeal

Permission to file/upload statutory appeal on the GST Web Portal under section 107 of the GST Act, 2017 - deposit of admitted tax, interest, fee, penalty and 10% pre deposit of remaining disputed tax - access to appellate portal upon compliance with undertaking - Petitioner permitted to file and upload the statutory appeal on the GST web portal upon depositing admitted amounts and a 10% pre deposit of the remaining disputed tax and giving the undertaking recorded before the Court. - HELD THAT: - The Court accepted the petitioner's undertaking that it will deposit the amount towards tax, interest, fine, fee and penalty as admitted and will deposit a sum equal to 10% of the remaining disputed tax arising from the impugned order. The State's counsel undertook that on such compliance the concerned authority will allow the petitioner access to the GST Web Portal to upload the statutory appeal as required under Section 107 of the GST Act, 2017. The Court recorded these statements and directed that the needful be done within four weeks.

Permission granted to file/upload the statutory appeal on compliance with the undertaking and pre deposit within four weeks.

Hearing by virtual mode due to Covid 19 - direction for expeditious disposal of appeal - On compliance within four weeks, the appellate authority shall hear the appeal by virtual mode and decide it expeditiously, preferably within three months from filing. - HELD THAT: - The Court, having recorded the petitioner's compliance undertaking, directed that the appellate authority hear the appeal through virtual mode in view of the Covid 19 pandemic and endeavour to decide the appeal expeditiously. The time frame of preference (three months) was indicated for the appellate authority to facilitate prompt disposal after filing.

Appellate authority directed to hear the appeal virtually and decide it expeditiously, preferably within three months from filing, if the petitioner complies within four weeks.

Final Conclusion: Petition disposed of: petitioner to comply with the undertaking (depositing admitted amounts and 10% pre deposit) within four weeks to be permitted to upload the statutory appeal on the GST portal; on such compliance the appellate authority shall grant portal access, hear the appeal virtually and endeavour to decide it expeditiously, preferably within three months.

Direction to adjudicatory authority to decide appeal expeditiously - stay of operation of impugned recovery order pending appellate disposal - lifting of lien on bank account during stay - right to hearing including physical hearing or video conferencing

Direction to adjudicatory authority to decide appeal expeditiously - right to hearing including physical hearing or video conferencing - Mandate to the appellate authority to consider and pass orders on the pending appeal within a specified time and to afford hearing to the appellant. - HELD THAT: - The Court directed the 3rd respondent to consider and pass orders on Ext.P11 appeal within six weeks from receipt of a copy of the judgment. The 3rd respondent is required to hear the petitioner before deciding the appeal, and the hearing may be conducted either physically or through video conferencing. The petitioner must produce a copy of the writ petition together with a copy of this judgment before the 3rd respondent for further action. The direction is procedural and aimed at expeditious disposal of the statutory appeal.

The 3rd respondent shall decide Ext.P11 appeal within six weeks after hearing the petitioner, either physically or via video conferencing; the petitioner to produce copies of the writ petition and this judgment before the 3rd respondent.

Stay of operation of impugned recovery order pending appellate disposal - lifting of lien on bank account during stay - Interim relief in the form of stay of operation of the impugned recovery order and consequential lifting of lien on the petitioner's bank account until the appellate order is communicated. - HELD THAT: - Pending disposal of the appeal by the 3rd respondent and until the order is communicated to the petitioner, the Court granted a stay of operation of Ext.P9 and the communication of the 1st respondent referred to therein. Consequentially, the lien exercised by the 1st respondent on the petitioner's bank account with the 7th respondent is to be lifted for the duration of the stay. This interim measure preserves the petitioner's position during the limited period allowed for appellate adjudication.

Stay granted on Ext.P9 and the referenced communication; lien on the petitioner's bank account with the 7th respondent to be lifted while the stay remains in force.

Final Conclusion: Writ petition disposed by directing the 3rd respondent to decide the pending appeal within six weeks after affording hearing (physical or by video conferencing), with a stay on operation of the impugned recovery order and lifting of the bank lien until the appellate order is communicated; petitioner to place copies of the writ petition and this judgment before the appellate authority.

Transitional credit - Form TRAN-1 - Section 140 of the CGST Act, 2017 - constitutional validity of Rule 117 of the CGST Rules - GST Council recommendation for TRAN-1 - liberty to apply to GST Council through Standing Counsel

Form TRAN-1 - GST Council recommendation for TRAN-1 - liberty to apply to GST Council through Standing Counsel - Petitioner granted liberty to seek filing/recognition of Form TRAN-1 by obtaining recommendation from the GST Council through the Standing Counsel and transmission to the jurisdictional Commissioner to enable credit of transitional (CENVAT) credit. - HELD THAT: - The Court found the controversy in the present petition to be similar to that decided by the Co-ordinate Division Bench in Obelisk Composite Technology LLP and accordingly disposed of the writ petition by adopting the directions in that order. The petitioner is permitted to make an application before the GST Council through the Standing Counsel; the Standing Counsel is requested to hand over the application to the jurisdictional officer for forwarding to the GST Council. The GST Council is to consider the application alongwith requisite particulars, evidence and a certified copy of the order, and if the petitioner's assertions are found correct, the GST Council shall issue the necessary recommendation to the Commissioner to enable the petitioner to avail the benefit of the transitional/CENVAT credit. The direction contemplates prompt consideration so as to give effect to the claim within the time stipulated by the Union of India.

Liberty granted to apply to the GST Council through Standing Counsel for recommendation to the Commissioner to effect credit of transitional/CENVAT credit; writ petition disposed accordingly.

Constitutional validity of Rule 117 of the CGST Rules - Section 140 of the CGST Act, 2017 - Challenge to the constitutional validity of Rule 117 (and the related challenge to Section 140) is not entertained and rejected as no longer res integra. - HELD THAT: - Relying on the reasoning and conclusion in the co-ordinate Division Bench order in Obelisk Composite Technology LLP, the Court recorded that the challenge to the constitutional validity of Rule 117 is not a fresh question for consideration and therefore cannot be entertained. The petition is disposed of in terms of the earlier order which had earlier held that such challenges were no longer res integra and declined to sustain them.

The constitutional challenge to Rule 117 (and related challenge to Section 140) is rejected as not being res integra and is not entertained.

Final Conclusion: Writ petition disposed of by granting the petitioner liberty to apply to the GST Council through the Standing Counsel for recommendation to the Commissioner to enable credit of transitional/CENVAT credit; constitutional challenge to Rule 117 (and related challenge to Section 140) not entertained as no longer res integra.

Detention, seizure and release of goods in transit - Release on payment of tax and penalty under Section 129(1)(a) and 129(1)(b) - Confiscation and fine in lieu under Section 130 - Extraordinary jurisdiction under Article 226 of the Constitution - Availability of alternative remedy under Section 107 - Remand for fresh consideration

Release on payment of tax and penalty under Section 129(1)(a) and 129(1)(b) - Detention, seizure and release of goods in transit - Confiscation and fine in lieu under Section 130 - Whether the learned Single Judge could order release under Section 129(1)(a) without first determining the legality of the orders passed under Section 129(1)(b) and Section 130. - HELD THAT: - The Court observed that Section 129(1)(a) operates where the owner comes forward to pay tax and penalty equal to 100% of the tax payable, but a prior order under Section 129(1)(b) rejecting the documents tendered by the person in charge must first be examined and, if necessary, set aside before an order under Section 129(1)(a) can be lawfully made. Likewise, orders passed under Section 130(1) calling for confiscation or imposition of fines also require determination. The Single Judge did not adjudicate on the validity of the detention/seizure orders impugned in the petitions and proceeded to direct release and distribution of auction proceeds by reference to a circular and Section 168, without first upholding or quashing the earlier statutory orders. The court held that ancillary reliefs premised on the continued existence of the impugned orders cannot be entertained until those orders are adjudicated. For these reasons the Single Judge's approach was not consonant with the statutory scheme governing detention, release and confiscation under the Act. [Paras 10, 11, 12]

The question was not finally decided on merits; the impugned order is unsustainable in view of the failure to determine the validity of orders under Sections 129 and 130 and the matter is remitted for fresh consideration.

Extraordinary jurisdiction under Article 226 of the Constitution - Availability of alternative remedy under Section 107 - Whether the learned Single Judge should have exercised writ jurisdiction under Article 226 in the face of an efficacious alternative remedy by way of appeal under Section 107. - HELD THAT: - The State contended that the respondents had an efficacious statutory remedy under Section 107 and that the Single Judge erred in exercising extraordinary constitutional jurisdiction to grant reliefs that were essentially within the appellate domain. The Court noted this contention and held that the Single Judge ought not to have proceeded to grant the impugned ancillary reliefs without first addressing the statutory orders; given these defects the exercise of writ jurisdiction in the manner done was inappropriate. Rather than deciding the maintainability point finally, the Court found interference necessary and remitted the matter for fresh adjudication in accordance with law so that the statutory remedies and issues may be considered by the Single Judge. [Paras 6, 10, 12]

The exercise of extraordinary jurisdiction in the circumstances was improper; the matter is remitted to permit determination of the statutory orders and consideration of available remedies.

Final Conclusion: Appeals allowed; the Single Judge's order dated 25.08.2019 in the writ petitions is set aside and the matter is remitted to the learned Single Judge to consider afresh all points and pass an order in accordance with law.

Transitional input tax credit - filing of Form TRAN-1 - CENVAT credit transition - GST Council recommendation for transitional credit - liberty to apply for recommendation via Standing Counsel - Rule 117 of the CGST Rules - constitutional validity of Rule 117 - res integra

Filing of Form TRAN-1 - transitional input tax credit - GST Council recommendation for transitional credit - liberty to apply for recommendation via Standing Counsel - Petitioners granted liberty to apply to the GST Council through Standing Counsel for issuance of recommendation to the Commissioner to enable claim/credit of transitional/CENVAT credit and petitions disposed accordingly. - HELD THAT: - The Division Bench found that the present petitions raise the same controversy as decided in Obelisk Composite Technology LLP and accordingly disposed of the petitions in terms of that order. Petitioners were permitted to submit an application to the GST Council through the Standing Counsel, who is requested to hand over the same to the jurisdictional officer for forwarding to the GST Council alongwith particulars, evidence and a certified copy of the order. The Court directed that the GST Council shall take a decision forthwith and, if the petitioners' assertions are found correct, shall issue the requisite recommendation to the Commissioner to enable the petitioners to obtain the benefit of transitional/CENVAT credit within the time stipulated by the Union of India.

Liberty granted to petitioners to apply to the GST Council through Standing Counsel for recommendation to the Commissioner to facilitate transitional/CENVAT credit; writ petitions disposed in those terms.

Rule 117 of the CGST Rules - constitutional validity of Rule 117 - res integra - Challenge to the constitutional validity of Rule 117 is not entertained as it is no longer res integra and the prayer to strike down or read down Rule 117 is rejected. - HELD THAT: - Relying on the coordinate Division Bench decision in Obelisk Composite Technology LLP and earlier treatment of the issue, the Court held that the question regarding the constitutional validity of Rule 117 has already been examined and is not open for fresh adjudication in these petitions. Consequently, the petitions seeking a declaration against Rule 117 were refused to be entertained and dismissed to the extent of that challenge, while procedural relief by way of seeking recommendation from the GST Council was permitted.

Prayer challenging constitutional validity of Rule 117 not entertained and rejected as not res integra; related relief refused.

Final Conclusion: Writ petitions disposed of in terms of the earlier Division Bench order in Obelisk Composite Technology LLP: petitioners granted liberty to apply to the GST Council through Standing Counsel for necessary recommendation to the Commissioner to enable transitional/CENVAT credit, and the challenge to the constitutional validity of Rule 117 is not entertained as it is no longer res integra.

Benefit of input tax credit - anti-profiteering under Section 171 of the CGST Act, 2017 - commensurate reduction in price - methodology of comparing ITC-to-turnover ratios - computation of profiteered amount and refund with interest - non-imposition of penalty by reason of non-retrospectivity of Section 171(3A)

Benefit of input tax credit - anti-profiteering under Section 171 of the CGST Act, 2017 - methodology of comparing ITC-to-turnover ratios - Whether the Respondent failed to pass on additional input tax credit to buyers of flats in project PARKWEST-EMERALD and thereby contravened Section 171 of the CGST Act, 2017 - HELD THAT: - The Authority accepted the DGAP's computation comparing the ratio of CENVAT/VAT (pre-GST) to turnover with the ratio of ITC (post-GST) to turnover for the project PARKWEST-EMERALD. The DGAP found the ITC-to-turnover ratio increased from 4.70% (pre-GST) to 6.69% (post-GST), i.e. an additional benefit of 1.99% of turnover. The Authority held that this additional ITC ought to have been passed on by commensurate reduction in basic and cum-tax prices; by charging GST on pre-GST basic prices the Respondent appeared to have contravened Section 171(1). The mathematical approach of prorating ITC to sold area and computing unit-wise benefit was held to be logical and acceptable for determining the quantum due to buyers. The Authority therefore determined the profiteered amount in respect of PARKWEST-EMERALD and directed restitution to eligible buyers with interest. [Paras 33, 34, 64, 65, 91]

Additional ITC of 1.99% of turnover accrued; profiteered amount for PARKWEST-EMERALD determined as Rs. 9,67,330/- (inclusive of GST); Respondent directed to return this amount to identified buyers with interest @18% p.a. within three months.

Benefit of input tax credit - anti-profiteering under Section 171 of the CGST Act, 2017 - computation of profiteered amount and refund with interest - Whether the Respondent failed to pass on additional input tax credit to buyers of flats in project PARKWEST-MAPLE and thereby contravened Section 171 of the CGST Act, 2017 - HELD THAT: - Using the same ITC-to-turnover comparison methodology for the PARKWEST-MAPLE project, the DGAP computed an increase in the ratio from 1.97% (pre-GST) to 5.59% (post-GST), i.e. an additional benefit of 3.62% of turnover. The Authority accepted that the Respondent did not pass on this additional ITC to eligible buyers and held that the additional benefit must be passed on. The DGAP's unit-wise computation identifying affected buyers was accepted and used to quantify the aggregate profiteered amount for the period under investigation. [Paras 33, 34, 64, 65, 92]

Additional ITC of 3.62% of turnover accrued; profiteered amount for PARKWEST-MAPLE determined as Rs. 3,03,94,113/- (inclusive of GST), of which Rs. 74,929/- relates to Applicant No.2; Respondent directed to return amounts to identified buyers with interest @18% p.a. within three months.

Commensurate reduction in price - computation of profiteered amount and refund with interest - monitoring and compliance by tax authorities - Remedial directions: manner and monitoring of refund and reduction in prices and the period for compliance - HELD THAT: - The Authority ordered that the Respondent reduce prices commensurate with the additional ITC for the two projects and refund the identified profiteered amounts to the eligible buyers mentioned in the DGAP's Annexures. Interest at 18% per annum was directed to be paid from the dates the amounts were collected until payment. The Commissioners of CGST and SGST, Karnataka were directed to monitor implementation and report compliance within four months. The Authority clarified that the investigation covered supplies up to 30.04.2019 and any ITC benefit accruing thereafter must also be passed on by the Respondent; units sold after GST implementation where price already incorporated GST benefit were outside the ambit of this order. [Paras 91, 92, 93, 95]

Respondent ordered to pass on benefits/reimburse identified buyers with interest @18% p.a. within three months; Commissioners CGST/SGST to monitor and report compliance within four months.

Non-imposition of penalty by reason of non-retrospectivity of Section 171(3A) - Whether penalty under Section 171(3A) of the CGST Act, 2017 could be imposed for the period 01.07.2017 to 30.04.2019 - HELD THAT: - The Authority noted that Section 171(3A), prescribing penalty for violation, was inserted w.e.f. 01.01.2020 and therefore was not in force during the period when the contravention occurred (01.07.2017 to 30.04.2019). Consequently, penalty under that provision could not be imposed retrospectively. Having found contravention of Section 171(1), the Authority limited its relief to restitution and interest and did not issue a notice for penalty. [Paras 94]

Penalty under Section 171(3A) not imposed because the provision was not in force for the period of violation.

Final Conclusion: The Authority upheld the DGAP's finding that the Respondent did not pass on additional input tax credit to buyers of flats in projects PARKWEST-EMERALD and PARKWEST-MAPLE for the period 01.07.2017 to 30.04.2019, determined profiteered amounts of Rs. 9,67,330/- and Rs. 3,03,94,113/- respectively (including GST), directed refund to identified buyers with interest at 18% p.a. within three months, required monitoring by the Commissioners of CGST/SGST and declined to impose penalty under Section 171(3A) as it was not in force during the period of contravention.

Violation of Section 171(1) - failure to pass on benefit of input tax credit - anti-profiteering determination and computation of profiteered amount - penalty under Section 122(1)(i) - incorrect or false invoices - absence of penal provision for non compliance with Section 171(1) during the relevant period - insertion of Section 171(3A) by Finance Act, 2019 w.e.f. 01.01.2020 - non retrospectivity of penal provisions

Violation of Section 171(1) - failure to pass on benefit of input tax credit - anti-profiteering determination and computation of profiteered amount - Respondent did not pass on the benefit of input tax credit to buyers for the period from 01.07.2017 to 30.06.2018 and was in violation of Section 171(1) of the CGST Act, 2017. - HELD THAT: - The Authority considered the DGAP's investigation and report dated 29.10.2018 and, after notice and hearing, recorded that the Respondent had denied ITC benefit to buyers on introduction of GST with effect from 01.07.2017. The Authority had earlier determined the profiteered amount for the period 01.07.2017 to 30.06.2018 and held the Respondent to be in contravention of Section 171(1). The present order reiterates that finding on the basis of the material placed before the Authority and the DGAP's report. [Paras 2, 6]

Finding of violation of Section 171(1) for the period 01.07.2017 to 30.06.2018 upheld; profiteered amount previously determined by the Authority stands.

Penalty under Section 122(1)(i) - incorrect or false invoices - absence of penal provision for non compliance with Section 171(1) during the relevant period - insertion of Section 171(3A) by Finance Act, 2019 w.e.f. 01.01.2020 - non retrospectivity of penal provisions - Penalty under Section 122(1)(i) could not be imposed for the respondent's failure to pass on ITC for the period 01.07.2017 to 30.06.2018; penalty proceedings withdrawn. - HELD THAT: - The Authority examined the statutory scheme and observed that no penal provision in Section 122(1)(i) covers failure to pass on benefits of tax reduction or ITC arising under Section 171(1). Although Finance Act, 2019 subsequently inserted Section 171(3A) prescribing specific penalty with effect from 01.01.2020, those penal provisions were not in existence during the period when the contravention occurred. Consequently, the later enacted penal provision could not be applied retrospectively. On that basis the show cause notice seeking imposition of penalty under Section 122(1)(i) was found unsustainable and was withdrawn; the penalty proceedings were dropped. [Paras 7, 9]

Notice for imposition of penalty under Section 122(1)(i) withdrawn; penalty proceedings dropped because no applicable penal provision existed for the contravention in the period 01.07.2017 to 30.06.2018 and subsequent Section 171(3A) is not retrospective.

Final Conclusion: The Authority confirms that the respondent failed to pass on ITC benefits and was liable for profiteering for the period 01.07.2017 to 30.06.2018 (amount previously determined). However, penalty proceedings under Section 122(1)(i) are unsustainable and withdrawn because no penalty provision applied to the anti profiteering contravention during that period and the later insertion of Section 171(3A) is not retrospective.

Fundamental right of life and personal liberty - service of notice and requirement to produce documents - reasonable accommodation due to pandemic and health risk - consent order - power to issue summons at alternative venue

Fundamental right of life and personal liberty - reasonable accommodation due to pandemic and health risk - Whether the petitioner's fundamental right to life and personal liberty required restraint on the respondents from enforcing the notice calling him to appear at Indore in view of COVID 19 and his health concerns - HELD THAT: - The Court recorded that the petitioner had responded to the notice by forwarding the required documents but could not travel to Indore because of COVID 19 related travel restrictions and ongoing health risks. Rather than granting a blanket restraint, the parties agreed a mutually acceptable accommodation: the petitioner would appear at the Directorate General of GST office in Delhi as and when called, and would appear at Indore only after forty five days from the date of the order. The Court accepted and made this arrangement binding on the petitioner. The order thus addresses the petitioner's liberty concern by providing a time limited, health sensitive accommodation rather than declaring the notice void or permanently restraining enquiries. [Paras 3, 4, 6, 7]

Petitioner's liberty concern was accommodated by directing appearance in Delhi when called and postponing appearance at Indore for forty five days; no blanket prohibition on the respondents was granted.

