TaxTMI Updates e-Newsletter
Sep 05,2022

Suspension of registration - cancellation of registration - show cause notice and adjudication for quantification of tax liability - revocation of suspension and interim relief - practical approach to revenue recovery

Show cause notice and adjudication for quantification of tax liability - cancellation of registration - Validity of a show cause notice for cancellation of registration in the absence of any adjudication quantifying tax liability. - HELD THAT: - The Court held that cancellation of registration premised on non-payment of tax cannot be sustained where no show cause notice had been issued and no adjudication had taken place to quantify any tax liability. Quantification of liability follows issuance of a show cause notice and the adjudicatory process; until that process is completed the ground of failure to pay tax does not arise. The Court recorded that the Department had issued repeated summons but had not proceeded to issue a show cause notice or to quantify liability, and therefore the procedural requirement for cancellation was not met. [Paras 4]

A show cause notice proposing cancellation of registration is not sustainable in the absence of prior issuance of show cause and adjudication quantifying liability.

Suspension of registration - revocation of suspension and interim relief - practical approach to revenue recovery - Whether the suspension of the appellant's registration should continue pending initiation of show cause and adjudication, and the relief to be granted. - HELD THAT: - The Court observed that suspension of a dealer's registration is counterproductive to revenue recovery because cancellation prevents the dealer from issuing invoices and thereby hampers tax collection. Absent a finding that the taxpayer has engaged in deliberate evasion, a pragmatic approach is required. Given the factual position - repeated summons without subsequent issuance of show cause and no adjudication - the Court concluded that suspension should be revoked. The Court directed the respondent authority to revoke the suspension forthwith, to issue a show cause notice within a fixed short timeframe, to afford the appellant a reasonable opportunity to object, and thereafter to adjudicate the show cause notice by a reasoned order on merits in accordance with law. The Court did not decide the merits of any substantive claims and left all contentions open for adjudication by the authority. [Paras 5, 7, 8, 9]

Suspension revoked; respondent directed to issue show cause within seven days, provide reasonable time for objections, and adjudicate the matter by a reasoned order.

Final Conclusion: The appeal and connected matters were allowed to the limited extent of directing immediate revocation of the appellant's registration suspension and directing the respondent authority to issue a show cause notice within seven days, afford the appellant an opportunity to be heard, and thereafter adjudicate the show cause by a reasoned order; the Court made no determination on the substantive merits.

Grant of regular bail in economic offences - Triple test for bail: flight risk, tampering with evidence, influencing witnesses - Completion of investigation and filing of charge-sheet as relevant factor for bail - Documentary evidence in custody of the State - Reasonable period of pre-trial detention and Article 21 protection

Grant of regular bail in economic offences - Triple test for bail: flight risk, tampering with evidence, influencing witnesses - Completion of investigation and filing of charge-sheet as relevant factor for bail - Documentary evidence in custody of the State - Reasonable period of pre-trial detention and Article 21 protection - Whether the petitioners are entitled to regular bail pending trial in the complaint registered under Section 132(1)(a),(b)&(c) of the CGST Act and Punjab GST Act - HELD THAT: - The Court applied established bail jurisprudence and the tripod/triple test, giving primacy to securing fair trial and Article 21 values. The investigation in the present matter stood completed and the complaint/charge-sheet had been filed; charges were not yet framed and the trial was not likely to conclude soon as many witnesses (66) remained to be examined. The prosecution did not put forward any convincing material that the petitioners were flight risks or would tamper with evidence or influence witnesses if released. The material on record showed that the evidence was primarily documentary and in the custody of the State. Having regard to the substantial period of pre-trial custody already undergone by the petitioners (approximately one and a half years), the maximum sentence prescribed (five years) and the absence of a specific, substantiated apprehension of interference with the process of justice, continued incarceration was held unnecessary. The Court accordingly exercised its discretion to allow bail, subject to the Trial Court's satisfaction and such conditions as it may impose to safeguard the prosecution's interests, and directed surrender of passports or affidavit where passports are not possessed, while leaving all merits open for trial. [Paras 9, 10, 11]

Bail granted to the petitioners on condition of compliance with the Trial Court's requirements and surrender of passports (or affidavit), with liberty to the State to move for cancellation of bail if petitioners or their associates attempt to contact, threaten or intimidate witnesses.

Final Conclusion: The bail petitions of Maninder Sharma, Vinod Kumar, Sunny Mehta and Sandeep Singh are allowed and they are ordered to be released on bail subject to the satisfaction of the Trial Court which may impose stringent conditions; passports are to be surrendered or an affidavit furnished and the State may seek cancellation of bail if any attempt is made to contact, threaten or intimidate witnesses.

Interest on delayed payment of tax is compensatory in nature - payment by debit to the electronic cash ledger as constituting 'remittance' under Section 50 - availability of balance in the electronic credit ledger is not equivalent to payment unless debited by filing the return - interest under Section 50 chargeable only on the cash portion after amendment - reverse charge mechanism (RCM) liabilities attract interest on delayed cash payments - proviso to Section 50 operates to protect assessee only when tax is paid by debiting electronic cash ledger - assessees must file returns and effect ledger debits for tax payments to be recognized for interest computation

Availability of balance in the electronic credit ledger is not equivalent to payment unless debited by filing the return - payment by debit to the electronic cash ledger as constituting 'remittance' under Section 50 - Whether mere availability of input tax credit or generation of e-challans in the electronic ledgers, without filing the statutory return and effecting a debit entry, protects the assessee from liability to pay interest under Section 50 of the TNGST Act. - HELD THAT: - The Court examined the language of Section 50 and the proviso and held that protection from interest is tied to actual remittance by way of debit in the electronic cash ledger arising on filing the return. The mere presence of balances in the electronic credit or cash ledgers, or generation of e-challans, does not amount to payment for the purposes of Section 50 unless the return is filed and the relevant ledger(s) are debited. The Court observed that treating mere availability of credit as payment would require rewriting the statutory proviso and would be risky for revenue because credits available may be subsequently found to be erroneously availed or incorrectly applied. On these bases the contention that electronic ledger balances alone exempt the assessee from interest was rejected. [Paras 14, 16, 21]

Availability of balances in electronic ledgers without filing the return and effecting the requisite debit does not constitute payment under Section 50; interest cannot be disallowed on that ground.

Interest under Section 50 chargeable only on the cash portion after amendment - reverse charge mechanism (RCM) liabilities attract interest on delayed cash payments - interest on delayed payment of tax is compensatory in nature - Whether, having regard to the amendment to Section 50 and the factual matrix, interest should be computed only on the cash portion (as recomputed by authorities) in respect of RCM liabilities for the periods July-October 2017. - HELD THAT: - The Court noted that respondents recomputed interest in light of the amendment to Section 50 and accepted that interest is now chargeable on the net tax liability's cash portion. The order of the authority computed interest on delayed cash payments under RCM for the tax periods July to October 2017 and reduced the demand accordingly. The Court endorsed the legal proposition that interest is compensatory and payable for the period the tax remains unpaid, and that, in the circumstances of this case where cash payments under RCM were belated, interest is properly chargeable on the delayed cash component as worked out by the authority. The reasoning in the impugned order, including reliance on precedents and the calculation in Table B, was held to support confirmation of the recomputed demand. [Paras 9, 12, 13]

Interest was correctly recomputed and levied only on the delayed cash portion (RCM payments) for July-October 2017; the demand as recomputed stands confirmed.

Final Conclusion: Writ petition partly allowed to the extent of directions already given by the Court (order dated 18.01.2021); challenge to the remainder of the demand is dismissed. The levy of interest is upheld: mere ledger balances do not constitute payment under Section 50 and interest properly applies to the belated cash portion as recomputed by the authorities for July-October 2017.

Redressal of grievance - closure of writ petition on account of remedy having been provided - filing and embedding of documents in the court record

Redressal of grievance - closure of writ petition on account of remedy having been provided - Petitioner's grievance stood redressed and the writ petition could be closed. - HELD THAT: - Respondent placed a compilation of documents before the Court indicating that the grievance of the petitioner had been addressed (paragraph 2). The compilation was furnished to the petitioner's counsel, who confirmed that the grievance stood redressed and consented to closure of the writ petition (paragraph 3). On that basis the Court ordered the writ petition and the pending application to be closed (paragraph 4). [Paras 2, 3, 4]

Writ petition and pending application closed as the grievance had been redressed.

Filing and embedding of documents in the court record - Compilation of documents placed by respondent to be scanned and uploaded to the case file for record. - HELD THAT: - For purposes of good order and record, the Court directed the Registry to scan and upload the documents submitted by the respondent so they are embedded in the case file (paragraph 5). This direction ensures that the material evidencing redressal is part of the Court record. [Paras 5]

Registry to scan and upload the documents so they stand embedded in the case file.

Final Conclusion: The Court, on the petitioner's counsel's concurrence that the grievance has been redressed and on production of supporting documents by the respondent, closed the writ petition and the pending application and directed the Registry to upload the documents to the case file.

Refund of IGST on zero rated supplies - treatment of shipping bills as refund applications - interest on delayed refund - duty drawback - issue of notice - leave to amend memo of parties - filing of counter-affidavit and rejoinder

Issue of notice - filing of counter-affidavit and rejoinder - Court issued notice to the respondents and directed filing of counter-affidavit(s) and rejoinder(s) within specified timelines; matter listed for further hearing. - HELD THAT: - The Court recorded the petitioner's contention that IGST against eleven shipping bills had been blocked and that refunds, along with interest, and duty drawback were claimed. In exercise of its power to secure pleadings and responses, the Court issued notice to the respondents, directed that counter-affidavit(s) be filed within four weeks and rejoinder(s), if any, before the next date, and listed the matter for hearing on the specified date. These directions are procedural steps to enable adjudication on the contested claim for IGST refund, interest and duty drawback. [Paras 2, 3, 5]

Notice issued; respondents to file counter-affidavit(s) within four weeks and petitioner may file rejoinder(s) before the next date; matter listed on 25.05.2022.

Leave to amend memo of parties - Permission granted to amend the memo of parties to correct the description of a respondent. - HELD THAT: - The petitioner sought leave to amend the memo of parties on the ground that respondent no. 4 was not accurately described. The Court allowed the amendment request and directed that the amended memo of parties be filed within ten days. The grant of leave is a procedural order permitting correction of party particulars to ensure proper representation and notice. [Paras 4]

Leave to amend the memo of parties granted; amended memo to be filed within ten days.

Final Conclusion: The Court issued notice and directed the filing of counter-affidavit(s) and rejoinder(s), granted leave to amend the memo of parties with a ten-day filing direction, and listed the matter for hearing on 25.05.2022; no substantive adjudication on the merits of the IGST refund, interest or duty drawback claims was made in this order.

Quashing of administrative order for failure to assign reasons - budgetary support in lieu of tax/central excise exemption - validity of decision to be judged by reasons recorded in the order - prohibition on supplementing judicially relevant reasoning by counter-affidavit

Quashing of administrative order for failure to assign reasons - validity of decision to be judged by reasons recorded in the order - prohibition on supplementing judicially relevant reasoning by counter-affidavit - Impugned order dated 26.08.2020 declining part of the petitioner's claim for budgetary support for January to March, 2020 is unsustainable for lack of reasons and reliance on post dating material. - HELD THAT: - The Court held that a decision refusing part of the petitioner's claim contained no reasons explaining the partial rejection despite acceptance of a portion of the claim, and therefore its validity must be assessed on the stated reasoning (or absence thereof) in the order itself. The respondents sought to justify ineligibility by reference to an office memorandum dated 26.07.2021 which did not exist on the date of the impugned order (26.08.2020); reliance on such subsequent material to validate an earlier order was held to be misconceived. Further, the Court reiterated the settled principle that reasoning for administrative or executive orders cannot be supplemented in judicial proceedings by counter affidavit or subsequent affidavits (citing the principle in Mohinder Singh Gill). Applying these principles, the Court found the impugned order legally unsustainable and liable to be quashed insofar as it declined part of the claim. [Paras 8, 9, 10, 11, 12]

Impugned order dated 26.08.2020 quashed to the extent it declines part of the budgetary support claim for January to March, 2020; writ petition disposed insofar as that order is set aside.

Budgetary support in lieu of tax/central excise exemption - Eligibility of the petitioner and the precise period for which budgetary support is available was not adjudicated and remains open for decision. - HELD THAT: - The Court expressly refrained from deciding the substantive question of the petitioner's overall eligibility for budgetary support or the period for which such benefit is available (including earlier findings or subsequent investigations suggesting differing terminal dates). Those questions were left undetermined by the Court and are not resolved by the present order. [Paras 13]

Substantive eligibility and period for grant of budgetary support not finally adjudicated and remain to be considered afresh by the competent authority or in further proceedings.

Final Conclusion: The administrative order dated 26.08.2020 partially denying budgetary support for January to March, 2020 is quashed for want of reasons and unlawful reliance on subsequent material; the Court has not decided the petitioner's overall eligibility or the period of entitlement, which remain open for fresh consideration.

Deduction under Section 80P - renewal certificate / renewal licence as prerequisite for deduction - remand to Assessing Officer for fresh consideration - opportunity of hearing

Deduction under Section 80P - renewal certificate / renewal licence as prerequisite for deduction - opportunity of hearing - Claim for deduction under Section 80P was not adjudicated on merits and was remitted to the Assessing Officer for fresh consideration in light of the renewal certificate. - HELD THAT: - The Tribunal noted that the CIT(A) sustained the disallowance on the ground that the renewal certificate filed did not pertain to the relevant previous year, whereas the appellant's representative contended that the renewal certificate had in fact been furnished before the CIT(A) but may have escaped his attention. No substantial opposition was pressed by the Department. In these circumstances the Tribunal set aside the CIT(A)'s order and directed that the Assessing Officer examine the renewal certificate and the appellant's entitlement to deduction under Section 80P afresh, after affording the assessee a reasonable opportunity of hearing. The matter was remitted for fresh decision rather than being finally decided on the merits by the Tribunal. [Paras 5]

Matter remitted to the Assessing Officer to decide the claim for deduction under Section 80P after verifying the renewal certificate and after giving the assessee a reasonable opportunity of hearing.

Final Conclusion: Appeal allowed for statistical purposes and the assessment-year 2015-16 claim for deduction under Section 80P is remitted to the Assessing Officer for fresh consideration on verification of the renewal certificate and after affording the assessee a reasonable hearing.

Deduction under Section 54F of the Income-tax Act as consequence of reinvestment of capital gains - acquisition of residential house by virtue of a development agreement - characterisation of receipts as long-term capital gains on relinquishment of rights - application of strict interpretation in favour of grant of tax exemption

Deduction under Section 54F of the Income-tax Act as consequence of reinvestment of capital gains - acquisition of residential house by virtue of a development agreement - Deduction claimed under Section 54F was allowable on the assessee's reinvestment made by way of a registered development agreement in a bungalow with appurtenant land. - HELD THAT: - Tribunal found on the record that the assessee received the sale consideration on relinquishment of rights in the original plot and that earlier ITAT proceedings had treated that receipt as long-term capital gains. The assessee produced a registered development agreement (dated 14 01 2008, registered 06 02 2008) evidencing acquisition of Plot No.9 with an old bungalow, showing a lump sum agreed consideration and assignment of rights including alienation. The Assessing Officer's conclusion that the arrangement was only for development was not supported by the documents and the AO did not rebut the factual position that the asset acquired was a residential house with land appurtenant. The Tribunal held there is no stipulation in Section 54F prohibiting acquisition by way of a development agreement and, applying a stricter interpretation in favour of the taxpayer, affirmed the appellate authority's deletion of the disallowance and allowed the deduction. [Paras 2, 3]

Revenue's appeal dismissed and deduction under Section 54F upheld.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the Assessing Officer's disallowance and dismissed the Revenue's appeal, holding that the assessee's reinvestment by a registered development agreement in a bungalow with appurtenant land qualified for deduction under Section 54F for AY 2008-09.

