TaxTMI Updates e-Newsletter
Sep 12,2020

Limitation for filing appeal under section 107 of the CGST Act - electronic filing requirement under Rule 108 and FORM GST APL-01 - commencement of limitation upon communication by uploading the order on the GST portal - absence of notified alternative (manual) mode for filing appeals - condonation of delay where appellant prevented by sufficient cause including technical failures of governmental portals

Limitation for filing appeal under section 107 of the CGST Act - electronic filing requirement under Rule 108 and FORM GST APL-01 - commencement of limitation upon communication by uploading the order on the GST portal - absence of notified alternative (manual) mode for filing appeals - condonation of delay where appellant prevented by sufficient cause including technical failures of governmental portals - Appellate authority's rejection of the appeal as time-barred was not justified where the adjudicating authority's order had not been uploaded on the GST portal and electronic filing was the prescribed mode. - HELD THAT: - The statutory scheme requires appeals to be filed in the electronic FORM GST APL-01 and treats an appeal as filed only when final acknowledgement (appeal number) is issued (Rule 108). There was no notification providing for a manual mode of filing. Consequently, the limitation period under section 107 runs from the date the decision or order is communicated to the person, which in the present scheme effectively requires upload of the adjudicating authority's order on the GST portal so that the appellant can file electronically. The petitioner did not receive the electronic copy nor could it file electronically because the order was not uploaded and repeated attempts, including use of GST Seva Kendras and lodging grievances, remained unavailing. Under these peculiar factual circumstances, the petitioner was prevented by sufficient cause from filing the appeal within the statutory period and ought not to be penalised for technical failures or absence of notified alternative procedure. The appellate authority therefore erred in rejecting the appeal as time-barred instead of condoning the delay and considering the appeal on merits. The court quashed the impugned order, condoned the delay and remanded the matter to the Appellate Authority for fresh de novo disposal after affording opportunity of hearing. [Paras 8, 9, 10]

Impugned order rejecting the appeal as time-barred quashed; delay in manual filing condoned and matter remanded to the Appellate Authority to decide afresh on merits after hearing the petitioner.

Final Conclusion: Petition allowed. The order dated 1st May, 2019 rejecting the appeal as time-barred is quashed; delay in filing the appeal is condoned and the appeal is remitted to the Commissioner (Appeals) for fresh de novo adjudication after giving the petitioner adequate opportunity of hearing.

Section 132(1) CGST - offences committed and retention of benefits - Cognizable and non-bailable offences under CGST - Pre-trial detention - Economic offences - tampering with documentary/electronic evidence - Influencing witnesses and obstructing investigation - Balance between individual liberty and public interest - Grant of bail is the rule and committal to jail an exception

Section 132(1) CGST - offences committed and retention of benefits - Cognizable and non-bailable offences under CGST - Whether the offences alleged against the accused fall within the non-bailable and cognizable offences under Section 132(1) of the CGST Act and whether the accused can be treated only as a facilitator/beneficiary not liable under the non-bailable clauses. - HELD THAT: - The Court interpreted Section 132(1) CGST as commencing with the words "whoever commits...", indicating that offences enumerated therein apply to any person who commits the offence and retains the benefits arising therefrom, and it is not a prerequisite that the person be registered under GST. Sub clause (b) covers generation of invoices without actual supply leading to wrongful availment of input tax credit, and sub clause (f) contemplates falsification/substitution of financial records to evade tax. The accused is alleged to have prepared fake invoices, falsified financial records and been the ultimate beneficiary of wrongful input tax credit; the departmental piercing of the corporate veil links the sham transactions to the accused. On these findings the accused's conduct falls within the offences described in Section 132(1) which, insofar as clauses (a)-(d) are concerned, are cognizable and non bailable; the submission that the accused is at best a facilitator and thus only liable for a bailable offence was rejected. [Paras 15, 16]

The offences alleged against the accused are within the scope of Section 132(1) CGST and attract provisions of cognizability and non bailability; the claim that only a bailable offence of abatement is made out is rejected.

Pre-trial detention - Economic offences - tampering with documentary/electronic evidence - Influencing witnesses and obstructing investigation - Balance between individual liberty and public interest - Grant of bail is the rule and committal to jail an exception - Whether bail should be granted to the accused having regard to the nature and gravity of the alleged economic offence, risk of tampering with evidence, influencing witnesses, and the larger public interest. - HELD THAT: - The Court applied established bail principles, balancing the presumption in favour of bail against factors relevant to economic offences: risk of tampering with documentary/electronic evidence, the need to preserve money trail, and the danger of influencing witnesses or absconding. The investigating material alleges deletion of WhatsApp chats and contacts by the accused when informed that statements had been recorded, fabrication of goods less invoices, routing of proceeds through multiple sham firms and being the ultimate beneficiary of wrongful input tax credit. Although no custodial interrogation was sought and the accused has been in custody since 26.08.2020, the Court found a real likelihood that release on bail would enable the accused to influence proprietors/partners of involved firms, erase or disturb the money trail, and jeopardize recovery of government dues. The Court also rejected the argument that absence of previous convictions favours grant of bail, observing that prior undetected conduct cannot be ruled out. Weighing individual liberty against the public interest and investigatory imperatives, the Court concluded that pre trial detention was warranted at this stage. [Paras 5, 6, 11, 17, 19]

Bail is refused as pre trial detention is necessary to prevent tampering with evidence, influencing witnesses and to protect the investigatory process and public interest.

Final Conclusion: Bail application of accused Amit Kumar Jain is dismissed. The Court holds that the allegations attract non bailable offences under Section 132(1) CGST and that pre trial detention is necessary to prevent tampering with evidence, influencing witnesses and to safeguard the investigation and public interest.

Refund of tax paid in respect of services not provided - application of Section 142(5) of the CGST Act to pre-GST service tax payments - limitation under Section 11B of the Central Excise Act and relevant date for cause of action - adjustment/credit under erstwhile Rule 6(3) of Service Tax Rules - doctrine of unjust enrichment - final assessment versus provisional assessment not barring refund

Refund of tax paid in respect of services not provided - application of Section 142(5) of the CGST Act to pre-GST service tax payments - adjustment/credit under erstwhile Rule 6(3) of Service Tax Rules - Refund under Section 142(5) of the CGST Act is admissible for service tax paid pre-GST where the service was not provided and the tax has not been adjusted by the service provider. - HELD THAT: - The Commissioner (Appeals) found that the appellant had paid service tax to the builder which the builder had deposited with the Department and had not refunded or adjusted that amount. The booking was cancelled prior to provision of the service and the builder undertook (by indemnity/declaration and CA certificate) that it had neither refunded nor claimed adjustment/credit for the service tax in question. The CBIC FAQ (referred to in the order) recognises that claims for non-provision of service paid on or before 30.06.2017 may be disposed of under Section 142(5) and that where adjustment/credit would have been available under erstwhile Rule 6(3) such refunds merit to be honoured under Section 142(5). Applying these principles, the Tribunal concluded that once it is established that no service was provided and no adjustment was availed by the provider, refund under Section 142(5) becomes admissible and the tax paid operates as a deposit refundable in cash. [Paras 10, 11, 12, 13]

Refund under Section 142(5) is admissible to the appellant because no service was provided and the builder has neither refunded nor adjusted the service tax; therefore the claim succeeds.

Limitation under Section 11B of the Central Excise Act and relevant date for cause of action - relevant date for computation of the one year period - Section 11B limitation does not bar the refund claim where the refund arises from non provision of service; alternatively, if limitation were to apply, the relevant date is the date of cancellation (event giving rise to refund) and not the date of original payment. - HELD THAT: - The Adjudicating Authority had rejected the claim as time barred under Section 11B, reasoning from the date of agreement/payment. The Commissioner (Appeals) held that Section 142(5) frees such claims from the fetters of limitation contained in sub section (1) of Section 11B except insofar as sub section (2) (unjust enrichment) applies. Further, even if Section 11B were applicable, established authorities permit shifting the relevant date to the event giving rise to the refund (e.g., date of cancellation or reversal) rather than the original payment date. Applying that principle, the cancellation by the buyer is the event generating the cause of action for refund and is the relevant date for the one year computation. [Paras 3, 9, 12, 13, 14]

The refund claim is not barred by Section 11B; alternatively, the relevant date for limitation is the date of cancellation, not the date of payment.

Doctrine of unjust enrichment - The doctrine of unjust enrichment does not defeat the appellant's refund claim where the appellant bore the incidence of the tax, the builder deposited the tax with the Department and has not refunded or adjusted it. - HELD THAT: - The Adjudicating Authority relied on precedent to apply unjust enrichment against the refund claim. The Commissioner (Appeals) distinguished that approach on the facts: the appellant as customer had borne the service tax component; evidence on record, including the builder's declaration and CA certificate, established that the builder had collected and deposited the tax and had not refunded or claimed adjustment. Thus the elements necessary to sustain an unjust enrichment defence - namely that the recipient retained a benefit or that no third party borne incidence exists - are absent. Consequently the unjust enrichment doctrine does not apply to bar refund. [Paras 9, 13, 15]

Doctrine of unjust enrichment is not attracted and cannot be invoked to deny the refund to the appellant.