Service of notice and requirement to produce documents - power to issue summons at alternative venue - consent order - Whether respondents could issue fresh summons and where the petitioner was to be required to appear - HELD THAT: - On consent of the parties the Court authorised respondent no.2 to issue fresh summons: for inquiries to be made at the Delhi office of the Directorate General of GST on any date, and/or for inquiries at Indore on any date beyond a period of forty five days from the date of the order. The petitioner expressly undertook to appear in Delhi as and when called and to attend at Indore after the stipulated interval; the Court recorded that the petitioner was bound by that statement. The order thereby preserves the authority of the respondents to continue enquiries while providing spatial and temporal modification to the mode of appearance. [Paras 6, 7, 8, 9, 10]

Respondent may issue fresh summons for inquiries in Delhi on any date and/or in Indore on any date after forty five days; the petitioner is bound to appear in Delhi when called and at Indore after forty five days.

Final Conclusion: By consent, the petition is disposed of by directing that the petitioner shall appear at the Directorate General of GST office in Delhi as and when called and shall appear at Indore only after forty five days; respondents may issue fresh summons accordingly, and the petition is disposed in those terms.

Natural justice - opportunity of hearing - set-off/adjustment of refunds against pending demands - objections to adjustment under Section 245 of the Income Tax Act, 1961 - assessment order under Section 143(1) of the Income Tax Act, 1961 - release of refund with interest

Natural justice - assessment order under Section 143(1) of the Income Tax Act, 1961 - objections to adjustment under Section 245 of the Income Tax Act, 1961 - Impugned order dated 03rd July, 2020 passed under Section 143(1) without dealing with the petitioner's objections was in violation of principles of natural justice. - HELD THAT: - The Court found that although the impugned order records that there was no response from the petitioner, the petitioner had in fact filed written objections with the Assessing Officer on 29th May, 2020 and had also filed objections online with the Centralized Processing Centre prior to passing of the order. Since the order under Section 143(1) was passed without considering those objections or affording the petitioner an opportunity of hearing, it breached the principles of natural justice. The order is therefore set aside and the Assessing Officer is directed to decide the objections afresh by way of a reasoned order after giving an opportunity of hearing to the petitioner.

Impugned order set aside; Assessing Officer to decide petitioner's objections afresh by a reasoned order after hearing within six weeks.

Set-off/adjustment of refunds against pending demands - release of refund with interest - opportunity of hearing - Remand for fresh consideration of objections to adjustment of refund arising in assessment year 2019-20 and of proposed set-off against earlier assessment years, with consequential direction for release of refund if objections are not decided. - HELD THAT: - The Court remitted the objections filed by the petitioner concerning adjustment of the refund for AY 2019-20 against alleged demands for earlier assessment years for fresh consideration. The Assessing Officer is directed to decide those objections within six weeks by a reasoned order after giving the petitioner an opportunity of hearing. The Court further directed that if the objections are not decided within the stipulated period, the petitioner shall be entitled to release of the refund with applicable interest forthwith. All other rights and contentions of the parties were left open.

Objections remanded for fresh adjudication within six weeks; if not decided, refund to be released with applicable interest.

Final Conclusion: The order passed under Section 143(1) dated 03rd July, 2020 is set aside for failure to consider objections and to afford hearing; the Assessing Officer must decide the objections relating to adjustment of the AY 2019-20 refund (and proposed set-off against earlier years) by a reasoned order within six weeks, failing which the refund shall be released with applicable interest.

Allowability of business expenditure - genuineness of expenditure and evidentiary credibility - disallowance under Section 40(a)(ia) of the Act - disallowance under Section 40A(3) of the Act - appellate fact finding and requirement of reasons - perverse finding/non application of mind

Disallowance under Section 40(a)(ia) of the Act - finality of precedent in statutory interpretation - Disallowance under Section 40(a)(ia) insofar as raised in the appeal is not maintainable in view of binding Supreme Court precedent and is answered in favour of the assessee. - HELD THAT: - The Court recorded that the second substantial question of law (relating to the applicability of Section 40(a)(ia)) is no longer res integra because it is covered by the Supreme Court decision in Calcutta Exports Company. In consequence, the Court answered that question in favour of the assessee and against the revenue and found no need for further adjudication on that question in the present proceeding. [Paras 11]

Second substantial question of law answered in favour of the assessee; disallowance under Section 40(a)(ia) not sustained in this appeal.

Allowability of business expenditure - genuineness of expenditure and evidentiary credibility - appellate fact finding and requirement of reasons - perverse finding/non application of mind - disallowance under Section 40A(3) of the Act - Whether the Tribunal properly decided (and gave reasons for) deletion of additions made by the Assessing Officer and the CIT(A) in respect of alleged bogus transportation charges, and whether disallowance under Section 40A(3) was correctly addressed. - HELD THAT: - The Court found that the Tribunal's order (while confirming one addition) was cryptic and failed to disclose reasons or a basis for deleting the other additions; the Tribunal did not perform the role expected of the final fact finding authority in recording its conclusions with supporting reasoning. Because factual adjudication on the genuineness and allowability of the transportation expenditures and on the applicability of Section 40A(3) was not undertaken by the Tribunal with requisite reasoning, the Court concluded that those aspects were not finally decided on merits by the Tribunal and could not be sustained on the record before the Court. [Paras 10, 11]

Order of the Tribunal set aside insofar as it pertains to the disputed findings on genuineness/allowability of transportation expenses and on Section 40A(3); those matters are remitted to the Tribunal for fresh decision in accordance with law.

Final Conclusion: The appeal is disposed of: the Court answers the second substantial question of law in favour of the assessee (following Calcutta Exports Company) and sets aside the Tribunal's order insofar as it relates to the remaining substantial questions (concerning genuineness/allowability of transportation expenses and the applicability of Section 40A(3)), remitting those issues to the Tribunal for fresh adjudication with reasons.

Interpretation of contractual terms - taxability of interest income - allowability of interest expense - remand for fresh consideration

Interpretation of contractual terms - allowability of interest expense - taxability of interest income - remand for fresh consideration - Whether the Tribunal considered the terms of the agreement concerning interest on capital bond and, in consequence, whether the matter requires fresh adjudication. - HELD THAT: - The assessee's case rests on clauses of the agreement and the capital bond arrangement under which it is alleged interest earned on deposits was to be paid to Prestige Holiday Resorts Company Ltd. The Tribunal upheld the lower authorities' conclusion that no liability to pay such interest had accrued, but the High Court found that the Tribunal's impugned order does not evince consideration of the contractual terms relied upon by the assessee. Because the determinative question-whether the agreement imposed an obligation on the assessee to pay interest to Prestige Holiday Resorts Company Ltd and thus whether corresponding interest income and deduction should be attributed or allowed-was not examined by the Tribunal, the Court declined to decide the substantial questions on merits and directed fresh consideration. The matter is remitted for the Tribunal to examine the agreement's terms and decide, in accordance with law, the issues of taxability of interest income and allowability of interest claimed as payable to Prestige Holiday Resorts Company Ltd for the specified assessment years.

Impugned order of the Income Tax Appellate Tribunal is set aside and the matter is remitted to the Tribunal for fresh decision in accordance with law for Assessment years 1997-98 to 2000-01 and 2002-03 to 2004-05.

Final Conclusion: The Tribunal's order is set aside and the appeals are remitted to the Income Tax Appellate Tribunal for fresh adjudication on the contractual obligation to pay interest and the consequent tax consequences for the specified assessment years.

Reopening of assessment - reason to believe - change of opinion - tangible material - limitation for reopening (four year period) - deduction under Section 80-IA for industrial/IT park - characterisation of lease rental as business income v. income from house property - availability of deduction where interest claimed under Section 43B

Reopening of assessment - reason to believe - change of opinion - tangible material - limitation for reopening (four year period) - Validly reopening the assessments under Sections 147/148 of the Income Tax Act - HELD THAT: - The Court held that reassessment cannot be based on a mere change of opinion and that reopening requires 'tangible material' from which the Assessing Officer forms 'reason to believe' that income has escaped assessment. The re assessment orders under Section 147 were examined and found to be founded on assumption, presumption and surmise without application of mind or any new material establishing escapement of income. Further, the notice for reopening the assessment for the assessment year 2003 04 was issued beyond the four year limitation period. In these circumstances the re opening was held invalid as amounting to impermissible review and lacking the requisite tangible material and/or compliance with limitation. [Paras 16, 17, 20, 21, 22]

Reopening of the assessments was invalid; reassessment based on change of opinion and without tangible material was quashed, and the reopening for 2003 04 was time barred.

Deduction under Section 80-IA for industrial/IT park - characterisation of lease rental as business income v. income from house property - Whether lease rental income of the assessee operating the IT/industrial park was eligible for deduction under Section 80 IA as business income - HELD THAT: - The Court found it unreasonable for the department to characterise the assessee's main income (lease rentals) as income from house property when the company's primary object and business was construction, maintenance and leasing of the software/industrial park. Both lower authorities had considered the factual matrix and relevant precedents and concluded that lease rentals in this context constitute business income derived from developing, operating and maintaining facilities covered by Section 80 IA, making the assessee eligible for the deduction. The High Court followed this view and relevant coordinate bench decisions relied upon by the assessee. [Paras 15, 18, 21]

Lease rental income was business income derived from the industrial/IT park and eligible for deduction under Section 80 IA; departmental recharacterisation was unsustainable.

Availability of deduction where interest claimed under Section 43B - Whether the deduction was disallowable for non payment of interest (Section 43B contention) for the assessment year 2003 04 - HELD THAT: - The Court examined the record and accepted the assessee's unchallenged disclosure that the interest shown as payable had been paid within the relevant assessment year and that particulars were furnished to the Assessing Officer in original proceedings. On that factual basis the Court rejected the Revenue's submission that the deduction was granted without payment of interest and held there was no concealment or basis to deny the claim on the Section 43B ground. [Paras 13, 19]

The contention that deduction was disallowable for non payment of interest fails; interest was paid within the relevant year and the deduction stands.

Final Conclusion: All three Tax Case Appeals (TCA Nos.972, 973 & 974 of 2013) filed by the Revenue are dismissed; the reassessments were invalid (including time bar for 2003 04), lease rental income was correctly treated as business income eligible for deduction under Section 80 IA, and the Section 43B objection failed on the record.

Quasi-judicial powers - independence from executive instructions - direction of a higher court to consider stay application on merits - hearing before passing an order - stay of recovery pending appellate reconsideration

Independence from executive instructions - quasi-judicial powers - direction of a higher court to consider stay application on merits - Whether the first appellate authority was justified in relying on CBDT office memoranda requiring payment of 20% of the disputed demand while considering the petitioner's stay application despite this Court's direction to decide the stay application on merits. - HELD THAT: - The Court found that the appellate authority, by insisting on payment of 20% of the disputed demand on the basis of CBDT office memoranda, was effectively acting under dictation and had abdicated the independent exercise of the quasi judicial discretion entrusted to it. Where a higher court has directed the appellate authority to consider a stay application on its merits, the authority must decide the application in accordance with the statutory scheme and its judicial obligations, not by following executive instructions that prescribe a particular outcome. The Court emphasised that a statutory/quasi judicial authority cannot be compelled to exercise discretion in the manner dictated by an executive office memorandum and must exercise its independent judgment when directed to decide on merits.

Ext.P6 was quashed insofar as it relied on CBDT instructions; the matter is remitted to the appellate authority for fresh consideration of the stay application on merits without being influenced by the executive memoranda.

Hearing before passing an order - stay of recovery pending appellate reconsideration - Whether the appellate authority erred in passing Ext.P6 without affording the petitioner an opportunity of hearing and what relief should follow. - HELD THAT: - The Court held that the appellate authority failed to afford the petitioner an opportunity of hearing before passing Ext.P6, contrary to the earlier direction of this Court. Procedural fairness requires that the petitioner be heard, either physically or through video conference, before a fresh order is passed. The Court directed the appellate authority to hear the petitioner and pass fresh orders within four months. Pending such fresh orders and their communication to the petitioner, recovery steps in respect of the amounts confirmed by the assessment orders impugned in the appeal are to be kept in abeyance.

Ext.P6 quashed for lack of hearing; appellate authority directed to hear the petitioner and pass fresh orders within four months, and recovery shall be kept in abeyance until such orders are communicated.

Final Conclusion: Ext.P6 is quashed. The appellate authority must reconsider the petitioner's stay application on merits and after hearing the petitioner (physically or by video conference) within four months; until the fresh order is communicated, recovery of amounts confirmed by the impugned assessment orders shall remain in abeyance.

Recharacterisation of receivables as unsecured loans - imputation of notional interest on delayed receivables - working capital adjustment - benchmarking rate: LIBOR plus credit spread - precedent and rule of consistency

Imputation of notional interest on delayed receivables - working capital adjustment - recharacterisation of receivables as unsecured loans - precedent and rule of consistency - Validity of transfer pricing adjustment by recharacterising overdue receivables from associated enterprises as loans and imputing LIBOR+400 bps interest, and whether the working capital adjustment precludes such notional interest. - HELD THAT: - The Tribunal examined the TPO's recharacterisation of outstanding receivables beyond 180 days as unsecured loans and the consequent imputation of notional interest at LIBOR plus 400 basis points. The assessee produced detailed invoice wise receivable and realization data and relied on earlier Tribunal and Hon'ble Delhi High Court decisions in its favour for prior years. The Revenue relied on factual ratios and patterns of delayed realisation to contend that separate benchmarking for delayed receivables was justified. On consideration, the Tribunal found grounds relating to the principal contention (grounds 2, 2.3, 2.4 and 3) to be made out in the assessee's favour: the assessee had placed on record the calculations and evidence before the TPO/DRP, and the facts for the year under appeal were identical to those previously decided in the assessee's favour. The Tribunal observed that the working capital adjustment and the accepted benchmarking for sale transactions were inextricably linked with receivables and that the approach of aggregating sale and receivable transactions was in accordance with established transfer pricing principles. Consequently, the Tribunal allowed these grounds and disallowed the notional interest adjustment insofar as it conflicted with the accepted facts and prior adjudication. [Paras 8]

Grounds 2, 2.3, 2.4 and 3 are allowed and the notional interest adjustment imposed by the TPO/DRP/AO is set aside to the extent contested.

Academic grounds - benchmarking rate: LIBOR plus credit spread - Whether general or academic grounds (Ground Nos. 1, 2.1, 2.2, 2.5 and 2.6) required independent adjudication. - HELD THAT: - The Tribunal recorded that certain grounds advanced by the assessee were either general in nature or rendered academic by the determinations on the substantive issues. The Tribunal therefore declined to adjudicate those grounds separately, treating them as not requiring independent relief. The Tribunal accordingly dismissed these grounds as either general or academic. [Paras 8]

Ground Nos. 1, 2.1, 2.2, 2.5 and 2.6 are dismissed as general or academic.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the notional interest transfer pricing adjustment in respect of the matters allowed and dismissed certain grounds as general or academic; appeal accordingly partly allowed.

Condonation of delay - penalty under section 271(1)(b) - non-compliance with notice under section 142(1) - ex-parte assessment under section 153A/144 - deletion of additions following Kabul Chawla (Del HC) - technical and venial default

Condonation of delay - service of order - Whether delay in filing appeals against penalty orders should be condoned. - HELD THAT: - The Tribunal considered the assessee's consolidated application for condonation supported by affidavit and the explanation that impugned orders were not personally served on the assessee and that he was engaged in prolonged litigation and personal difficulties. The Tribunal noted that the Ld. CIT(A) subsequently deleted the quantum additions on merit following the Delhi High Court decision in CIT v. Kabul Chawla, so that no tax liability survived. Exercising discretion, and having regard to the bonafide explanation and the pragmatic view appropriate in the facts, the Tribunal held that the assessee was prevented by sufficient cause from filing the appeals within time and that delay should be condoned. [Paras 3, 5]

Delay in filing the appeals is condoned for all the relevant assessment years.

Penalty under section 271(1)(b) - non-compliance with notice under section 142(1) - deletion of additions following Kabul Chawla (Del HC) - technical and venial default - Whether penalty under section 271(1)(b) is leviable after deletion of estimated additions by the appellate authority. - HELD THAT: - The Tribunal recorded that the Assessing Officer had passed ex parte assessment orders under section 153A/144 on estimate basis for non compliance with section 142(1) notices. However, the Ld. CIT(A) deleted the entire additions following the Delhi High Court decision in Kabul Chawla, so the estimated additions did not survive and no tax liability remained. The Tribunal reasoned that once the additions were deleted, the failure to comply with notices became at best a technical or venial default and, in the circumstances, penalty under section 271(1)(b) should not be imposed. Applying this determinative reasoning, the Tribunal set aside the orders imposing penalty and cancelled the penalty for the assessment years in question. [Paras 5, 6]

Orders imposing penalty under section 271(1)(b) are set aside and the penalty is cancelled for all the impugned assessment years.

Final Conclusion: The Tribunal condoned the delay in filing the appeals and, on the basis that the appellate authority deleted the additions (so no tax liability survived), held that the default was technical and cancelled the penalty under section 271(1)(b) for A.Ys. 2005-2006 to 2009-2010; appeals allowed.

Validity of search and warrant of authorisation issued in the name of a non existent entity - assessment framed on a non existing person is void ab initio - jurisdictional defect versus procedural irregularity (non curable under section 292B principle) - consequential invalidity of assessments framed under section 153A where initiation/search is invalid

Validity of search and warrant of authorisation issued in the name of a non existent entity - assessment framed on a non existing person is void ab initio - Whether the search conducted and assessments framed in the name of the erstwhile partnership firm (which had ceased to exist before the warrant/search) are valid or are null and void ab initio. - HELD THAT: - The Tribunal found as an undisputed fact that the partnership firm M/s. R.R. Gold Palace was converted into a private limited company w.e.f. 25.10.2011 and had ceased to exist as a firm at the time the warrant of authorisation was issued (7.2.2013) and search was executed (8.2.2013). The warrant and punchanamas recorded references to both the erstwhile firm and the successor company, but the issuance and execution of the warrant in the name of a non existing entity render the search and consequential proceedings legally untenable. Decisions of higher fora were applied to conclude that framing assessment proceedings against a person or entity that has ceased to exist is not a mere procedural irregularity but a jurisdictional defect which goes to the root of the matter; accordingly such assessments are null and void ab initio. The Tribunal agreed with the CIT(A)'s annulment of the assessments for the stated tax years on this ground and held that continued possession of a PAN or filing of a return under protest does not cure the jurisdictional defect arising from initiation of proceedings in the name of a non existent entity. [Paras 10, 11, 12]

Search and consequent assessments in the name of the non existent partnership firm are void ab initio; the CIT(A)'s quashing of the assessments is upheld.

Jurisdictional defect versus procedural irregularity (non curable under section 292B principle) - consequential invalidity of assessments framed under section 153A where initiation/search is invalid - Whether the defect of initiating search/assessment in the name of a non existing entity is a curable procedural irregularity or a jurisdictional defect which invalidates assessments under section 153A. - HELD THAT: - The Tribunal followed authoritative pronouncements holding that assessment framed in the name of an entity that had ceased to exist cannot be treated as a procedural irregularity curable under principles akin to section 292B, but is a jurisdictional defect invalidating the entire proceeding. Applying that ratio to the facts - i.e. that the firm had ceased to exist before the warrant/search and that the successor company carried on the business - the Tribunal concluded that the assessments completed under section 143(3) read with section 153A are vitiated by the foundational illegality of the warrant/search. Consequently, it was unnecessary to adjudicate other substantive additions or grounds once the jurisdictional nullity was established. [Paras 11, 12]

The defect is jurisdictional and not a curable procedural irregularity; assessments under section 153A consequent to the invalid search are void.