Depreciation on capital asset - asset "put to use" for claiming depreciation - admission of additional evidence and remand verification - computation of book profit for MAT under Section 115JB - depreciation as per Companies Act versus Income-tax Rules - precedential effect of Supreme Court decisions pending reference to larger bench

Depreciation on capital asset - asset "put to use" for claiming depreciation - admission of additional evidence and remand verification - Claim for depreciation on windmill for the year was allowable as the asset was put to use on 31.03.2012 and the assessee was entitled to depreciation for F.Y. 2011-12 (relevant to A.Y. 2012-13). - HELD THAT: - The Assessing Officer initially disallowed depreciation on the ground that regulatory records showed no power generation credited to the assessee during 01.04.2011-31.03.2012. The assessee produced additional contemporary evidence during appeal, including a letter of the Deputy Director, GEDA dated 25.10.2016 and a wheeling agreement indicating credit of units to the assessee on 31.03.2012. The additional evidence was admitted by the CIT(A) and sent to the Assessing Officer for verification. The Assessing Officer's remand report accepted the assessee's position that the windmill was put to use and power generation credited to the assessee on 31.03.2012. The Tribunal placed weight on the verified additional evidence and the Assessing Officer's own finding on verification, and found no reason to interfere with the CIT(A)'s admission of evidence and allowance of depreciation. [Paras 2, 4, 6]

Depreciation claimed on the windmill is allowable; Revenue's appeal on this issue is dismissed.

Computation of book profit for MAT under Section 115JB - depreciation as per Companies Act versus Income-tax Rules - precedential effect of Supreme Court decisions pending reference to larger bench - For computation of book profit under Section 115JB, the addition made by the Assessing Officer disallowing excess depreciation (on the basis that depreciation for MAT should be as per the Companies Act) was deleted and the assessee's cross-objection allowed. - HELD THAT: - The Assessing Officer had increased book profit by disallowing excess depreciation on the view that depreciation for MAT (Section 115JB) must follow rates under the Companies Act. The CIT(A) had upheld the AO relying on a later Supreme Court pronouncement (Dynamic Orthopedics) that questioned an earlier decision (Malayala Manorama) and referred the matter to a larger bench. The Tribunal, however, noted binding effect of the earlier Supreme Court decision in Malayala Manorama until expressly overruled, and relied on a coordinate-bench decision of this Tribunal in a directly similar matter which followed Malayala Manorama. Applying that precedent and the principles of stare decisis pending a larger bench decision, the Tribunal held the addition was not sustainable and deleted the adjustment to book profit. [Paras 4, 11, 12]

Addition to book profit under Section 115JB on account of alleged excess depreciation is deleted; assessee's cross-objection is allowed.

Final Conclusion: The Revenue's appeal is dismissed (depreciation on the windmill upheld); the assessee's cross-objection is allowed (the addition to book profit under Section 115JB on account of depreciation is deleted).

Scope of assessment under section 153A where no incriminating material is found during search - Limitation on reopening concluded assessments under section 153A to material seized or discovered during search - Deletion of additions made by AO for non-application or misapplication of mind - Application of section 41(1) where creditor liability was subsisting at the end of the year

Scope of assessment under section 153A where no incriminating material is found during search - Limitation on reopening concluded assessments under section 153A to material seized or discovered during search - Deletion of additions made by AO for non-application or misapplication of mind - Whether the addition of contract receipts of Rs. 2,57,69,929/- could be sustained in assessment framed under section 153A when no incriminating material was found during the search and the AO had misapplied his mind. - HELD THAT: - The Tribunal accepted the CIT(A)'s findings that the assessment did not rest on any incriminating material found or seized during the course of search; the AO had made additions based on enquiries in post-search proceedings without any reference to seized material. Reliance was placed on settled precedents that under section 153A a concluded assessment may be reopened only insofar as it relates to incriminating material discovered in the search, and not on material collected later in the assessment where no incriminating material existed. The Tribunal further upheld the CIT(A)'s factual finding that the AO had failed to apply his mind to the details in the TDS certificate and other documents, rendering the impugned addition arbitrary and unjustified. On both the jurisdictional principle and merits, the deletion of the addition was upheld. [Paras 6, 7, 8]

Addition of Rs. 2,57,69,929/- deleted; ground dismissed.

Application of section 41(1) where creditor liability was subsisting at the end of the year - Whether the addition under section 41(1) should be restricted to Rs. 8,97,893/- instead of Rs. 10,21,420/- by recognising debit balances and subsequent repayments/write-offs. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's related appeal, accepting the assessee's chart and evidence showing that part of the outstanding figure represented debit balances reducing the true liability and that portions were subsequently repaid or written off and offered to tax in later years. On this factual basis the Tribunal concluded that the actual creditor liability as at the relevant year-end was Rs. 8,97,893/-, not Rs. 10,21,420/-, and therefore the CIT(A)'s restriction of the addition was correct. [Paras 10, 11]

Addition under section 41(1) limited to Rs. 8,97,893/-; departmental ground dismissed.

Final Conclusion: The departmental appeal is dismissed in entirety: the addition of contract receipts was deleted because no incriminating material from the search justified reopening under section 153A and the AO misapplied his mind; the addition under section 41(1) was correctly restricted to the actual subsisting creditor liability of Rs. 8,97,893/- for AY 2007-08.

Reopening of assessment under section 147 - Validity of notice under section 148 - Long Term Capital Gains exemption under section 10(38) - Addition under section 68 (cash credits) - Addition under section 69C (undisclosed expenditure) - Use and evidentiary value of statements recorded under section 132(4)/131 - Principle that suspicion, surmise or statement alone cannot sustain additions - Demat account entries, contract notes and bank receipts as corroborative documentary evidence

Reopening of assessment under section 147 - Validity of notice under section 148 - Validity of initiation of proceedings under section 147/148 - HELD THAT: - The Tribunal reviewed the materials relied upon by the AO, including information from the Directorate of Investigation and SEBI action concerning manipulation in certain scrips, and held that these constituted tangible material from which the AO could form a prima facie belief that income assessable to tax had escaped assessment. At the stage of reopening the requirement is only a reasonable belief based on tangible material, not full legal proof, and the AO's reliance on the investigation inputs and appraisal material satisfied that threshold. Accordingly the reopening and issuance of notice under section 148 were held valid. [Paras 3]

Reopening under section 147 and notice under section 148 upheld as valid.

Long Term Capital Gains exemption under section 10(38) - Addition under section 68 (cash credits) - Use and evidentiary value of statements recorded under section 132(4)/131 - Principle that suspicion, surmise or statement alone cannot sustain additions - Demat account entries, contract notes and bank receipts as corroborative documentary evidence - Sustainability of addition under section 68 by treating claimed LTCG as bogus accommodation entry - HELD THAT: - The Tribunal examined the documentary evidence produced by the assessee - purchase bills, bank payment evidencing purchase through account payee cheque, demat account entries showing credit of shares, broker contract notes for sale, and bank credits of sale consideration - and observed that once shares are dematerialised and held in the assessee's demat account and sale proceeds were routed through banking channels, the holding and sale cannot be disputed without contrary material. The AO's addition rested primarily on statements and on general investigation findings about a market racket; the AO did not place any documentary incriminating material specifically linking the assessee to accommodation entries nor did he confront or rebut the assessee's contemporaneous records. The Tribunal reiterated that statements under section 132(4)/131, particularly of third parties, cannot alone support an addition unless relatable to tangible incriminating material, and that suspicion or surmise cannot substitute for evidence. Applying these principles and following precedent, the Tribunal found the AO's conclusion to be based on suspicion and deleted the addition made under section 68. [Paras 6]

Addition under section 68 held unsustainable and deleted; exemption under section 10(38) allowed.

Addition under section 69C (undisclosed expenditure) - Sustainability of addition under section 69C for alleged commission paid in relation to accommodation entries - HELD THAT: - The Tribunal treated the claim on commission as consequential to the finding on the genuineness of the share transactions. Having held that the primary additions treating the LTCG as bogus were not sustainable because documentary evidence produced by the assessee was uncontroverted by tangible material from the AO, the consequential notional addition under section 69C for commission, being dependent on the disallowance of the LTCG, could not be sustained. [Paras 7]

Addition under section 69C deleted as consequential to deletion of the section 68 addition.

Final Conclusion: Reopening of assessment for AY 2010-11 was held valid on the basis of investigation inputs; however, on merits the additions treating claimed exempt LTCG as an accommodation entry were deleted because the assessee produced contemporaneous, independently verifiable documentary evidence (demat entries, contract notes and bank receipts) which the AO did not controvert by tangible material, and the consequential addition under section 69C was also deleted. The appeal is partly allowed.

Reopening of assessment under section 147/148 and its distinction from assessment under section 153C - Applicability of section 153C only upon handing over of seized materials to jurisdictional AO - Recording of satisfaction by Commissioner for issuance of notice under section 151 - Addition under section 68 - unexplained credits treated as commission/income

Reopening of assessment under section 147/148 and its distinction from assessment under section 153C - Applicability of section 153C only upon handing over of seized materials to jurisdictional AO - Validity of reassessment initiated under section 147/148 when incriminating material arose from a search in third party premises and whether proceedings should have been initiated under section 153C. - HELD THAT: - The Tribunal held that section 147/148 empowers the Assessing Officer to reopen assessment when he has reason to believe that income has escaped assessment and that this power is wider in scope. Section 153C is a special procedure which is triggered only when seized or requisitioned materials are actually handed over to the Assessing Officer having jurisdiction over the other person and that AO records the requisite satisfaction. Mere receipt of information from investigation or possession of intelligence about documents seized from a third party does not automatically invoke section 153C. In the present case it was undisputed that no search was conducted on the assessee and there was no evidence that seized materials were handed over to the assessee's jurisdictional AO before initiation under section 147. Reliance on the reasoning in Karti P. Chidambaram (Madras High Court) was noted to support the distinction, and the Tribunal concluded that initiation under section 147/148 was permissible on the material available to the AO. Accordingly, the ground that proceedings should have been under section 153C and that reopening under section 147/148 was void was rejected. [Paras 15, 16, 17]

Reassessment under section 147/148 was valid; initiation under section 153C was not mandatory in absence of handing over of seized materials to the assessee's AO.

Recording of satisfaction by Commissioner for issuance of notice under section 151 - Validity of the approval recorded by Addl. CIT/PCIT under section 151 for issuance of notice under section 148. - HELD THAT: - The Tribunal examined the form of approval placed on record and observed that the Addl. CIT had perused the reasons recorded by the AO and recommended reopening, and the PCIT had recorded her satisfaction in writing. The statutory requirement is that the Commissioner apply his mind and form an independent satisfaction; there is no prescribed formality for elaborate reasons. The assessee did not place material to show that the reasons recorded by the AO were not placed before the sanctioning authority or that there was no application of mind. Reliance on precedents (including Experion Developers (Delhi High Court)) was noted to support that detailed reasoning is not mandated. On the facts, the Tribunal found no infirmity in the recording of satisfaction and held the sanction valid. [Paras 18, 19]

Approval under section 151 was validly recorded and not mechanical; the reopening is not vitiated on this ground.

Addition under section 68 - unexplained credits treated as commission/income - Sustenance of addition made under section 68 treating bank credits as accommodation entries and commission as undisclosed income. - HELD THAT: - The Tribunal noted that lower authorities had found, on the material including investigation inputs and bank statements, that the assessee's bank accounts recorded substantial credits which were held to represent accommodation entry transactions and that commission was computed accordingly and treated as income. Before the Tribunal the assessee did not advance substantive oral argument or point to any material that would displace the findings of the AO and CIT(A). In absence of challenge to the reasoning or fresh evidence contesting the factual findings, the Tribunal declined to interfere with the well reasoned conclusions of the lower authorities upholding the addition under section 68. [Paras 20, 21]

Addition under section 68 upheld; no interference with findings of lower authorities.

Final Conclusion: All grounds raised by the assessee were dismissed; the reassessment under section 147/148, the sanction under section 151 and the addition under section 68 were held valid and the appeal is dismissed.

Revisionary jurisdiction under section 263 of the Income tax Act, 1961 - Principles of natural justice - requirement of opportunity of hearing before finalising revisional order - Allowability of deduction under section 80P(2)(a)(i) - taxation of interest on surplus funds versus operational funds - Allowability of deduction under section 80P(2)(d) - interest from investments with other co operative societies/co operative banks - Obligation to consider alternative grounds raised by assessee before holding original order erroneous - Application of Totgar principle - distinction between surplus funds and operational funds

Revisionary jurisdiction under section 263 of the Income tax Act, 1961 - Principles of natural justice - requirement of opportunity of hearing before finalising revisional order - Obligation to consider alternative grounds raised by assessee before holding original order erroneous - Validity of the Commissioner's order under section 263 where the basis on which the AO's order was held erroneous was not the same as the basis mentioned in the show cause notice and where material factual analysis was not confronted to the assessee. - HELD THAT: - The Tribunal found that the Pr.CIT initially proceeded under section 263 on the premise that interest on FDRs was not allowable under section 80P(2)(d), but the final order held the AO's order erroneous on a different premise - non allowability under section 80P(2)(a)(i) - and the Commissioner applied factual analysis (liquidity percentages, by laws, motive to earn interest) when reaching that conclusion. Where such factual analysis is decisive, the assessee must be confronted with those facts and afforded an opportunity to rebut them before the revisional conclusion is finalised. Section 263 does not mandate a prior show cause notice in specific terms, but it does require that the assessee be heard on the matters on which the Commissioner reaches his decision; failure to do so amounts to a breach of natural justice. Because the Pr.CIT did not put the factual analysis and the alternative legal premise to the assessee for response, the revisional order is vitiated on grounds of natural justice and must be set aside (paras 6, 9-11, 13). [Paras 6, 9, 11, 13]

The order passed under section 263 was set aside because the Commissioner reached a different premise and applied adverse factual conclusions without confronting those facts to the assessee and affording an opportunity of rebuttal.

Allowability of deduction under section 80P(2)(a)(i) - taxation of interest on surplus funds versus operational funds - Allowability of deduction under section 80P(2)(d) - interest from investments with other co operative societies/co operative banks - Obligation to consider alternative grounds raised by assessee before holding original order erroneous - Application of Totgar principle - distinction between surplus funds and operational funds - Whether the Pr.CIT rightly held that the AO's allowance of deduction of interest was erroneous and prejudicial to revenue without considering the assessee's alternative contention that the deduction was allowable under section 80P(2)(d). - HELD THAT: - The assessee had expressly pleaded in reply to the revisional notice that the deduction was allowable alternatively under section 80P(2)(d) (interest from investments with co operative societies/co operative banks) and relied on tribunal and High Court decisions supporting that view. The Pr.CIT, however, decided only the question of non allowability under section 80P(2)(a)(i) by applying the Totgar line of reasoning (surplus versus operational funds) and did not address the alternative statutory plea under clause (d). Because both the existence of error and the resultant prejudice to revenue must be established before exercise of revisionary power, the failure to consider and decide the alternative ground meant there was no sustainable finding that the AO's allowance caused prejudice to revenue. For that reason also the revisional order could not stand (paras 14-16). [Paras 14, 15, 16]

The Pr.CIT's order is invalid for having failed to deal with the assessee's alternative claim under section 80P(2)(d); in consequence there was no sustainable finding of error prejudicial to the revenue.

Final Conclusion: The revisional order passed by the Pr.CIT under section 263 is set aside for violation of principles of natural justice and for failure to consider the assessee's alternative statutory plea; the assessment order of the AO is restored and the assessee's appeal is allowed.

Deductibility of interest under section 36(1)(iii) read with method of accounting - Capitalisation versus revenue treatment of software/ERP expenditure - Claim for deduction under Section 80GGB - proof and verifiability by bank evidence and requirement under Section 293A of the Companies Act - Applicability of section 14A and Rule 8D where no exempt income is earned

Deductibility of interest under section 36(1)(iii) read with method of accounting - Deletion of the disallowance of interest of Rs. 2,241,160,000 and allowance of the interest claimed by the assessee under section 36(1)(iii). - HELD THAT: - The Tribunal confirmed the CIT(A)'s deletion of the AO's addition and held that interest paid on capital borrowed for business purposes is allowable under section 36(1)(iii) where the borrowed funds are utilized for stock in trade (projects held as trading inventory) even though accounting standards or valuation of WIP were invoked. The Tribunal relied on binding precedent of the jurisdictional High Court in CIT v. Lokhandwala Construction Industries Ltd and consistent Tribunal decisions (including the assessee's earlier coordinate bench order for AY 2014 15 and other Mumbai Bench decisions) to conclude that the proviso to section 36(1)(iii) (introduced by the Finance Act, 2003) requiring capitalization applies only where funds are used for acquisition of a capital asset; it does not apply where funds finance stock in trade. The percentage completion method followed by the assessee and the acceptance of similar contentions in settlement proceedings reinforced the conclusion that interest is a period cost deductible in the year of incurrence. Accordingly the AO's transfer of interest to WIP and disallowance was not sustained. [Paras 11, 12, 14]

Appeal of the Revenue on this point dismissed; the interest claim allowed as business deduction under section 36(1)(iii).