Final assessment versus provisional assessment not barring refund - A refund claim is not precluded merely because the tax deposited by the service provider was against a final (non provisional) assessment. - HELD THAT: - The Adjudicating Authority's conclusion that refund was not maintainable because the builder's deposit related to a final assessment was rejected. The Commissioner (Appeals) observed that neither law nor precedent requires that refunds be confined to provisional assessments; the essential question is whether tax was paid and whether the conditions for refund (non provision of service, no adjustment/refund by provider, compliance with unjust enrichment requirement) are met. On that basis, the final nature of the assessment does not negate the appellant's entitlement. [Paras 9, 10]

Finality of the provider's assessment does not, by itself, bar the appellant's refund claim.

Final Conclusion: The Commissioner (Appeals) allowed the appeal, set aside the Adjudicating Authority's order and directed refund of the service tax to the appellant with consequential reliefs, holding that the appellant is entitled to refund under Section 142(5) CGST as no service was provided, limitation under Section 11B is not a bar (or the relevant date is the cancellation), and unjust enrichment does not apply.

Registration under Section 12AA - charitable purpose as defined in Section 2(15) - meaning and scope of "education" for charitable purposes - effect of surplus on charitable status - relevance of registration under Section 25 of the Companies Act - predominant object test

Registration under Section 12AA - relevance of registration under Section 25 of the Companies Act - predominant object test - Validity of the refusal to grant registration under Section 12AA to a Section 25 company engaged in financial-literacy activities. - HELD THAT: - The Court held that registration under Section 25 of the Companies Act, while not creating an automatic entitlement to registration under Section 12AA, is a highly relevant factor and the Memorandum/Objects and licence granted under Section 25 must be given due weight by the CIT when considering an application under Section 12AA. The Tribunal's categorical proposition that Section 25 registration does not matter was rejected: such registration recognises the non-profit character and main objects of the company and cannot be ignored. Applying the predominant object test, the Court found that the Tribunal and the CIT misdirected themselves in disregarding the company's objects and licence and in treating the presence of sponsorship receipts and an incidental surplus as determinative against registration. The Court concluded that the rejection of the application under Section 12AA was based on a misreading of relevant authorities and the company's records and was therefore erroneous. [Paras 11, 20, 21]

The order rejecting registration under Section 12AA was erroneous and the appeal is allowed on this issue.

Meaning and scope of "education" for charitable purposes - charitable purpose as defined in Section 2(15) - effect of surplus on charitable status - Whether the assessee's activities of imparting financial education/awareness and receipt of sponsorships/surplus disentitle it from being treated as a charitable/educational activity under Section 2(15). - HELD THAT: - The Court disagreed with the Tribunal's restrictive reading of "education" in light of precedents which interpret the term to include systematic dissemination of knowledge and training through appropriate modern methods, not confined to traditional school or college settings. Reliance on decisions of High Courts (including Gujarat and Delhi) and Supreme Court jurisprudence established that activities like organised financial-literacy programmes can fall within "education" under Section 2(15). On the question of surplus, the Court applied the settled proposition that an incidental surplus or reasonable retained surplus does not convert an institution into one "for profit"; the decisive test is whether the predominant object is profit-making as opposed to education. The Memorandum/Articles and licence, which prohibit distribution of income and require application of income for the objects, and the limited retained surplus (not distributed) support the assessee's claim. The Tribunal's emphasis on sponsorship receipts and generation of surplus as negating charitable character was therefore misplaced. [Paras 12, 16, 17, 18, 19]

The Tribunal's conclusion that the activities were not charitable/educational and that the presence of sponsorships or an incidental surplus defeated charitable status was set aside; the activities qualify as educational and the surplus does not deprive the assessee of charitable character.

Final Conclusion: The High Court set aside the Tribunal's order and held that the rejection of registration under Section 12AA was erroneous: the assessee's financial-literacy activities fall within the scope of "education" under Section 2(15), registration under Section 25 is a relevant consideration, and an incidental/retained surplus does not disentitle the assessee from charitable status; the appeal is allowed.

Exemption under Section 10(23C)(iiiab) of the Income Tax Act - existing solely for educational purposes and not for purposes of profit - wholly or substantially financed by the Government - predominant object test - surplus ploughed back for educational purposes

Exemption under Section 10(23C)(iiiab) of the Income Tax Act - existing solely for educational purposes and not for purposes of profit - wholly or substantially financed by the Government - predominant object test - surplus ploughed back for educational purposes - Whether the petitioner is entitled to exemption under Section 10(23C)(iiiab) for assessment year 2006-07 - HELD THAT: - The Court found that the petitioner, a government-owned corporation constituted to print, publish and distribute school textbooks, was established solely for educational purposes and is wholly or substantially financed by the State. Applying the settled tests in Queen's Educational Society and subsequent decisions, the Court held that generation of a surplus does not defeat the character of an educational institution so long as the predominant object remains educational and surplus, if any, is applied for educational purposes. The Assessing Officer's order was cryptic, failed to address the petitioner's contentions and ignored binding judicial precedent including this Court's earlier decision in an identical matter and the Apex Court's decisions (including Assam State Text Book). The Visvesvaraya decision relied upon by Revenue was distinguished on facts (where government funding was minimal and large unploughed surpluses existed). On the material before the Court - government ownership, substantial state financing, the institution's educational object and practice of distributing books free in government schools - the exemption clause was applicable and the reassessment action was unsustainable.

Exemption under Section 10(23C)(iiiab) held applicable to the petitioner for the period in dispute; reassessment notice and consequential assessment order quashed.

Final Conclusion: The writ petition is allowed; the notice dated 28.1.2010 and the assessment order dated 23.12.2010 are quashed for being legally unsustainable in view of the petitioner being an educational institution existing solely for educational purposes and wholly/substantially financed by the Government.

Compliance with Part II and Part III of Schedule VI of the Companies Act, 1956 - recognition of revenue and matching concept - preparation of accounts in accordance with accounting standards - assessment under normal provisions and computation of book profits under Section 115JB - consequential relief to avoid double taxation - scope of Section 260A(4)

Compliance with Part II and Part III of Schedule VI of the Companies Act, 1956 - recognition of revenue and matching concept - preparation of accounts in accordance with accounting standards - assessment under normal provisions and computation of book profits under Section 115JB - Whether the assessing officer was justified in holding that the assessee's accounts were not prepared in accordance with the Companies Act, 1956 and in sustaining the additions made. - HELD THAT: - The assessing officer recorded factual findings, supported by the statutory auditor's report, that the assessee did not recognise revenue and make provisions in accordance with Schedule VI of the 1956 Act and applicable accounting standards, resulting in non matching of revenue and expenses. The assessing officer's order explained the basis for treating certain receipts as delayed revenue recognition and for computing book profits under Section 115JB accordingly. The CITA and the Tribunal independently examined these factual findings and concurred that the books were not prepared in accordance with the 1956 Act. The High Court, on review of the orders, treated the question as essentially factual and held that no substantial question of law arises from those conclusions. [Paras 7, 8, 11, 14]

Findings of the assessing officer that the accounts were not prepared in accordance with the Companies Act, 1956 and the resultant additions are sustained; no substantial question of law arises for interference.

Consequential relief to avoid double taxation - scope of Section 260A(4) - Whether a consequential direction should be issued to the assessing officer to examine subsequent assessment years where the disputed receipts were admitted and taxed, to avoid double taxation. - HELD THAT: - The Court noted that the assessee had specifically pleaded before the Tribunal that the disputed receipts were received and assessed in later assessment years. The Tribunal sustained the additions for AY 2009-2010 but did not issue consequential directions. The High Court found that, in order to prevent double taxation, it was appropriate under the scope of Section 260A(4) to direct the Assessing Officer to reopen assessments for AYs 2010-2011 to 2014-2015 solely for the limited purpose of ascertaining whether the assessee had been taxed on those disputed receipts, to afford the assessee an opportunity of hearing and to redo the assessment on that aspect alone. [Paras 16, 18, 19]

Directed the Assessing Officer to reopen AYs 2010-2011 to 2014-2015 and, after hearing the assessee, ascertain whether tax was paid on the disputed receipts and redo the assessment only on that aspect to obviate double taxation.

Final Conclusion: Appeals dismissed as no substantial question of law arises; consequential direction issued to the Assessing Officer to reopen assessments for AYs 2010-2011 to 2014-2015 and, after affording opportunity of hearing, ascertain whether the assessee was taxed on the disputed receipts and redo the assessments limited to that issue; connected miscellaneous petition closed; no costs.

Requirement to consider merits before imposing pre-condition for grant of stay - quashment of mechanically framed stay orders based on administrative circulars - fetters on quasi-judicial discretion - CBDT circulars and their non-binding character on adjudicatory discretion - abeyance of recovery pending fresh adjudication

Requirement to consider merits before imposing pre-condition for grant of stay - quashment of mechanically framed stay orders based on administrative circulars - fetters on quasi-judicial discretion - CBDT circulars and their non-binding character on adjudicatory discretion - Ext.P7 stay order was vitiated as it was passed mechanically by applying CBDT instructions without considering the merits, thereby fettering the adjudicatory discretion of the 2nd respondent. - HELD THAT: - The High Court found that the 2nd respondent disposed of the stay petition by directing payment of 20% of the disputed amount as a pre-condition for stay solely on the basis of CBDT instructions, without an independent consideration of the merits of the petitioner's appeal. As a quasi-judicial authority performing an adjudicatory function, the 2nd respondent cannot permit his discretion to be fettered by administrative directions; he must apply his mind to the facts and merits before imposing conditions for stay. The impugned order is therefore unlawful and liable to be quashed.