Final Conclusion: For the assessment years 2008 09, 2010 11 and 2011 12 the Tribunal upheld the CIT(A)'s finding that the search and consequential assessments were initiated in the name of a non existent partnership firm and are therefore void ab initio; the revenue appeals are dismissed and the assessee's cross objections are allowed.

Unexplained cash credit - Onus of proof under section 68 - Identity, genuineness and creditworthiness of creditors - Effect of non compliance with notices and assessment under section 144

Unexplained cash credit - Onus of proof under section 68 - Identity, genuineness and creditworthiness of creditors - Effect of non compliance with notices and assessment under section 144 - Whether the sum of Rs. 29,00,000 received as unsecured loans was correctly treated as unexplained cash credit under section 68 and added to the assessee's income. - HELD THAT: - The Tribunal upheld the findings of the Assessing Officer and the CIT(A) that the assessee failed to discharge the onus cast upon him under section 68. The AO had proceeded under section 144 after the assessee did not appear on multiple opportunities in the second round of proceedings despite specific statutory notices seeking party wise confirmations, particulars and documents to substantiate identity and creditworthiness. Although the assessee produced ledger copies, confirmations and bank statements before the CIT(A), the confirmations were incomplete: many lacked PAN, full addresses and documentary evidence of creditors' creditworthiness; the transactions were in cash and mostly below the prescribed denomination. The Tribunal accepted the view that mere submission of incomplete confirmation letters, without requisite particulars enabling verification, did not establish identity, genuineness or creditworthiness of the lenders. Repayments in subsequent years, including by cheque, were not treated as sufficient to prove the transactions at the relevant time. Given the assessee's non compliance with notices, the incomplete nature of confirmations and absence of evidence enabling independent verification, the Tribunal found no merit in the plea that the onus shifted to the revenue to summon creditors; accordingly, the addition was sustained. [Paras 3, 4, 7]

Addition of Rs. 29,00,000 treated as unexplained cash credit under section 68 is sustained; appeal dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the addition of Rs. 29,00,000 as unexplained cash credit under section 68 for AY 2007-2008, the authorities having correctly found that the assessee failed to prove identity, genuineness and creditworthiness of the lenders and had not complied with notices.

Revisionary jurisdiction under section 263 - Appeal pending before the CIT(A) bars exercise of section 263 - Valuation of shares under Rule 11UA and Explanation to section 56(2)(viib) - Limitation for exercise of revisionary power - Change of opinion not a valid ground for revision under section 263

Revisionary jurisdiction under section 263 - Appeal pending before the CIT(A) bars exercise of section 263 - Valuation of shares under Rule 11UA and Explanation to section 56(2)(viib) - Whether the Principal Commissioner of Income Tax could exercise revisional powers under section 263 to revise the valuation of shares when the same valuation issue was the subject matter of an appeal pending before the CIT(A). - HELD THAT: - The Tribunal examined the assessment order, the revisional order and the appeal filed by the assessee against the valuation adopted by the Assessing Officer. Explanation (c) to Section 263(1) was held determinative: where an assessing officer's order has been the subject matter of an appeal, the powers of the Principal Commissioner under section 263 extend only to matters not considered and decided in such appeal. The Tribunal followed the coordinate-bench reasoning (reproduced at paras 11-16 of the cited decision) that the Commissioner is not empowered to re-open issues which the AO has examined and which are pending adjudication before the CIT(A). Applying that principle to the present facts - where the AO had addressed valuation and the assessee had appealed the same to the CIT(A) - the Principal Commissioner was held not justified in exercising revisional jurisdiction to alter the valuation. As the Tribunal accepted the primary contention that the issue was under appeal, it quashed the revisionary order without adjudicating other alternative grounds which were thereby rendered academic. [Paras 6, 7]

Order passed by the Pr.CIT under section 263 quashed; direction to the AO to modify the assessment set aside.

Final Conclusion: The appeal is allowed and the order passed by the Principal Commissioner under section 263 for A.Y.2014-2015 is quashed on the ground that the valuation issue was the subject matter of an appeal pending before the CIT(A), thereby barring exercise of revisional powers.

Levy of fee under section 234E for delayed filing of TDS statements - processing and computation under section 200A(1)(c) - prospective effect of amendment to procedural provision - interaction between charging provision and machinery provision - deletion of demand and consequential interest under section 220(2)

Levy of fee under section 234E for delayed filing of TDS statements - processing and computation under section 200A(1)(c) - prospective effect of amendment to procedural provision - interaction between charging provision and machinery provision - deletion of demand and consequential interest under section 220(2) - Validity of intimation under section 200A computing fee under section 234E for TDS statements relating to periods prior to 01.06.2015 and consequential interest - HELD THAT: - The Tribunal examined whether intimation issued under section 200A (incorporating computation of fee as per section 234E by amendment effective 01.06.2015) could sustain demands for fee in respect of TDS/TCS statements the default for which related to periods prior to 01.06.2015. Having considered conflicting High Court decisions and earlier coordinate Bench rulings, the Tribunal applied the principle that where High Courts differ and there is no adverse decision of the jurisdictional High Court, the view favourable to the assessee is to be followed. The Tribunal accepted the reasoning that the amendment inserting clause (c) in section 200A is procedural and prospective; it does not empower the Assessing Officer to issue intimations under section 200A for computation of section 234E fee in respect of defaults occurring before 01.06.2015. Consequently, intimations issued under section 200A for periods prior to 01.06.2015 which raised demands by charging fee under section 234E were beyond the statutory scope and unsustainable. The Tribunal also held that if the charging of fee under section 234E is not leviable for those periods, the related interest under section 220(2) does not survive. [Paras 16, 22]

Intimation under section 200A charging fee under section 234E for defaults prior to 01.06.2015 is not maintainable; the fee and consequential interest under section 220(2) are deleted and the appeals are allowed.

Final Conclusion: The Tribunal set aside the CIT(A)'s confirmation of fee under section 234E (and consequential interest) where the defaults related to periods prior to 01.06.2015, holding the 2015 amendment to section 200A procedural and prospective and therefore not competent to support such intimations; all appeals are allowed.

Condonation of delay for filing appeal - late filing fee under section 234E - processing/intimation under section 200A(1)(c) - prospective effect of statutory amendment - interest under section 220(2) consequential on fee levy - rule of consistency where High Court decisions conflict

Condonation of delay for filing appeal - procedural/typographical error in Form No.35 - Remfry principle - rectification of technical mistakes - Whether the appeals were barred by delay before the CIT(A) or were filed in time despite a clerical error in Form No.35 - HELD THAT: - The Tribunal examined the record including Form No.35 and the rectification order passed under section 154. The order under section 154 was passed on 11.02.2019 and the assessee filed the appeal on 02.03.2019, which was within time calculated from the rectification order. The CIT(A) had treated the appeals as time-barred by referring to the original intimation dated 11.11.2013 due to a typographical error in Form No.35 where section 154 was mistakenly recorded as section 200A. Applying the principle that procedural or technical mistakes should not defeat substantive rights (as in Remfry and Sons), the Tribunal held that the clerical error must not stand in the way of justice and that there was no inordinate delay. The CIT(A)'s dismissal on account of delay was therefore set aside. [Paras 22, 23]

Appeals were filed in time; dismissal by CIT(A) for delay set aside.

Late filing fee under section 234E - processing/intimation under section 200A(1)(c) - prospective effect of statutory amendment - interest under section 220(2) consequential on fee levy - rule of followership where conflicting High Court decisions exist - Whether fee under section 234E can be levied by intimation under section 200A in respect of TDS statements relating to periods prior to 01.06.2015 (when clause (c) was inserted in section 200A(1)) and whether consequential interest under section 220(2) survives - HELD THAT: - The Tribunal considered competing precedents and statutory scheme. Section 234E is a charging provision introduced earlier, while clause (c) to section 200A(1) (enabling computation of the fee at processing) was inserted w.e.f. 01.06.2015. The Tribunal followed coordinate-bench authorities and the reasoning of the Karnataka High Court that the amendment to section 200A(1) is procedural and prospective; it does not empower the Assessing Officer to compute and demand fee under section 234E for defaults relating to periods prior to 01.06.2015 merely because processing or intimation occurred after that date. Where High Courts are in conflict and the jurisdictional High Court has not decided the issue, the Tribunal applied the settled practice of following the decision favourable to the assessee. Consequently, intimations under section 200A purporting to charge section 234E for pre-01.06.2015 defaults were held not maintainable. As the levy of fee was deleted, related interest charged under section 220(2) was also held not to survive. [Paras 24, 27, 28]

Fee under section 234E levied by intimation under section 200A for defaults prior to 01.06.2015 deleted and consequential interest under section 220(2) deleted; appeals allowed on merits.

Final Conclusion: The Tribunal set aside the CIT(A)'s dismissal for delay and, on the merits, held that late fee under section 234E could not be levied by intimation under section 200A for TDS statement defaults relating to periods prior to 01.06.2015; consequential interest under section 220(2) was also deleted and all appeals were allowed.

Levy of fee u/s 234E for delayed filing of TDS statements - Prospective effect of amendment to section 200A(1) w.e.f. 01.06.2015 - Processing of TDS statements under section 200A - Charging provision v. machinery provision - Condonation of delay for filing appeals - Deletion of consequential interest under section 220(2)

Condonation of delay for filing appeals - Rectification order under section 154 - Whether the appeals before the CIT(A) were time barred or dismissed correctly for delay - HELD THAT: - The Tribunal examined the Form No.35 and the rectification order passed by the CPC under section 154 dated 6.2.2019 and found that the assessee filed the appeal to the CIT(A) against that rectification within the prescribed period. The CIT(A) had treated the appeal as belated by referring erroneously to the original intimation under section 200A dated 27.7.2013, and had not confronted the assessee or appreciated the clerical/typographical error in Form 35 (where section 154 was mistakenly recorded as section 200A). Applying the principle that procedural/technical mistakes should not defeat substantive rights (Remfry & Sons), the Tribunal held there was no delay and set aside the CIT(A)'s order insofar as it dismissed the appeals for delay. [Paras 22, 23]

Assessee's appeals were not time barred; CIT(A)'s dismissal for delay quashed and appeals admitted.

Levy of fee u/s 234E for delayed filing of TDS statements - Prospective effect of amendment to section 200A(1) w.e.f. 01.06.2015 - Processing of TDS statements under section 200A - Charging provision v. machinery provision - Deletion of consequential interest under section 220(2) - Whether fee under section 234E can be levied by intimation under section 200A for TDS statements relating to periods prior to 01.06.2015 - HELD THAT: - The Tribunal considered competing High Court decisions and earlier coordinate Bench rulings. It noted that section 234E is a charging provision introduced w.e.f. 01.07.2012 while clause (c) to section 200A(1) (enabling computation of the fee at processing) was inserted w.e.f. 01.06.2015. Applying the view followed by several coordinate Benches (and the principle that when High Courts conflict, a decision favourable to the assessee may be followed in absence of a jurisdictional High Court ruling), the Tribunal held that the amendment to section 200A(1) is prospective and did not empower issuance of intimations under section 200A for computing/raising demands of fee under section 234E in respect of defaults that occurred prior to 01.06.2015. Consequently, intimation/demand under section 200A charging fee under section 234E for periods prior to 01.06.2015 is not maintainable. As the fee was deleted, associated interest under section 220(2) also did not survive. [Paras 25, 27, 28]

Fee u/s 234E and consequential interest u/s 220(2) charged by intimation under section 200A for defaults prior to 01.06.2015 are deleted; appeals allowed on merits.

Final Conclusion: The Tribunal held that (i) the assessee's appeals were filed within time against the rectification order and the CIT(A)'s dismissal for delay was set aside, and (ii) fee under section 234E and consequential interest under section 220(2) cannot be levied by intimation under section 200A in respect of TDS statement defaults occurring prior to 01.06.2015; accordingly the demands were deleted and the appeals allowed.

Remand for fresh consideration - unascertained trade liabilities - opportunity of being heard / audi alteram partem - verification by Assessing Officer / remand report - disallowance made on ad hoc basis - requirement of supporting vouchers / evidence for expenses - restriction of ad hoc disallowance percentage - appeals allowed for statistical purposes

Unascertained trade liabilities - opportunity of being heard / audi alteram partem - verification by Assessing Officer / remand report - Deletion of expenditure treated as unascertained trade liabilities in AY 2012-13 was set aside and remanded for fresh decision after providing opportunity to parties and verification by AO. - HELD THAT: - The ld. CIT(A) deleted part of the addition by treating certain claimed liabilities as unascertained trade liabilities without himself examining the supporting documents or obtaining verification from the Assessing Officer. The Tribunal held that deletion by the first appellate authority cannot be made after accepting the assessee's submissions as conclusive without giving the AO an opportunity to verify the evidence and file a remand report. In view of the absence of such verification and the procedural omission to afford the AO a hearing, the issue must be remitted to the CIT(A) for fresh adjudication in accordance with law, after giving both the assessee and the AO an opportunity of being heard and obtaining necessary verification. [Paras 7]

Remitted to the ld. CIT(A) to decide afresh after affording opportunity to the assessee and the AO; ground determined in favour of the Revenue for statistical purposes.

Remand for fresh consideration - cryptic directions by appellate authority - opportunity of being heard / audi alteram partem - Direction by CIT(A) concerning allowance of relief in AY 2014-15 (arising from an adjustment in AY 2013-14) was set aside and remitted for fresh consideration after hearing. - HELD THAT: - The CIT(A) had issued directions to allow relief in AY 2014-15 based on his treatment in AY 2013-14, but the Tribunal found those directions to be cryptic and unsupported by material on record. There was no evidence on record to show that the Assessing Officer implemented the appellate direction, and the appellate findings lacked requisite confrontation and verification. Accordingly, in the interests of justice the Tribunal set aside the CIT(A)'s direction and remitted the matter to the CIT(A) to decide afresh after providing opportunity of hearing to the parties and dealing with the matter on proper evidence. [Paras 8]

Remitted to the ld. CIT(A) for fresh decision after affording opportunity to the parties; ground determined in favour of the Revenue for statistical purposes.

Disallowance made on ad hoc basis - requirement of supporting vouchers / evidence for expenses - restriction of ad hoc disallowance percentage - remand for fresh consideration - The CIT(A)'s blanket restriction of ad hoc disallowance from 25% to 10% for employee and administrative expenses in AYs 2012-13 and 2014-15 was set aside and remitted for fresh adjudication. - HELD THAT: - The Assessing Officer disallowed portions of claimed employee and administrative expenses for want of supporting vouchers, making an ad hoc 25% disallowance. The CIT(A) reduced that disallowance to 10% also on an ad hoc basis without examining records or providing reasoning grounded in the material. The Tribunal held that if the AO's disallowance was ad hoc due to lack of vouchers, the appellate authority should not itself substitute another ad hoc percentage without examining evidence or remanding for verification. Consequently, the matter was set aside to the CIT(A) to decide afresh in accordance with law after affording both parties an opportunity of being heard. [Paras 10]

Remitted to the ld. CIT(A) for fresh adjudication after opportunity of hearing to the parties; ground determined in favour of the assessee for statistical purposes.

Final Conclusion: Both appeals arising for AY 2012-13 and AY 2014-15 are allowed for statistical purposes; key factual and evidentiary issues are remitted to the First Appellate Authority for fresh decision after affording opportunities of hearing and obtaining necessary verification from the Assessing Officer.

Validity of show cause notice under section 274 r.w.s. 271AAA - Immunity from penalty under section 271AAA upon disclosure in statement under section 132(4) and payment of tax - Requirement of specific charge to satisfy principles of natural justice in penalty proceedings

Validity of show cause notice under section 274 r.w.s. 271AAA - Requirement of specific charge to satisfy principles of natural justice in penalty proceedings - Show cause notice issued under section 274 read with section 271AAA was defective for not specifying the specific charge and therefore the consequent penalty proceedings were invalid. - HELD THAT: - The Tribunal held that the notice initiating penalty proceedings, though purporting to invoke section 271AAA, used a general/form proforma and addressed the assessee on the charge of concealment or furnishing inaccurate particulars (the language of section 271(1)(c)) rather than specifically stating the charge required for penalty under section 271AAA. Such vagueness deprived the assessee of a meaningful opportunity of hearing and offended the principles of natural justice. Reliance was placed on binding precedents holding that a show cause notice must specify the particular limb or charge so the assessee knows the case to be met; failure to do so renders the notice defective and the penalty proceedings void ab initio. The Tribunal found the defect incurable under section 292BB and, on that legal ground alone, directed deletion of the penalty. [Paras 7]

Penalty proceedings under section 271AAA quashed as initiated on the basis of a defective show cause notice; penalty deleted.

Immunity from penalty under section 271AAA upon disclosure in statement under section 132(4) and payment of tax - Requirement of enquiry into manner of derivation under section 132(4) for attracting subsection (2) conditions - Where the assessee declared additional income in a statement recorded under section 132(4), included that amount in the return and paid the tax thereon, and no question was put during recording of the statement regarding the manner of deriving such income, penalty under section 271AAA could not be sustained. - HELD THAT: - The Tribunal applied the settled principle that sub section (2) of section 271AAA grants immunity where the assessee admits undisclosed income in the statement under section 132(4) and pays tax (with interest) thereon; further, the obligation to 'specify' and thereafter 'substantiate' the manner of derivation arises only if the authorised officer elicits that information when recording the statement. In the present facts the authorised officer did not question the assessee about the manner of earning the additional income, the amount was incorporated in the return and tax was paid. Precedents were followed which hold that, absent a specific query during the statement, the Revenue cannot later claim failure to specify or substantiate manner of derivation to deny immunity. Applying these principles, and having found that the Assessing Officer did not confront the assessee on manner of derivation, the Tribunal concluded that penalty could not be levied. [Paras 7, 8, 11]

Penalty under section 271AAA is not sustainable on merits where disclosure under section 132(4) was followed by inclusion in return and payment of tax, and no query on manner of derivation was put; penalty deleted.

Final Conclusion: Both appeals allowed: the Tribunal set aside the penalty orders under section 271AAA for AY 2012-13, directing deletion of the penalty as the show cause notice was defective and, on the merits, the assessee was entitled to immunity where disclosure was made under section 132(4), the amount was returned and tax paid and no enquiry on manner of derivation was made.

Anti-dumping duty - material injury and causal link - period of investigation and contemporaneous data - like article - judicial review of quasi-judicial trade remedy authority - replacement of the designated authority for contumacious conduct - Section 9A of the Customs Tariff Act and Rule 17 time-limits - Manual/SOP guidance on POI (para 5.9) and necessity of updated data

Period of investigation and contemporaneous data - Manual/SOP guidance on POI (para 5.9) and necessity of updated data - Section 9A of the Customs Tariff Act and Rule 17 time-limits - Validity of the Designated Authority seeking contemporaneous/updated data and proposing POI enlargement for investigation. - HELD THAT: - The Court held that the Designated Authority was entitled to require relatively contemporary data and to have regard to guidelines in the Manual/SOP when determining the appropriate period of investigation. The statutory scheme under Section 9A and the Rules of 1995 envisages timely investigations with rigid timelines (Rule 17 and Rule 20) and the Manual's guidance that the POI should be as recent as possible (para 5.9) is rationally connected to completing meaningful investigations and to avoid stale inquiries. Requiring updated information cannot be regarded as arbitrary or contrary to law, having regard also to international standards reflected in the Marrakesh Agreement. The High Court's criticism of the DA for seeking updated data and proposing consideration of additional periods was therefore unsustainable. [Paras 24, 28, 29, 30, 31]

The DA's action in seeking contemporaneous/updated data and proposing appropriate POI was lawful; the High Court's orders faulting the DA on this ground were set aside.