Capitalisation versus revenue treatment of software/ERP expenditure - Disallowance of Rs. 26,983,497 by treating ERP/software expenditure as capital was set aside and the full expenditure was held allowable as revenue expense (with previously allowed depreciation to be withdrawn). - HELD THAT: - Applying the functional test and following the Bombay High Court decision in CIT v. Raychem RPG Ltd and relevant Tribunal precedents, the Tribunal held that the ERP and software licence costs did not form part of the assessee's profit making apparatus in the sense of a capital asset conferring enduring benefit; instead they facilitated trading/management operations and qualify as revenue expenditure. On that basis the assessing officer was directed to delete the disallowance, allow the full deduction of the software expenditure and withdraw depreciation granted earlier. [Paras 21, 22]

Assessee's ground allowed; software/ERP expenditure to be treated as revenue expenditure and fully deductible.

Claim for deduction under Section 80GGB - proof and verifiability by bank evidence and requirement under Section 293A of the Companies Act - The claim for deduction of Rs. 6,534,000 (donation to a political party) was not finally adjudicated but set aside for fresh examination by the AO on verification of bank records and proof that the payment qualifies as a contribution under Section 293A of the Companies Act. - HELD THAT: - While the assessee produced receipts for other donations, no receipt was produced for the sum in dispute though payment by account payee cheque appeared in the bank statement. The Tribunal held that absence of a receipt alone is not necessarily fatal where the transaction is verifiable from bank records and the contribution must be examined to ensure it meets statutory requirements (including those in Section 293A of the Companies Act). Therefore the matter was remitted to the assessing officer to examine the bank evidence and determine whether the payment qualifies for deduction under Section 80GGB. [Paras 23, 25]

Assessee's appeal partly set aside and remitted to the AO for fresh verification and decision on the contested donation of Rs. 6,534,000.

Applicability of section 14A and Rule 8D where no exempt income is earned - Deletion of the disallowance made under section 14A (computed under Rule 8D) on the ground that the assessee earned no exempt income during the year. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the assessee did not earn any exempt income in the relevant year; in that factual situation no expenditure can be regarded as incurred in relation to exempt income and therefore no disallowance under section 14A is warranted. Reliance by the Department on later legislative amendment (Finance Act 2022) was held inapplicable as prospective and not altering the result for the year under appeal. [Paras 13, 16]

AO's disallowance under section 14A deleted; ground of Revenue dismissed.

Final Conclusion: For Assessment Year 2015 16 the Tribunal dismissed the Revenue's cross appeal on interest and section 14A disallowance, allowed the assessee's appeal on software/ERP expenditure, and remitted the limited issue relating to proof of a political donation under section 80GGB to the assessing officer for verification of bank evidence and compliance with statutory requirements.

Limited scrutiny under CASS - scope of limited scrutiny selection and its enlargement - revisional jurisdiction under Section 263 of the Income Tax Act-Explanation 2 - assessing officer exceeding jurisdiction by collecting information beyond limited scrutiny - erroneous assessment order prejudicial to the interest of revenue

Limited scrutiny under CASS - revisional jurisdiction under Section 263 of the Income Tax Act-Explanation 2 - erroneous assessment order prejudicial to the interest of revenue - Validity of the Principal Commissioner's exercise of revisional jurisdiction under Section 263 in respect of matters not within the scope of limited scrutiny selection. - HELD THAT: - The Tribunal examined whether the PCIT could invoke Section 263 to set aside the AO's assessment on the ground that the AO had not taxed deemed rental income from a holiday home when the return had been selected for 'limited scrutiny' under CASS for specified issues. The Court accepted that limited-scrutiny selection constrains the scope of enquiry and that the AO had no power, in a limited-scrutiny assessment, to make additions on issues beyond those reasons for selection. Although the AO had obtained details beyond the limited-scrutiny issues, that fact did not justify invocation of the revisional jurisdiction. The PCIT erred in treating the absence of an addition on house-property income (which was not within the limited-scrutiny scope) as rendering the assessment 'erroneous and prejudicial to the interest of revenue' under Explanation 2 to Section 263. The correct course, where the AO has collected information beyond his limited mandate, would have been to address or reprimand the AO for exceeding jurisdiction rather than to exercise Section 263 to reopen matters outside the selected scope. Having regard to CBDT instructions on limited scrutiny and the applicable precedents placed before the Tribunal, the PCIT's action amounted to an improper expansion of revisional power and was without jurisdiction. [Paras 10, 11]

The PCIT's order under Section 263 quashing the assessment on grounds relating to house property income (not within the limited scrutiny scope) is without jurisdiction and is quashed.

Assessing officer exceeding jurisdiction by collecting information beyond limited scrutiny - scope of limited scrutiny selection and its enlargement - Whether the assessing officer exceeded his jurisdiction by calling for and recording information beyond the limited scrutiny scope, and the consequence of such excess. - HELD THAT: - The Tribunal found that the AO did ask the assessee for details of movable and immovable properties and thus collected information beyond the narrow issues for which the return was selected under limited scrutiny. The Court recorded that such collection exceeded the AO's jurisdiction under a limited-scrutiny selection. However, this excess by the AO does not validate the PCIT's use of Section 263 to reopen and quash the assessment on those extra scope matters. The appropriate response to an AO exceeding the limited scope would be administrative correction or reprimand, not exercise of revisional powers to expand the scope of assessment retrospectively. The finding against the AO therefore supports quashing the revisional order, while noting the AO's procedural overreach. [Paras 6, 10]

The AO had exceeded the jurisdiction conferred by the limited scrutiny selection by collecting information beyond the selected issues; that excess does not justify the PCIT's exercise of revisional powers and the PCIT should not have quashed the assessment on that basis.

Final Conclusion: The order passed by the Principal Commissioner under Section 263 dated 30.03.2022 for Assessment Year 2017 - 18 is quashed; the appeal of the assessee is allowed.

Allowability of business expenditure - foreign travel expenses - business purpose test - capital gains computation - consideration received or receivable - escrow arrangement and adjustment of sale consideration - jurisdiction of Commissioner (Appeals) to decide matter despite prior section 264 rejection - remand for adjudication on merits

Allowability of business expenditure - foreign travel expenses - business purpose test - The disallowance of foreign travel expenses of Rs.5,44,023/- was not justified and such expenses were allowable as incurred for business purpose. - HELD THAT: - The Tribunal examined the nature of the assessee's business-acting as an agent in India and abroad dealing in non-conventional energy engineering equipment-and the role of the directors who frequently travelled abroad to promote the business. The assessee showed the expenditure in the profit and loss account and pointed to consequent commission income earned in subsequent years linked to foreign travel. On the facts and circumstances, the Tribunal concluded that the foreign travel expenditure was incurred for business purposes and therefore the disallowance by the Assessing Officer and confirmation by the CIT(A) was erroneous. The Tribunal allowed the ground of appeal relating to the foreign travel expenditure. [Paras 4]

Foreign travel expenses of Rs.5,44,023/- held to be incurred for business purpose and allowed.

Capital gains computation - consideration received or receivable - escrow arrangement and adjustment of sale consideration - jurisdiction of Commissioner (Appeals) to decide matter despite prior section 264 rejection - remand for adjudication on merits - The CIT(A) erred in refusing to adjudicate the additional ground on reduction of sale consideration (and corresponding reduction of long-term capital gain) on the basis that the same was earlier subject of a section 264 petition; the matter is remitted to the CIT(A) to decide on merits. - HELD THAT: - The assessee contended that amounts withdrawn from the escrow account to meet pre-closing liabilities reduced the actual consideration received and therefore ought to reduce the capital gains. Although the CIT(A) sought a remand report, he declined to adjudicate the additional ground on the basis that a section 264 petition had been earlier rejected by the Principal CIT. The Tribunal found this approach incorrect: rejection of a section 264 application by the Principal CIT does not bar the CIT(A) from considering the same ground in appeal. Consequently, the Tribunal directed the CIT(A) to decide the additional ground on its merits and remanded the file for fresh adjudication on the question of reduction of capital gain in light of the escrow adjustments. [Paras 8]

Grounds for reduction of sale consideration and corresponding capital gains remit to the CIT(A) for fresh adjudication on merits; CIT(A)'s refusal to decide was erroneous.

Final Conclusion: The appeal is partly allowed: the foreign travel expenditure disallowance is set aside and allowed; the question of reduction of sale consideration/capital gain in relation to escrow adjustments is remanded to the CIT(A) for decision on merits.

Disallowance under Section 69 of the Income Tax Act - treatment of refundable Special Additional Duty (SAD) as current asset versus profit and loss expense - obligation to explain discrepancies disclosed in Annual Information Report (AIR) - consequence of non attendance and disposal on the basis of available record

Disallowance under Section 69 of the Income Tax Act - obligation to explain discrepancies disclosed in Annual Information Report (AIR) - Addition of Rs.8,67,173 made as unexplained expenditure under Section 69 was upheld. - HELD THAT: - The Assessing Officer added the amount as unexplained expenditure under Section 69 after observing a mismatch between customs duty shown as paid in AIR and the amount reflected in the profit and loss account. The CIT(A) examined the books and the assessee's contention that the disputed amount represented SAD refundable from Customs and was shown as an asset, but found that the assessee had not adequately explained the variation or demonstrated why the SAD receivable should have been reflected in P&L before receipt or set off. The assessee failed to place any further explanation or evidence before this Tribunal despite repeated opportunities and notices. In the absence of a satisfactory explanation and with the SAD classified as a receivable in the balance sheet, the authorities were justified in treating the unexplained portion as assessable under Section 69. The Tribunal found no reason to interfere with the concurrent factual findings of the authorities below. [Paras 8, 9, 10]

The addition under Section 69 is affirmed and the ground of appeal is dismissed.

Treatment of refundable Special Additional Duty (SAD) as current asset versus profit and loss expense - consequence of non attendance and disposal on the basis of available record - The assessee's claim that SAD treated as refundable and shown as a receivable (current/long term asset) absolved it from reflecting the amount in P&L was rejected for lack of explanation; appeal disposed on available record due to non attendance. - HELD THAT: - The assessee's account treatment-showing the disputed SAD as a receivable rather than an expense-was noted, but the appellate authority held that such classification does not excuse the assessee from explaining the discrepancy vis a vis AIR. The Tribunal observed that the assessee did not attend hearings or furnish further clarification despite multiple adjournments and notices. Given the absence of corroborative explanation or evidence at all stages, the factual conclusion that the amount was unexplained was sustainable. The appeal was therefore decided on the material on record and the assessee's non prosecution was a relevant factor in affirming the addition. [Paras 3, 8, 9]

The claim of SAD being a refundable receivable did not negate the addition in the absence of explanation; matter disposed on available record given the assessee's non attendance.

Final Conclusion: The Tribunal upheld the addition of Rs.8,67,173 as unexplained expenditure under Section 69 for AY 2015-16, affirmed the findings of the authorities below and dismissed the assessee's appeal, the matter being decided on the material available in view of the assessee's repeated non attendance.

Revision under section 263 of the Income-tax Act - assessing officer's failure to make inquiries and verifications - interest subsidy and grant-in-aid as income under clause (xviii) of section 2(24) - capital grant as capital receipt versus taxable government assistance - scope of powers of CIT to set aside assessment where inquiries/verifications absent

Revision under section 263 of the Income-tax Act - assessing officer's failure to make inquiries and verifications - interest subsidy and grant-in-aid as income under clause (xviii) of section 2(24) - scope of powers of CIT to set aside assessment where inquiries/verifications absent - Whether the Pr. CIT was justified in invoking powers under section 263 to set aside the assessment on the ground that the AO failed to examine and verify treatment of interest subsidy and related entries, rendering the assessment erroneous and prejudicial to the revenue. - HELD THAT: - The Tribunal found that the AO had not examined issues under section 14A nor carried out enquiries/verification regarding the interest subsidy and grant-in-aid receivable which appeared in the balance sheet. Although the assessee contended that interest subvention had been offered to tax and was reflected in total interest income, the Tribunal was not satisfied that the AO had examined or verified the matter. Applying the principle that where necessary inquiries and verifications are not made and, in the absence of such exercise, a conclusive finding is not possible one way or the other, the Pr. CIT was entitled to set aside the assessment under section 263 and direct the AO to make fresh inquiries/verification. The Tribunal relied on the reasoning in Sir Dorabji Tata Trust (as cited) to conclude that setting aside the order for lack of proper inquiry/verification fell within the CIT's powers under section 263, and therefore sustained the revisionary order in respect of this defect. [Paras 7, 8, 9]

The Pr. CIT's order under section 263 setting aside the assessment for failure of the AO to make requisite inquiries and verifications regarding interest subsidy is justified and is sustained; the assessment order is set aside for fresh consideration.

Capital grant as capital receipt versus taxable government assistance - interest subsidy and grant-in-aid as income under clause (xviii) of section 2(24) - assessing officer's failure to make inquiries and verifications - Taxability of the capital grant received from the State Government (characterisation as capital contribution versus taxable income) was not finally adjudicated and requires fresh examination by the AO. - HELD THAT: - The Tribunal recorded the assessee's submissions that the State Government grant was intended to restore capital adequacy and constituted a capital contribution (and relied on provisions and legislative memorandum relating to clause (xviii) of section 2(24) and ICDS-VII). However, because the AO had not examined or verified the material on record, the Tribunal did not decide the legal characterization of the grant on merits. Instead, consistent with the finding that necessary inquiries/verifications were not carried out, the matter is to be examined afresh by the AO in compliance with the Pr. CIT's revisionary direction.

The question of taxability of the capital grant is remanded to the AO for de novo examination and verification; no final adjudication on its taxability is recorded by the Tribunal.

Final Conclusion: The Tribunal upheld the Pr. CIT's exercise of jurisdiction under section 263 insofar as the assessment was set aside for failure of the AO to make necessary inquiries and verifications regarding interest subsidy and related entries; the assessment is therefore set aside for fresh consideration by the AO, and the question of taxability of the capital grant is remanded for examination without a final finding on merits.

Agricultural land - capital asset under Section 2(14) of the Income tax Act - Ghasni land as agricultural land - notification excluding Himachal Pradesh from the definition of capital asset - change of land use and its effect on capital gains - gift not a transfer under Section 47(iii)

Agricultural land - capital asset under Section 2(14) of the Income tax Act - Ghasni land as agricultural land - notification excluding Himachal Pradesh from the definition of capital asset - change of land use and its effect on capital gains - gift not a transfer under Section 47(iii) - Whether the land sold by the assessee constituted a capital asset chargeable to long term capital gains in A.Y. 2013 14 - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the land situated in Himachal Pradesh was 'Ghasni' land and, by reference to the Himachal Pradesh Tenancy and Land Reforms Act, 1972, fell within the category of agricultural land. The Tribunal noted that up to A.Y. 2013 14 lands in Himachal Pradesh had not been brought within the notificational coverage under the statutory provision defining capital asset, so the aerial distance rule relied upon by the Assessing Officer was not operative for the year under consideration. The assessee produced zamabandi and a gram panchayat certificate identifying the land as Ghasni; there was no evidence on record rebutting those documents or alleging that the registered gift deed was bogus. The Tribunal also recorded that the change of land use application on file was that of the purchaser company and not of the assessee. On these facts, and in absence of contrary material, the Tribunal accepted that the land did not fall within the definition of capital asset under Section 2(14) for the relevant year and that the question of capital gain therefore did not arise. The Tribunal further observed that the statutory exclusion of gifts from 'transfer' under Section 47(iii) was reflected in the material and not controverted by the AO. Having considered the totality of evidence and the legal position, the Tribunal found no justification to interfere with the CIT(A)'s conclusion and dismissed the Department's appeal. [Paras 9, 10]

Addition of long term capital gain was deleted; the Department's appeal is dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s conclusion that the land was agricultural (Ghasni) and not a capital asset for A.Y. 2013 14; the addition of long term capital gain was deleted and the Department's appeal dismissed.

Arm's length price determination - determination of ALP at Nil without applying prescribed methods - application of methods under section 92C and Rule 10AB - need and benefit test - onus on assessee to substantiate receipt of services - benchmarking and comparability in intra group services

Onus on assessee to substantiate receipt of services - need and benefit test - benchmarking and comparability in intra group services - Whether the assessee had demonstrated receipt of India specific services from its Global Head Office and Regional Head Office. - HELD THAT: - The Tribunal analysed the documentary record including agreements, allocation workings and numerous e mails placed before it and concluded that it was incorrect to hold that no India specific services had been rendered. While acknowledging that some elements of the service agreements were general in nature, the Tribunal found sufficient evidence of India specific support (e.g., regional management, technology and business support) provided by the overseas offices. The Tribunal therefore held that the Transfer Pricing Officer (and DRP) had taken an unduly restrictive view and had not fully appreciated the evidential material demonstrating rendition of services. The Tribunal emphasised that once receipt of services is shown, the question is valuation and not denial of the transaction itself.