Ext.P7 stay order quashed for being passed without consideration of merits and under dictation of CBDT instructions.

Abeyance of recovery pending fresh adjudication - The appeal in Ext.P2 was remitted to the 2nd respondent for fresh adjudication and recovery steps were ordered to be kept in abeyance until disposal of the appeal. - HELD THAT: - The Court directed the 2nd respondent to consider and decide the Ext.P2 appeal afresh after hearing the petitioner, within an outer limit of six months from receipt of the judgment copy. In the interim, recovery measures in respect of amounts confirmed by Ext.P1 assessment order are to be kept in abeyance until the appeal is decided and the order communicated to the petitioner. The remand requires fresh consideration of merits rather than mechanical application of administrative circulars.

Matter remitted for fresh decision on merits within six months; recovery stayed until the appellate order is passed and communicated.

Final Conclusion: The High Court quashed the stay order as unlawful for fettering adjudicatory discretion by mechanically applying CBDT instructions, remitted the appeal for fresh consideration after hearing the petitioner within six months, and directed that recovery shall remain in abeyance until the appeal is decided and communicated.

Exemption under Section 54 - Pre-sale investment/advance payment counted as cost of new asset - Purposive interpretation of exemption provisions - Parity of Sections 54 and 54F

Exemption under Section 54 - Pre-sale investment/advance payment counted as cost of new asset - Purposive interpretation of exemption provisions - Whether an advance payment made for purchase of a residential flat prior to the date of sale of the original capital asset constitutes part of the cost of the new residential asset for the purpose of claiming exemption under Section 54. - HELD THAT: - The Court held that Section 54 does not mandate that the cost of the new residential house must be met exclusively from the sale consideration of the original asset and that the statutory language permits acquisition within the period specified even if steps towards acquisition (including payment of advance) preceded the date of transfer. The decision follows and applies earlier pronouncements of this Court and other High Courts which treated Sections 54 and 54F as permitting pre-transfer investments to qualify, and adopts a purposive construction of the exemption provisions in favour of facilitating the legislative objective of encouraging reinvestment in residential property. The Court rejected the Revenue's contention that the benefit must be strictly confined to use of the sale proceeds, noting that the statutory scheme expressly contemplates acquisitions before the date of transfer and that had the Legislature intended to require application of the very same money received on sale, it would have so provided. Reliance was placed on precedents treating Sections 54 and 54F as allowing prior purchase or construction within the specified periods and on the legislative notes indicating the intention to permit purchase before or after the date of transfer.

The substantial question is answered in favour of the assessee: an advance payment made for purchase of the new residential flat prior to the date of sale of the original asset is to be treated as part of the purchase for the purposes of exemption under Section 54.

Final Conclusion: The tax case appeal is allowed and the substantial question of law framed is answered in favour of the assessee, granting eligibility for exemption under Section 54 in respect of the advance payment toward the new residential flat made prior to the date of sale of the original asset.

Academic disposal of appeal - remand for de novo adjudication - Substantial Questions of Law left open

Academic disposal of appeal - Substantial Questions of Law left open - The appeal was rendered academic by subsequent proceedings and was disposed of without adjudication on the substantial questions of law. - HELD THAT: - The High Court observed that developments during the pendency of the appeal - namely, that the Assessing Officer had given effect to the earlier order and had passed an adverse order on 31.12.2018, against which the assessee had filed a further appeal to the Commissioner of Income Tax (Appeals) - made the substantial questions of law raised by the revenue academic. Although the court noted the general proposition that a superior forum should not mechanically remand matters for de novo consideration, it expressly declined to answer the substantial questions of law because the subsequent proceedings rendered those questions academic. Accordingly, the tax case appeal was disposed of without adjudication on the merits of those questions. [Paras 7, 8]

Appeal disposed of as academic; substantial questions of law left open.

Final Conclusion: The High Court disposed of the tax case appeal as academic in view of subsequent adverse orders and pending proceedings, and left the substantial questions of law unanswered; no costs.

Revised return of income - Filing revised return after return under section 139(4) - Prospective application of the Finance Act, 2016 amending section 139(5) - Jurisdiction of Assessing Officer to process a revised return - Power of the Principal Commissioner under section 263 to declare an assessment erroneous and prejudicial to the interest of revenue

Revised return of income - Filing revised return after return under section 139(4) - Jurisdiction of Assessing Officer to process a revised return - Power of the Principal Commissioner under section 263 to declare an assessment erroneous and prejudicial to the interest of revenue - Prospective application of the Finance Act, 2016 amending section 139(5) - Whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 on the ground that the Assessing Officer erroneously acted upon a revised return filed after an original return under section 139(4), and whether the amendment to section 139(5) by the Finance Act, 2016 applies. - HELD THAT: - The Tribunal examined that the assessee initially filed a return under section 139(4) and thereafter filed a revised return claiming cost of improvement and exemption under section 54F. The Finance Act, 2016 substituted section 139(5) w.e.f. 01-04-2017 allowing revised returns where a return under subsection (1) or (4) discloses omission or wrong statement, but the substitution is prospective and not applicable to AY 2012-13. Prior law permitted revised returns only where the original return was filed under subsection (1); since the assessee's original return was not under subsection (1), the pre-2017 provisions did not entitle the assessee to file a revised return for the year in question. Notwithstanding contentions that the assessment based on the later filing was non-est, the Tribunal held that the assessment completed by the Assessing Officer in pursuance of the valid return under section 139(4) was not non-est; rather, it could be erroneous and prejudicial to the revenue if proper claims were not admitted or relevant enquiries not made. Given these conclusions, the Principal Commissioner correctly held that the assessment was erroneous and prejudicial to the interest of the revenue and that the prospective amendment did not validate the revised return for AY 2012-13. The Tribunal therefore upheld the exercise of power under section 263 and dismissed the assessee's grounds. [Paras 4, 8, 9, 10]

Order of the Principal Commissioner under section 263 setting aside the assessment as erroneous and prejudicial to the interest of revenue upheld; assessee's appeal dismissed.

Final Conclusion: The Tribunal upheld the Pr. CIT's exercise of jurisdiction under section 263 in respect of assessment year 2012-13, holding that the Finance Act, 2016 amendment to section 139(5) is prospective and that the assessment completed in pursuance of the return filed under section 139(4) could properly be set aside as erroneous and prejudicial to the revenue; the assessee's appeal is dismissed.

Bogus purchases - estimation of profit element in bogus purchases - benefit of MVAT paid - admission of additional evidence - binding nature of coordinate bench decision - survey under section 133A - reopening of assessment

Bogus purchases - estimation of profit element in bogus purchases - binding nature of coordinate bench decision - benefit of MVAT paid - Extent of disallowance on account of purchases treated as bogus and the applicable reduction where MVAT has been paid. - HELD THAT: - The Tribunal found the facts of A.Y. 2008-09, 2009-10 and 2011-12 identical to the assessee's own matter for A.Y. 2010-11 where a coordinate Bench of the ITAT restricted a 100% addition to 6.5% (MVAT @4% + profit @2.5%) and subsequently, on account of documentary proof of MVAT payment, directed reduction to 2.5% (profit element) after allowing credit for 4% MVAT already paid. As that coordinate-bench decision has not been reversed by the Jurisdictional High Court, the Tribunal applied the same ratio. The Tribunal therefore directed that, upon verification that the assessee in the present years has paid MVAT @4% on the impugned purchases, the addition should be restricted to 2.5% of the questioned purchases; the Tribunal declined to sustain the AO's 100% disallowance where sales were not disputed and profit element only was to be estimated in line with judicial precedents relied upon by the lower authorities.

Addition restricted to 2.5% of the impugned purchases if MVAT @4% paid is verified by the Assessing Officer; 100% disallowance by AO is not sustained.

Admission of additional evidence - benefit of MVAT paid - verification by Assessing Officer - Admissibility of additional evidence in the form of MVAT payment details and challans. - HELD THAT: - The Tribunal allowed the assessee's application for admission of additional evidence consisting of MVAT payment details and challans for the concerned assessment years. The Tribunal observed that the documentary evidence regarding payment of MVAT was material and had bearing on the quantification of the addition, and therefore admitted the documents at this stage.

Additional evidence (MVAT payment documents) admitted.

Verification by Assessing Officer - remand for verification - Remand to the Assessing Officer to verify the veracity of the MVAT payments and to give effect to the Tribunal's direction. - HELD THAT: - The Tribunal directed the Assessing Officer to examine the veracity of the MVAT payments alleged to have been made by the assessee at the rate of 4% for the impugned purchases. The Tribunal's final quantification (restriction to 2.5%) is made subject to such verification; the matter is therefore remanded to the AO for verification of the documentary evidence and to compute the addition accordingly.