Judicial review of quasi-judicial trade remedy authority - replacement of the designated authority for contumacious conduct - Whether the High Court was justified in initiating suo motu contempt proceedings and directing replacement of the incumbent Designated Authority. - HELD THAT: - The Court emphasized that although judicial review under Articles 226/32 is a valuable right, it must be exercised circumspectly and should not amount to continuous oversight of a quasi-judicial authority conducting trade remedy investigations. The decision to initiate suo motu contempt and to direct substitution of the incumbent DA on the basis that he enlarged the POI or sought updated data was disproportionate. The choice and appointment of the Designated Authority is a matter for the Union, and substitution of the officer cannot be lightly ordered on the assumption of mala fides where the DA acted within procedural bounds. [Paras 16, 17, 31, 32, 33]

The High Court's initiation of suo motu contempt proceedings and the directive to replace the incumbent DA were unjustified and were set aside.

Like article - material injury and causal link - judicial review of quasi-judicial trade remedy authority - Scope of judicial interference with the DA's determination on whether imported goods are 'like article' and whether causal link/injury is established. - HELD THAT: - The Court recognized that determination of 'like article' and of dumping, injury and causality involves technical and evidentiary assessment within the DA's quasi-judicial domain. While courts can demand that directions be obeyed and that decisions not be routine or without application of mind, they should refrain from substituting their view for the DA's on technical matters unless there is manifest illegality or denial of procedure. The impugned High Court approach, which compelled the DA to adopt a particular substantive outcome or punished perceived non-compliance by ordering replacement, failed to respect the DA's statutory fact-finding role. [Paras 21, 22, 23, 31, 32]

Questions of 'like article', dumping, injury and causation fall primarily within the DA's statutory domain; the High Court erred in interfering with those determinations in the manner it did.

Final Conclusion: The appeals are allowed. The High Court orders dated 28.08.2018 and 22.07.2019 are set aside in entirety; the order dated 05.08.2019 is set aside insofar as it directs replacement of the incumbent Designated Authority. The Designated Authority's actions in seeking updated/contemporaneous data and proposing appropriate periods of investigation were within the framework of the Rules, SOP and international practice and did not justify the High Court's suo motu contempt initiation or the substitution of the officer.

Ownership of imported goods - amendment of customs documents - custody and release of imported goods - retention period of goods under customs - civil claims vis-a -vis customs administration

Ownership of imported goods - amendment of customs documents - Whether the procedure under the provision concerning amendment of documents was required to be invoked to determine title and thereby prevent release of the goods to the original importer. - HELD THAT: - The petitioner relied on the statutory provision governing amendment of documents and submitted that when ownership is disputed the procedure should have been followed. The Court noted the contention and the cited provision, but found on the material before it that the petitioner had not discharged the factual burden of demonstrating a superior right to the goods; original documents were with the second respondent and no payment had been made by the petitioner to the exporter or to the importer. On these facts the Court was not persuaded that the customs authority was required to withhold release by invoking the amendment procedure. The statutory amendment power does not operate to permit indefinite retention of goods where the party asserting title has not furnished adequate documentary or other material to displace the position of the importer who has complied with formalities. [Paras 5, 6, 11]

The challenge based on non-invocation of the amendment provision is rejected and does not justify restraining release of the goods.

Custody and release of imported goods - retention period of goods under customs - Whether the customs authority could continue to retain the perishable imported goods instead of releasing them to the importer who had complied with formalities, having regard to the statutory limitation on retention. - HELD THAT: - The Court observed that customs authorities are subject to the statutory restriction on retention and noted the submission that Section 49 prevents retention beyond a specified period. The goods in question are perishable; continued detention would cause deterioration and loss of value. In the absence of a satisfactory showing by the petitioner of a superior enforceable right that would justify continued custody, and given that the importer had complied with formalities, the Court held that the customs authority rightly proposed release rather than indefinite retention which would only prejudice the importer and serve no useful purpose. [Paras 10, 11, 12]

Customs was not required to retain the perishable goods and was justified in releasing them to the importer who complied with formalities.

Civil claims vis-a -vis customs administration - ownership of imported goods - Whether the petitioner's civil claim against the foreign exporter could operate to restrain the customs authority from releasing the goods to the importer. - HELD THAT: - The Court emphasised that disputes between private parties, including claims against a foreign exporter, are civil matters and do not entitle the claimant to require customs to retain goods beyond what the law permits. The petitioner had not made payment and the foreign exporter was not before the Court; the transaction between petitioner and exporter could not convert into a right to impede release by customs. The Court declined to entertain the petition as a substitute for appropriate civil proceedings and noted that allowing detention for resolution of such disputes would be inappropriate, especially for perishable consignments. [Paras 9, 11, 12]

Civil remedy available to the petitioner against the foreign exporter does not furnish a ground for directing customs to retain the goods.

Final Conclusion: The writ petition is dismissed; the impugned communication is sustained and there is no basis to direct customs to retain the perishable goods pending resolution of the petitioner's private dispute with the foreign exporter.

Provisional release under Section 110A of the Customs Act, 1962 - Seizure under Section 110 of the Customs Act, 1962 - Import restriction versus prohibition and redemption/release under Foreign Trade Policy and Customs law - Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 - procedure for import and illegal traffic (Rule 13; Rule 15) - Re-export obligation for illegally imported wastes under Rule 15(2)

Provisional release under Section 110A of the Customs Act, 1962 - Import restriction versus prohibition and redemption/release under Foreign Trade Policy and Customs law - Entitlement to provisional release of seized consignments of imported used rubber tyres under Section 110A of the Customs Act, 1962 despite contentions of mis-declaration and absence of DGFT authorisation. - HELD THAT: - The Court examined whether seizure under Section 110 could preclude provisional release under Section 110A where the goods are alleged to be restricted imports (and possibly misdeclared) and no licence from DGFT was produced. Relying on the statutory scheme and precedent, including the reasoning in Atul Automations, the Court distinguished decisions which were factually different and noted that a distinction exists between prohibited and restricted imports. Where goods are not shown to be covered by the List of prohibited imports (Schedule VI of the 2016 Rules was not shown to apply), and in the absence of re-export proceedings under the Hazardous Wastes Rules, the Customs Act provision for provisional release operates. The Court followed earlier Madras High Court decisions that recognised the availability of provisional release on bond and appropriate security and conditions, subject to eventual adjudication and payment of duties and charges. The adjudicatory process is not foreclosed by the allegation of mis declaration; rather, provisional release under Section 110A is permissible pending completion of adjudication. [Paras 9, 11, 12]

Petitioners entitled to provisional release of the goods under Section 110A on taking bond with security and conditions, subject to assessment and adjudication.

Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 - procedure for import and illegal traffic (Rule 13; Rule 15) - Re-export obligation for illegally imported wastes under Rule 15(2) - Seizure under Section 110 of the Customs Act, 1962 - Whether the import control and re-export provisions in the 2016 Rules operate to bar provisional release by Customs or to obligate immediate re-export by Customs authorities. - HELD THAT: - The Court considered the 2016 Rules, including the definitions of hazardous/other wastes, the procedure for import (Rule 13) and the deeming provision for illegal traffic with re-export obligations in Rule 15. It observed that the 2016 Rules provide for re-export in cases of illegal import but that the Customs Act itself does not provide for re-export and that the Rules contemplate action by specified authorities under Schedule VII. The Court noted authorities holding that mere invocation of Rule 15 does not automatically oust the power under Section 110A to provisionally release goods; absent specific re-export proceedings initiated under the 2016 Rules, Customs cannot insist on immediate re-export as a precondition to provisional release. Consequently, the existence of the 2016 Rules and their re-export mechanism does not ipso facto prohibit provisional release under the Customs Act pending adjudication. [Paras 5, 10, 11]

The re-export obligation in the 2016 Rules does not bar provisional release by Customs in the absence of re-export proceedings; Customs must permit provisional release subject to bond, security and provisional assessment.

Final Conclusion: Writ petitions allowed. Respondents directed to provisionally release the seized consignments on taking a bond in proper form with such security and conditions as the adjudicating authority may require, and after provisional assessment and collection of applicable customs duty and charges, within three weeks; adjudication proceedings to continue.

Maintainability of writ against issuance of a show cause notice - prematurity of challenge to a show cause notice - jurisdiction to issue a show cause notice under the Foreign Trade Policy and under SFIS - exhaustion of statutory remedies before invoking writ jurisdiction

Maintainability of writ against issuance of a show cause notice - prematurity of challenge to a show cause notice - exhaustion of statutory remedies before invoking writ jurisdiction - Whether the writ petition challenging the issuance of the show cause notice was maintainable at this stage. - HELD THAT: - The Court held that the petition was premature and denied relief without entering into the merits. It emphasised the settled principle that writ jurisdiction normally should not be invoked against a mere show cause notice where statutory remedies exist. Reliance was placed on Supreme Court authority that the proper course is to raise objections before the authority which issued the notice and, if an adverse order is passed, then approach the writ court. Given that the show cause notice dated 26 June 2020 had not been adjudicated, the Court declined to entertain the petition and directed the petitioner to file its reply before the concerned authorities, leaving open remedies if an adverse decision is rendered. [Paras 3, 5, 6, 7, 8]

Writ petition dismissed as premature; petitioner directed to reply to the show cause notice and pursue statutory remedies, with liberty to approach the Court after adjudication.

Jurisdiction to issue a show cause notice under the Foreign Trade Policy and under SFIS - Whether the respondents lacked jurisdiction to issue the impugned show cause notice. - HELD THAT: - The Court rejected the petitioner's contention of lack of jurisdiction, finding that the respondents possess power, jurisdiction and authority to issue the show cause notice in respect of alleged breach of the Foreign Trade Policy and alleged wrongful availing of benefits under the Served from India Scheme (SFIS). The Court observed that objections of this nature are matters to be raised and decided by the authority in the course of adjudication on the show cause notice, and do not warrant pre-emptive relief by way of writ at this stage. [Paras 3, 5]

Contention of lack of jurisdiction repelled; objections to jurisdiction to be addressed before the adjudicating authority in the course of proceedings on the show cause notice.

Final Conclusion: The writ petition challenging the show cause notice is dismissed as premature; the petitioner is directed to file a reply to the show cause notice and seek relief, if any, after adjudication by the competent authorities in accordance with law.

Appeal under Section 130 of the Customs Act - revocation of Customs Broker Licence - restoration of licence - precedent of a Coordinate Bench - direction for compliance within specified time

Precedent of a Coordinate Bench - appeal under Section 130 of the Customs Act - restoration of licence - Whether the appeal should be entertained in view of a prior Coordinate Bench decision and whether the respondent's Customs Broker Licence should be restored. - HELD THAT: - The counsel for the appellant candidly accepted that the question raised in the present appeal is squarely covered by a prior decision of a Coordinate Bench in CUSAA 159/2018 dated 9th October, 2018, which upheld the Tribunal's decision to set aside the revocation while setting aside penalty and forfeiture. In view of that precedent and the admission by learned counsel, the Court declined to entertain the appeal. Exercising its supervisory jurisdiction, the Court directed restoration of the respondent's Customs Broker Licence and fixed a short time-frame for compliance. [Paras 7, 8]

Appeal dismissed as covered by Coordinate Bench precedent; appellant directed to restore the respondent's Customs Broker Licence within three weeks.

Final Conclusion: The appeal was dismissed as covered by an earlier Coordinate Bench decision; the Customs Broker Licence of the respondent is to be restored within three weeks and the order to be uploaded and communicated to counsel.

Confiscation of seized goods - burden of proof under Section 123 of the Customs Act, 1962 - admissibility and evidentiary value of statement under Section 108 of the Customs Act, 1962 - right to cross examine seizing witnesses - seizure handed over by BSF to Customs - pre trial disposal of seized goods - penalty under Section 112(b) of the Customs Act, 1962

Seizure handed over by BSF to Customs - admissibility and evidentiary value of statement under Section 108 of the Customs Act, 1962 - burden of proof under Section 123 of the Customs Act, 1962 - right to cross examine seizing witnesses - Validity of confiscation of the seized gold and whether the appellant was required to discharge the burden under Section 123 of the Customs Act, 1962 - HELD THAT: - The Tribunal found that the appellant repeatedly denied recovery of gold from his possession in statements recorded under Section 108 of the Customs Act, 1962 and there is no rebuttal evidence contradicting those statements. The appellant had sought cross examination of witnesses named in the BSF Seizure Memo, but this was not permitted; the seizure narrative in the BSF memo was therefore disputed. The statement under Section 108 was treated as a substantive piece of evidence favouring the appellant. In these circumstances the authorities below proceeded on an assumption of recovery from the appellant and wrongly required him to discharge the burden under Section 123. As there was no claimant of the gold and its recovery from the appellant was not proved on the record, the Tribunal held that the confiscation of the gold entrusted by BSF to Customs could be dealt with by Customs but the appellant could not be held to have been proved as the person from whose possession the gold was recovered.

Recovery of gold from the appellant has not been proved; appellant was not required to discharge the burden under Section 123; absence of claimant justifies Customs dealing with the gold but the appellant cannot be held liable for its unlawful importation.

Confiscation of seized goods - pre trial disposal of seized goods - penalty under Section 112(b) of the Customs Act, 1962 - Validity of confiscation of the appellant's mobile phone and Indian currency and of the penalty imposed under Section 112(b) - HELD THAT: - The Tribunal recorded that since the illegal importation of gold by the appellant was not established, the consequential confiscation of peripheral items - the old and used mobile phone and the Indian currency - could not be sustained. The Adjudicating Authority had based confiscation of the currency on a mere probability that it represented advance for smuggling; the Commissioner (Appeals) did not deal adequately with the appellant's substantive statements or legal authorities relied upon. In view of the failure to prove the appellant's involvement in smuggling, the confiscation of the mobile phone and currency and the penalty imposed cannot be maintained.

Confiscation of the mobile phone and Indian currency and the penalty imposed under Section 112(b) are not sustainable and are set aside.

Final Conclusion: The order of the Commissioner (Appeals) upholding the Adjudicating Authority is set aside. The Tribunal holds that recovery of gold from the appellant was not proved and he was not required to discharge the burden under Section 123; in view of non establishment of his involvement, confiscation of the mobile phone and Indian currency and the penalty under Section 112(b) are quashed. The appeal is allowed with consequential relief, if any.

Provisional assessment - binding effect of appellate order / judicial discipline - mechanical insistence on bank guarantee - indemnity bond as alternative to bank guarantee

Binding effect of appellate order / judicial discipline - Whether a subordinate/customs authority can refuse to follow an appellate order favourable to the importer and insist on onerous conditions pending an appeal by the department. - HELD THAT: - The Tribunal held that orders of a higher appellate authority are binding on subordinate authorities and cannot be disregarded merely because the department has preferred an appeal against that order. Reliance was placed on the principle of judicial discipline articulated by the Supreme Court in Kamlakshi Finance Corporation, that the mere pendency of an appeal does not justify non compliance with an appellate order unless its operation has been stayed by a competent court. Applying that principle to the facts, the Commissioner (Appeals) had allowed the assessee's appeal on classification/assessment of identical goods; accordingly the Assistant Commissioner had no justification to impose measures that would negate the effect of that appellate decision. [Paras 8, 9]

The subordinate/customs authority is bound to follow the appellate order favourable to the importer and cannot refuse compliance on the ground of pendency of an appeal by the department.

Provisional assessment - mechanical insistence on bank guarantee - indemnity bond as alternative to bank guarantee - Whether the department may provisionally assess consignments and, if so, whether it can require execution of 100% bank guarantee where an appellate order in identical matters favours the importer. - HELD THAT: - The Tribunal accepted that the Department may carry out provisional assessment to safeguard revenue, but held that such provisional assessment cannot be accompanied by an automatic or mechanical demand for onerous security (viz., 100% bank guarantee) where the appellate authority has already decided identical consignments in favour of the importer. The Tribunal noted judicial precedents (including Sai Exports and Chalissery Kirana Merchant) supporting the view that in similar circumstances an indemnity bond undertaking to pay any differential duty, rather than a bank guarantee, is an appropriate and proportionate safeguard. Given the seasonal and competitive nature of the goods and the loss already suffered, the Tribunal directed that provisional release be permitted upon execution of an indemnity bond instead of requiring a 100% bank guarantee. [Paras 9, 11]

Provisional assessment may proceed, but the department cannot insist on a 100% bank guarantee where an appellate order on identical goods is in the assessee's favour; release on execution of an indemnity bond undertaking to pay any differential duty is directed.

Final Conclusion: Appeal allowed. The Revenue is directed to permit release of the appellant's consignments on provisional assessment without insisting on a 100% bank guarantee; the appellant shall execute an indemnity bond undertaking to pay any differential duty applicable on final assessment. The Revenue must comply with the appellate order in letter and spirit.

Rectification of mistake apparent on record - remand for fresh adjudication - set aside of charges under Regulation 10(d) of CBLR, 2018 - absence of evidence to establish pre-knowledge - direction to supply non-existent statement cannot be implemented

Rectification of mistake apparent on record - direction to supply non-existent statement cannot be implemented - set aside of charges under Regulation 10(d) of CBLR, 2018 - absence of evidence to establish pre-knowledge - Application for rectification of Tribunal's order to remove a remand based on a non-existent statement and to decide the appeal on merits. - HELD THAT: - The Tribunal found that its earlier order had remanded the issue under Regulation 10(d) of CBLR, 2018 for fresh decision after directing supply of a statement which, on review, does not in fact exist. The earlier order itself recorded that there was no material evidence to establish that the appellant had pre-knowledge of the nature of the cargo and that the only purported basis for the charge was an alleged statement referred to in para 7.2 of the show cause notice which was not provided. Because the remand direction required supplying a non-existent statement, the remand could not be implemented. The Tribunal concluded that this constituted a mistake apparent on the record warranting rectification. Consequently, paras 10.1 and 10.2 of the earlier order were replaced so as to record that there is no evidence to uphold the impugned order and that the allegation under Regulation 10(d) is set aside and the appeal is allowed; para 11 was similarly replaced to record that the appeal is allowed. [Paras 10, 11]

ROM application allowed; paras 10.1, 10.2 and 11 are modified to record that there is no evidence to uphold the charge under Regulation 10(d) of CBLR, 2018, the allegation is set aside and the appeal is allowed.

Final Conclusion: The review (ROM) petition was allowed: the Tribunal corrected its earlier order which had remanded the matter based on a non-existent statement, held that no evidence establishes pre-knowledge under Regulation 10(d) of CBLR, 2018, set aside that allegation and allowed the appeal.

Opportunity of being heard - principles of natural justice - suo motu inquiry under Section 206(4) of the Companies Act, 2013 and its first proviso - investigation by the Serious Fraud Investigation Office under Section 212(1)(a) and (c) of the Companies Act, 2013 - formation of opinion by the Central Government as a precondition for ordering investigation - judicial review limited to decision making process (Article 226)

Opportunity of being heard - suo motu inquiry under Section 206(4) of the Companies Act, 2013 and its first proviso - principles of natural justice - The inquiry initiated by the Central Government and the report dated 24.02.2020 submitted by the Registrar of Companies conform to Section 206(4) of the Companies Act, 2013. - HELD THAT: - A combined reading of Sections 206(1)-(4), 207 and 208 shows that when the Registrar conducts an inquiry under Section 206(4), the company must be informed of allegations in writing and given a reasonable opportunity of being heard. Whether that opportunity requires an oral, personal hearing depends on the nature of the inquiry and rights affected. The petitioner received and submitted a detailed reply on 03.02.2020; this court had directed that the Registrar consider that reply and conclude the inquiry. The ROC, having considered the petitioner's written explanation and having submitted the report under Section 208 in compliance with the court's direction, followed the procedure envisaged by Section 206(4). In these circumstances the report dated 24.02.2020 cannot be impugned on the ground of denial of opportunity of being heard or non compliance with Section 206(4). [Paras 64]

Issue answered in the affirmative; the inquiry and the ROC's report conform to Section 206(4).