Findings that no India specific services were rendered are unsustainable; the assessee demonstrated receipt of services.

Arm's length price determination - determination of ALP at Nil without applying prescribed methods - application of methods under section 92C and Rule 10AB - Whether the TPO/DRP could determine the arm's length price of the intra group services at Nil without applying any of the prescribed transfer pricing methods. - HELD THAT: - The Tribunal held that Rule 10AB requires the 'other method' to take into account prices charged in comparable uncontrolled transactions and that the statutory scheme mandates application of one of the methods in section 92C (read with the Rules) to determine ALP. The Tribunal reviewed judicial precedents and concluded that where the TPO does not apply any prescribed benchmarking exercise and simply fixes ALP at Nil (even while accepting that services were rendered), such an adjustment is not sustainable. The Tribunal found that in the present case no search for comparable uncontrolled transactions was undertaken and the TPO merely applied a subjective need/benefit approach to conclude Nil ALP. The determinative legal principle stated is that transfer pricing adjustments must be made by applying an appropriate method under the Act and Rules; a straight determination of ALP at Nil without such exercise is impermissible.

Determination of ALP at Nil without applying any prescribed method is legally unsustainable; the TPO erred in treating the transaction value as Nil.

Final Conclusion: The appeal is allowed. The Tribunal held that the assessee had produced sufficient evidence of receipt of India specific services and that the TPO/DRP were not justified in fixing the arm's length price at Nil without applying any of the methods prescribed under section 92C read with the Rules (including Rule 10AB). The adjustments made by the TPO treating ALP as Nil are therefore not sustainable.

Depreciation calculated on written down value as defined by section 43(1)(6) of the Income tax Act - Depreciation allowable under section 32 of the Income tax Act - Prohibition on altering WDV based on valuation prepared for a different purpose - Deduction claimed for statutory levies subject to actual payment under section 43B - Section 43B applies only when a deduction is claimed in the books of account

Depreciation calculated on written down value as defined by section 43(1)(6) of the Income tax Act - Depreciation allowable under section 32 of the Income tax Act - Prohibition on altering WDV based on valuation prepared for a different purpose - Whether the Assessing Officer was justified in disallowing part of the depreciation claimed by substituting the opening WDV shown in the books with a value arrived at in a valuation report prepared for the purpose of share premium. - HELD THAT: - The Tribunal held that WDV for the purposes of computing depreciation must be determined by applying the method prescribed in section 43(1)(6), i.e., by taking opening WDV as per books, adding assets acquired, reducing assets sold or discarded and then computing depreciation under section 32. A valuation report prepared for an unrelated purpose (determination of share premium) cannot be used to tamper with the books' WDV. The Assessing Officer therefore had no authority to substitute the book WDV with the valuation figure in order to restrict depreciation. Consequently the addition made by the AO was not warranted and was directed to be deleted. [Paras 6]

The disallowance of excess depreciation based on the valuation report is deleted; depreciation as per books following section 43(1)(6) and section 32 is restored.

Deduction claimed for statutory levies subject to actual payment under section 43B - Section 43B applies only when a deduction is claimed in the books of account - Whether the outstanding service tax amount shown as liability in the balance sheet but not debited to profit and loss account can be disallowed under section 43B. - HELD THAT: - The Tribunal followed the principle in Noble & Hewitt that section 43B operates to restrict deductions which have been claimed and are payable but not actually paid; where no deduction has been claimed and the amount has not been debited to the Profit & Loss Account, there is nothing to disallow under section 43B. Reliance was placed on decisions holding that if an assessee has not claimed a deduction for a statutory levy in its computation (and has not debited it to P&L), the Revenue cannot invoke section 43B to disallow an unclaimed item. On that basis, the addition of the unpaid service tax was held unsustainable and deleted. [Paras 7, 8, 9, 10, 11]

The disallowance of the unpaid service tax under section 43B is not sustained and is deleted.

Final Conclusion: The appeal is allowed: the AO's disallowance of excess depreciation by substituting book WDV with a valuation for a different purpose is set aside, and the disallowance of unpaid service tax under section 43B is deleted.

Limitation under Section 20 of the Contempt of Courts Act, 1971 - Mode of taking cognizance of criminal contempt - compliance with Section 15 of the Contempt of Courts Act, 1971 - Scope and ingredients of criminal contempt (scandalising, interference with judicial proceedings, obstruction of administration of justice) - Liability of supervisory committee members versus obligation of Successful Resolution Applicant to implement a resolution plan

Limitation under Section 20 of the Contempt of Courts Act, 1971 - Whether alleged acts of contempt falling prior to one year from the date of filing were cognizable - HELD THAT: - Section 20 prescribes a one year limitation for initiating contempt proceedings. The Tribunal examined the pleaded acts and held that alleged acts up to withdrawal of I.A. No.1351 of 2020 on 6.8.2020 were beyond the one year period prior to filing of the contempt petition on 14.9.2021 and therefore not cognizable. The Tribunal emphasised that Section 20 is a condition precedent to exercise contempt jurisdiction and cannot be overlooked; only acts within one year of filing could be grounds for cognizance. The Tribunal further observed that the direction dated 01.06.2021 was not a time bound order and, while the SRA had partially complied by infusing funds on 15.06.2021, the petitioner filed contempt proceedings within four months thereafter, but acts earlier than 14.09.2020 were barred by limitation. [Paras 11, 12, 13, 14, 15]

Alleged contempts prior to 14.09.2020 are time barred and cannot be taken into account.

Mode of taking cognizance of criminal contempt - compliance with Section 15 of the Contempt of Courts Act, 1971 - Whether the procedure for taking cognizance of criminal contempt was complied with in the present petition - HELD THAT: - The Tribunal noted that a special procedure governs cognizance of criminal contempt (distinct from contempt in the face of the Court) and that Section 15 requires prescribed modes of taking cognizance. It found that the procedure under Section 15 had not been complied with in this case. Non compliance with the mandatory procedure vitiates cognizance and, coupled with the limitation bar for substantial part of the alleged acts, renders the contempt petition unsustainable. [Paras 19, 20]

Cognizance was taken in violation of the mandatory procedure under Section 15; the contempt case is liable to be closed on that ground.

Scope and ingredients of criminal contempt (scandalising, interference with judicial proceedings, obstruction of administration of justice) - Liability of supervisory committee members versus obligation of Successful Resolution Applicant to implement a resolution plan - Whether Contemnor Nos. 1 and 4 (members of the Supervisory Committee) committed criminal contempt by their acts or omissions in relation to implementation of the approved resolution plan - HELD THAT: - The Tribunal applied the statutory definition of criminal contempt and Apex Court precedents requiring an act to scandalize or tend to lower the authority of the Court, to prejudice or interfere with judicial proceedings, or to obstruct administration of justice. It found that the Supervisory Committee members were not the Successful Resolution Applicant and that the obligation to implement the plan (including infusion of funds) lay with the SRA. The Committee members' conduct did not constitute willful or intentional acts that scandalize the Court or obstruct proceedings; their acts fell short of the ingredients of criminal contempt. The Tribunal therefore held that the alleged conduct of Contemnor Nos.1 and 4 did not amount to criminal contempt. [Paras 16, 17, 18]

The acts and omissions of Contemnor Nos. 1 and 4 do not constitute criminal contempt; they cannot be punished as contemnors for failure to implement the Resolution Plan.

Final Conclusion: The contempt petition is closed: most alleged acts are time barred under Section 20, cognizance was improperly taken without complying with Section 15, and the supervisory committee members are not guilty of criminal contempt for failure to implement the resolution plan; creditors remain free to pursue remedies under the IBC and applicable regulations.

SEBI Circular - RBI Circular - Inter-Creditor Agreement (ICA) - ISIN-wise voting - binding dissenting creditors - Debenture Trustee duties - retroactive vs retrospective application - jurisdiction of civil courts - Article 142 relief / moulding of relief

Jurisdiction of civil courts - SEBI Circular - The civil court had jurisdiction to entertain the suit and to adjudicate the challenge to the RBI Circular and related reliefs. - HELD THAT: - Section 15Y of the SEBI Act and Section 430 of the Companies Act do not oust the jurisdiction of a civil court to entertain the challenge and grant the reliefs sought here because the matters impugned (a challenge to the RBI Circular and related injunctive reliefs) were not matters exclusively triable by an adjudicating officer under the SEBI Act nor by the NCLT/NCLAT under the Companies Act. None of the statutory provisions relied upon vest the adjudicating officer or the NCLT/NCLAT with jurisdiction to decide the principal reliefs initially claimed by the plaintiffs. The Single Judge and the Division Bench therefore properly exercised jurisdiction over the subject-matter of the suit. [Paras 64, 65, 66, 67]

Civil court jurisdiction to entertain the suit is not barred and was properly exercised.

SEBI Circular - Inter-Creditor Agreement (ICA) - Debenture Trustee duties - Where debenture holders choose to implement a Resolution Plan to which lenders are a party, they must comply with the procedure laid down in the SEBI Circular and participate through the ICA as envisaged by the RBI Circular. - HELD THAT: - The SEBI Circular was issued to standardise the procedure to be followed by debenture trustees in events of default and expressly contemplates the RBI Circular's ICA and Resolution Plan framework. While the SEBI Circular does not make execution of an ICA the only route to a compromise, it prescribes a mandatory procedure (notice, meeting, and consent thresholds) when debenture holders opt to join a Resolution Plan that is tied to the lenders' ICA. Regulation 15(7) of the 1993 Regulations and Clause 4 of the SEBI Circular embed the RBI framework into the process for debenture trustees. Consequently, debenture holders cannot circumvent the modalities in the SEBI Circular if they seek to participate in and be bound by a Resolution Plan arrived at through the lenders' ICA. [Paras 72, 73, 74, 75, 76]

Debenture holders wishing to implement a Resolution Plan with lenders must follow the SEBI Circular procedure and participate via the ICA.

ISIN-wise voting - binding dissenting creditors - SEBI Circular - The SEBI Circular's ISIN-wise voting and the specified special majority have the consequence of binding dissenting debenture holders when the requisite thresholds are met. - HELD THAT: - Clause 6.6 of the SEBI Circular prescribes that consent to enter into an ICA requires not less than 75% by value and 60% by number at the ISIN level; that special majority mechanism is intended to bind dissenting and abstaining debenture holders in the same manner as the RBI Circular and Section 230 regimes operate to bind dissenters. Concerns that ISIN-wise voting could frustrate a Resolution Plan do not alter the applicability of the Circular; they are matters for regulatory consideration but do not vitiate the Circular's operative effect in binding dissenters when its thresholds are satisfied. [Paras 76, 77, 78, 79]

Dissenting ISIN-level debenture holders can be bound by the ICA/Resolution Plan if the SEBI-prescribed ISIN-level majority is achieved.

Retroactive vs retrospective application - SEBI Circular - Debenture Trust Deeds - The SEBI Circular has retroactive application (quasi-retroactive) and displaces conflicting contractual provisions in the Debenture Trust Deeds; it is not 'retrospective' in the sense of impairing vested rights. - HELD THAT: - The Court applied the distinction between retrospective (impairing vested rights) and retroactive/quasi-retroactive operation (applying to ongoing transactions or statuses arising before the instrument). As no binding compromise or resolution had crystallised prior to 13 October 2020, the SEBI Circular operated on the unresolved process of debt resolution and could be applied to the manner of resolution. Clause 59 of the Debenture Trust Deeds made provisions inconsistent with the 1993 Regulations void; since the SEBI Circular emanates from statutory powers including the 1993 Regulations, inconsistent deed provisions must give way and the SEBI procedure governs. [Paras 82, 83, 84, 85, 86]

The SEBI Circular applies retroactively to the ongoing resolution process and overrides conflicting provisions of the Debenture Trust Deeds.

Article 142 relief / moulding of relief - binding dissenting creditors - SEBI Circular - Although the SEBI Circular applies in law, this Court exercised its power under Article 142 to mould relief in the peculiar facts of the case to protect retail debenture holders and to afford dissenting debenture holders choice. - HELD THAT: - Recognition was given to the legal correctness of SEBI's position, but applying the Circular at the present juncture would unjustly disturb a negotiated settlement that benefits a large class of retail debenture holders who stood to realise full or substantial recoveries and who had not complained. Using Article 142, the Court fashioned relief to preserve the negotiated resolution insofar as it benefitted those retail investors, while concurrently holding that dissenting debenture holders (who were not bound under the Deed-level compromise) should be given the option either to accept the Resolution Plan on terms consistent with the statutory/regulatory route or to remain outside it and pursue other remedies. The Court emphasised that Article 142 must be used equitably and cannot supplant mandatory substantive law, but may relax application of law in exceptional circumstances to do complete justice. [Paras 95, 96, 97, 98, 99]

The appeal is allowed in part: SEBI's legal position is accepted, Article 142 was exercised to protect retail debenture holders and to provide dissenting debenture holders the option either to accept the Resolution Plan under the statutory/regulatory route or to stand outside it and pursue other remedies.

Final Conclusion: SEBI's appeal is allowed in part. The SEBI Circular is applicable to debenture holders who elect to participate in a Resolution Plan that is linked to the lenders' ICA; civil courts had jurisdiction to hear the challenge; the SEBI procedure (including ISIN-wise voting and the prescribed consent thresholds) can bind dissenting debenture holders when met; the Circular operates retroactively (quasi-retroactively) and overrides conflicting deed provisions; in the particular facts this Court, invoking Article 142, preserved the negotiated settlement for retail investors while ensuring dissenting debenture holders are given the statutory/regulatory options or may pursue alternative legal remedies.

Supply of essential goods or services during moratorium - moratorium under the Insolvency and Bankruptcy Code - continuation of licences, permits and similar rights subject to payment of current dues - obligation to pay current dues where supply is critical to preserve value of corporate debtor - termination or suspension of supply for non-payment under Section 14(2 A)

Supply of essential goods or services during moratorium - obligation to pay current dues where supply is critical to preserve value of corporate debtor - termination or suspension of supply for non-payment under Section 14(2 A) - Direction of the Adjudicating Authority that the Resolution Professional pay outstanding electricity dues during the CIRP period within 90 days is sustainable. - HELD THAT: - The Bench held that Section 14(2) read with the Explanation to Section 14(1) and inserted Section 14(2 A) manifests a legislative scheme under which continuation of essential supplies or statutory licences during the moratorium is subject to there being no default in payment of current dues. Where the interim resolution professional or resolution professional considers a supply critical to protect and preserve the value of the corporate debtor and to manage it as a going concern, the supply may be continued, but this entitlement is subject to the condition that dues arising from such supply for the moratorium period are paid. The Resolution Professional himself pleaded in IA No.1661 of 2021 that continued electricity supply was essential to maintain the value of the corporate debtor; having sought and obtained continuation of supply to preserve value, the corporate debtor is obliged to pay the outstanding electricity dues arising during the CIRP period. The Adjudicating Authority's direction to pay the outstanding dues within 90 days accords with the scheme and object of the amendment to Section 14, and the Resolution Professional cannot accept the benefit of continued supply while denying payment of the dues. The Bench also clarified that in the event of non payment the supplier remains entitled to terminate or suspend supply under Section 14(2 A). [Paras 9, 11, 12, 13, 14]

The direction that the Resolution Professional pay outstanding electricity dues during the CIRP period within 90 days is upheld; the appeal is dismissed.

Final Conclusion: Appeal dismissed. The Adjudicating Authority's direction that the Resolution Professional pay outstanding electricity dues incurred during the CIRP period within 90 days is sustained; non payment permits the supplier to suspend or terminate supply under Section 14(2 A).

Registered MSME - acknowledged Entrepreneurs' Memorandum - cancellation of acknowledgement requires exercise of statutory power - protection under Section 240A of the I&B Code for MSME - Form G and Information Memorandum requirement in CIRP - liquidation as a last resort - material irregularity in the CIRP vitiating liquidation - commercial wisdom of the Committee of Creditors

Acknowledged Entrepreneurs' Memorandum - registered MSME - cancellation of acknowledgement requires exercise of statutory power - Filing of Part II Entrepreneurs' Memorandum acknowledged by the District Industries Centre is sufficient to treat the Corporate Debtor as a registered MSME and the acknowledgment is not automatically cancelled by the mere passage of time. - HELD THAT: - The Central Government notification prescribing the form and procedure under Section 8(2) was followed by filing of Entrepreneurs' Memorandum (Part II) and an acknowledgment with an Entrepreneur Memorandum Number was allotted on 30.01.2007. Clause 13 of the Schedule (Notification dated 16.01.2009) empowers cancellation where the unit is found closed for more than six months but contemplates exercise of the cancellation power following proceedings; it does not effectuate any automatic or self-executing cancellation. No proceedings for cancellation were shown to have been initiated and no material established that the acknowledgment had in fact been cancelled. The Resolution Professional's and CoC's view that the unit was not an MSME because no registration certificate was produced disregarded the acknowledged Entrepreneurs' Memorandum. For these reasons the Corporate Debtor is to be treated as a registered MSME within the meaning of the Act, 2006. [Paras 6, 7, 8, 9, 10]

Appellant's filing of the Entrepreneurs' Memorandum (Part II) with acknowledgment dated 30.01.2007 establishes status as a registered MSME; the acknowledgment was not auto-cancelled.