Matter remanded to the AO to verify MVAT payments; if found in order, AO to restrict the addition to 2.5% of the impugned purchases.

Final Conclusion: Appeals by the assessee partly allowed and Revenue appeals dismissed; additional evidence of MVAT payment admitted and the Assessing Officer directed to verify MVAT paid @4%, and if verified, to restrict the addition on bogus purchases to 2.5%.

Section 50C of the Income Tax Act, 1961 - deeming substitution of full value of consideration for computation of capital gains - Section 263 of the Income Tax Act, 1961 - revision of assessment as erroneous and prejudicial to the interests of revenue - Limited scrutiny - scope of AO's powers in assessments selected for limited scrutiny - Agricultural land excluded from definition of capital asset under Section 2(14) - Effect of stamp duty valuation/circle (DLC) rates and government notification increasing stamp valuation for sales to companies - Admission of additional grounds under Rule 11 - question of law arising from recorded facts - Reliance on coordinate Bench precedent of the Tribunal

Section 50C of the Income Tax Act, 1961 - deeming substitution of full value of consideration for computation of capital gains - Section 263 of the Income Tax Act, 1961 - revision of assessment as erroneous and prejudicial to the interests of revenue - Agricultural land excluded from definition of capital asset under Section 2(14) - Effect of stamp duty valuation/circle (DLC) rates and government notification increasing stamp valuation for sales to companies - Reliance on coordinate Bench precedent of the Tribunal - Validity of the Principal Commissioner's exercise of jurisdiction under Section 263 in holding that the Assessing Officer should have applied Section 50C and taken the higher stamp-duty valuation for computing capital gains on sale of agricultural land. - HELD THAT: - The Tribunal found on the record that the land sold was agricultural land at the time of sale and thus falls within the exclusion from the definition of capital asset under Section 2(14). The Assessing Officer had examined the applicability of Section 50C during assessment, considered the assessee's explanation and material on record, and declined to substitute the declared sale consideration because the declared consideration exceeded the DLC (circle) rate. The higher value adopted by the Stamp Duty Authority arose from a Rajasthan Government instruction to assess stamp duty at 1.5 times in transactions involving a company; that administrative multiplier for stamp duty does not alter the DLC indicative market value for the purposes of Section 50C. Where the declared sale consideration exceeds the DLC indicative rate, there is no justification to invoke the deeming fiction of Section 50C to substitute a higher figure; if AO is dissatisfied with explanations, the statutory remedy is reference to the DVO for valuation. The Tribunal further followed a coordinate Bench decision in respect of a co-owner of the same land which reached the same conclusion that Section 50C could not be applied where the sale consideration declared was higher than the DLC rate and the enhanced stamp valuation was only for stamp-duty collection purposes. Applying these legal principles to the facts, the Tribunal held that the Principal Commissioner's conclusion that the assessment was erroneous and prejudicial was not justified. [Paras 5, 19, 20, 21]

The revision under Section 263 was not sustainable; the AO's order is not erroneous or prejudicial to the revenue in respect of the application of Section 50C, and the appeal is allowed.

Final Conclusion: Tribunal allowed the appeal for A.Y. 2015-16, holding that the Principal Commissioner erred in invoking Section 263 since Section 50C was not attractable where declared sale consideration exceeded the DLC rate and the higher stamp-duty valuation (1.5x) related only to levy of stamp duty on sales to a company and could not be substituted as deemed consideration for capital gains computation.

Computation of capital gains on receipt under joint development agreement - determination of sale consideration based on cost of construction versus builder's books/market value - treatment of common area in consideration under a joint development agreement - deduction under section 54F of the Income tax Act - remand to Assessing Officer for valuation, reference to valuation cell or SRO information - validity of reassessment under section 148

Determination of sale consideration based on cost of construction versus builder's books/market value - remand to Assessing Officer for valuation, reference to valuation cell or SRO information - Sale consideration for constructed area received under the JDA was not finally accepted and is remitted to the Assessing Officer for re estimation on the basis of proper evidence or by referring to the valuation cell or obtaining information from the SRO. - HELD THAT: - The Tribunal found that the AO adopted the developer's books to arrive at a sale consideration while the assessee claimed a lower cost of construction per sq. ft. There was no material before the Tribunal to accept the assessee's asserted rate of Rs. 550 per sq. ft., and the correctness of the developer's stated cost likewise required verification. In the absence of reliable material, the AO is obliged to verify the cost of construction by appropriate means (including reference to the valuation cell or obtaining SRO market information) and re determine the sale consideration after giving the assessee an opportunity to produce evidence. The matter is therefore set aside to the AO for re estimation and determination of sale consideration to compute capital gains. [Paras 9]

Issue remitted to the AO to re work and determine the sale consideration for computation of capital gains.

Treatment of common area in consideration under a joint development agreement - computation of capital gains on receipt under joint development agreement - Whether the 1,100 sq. ft. difference (24100 sq.ft. as per JDA vis a vis 23000 sq.ft. claimed by the assessee) constitutes consideration to be included is remitted to the Assessing Officer for examination and decision on merits after opportunity to the assessee. - HELD THAT: - The Tribunal noted inconsistent contentions about the 1,100 sq. ft. (the assessee asserted it was common area/not received; no evidence was placed before the CIT(A) or the Tribunal). Absent material proof, the Tribunal held that common area, if part of the consideration under the JDA, should ordinarily be included and directed the AO to examine documentary material and the builder's position to decide whether the assessee actually received the 1,100 sq. ft. and whether it forms part of the sale consideration. [Paras 10]

Issue remitted to the AO to examine and decide, on merits, whether the 1,100 sq. ft. forms part of the consideration received by the assessee.

Deduction under section 54F of the Income tax Act - computation of capital gains on receipt under joint development agreement - The quantum of deduction under section 54F claimed by the assessee was not finally determined by the Tribunal; the CIT(A)'s allowance is to stand subject to the sale consideration as finally determined by the AO on remand. - HELD THAT: - The CIT(A) allowed deduction computed on a particular basis (accepting usage of 4,147 sq.ft. at Rs.550 per sq.ft. for the purpose of section 54F) after noting inconsistent claims made by the assessee at various stages and absence of supporting material for improvements. Since the sale consideration itself has been remitted to the AO for fresh determination, the Tribunal directed that the deduction under section 54F be allowed in accordance with the sale consideration finally determined by the AO. No separate finding was recorded on the assessee's additional claims for improvement expenditure in the absence of evidence. [Paras 11, 12]

Deduction under section 54F to be allowed by the AO in accordance with the sale consideration as re determined on remand.

Validity of reassessment under section 148 - Reassessment proceedings reopened under section 148 (and completed under section 143(3) r.w.s.147) were held to be infructuous and are annulled where no escapement of income was found and the reassessment resulted in the same total income as the original assessment. - HELD THAT: - The AO had reopened assessment to verify classification of capital gains but ultimately did not find any mistake and accepted the income as originally assessed. Because the reassessment produced the same result as the original assessment and no escapement of income was established, the Tribunal treated the reassessment as infructuous and annulled the reassessment proceedings. [Paras 16]

Reassessment proceedings under section 148 are annulled as infructuous.

Computation of capital gains on receipt under joint development agreement - Grounds on contention of taxability year and claim of existence of residential building as on 1.4.1981 were dismissed as not pressed for lack of argument or evidence. - HELD THAT: - Ground No.2 (challenge to taxability in AY 2009 10) and Ground No.5 (claim that a residential building existed on 1.4.1981 and its indexed cost should be considered) were not argued before the Tribunal; the assessee's authorised representative did not press these grounds and no material was produced. Consequently, the Tribunal dismissed these grounds as not pressed. [Paras 5, 6]

Grounds dismissed as not pressed for adjudication.

Final Conclusion: The Tribunal remitted the primary issues of sale consideration (both rate and area) and consequent computation of capital gains and the section 54F deduction to the Assessing Officer for fresh determination after verification/obtainment of market evidence (valuation cell/SRO) and after giving the assessee an opportunity; reassessment proceedings under section 148 were annulled as infructuous; certain grounds were dismissed as not pressed.

Bogus purchases - suppressed profit - no-doubt on sales precludes 100% disallowance - purchases from grey market - disallowance under section 43B

Bogus purchases - suppressed profit - no-doubt on sales precludes 100% disallowance - purchases from grey market - Extent of disallowance on account of purchases shown to be from bogus suppliers - HELD THAT: - The Tribunal upheld the learned CIT(A)'s approach of rejecting a 100% disallowance where the genuineness of sales/consumption was not doubted and estimating only the profit element embedded in the impugned purchases. Having regard to the facts that the assessee's sales were accepted and that purchases appeared to have been made from the grey market (thereby providing tax savings to the assessee), the Tribunal found the estimation of suppressed profit at 12.5% of the purchases to be reasonable and in line with precedents which permit disallowance of the profit element rather than the entire purchase value when sales/consumption are not disputed. On this basis the Tribunal confirmed the addition of 12.5% (Rs. 7,344) and deleted the balance addition made by the AO. [Paras 4]

Addition on account of bogus purchases reduced to 12.5% of the impugned purchases; balance deletion upheld.