Investigation by the Serious Fraud Investigation Office under Section 212(1)(a) and (c) of the Companies Act, 2013 - formation of opinion by the Central Government as a precondition for ordering investigation - judicial review limited to decision making process (Article 226) - The Central Government validly formed an opinion and lawfully ordered investigation by SFIO under Section 212(1)(a) and (c). - HELD THAT: - Section 212(1) requires the Central Government to form an opinion, on specified sources (including a Registrar's report under Section 208), that investigation by SFIO is necessary. Precedent establishes that such opinion must be grounded on demonstrable prima facie circumstances and that the Court's review is confined to the decision making process. The impugned order records that the Central Government considered the ROC's report dated 24.02.2020 and the Oversight Committee's recommendation of 25.02.2020, and there existed prima facie material-including SEBI findings, media reports, investor complaints and the ROC's factual conclusions-justifying the conclusion that serious fraud and substantial public interest warranted SFIO investigation. On review of the process and material relied upon, the Court found no defect in the formation of opinion or in the administrative process leading to the SFIO order. [Paras 88]

Issue answered in the affirmative; the opinion was formed on prima facie material and the SFIO investigation order is sustainable.

Final Conclusion: On judicial review confined to the decision making process, the High Court found no infirmity in the ROC's inquiry or in the Central Government's formation of opinion and order under Sections 206(4) and 212(1)(a) & (c) respectively; the impugned order dated 27.02.2020 is confirmed and the writ petitions are dismissed.

Superintendence under Article 227 - High Court power to supervise tribunal procedure and issue directions - Virtual hearing and physical hearing of tribunals during pandemic - Consent of all counsel before adopting physical hearing - Framing of standard operating procedure for virtual hearings

Superintendence under Article 227 - High Court power to supervise tribunal procedure and issue directions - High Court's power under Article 227 extends to supervising the procedural and administrative functioning of the NCLT and to issue directions to ensure fair and efficient administration. - HELD THAT: - The Court relied on the supervisory jurisdiction of High Courts as a constitutionally entrenched power to oversee tribunals' functioning and to ensure standards indispensable to fair administration. Noting authorities cited in the record, the Court held that instead of outrightly rejecting the writ petition, the Single Judge ought to have exercised Article 227 to issue appropriate directions to address systemic procedural difficulties faced by practitioners before the NCLT, particularly in the context of modes of hearing during the pandemic. The Court observed that High Courts are empowered to keep a close watch on tribunals within their jurisdiction and to ensure smooth, efficient and transparent working of such fora, and that exercise of supervisory power was warranted on the material before it. [Paras 24, 26, 30]

The Single Judge's refusal to exercise supervisory power was inappropriate; the High Court may issue directions under Article 227 to regulate tribunal procedure in the circumstances disclosed.

Virtual hearing and physical hearing of tribunals during pandemic - Consent of all counsel before adopting physical hearing - A tribunal may conduct physical hearings, but if it does so while others participate virtually, the consent of all counsel in the particular litigation must be obtained; absent such consent the hearing should be virtual to avoid prejudice. - HELD THAT: - On the material before it, including the representation from the practitioners' association and orders showing mixed modes of hearing, the Court found that part-physical and part-virtual hearings risk unfairness and prejudice to those participating remotely. The Court directed that if a matter is to be heard physically the Tribunal must first obtain consent of all learned counsel appearing; where any counsel objects, the matter should be conducted wholly by virtual mode. The Court emphasised that inconsistent practice between benches (Court No.1 and Court No.2) and conducting physical hearings without ensuring parity for virtually appearing counsel gives rise to legitimate grievance and must be remedied. [Paras 27, 28, 30]

Physical hearings are permissible only after obtaining consent of all counsel; otherwise the hearing should be virtual to protect parties' right to fair hearing.

Framing of standard operating procedure for virtual hearings - High Court power to supervise tribunal procedure and issue directions - The NCLT, Ahmedabad was directed to consider the practitioners' representation and to frame, in consultation with the Bar, a standard operating procedure (SOP) for virtual functioning within a specified short timeframe. - HELD THAT: - Having identified systemic difficulties with the existing virtual platform and inconsistent practices, the Court exercised its supervisory jurisdiction to require the Tribunal to give personal hearing to the practitioners' representative, consider the representation dated 29th July 2020, and endeavour to frame an SOP for virtual hearings in consultation with the Bar. The Court set a timetable for completing this exercise expeditiously (preferably within one week of receipt of the order) and asked the Tribunal to address issues such as platform stability, court-master/technician conduct, display of causes lists and attendant practical measures to avoid prejudice to remotely appearing counsel. [Paras 30, 32, 34]

NCLT, Ahmedabad directed to hear the Association's representation and frame virtual hearing SOP in consultation with the Bar within the prescribed period.

Final Conclusion: The Single Judge's order is set aside; the writ petition is allowed to the limited extent that the High Court has directed the NCLT, Ahmedabad to consider the practitioners' representation, give personal hearing to the Association's representative, frame a SOP for virtual hearings in consultation with the Bar within the stipulated time, and ensure that physical hearings are undertaken only with the consent of all counsel; the appellant is directed to cooperate for expeditious disposal before the Tribunal.

Limitation period for offences punishable with imprisonment up to two years - Knowledge of making a false statement as the triggering date for limitation - Penalty for false statements under Section 628 of the Companies Act, 1956

Knowledge of making a false statement as the triggering date for limitation - Limitation period for offences punishable with imprisonment up to two years - Penalty for false statements under Section 628 of the Companies Act, 1956 - Whether the complaints under Section 628 of the Companies Act, 1956, against the petitioner were barred by limitation - HELD THAT: - The Court applied the principle that limitation for offences under Sections 63 and 628 of the Companies Act, 1956, begins from the date of knowledge of making a false statement. In the absence of any date of inspection in the complaints, the Court treated the date of filing of the balance sheets as the date on which the Registrar had knowledge of the alleged false statements. The balance sheets in question were filed on 31.03.2001 and 31.03.2002, and therefore knowledge arose in March 2001 and March 2002 respectively. The maximum punishment for an offence under Section 628 is imprisonment of up to two years (with fine), which attracts a three-year limitation period. The respondent issued show cause notices in February 2005 and filed the complaints in July 2005, which is beyond three years from the dates of knowledge; accordingly the complaints were held to be barred by limitation and not maintainable as against the petitioner. [Paras 12, 13, 14]

The complaints in E.O.C.C.Nos.271 and 273 of 2005 are barred by limitation and are quashed as against the petitioner.

Final Conclusion: The criminal original petitions are allowed and the complaints in E.O.C.C.Nos.271 and 273 of 2005 on the file of the Additional Chief Metropolitan Magistrate Court, (EO-I), Egmore, Chennai, are quashed insofar as the petitioner is concerned; connected petitions are closed.

Transfer of shares to Investor Education and Protection Fund (IEPF) - Article 300-A deprivation of property - Manifest arbitrariness under Article 14 - Procedure for refund under IEPF Rules - Custodial transfer vs. statutory vesting of property

Article 300-A deprivation of property - Custodial transfer vs. statutory vesting of property - Whether transfer of shares under Section 124(6) amounts to deprivation of property attracting Article 300-A. - HELD THAT: - The Court held that transfer of shares to the IEPF under Section 124(6) does not amount to deprivation of property under Article 300-A. The statutory scheme does not effectuate a permanent vesting of ownership in the Authority; rather the transfer is custodianal and is subject to the proviso enabling the claimant to reclaim the shares. The Rules (notably Rule 7) prescribe a procedure for refund/return of shares to the rightful owner, and that procedural mechanism evidences that ownership is not extinguished by the transfer. Consequently Article 300-A is not attracted because there is no executive fiat depriving the petitioner of property without lawful authority and remedy. [Paras 48, 49, 50, 51]

Transfer to the IEPF is not a deprivation of property under Article 300-A; the proviso and Rules preserve the right to reclaim shares.

Manifest arbitrariness under Article 14 - Transfer of shares to Investor Education and Protection Fund (IEPF) - Whether Section 124(6) and the IEPF Rules are manifestly arbitrary and therefore violative of Article 14. - HELD THAT: - The Court applied the test of manifest arbitrariness as explained in Shayara Bano and concluded that the impugned statutory provisions are not capricious, irrational or lacking an adequately determining principle. Parliament enacted the scheme to guard against misuse of unclaimed amounts and to further public interest objectives by channeling unclaimed dividends and related securities to the IEPF. The time-limit and transfer mechanism are legislative choices grounded in public policy considerations akin to limitation rules; difficulty or expense in complying with the refund procedure does not render the law arbitrary. The Court therefore refused to strike down the provisions on Article 14 grounds. [Paras 52, 53, 54, 55]

Section 124(6) and the Rules are not manifestly arbitrary and do not violate Article 14.

Procedure for refund under IEPF Rules - Transfer of shares to Investor Education and Protection Fund (IEPF) - Whether the procedural provisions in Rules 6 and 7 (including amendments) are invalid for being excessively onerous or beyond the empowering statute. - HELD THAT: - The Court examined the complained procedural burdens - dematerialisation requirement, documentary prerequisites for legal heirs, and verification and indemnity obligations - and held that the existence of a more elaborate or costly procedure does not automatically render subordinate legislation unconstitutional. The Rules were promulgated to ensure genuine claims are entertained and to preserve the integrity of the fund and the corporate register; absent a showing that the Rules exceed statutory power or are manifestly arbitrary, procedural difficulty alone does not invalidate them. The statutory proviso and the rule based refund mechanism together provide a route for reclaiming shares. [Paras 55]

Rules 6 and 7, including the challenged procedural requirements, are not invalid on the grounds urged and remain intra vires the Act.

Final Conclusion: Writ petition dismissed: Section 124(6) of the Companies Act, 2013 and Rules 6 and 7 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 are not violative of Articles 300-A or 14; the statutory scheme effects a custodial transfer with a rule based remedy for reclaiming shares and the procedural requirements do not render the provisions manifestly arbitrary.

Sanction of scheme of arrangement under sections 230-232 of the Companies Act, 2013 and sections 391-394 of the Companies Act, 1956 - scope and meaning of the term "arrangement" - fair, just and reasonable standard for schemes (Miheer H. Mafatlal principle) - locus to object under proviso to section 230(4) of the Companies Act, 2013 - procedural irregularities versus illegality/public policy

Scope and meaning of the term "arrangement" - sanction of scheme of arrangement under sections 230-232 of the Companies Act, 2013 and sections 391-394 of the Companies Act, 1956 - Whether the proposed scheme falls within the ambit of an "arrangement" under the Companies Act and is amenable to sanction by the Tribunal. - HELD THAT: - The Tribunal held that the term "arrangement" is of wide amplitude and not narrowly circumscribed; the Legislature deliberately refrained from defining it, recognising that corporate arrangements may assume varied forms. Applying established principles, including the requirement that a scheme be fair, just and reasonable and not contrary to law or public policy, the Tribunal found no statutory impediment to treating the proposed scheme (even if it regularises earlier actions) as an "arrangement" under sections 391-394 of the 1956 Act or sections 230-232 of the 2013 Act. The Tribunal emphasised that remedies which regularise past allotments can still constitute an arrangement and therefore fall within the Tribunal's sanctioning jurisdiction. [Paras 20, 21, 22]

The scheme as presented qualifies as an "arrangement" within the meaning of the Companies Act and is amenable to sanction by the Tribunal.

Procedural irregularities versus illegality/public policy - sanction of scheme of arrangement under sections 230-232 of the Companies Act, 2013 and sections 391-394 of the Companies Act, 1956 - Whether the objections raised by the Regional Director (WR) on procedural grounds preclude sanction of the scheme. - HELD THAT: - The Regional Director's objections focused on procedural matters: reliance on a legal opinion rather than explicit compliance with section 100 of the 1956 Act, shareholder subscriptions below 100, non-receipt of a BSE letter, and that the scheme was pursued following BSE advice. The Tribunal treated these as procedural niceties and observed that the RD did not contend that the scheme involved illegality or violated public policy. Given absence of a substantive legal objection, procedural technicalities alone were insufficient to bar consideration or sanction of the scheme, and the RD's preliminary observations were overruled. [Paras 23]

The RD's procedural objections were overruled as not amounting to illegality or public policy violation and do not preclude sanctioning the scheme.

Locus to object under proviso to section 230(4) of the Companies Act, 2013 - fair, just and reasonable standard for schemes (Miheer H. Mafatlal principle) - Whether the objecting shareholder holding fifteen shares had locus to maintain objection and whether his objection could be sustained on merits. - HELD THAT: - The admitted position was that the objector held fifteen shares, well below the ten per cent. threshold in the proviso to section 230(4). Although the Tribunal proceeded to consider his objection, the objector's asserted benefit from rejection of the scheme (a speculative possibility of a future buy-back) was found purely speculative. Applying the fairness standard and assessing the absence of any concrete prejudice or plausible benefit, the Tribunal rejected the objection on merits and noted that the objector did not satisfy the statutory threshold for objections. [Paras 24, 25]

The objector lacked the requisite locus and his objection, being speculative, was repelled on merits.

Fair, just and reasonable standard for schemes (Miheer H. Mafatlal principle) - sanction of scheme of arrangement under sections 230-232 of the Companies Act, 2013 and sections 391-394 of the Companies Act, 1956 - Whether the scheme is fair, reasonable and not contrary to law or public policy and therefore fit to be sanctioned. - HELD THAT: - Having repelled objections, the Tribunal reviewed the scheme against the established test that it be fair, just and reasonable and not contrary to law or public policy. The Tribunal noted the unanimous approval by shareholders and creditors at convened meetings, the absence of adverse observations from BSE, and found nothing inherently abhorrent in the scheme. Consequently, the Tribunal concluded that the statutory compliances were fulfilled and the scheme met the requisite standards for sanction. [Paras 26, 27]

The scheme is fair, reasonable, not contrary to law or public policy, and the petition is made absolute in terms of the reliefs sought.

Final Conclusion: The Tribunal held that the proposed scheme qualifies as an "arrangement" under the Companies Act, overruled the Regional Director's procedural objections, rejected the speculative objection of a minority shareholder who lacked statutory locus, and sanctioned the scheme as fair, just and reasonable; the petition is made absolute and directions were given for lodging certified copies with concerned authorities.

Scheme of amalgamation under sections 230-232 of the Companies Act, 2013 - Dispensation of meeting of equity shareholders - Convening meeting of unsecured creditors - Voting by ballot/poll and proxy voting at creditors' meeting - Quorum for creditors' meeting - Notice, publication and explanatory statement requirements under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Filing of meeting result in Form CAA-4 and affidavit compliance - Service of statutory notices to Regional Director, Registrar of Companies, Income-tax Authorities and Official Liquidator - Accounting treatment conformity certificate under section 133

Dispensation of meeting of equity shareholders - Dispensation of meeting of secured creditors - Dispensation of meetings of equity shareholders of both applicant-companies and of secured creditors of the applicant-transferee company was ordered. - HELD THAT: - The Tribunal examined the applicants' averments and supporting documents, including board resolutions, shareholding structure and auditors' certificates, and found that the transferor company is wholly owned subsidiary with its two equity shareholders having filed affidavits of consent and that the transferor has no secured or unsecured creditors. Similarly, the transferee company's equity shareholders and its sole secured creditor have given affidavits/consent. On this basis the Tribunal dispensed with the convening of the meetings of the equity shareholders of both companies and of the secured creditors of the transferee company as unnecessary for the purpose of considering the scheme of amalgamation. [Paras 16, 17, 18]

Meetings of equity shareholders of both applicant-companies and meetings of secured creditors of the applicant-transferee company are dispensed with as directed.

Convening meeting of unsecured creditors - Voting by ballot/poll and proxy voting at creditors' meeting - Quorum for creditors' meeting - Appointment of chairman and scrutinizer - A meeting of the unsecured creditors of the applicant-transferee company was directed to be convened with specified procedural safeguards and modalities of voting. - HELD THAT: - The Tribunal directed that the unsecured creditors' meeting be convened at the transferee company's registered office on the date and time specified in the order. Voting at the meeting was ordered to be by ballot/poll at the venue; proxy and authorized representative voting were permitted subject to filing of prescribed proxy/authorization at the registered office not later than 48 hours before the meeting. The quorum for the meeting was fixed as five unsecured creditors present in person, by proxy or by authorized representative. The Tribunal appointed directors of the transferee company to act as chairman for the meeting (and any adjournments) and appointed a practising company secretary as scrutinizer. The chairman was vested with powers under the articles and applicable rules to decide procedural questions and to ascertain the decision of the meeting. [Paras 17, 18]

Meeting of unsecured creditors of the applicant-transferee company to be convened with voting, quorum, proxy and appointment arrangements as ordered.

Notice, publication and explanatory statement requirements under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Filing of meeting result in Form CAA-4 and affidavit compliance - Service of statutory notices to Regional Director, Registrar of Companies, Income-tax Authorities and Official Liquidator - Directions were given regarding the content, service and publication of notices for the creditors' meeting, and for statutory service and reporting obligations under the Rules. - HELD THAT: - The Tribunal ordered that at least one month before the meeting a notice in Form CAA-2 together with the scheme, the explanatory statement required under the Act and rule 6 of the Rules and the prescribed form of proxy be sent to unsecured creditors by permitted modes and be published once in the specified English and Gujarati newspapers circulating in the area of the registered office. The chairman was directed to file an affidavit at least seven days before the meeting confirming compliance with notice and advertisement requirements as per rule 12, and to file the result of the meeting in Form CAA-4 verified by affidavit within seven days after conclusion as per rule 14. Further, in compliance with sub-section (5) of section 230 and rule 8, the applicants were directed to serve notices with the scheme and explanatory statement on the Regional Director (North Western Region), the Registrar of Companies, the concerned Income-tax Authorities and the Official Liquidator (in respect of the transferor company), with a 30-day period for those authorities to make representations to the Tribunal. [Paras 18]

Notices, publication, statutory service and reporting obligations must be complied with as directed; statutory authorities have thirty days to make any representations.

Final Conclusion: The joint application under sections 230-232 of the Companies Act, 2013 is allowed. Meetings of equity shareholders of both applicants and of secured creditors of the transferee are dispensed with; a meeting of the unsecured creditors of the transferee company is ordered to be convened with the procedural directions and statutory filings specified in the order, and the Tribunal's directions are to be complied with accordingly.

Spectrum as asset in corporate insolvency - Jurisdiction of adjudicating authority under the Code to decide disposition of spectrum - Spectrum sharing and liability for past AGR and SUC dues - Spectrum trading and allocation of liability between seller and buyer - Adjusted Gross Revenue (AGR) recovery and time bound instalment relief

Spectrum as asset in corporate insolvency - Jurisdiction of adjudicating authority under the Code to decide disposition of spectrum - Whether spectrum/licence can be subjected to proceedings under the Insolvency and Bankruptcy Code and the forum to decide that question. - HELD THAT: - The Court recognised that the question whether spectrum/right to use a licence is an asset susceptible to the corporate insolvency resolution process raises substantial and fact sensitive issues (including ownership, possession, contractual limitations under the licence, public trust character of spectrum and statutory scheme under the Telegraph Act and related rules). Given the jurisdictional and mixed fact law nature of the controversy, the Court did not decide the merits. Instead, it directed the National Company Law Tribunal to consider the specified aspects, hear parties and pass reasoned orders within an outer limit of two months. The Court expressly left all questions on merits open to the NCLT and recorded that it has not observed on merits. [Paras 23]

Question whether spectrum/licence is amenable to resolution under the Code is remitted to the NCLT for reasoned decision within two months; merits left open.

Spectrum sharing and liability for past AGR and SUC dues - Adjusted Gross Revenue (AGR) recovery - Liability for AGR/SUC in cases of spectrum sharing and whether a sharing operator becomes liable for past dues of the original licensee. - HELD THAT: - Having examined the Spectrum Sharing Guidelines (24.9.2015) and DoT's affidavit, the Court recorded that spectrum sharing does not transfer title or change hands; each sharing licensee continues to hold its own right to use spectrum. The Guidelines impose that both sharers remain individually responsible to pay AGR/SUC for the spectrum each holds and an incremental SUC of 0.5% is levied on each sharer post sharing. The sharing regime contains no provision that saddles a sharing operator with the past dues of the original licensee; liability for past AGR dues remains with the original licensee to the extent of the spectrum it held and used prior to sharing. The Court noted that where sharers have self assessed and paid post sharing AGR, DoT may verify and raise demands if necessary. [Paras 24, 25, 26]

In spectrum sharing, each operator remains liable only for AGR/SUC attributable to the spectrum it holds/uses; a shared operator is not liable for the original licensee's past AGR dues.