Protection under Section 240A of the I&B Code for MSME - Form G and Information Memorandum requirement in CIRP - liquidation as a last resort - material irregularity in the CIRP vitiating liquidation - commercial wisdom of the Committee of Creditors - The CoC's decision to liquidate was vitiated by material irregularities: the CoC and Resolution Professional failed to treat the Corporate Debtor as an MSME, did not prepare an Information Memorandum or appoint valuers before deciding liquidation, and thereafter refused to consider the appellant's plan on the ground that no plan had been invited despite having permitted him to file a plan; consequently the order of liquidation was set aside and the CIRP remitted for further steps. - HELD THAT: - Section 240A affords special protection to MSMEs by excluding certain disqualifications; the Code's object is revival and continuation, with liquidation as the last resort. Although the CoC resolved for liquidation in its 5th meeting, subsequent meetings (6th-8th) show that the CoC permitted the appellant (an MSME) to submit a resolution plan and discussed that plan. The CoC ultimately refused to deliberate the appellant's plan on the narrow ground that no plan had been invited, notwithstanding the earlier permission to the appellant to file by a specified date; the CoC also had not appointed valuers, prepared an Information Memorandum or issued Form G before moving to liquidation. Non-acceptance of the appellant's MSME status by the RP/CoC was a material irregularity in the CIRP. Reliance on the CoC's commercial wisdom in approving a plan is inapposite where the CoC failed to follow the process and committed material irregularity. The cumulative effect of these failures satisfies the threshold under Section 61(4) to challenge liquidation; accordingly the Adjudicating Authority's order directing liquidation was set aside and the matter remitted for completion of CIRP steps. [Paras 17, 18, 19, 20, 21]

Order of liquidation set aside for material irregularity; RP and CoC directed to prepare Information Memorandum, issue Form G and consider resolution plans (including appellant's) within 90 days; no expression on merits of any plan.

Final Conclusion: Appeal allowed. The Adjudicating Authority's order dated 26.08.2021 directing liquidation is set aside for material irregularity; the Resolution Professional and CoC are granted 90 days to prepare the Information Memorandum, issue Form G and consider resolution plans (including the appellant's) in accordance with law. No opinion expressed on merits of any plan; parties to bear their own costs.

Maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - conversion of debt into capital contribution and effect on status as financial debt - consent for conversion of loan into capital - admission of Section 7 application and remand for fresh adjudication

Maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Application filed under Section 7 was to be admitted and the impugned dismissal on maintainability grounds set aside. - HELD THAT: - This Appellate Tribunal found that the Adjudicating Authority's rejection of the Section 7 application for want of valid authorization was not sustainable. Earlier orders of this Tribunal had already held that an application under Section 7 could not be rejected merely because it was filed by a power of attorney holder, and that delay was condoned. On fresh consideration, the appeal is allowed and the impugned order dismissing the Section 7 petition is set aside. The matter is remitted to the Adjudicating Authority for further proceedings after formally admitting the Section 7 application.

The appeal is allowed insofar as the Section 7 application was dismissed for want of maintainability; the impugned order is set aside and the application is to be admitted.

Conversion of debt into capital contribution and effect on status as financial debt - consent for conversion of loan into capital - admission of Section 7 application and remand for fresh adjudication - Whether the loan advanced by the appellant was converted into capital contribution without her consent and whether that conversion precludes classification as a financial debt was left for fresh adjudication by the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the Respondent failed to produce any document on record showing the appellant's consent to convert the loan into capital contribution. Given the absence of evidence of consent, the mere fact that designated partners passed a resolution effecting conversions does not establish that the appellant's loan ceased to be a debt. The question whether the amount advanced was in law converted into capital (and thus ceased to be a financial debt) was not finally adjudicated on merits by this Tribunal; instead, because the Section 7 application is to be admitted, the matter is remanded to the Adjudicating Authority for fresh consideration of that controversy and all rival contentions.

The issue of conversion of the loan into capital contribution (and its consequence on classification as financial debt) is remanded to the Adjudicating Authority for fresh adjudication in light of the absence of evidence of the appellant's consent.

Final Conclusion: The appeal is allowed; the impugned order dismissing the Section 7 application is set aside and the petition is to be admitted. The question whether the loan was validly converted into capital contribution (and hence ceased to be a financial debt) is remitted to the Adjudicating Authority for fresh consideration.

Exclusive regulatory power of IBBI over Insolvency Professionals - Jurisdictional limits of the Adjudicating Authority under the Insolvency and Bankruptcy Code - Power of IBBI to initiate, conduct and close inspections and investigations - Prohibition on Adjudicating Authority directing initiation or halting of disciplinary proceedings by IBBI - Limited appellate and supervisory jurisdiction articulated in K. Sashidhar

Exclusive regulatory power of IBBI over Insolvency Professionals - Jurisdictional limits of the Adjudicating Authority under the Insolvency and Bankruptcy Code - Power of IBBI to initiate, conduct and close inspections and investigations - Prohibition on Adjudicating Authority directing initiation or halting of disciplinary proceedings by IBBI - Limited appellate and supervisory jurisdiction articulated in K. Sashidhar - Whether the Adjudicating Authority could direct the Insolvency and Bankruptcy Board of India to initiate or halt an enquiry into the conduct of an Insolvency Professional appointed as IRP. - HELD THAT: - The Tribunal held that the statutory scheme vests the regulatory authority to inspect, investigate and take disciplinary action against Insolvency Professionals in the Board (IBBI), and that the Adjudicating Authority is not empowered to exercise a supervisory or plenary jurisdiction over that regulatory function. The Court relied on the limited jurisdictional principle in K. Sashidhar and the consistent view of this Tribunal that, once disciplinary proceedings are initiated by the Board on the basis of evidence, it is for the Board (and not the Adjudicating Authority) to continue, close or pass appropriate orders in respect of such proceedings. Applying these principles to the record, the impugned orders by which the Adjudicating Authority directed IBBI to make enquiries and subsequently directed IBBI not to initiate or to halt any enquiry were outside the adjudicating Authority's powers under the Code. For these reasons the impugned directions interfering with the Board's exclusive regulatory domain were set aside. [Paras 15, 16]

Impugned orders directing IBBI to initiate or to halt enquiry against the IRP were beyond the Adjudicating Authority's powers and are set aside; appeal allowed.

Final Conclusion: The Appellate Tribunal set aside the Adjudicating Authority's orders dated 06.07.2021 and 29.07.2021 to the extent they directed the IBBI to initiate or halt enquiries against the IRP, holding that such directions transgress the limited jurisdiction of the Adjudicating Authority and intrude into the Board's exclusive regulatory functions under the Code.

Initiation of Corporate Insolvency Resolution Process under Section 9 - Parallel insolvency applications and treatment of subsequent Section 9 petitions - Filing claim with the Interim Resolution Professional in an ongoing Corporate Insolvency Resolution Process - Liberty to revive/restore petition if CIRP is terminated or set aside on appeal

Initiation of Corporate Insolvency Resolution Process under Section 9 - Parallel insolvency applications and treatment of subsequent Section 9 petitions - Whether the Section 9 application filed by New Pearl Vitrified Pvt. Ltd. could be proceeded with independently when a CIRP against the same corporate debtor was already underway in another Section 9 proceeding. - HELD THAT: - The Tribunal noted that a Corporate Insolvency Resolution Process had already been initiated against the corporate debtor by an order of the Adjudicating Authority in IB No. 1047/PB/2020. In view of the ongoing CIRP, the Adjudicating Authority directed the operational creditor to approach the Interim Resolution Professional appointed in that existing proceeding and to file its claim thereunder. The Tribunal thereby declined to proceed with separate initiation steps in the present petition and provided a procedural route for the operational creditor to participate in the existing CIRP. The Tribunal also granted liberty to the operational creditor to seek revival or restoration of the present petition (IB/1048/PB/2020) if the CIRP in IB No. 1047/PB/2020 is terminated or set aside on appeal, thereby preserving the operational creditor's remedy in those eventualities. [Paras 5, 6]

The operational creditor is directed to file its claim with the Interim Resolution Professional in the existing CIRP (IB No. 1047/PB/2020); liberty granted to revive the present application if the CIRP is terminated or set aside.

Final Conclusion: The Section 9 petition is disposed of by directing the operational creditor to file its claim with the IRP in the ongoing CIRP; the petitioner may seek revival of this petition if the existing CIRP is subsequently terminated or set aside.

Admissibility of an application under Section 7 of the IBC - requirement to specify date of default and effect of omission - applicability of limitation (Article 137 of the Limitation Act) to Section 7 claims - proof of financial debt and privity of contract - minimum financial threshold for Section 7 petitions - treatment of disputed documents and dishonoured cheques in summary IBC proceedings

Requirement to specify date of default and effect of omission - applicability of limitation (Article 137 of the Limitation Act) to Section 7 claims - The petition is incomplete and barred by limitation in absence of an explicit date of default and on facts showing last payment earlier than three years before filing. - HELD THAT: - The Tribunal noted that Form 5 did not state the date of default and that determination of the cause of action and limitation requires the date of default (10.2, 10.4). Relying on appellate authority, the Tribunal observed that Article 137 of the Limitation Act applies to Section 7 applications and the right to sue accrues on occurrence of default; an application filed more than three years after default is barred unless delay is condoned (10.3). Here the petition recorded last payments in 2016 and specific transfers to the two parties whose MOU is relied upon show last payment on 20.05.2016, making the petition filed on 03.09.2019 time-barred (10.4, 10.8). In consequence the omission of date of default rendered the petition incomplete and liable to be rejected (10.12). [Paras 10]

The petition is incomplete for not specifying the date of default and, on the facts, is barred by limitation.

Proof of financial debt and privity of contract - admissibility of an application under Section 7 of the IBC - minimum financial threshold for Section 7 petitions - Only the claims of the two signatories to the MOU are tenable; other petitioners lack documentary support and the admitted claim does not satisfy the minimum monetary threshold. - HELD THAT: - On examination of the MOU and bank material, the Tribunal found that the MOU parties were the four directors on one side and Shri Shyam Sundar Poddar and Shri Sital Kumar Poddar on the other; other petitioners were not parties to the MOU (10.5, 10.6). Annexures E and F showed that only the two MOU parties cumulatively transferred Rs.90,000 to the Corporate Debtor, while the larger claimed sums were transferred by persons not party to the MOU (10.6). The Tribunal held that the MOU could not be used to found claims of petitioners who were not parties to it in absence of supporting internal agreements (10.6). Consequently only the two petitioners' claims remained, which were below the statutory financial threshold relevant at the time (10.7). [Paras 10]

Claims of petitioners not party to the MOU are not established; admitted claim of the two MOU parties is below the minimum threshold and therefore not maintainable under Section 7.

Treatment of disputed documents and dishonoured cheques in summary IBC proceedings - admissibility of an application under Section 7 of the IBC - Dishonoured cheques relied upon to establish default are disputed and cannot be accepted in summary proceedings under the Code. - HELD THAT: - The dishonoured cheques relied upon by the Financial Creditors were all dated 02.09.2019 and signed by persons whom the Corporate Debtor contends were not directors at the relevant time; the Corporate Debtor also contends the cheques were issued earlier as security and are now used mala fide (10.10). The Tribunal held that the genuineness and validity of such cheques, being pivotal to establish default, require appropriate evidence and cannot be resolved in summary IBC proceedings; therefore the disputed cheques could not be taken into account for establishing default (10.10, 10.11). [Paras 10]

The dishonoured cheques are disputed and cannot be relied upon in these summary proceedings to establish default.

Final Conclusion: The Adjudicating Authority was not satisfied that a default by the Corporate Debtor was established; the petition was incomplete for failing to state the date of default, the documentary basis for most claimants was lacking, the admitted claim was below the statutory threshold, and disputed dishonoured cheques could not be relied upon in summary proceedings. Accordingly, C.P.(IB) No.1586/KB/2019 is dismissed, subject to the Financial Creditors' liberty to seek remedies under other laws.

Corporate Insolvency Resolution Process - debt and default - admission under Section 7 of the Code - date of default and limitation - appointment of Interim Resolution Professional - moratorium

Debt and default - admission under Section 7 of the Code - date of default and limitation - Whether the Company Petition under Section 7 is maintainable and the Financial Creditor has proved the existence of debt and default such that CIRP can be initiated. - HELD THAT: - The Tribunal found that the Financial Creditor furnished the Loan Agreement, Demand Promissory Note, Guarantee and ledger/accounts evidencing disbursement and repayments and demonstrating an outstanding principal of Rs. 15,00,000 and aggregate dues claimed of Rs. 17,84,219. The Corporate Debtor's own communications, including the Letter dated 3rd April 2017, recorded admission of the outstanding principal. The date of default was recorded as 16th January 2017 and the petition filed on 8th November 2019 was held not to be barred by limitation. The Tribunal also noted that negotiations for settlement/allotment had broken down and there had been no repayment of the outstanding amount. On this basis the Bench concluded that the Financial Creditor had successfully demonstrated debt and default and that the petition met the requirements for admission under Section 7. [Paras 8, 9, 10]

The petition under Section 7 is admitted and the requirements for initiation of CIRP are satisfied.

Appointment of Interim Resolution Professional - moratorium - public announcement of CIRP - Reliefs and directions consequential to admission including appointment of IRP, imposition of moratorium and related directions. - HELD THAT: - Having admitted the petition, the Tribunal appointed an Interim Resolution Professional to carry out functions under the Code and directed the Financial Creditor to deposit initial CIRP costs. The Bench ordered the statutory moratorium prohibiting institution or continuation of suits, execution, transfer, disposition or enforcement of security against the Corporate Debtor and directed that supply of essential goods or services shall not be interrupted during the moratorium. The Tribunal further directed immediate public announcement of the CIRP and communication of the order to the Registrar of Companies and the parties. [Paras 11]

An Interim Resolution Professional is appointed, moratorium is imposed and related directions for conduct of CIRP are issued.

Final Conclusion: The Company Petition under Section 7 is admitted; CIRP against the Corporate Debtor is ordered to commence, an Interim Resolution Professional is appointed, the moratorium under the Code is imposed and consequential directions for conduct and public announcement of the CIRP are issued.

Limitation under the Limitation Act and Section 18 acknowledgment - acknowledgement of debt - One Time Settlement (OTS) as acknowledgement - default under Section 3(12) and Section 7 of the Insolvency and Bankruptcy Code - existence of financial debt - moratorium under Section 14 of the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional

Limitation under the Limitation Act and Section 18 acknowledgment - acknowledgement of debt - One Time Settlement (OTS) as acknowledgement - Petition under section 7 of the Code is not barred by limitation. - HELD THAT: - The Tribunal found that the Corporate Debtor accepted an OTS under the SARAL KARJ BHUGTAN YOJNA and made part payments pursuant thereto. The OTS approval dated 11 January 2019 provided for payment of the balance within 30 days of the Letter of Approval, which the Tribunal held falls within the ambit of a written acknowledgement of liability capable of attracting Section 18 of the Limitation Act and thereby reviving or extending the period of limitation. The Tribunal relied on the legal principle stated in Laxmi Pat Surana V. Union Bank of India & Anr and Rajendra Narottamdas Sheth and Another v. Chandra Prakash Jain and Another that Section 18 applies to applications under Section 7 of the Code where there is a written acknowledgement of debt by the corporate debtor within the prescribed period, and that such acknowledgement restarts the limitation period. Applying those principles to the facts (acceptance of OTS, part payments and the OTS payment schedule), the Tribunal concluded the petition was filed within the revived limitation period. [Paras 20, 21, 22, 24, 25]

Limitation plea rejected; acknowledgment arising from the OTS and payments extended the limitation period and rendered the Section 7 petition maintainable.