Disallowance under section 43B - Allowability under section 43B of amounts payable for VAT and service tax not paid before filing return - HELD THAT: - The Tribunal accepted the learned CIT(A)'s application of precedent (including the assessee's own earlier ITAT order) and the statutory premise that section 43B operates where a deduction has been claimed but payment has not been made. The Tribunal agreed that service tax, being collected on behalf of the government and not an allowable business deduction, does not attract disallowance under section 43B where no deduction was claimed; accordingly the addition made by the AO in respect of outstanding service tax was deleted. By contrast, in respect of outstanding VAT the assessee did not furnish an explanation and the learned CIT(A) had confirmed the AO's addition under section 43B; the Tribunal found no contrary precedent and therefore upheld the addition in respect of VAT payable. [Paras 6, 7, 8]

Addition under section 43B in respect of outstanding service tax deleted; addition in respect of outstanding VAT confirmed.

Final Conclusion: The revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s reduction of the bogus-purchase addition to 12.5% and, following precedent, deleted the service-tax addition under section 43B while confirming the addition relating to outstanding VAT for AY 2012-13.

Deduction under section 80P of the Income tax Act - limitation for passing assessment order - admission of additional grounds in appeal - remand for fresh consideration

Admission of additional grounds in appeal - Admission of additional grounds filed by the assessee - HELD THAT: - The Tribunal considered the assessee's plea that the additional grounds were raised due to inadvertence and that all relevant facts and materials were already on record. Relying on the principle in CIT v. NTPC and noting that no fresh evidence or investigation was necessary, the Tribunal exercised its discretion to admit the additional grounds for adjudication. The Revenue's objection was considered but not accepted. [Paras 6]

Additional grounds admitted.

Limitation for passing assessment order - Whether the assessment order for AY 2015-16 was barred by limitation - HELD THAT: - The Tribunal found that the assessment order was dated 29/12/2017 but was received by the assessee on 02/01/2018. The assessee contended the order should have left the Assessing Officer's desk before 31/12/2017. The Tribunal took into account that 30/12/2017 and 31/12/2017 were a Saturday and Sunday (government holidays) and accepted the Revenue's position that posting on 01/01/2018 was appropriate. On that basis the Tribunal concluded the assessment was not time barred and rejected the limitation ground. [Paras 9]

Limitation plea rejected; assessment order not barred by limitation.

Deduction under section 80P of the Income tax Act - remand for fresh consideration - Claim that loss from business with regular members should be set off against income from nominal members for computing deduction under section 80P - HELD THAT: - The Tribunal observed that this contention was raised for the first time before it and had not been considered by the lower authorities. In view of the absence of earlier adjudication on this specific computation and set off issue, the Tribunal found it appropriate to remit the matter to the Commissioner (Appeals) for fresh consideration so that the issue can be examined and decided after adjudication at the appellate stage below. [Paras 11]

Issue remitted to the file of the Commissioner of Income tax (Appeals) for fresh consideration.

Final Conclusion: The Tribunal admitted the additional grounds, rejected the limitation objection and held the assessment was not time barred, and remitted the computation/set off issue relating to deduction under section 80P to the Commissioner (Appeals) for fresh consideration; the appeal is partly allowed for statistical purposes.

Computation of full value of consideration under section 50C - date of agreement fixing consideration versus date of registration - part-payment by account payee cheque as evidence of enforceable agreement - circle rate (stamp valuation) to be determined as on date of agreement - remand to Assessing Officer for determination of stamp valuation as on agreement date

Computation of full value of consideration under section 50C - date of agreement fixing consideration versus date of registration - part-payment by account payee cheque as evidence of enforceable agreement - circle rate (stamp valuation) to be determined as on date of agreement - Full value of consideration for computing long term capital gain is to be taken with reference to the stamp valuation (circle rate) as on the date of the agreement fixing the consideration where the agreement is enforceable in law and part of the consideration has been paid by account payee cheque on or before the agreement. - HELD THAT: - The Tribunal applied its earlier reasoning in Rahul G. Patel (Ahd-Trib) and held that where an agreement to sell is enforceable and part payments have been received by banking channel and are reflected in the subsequent sale deed, the right created by the agreement constitutes an encumbrance and the consideration fixed by that agreement is relevant for section 50C purposes. The Tribunal noted the legislative background and the proviso later inserted in section 50C by Finance Act, 2016 (construed as clarificatory and applicable to pending matters) which supports taking stamp valuation as on the agreement date when part consideration has been paid by account payee cheque/bank transfer. Applying these principles to the facts, the Tribunal concluded the agreement dated 30.12.2010 was given effect to, part payments through account payee cheques were received and recognised in the sale deed, and therefore the full value of consideration for computing long term capital gain in respect of the assessee's share is to be taken with reference to the circle rate as on 30.12.2010. The matter is remitted to the Assessing Officer to call for the circle rate on that date, determine the sale value accordingly, and compute long term capital gain. [Paras 8]

Grounds 1 to 4 allowed in part; issue set aside to the file of the AO to determine circle rate as on date of agreement (30.12.2010) and compute long term capital gain accordingly; full sale consideration in the hands of the assessee to be adopted at Rs. 81 lakhs (25% of Rs.3,24,00,000) for the present facts.

Receipt not pressed by assessee - The plea regarding non-inclusion of receipt of Rs.20,10,000/- in consideration is not pressed by the assessee. - HELD THAT: - The assessee conceded that this ground arose consequentially from the Revenue's appeal which was dismissed for low tax effect; hence the assessee did not press this contention before the Tribunal. [Paras 9]

Ground No.5 not pressed and therefore not adjudicated on merits.

Interest under sections 234A, 234B & 234C - Contention against charging interest under sections 234A, 234B & 234C is consequential and dismissed. - HELD THAT: - The Tribunal treated the challenge to interest as consequential to the primary determination on capital gains and dismissed the ground accordingly without separate adjudication on merits. [Paras 10]

Ground No.6 dismissed as consequential.

Initiation of penalty under section 271(1)(c) - Challenge to initiation of penalty under section 271(1)(c) is premature and dismissed. - HELD THAT: - The Tribunal observed that penalty proceedings are premature at the stage of the present appeal and therefore declined to entertain the ground. [Paras 11]

Ground No.7 dismissed as premature.

Final Conclusion: The assessee's appeal is partly allowed: the Tribunal directed remand to the Assessing Officer to determine the stamp valuation (circle rate) as on the date of the enforceable agreement (30.12.2010) - payment evidenced by account payee cheques - and to recompute long term capital gain accordingly; remaining grounds were either not pressed, dismissed as consequential, or dismissed as premature.

Specific issue based enquiry in limited scrutiny under CASS - Scope of enquiry in limited scrutiny cases selected on AIR/CIB/26AS data - Conversion to complete scrutiny required to examine wider or related aspects of assessment - Revision under the revisional jurisdiction cannot be based on matters beyond the scope of limited scrutiny selection - Computation of capital gains as integral to charge of tax on transfer income

Specific issue based enquiry in limited scrutiny under CASS - Scope of enquiry in limited scrutiny cases selected on AIR/CIB/26AS data - Conversion to complete scrutiny required to examine wider or related aspects of assessment - Limited scrutiny selection under CASS confines the Assessing Officer to enquiries only on the specific AIR/CIB/26AS issues communicated; wider investigation into related aspects requires conversion into complete scrutiny following prescribed procedure. - HELD THAT: - The Tribunal examined Instruction No.20/2015 and held that where a return is selected for limited scrutiny on the parameter(s) of AIR/CIB/26AS data the questionnaire and scope of enquiry must be confined to those specific issues communicated to the assessee. The Board Instruction applies to CASS-2015 limited scrutiny cases and mandates issue-based examination; broader verification of matters (for example, detailed components of capital gains such as cost of construction and its indexation) cannot be undertaken under the limited scrutiny regime unless the AO follows the procedure to convert the case into a complete scrutiny. The revisional authority (Pr. CIT) cannot treat an assessing order as erroneous and prejudicial for want of enquiry into matters which were outside the defined scope of the limited scrutiny selection; doing so would be a transgression of power. The Tribunal observed that although the computer highlights areas based on defined parameters, formulation of specific issues for enquiry requires application of mind by the AO and remains bounded by the communicated limited scrutiny reasons. [Paras 4, 5]

Scope of limited scrutiny under CASS is confined to the specific AIR/CIB/26AS issues communicated; wider enquiries require conversion to complete scrutiny and cannot form the basis for revision under section 263.

Computation of capital gains as integral to charge of tax on transfer income - Revision under the revisional jurisdiction cannot be based on matters beyond the scope of limited scrutiny - Assessment understated the sale consideration by a small amount which the Tribunal directed to be adjusted upward; otherwise the assessee's appeal is allowed insofar as the revisional order sought to expand the scope of enquiry. - HELD THAT: - The Tribunal recorded that the sale consideration adopted in the assessment was short by a specific amount and accepted the concession that the figure ought to be adjusted upward to align with the value under the relevant AIR/section 50C reference. The Bench noted that the AO was entitled, within the limited scrutiny scope, to examine and accept or reject explanations relating to the communicated issue (for example, commission deducted from sale consideration), and that rectification or adjustment of the shortfall could be effected. Subject to this upward correction, the Tribunal upheld the assessee's contention that the revisional order could not be sustained to the extent it sought to mandate examination of unrelated components of capital gains without conversion to complete scrutiny. [Paras 4, 5]

Upward adjustment of the sale consideration directed; remainder of the revision quashed to the extent it attempted to extend the limited scrutiny beyond its communicated issues.