Spectrum trading and buyer-seller liability - Adjusted Gross Revenue (AGR) recovery - Allocation of liability for pre existing AGR dues between seller and buyer under the Spectrum Trading Guidelines (12.10.2015) and subsequent clarification (O.M. 12.05.2016). - HELD THAT: - The Court construed para 11 of the Trading Guidelines read with the O.M. dated 12.05.2016. Where part of the spectrum is traded, past dues of the seller do not become the buyer's liability; where the entire spectrum holding of the TSP in all LSAs is traded, the seller must clear pending dues or the buyer may become liable for past dues, subject to DoT's indicated dues and the Government's discretion to recover amounts found recoverable after the effective date from buyer or seller jointly or severally. The Court observed that in many instances parties were aware of pending AGR litigation; DoT was directed to complete assessments, examine self assessments and issue demands where not raised within six weeks. [Paras 27, 28, 29]

Under trading guidelines, partial trades do not transfer seller's past AGR liabilities to the buyer; full transfer of entire spectrum holding may render buyer liable subject to the Guidelines and DoT's discretion; DoT to complete and, if necessary, raise demands.

Adjusted Gross Revenue (AGR) recovery and instalment regime - Protection of net present value and enforcement on default - Modifications to recovery of AGR dues and the terms for phased payment, including timelines, guarantees and consequences of default. - HELD THAT: - The Court considered the Government/Cabinet proposal for long term instalments and, while accepting the need for sectoral stability, modified the proposed timeframe. It prohibited any fresh reassessment of AGR demands arising from the judgment and directed an initial payment of 10% of total DoT demanded dues by 31.3.2021. Balance to be paid in equal yearly instalments commencing 1.4.2021 and ending 31.3.2031, with TSPs to furnish undertakings and keep existing bank guarantees alive until payment is complete. Any default will attract interest, penalty and interest on penalty as per the licence agreement and may be punished as contempt of Court; DoT and TSPs must report compliance annually by 7 April. [Paras 30, 33, 34, 36, 38]

No reassessment of AGR dues; 10% payable by 31.3.2021; remaining dues to be paid in equal annual instalments from 1.4.2021 to 31.3.2031; bank guarantees to remain valid; default attracts contractually stipulated charges and contempt consequences; annual compliance reporting directed.

Claims against non telecom public sector undertakings - Adjusted Gross Revenue (AGR) recovery - Whether demands raised on non telecom PSUs for non telecom revenue should stand. - HELD THAT: - On re examination and representations from affected PSUs, DoT concluded that the non telecom revenue components claimed were negligible and not part of Access Service Licence activities. DoT decided to withdraw demands raised for licence fee based on non telecom revenue for specified PSUs, and the Court recorded this action. [Paras 37]

Demands raised for licence fee based on non telecom revenue against specified non telecom PSUs are withdrawn as recorded by DoT.

Final Conclusion: The Supreme Court left the core question whether spectrum/licence is amenable to CIRP to the NCLT for a reasoned determination within two months; concurrently it decided that under the Department of Telecommunications' sharing regime each sharer remains liable only for AGR/SUC attributable to its use, and under trading guidelines a partial trade does not transfer the seller's past AGR liabilities to the buyer (full transfers attract different consequences under the Guidelines). The Court prohibited reassessment of AGR demands, mandated phased payment (10% by 31.3.2021; equal annual instalments from 1.4.2021 to 31.3.2031), preservation of bank guarantees, compliance reporting and specified consequences on default, and recorded withdrawal of certain demands on non telecom PSUs.

Definition of Financial Creditor and Financial Debt under the I&B Code - conversion of debt into capital and its effect on financial debt - initiation of corporate insolvency resolution process under Section 7 - competence of a Power of Attorney holder to file an application under the I&B Code

Definition of Financial Creditor and Financial Debt under the I&B Code - conversion of debt into capital and its effect on financial debt - initiation of corporate insolvency resolution process under Section 7 - Whether the appellant is a "Financial Creditor" for the purposes of initiating CIRP under Section 7 of the I&B Code given the contention that the loan was converted into capital. - HELD THAT: - The Tribunal examined the statutory definitions of "Financial Creditor" and "Financial Debt" and applied the settled legal proposition that a debt which has been converted into capital cannot thereafter be treated as a financial debt. Having regard to the material on record relied upon by the respondents (including the amended and supplementary agreements, entries recorded with the Registrar and auditor's certificate), the Tribunal held that the loan had been converted into capital and therefore ceased to be a "financial debt" within the meaning of the Code. Consequently the appellant could not claim the status of a "financial creditor" entitled to initiate CIRP under Section 7. The Tribunal noted that, on this basis, the matter did not fall within the remedial scheme of the I&B Code and the appeal was without merit. [Paras 10, 11]

The loan having been converted into capital is not a "financial debt" and the appellant is not a "financial creditor" for the purposes of initiating CIRP; the appeal is dismissed.

Competence of a Power of Attorney holder to file an application under the I&B Code - procedural validity of filings made by an authorized representative - Whether the application under Section 7 could be rejected solely on the ground that it was filed by a Power of Attorney holder. - HELD THAT: - The Tribunal considered the respondents' objections to the application having been filed through a Power of Attorney holder and the Adjudicating Authority's treatment of that issue. The Tribunal concluded that the application under Section 7 cannot be rejected merely because it was filed by a Power of Attorney holder. The Tribunal observed that the procedural objection on that ground did not justify rejection of the petition and noted that delay in filing had already been condoned by the Tribunal. However, this procedural conclusion did not affect the substantive finding that the appellant was not a financial creditor because the debt had been converted into capital. [Paras 8]

An application under Section 7 cannot be rejected solely on the ground that it was filed by a Power of Attorney holder; but the appellant still fails on the substantive issue of being a financial creditor.

Final Conclusion: The appeal is dismissed on the substantive ground that the alleged loan was converted into capital and therefore is not a "financial debt", so the appellant is not a "financial creditor" entitled to initiate CIRP under Section 7; the Tribunal also held that filing by a Power of Attorney holder is not, by itself, a ground for rejection and the appellant remains at liberty to seek appropriate reliefs before other fora in accordance with law.

Possession - requirement of corpus and animus for possession - liquidator's possession of corporate debtor's assets - bar on institution of suits after liquidation under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - quashing of civil proceedings by the Adjudicating Authority - mesne profits / claim for use of property - police action in accordance with law

Possession - requirement of corpus and animus for possession - mesne profits / claim for use of property - Whether the Appellant has such possession or title in the corporate debtor's property as would prevent the Liquidator from taking possession. - HELD THAT: - The letter dated 17th August, 2002 at best records handing over of possession to manage a school and anticipates a future memorandum of understanding; no agreement or trust resolution establishing ownership, tenancy or a continuing proprietary right is shown. Legal possession requires both corpus (physical control) and animus (intention to hold as owner or under a legal right). Mere occupation to manage a school, payment of property tax and construction of a wall do not establish animus as owner, tenant or licensee sufficient to defeat the liquidator's rights. The liquidator's claim for payment for 'use of the Wada property' is a claim for mesne profits and does not create a contractual lessor-lessee relationship or a title in favour of the occupier.

Appellant's claim to possessory or proprietary right was rejected and the Adjudicating Authority's direction restraining disturbance of the liquidator's possession is upheld insofar as it protects the liquidator's possession.

Bar on institution of suits after liquidation under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - quashing of civil proceedings by the Adjudicating Authority - power of Adjudicating Authority vs Civil Court jurisdiction - Whether the Adjudicating Authority was competent to quash Civil Suit No.251/2019 filed in the Civil Court. - HELD THAT: - Section 33(5) imposes a bar on suits by or against the corporate debtor after a liquidation order, and allows the liquidator to institute suits with prior approval of the Adjudicating Authority. However, where a civil suit has been filed in a Civil Court, the appropriate course is for the liquidator to approach that Civil Court (or the higher civil forum) invoking the IBC provisions for stay or for appropriate relief. It is not appropriate for the Adjudicating Authority to quash a suit already filed in a civil court; such quashing should be sought before the civil forum or by following the civil hierarchy.

The direction quashing Civil Suit No.251/2019 was set aside; the liquidator is at liberty to move the Civil Court concerned or the District Court for appropriate relief.

Liquidator's possession of corporate debtor's assets - police action in accordance with law - Whether the direction in the impugned order calling for the Appellant's arrest was appropriate. - HELD THAT: - The Adjudicating Authority directed arrest on findings of threatening and obstruction. The Tribunal held that instead of directing arrest, the proper measure is to direct the police to take suitable action as per law on the liquidator's complaint. Substituting an order of arrest with a direction to the police to act in accordance with law preserves procedural propriety and the rule of law while addressing allegations of threats and obstruction.

Direction for arrest substituted by a direction that the police take suitable action as per law; remaining operative directions of the impugned order are maintained.

Final Conclusion: Appeal partly allowed: the Tribunal upheld the protection of the liquidator's possession but set aside the Adjudicating Authority's quashing of the civil suit, leaving the liquidator free to approach the civil forum; the direction for arrest was modified to a direction that the police take suitable action as per law, and other directions of the impugned order remain intact.

Deemed sale - rent-a-cab service - mutual exclusivity of taxation under the Seventh Schedule - machinery for assessment - service tax on lease rentals

Deemed sale - service tax on lease rentals - mutual exclusivity of taxation under the Seventh Schedule - Whether lease rentals charged as 'deemed sale' could be subjected to service tax under the Finance Act, 1994 - HELD THAT: - The Tribunal held that agreements of lease are acknowledgedly taxable as 'deemed sale' and the entire rental was treated as such; where the whole consideration is subject to tax as 'deemed sale' there is no scope for that portion to be leviable to service tax under the Finance Act, 1994. Applying the constitutional scheme and authorities examining the demarcation between sales and services, the court observed that in absence of concurrent jurisdiction the Parliament cannot validly tax what is in substance 'deemed sale' under a service head. The adjudicating authority erred in treating the lease rental as taxable service; concomitant principles of mutual exclusivity under the Seventh Schedule and the jurisprudence on demarcation of sale and service lead to exclusion of the lease rental from service tax levy. [Paras 13]

Lease rentals characterised as 'deemed sale' cannot be subjected to service tax under the Finance Act, 1994; the impugned levy on lease rental is unsustainable.

Machinery for assessment - extended period of limitation - Whether the tax demand (including invocation of extended period) could be sustained in the absence of a valid machinery provision for assessment under the taxing statute - HELD THAT: - The Tribunal noted the constitutional and judicial emphasis on the necessity of adequate machinery provisions for assessment and recovery of tax. In the present case, having regard to the discharge of service tax on certain components by the assessee and the classification of the lease rental as 'deemed sale', the court found no scope to subject the lease rental to service tax, particularly when there is no valid machinery provision in the taxing statute to support the impugned demand. Consequently, the extension of the limitation period and related demand could not be upheld. [Paras 14]

Demand (including that sought by invoking extended period) cannot be sustained in the absence of a valid machinery provision; the impugned orders are set aside.

Final Conclusion: The appeals are disposed by allowing the assessee's appeal and dismissing the Revenue's appeal: the lease rentals, treated as 'deemed sale', are not liable to service tax under the Finance Act, 1994, and the tax demands (including attempts to invoke extended limitation) are unsustainable in the absence of requisite machinery provisions, accordingly the impugned orders are set aside.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - voluntary disclosure - Form SVLDRS 1 - curable mistake - incurable mistake - correction of disclosure - reasoned speaking order - remand for fresh consideration

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - voluntary disclosure - Form SVLDRS 1 - curable mistake - incurable mistake - Whether the petitioner's inadvertent entry of undisclosed dues in clause 9.1 instead of clause 9.4 of Form SVLDRS 1 disentitles it to relief under the Scheme 2019. - HELD THAT: - The Court examined the nature of the error made in the Form SVLDRS 1 and distinguished between mistakes that are deliberate and misleading (incurable) and inadvertent or callous oversights that do not confer any undue advantage (curable). The petitioners had wrongly entered the undisclosed dues in clause 9.1 instead of clause 9.4. The mistake did not operate to claim a benefit to which the petitioner was not otherwise entitled under the Scheme. The parties admitted that the petitioner does not fall within the exceptions to eligibility under the Scheme. In these circumstances the error was held to be an inadvertent, curable mistake which did not disentitle the petitioner from claiming relief under the Scheme 2019. [Paras 5, 7, 8]

The Court held that the entry error in Form SVLDRS 1 was an inadvertent, curable mistake and did not by itself disentitle the petitioner from relief under the Scheme 2019.

Correction of disclosure - reasoned speaking order - remand for fresh consideration - What remedial course should follow and whether the respondent authorities should be directed to consider a corrective application and pass an order. - HELD THAT: - The parties agreed that the petitioner may apply to the appropriate authorities for correction of the information in Form SVLDRS 1 regarding the earlier penalty and that the authorities would exercise their discretion on such application. The Court directed the petitioner to submit an application for correction within 15 days of obtaining the certified copy of the order. Upon receipt, the respondent authorities were directed to consider the application and pass a reasoned and speaking order within two months. The Court also clarified that earlier observations concerning entitlement under Section 124(1)(e) would not limit the petitioner from claiming any other benefit to which it may be entitled under the Scheme. [Paras 9, 10, 11]

The petition was disposed by directing the petitioner to apply for correction and by remanding the matter to the respondent authorities to decide the application by a reasoned speaking order within two months; the petitioner may claim any benefit legitimately available under the Scheme.

Final Conclusion: Writ petition disposed; petitioner permitted to seek correction in Form SVLDRS 1 within 15 days of certified copy and respondent authorities directed to decide the application by a reasoned speaking order within two months; the petitioner's inadvertent error was held curable and did not by itself disentitle it from relief under the Scheme 2019.

Failure to furnish ST-3 returns - obligation to file NIL returns or intimate cessation of liability - remand for de novo adjudication - requirement to await outcome of related appeal before final adjudication

Failure to furnish ST-3 returns - obligation to file NIL returns or intimate cessation of liability - Whether the appellant's cessation of filing ST-3 returns without intimating the Department amounted to a matter requiring adjudication and whether the adjudicating authority and Commissioner (Appeals) acted properly in the circumstances - HELD THAT: - The Tribunal found that the appellant was earlier registered and had filed ST-3 returns up to March, 2008 but thereafter ceased filing returns on the view that they were no longer liable, without giving any intimation to the Department. The Tribunal held that the appellant ought to have either filed NIL ST-3 returns or formally informed the Department of reasons for non-filing. The adjudicating authority should have called for the appellant's details; and where an appeal in respect of the preceding period (April, 2006 to March, 2008) was pending before the Commissioner (Appeals), the adjudicating authority should have awaited that appellate outcome before finalising the present proceedings. The Tribunal also observed that the Commissioner (Appeals), instead of conclusively deciding the matter, should have remanded the case to the adjudicating authority for fresh consideration. In view of these deficiencies, the Tribunal set aside the impugned order and directed a fresh adjudication, with the adjudicating authority to elicit required details from the appellant and to proceed only after receipt of the appellate order in the pending appeal for April, 2006 to March, 2008. [Paras 5]

Impugned order set aside; matter remanded for de novo adjudication after calling for details and after receipt of the appellate order for April, 2006 to March, 2008

Final Conclusion: The Tribunal set aside the impugned order and remanded the matter for fresh adjudication; the adjudicating authority is directed to obtain details from the appellant, consider the question afresh in de novo proceedings and decide only after receipt of the Commissioner (Appeals) order in the pending appeal for April, 2006 to March, 2008.

Seizure and detention of goods - assessment of tax on seized goods - penalty under Section 129(1)(b) - release of seized goods on deposit and security - protection of revenue - maintainability of writ under Article 226 in absence of tribunal - verification of computerized court order

Seizure and detention of goods - assessment of tax on seized goods - penalty under Section 129(1)(b) - release of seized goods on deposit and security - protection of revenue - Release of seized eatable goods and the vehicle subject to deposit of assessed tax and part payment of penalty with security for the remainder - HELD THAT: - The Court recorded that the seized goods (supari) and the vehicle had remained in departmental custody since 14 December 2018 and, having regard to the interest of revenue and the peculiar facts, directed conditional release. The petitioner was directed to deposit the entire assessed tax as determined by the seizing authority and to pay a part of the penalty in cash; for the remaining penalty amount the petitioner was permitted to furnish security other than a cash bank guarantee or bank draft, to the satisfaction of the seizing/assessing authority. On compliance with these conditions the seizing authority was directed to release the goods and vehicle in accordance with law. The order balances the assessee's entitlement to release of seized property with the protection of the revenue by requiring payment and security before release.

Seized goods and vehicle to be released on deposit of assessed tax and part payment of penalty with security for remaining penalty, upon satisfaction of the seizing authority.

Maintainability of writ under Article 226 in absence of tribunal - verification of computerized court order - Procedural directions regarding filing of counter-affidavit, verification of the computerized copy of this order and listing for further hearing - HELD THAT: - The Court noted that the departmental appellate tribunal had not yet been constituted and that, in the absence of an effective alternative remedy, the petitioner approached the High Court under Article 226. The Court directed the respondent authority to file a counter-affidavit placing on record the material relevant to adjudication, permitted timelines for filing of the counter and rejoinder, and required the Standing Counsel to place a computer-generated copy of this order (downloaded from the High Court website) before the concerned authority. The concerned authority was directed to verify the authenticity of that computerized copy from the official website and make a written declaration of such verification. The matter was listed for further hearing on the specified date.

Respondent to file counter-affidavit; computerized copy of the order to be placed and authenticated by the concerned authority; matter listed for further hearing.

Final Conclusion: Writ petition entertained under Article 226; seized goods and vehicle ordered released on compliance with deposit and security conditions to protect revenue; respondent to file counter-affidavit and authenticate the computerized copy of this order; matter listed for further consideration.

Power of Government to notify reductions of tax - Power to amend Schedules (wholesale alteration of rates) - Distinction between notification for targeted reduction and amendment for general rate change - Requirement of legislative ratification for notifications amending Schedules - Conditions and restrictions as pre requisites for exemption or reduced rate - Acquiescence in an illegal levy does not validate it

Power of Government to notify reductions of tax - Power to amend Schedules (wholesale alteration of rates) - Distinction between notification for targeted reduction and amendment for general rate change - Conditions and restrictions as pre requisites for exemption or reduced rate - Validity of G.O.Ms.No.24 dated 27.05.2020 issued under Section 31 of the PVAT Act increasing the rate of tax on petrol and diesel - HELD THAT: - Sections 31 and 75 of the PVAT Act perform different functions: Section 31 permits the Government, by notification, to grant exemptions or reductions of tax to a specified class of assessees or transactions subject to conditions and restrictions; Section 75 enables the Government to alter, add to or cancel Schedules so as to effect a general alteration of the rate of tax applicable across the board and requires introduction of a Bill in the Legislative Assembly for ratification within the prescribed time. The impugned notification effects an across the board increase in the rate of tax on petrol and diesel without identifying any specified class of assessees or transactions and without imposing conditions upon which a reduced rate would operate. Such omnibus alteration is the province of Schedule amendment under Section 75 and not of a Section 31 notification which is intended for targeted reductions/exemptions contingent on compliance with notified conditions. The absence of the statutory pre requisites for a Section 31 notification and the general nature of the amendment therefore render the impugned notification contrary to law. That prior use of Section 31 for temporary measures does not validate a subsequent unauthorised levy; acquiescence in an invalid levy does not confer validity. [Paras 15, 16, 20, 21]

G.O.Ms.No.24 dated 27.05.2020, issued under Section 31 to alter the rates of tax on petrol and diesel, is contrary to law and is quashed.

Final Conclusion: Writ petition allowed; impugned notification quashed as an unlawful exercise of power under Section 31 where a general amendment of rates required action under Section 75 and legislative ratification.