Default under Section 3(12) and Section 7 of the Insolvency and Bankruptcy Code - existence of financial debt - There exists a financial debt and default by the Corporate Debtor, and the petition satisfies the statutory requirements for admission under Section 7. - HELD THAT: - On the material on record the Tribunal observed that the transactions were financial in nature and constituted a financial debt. The bank accounts in the name of the Corporate Debtor were declared NPA and the record showed that the Corporate Debtor had defaulted in repayment; furthermore, the Corporate Debtor's audited financial statements for 2017-18 recorded defaults to financial institutions. Taking these facts together, the Tribunal held that the petition establishes default and the minimum threshold for a Section 7 application. The Tribunal therefore found the petition complete in all respects as required by law and fit for admission. [Paras 21, 23, 26]

Default and existence of financial debt established; Section 7 petition admitted.

Final Conclusion: The Company Petition under Section 7 is admitted: the Tribunal held the petition not barred by limitation due to acknowledgment under the OTS and part payments, found existence of financial debt and default, ordered moratorium under Section 14, appointed an Interim Resolution Professional and directed initiation of the CIRP as recorded in the order.

Initiation of Corporate Insolvency Resolution Process - application under section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of debt and default - admission of petition - appointment of Interim Resolution Professional - moratorium - prohibition on institution or continuation of suits and enforcement actions - public announcement of CIRP - management of corporate debtor to vest in IRP - deposit towards initial CIRP costs - supply of essential goods or services during moratorium - communication to Registrar of Companies for updating Master Data

Existence of debt and default - application under section 7 of the Insolvency and Bankruptcy Code, 2016 - admission of petition - The Financial Creditors proved existence of debt and default and the Section 7 petition was admitted, leading to initiation of CIRP against the Corporate Debtor. - HELD THAT: - The Tribunal examined the Loan Agreement dated 18.02.2020, disbursement particulars supported by bank statements, and the Corporate Debtor's reply which admitted indebtedness and inability to repay. On this evidence and the absence of repayment despite time afforded, the Bench concluded that both debt and default were established. The Tribunal relied on these materials to satisfy the statutory threshold for admission of the Section 7 petition and ordered initiation of the Corporate Insolvency Resolution Process. [Paras 5]

The petition under Section 7 was allowed and CIRP was ordered against the Corporate Debtor.

Appointment of Interim Resolution Professional - deposit towards initial CIRP costs - moratorium - prohibition on institution or continuation of suits and enforcement actions - supply of essential goods or services during moratorium - public announcement of CIRP - management of corporate debtor to vest in IRP - communication to Registrar of Companies for updating Master Data - Appointment of an Interim Resolution Professional and ancillary directions consequential to admission of the petition were issued. - HELD THAT: - Upon admitting the petition, the Tribunal appointed Mr. Anurag Kumar Sinha as Interim Resolution Professional to perform functions under the Code. The Bench directed the Financial Creditors to jointly deposit an initial amount towards CIRP costs, imposed the statutory moratorium restraining suits, proceedings and enforcement actions against the corporate debtor, protected ongoing supply of essential goods or services during the moratorium, and mandated immediate public announcement of the CIRP. The Tribunal further directed that management shall vest in the IRP and ordered communication of the order to the Registrar of Companies for updating the corporate master data. These directions flow from the admission and are intended to preserve the corporate debtor's assets and ensure conduct of the CIRP as provided under the Code. [Paras 5]

Mr. Anurag Kumar Sinha was appointed as IRP and the Tribunal issued directions regarding CIRP costs, moratorium, supply of essentials, public announcement, vesting of management in the IRP and communication to the Registrar of Companies.

Final Conclusion: The Tribunal admitted the Section 7 petition, ordered initiation of the Corporate Insolvency Resolution Process against Richfeel Health & Beauty Private Limited, appointed an Interim Resolution Professional, and issued consequential directions including deposit of initial CIRP costs, imposition of moratorium with protection for essential supplies, public announcement of CIRP, vesting of management in the IRP and communication to the Registrar of Companies.

Application under section 7 of the Insolvency and Bankruptcy Code, 2016 - default - acknowledgement in writing and Section 18 of the Limitation Act reviving limitation - One Time Settlement (OTS) and part payments as acknowledgment - balance sheet and auditors' report as evidence of acknowledgement of debt - moratorium under section 14 of the Insolvency and Bankruptcy Code

Application under section 7 of the Insolvency and Bankruptcy Code, 2016 - default - acknowledgement in writing and Section 18 of the Limitation Act reviving limitation - One Time Settlement (OTS) and part payments as acknowledgment - balance sheet and auditors' report as evidence of acknowledgement of debt - moratorium under section 14 of the Insolvency and Bankruptcy Code - Whether the petition filed by the Financial Creditor under section 7 of the Code is barred by limitation and consequent entitlement to admission and reliefs under the Code - HELD THAT: - The Tribunal found that the transaction was a financial debt and that the corporate debtor had repeatedly acknowledged the debt in its balance sheets and auditors' reports for multiple financial years. The record also showed that the corporate debtor accepted an OTS under the SARAL KARJ BHUGTAN YOJNA and made part payments pursuant to that settlement, which the Tribunal treated as acknowledgements reviving the period of limitation under Section 18 of the Limitation Act as applied to Section 7 proceedings. Reliance was placed on the principles in Laxmi Pat Surana and Rajendra Narottamdas Sheth that acknowledgements in writing by the corporate debtor within the initial limitation period operate to extend limitation for filing under Section 7. Having regard to the continuous acknowledgements in the balance sheets, the OTS acceptance and payments, the Tribunal held the petition was not time-barred, was complete in all respects, and established default above the statutory minimum for initiation of CIRP. Consequential reliefs were then directed: admission of the Section 7 petition, imposition of moratorium, appointment of an Interim Resolution Professional and related directions for public announcement, cooperation by management and deposit towards CIRP expenses. [Paras 22, 25, 26, 27, 28]

The petition under section 7 is not barred by limitation and is admitted; moratorium under the Code is declared, an IRP is appointed and ancillary directions for initiation of CIRP are issued.

Final Conclusion: The Adjudicating Authority admitted the Section 7 petition, held that acknowledgements (balance sheets, auditors' reports, OTS acceptance and part payments) revived limitation under Section 18 of the Limitation Act, directed the moratorium and appointed an Interim Resolution Professional to commence CIRP.

Administrative powers of Resolution Professional - verification and determination of claims - quasi-judicial versus administrative function - related party under Section 5(24)(i) of the Code - joint venture agreement as indicia of relatedness

Administrative powers of Resolution Professional - verification and determination of claims - quasi-judicial versus administrative function - Power of the Interim Resolution Professional/Resolution Professional to review, re-designate or vary a creditor's claim after admission/verification and whether such action is adjudicatory in nature. - HELD THAT: - The Tribunal held that the IRP/RP is obliged to collate, verify and determine claims in discharge of duties under the Code and the CIRP Regulations, and that these functions are administrative rather than adjudicatory. The Court relied upon the principle in Swiss Ribbons that the RP is vested with administrative (as opposed to quasi-judicial) powers. On the facts, after receipt of additional material from financial creditors and the corporate debtor, and after seeking clarification from the applicant (to which no reply was received), the RP re-designated the applicant's claim from Financial Creditor to Financial Creditor-Related party on the basis of the subsequent material. The Tribunal distinguished earlier NCLAT precedents relied upon by the applicant as factually different (those concerned with re-designation between Financial and Operational creditor or assessments under GST) and therefore inapplicable. The Tribunal concluded that the RP's communication re-designating the claim was administrative and within his powers under the Code and CIRP Regulations. [Paras 18, 19, 20, 21, 22]

The RP was within his administrative powers to re-designate the applicant's claim on receipt of additional material; that act was not adjudicatory and did not exceed the RP's authority.

Related party under Section 5(24)(i) of the Code - joint venture agreement as indicia of relatedness - Whether the applicant is a related party of the corporate debtor on the material before the RP and the Tribunal. - HELD THAT: - The Tribunal examined the Joint Venture Agreement and highlighted clauses evidencing profit sharing and brokerage sharing (13.5% to the applicant) which established a nexus between the parties. The Tribunal also relied on supporting documents placed before it (including irrevocable letter of consent, board resolutions, power of attorney, bank sanction terms and charges registered with ROC) to conclude that the applicant prima facie fell within the definition of related party under Section 5(24)(i) of the Code read with relevant company law definitions of associate/joint venture. On that basis the Tribunal found the applicant to be a related party. [Paras 23, 24, 25]

The applicant is a related party of the corporate debtor in terms of Section 5(24)(i) of the Code.

Verification and determination of claims - Disposition of ancillary application IA No. 5535/2021 (alleging wilful false disclosure and concealment in Claim Form-C) insofar as its hearing is affected by the findings in IA No. 2325/2022. - HELD THAT: - Having held that the RP validly re-designated the applicant as a related party on the basis of additional material not disclosed in Form-C, the Tribunal considered IA No. 5535/2021 to raise distinct allegations of wilful and false disclosure that require separate hearing. The Tribunal therefore directed that IA No. 5535/2021 be listed for further hearing on a specified date for fresh adjudication of those allegations.

IA No. 5535/2021 is to be heard separately and is listed for further consideration.

Final Conclusion: IA No. 2325/2022 is dismissed on the merits: the RP acted within his administrative powers in re-designating the applicant as a related party and the applicant is held to be a related party under Section 5(24)(i) of the Code. IA No. 5535/2021 is directed to be heard separately on the specified date.

Modification or alteration of an approved resolution plan - commercial wisdom of the Committee of Creditors - extinguishment of claims not part of an approved resolution plan - distinction between right to use (license) and title/ownership in incorporeal property - jurisdiction of the Adjudicating Authority to adjudicate proprietary rights in trademarks

Modification or alteration of an approved resolution plan - extinguishment of claims not part of an approved resolution plan - distinction between right to use (license) and title/ownership in incorporeal property - Declaration of ownership of the Trademarks in I.A. No.155/2018 after approval of the Resolution Plan is impermissible as it amounts to modification of the approved Resolution Plan and is therefore liable to be set aside. - HELD THAT: - The Resolution Plan approved by the Committee of Creditors and the Adjudicating Authority (subject to a pending application) confined the Resolution Applicant to a perpetual exclusive right to use the brands (clause 11.12) and did not claim ownership or title. The Tribunal held that a claim to title and ownership asserted after approval of the plan and granted by the Adjudicating Authority would create a superior proprietary right not included in the approved plan and thus effect a modification of the plan. Applying the principle that claims not part of an approved resolution plan stand extinguished, the Tribunal relied on the settled position that the commercial wisdom of the CoC is paramount and that an approved plan cannot be altered by subsequent declarations that introduce rights beyond those in the plan. Consequently the Adjudicating Authority's declaration of ownership over the Trademarks was held to be beyond its jurisdiction in the context of the approved plan and was set aside. [Paras 32, 33]

Order in I.A. No.155/2018 dated 14.08.2019 declaring Corporate Debtor as owner of the Trademarks is set aside as amounting to impermissible modification of the approved Resolution Plan.

Jurisdiction of the Adjudicating Authority to adjudicate proprietary rights in trademarks - commercial wisdom of the Committee of Creditors - No adjudication was made on the separate question whether the Adjudicating Authority has jurisdiction to decide ownership of trademarks; the point was left open. - HELD THAT: - Having decided that the declaration of ownership constituted an impermissible modification of the approved Resolution Plan and setting aside that declaration, the Tribunal declined to record any finding on the broader question of the Adjudicating Authority's jurisdiction to decide proprietary title in trademarks. The Tribunal expressly left the parties free to approach the competent court, authority or tribunal on the question of ownership at the appropriate stage. [Paras 34, 35]

Jurisdictional question left open; parties permitted to approach the appropriate forum for determination of ownership/right, title or interest in the Trademarks.

Final Conclusion: The appeal is allowed: the Adjudicating Authority's order in I.A. No.155/2018 dated 14.08.2019 declaring the Corporate Debtor owner of the Trademarks is set aside as it amounted to an impermissible modification of the approved Resolution Plan; the question of the Adjudicating Authority's jurisdiction to decide trademark ownership is left open and the parties may approach the appropriate forum.

Offence of money-laundering under Section 3 and punishment under Section 4 of the PMLA - Offences by companies and liability of directors under Section 70 of the PMLA - Bail in PMLA cases and the twin conditions of Section 45 (as revived by Amendment Act 13 of 2018) - Economic offences and the approach to bail - Likelihood of accused committing an offence if released on bail

Bail in PMLA cases and the twin conditions of Section 45 (as revived by Amendment Act 13 of 2018) - Offence of money-laundering under Section 3 and punishment under Section 4 of the PMLA - Application for grant of bail to the applicant under the PMLA - HELD THAT: - The Court held that Section 45 of the PMLA, after amendment by Act 13 of 2018, has revived the twin conditions applicable to grant of bail in PMLA cases. The court applied the established judicial approach that economic offences are to be viewed seriously and, in the context of the material on record and precedents cited, the rigors and principles underlying Section 45 are engaged once bail is sought in a PMLA matter. Having regard to the allegations, documentary material and investigative findings that link the applicant to alleged money-laundering transactions, the Court concluded there are reasonable grounds for believing that the applicant is guilty of the offence of money-laundering punishable under Sections 3 and 4 of the Act. On that basis and on the footing that the applicant is likely to commit an offence if enlarged on bail, the court refused the bail prayer. [Paras 7, 9, 10, 11, 14]

Bail application refused.

Offences by companies and liability of directors under Section 70 of the PMLA - Evidence of involvement in laundering of proceeds of crime - Whether material on record establishes reasonable grounds to believe the applicant, as a Director, was involved in offences under the PMLA - HELD THAT: - The Court recorded investigative findings that funds received by the company and its associated entities were traced through multiple bank accounts, that the applicant was shown as a Director and had receipts/transfers linked to his account, and that the prosecution relied upon Section 70 to attribute company contraventions to responsible persons. The court accepted that documentary scrutiny and statements provide reasonable grounds to believe the applicant's involvement in laundering proceeds of crime, noting the role of company directors and the statutory deeming and attribution principles under Section 70. [Paras 3, 5, 6, 14]

Court found reasonable grounds to believe the applicant was implicated in offences under the PMLA; this supported refusal of bail.

Final Conclusion: The bail petition filed by Shri Ram Pratap Verma @ Ram Pratap Verma in ECIR No. 02/2020 (PMLA) is refused: the court concluded that, applying the revived twin conditions of Section 45 and on the basis of material linking the applicant to alleged money laundering and company level contraventions under Section 70, there are reasonable grounds to believe the applicant is guilty and likely to offend if released on bail.

Pre-deposit under proviso to section 35F - application of unamended versus amended section 35FF - interest on delayed refund - provision-based applicability of statutory amendments

Pre-deposit under proviso to section 35F - application of unamended versus amended section 35FF - interest on delayed refund - Whether interest on refund of the pre-deposit is payable under the amended section 35FF or the unamended section 35FF where the pre-deposit was ordered under the first proviso to section 35F and subsequently deposited after the amendment. - HELD THAT: - The Tribunal found that the determinative factor is the provision under which the pre-deposit was directed and made, not merely the calendar date of payment. The Delhi High Court's direction to deposit an amount equal to 7.5% of the demand was a modification of the Tribunal's order in the facts and did not hold that the amended section 35F applied to the proceedings. The proviso to the amended section 35FF preserves the operation of the unamended section 35FF in respect of amounts deposited under the unamended section 35F (i.e., under its first proviso). Consequently, amounts deposited pursuant to an order under the first proviso to the unamended section 35F continue to be governed by the pre-amendment section 35FF. Under the unamended section 35FF interest is payable only where refund is not made within three months from communication of the appellate order. As the pre-deposit was refunded within three months, no interest is payable. The Commissioner (Appeals)'s reliance on the date of deposit and the Delhi High Court order to invoke the amended section 35FF was therefore incorrect. [Paras 19, 24, 25, 27, 29]

The unamended section 35FF applies to the pre-deposit made pursuant to the first proviso to the unamended section 35F; no interest is payable because the refund was made within three months.

Final Conclusion: The appeal is allowed; the Commissioner (Appeals) order granting interest under the amended section 35FF is set aside. The respondent's cross-objections for higher interest are rejected.