Final Conclusion: Assessee's appeal allowed in part: the revisional order under section 263 is set aside insofar as it sought to expand inquiry beyond the specific AIR/CIB/26AS issue selected for limited scrutiny; the sale consideration is to be corrected upward as conceded, and otherwise the assessment stands affirmed.

Disallowance of interest under 36(1)(iii) - remand for factual verification of application of borrowed funds - valuation of closing stock (work-in-progress) in real estate projects - onus of proof for escapement of income - addition not pressed dismissed

Disallowance of interest under 36(1)(iii) - remand for factual verification of application of borrowed funds - Whether interest on borrowed capital was rightly disallowed on account of alleged application of borrowed funds to interest-free advances and whether the matter required remand for factual verification. - HELD THAT: - The Tribunal found that the assessment and first appellate orders proceeded without an appreciation of the assessee's asserted case that sufficient interest-free capital existed to fund the admitted interest-free advances. The authorities did not have before them any statement of affairs, project-wise cost details or fund-flow particulars that could establish the actual end-use of borrowed funds during the year. Bank commissions were incorrectly treated as part of interest disallowance though they are deductible under general business expenditure provisions. Given the factual indeterminacy and absence of definite findings based on material on record, the Tribunal held that the question whether borrowed funds were utilised for business purposes (and to what extent) must be decided after affording the assessee opportunity to present evidence and after the Assessing Officer makes clear findings of fact. [Paras 3]

Matter remitted to the Assessing Officer for fresh decision in accordance with law after giving the assessee opportunity to produce material establishing application of funds; AO to record definite findings of fact.

Valuation of closing stock (work-in-progress) in real estate projects - onus of proof for escapement of income - Whether the addition made by the Assessing Officer on account of alleged under-valuation of closing stock of a Township project should be sustained. - HELD THAT: - The Tribunal observed that the Township project was located on the outskirts while the other two projects were in the heart of the city, and land cost - a major component of project cost - may vary substantially with location and stage of sanction/ completion. The AO made the addition without calling for or examining project-wise cost breakups or the assessee's audited accounts which stated valuation policy. The first appellate authority likewise failed to record factual findings or to require production of accounts or cost details. The onus to establish escapement of income lies on the Revenue, which did not discharge it and effected a presumptuous addition without factual basis. Considering the lack of application of mind and absence of requisitioning relevant material, the Tribunal found the addition unsustainable. [Paras 5]

Addition on account of alleged under-valuation of closing stock deleted; closing stock to be reflected as per assessee's final accounts as on 31/3/2009.

Addition not pressed dismissed - Treatment of addition for interest accrued on FDRs which was not pressed by the assessee at hearing. - HELD THAT: - The counsel did not press the ground relating to interest on FDRs during hearing before the Tribunal. In the absence of a contest, the Tribunal did not entertain the said ground. [Paras 6]

Addition relating to interest on FDRs dismissed as not pressed.

Final Conclusion: For AY 2009-10 the Tribunal remitted the question of disallowance under 36(1)(iii) to the Assessing Officer for fresh factual determination after affording the assessee opportunity to produce relevant fund-flow and project-wise cost material; it deleted the addition for alleged under-valuation of closing stock of the Township project for want of factual basis by the Revenue; and dismissed as not pressed the addition relating to interest on FDRs.

Validity of subordinate legislation - publication and coming into force of notifications - Deeming provision - amended Section 25(4) of the Customs Act, 1962 - Conflict between issuance for publication and actual publication - Sections 25(1), 25(2A) vis-a -vis amended Section 25(4) - Attribution of knowledge by publication in Official Gazette (including electronic publication) - Right to refund of amounts collected pursuant to an invalid or inapplicable notification

Deeming provision - amended Section 25(4) of the Customs Act, 1962 - Conflict between issuance for publication and actual publication - Sections 25(1), 25(2A) vis-a -vis amended Section 25(4) - Validity of subordinate legislation - publication and coming into force of notifications - Whether Section 25(4) of the Customs Act, 1962 as amended is arbitrary and inconsistent with Sections 25(1) and 25(2A) and therefore liable to be struck down. - HELD THAT: - The Court held that the post-amendment language of subsection (4) creates a deeming effect that a notification comes into force on the date it is issued for publication, while subsections (1) and (2A) continue to mandate publication in the Official Gazette to bring notifications to public notice. This gives rise to an irreconcilable friction between the provisons, producing absurdity and uncertainty about when rates become binding on importers. The Court applied principles of statutory interpretation to avoid results that introduce practical inconvenience, confusion or frustrate the legislative scheme, and relied on earlier decisions and reasoning concerning the need for publication/promulgation of subordinate legislation to attribute knowledge to the public. Having considered competing authorities and the Andhra Pradesh High Court's decision on the same controversy, the Court concluded that the amended subsection (4) operates contrary to the purpose and scheme of Section 25 and is therefore arbitrary and unconstitutional to the extent indicated. [Paras 23]

Section 25(4) of the Customs Act, 1962 as amended is declared arbitrary and contrary to Sections 25(1) and 25(2A) and is struck down to that extent.

Attribution of knowledge by publication in Official Gazette (including electronic publication) - Right to refund of amounts collected pursuant to an invalid or inapplicable notification - Validity of subordinate legislation - publication and coming into force of notifications - Whether importers who paid enhanced duty demanded pursuant to a notification not yet published/uploaded in the Official Gazette on the bills-of-entry date are liable to the enhanced rate, and whether they are entitled to refund of excess amounts paid. - HELD THAT: - Applying the conclusion on Section 25(4), the Court held that where a notification increasing duty was not published/available in the Official Gazette (including by electronic publication) on the relevant date of presentation of the bills of entry, the enhanced duty could not be validly imposed on those imports. The Court followed the reasoning that publication in the Gazette is the effective act by which knowledge is attributed and that giving effect to a notification before its publication would create absurdity and unfairness to importers who had paid duty on the earlier rate. On that basis, and having regard to the Andhra Pradesh High Court decision on identical facts, the Court directed repayment of the excess customs duty and differential IGST collected consequent to the subsequent publication, with simple interest at the rate ordered. [Paras 23]

Petitioners are entitled to refund of excess customs duty and differential IGST collected pursuant to the subsequently published notification, with simple interest; the writ petitions are allowed to that extent.

Final Conclusion: The Court declared amended Section 25(4) of the Customs Act, 1962 arbitrary and contrary to Sections 25(1) and 25(2A). Where a notification increasing customs duty was not published in the Official Gazette (including electronic publication) on the relevant bills of entry date, the enhanced rate could not be applied; the respondents were directed to refund the excess customs duty and differential IGST collected, with simple interest, and the writ petitions were allowed to that extent.

Inclusion of a substance as a psychotropic substance by statutory notification - Prospective application of a notification determining commission date of an offence - Cognizance and trialability under the NDPS Act for newly notified contraband - Distinguishing precedent where offence preceded notification

Inclusion of a substance as a psychotropic substance by statutory notification - Prospective application of a notification determining commission date of an offence - Distinguishing precedent where offence preceded notification - Whether the prosecution under the NDPS Act could be quashed on the ground that the parcel was booked prior to the notification declaring khat leaves as a psychotropic substance. - HELD THAT: - The Court accepted the factual chronology that, although the parcel was booked on 24.02.2018, the package reached Mumbai on 03.03.2018, arrived at the Foreign Post Office, Meenambakkam on 05.03.2018, was examined on 12.03.2018 and, in the presence of independent witnesses, formally examined and found to contain khat leaves on 27.04.2018. The notification declaring Catha Edulis (khat leaves) a psychotropic substance was dated 27.02.2018. The Court held that the determinative date for applicability of the NDPS prohibition is the date of commission/ detection of the offence, which in this case occurred after the notification. Consequently the prosecution is not barred by the earlier booking date. The Gujarat High Court decision relied upon by the petitioner was distinguished because, in that case, the offence occurred before the notification and the State there conceded non-prosecution; that factual and temporal distinction made that precedent inapplicable here. Applying the foregoing, the petition seeking quashment was found to be without merit. [Paras 5, 6, 7]

The petition to quash the proceedings is dismissed and the prosecution may proceed.

Final Conclusion: The criminal original petition is dismissed as the contraband was detected after the notification dated 27.02.2018 that declared khat leaves a psychotropic substance; the Gujarat authority relied on is distinguishable on temporal facts.

Admissibility of statements recorded under Section 108 of the Customs Act - Bailable versus non-bailable character of offence involving import of undeclared goods of high value - Consideration of nature and gravity of offence and evidence at bail stage

Admissibility of statements recorded under Section 108 of the Customs Act - The evidentiary status of the statement recorded from the applicant under Section 108 of the Customs Act and its effect on the bail application. - HELD THAT: - The Court examined binding precedents which treat inquiries and statements recorded by a gazetted customs officer under Section 108 as judicially significant and admissible. The judgments relied upon establish that a person summoned under Section 108 is obliged to state the truth, that such inquiries do not require magisterial intervention and that statements so recorded are distinct from police statements under the Code of Criminal Procedure. Applying these principles, the Court concluded that the applicant's contention that the statement was not voluntary or unusable is unsustainable, and the statement retains evidentiary value for assessing the case at the bail stage.