Petition rendered infructuous by change of law - discrimination in conferment of statutory benefits - liberty to agitate grievance before competent authority and appropriate forum - direction for expeditious decision by administrative authority

Petition rendered infructuous by change of law - Petition has become infructuous because of subsequent change in law and position of law. - HELD THAT: - The Court recorded the learned counsel's concession that, with the passage of time, the petition has become infructuous owing to the change in the position of law. In view of that concession, the Court did not adjudicate the substantive merits of the petitions seeking declarations and reliefs under the earlier statutory scheme but treated the main challenge as overtaken by the change in law and disposed of the petition accordingly.

Petition disposed of as infructuous in view of the change in law.

Discrimination in conferment of statutory benefits - liberty to agitate grievance before competent authority and appropriate forum - direction for expeditious decision by administrative authority - Allegation of discrimination in the grant of exemption may be agitated before the appropriate administrative authority and thereafter before the appropriate forum; liberty to do so granted and authorities directed to decide expeditiously. - HELD THAT: - Although the petition was disposed of as infructuous, the Court noted the petitioner's grievance that it alone stood discriminated against while other industrial units received benefits. The Court held that such contention can be raised before the competent authority and, if required, before the appropriate adjudicatory forum in accordance with law. The Court granted the petitioner liberty to pursue those remedies and expressed expectation that respondent authorities will consider and decide any representation about discrimination in accordance with law expeditiously, preferably within three months.

Liberty granted to approach the administrative authority and appropriate forum; respondent authorities directed to consider and decide representations regarding discrimination expeditiously and preferably within three months.

Final Conclusion: The petition is disposed of as infructuous due to change of law; petitioner is granted liberty to agitate its grievance of alleged discrimination before the appropriate authority and forum, and the respondent authorities are expected to consider and decide such representations expeditiously, preferably within three months.

Principles of natural justice - quasi-judicial function - reasoned order - application of mind - stay of collection of disputed tax pending appeal - remand for fresh consideration

Principles of natural justice - quasi-judicial function - reasoned order - application of mind - Validity of the impugned order rejecting the stay application in view of absence of adequate hearing, incorrect recital of facts and lack of reasons - HELD THAT: - The Court found that the authority exercising quasi-judicial power when deciding a stay application must record reasons indicating application of mind to relevant factors. The impugned order was held to contain incorrect factual recitals regarding hearing and the background, did not refer to or consider the grounds advanced by the petitioner, and merely stated that no valid grounds existed without any discussion. Reliance was placed on the principle that an order refusing stay of collection of taxes must indicate consideration of relevant factors; an order silent on such consideration or founded on wrong facts is liable to be set aside. In these circumstances the Court concluded that the impugned order could not be sustained and that the matter must be reconsidered after affording personal hearing and passing a reasoned order. [Paras 20, 21]

Impugned order set aside; matter remitted to the authority to apply its mind to the petitioner's contentions, afford personal hearing and pass a reasoned order in accordance with law.

Final Conclusion: Writ petition allowed; the impugned stay-rejection order is quashed and the authority directed to reconsider the stay application by affording personal hearing, applying its mind and passing a reasoned order; no order as to costs.

Violation of principles of natural justice - Right to personal hearing - Remand for fresh consideration - Grant of time to file objections and produce records - Provision of electronic portal/login credentials - Assessment set aside for procedural impropriety - COVID-19 lockdown as ground for extension/relief - Winding up and transfer of books affecting compliance - Limitation under Section 21(3) and (4) of the Telangana VAT Act, 2005

Violation of principles of natural justice - Right to personal hearing - Impugned assessment order was passed in breach of principles of natural justice by not granting adequate opportunity to file objections or to be heard. - HELD THAT: - The Court found that the petitioner, having wound up its business and transferred its books, and in the backdrop of the COVID-19 lockdown, was disabled from promptly compiling and producing records. The petitioner had sought time by email and a representative requested further time in person on 10-06-2020, but the respondent neither effectively assisted in providing portal access nor granted the requested opportunity; instead the assessment was finalized on 23-06-2020 without affording the petitioner reasonable opportunity to file objections or to be heard. These cumulative facts established a gross violation of natural justice causing serious prejudice to the petitioner. [Paras 14, 15, 16, 17]

Finding of breach of principles of natural justice; impugned assessment set aside on this ground.

Provision of electronic portal/login credentials - Grant of time to file objections and produce records - COVID-19 lockdown as ground for extension/relief - Directions were required to enable the petitioner to file objections and produce records, including provision of new login credentials and an opportunity for personal hearing. - HELD THAT: - Given the petitioner's inability to access earlier-uploaded returns and supporting documents due to lack of login credentials and replacement of staff, the Court directed that the respondents must provide new login credentials within two weeks to enable retrieval of information. The petitioner was granted six weeks from receipt of the order-copy to file objections and produce records, and must be afforded a personal hearing before a reasoned order is passed on fresh consideration. [Paras 16, 18]

Respondents to provide new portal login within two weeks; petitioner granted six weeks to file objections and produce records; personal hearing to be afforded and a reasoned order to be passed on fresh consideration.

Remand for fresh consideration - Assessment set aside for procedural impropriety - Impugned Assessment Order No.56555 dated 23-06-2020 was set aside and the matter remitted to the assessing authority for fresh consideration in accordance with law. - HELD THAT: - Because the assessment was finalized without giving the petitioner adequate opportunity and without resolving the petitioner's inability to access the portal or to produce records, the Court held the order unsustainable and set it aside. The matter was remitted to the 1st respondent to consider afresh after compliance with the Court's directions and after affording the petitioner the mandated opportunities. [Paras 17, 18]

Assessment order set aside and matter remitted to the assessing authority for fresh consideration in accordance with law.

Limitation under Section 21(3) and (4) of the Telangana VAT Act, 2005 - The question of expiry of the period of limitation for assessment (claimed to have expired by 31-03-2019) was not finally adjudicated and remains open for fresh consideration by the assessing authority. - HELD THAT: - Although the petitioner contended that the limitation period had expired, the Court did not decide that contention on the merits. By remitting the matter for fresh consideration, the Court left the issue of limitation to be examined and determined by the 1st respondent in the course of the fresh proceedings, after the petitioner is given opportunity to file objections and produce records. [Paras 11, 18]

Limitation plea not decided by the Court and to be considered afresh by the assessing authority on remand.

Final Conclusion: Writ petition allowed. Assessment Order No.56555 dated 23-06-2020 set aside for breach of natural justice and remitted to the assessing authority for fresh consideration; petitioner granted six weeks to file objections and produce records; respondents to provide new VAT portal login within two weeks; personal hearing to be afforded and a reasoned order passed.

Refund of input tax under Section 13 - prescription of procedure and documents under Rule 47 - power of the assessing authority to condone delay under the Rules - concurrent application of an enabling provision conferring power on the Deputy Commissioner - preclusive effect of specific rule-making on general enabling provisions - requirement of production of specified original documents for refund claims

Refund of input tax under Section 13 - prescription of procedure and documents under Rule 47 - power of the assessing authority to condone delay under the Rules - concurrent application of an enabling provision conferring power on the Deputy Commissioner - preclusive effect of specific rule-making on general enabling provisions - Power to condone delay in filing an application for refund under Section 13 is to be exercised by the assessing authority under Rule 47 and not by the Deputy Commissioner under Section 20A where the Rules expressly confer such power. - HELD THAT: - Section 13 contemplates refund of input tax "in such manner and subject to such conditions as may be prescribed"; Rule 47 prescribes the form, time limit and specific documents to be submitted and contains a proviso permitting the assessing authority to condone delay in filing the application or documents for reasons to be recorded. Section 20A, introduced later as an enabling provision conferring condonation power on the Deputy Commissioner, operates only where no other officer is specifically empowered to condone delay. Where the Rules expressly vest condonation power in the assessing authority for refund claims under Section 13, the Deputy Commissioner cannot usurp that power. Consequently, Section 20A is inapplicable to applications under Section 13 insofar as Rule 47 provides for condonation by the assessing authority. The Court therefore answered the question of law in favour of the assessee and against the revenue, directing that the assessing authority exercise the power of condonation and consider the refund claim afresh. [Paras 6, 7, 8]

Section 20A does not apply to refund applications under Section 13 where Rule 47 expressly empowers the assessing authority to condone delay; the assessing authority must consider condonation and the refund claim afresh.

Requirement of production of specified original documents for refund claims - assessment reconsideration and remand for examination of documents - The question whether the documents filed in support of the refund claim were proper was not finally determined and is remanded to the assessing authority for fresh consideration; only originals (not xerox copies) and the specified documents under Rule 47 are permissible. - HELD THAT: - The Assessing Officer and first appellate authority made perfunctory findings on the adequacy of documents, and the Tribunal did not examine the documentary record. Given the Court's declaration that the assessing authority has the condonation power, the original authority must reassess the claim, determine whether the reasons for delay are satisfactory, and then examine the documents afresh. The Court clarified that there shall be no further submission of documents by the assessee except a prepared statement linking specific transactions to shipping bills; xerox copies are not acceptable and the documents required under clauses (i) to (iii) of Rule 47 must have been produced before the assessing authority for the claim to be accepted. [Paras 5, 7, 9]

Matter remanded to the assessing authority to reconsider condonation and to examine the required original documents afresh; xerox copies are not to be accepted and only a statement linking transactions to produced shipping bills may be furnished.

Final Conclusion: Revisions allowed; the Court held that Rule 47 vests the assessing authority with power to condone delay in refund applications under Section 13, rendering Section 20A inapplicable in that context, and remanded the matters to the assessing authority for fresh consideration of condonation and examination of the prescribed documents, parties to bear their respective costs.

Remand for reconsideration - set aside impugned orders - separately charged freight and delivery charges not includable in sale price - liberty to place precedent before authority - direction to decide within fixed time

Set aside impugned orders - remand for reconsideration - Impugned orders dated 16.08.2011 and 22.08.2011 were set aside and the matters remanded to the first respondent for reconsideration. - HELD THAT: - The High Court found that the authorities proposed levy of tax and penalty inter alia relying on Rule 8(2) of the TNVAT Rules, 2006, but noted that the petitioner's grievance centred on freight and pumping charges shown separately in invoices. In view of a recent Division Bench decision of this Court on the point, the impugned orders were set aside and the matters were remanded to the first respondent for fresh consideration. The remand directs the first respondent to reconsider the matters in accordance with law upon receipt of the petitioner's objections and relied decisions. [Paras 3, 4]

Impugned orders set aside; matters remanded to the first respondent for reconsideration.

Liberty to place precedent before authority - direction to decide within fixed time - Petitioner granted liberty to place the Division Bench decision and file objections; the first respondent directed to consider objections and pass appropriate orders within three months. - HELD THAT: - The Court observed that the Division Bench decision in M/s. Larsen & Toubro Limited v. State of Tamil Nadu had not been placed before the authorities. The petitioner was therefore given liberty to file objections along with copies of the decisions relied upon. On receipt of such objections, the first respondent is required to consider them in accordance with law and pass appropriate orders expeditiously and in any event within a period of three months from receipt of a copy of the order. [Paras 3, 4]

Liberty granted to petitioner to place relied decisions and file objections; first respondent to decide afresh within three months.

Separately charged freight and delivery charges not includable in sale price - Question whether freight and pumping charges, when separately shown in invoices, are includable in sale price was not decided on merits by this Court but remanded for fresh consideration in light of the Division Bench decision. - HELD THAT: - The Court noted the Division Bench ruling that cost of freight, delivery or transportation cannot be included in the sale price where such charges are separately charged and shown in invoices. Rather than finally adjudicating the taxability issue itself, the Court remanded the matter to the authority to reconsider in light of that precedent and the petitioner's objections, thereby leaving the substantive question open for fresh administrative determination. [Paras 3, 4]

Substantive question remanded for fresh consideration by the authority in light of the Division Bench decision.

Final Conclusion: The High Court set aside the impugned orders and remanded the matters to the first respondent for fresh consideration; the petitioner may place the Division Bench decision and file objections, and the authority is directed to decide the matters in accordance with law within three months.

Evidence by affidavit - Section 145 of Negotiable Instruments Act - Accused's right to give evidence on affidavit - Trial court's discretion to accept affidavit - Summary trial under Section 138 of the Negotiable Instruments Act - Right to cross-examination on request

Section 145 of Negotiable Instruments Act - Evidence by affidavit - Accused's right to give evidence on affidavit - Trial court's discretion to accept affidavit - Right to cross-examination on request - Whether the accused may have his examination-in-chief recorded by affidavit under Section 145 of the Negotiable Instruments Act and whether the trial court was correct in rejecting the accused's application to file such affidavit. - HELD THAT: - The Court examined the interplay of earlier decisions, noting that Mandvi Co-operative Bank Limited held that the accused does not have a right to give evidence on affidavit under Section 145(1), and this Court in Suresh applied that principle to disallow affidavit evidence by the accused. However, the Supreme Court in Indian Bank Association (para 23 and, in particular, para 23.5) recognised that trial courts have the option of accepting affidavits of witnesses and that witnesses of the accused and the accused may give evidence by affidavit where the trial court so permits; such affidavits remain subject to cross-examination when called for. The Court also noted the summary nature of proceedings under Section 138 (as reiterated in Meters & Instruments) and the judicial emphasis on concluding trials expeditiously, including by accepting affidavit evidence and allowing cross-examination on request. Applying these principles, the High Court held that the learned trial Court had a discretion to permit the accused's affidavit as his examination-in-chief and erred in rejecting the application solely on the basis of Mandvi without considering the supervisory direction in Indian Bank Association which permits the trial court to accept affidavits of the accused/witnesses subject to cross-examination. The applicant had filed a detailed affidavit which could serve as examination-in-chief and, if the complainant sought cross-examination, the trial court could direct the accused to appear; failing appearance, the court could treat non-appearance as deliberate and proceed accordingly. [Paras 8, 12, 13, 14, 15]

Impugned order dated 14/01/2020 set aside; the affidavit filed by the applicant shall be treated as his examination-in-chief, subject to the complainant's right to seek cross-examination and the trial court's direction thereon.

Final Conclusion: The petition is allowed: the trial Court's order refusing permission to treat the accused's affidavit as his examination-in-chief is set aside and the affidavit shall be considered as evidence in chief, with liberty to the complainant to seek the accused's cross-examination and for the trial Court to proceed in accordance with the directions in Indian Bank Association and applicable law.

Interim bail on grounds of pandemic and deteriorating jail conditions - Health and custodial period as ground for temporary release - Presumption under the NDPS statutory scheme and its impact on bail - Requirement and significance of independent witnesses at seizure - Retracted statement under Section 67 and its non-adjudication on interim bail - Conditions attendant to grant of interim bail: personal bond, surety, residence, reporting and non-contact with co-accused

Interim bail on grounds of pandemic and deteriorating jail conditions - Health and custodial period as ground for temporary release - Conditions attendant to grant of interim bail: personal bond, surety, residence, reporting and non-contact with co-accused - Grant of interim bail to the applicant for 45 days on specified conditions. - HELD THAT: - Having considered the materials on record including the duration of custody (over two years), the applicant's age and family ties in her native State, reports regarding her health (skin allergy) and the general threat posed by the pandemic in prisons, the Court was inclined to grant temporary release. The Court imposed conditions to secure attendance and prevent interference with the trial: execution of a personal bond with a surety, residence at the permanent family address, periodic reporting to the local SHO, provision of a live mobile number and continuous communication with the IO, obligation to participate in the trial in person or by video conferencing, and prohibition on contacting co-accused or hampering the trial. The applicant was directed to surrender at the expiry of 45 days. [Paras 2, 11, 12, 14, 15]

Interim bail granted for 45 days subject to specified conditions and surrender thereafter.

Presumption under the NDPS statutory scheme and its impact on bail - Health and custodial period as ground for temporary release - The existence of statutory presumptions under the NDPS Act and the commercial quantity alleged did not preclude the Court from granting interim bail in the facts of this case. - HELD THAT: - The Court noted the NCB's reliance on statutory presumptions arising under the NDPS scheme and the contention that commercial quantity was involved. Nevertheless, weighing the overall facts - including prolonged custody, family sureties, the applicant's residence outside Delhi, the jail medical report and pandemic risks - the Court exercised its discretionary jurisdiction to grant interim bail. The Court considered, but did not accept as decisive for denial of interim relief, the prosecution's submission regarding statutory presumptions. [Paras 3, 8, 14]

Statutory presumptions and the commercial quantity alleged were not treated as decisive to deny interim bail in the present circumstances.

Requirement and significance of independent witnesses at seizure - Retracted statement under Section 67 and its non-adjudication on interim bail - Deficiencies in seizure formalities and the absence of independent witnesses were noted; the retracted Section 67 statement was not adjudicated for validity at this stage. - HELD THAT: - The Court observed that the seizure memo named two witnesses who were Railway Police officials and therefore not independent, which raised doubt about the circumstances of the recovery. Counsel for the applicant also pointed to retraction of the statement made under Section 67. The Court explicitly declined to enter upon a determination of the validity of the Section 67 statement at the interim bail stage, confining itself to noting these factors in the overall balance. [Paras 7, 9, 10, 13]

Noted deficiencies in the presence of independent witnesses at seizure; did not decide the validity of the retracted Section 67 statement while granting interim bail.

Final Conclusion: Interim bail was granted for 45 days, the Court balancing prolonged custody, health and pandemic concerns, family undertakings and procedural deficiencies in seizure against the prosecution's reliance on NDPS presumptions; bail is subject to specified conditions and surrender at the expiry of the period.

Power of appellate court to impose conditions while suspending sentence - Deposit of compensation or fine pending appeal under Negotiable Instruments Act - Relationship between Section 357 Cr.P.C. and suspension of sentence - Effect of insertion of Section 148 in the Negotiable Instruments Act - Notwithstanding clause displacing Section 357(2) Cr.P.C. as regards deposit direction - Reasonableness and quantification of compensation

Power of appellate court to impose conditions while suspending sentence - Deposit of compensation or fine pending appeal under Negotiable Instruments Act - Effect of insertion of Section 148 in the Negotiable Instruments Act - Whether the Appellate Court was empowered to direct deposit of 50% of the compensation while suspending sentence in an appeal preferred prior to insertion of Section 148 of the Negotiable Instruments Act. - HELD THAT: - The High Court held that even though Section 148 was not in existence when the appeal and the impugned order were filed and passed, the Appellate Court possessed jurisdiction to impose a condition for deposit of compensation or part thereof while suspending sentence. Earlier Supreme Court authorities recognise the power of an appellate court to impose terms when suspending sentence in proceedings under Section 138 of the NI Act and to direct remittance of at least a portion of the fine or compensation where appropriate. The subsequent insertion of Section 148, which commences with a notwithstanding clause, expressly confers and confirms the power on the Appellate Court to direct deposit of a minimum proportion of fine or compensation and displaces the operation of Section 357(2) Cr.P.C. insofar as the deposit direction under Section 148 is concerned. The Court emphasised that the quantum of any deposit must be fixed having regard to the nature of the lis, and the parties' ability to pay, and that Section 148 operates irrespective of whether the appeal was instituted before or after the amendment. [Paras 6, 17, 18]

Appellate Court acted within its powers in directing deposit of 50% of the compensation while suspending sentence; the insertion of Section 148 thereafter confirms and clarifies that statutory power.

Relationship between Section 357 Cr.P.C. and suspension of sentence - Reasonableness and quantification of compensation - Whether the petitioner could be permitted to deposit the directed amount by instalments and the treatment of an application for modification of the deposit condition. - HELD THAT: - The High Court observed that a prayer for instalmentary deposit was rendered largely ineffective by lapse of time since the Appellate Court's order was passed about five years earlier. Nevertheless, exercising a lenient approach the Court declined to itself grant instalmentary relief but granted liberty to the petitioner to move the First Appellate Court for appropriate relief. Any such application is to be considered by the Appellate Court on its merits, having regard to the facts, the quantification of compensation and without being influenced by observations made in the present order. [Paras 19]

Petition to permit deposit in instalments dismissed as premature on these facts; liberty granted to petitioner to apply to the First Appellate Court for consideration of instalmentary payment.

Final Conclusion: Petition dismissed. The High Court upheld the Appellate Court's power to direct deposit of compensation while suspending sentence (a power now expressly confirmed by insertion of Section 148 NI Act) and granted liberty to the petitioner to approach the First Appellate Court for consideration of instalmentary payment of the directed amount.