Reversal of CENVAT credit attributable to exempted services - treatment of interest as exempted service - computation and utilization of credit under Rule 6 of CENVAT Credit Rules, 2004 - remand for fresh adjudication in absence of details of credit and utilization

Reversal of CENVAT credit attributable to exempted services - computation and utilization of credit under Rule 6 of CENVAT Credit Rules, 2004 - Whether the recovery and demands confirmed by the lower authorities under Rule 6 of CENVAT Credit Rules, 2004 were sustainable on the material before them - HELD THAT: - The Tribunal found that the impugned proceedings were founded on the premise that interest constituted consideration for exempted service and that the only option for the appellant was payment of the prescribed percentage on the value of such exempted service for the post 2008 period. However, the lower authorities had not considered the correct manner for reversal as mandated by Rule 6 of the CENVAT Credit Rules, 2004, nor had they proceeded on the basis of the definition of exempted services in rule 2 when determining ineligibility for continued maintenance of credit. Because the record lacked details of credit availed and details of utilization during the disputed periods, the Tribunal was unable to ascertain the amount, if any, required to be reversed under the CENVAT scheme. In these circumstances the Tribunal concluded that the proper course was to set aside the impugned order and remit the matters to the original adjudicating authority for fresh consideration of the assessee's submissions, in light of judicial decisions and the factual details of availment and utilization of credit. [Paras 7, 8]

Impugned order set aside and matter remitted to the original authority for fresh adjudication on reversal/adjustment of CENVAT credit in accordance with Rule 6 and relevant judicial decisions.

Treatment of interest as exempted service - Whether the classification of 'interest' as an exempted service for purposes of reversal under Rule 6 was conclusively determined by the Tribunal - HELD THAT: - The Tribunal observed decisions and administrative clarifications indicating that by Notification No. 11/2012-Service Tax interest was expressly made an exempt service and cited the Tribunal's reasoning in related cases. Nonetheless, the present appeal did not result in a final factual or mathematical determination on the effect of that classification for the appellant because the adjudicating authority did not apply the reversal procedure under Rule 6 to the particulars of the appellant's credit and utilization. Consequently the Tribunal did not finally decide the applicability or quantum of reversal arising from the classification of interest but directed fresh adjudication taking such legal positions and facts into account. [Paras 6, 7]

No definitive adjudication on the quantumal effect of interest being treated as exempted service; matter to be examined afresh by the original authority in the remand.

Final Conclusion: The Tribunal set aside the impugned order and remanded the matters relating to 2005 06 to 2010 11 to the original adjudicating authority for fresh consideration and computation of any reversal or recovery of CENVAT credit under Rule 6 of the CENVAT Credit Rules, 2004, having regard to the classification of interest, relevant judicial decisions and the factual details of credit availed and utilized.

Effect of payment of tax with interest before issuance of show cause notice under Section 73(3) of the Finance Act, 1994 - Imposition of penalty under Section 78 of the Finance Act, 1994 - Requirement of material to prove suppression or concealment for imposing penalty - Applicability of earlier Tribunal precedents in like facts

Effect of payment of tax with interest before issuance of show cause notice under Section 73(3) of the Finance Act, 1994 - Imposition of penalty under Section 78 of the Finance Act, 1994 - Requirement of material to prove suppression or concealment for imposing penalty - Whether penalty under Section 78 could be sustained where service tax along with interest was paid before issuance of the show cause notice and no material was produced to prove suppression or concealment - HELD THAT: - The Tribunal applied the principle in Bhoruka Aluminium Ltd. v. CCEx. & S.Tax [2017 (51) STR 418 (Tri.Bangalore)] and held that Section 73(3) precludes issuance of a show cause notice in respect of tax that has been paid along with interest before initiation of proceedings. The adjudicatory authorities had not produced material demonstrating deliberate suppression or concealment with intent to evade tax; the mere allegation of suppression, without evidence, is insufficient to sustain penalty under Section 78. The appellate authorities also failed to record any finding of intention to evade tax. Consequently, in facts squarely falling within the cited precedent - payment before issuance of the show cause notice and absence of proof of suppression - imposition of penalty was not justified. [Paras 5, 6]

Penalty under Section 78 set aside and appeal allowed.

Final Conclusion: The impugned orders imposing penalty are set aside and the appeal is allowed, providing consequential relief to the appellant, on the basis that tax with interest was paid prior to issuance of the show cause notice and no material established suppression or concealment.

Exclusion of outdoor catering from input service (post 1.4.2011) - Cenvat credit inadmissibility for excluded services - invocation of extended period of limitation by suppression - payment under Section 73(3) - bar to penalty by Explanation 2 - sustainability of interest on confirmed demand

Exclusion of outdoor catering from input service (post 1.4.2011) - Cenvat credit inadmissibility for excluded services - Cenvat credit availed on outdoor catering services (post 1.4.2011) is inadmissible and the demand for reversal is sustainable. - HELD THAT: - The definition of 'input service' was amended effective 1-4-2011 to exclude services in relation to outdoor catering when such services are used primarily for personal use or consumption by any employee. The Tribunal's Larger Bench in Wipro Ltd. construed the amendment as excluding outdoor catering services from input service eligibility and held that food provided through canteens is primarily for personal consumption; that view has been approved by higher courts. The statutory exclusion is decisive regardless of whether the employer bears the cost or treats the expense as output; allowing credit would defeat the legislative intent. Applying that principle to the facts, the cenvat credit taken by the appellant for outdoor catering after 1-4-2011 is not admissible and the demand for disallowance is correctly sustained. [Paras 4]

Demand for disallowance of cenvat credit on outdoor catering services is upheld.

Invocation of extended period of limitation by suppression - S.73 extended period - requirement of knowledge and nondisclosure - Extended period of limitation for recovery under Section 73 was rightly invoked on facts of suppression. - HELD THAT: - The extended period under Section 73 requires existence of the statutory ingredients, including facts within the assessee's knowledge not disclosed to revenue. The audit detected the availment of credit on excluded services and there is no material that the appellant had disclosed such availment earlier; Form ST-2 and other records did not show the claim. The appellant's deposit of amounts under protest immediately after audit and before service of show cause notice does not nullify the finding of suppression. Consequently, the invocation of extended period is sustainable on the factual matrix. [Paras 4]

Extended period of limitation was correctly invoked and the demand is not time barred.

Sustainability of interest on confirmed demand - Interest on the confirmed demand is sustainable. - HELD THAT: - Once the demand for inadmissible cenvat credit is sustained (including under extended period), interest under the relevant provision is consequent and sustainable. The appellant had deposited interest along with the tax, and the adjudication appropriately addressed interest as part of the demand. [Paras 4]

Interest on the disallowed credit is upheld.

Payment under Section 73(3) - bar to penalty by Explanation 2 - penalty under Section 78 / Rule 15(3) - Penalty under Section 78 (Rule 15(3)) is not leviable because the appellant had deposited the tax and interest under protest prior to service of show cause notice, attracting Explanation 2 to Section 73(3); penalty is set aside. - HELD THAT: - Section 73(3) permits a person to pay the tax and interest on self ascertainment and on informing the Central Excise Officer such payment, and Explanation 2 declares that no penalty shall be imposed in respect of payment made under that sub section. The appellant deposited the tax and interest on 03.07.2018 before issuance of the show cause notice on 18.07.2018. On that basis, the Tribunal found Explanation 2 applicable and held that penalty under Section 78 / Rule 15(3) could not be sustained; accordingly the penalty imposed was set aside. [Paras 4, 5]

Penalty imposed under Section 78 is quashed; appeal is allowed to that extent.

Final Conclusion: The Tribunal upholds the disallowance of cenvat credit claimed on outdoor catering services for the period 2012-13 to 2017-18 (till June 2018) and sustains the demand and interest, including invocation of the extended period; however, penalty under Section 78 (Rule 15(3)) is set aside because the assessee had deposited the tax and interest prior to issuance of the show cause notice under the ambit of Section 73(3) Explanation 2. Appeal is partly allowed only to the extent of penalty being quashed.

Refund under Rule 5 of Cenvat Credit Rules - Export turnover - Total turnover - Formula for refund calculation - Notification No. 27/2012-CE(NT) - cap on refund

Export turnover - Total turnover - Formula for refund calculation - Refund under Rule 5 of Cenvat Credit Rules - Correctness of the denominator (total turnover) used in computing refund under the prescribed formula where part of export turnover related to payments received before the relevant period was included. - HELD THAT: - The Tribunal noted that the export turnover figure of Rs. 17,60,67,491/- and the eligible/net Cenvat credit of Rs. 2,43,54,808/- were not in dispute. The sole controversy was the computation of the denominator (total turnover). The Adjudicating Authority had treated the amount of invoices raised before the relevant period (but paid during the period) as an additional component over and above the export turnover figure, thereby producing an inflated denominator. The Tribunal held that the correct denominator is Rs. 22,71,89,438/-, which already incorporates the export turnover (comprising invoices raised before and during the relevant period as defined). Consequently, the refund must be recalculated using the correct total turnover and in accordance with the refund formula under Rule 5, subject to the cap under Notification No. 27/2012-CE(NT). The Tribunal directed the Adjudicating Authority to recompute the refund, allow the balance amount with interest, and permitted the appellant to file a calculation sheet for verification; payment to be made within sixty days. [Paras 10]

Appeal allowed; directed recomputation of refund using total turnover of Rs. 22,71,89,438/-, allowance of the balance refund with interest, and filing of a calculation sheet; payment within sixty days.

Final Conclusion: The appeal is allowed. The Adjudicating Authority is directed to recalculate the refund using the correct total turnover figure (Rs. 22,71,89,438/-), grant the balance refund with interest, and complete payment within sixty days after the appellant files the calculation sheet.

Compounded levy scheme under Section 3A - Capacity determination under the Chewing Tobacco Rules - Duty leviable on number of packing machines - Self-contained code governing levy, determination and recovery - Burden of proof for clandestine manufacture and reliance on assumptions - Extended period of limitation - suppression as condition precedent - Relevance of undisclosed income declared before Income Tax authorities to excise liability - Cross examination of witnesses / Section 9D and principles of natural justice

Compounded levy scheme under Section 3A - Capacity determination under the Chewing Tobacco Rules - Duty leviable on number of packing machines - Self-contained code governing levy, determination and recovery - Validity of demand of excise duty and penalty founded on presumed clandestine manufacture by reference to the 'red' column of a private survey sheet and reverse calculation of undeclared packing machines under the compounded levy scheme. - HELD THAT: - The Tribunal held that the Chewing Tobacco Rules enacted under Section 3A constitute a complete code prescribing that duty under the compounded levy is to be determined on the basis of the notified factor of production - namely the number of packing (FFS) machines - as fixed by capacity determination orders. In the present case no undeclared packing machines were found in the factory or at undisclosed premises, the departmental demand was premised on assumptions and reverse calculations from the private survey sheet and not on any positive evidence of undeclared machines. Once an assessee is assessed under the compounded levy scheme, duty cannot be re assessed on the basis of actual production under Section 3 or on speculative computation of non existent machines. The Determination Orders under Rule 6(2) had attained finality and the Department's demand based on presumed clandestine machines was therefore not sustainable. [Paras 41, 42]

Demand of excise duty and penalty founded on presumed clandestine manufacture and reverse calculated undeclared machines is unsustainable and the impugned demand is set aside.

Burden of proof for clandestine manufacture and reliance on assumptions - Cross examination of witnesses / Section 9D and principles of natural justice - Whether the departmental reliance on third party reports/letters and the survey sheet without granting opportunity for cross examination was permissible and whether the adjudicating authority erred in rejecting the appellant's request for cross examination. - HELD THAT: - The Tribunal noted that the adjudicating authority had arbitrarily rejected the appellant's request for cross examination of the authors of reports/letters relied upon in the show cause notice and that the appellant had been given cogent explanations regarding the private survey sheet recovered from the director's residence which were summarily disbelieved. The appellate proceedings earlier directed reconsideration of the request for examination/cross examination; in the current disposal the Tribunal found that the explanation was arbitrarily rejected and that reliance on untested third party statements, without affording the opportunity to test their veracity, was not acceptable in the adjudicatory process under the Act. [Paras 9, 42]

Findings based on untested reports/letters and summary rejection of the appellant's request for cross examination were improper and contributed to unsustainable conclusions in the impugned order.

Extended period of limitation - suppression as condition precedent - Availability of extended period of limitation for recovery of the proposed demand. - HELD THAT: - The Tribunal held that invocation of the extended period of limitation requires a case of suppression or contumacious conduct. On the material on record the Department failed to demonstrate any suppression by the appellant; the assessee had regularly filed returns, determination orders were on record and departmental officers had visited and verified the factory. Accordingly, the extended period of limitation could not be invoked and the demand was time barred to that extent. [Paras 42]

Extended period of limitation was not available to the Revenue; invocation thereof was held bad.

Relevance of undisclosed income declared before Income Tax authorities to excise liability - Whether the voluntary disclosure/assessment of an amount before the Income Tax Department bears upon or supports the excise demand for clandestine manufacture. - HELD THAT: - The Tribunal recorded that undisclosed income declared before the Income Tax Department has no bearing on excise liability under the compounded levy scheme. Moreover, the assessment position in Income Tax (where the appellate authority set aside the addition) did not support an adverse inference against the appellant. Thus, the departmental reliance on such disclosure as corroborative of clandestine excise clearances was misplaced. [Paras 42]

The disclosure/assessment in Income Tax proceedings does not justify or sustain the excise demand under the compounded levy regime.

Final Conclusion: Appeals allowed; impugned order demanding duty and imposing penalties set aside as unsustainable - compounded levy under the Chewing Tobacco Rules is a self contained code, no undeclared packing machines were found, extended limitation was not invokable and the Income Tax disclosure did not support the excise demand.

Remission of duty for storage and transit losses - condonable storage loss up to 1% as per CBEC Circular dated 19.10.1981 - standard of scrutiny for claimed losses exceeding 1% - responsibility for payment of duty where goods sent for warehousing are not received in warehouse (Rule 20 sub rule (4)) - remission of duty under Rule 21 of the Central Excise Rules, 2002 - withholding of information/suppression and its effect on limitation/time bar

Remission of duty for storage and transit losses - condonable storage loss up to 1% as per CBEC Circular dated 19.10.1981 - remission of duty under Rule 21 of the Central Excise Rules, 2002 - standard of scrutiny for claimed losses exceeding 1% - Entitlement of the appellant to remission of duty on claimed storage/ transit losses - HELD THAT: - The Tribunal held that the Board's Circular of 19.10.1981 establishes that losses up to 1% may be condoned without detailed scrutiny while claims above 1% require close scrutiny to satisfy genuineness. The Commissioner had allowed remission only to the extent indicated in earlier Circulars of 1956 and 1959 for specified products and disallowed or treated other products as having zero condonable limit. The Tribunal found that, on the record (as per the revised annexure), the losses in almost all cases were below 1% and there was no allegation or evidence of diversion, clandestine removal or non genuineness. Applying the 1981 Circular and the discretionary power under Rule 21, the Tribunal concluded there was no justification for denying remission of the claimed losses and therefore the demand could not be sustained. [Paras 13, 14]

Losses claimed by the appellant (being below 1% and not shown to be non genuine) are to be remitted and the demand of duty set aside on merits.

Responsibility for payment of duty where goods sent for warehousing are not received in warehouse (Rule 20 sub rule (4)) - withholding of information/suppression and its effect on limitation/time bar - Whether the appellant can escape demand as time barred given delayed furnishing of data and the legal effect of its non submission - HELD THAT: - The Tribunal accepted that where goods sent for warehousing are not received, liability for duty lies on the consignor under Rule 20(4). It also held that the appellant repeatedly failed to furnish required loss data despite specific requests, and that the extent of losses was within the appellant's exclusive knowledge. The Tribunal rejected the appellant's contention that system change caused delay which would make the demand time barred, observing that a party cannot benefit from its own failure to supply material information and that suppression/withholding of information defeats a limitation plea in this context. [Paras 11]

The plea that the demand is time barred is rejected because the appellant had withheld information and failed to provide data despite requests.

Remission of duty for storage and transit losses - Alleged clerical error in calculation of motor spirit loss for April 2004 and its effect on the demand - HELD THAT: - Counsel pointed out a manifest recording error where quantity was recorded erroneously (an extra digit), producing an inflated loss percentage. The Tribunal noted the claimed calculation error (apparent loss of 3,443% when actual was 0.348%) in the Commissioner's computations and accepted that the error affected the demand for that month. This factual/clerical mistake was addressed in the Tribunal's reasoning that the appellant was entitled to remission and the demand could not be sustained in the corrected computation. [Paras 13]

The clerical error in the motor spirit computation is recognised and, together with the entitlement to remission, undermines the demand relating to that month.

Final Conclusion: The appeal is allowed. Applying the Board's 19.10.1981 guidance and Rule 21, the Tribunal remits losses below 1% as condonable without detailed scrutiny, rejects the limitation plea because the appellant withheld information, recognises the clerical error in the motor spirit computation, and sets aside the impugned demand with consequential relief to the appellant.