Statement recorded under Section 108 is admissible and the applicant's contention about coercion and non-voluntariness was rejected.

Bailable versus non-bailable character of offence involving import of undeclared goods of high value - Consideration of nature and gravity of offence and evidence at bail stage - Whether the applicant was entitled to bail having regard to the nature of the offence, the quantity and character of the seized goods, the absence of valid papers, admissions in the recorded statement and the statutory scheme governing bailability. - HELD THAT: - The Court considered rival authorities and statutory provisions addressing when offences under the Customs Act become non-bailable by reason of value or nature of goods. It noted precedent where similar offences have been held bailable in some circumstances but also referred to decisions and provisions treating import of undeclared or prohibited goods of high value as non-bailable. On the facts before it - large quantity of gold recovered, inability of the applicant to produce relevant papers, and admissions recorded under Section 108 - the Court found that the nature and gravity of the offence and the supporting material did not favour grant of bail. The court emphasised that innocence cannot be adjudicated at the pre-trial stage but that the materials on record weighed against releasing the applicant on bail.

Bail was refused; the applicant has not made out a case for bail having regard to the nature of the offence and the evidence on record.

Final Conclusion: The application for bail is dismissed. The Court held that the statement recorded under Section 108 of the Customs Act is admissible and, considering the nature and gravity of the alleged offence and the material on record, the applicant is not entitled to bail.

Freezing of bank accounts - power to freeze bank accounts under the Customs Act - limits on exercise of statutory powers to preserve livelihood and business - investigation under the Central Goods and Service Tax Act and competence of other authorities - temporal limitation on freezing bank accounts introduced by amendment

Freezing of bank accounts - power to freeze bank accounts under the Customs Act - investigation under the Central Goods and Service Tax Act and competence of other authorities - Validity of the order dated 4.6.2019 by the Deputy Commissioner (Customs) freezing the petitioner's bank account when the investigation was being conducted under the Central Goods and Service Tax Act. - HELD THAT: - The Court found that the bank account was frozen by the Deputy Commissioner (Customs) in the context of an investigation being carried out under the Central Goods and Service Tax Act. The impugned order was passed prior to the amendment to Section 110(5) of the Customs Act which first introduced express power to freeze bank accounts under the Customs Act, and even under the amendment such power is temporally limited. The Court applied the principle that statutory authorities must exercise their powers strictly according to the Act under which they function and that drastic measures affecting an assessee's source of livelihood cannot be sustained without lawful authority and reasonable justification. Reliance in the judgment on earlier decisions treating pre amendment freezing as impermissible and on the necessity for authorities to conclude investigations and follow statutory procedure supports the view that the freezing order lacked legal foundation in the circumstances of this case. In light of these considerations the Court concluded that the impugned order was not maintainable and quashed it, thereby restoring the petitioner's right to operate the bank account.

The impugned order of 4.6.2019 freezing the petitioner's bank account is quashed and the petitioner is permitted to operate the account.

Final Conclusion: Writ petition allowed; the order freezing the petitioner's bank account dated 4.6.2019 is quashed and the petitioner is directed to be permitted to operate the bank account.

Principles of natural justice - cancellation of letter of approval and obligation to afford hearing under Section 16 - exercise of power under Rule 18(4) to reject renewal - Net Foreign Exchange shortfall - remand for fresh consideration after giving reasonable opportunity of hearing

Principles of natural justice - cancellation of letter of approval and obligation to afford hearing under Section 16 - The decision of the Board of Approval to reject the petitioner's application for renewal/extension without affording an opportunity of hearing and which has the consequential effect of cancelling the letter of approval is in breach of the requirement of hearing under Section 16 and the principles of natural justice. - HELD THAT: - The minutes of the Board of Approval's 89th meeting recorded rejection of the petitioner's proposal for renewal, which on its plain reading has the consequential effect of cancellation of the letter of approval granted earlier. Section 16(1) provides that no letter of approval shall be cancelled unless the entrepreneur has been afforded a reasonable opportunity of being heard. It is not in dispute that no such opportunity was given before the decision taken on 22nd April 2019. Consequently the impugned decision suffers from breach of the statutory requirement and principles of natural justice and must be quashed without going into the merits of the underlying allegations. [Paras 7, 8, 9]

Impugned decision of the Board of Approval dated 22nd April 2019 quashed for failure to afford a reasonable opportunity of hearing; petition allowed on this ground.

Exercise of power under Rule 18(4) to reject renewal - Net Foreign Exchange shortfall - remand for fresh consideration after giving reasonable opportunity of hearing - Whether the Board's rejection based on past violations and negative Net Foreign Exchange Earnings would justify refusal of renewal was not adjudicated on merits and the matter was remanded for reconsideration after affording hearing. - HELD THAT: - Although the Board recorded reasons including past alleged Customs Act violations and repeated failure to achieve positive Net Foreign Exchange, the High Court declined to express any opinion on the merits of those contentions. Instead, having found procedural infirmity, the Court remitted the petitioners' renewal application to the Board for fresh consideration in accordance with law after giving the petitioners adequate opportunity to be heard. The Court's order thereby requires the Board to reassess relevance and applicability of the cited defaults (including any contention about the applicability of Rule 80) in the reconsideration exercise. [Paras 5, 9, 10]

Matter remanded to the Board of Approval to reconsider the renewal/extension application after giving the petitioners a reasonable opportunity of hearing; no opinion expressed on merits.

Final Conclusion: Writ petition allowed to the extent that the Board of Approval's decision in its 89th meeting dated 22nd April 2019 is quashed for failure to afford hearing; the matter is remitted to the Board to reconsider the renewal/extension application after giving adequate opportunity of hearing and to complete the exercise within three months; no order as to costs.

Penalty under Section 114AA of the Customs Act - Re-determination of FOB value for export consignments - Principles of natural justice in adjudication - Use of benamidars / name-lenders to inflate turnover - Corroborative evidence by seizure of documents and cheque books - Exercise of discretion to reduce penalty

Penalty under Section 114AA of the Customs Act - Use of benamidars / name-lenders to inflate turnover - Corroborative evidence by seizure of documents and cheque books - Re-determination of FOB value for export consignments - Liability of the appellant under the penalty provision for facilitating inflation of FOB value and consequent reduction of the imposed penalty. - HELD THAT: - The Tribunal found on the material on record that the appellant was the actual manager/controller of a number of firms which, though showing other persons as proprietors/directors, were operated by the appellant and used to raise inflated invoices. The finding is supported by seizure of cheque books and documents, admissions of the name lenders that they were salaried employees acting on appellant's instructions, and the appellant's own statements acknowledging control and issuance of invoices. The Tribunal accepted that these firms raised inflated bills which facilitated the exporter in inflating FOB values for claiming DEPB benefits. Taking a liberal view of the appellant's degree of facilitation (indirect rather than direct participation in export overvaluation), the Tribunal held that penalty under the statutory provision was attracted but exercised its discretion to reduce the quantum of penalty imposed by the adjudicating authority. [Paras 35, 36]

Appellant held liable for facilitating inflation of FOB value; penalty reduced from Rs. 25,00,000 to Rs. 7,50,000 and appellant entitled to consequential benefits in accordance with law.

Principles of natural justice in adjudication - Exercise of discretion to reduce penalty - Whether the appellant's plea of violation of principles of natural justice warranted setting aside the impugned order. - HELD THAT: - The Tribunal considered the appellant's contention that the adjudication was in violation of natural justice. The record shows that after remand by the Tribunal the adjudicating authority provided opportunities including cross examination of witnesses and experts; several witnesses and experts were cross examined and the appellant himself was cross examined. On consideration of the hearing and the evidentiary material, the Tribunal treated the natural justice plea as not sufficient to vitiate the findings holding the appellant liable. However, in view of mitigation and the appellant's indirect role, the Tribunal exercised its discretion to substantially reduce the penalty. [Paras 33, 35, 36]

Natural justice plea rejected on the merits; no setting aside of adjudication for lack of opportunity, but penalty moderated in exercise of discretion.

Final Conclusion: Appeal allowed in part: the finding of facilitation in inflating FOB value is sustained on corroborative evidence, but the penalty imposed on the appellant is reduced from Rs. 25,00,000 to Rs. 7,50,000; the appellant is entitled to consequential benefits in accordance with law.