Anticipatory bail after final conviction - finality of conviction, appeal and revision - maintainability of petition under Section 438 Cr.P.C. - imprisonment in default of payment of fine in summary trials - binding effect of a Division Bench decision until altered by a competent court

Anticipatory bail after final conviction - maintainability of petition under Section 438 Cr.P.C. - finality of conviction, appeal and revision - Whether an accused convicted after trial, appeal and revision which has attained finality is entitled to seek anticipatory bail under Section 438 Cr.P.C. - HELD THAT: - The Court found on the record that the petitioner had been convicted at trial, the conviction was affirmed on appeal and the Criminal Revision (Crl.R.C.No.2012 of 2002) was disposed of by the Division Bench on 06.02.2007, leaving only the default sentence portion set aside. Given that the prosecution had crossed trial, appellate and revisional stages and the revision was disposed of, the conviction had attained finality. The Court held that a person in such a position has no right to claim anticipatory bail under Section 438 Cr.P.C. for modification of a final sentence. The petitioner's representation that the revision was pending before the High Court was factually incorrect and therefore fatal to his claim for anticipatory bail. [Paras 8, 9, 10, 11]

Anticipatory bail under Section 438 Cr.P.C. is not maintainable once conviction, appeal and revision have attained finality; the anticipatory bail petition is dismissed.

Imprisonment in default of payment of fine in summary trials - binding effect of a Division Bench decision until altered by a competent court - Whether the Division Bench's 06.02.2007 decision setting aside imprisonment in default of payment of fine in this case remains operative despite a later change in law by the Supreme Court. - HELD THAT: - The Court recorded that the Division Bench, after reference by a Single Judge, held that Section 30 Cr.P.C. did not apply to summary trials under the Negotiable Instruments Act and set aside only the default sentence of imprisonment while confirming conviction and fine. That decision was final in Crl.R.C.No.2012 of 2002. Although the bench noted that the Supreme Court in 2017 revisited the legal position and held otherwise, the Division Bench's determination in this revision remains binding and final for the purposes of the disposed revision; a subsequent change in interpretation by a higher court does not alter the fact that the revision was disposed of and had attained finality on the date of that order. [Paras 6, 7, 8, 12]

The Division Bench's order of 06.02.2007 setting aside only the default sentence is final for the disposed revision; a later change in legal interpretation by the Supreme Court does not reopen the disposed revision.

Final Conclusion: The Criminal Original Petition for anticipatory bail is dismissed because the conviction had attained finality after disposal of the revision; execution of the non bailable warrant is deferred until 03.04.2020.

Dishonour of cheque constituting offence under Section 138 Negotiable Instruments Act - Rebuttable presumption under Sections 118 and 139 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities for rebuttal - Initial evidential burden on accused to produce probable defence

Rebuttable presumption under Sections 118 and 139 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities for rebuttal - Initial evidential burden on accused to produce probable defence - Dishonour of cheque constituting offence under Section 138 Negotiable Instruments Act - Whether the accused succeeded in rebutting the statutory presumptions under Sections 118 and 139 and whether his conviction under Section 138 was sustainable. - HELD THAT: - The Court applied the established principle that Sections 118 and 139 create rebuttable presumptions which an accused can dispel on the preponderance of probabilities. The accused did not deny issuance or the signature on the cheque, so the statutory presumption in favour of the holder arose. The accused's defence-that the cheque was given as security for an earlier loan and that prior cheques were misused-was supported only by oral testimony of his witnesses without documentary proof; he also failed to enter the witness box himself. The statutory notice reply and the oral evidence were not corroborated, and nothing material was elicited from the cross-examination of the complainant. Mere denial was held insufficient to shift the burden. On this record the Court found that the accused did not adduce facts or circumstances that made non-existence of liability reasonably probable, whereas the complainant proved dishonour and the antecedent transactions. Consequently, the trial court's finding of commission of the offence under Section 138 was correctly recorded and rightly affirmed by the appellate court. [Paras 10, 11]

The accused failed to rebut the presumptions; conviction under Section 138 upheld and the revision dismissed.

Final Conclusion: Criminal Revision dismissed. The conviction and sentence imposed by the trial Court for the offence under Section 138 of the Negotiable Instruments Act, as affirmed by the Appellate Court, are sustained; the trial Court is directed to secure and commit the accused for the remaining sentence, and any deposit, if made, shall be disbursed to the complainant (or legal heirs) with accrued interest; parties may apply for compounding under Section 147 to the trial Court.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - cheque given as security - reverse onus clause - burden to rebut by proving payment of full amount - liability under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - cheque given as security - burden to rebut by proving payment of full amount - Whether the presumption of existence of a legally enforceable debt under Section 139 survives when the accused pleads the cheque was given as security, and whether the accused rebutted that presumption. - HELD THAT: - The Court applied settled principles that once issuance and signature on the cheque are admitted, Section 139 creates a rebuttable presumption in favour of the complainant that the cheque was issued for discharge of a debt or liability. The presumption is part of the reverse onus scheme and remains effective unless the accused adduces evidence fairly and reasonably tending to show the contrary. Where the defence is that the cheque was given as security, the accused must lead evidence to rebut the presumption, in particular evidence showing that the full amount due and payable to the complainant has been paid or other evidence negating a legally enforceable debt. The Court relied on the exposition in APS Forex and earlier precedents, noting that mere denial or unsupported assertion is insufficient. On the facts, the accused admitted execution of the agreement and the cheque but failed to produce the mediator as a witness or other evidence to establish the security-nature of the cheque or that the debt had been discharged. The Trial Court erred in shifting the onus onto the complainant to prove the debt despite the admitted issuance and signature and the statutory presumption. Consequently, the presumption under Section 139 was not successfully rebutted and liability under Section 138 follows.

Presumption under Section 139 was not rebutted by the accused; the defence that the cheque was given as security failed.

Liability under Section 138 of the Negotiable Instruments Act - reverse onus clause - Whether the Trial Court's order of acquittal should be set aside and the complaint under Section 138 allowed. - HELD THAT: - Applying the concluded finding that the presumption of a legally enforceable debt stood unrebutted, the High Court held that the Trial Court materially erred in acquitting the accused. The appellate court observed that both lower courts improperly required the complainant to discharge the burden which, by virtue of admitted issuance and signature, lay upon the accused to rebut. On that basis the High Court allowed the appeal, set aside the acquittal and directed payment by the accused of the cheque amount and compensation, failing which sentence would follow as directed.

Impugned judgment of acquittal set aside; complaint allowed and relief granted to the complainant.

Final Conclusion: Appeal allowed; Trial Court's acquittal under Section 138 set aside as the accused failed to rebut the presumption under Section 139, and the accused was directed to pay the cheque amount and compensation within the time stipulated, failing which sentence as ordered will follow.

Amendment of complaint to implead a company as accused in proceedings under Section 138 of the Negotiable Instruments Act - non-impleadment of company and its consequence under Section 141 of the Negotiable Instruments Act - power to additionally summon or implead under Section 319 of the Criminal Procedure Code - curability of formal infirmities by amendment - precedential effect of a coordinate-bench decision and prior adjudication in the same proceedings - application for quashing of complaint where company was not impleaded

Amendment of complaint to implead a company as accused in proceedings under Section 138 of the Negotiable Instruments Act - non-impleadment of company and its consequence under Section 141 of the Negotiable Instruments Act - power to additionally summon or implead under Section 319 of the Criminal Procedure Code - Whether the trial court erred in refusing the complainant's application to amend the complaints in Criminal Case Nos. 7674 and 7675 of 2015 to add M/s. B.M. Infrastructure Industries Pvt. Ltd. as an additional accused. - HELD THAT: - The court observed that the petitioner had not originally impleaded the company as an accused in the Section 138 complaints. The learned Trial Judge declined the applications (Exhibits 66 and 72) to add the company as accused No.3, applying Section 138 and Section 141 of the Negotiable Instruments Act read with Section 319 Cr.P.C. The High Court noted that a coordinate bench had earlier quashed and set aside complaints insofar as accused No.2 by reason of non-impleadment of the company, applying the principle in Aneeta Handa and related authorities; that earlier adjudication directly concerned the same issue in the proceedings involving the present petitioner; and that no distinct factual matrix existed here to bring the present case within authorities relied upon by the petitioner which permit amendment where the defect is a simple, curable formal infirmity. The court examined the cases cited by the petitioner and concluded they were factually distinguishable: some did not deal with non-impleadment of a company, others concerned defects in service or notice, or where the company was already a co-accused but not summoned. On the facts, the proposed amendment was not a mere formal curable infirmity and permitting it would be contrary to the prior decision in the same proceedings. Consequently, no illegality or infirmity was made out in the impugned orders refusing amendment. [Paras 3, 5, 6, 7, 8]

Applications to amend the complaints to implead the company were rightly refused; amendment of the nature sought could not be permitted and the impugned orders show no infirmity.

Precedential effect of a coordinate-bench decision and prior adjudication in the same proceedings - application for quashing of complaint where company was not impleaded - Whether the present petitions under Articles 226 and 227 and Section 482 Cr.P.C. seeking quashing of the impugned orders call for interference despite the prior coordinate-bench decision. - HELD THAT: - The Court emphasised that the controversy had already been considered and concluded by a coordinate bench of this High Court which had quashed the complaints qua accused No.2 on account of non-impleadment of the company, following the Apex Court's approach in Aneeta Handa. That prior adjudication in the same set of proceedings precluded re-opening the same question absent distinguishing circumstances. The petitioner's reliance on various other decisions was considered but found inapplicable on facts; none demonstrated a legal error in the trial court's refusal to permit the amendment. In view of the earlier decision and absence of any demonstrable illegality or exceptional circumstance, the High Court declined to entertain the petitions. [Paras 5, 6, 8, 9]

Petitions for quashing and for leave to amend are not maintainable on the present facts and are rejected at the admission stage.

Final Conclusion: The applications to amend the complaints to implead M/s. B.M. Infrastructure Industries Pvt. Ltd. as an additional accused were correctly rejected by the trial court; having regard to the prior coordinate-bench decision and the factual distinctions from authorities relied upon by the petitioner, no error or illegality was shown and the petitions under Articles 226/227 and Section 482 Cr.P.C. are dismissed at admission.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption of consideration and legally enforceable debt - Burden of proof shifts to complainant after successful rebuttal - Credibility and probability of defence in cheque bounce prosecutions - Proof of capacity to lend and existence of debt - Acquittal in prosecution under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption of consideration and legally enforceable debt - Burden of proof shifts to complainant after successful rebuttal - Proof of capacity to lend and existence of debt - Credibility and probability of defence in cheque bounce prosecutions - Whether the trial Court erred in acquitting the accused after finding that the statutory presumption under Section 139 was rebutted and that the complainant failed to prove existence of a legally enforceable debt and capacity to lend. - HELD THAT: - The High Court upheld the trial Court's conclusion that the presumption of consideration under Section 139 was rebutted. The trial Court relied on material showing inconsistencies in the complainant's case, including an earlier admission in a Domestic Violence proceeding that the disputed cheque was given in December 2013 whereas the complainant pleaded the loan was advanced in February 2014, and evidence from a bank official indicating the cheque leaf was non-CTS, from an earlier cheque book bearing another name and appearing to have been issued in 2012. Those facts, together with the defence evidence and cross-examination, rendered the non-existence of consideration and debt sufficiently probable to rebut the statutory presumption. Once the presumption was held rebutted, the onus shifted to the complainant to prove the existence of the debt and his capacity to lend; the Court found that the complainant, a security guard earning modest wages, gave inconsistent explanations (claiming he borrowed from relatives only in cross-examination) which were not reflected in the complaint, notice or examination-in-chief. The High Court concluded that the trial Judge had examined the evidence minutely and legitimately found the accused's defence credible and the complainant's proof deficient, so that acquittal was justified and not open to interference.

The acquittal of the accused in the prosecution under Section 138 of the Negotiable Instruments Act is affirmed; the presumption under Section 139 was properly found rebutted and the complainant failed to prove existence of a legally enforceable debt and capacity to lend.

Final Conclusion: Special leave to appeal is rejected; the conviction is not interfered with, the acquittal is affirmed and the record and proceedings are directed to be returned to the trial Court forthwith.

Presumption under Section 139 of the Negotiable Instruments Act - cheque issued in discharge of debt or liability - stop payment instruction and requirement of sufficient funds - effect of criminal acquittal on civil remedy

Presumption under Section 139 of the Negotiable Instruments Act - cheque issued in discharge of debt or liability - The cheque Ex.A1 was issued by the defendant in discharge of a debt owed to the plaintiff and the presumption in favour of the holder applied. - HELD THAT: - The Trial Court observed that, notwithstanding limited particulars as to dates of borrowal and promissory notes in the pleadings, the plaintiff proved issuance and presentation of Ex.A1 and relied upon the statutory presumption to infer that the cheque was issued for repayment of a debt. The appellate Court found no perversity in the Trial Court's evaluation of the documents and oral testimony, noting the parties' admissions as to issuance and presentation of the cheque and the insufficiency of the defendant's evidence to rebut the presumption. On that basis the civil claim for recovery founded on the cheque was held established and the decree confirmed. [Paras 8, 13, 18]

The finding that Ex.A1 was issued in discharge of debt is upheld and the plaintiff is entitled to decree for recovery.

Stop payment instruction and requirement of sufficient funds - A 'stop payment' instruction by the drawer is not acceptable in the absence of sufficient funds in the account; the Trial Court rightly treated the defendant's contention on stop payment as untenable where account balances were inadequate. - HELD THAT: - The Trial Court applied the principle that a drawer cannot validly issue a stop payment instruction when there are not sufficient funds in the account to meet the cheque; it recorded that the defendant's own case showed a bank balance far below the cheque amount. The High Court agreed with the Trial Court's reliance on authoritative precedent and its conclusion that the defendant failed to establish a lawful basis for the stop payment instruction, thereby reinforcing the plaintiff's entitlement arising from the dishonoured cheque. [Paras 11, 12]

The Trial Court's conclusion rejecting the defendant's stop payment defence is affirmed.

Effect of criminal acquittal on civil remedy - The acquittal of the defendant in the criminal complaint under Section 138 did not bar the civil suit for recovery; the civil Court may consider evidence or depositions from the criminal proceedings but is not bound by the criminal outcome. - HELD THAT: - The judgment records that the criminal complaint filed by the plaintiff under Negotiable Instruments law resulted in acquittal, but that alone does not preclude the civil remedy. The High Court noted precedent that an acquittal in criminal proceedings is not a bar to a civil suit and that depositions in criminal proceedings may be admissible in the civil trial. The Court found that, on the civil evidence and documents before it, the Trial Court correctly reached its conclusion irrespective of the criminal acquittal. [Paras 9, 15, 18]

The civil suit proceeds and the Trial Court's decree is unaffected by the criminal acquittal.

Final Conclusion: The judgment and decree in O.S.No.172 of 2005 dated 29.09.2009 are confirmed; the first appeal is dismissed and the plaintiff's decree for recovery (with interest and costs as awarded by the Trial Court) is upheld.

Cross-examination of complainant under Section 145(2) of Negotiable Instruments Act - Evidence by affidavit and right to recall witness for cross-examination - Discretion and duty of trial court to summon person giving evidence on affidavit

Cross-examination of complainant under Section 145(2) of Negotiable Instruments Act - Evidence by affidavit and right to recall witness for cross-examination - Validity of the trial court's order permitting the accused to recall the complainant for cross-examination under Section 145(2) of the Negotiable Instruments Act. - HELD THAT: - The High Court held that Section 145(1) allows the complainant to give evidence by affidavit and, if so given, Section 145(2) permits the accused to apply for recall of the person who gave evidence on affidavit for cross-examination. The trial court's order enabling the accused to cross-examine the complainant was in accordance with this scheme. The magistrate had not conducted the proceeding as a summary trial; absence of a recorded plea of defence in the file did not demonstrate that no probable defence existed or that the accused lacked entitlement to seek cross-examination. Reliance on the reasoning in the quoted decision establishes that once examination-in-chief is on affidavit, the accused may request the court to summon the affiant for cross-examination, and the trial court is not in error in allowing such an application under Section 145(2).

The impugned order allowing the accused to recall and cross-examine the complainant under Section 145(2) was held to be lawful and the petition challenging it dismissed.

Final Conclusion: The High Court dismissed the petition, upholding the trial court's exercise of its power under Section 145(2) of the Negotiable Instruments Act to permit the accused to recall the complainant for cross-examination; no interference was warranted.

Conviction under Section 138 of the Negotiable Instruments Act - concurrent findings - revisional jurisdiction - compensation award - reduction of custodial sentence

Conviction under Section 138 of the Negotiable Instruments Act - concurrent findings - revisional jurisdiction - The correctness and sustainment of the conviction recorded under Section 138 of the Negotiable Instruments Act by the trial and appellate courts. - HELD THAT: - The statement of the complainant together with documentary evidence on record established commission of the offence under Section 138 of the Negotiable Instruments Act. The High Court found no error in the concurrent findings of fact recorded by the trial and appellate courts. Given the limited scope of revisional jurisdiction to reappreciate concurrent findings of fact, interference was not warranted and the convicting judgments were affirmed. [Paras 8]

Conviction under Section 138 of the Negotiable Instruments Act affirmed.

Compensation award - reduction of custodial sentence - Modification of the sentence and status of the compensation awarded to the complainant. - HELD THAT: - The applicant had deposited the compensation amount before the trial court and the complainant/respondent expressed no grievance. The applicant had already undergone more than fifteen days of imprisonment out of the two months' sentence. In view of payment of compensation and absence of grievance, the High Court exercised its authority to reduce the custodial part of the sentence to the period already undergone, while leaving the award of compensation intact. Consequential directions were issued for release and transmission of the order to the courts below. [Paras 9, 10, 11]

Award of compensation affirmed; custodial sentence reduced to the period already undergone and release warrant to be issued.

Final Conclusion: The revision petition is partly allowed: the conviction under Section 138 of the Negotiable Instruments Act is affirmed, the compensation award is maintained, but the custodial sentence is reduced to the period already undergone and directions issued for the applicant's release.

Amendment of complaint under Order 6 Rule 17 CPC - Inherent powers of court to do complete justice and rectify typographical errors - Proceedings under the Negotiable Instruments Act (section 138) and amendment of complaints - Maintainability of criminal revision and waiver of preliminary objections

Maintainability of criminal revision - Waiver of preliminary objections - Objection to the maintainability of the criminal revision could not be raised before this Court where no such objection was taken before the revisional court. - HELD THAT: - The petitioner-accused did not object to the maintainability of the revision before the revisional court; having failed to raise that preliminary point at the stage when the revisional jurisdiction was invoked, the petitioner cannot now seek to challenge maintainability in this petition. The court followed the principle that objections to jurisdiction or maintainability should be raised before the forum which invoked the revisional jurisdiction, and where not raised earlier the question is left undecided for the later forum.

Objection to maintainability not available to petitioner in this petition and cannot form a ground for quashing the revisional order.

Amendment of complaint under Order 6 Rule 17 CPC - Inherent powers of court to do complete justice and rectify typographical errors - Proceedings under the Negotiable Instruments Act (section 138) and amendment of complaints - The revisional court's allowance of amendment to the memo of complaint in proceedings under Section 138 of the Negotiable Instruments Act at an initial stage was not illegal or perverse. - HELD THAT: - The court accepted that proceedings under Section 138 are at an initial stage and the trial court and revisional court possess inherent jurisdiction to permit amendment to ensure justice, including rectification of typographical mistakes or incorrect particulars in the complaint. Reliance placed on precedents recognising the court's power to allow amendments in such prosecutions to prevent injustice and to enable determination of the dispute on merits. Allowing amendment at an early stage does not preclude the accused from raising defence; rather it facilitates adjudication on merits and is consistent with the court's duty to do complete justice.

Impugned order permitting amendment is not found to be illegal or perverse and is sustainable.

Final Conclusion: Petition dismissed; the revisional court's order allowing amendment of the complaint is upheld and the maintainability objection cannot be entertained before this Court as it was not raised earlier.