Cenvat Credit - transitional credit under Section 140(1) of the CGST Act, 2017 - transfer of pre-GST credit into TRANS-1 - competence of Commissioner (Appeals) - applicability of Central Excise Act vis-a -vis CGST Act - clerical error in statutory returns

Competence of Commissioner (Appeals) - applicability of Central Excise Act vis-a -vis CGST Act - Whether the Commissioner (Appeals) who heard and decided the appeal had jurisdiction to adjudicate the matter. - HELD THAT: - The Tribunal examined the impugned order and noted that the Order in Appeal was passed by Sugrive Meena, Commissioner (Appeals) for both Central Excise and CGST, Jaipur, indicating that the appellate officer exercised jurisdiction in respect of Central Excise matters as well as CGST. The Tribunal further observed that the sum in dispute related to the closing balance of Cenvat Credit for June, 2017 - a period falling within the Central Excise regime - and that the revised ER 1 return and original ER 1 pertained to excise returns. On this basis the Tribunal held the departmental contention that the Commissioner (Appeals) lacked competence to decide the appeal to be unfounded and therefore rejected the plea attacking jurisdiction. [Paras 7, 10]

The challenge to the competence of the Commissioner (Appeals) is rejected; the Commissioner (Appeals) had jurisdiction to decide the appeal.

Cenvat Credit - transitional credit under Section 140(1) of the CGST Act, 2017 - transfer of pre-GST credit into TRANS-1 - clerical error in statutory returns - Whether the disallowance of Cenvat Credit (difference between figures in ER 1 and revised ER 1 / TRANS 1 transfer) was sustainable. - HELD THAT: - The Tribunal found that the credit in dispute related to the closing balance of Cenvat Credit as per ER 1 for June, 2017 and that Section 140(1) of the CGST Act permits transitional credit of amounts attributable to the pre GST period. The adjudicating authorities had held that the assessee wrongly availed credit by transferring the revised ER 1 balance into TRANS 1, but the Tribunal noted that by the time the revised return was filed (16.7.2017) the appointed date for GST (1.7.2017) had already arrived, and the initial ER 1 (filed on 10.7.2017) showing the higher balance was not controverted by departmental evidence. The assessee had also intimated the department by letter of a clerical error in the revised return. In the absence of evidence to show that the figures in the ER 1 were incorrect and given the admitted provenance of the credit from the excise era and the transitional regime, the Tribunal concluded that the reversal confirmed by the lower authorities was unsustainable and that the assessee was entitled to the credit as claimed. [Paras 8, 9, 10]

The disallowance of the contested Cenvat Credit is unsustainable; the assessee is entitled to the credit and the order disallowing it is set aside.

Final Conclusion: The appeal filed by the assessee is allowed and the order disallowing the Cenvat Credit is set aside; the appeal filed by the Department challenging the competence of the Commissioner (Appeals) is rejected.

Late fee under Rule 12(6) of the Central Excise Rules, 2002 - definition of "assessee" and applicability of penal provision - NIL returns and liability to pay late fee - limitation and invocation of extended period for willful mis-declaration or suppression - statutory ceiling on late fee per return

Definition of "assessee" and applicability of penal provision - late fee under Rule 12(6) of the Central Excise Rules, 2002 - Whether the amended Rule 12(6) applies only to a person liable to pay duty/tax ("assessee") and therefore is not applicable for periods in which returns filed were 'NIL'. - HELD THAT: - The Court construed the amended wording of Rule 12(6) which uses the term "assessee" and held that, by virtue of the Finance Act definition adopted under Section 83, "assessee" means a person liable to pay tax. Since Central Excise does not define 'assessee' separately, the Finance Act definition applies. Where the ER-1 return for a period is a 'NIL' return (no liability to pay duty for that period), the person is not an "assessee" for that specific period and Rule 12(6) therefore does not apply to attract the mandatory late fee for that period. The Tribunal relied on the table in the show cause notice and concluded that 18 of 31 returns were 'NIL' returns and late fee for those returns was wrongly charged. [Paras 7, 8]

Late fee under amended Rule 12(6) is not chargeable in respect of periods for which the returns are 'NIL'.

Limitation and invocation of extended period for willful mis-declaration or suppression - Whether the demand for late fee for the non-'NIL' delayed returns (remaining periods) could be issued after the normal period of limitation by invoking the extended period on the ground of willful suppression or mis-declaration. - HELD THAT: - The Tribunal found that the Show Cause Notice dated 25.06.2020 related to periods in 2015-2017 and was issued beyond the normal limitation period. The department was aware of the delayed filing since December 2014 and took no action within the normal period; ACS scrutiny in 2019 cannot justify invoking the extended period. The extended period can be invoked only where there is willful mis-declaration or willful suppression. There was no evidence or allegation of any positive act by the appellant amounting to willful suppression; taxes had been paid through Cenvat credit and there was merely delay in filing, not concealment. Relying on settled law, mere delay does not constitute willful mis-declaration. Consequently, demand for the remaining delayed returns is barred by limitation. [Paras 9, 10, 11]

Demand for late fee in respect of the remaining delayed returns is barred by limitation as extended period could not be invoked in absence of willful suppression or mis-declaration.

Statutory ceiling on late fee per return - late fee under Rule 12(6) of the Central Excise Rules, 2002 - Whether the aggregate late fee demanded is excessive contrary to the statutory maximum prescribed in Rule 12(6). - HELD THAT: - Rule 12(6) prescribes a late fee calculated at a specified per day rate subject to a maximum of Rs.20,000 for the period of delay in submission of each return. The Tribunal observed that the total demand of late fee reflected in the order under challenge exceeded what would be permissible when the statutory cap per return is properly applied. Having held that many returns were 'NIL' and others barred by limitation, the Tribunal also held the aggregate demand to be excessive in view of the per-return ceiling. [Paras 12]

The aggregate late fee demanded is excessive and not sustainable in view of the statutory maximum per return.

Final Conclusion: The Tribunal allowed the appeal, setting aside the order-in-appeal: late fee under amended Rule 12(6) cannot be imposed for periods covered by 'NIL' returns; the demand for the remaining delayed returns is time-barred as extended period was not invocable in absence of willful suppression; and the aggregate late fee claimed was excessive having regard to the statutory cap per return.

Reversal of input tax credit under Section 19(2)(v) - binding effect of Division Bench precedent - setting aside assessment order

Reversal of input tax credit under Section 19(2)(v) - Division Bench decision in The State of Tamil Nadu and Another Vs. M/s. Everest Industries Limited, 2022 (4) TMI 1204 - Validity of the reversal of input tax credit under Section 19(2)(v) in the assessment order for the period 2014-15. - HELD THAT: - The High Court accepted the parties' concurrence and applied the Division Bench ruling in The State of Tamil Nadu and Another Vs. M/s. Everest Industries Limited (2022 (4) TMI 1204), which decided the question in favour of the assessee. Relying on that precedent, the Court held that the reversal mandated by the assessment could not be sustained and that the impugned assessment order must be set aside to that extent. No separate factual or evidentiary inquiry was undertaken because the legal principle established by the Division Bench disposed of the controversy.

Impugned order of assessment dated 29.03.2019 is set aside insofar as it directs reversal of input tax credit under Section 19(2)(v) for 2014-15; writ petition allowed.

Final Conclusion: The assessment order of 29.03.2019 is quashed to the extent of the reversal of input tax credit under Section 19(2)(v) for the tax period 2014-15, in view of the Division Bench decision in The State of Tamil Nadu and Another Vs. M/s. Everest Industries Limited (2022 (4) TMI 1204); connected petition closed with no costs.

Statutory pre-condition for maintenance of appeal - pre-deposit condition in appeal - incidental powers of appellate authority cannot override a statutory limitation - exercise of writ jurisdiction in cases of extreme hardship and patent illegality - prima facie case on merits insufficient to dispense with statutory pre-deposit

Statutory pre-condition for maintenance of appeal - incidental powers of appellate authority cannot override a statutory limitation - Whether the Sales Tax Appellate Tribunal had power to waive or dispense with the statutory pre-deposit required under the proviso to Section 58(1) of the TNVAT Act. - HELD THAT: - The Court held that the statutory proviso to Section 58(1) unambiguously requires payment of the tax as ordered by the first Appellate Authority before an appeal under clause (a) can be entertained. Relying on the Supreme Court's reasoning in Tecnimont (which interpreted an analogous provision), the Court reiterated that the principle in Mohammed Kunhi cannot be invoked to override an express statutory limitation; implied or ancillary powers of an appellate authority do not extend to doing that which the statute specifically prohibits. Consequently, the Tribunal could not waive or ignore the pre-deposit requirement and its refusal to admit appeals for want of maintainability was in accordance with the statutory mandate. [Paras 14, 20, 21]

Tribunal had no power to dispense with the statutory pre-deposit; appeals not maintainable unless the prescribed pre-deposit was made.

Exercise of writ jurisdiction in cases of extreme hardship and patent illegality - pre-deposit condition in appeal - Whether this Court under Article 226 can entertain a writ petition seeking waiver of the statutory pre-deposit and, if so, on what grounds such relief may be granted. - HELD THAT: - The Court accepted that writ jurisdiction remains available where a party establishes extreme hardship and that the impugned order is patently arbitrary or erroneous; the judgment in Tecnimont and earlier Supreme Court decisions dealing with the Stamp Act were cited for the proposition that relief by writ may be appropriate in genuine cases of hardship and patent illegality. However, those precedents arose in the context of Section 47A of the Stamp Act and concern enhancement orders shown to be arbitrary; their ratio must be narrowly applied. For a VAT assessee to obtain relief, the petitioner must demonstrate substantial hardship and patent error in the assessment/appeal order. Absent such material, the protective scope of Article 226 cannot be used to circumvent the clear statutory pre-condition. [Paras 23, 24, 25, 26, 27]

Writ relief to waive pre-deposit is available only in exceptional cases of extreme hardship and patent illegality; such exceptional facts were not established here.

Prima facie case on merits insufficient to dispense with statutory pre-deposit - classification dispute not sufficient for waiver - Whether the petitioners' asserted prima facie case on classification of goods justified dispensing with the pre-deposit requirement. - HELD THAT: - The petitioners relied on their contention that for two assessment years the first Appellate Authority had taken a favourable classification in CST assessments and argued that the VAT assessment should follow. The Court observed that no materials were placed to establish extreme hardship or that the assessment/appeal order was patently arbitrary; at best the petitioners had a prima facie case on merits regarding classification. The court emphasized that a mere arguable prima facie case does not meet the stringent threshold required to invoke writ relief to override the statutory pre-condition and that accepting such an approach would frustrate the statutory scheme by enabling routine bypass of the pre-deposit requirement. [Paras 9, 26, 27, 28]

Prima facie merit on classification was insufficient to warrant waiver of the pre-deposit; petitioners failed to show the requisite extreme hardship or patent illegality.

Final Conclusion: Writ petitions dismissed. The statutory requirement of pre-deposit under the proviso to Section 58(1) must be complied with; Tribunal correctly declined admission of appeals for non-compliance. Article 226 relief to dispense with pre-deposit is confined to exceptional cases of extreme hardship and patent illegality, which were not established here. Petitioners granted six weeks' liberty to make the statutory pre-deposit and re-present their appeals for adjudication on merits.

Post-award interest - pre-award interest - sum directed to be paid - unless the award otherwise directs - discretion of arbitrator in awarding interest - Section 31(7) of the Arbitration and Conciliation Act, 1996

Unless the award otherwise directs - discretion of arbitrator in awarding interest - post-award interest - Section 31(7) of the Arbitration and Conciliation Act, 1996 - The scope of the phrase 'unless the award otherwise directs' in Section 31(7)(b) and whether the arbitrator retains discretion to determine both the rate of post-award interest and the particular 'sum' on which it is to be awarded. - HELD THAT: - The Court held that the placement of the words 'unless the award otherwise directs' in clause (b) qualifies the rate of post-award interest and does not, by its position, curtail the arbitrator's discretion to determine whether to grant post-award interest and on what portion of the awarded sum such interest should be payable. Clause (a) confers wide discretion on an arbitral tribunal to determine rate, period and the quantum (whole or any part) for pre-award interest. There is no express provision in the Act restricting the arbitrator's exercise of discretion in relation to post-award interest; clause (b) contemplates the statutory fallback of 18% only where the arbitrator has not exercised that discretion. Accordingly, the arbitrator may, exercising reasonable judgment and good faith, award post-award interest on the whole award or on a part thereof, having regard to relevant circumstances. The provision that an award shall carry interest at eighteen percent applies when the tribunal has not otherwise directed; it does not operate to limit an arbitrator's inherent discretion to fix the 'sum' for post-award interest where the arbitrator chooses to exercise that power. [Paras 18, 19, 20, 21, 22]

The phrase qualifies the rate of interest; the arbitrator retains discretion to grant post-award interest and to determine the 'sum' on which it is to be awarded, subject to reasonableness and good faith.

Sum directed to be paid - pre-award interest - post-award interest - Hyder Consulting (UK) Ltd. v. State of Orissa - Whether post-award interest must, as a matter of law, be calculated on the aggregate of principal and pre-award interest (i.e., whether pre-award interest merges into the 'sum' for post-award interest). - HELD THAT: - The Court reviewed the three-judge decision in Hyder Consulting which overruled SL Arora to the extent that pre-award interest could not be included in the 'sum' for calculating post-award interest. The majority opinions in Hyder Consulting (particularly Justice Bobde and Justice Sapre) held that the term 'sum' may include principal and pre-award interest so that post-award interest could be calculated on the merged amount. However, the Court observed that Hyder Consulting did not conclusively decide that the arbitrator lacks the discretion to award post-award interest on only a part of that 'sum'. Consequently, while Hyder Consulting corrected SL Arora's rule that pre-award interest could never form part of the 'sum', that principle does not eliminate the arbitrator's discretion to limit post-award interest to a portion of the awarded sum when the arbitrator otherwise directs. [Paras 10, 11, 16, 17, 22]

Hyder Consulting overruled SL Arora on the point that the 'sum' may include pre-award interest; but that decision does not preclude an arbitrator, in the exercise of discretion, from directing post-award interest on only part of the 'sum'.

Final Conclusion: The appeal is dismissed. The Court affirms that (a) Hyder Consulting corrected SL Arora by holding that the 'sum' may include principal and pre-award interest for the purpose of post-award interest, and (b) Section 31(7)(b)'s phrase 'unless the award otherwise directs' qualifies the rate and does not curtail the arbitrator's discretion to decide whether to grant post-award interest and on which part of the awarded sum it should be payable; the arbitrator must exercise that discretion reasonably and in good faith, and the award in question awarding post-award interest on the principal only does not disclose an error apparent.

Section 138 of the Negotiable Instruments Act - dishonour of cheque - proof of legally enforceable debt or liability - cheque kept as security - presumption as to issuance of cheque - acquittal upheld for lack of evidence

Section 138 of the Negotiable Instruments Act - proof of legally enforceable debt or liability - dishonour of cheque - cheque kept as security - presumption as to issuance of cheque - Whether the accused could be convicted under Section 138 N.I. Act for dishonour of cheque dated 21.07.2004. - HELD THAT: - The High Court affirmed the Trial Court's finding of acquittal on the ground that the prosecution failed to prove that the disputed cheque was issued to discharge any legally enforceable debt or liability. The accused consistently testified that his business and bank account were closed in 1990 and that the cheque was handed over to the complainant as security; he produced documentary evidence including the winding up/closure record (Exhibit-A), earlier receipts and invoices (Exhibit-D series), bank reply and account statement (Exhibit-E and Exhibit-F) showing the account ledger traceable only up to 21.07.1990. The complainant produced a series of earlier cheques (Exhibit 6 series) issued in 1989 and the disputed cheque (Exhibit 1) dated 21.07.2004, which is the immediate next cheque number after Exhibit 6/6. The Court found it inherently improbable that a new cheque in the same cheque-book would be issued after a gap of fifteen years when the account and business were shown to have been closed, and noted absence of any documentary evidence of transactions between the parties from 1990 to 2004. Given these materials, the statutory presumption in respect of the cheque could not be sustained; the evidence supported the defence that the cheque was held as security and was misused by the complainant. On this basis the Court found no infirmity in the acquittal and declined to interfere.

Acquittal of the accused under Section 138 N.I. Act is affirmed as the prosecution failed to prove issuance of the cheque for a legally enforceable debt; the cheque was held to have been kept as security and misused.

Final Conclusion: The appeal is dismissed; the High Court upholds the Trial Court's acquittal under Section 138 N.I. Act on findings that the accused's business and bank account were closed in 1990, no transactions between the parties occurred from 1990 to 2004, and the disputed cheque was kept as security and misused, so the ingredients of the offence were not proved.