Composite Scheme of Arrangement - Demerger - Intervention application - Note of intent in scheme - Transfer/vesting of shareholding - Sanction of scheme subject to exclusion - Consent/consensual disposal

Note of intent in scheme - Transfer/vesting of shareholding - Sanction of scheme subject to exclusion - Consent/consensual disposal - Disposal of the intervention application by permitting sanction of the Composite Scheme of Arrangement excluding the entry relating to Roseland Buildtech Private Limited (Serial No.47) and Note #2 in Part IV of the Schedule. - HELD THAT: - The applicant sought to intervene and to object to the proposed demerger insofar as it affected the Demerged Company's investment in Roseland Buildtech Private Limited and certain downstream companies, relying on Note #2 to Part IV of the Schedule. The petitioner companies filed affidavits clarifying that Note #2 recorded an intent for future, separate transactions and was not an integral part of the Scheme, and subsequently offered that there would be no objection to sanction of the Scheme if Serial No.47 and Note #2 were excluded from Part IV. Having heard counsel and perused the pleadings, the Tribunal accepted the categorical submission by the petitioners that the Scheme could be sanctioned without Serial No.47 and Note #2 and disposed of the intervention application accordingly, without adjudicating the rival contentions on merits.

CA No.43/2020 is disposed of by allowing sanction of the Scheme without Serial No.47 (Roseland Buildtech Private Limited) and excluding Note #2 from Part IV of the Schedule.

Final Conclusion: The application to intervene and to oppose the Scheme was disposed of by the Tribunal by sanctioning the Composite Scheme of Arrangement subject to exclusion of the entry for Roseland Buildtech Private Limited (Serial No.47) and Note #2 from Part IV of the Schedule, the Tribunal not deciding the substantive objections on merits.

Scheme of Amalgamation - Dispensation of meetings of shareholders and creditors on consent - Appointed date - Service of notice on regulatory and revenue authorities with presumption of no objection under Rule 8 - Appointment of experts to assist Official Liquidator for scrutiny of accounts

Dispensation of meetings of shareholders and creditors on consent - Dispensation of meetings of equity shareholders of each applicant company where all shareholders had filed affidavits consenting to the Scheme. - HELD THAT: - The Tribunal recorded that all equity shareholders of Applicant Company 1, Applicant Company 2, Applicant Company 3 and Applicant Company 4 had given their consent to the Scheme by affidavits and/or board resolutions placed on record. In view of the unanimous consent evidenced in the affidavits and filings, the Tribunal dispensed with holding separate meetings of the equity shareholders of each of the four companies. [Paras 7, 8, 9, 10]

Meetings of the equity shareholders of all four applicant companies are dispensed with.

Dispensation of meetings of shareholders and creditors on consent - Dispensation of meetings of unsecured creditors of each applicant company where consent of all unsecured creditors was on record and the Scheme did not affect creditor liabilities. - HELD THAT: - The Tribunal noted the names and consents of unsecured creditors for each Transferor and the Transferee company and observed that the Scheme does not involve any arrangement with creditors nor results in diminution of liabilities towards such unsecured creditors. Since consents from all unsecured creditors were placed on record, the Tribunal dispensed with convening meetings of unsecured creditors of all applicant companies. [Paras 11, 12]

Meetings of unsecured creditors of all applicant companies are dispensed with.

Appointed date - Declaration of the appointed date for the Scheme of Amalgamation. - HELD THAT: - The Tribunal recorded the submission of the authorised representative that the appointed date for the Scheme of Amalgamation is 1st April, 2019, and accepted that appointed date as part of the Scheme particulars placed before the Tribunal. [Paras 4]

Appointed date for the Scheme is fixed/recorded as 1st April, 2019.

Service of notice on regulatory and revenue authorities with presumption of no objection under Rule 8 - Direction to serve notice of the application and Scheme on the Regional Director, Registrar of Companies and the Income Tax Authorities with a 30-day presumption of no objection under the applicable rule. - HELD THAT: - The Tribunal directed the applicant companies to serve the application and enclosures on the Regional Director (Western Region), the Registrar of Companies, Maharashtra and the Income Tax Authorities within whose jurisdiction the applicant companies are assessed, specifying the PAN of the concerned companies. The order further provides that if no response is received within 30 days from such authorities, it will be presumed they have no objection to the proposed Scheme as contemplated by the applicable rule. [Paras 13]

Notice to RD, ROC and Income Tax Authorities to be served; absence of response within 30 days will be treated as no objection.

Appointment of experts to assist Official Liquidator for scrutiny of accounts - Direction to serve notice on the Official Liquidator and appointment of a firm of Chartered Accountants to assist the Official Liquidator in scrutinising books of accounts for last five years, with specified remuneration. - HELD THAT: - The Tribunal directed service of notice upon the Official Liquidator, High Court, Bombay pursuant to the relevant provision and appointed M/s Gondalia & Mandviwalla, Chartered Accountants to assist the Official Liquidator in scrutinising the Transferor Companies' books of accounts for the last five years. The appointment includes a stated remuneration inclusive of taxes and specifies that absence of response from the Official Liquidator within 30 days will be treated as no objection. [Paras 14]

Notice to Official Liquidator to be served; M/s Gondalia & Mandviwalla appointed to assist the Official Liquidator with prescribed remuneration.

Scheme of Amalgamation - Service of notice on regulatory and revenue authorities with presumption of no objection under Rule 8 - Publication/hosting of the Scheme on the applicant companies' websites. - HELD THAT: - The Tribunal directed the applicant companies to host notices along with a copy of the Scheme on their respective websites, if any, to ensure public availability of the Scheme documents in addition to the formal service on statutory authorities and the Official Liquidator. [Paras 15]

Applicant companies to host notices and the Scheme on their websites, if any.

Final Conclusion: The Tribunal recorded the appointed date as 1st April 2019, dispensed with convening meetings of all equity shareholders and unsecured creditors on the basis of recorded consents, directed service of notices on the Regional Director, Registrar of Companies, Income Tax Authorities and the Official Liquidator (with a 30 day presumption of no objection), appointed a firm of Chartered Accountants to assist the Official Liquidator in scrutiny of accounts, and directed hosting of the Scheme on the companies' websites.

Sanction of Scheme of Amalgamation under sections 230 to 232 of the Companies Act, 2013 - Appointed Date effective from 1st April, 2019 - Acceptance of undertakings and compliance with statutory requirements - Consideration of Regional Director's report and response to observations - Dissolution of transferor company without winding up - Obligation to file certified order and Scheme with Registrar and to take consequential statutory steps - Scheme found fair and reasonable and not contrary to public policy

Sanction of Scheme of Amalgamation under sections 230 to 232 of the Companies Act, 2013 - Scheme found fair and reasonable and not contrary to public policy - Sanction of the Scheme of Amalgamation between the two petitioner companies. - HELD THAT: - Having considered the petition, the material on record, the reports and the absence of any opposition or objection, the Tribunal found that the Scheme complies with the statutory requirements and is not violative of any law or public policy. The Tribunal recorded that requisite statutory compliances have been fulfilled and therefore made the company petition absolute and sanctioned the Scheme in terms of the prayer made in the petition. [Paras 11]

The Scheme is sanctioned and the company petition is made absolute.

Appointed Date effective from 1st April, 2019 - The Appointed Date for the Scheme is fixed as 1st April, 2019 and the Scheme shall be effective from that date. - HELD THAT: - The Scheme as presented clearly indicates the Appointed Date as 1st April, 2019. The Tribunal recorded that the Appointed Date has been fixed under the Scheme and the Scheme shall become effective from that Appointed Date. [Paras 4]

Appointed Date fixed as 1st April, 2019 and the Scheme shall be effective from that date.

Acceptance of undertakings and compliance with statutory requirements - The undertakings given by the Petitioner Companies regarding compliance with statutory and accounting requirements are accepted. - HELD THAT: - The Petitioner Companies filed affidavits of compliance and provided undertakings to comply with all statutory requirements and applicable accounting standards as noted in the Regional Director's observations. The Tribunal accepted the undertakings and recorded that the Petitioner Companies shall comply with the undertakings given. [Paras 7, 9]

Undertakings filed by the Petitioner Companies are accepted and they are directed to comply with them.

Consideration of Regional Director's report and response to observations - The observations in the Regional Director's report have been considered and the explanations, clarifications and undertakings provided by the Petitioner Companies are accepted. - HELD THAT: - The Regional Director submitted a report raising certain observations. The Petitioner Companies furnished responses, clarifications and undertakings addressing the matters raised (including accounting entries, confirmation of the Appointed Date, treatment of fee set-off, approvals and notices to authorities). The Tribunal examined the responses and accepted them, recording that the undertakings are on record and satisfied the concerns of the Regional Director. [Paras 8, 9]

Regional Director's observations noted; the Petitioners' clarifications and undertakings are accepted.

Dissolution of transferor company without winding up - The Transferor Company is ordered to be dissolved without being wound up. - HELD THAT: - The Official Liquidator's report stated that the affairs of the Transferor Company were not conducted in a manner prejudicial to shareholders and recommended dissolution without winding up. The Tribunal accepted that position and directed dissolution of the Transferor Company without winding up pursuant to the sanctioned Scheme. [Paras 10]

Transferor Company to be dissolved without being wound up.

Obligation to file certified order and Scheme with Registrar and to take consequential statutory steps - Directions for filing the certified order and Scheme with the Registrar, stamping adjudication, publications and taking consequential statutory steps are given. - HELD THAT: - The Tribunal directed that a certified copy of the order and the Scheme be issued forthwith and that the Petitioners file the order and Scheme with the Registrar of Companies electronically in the prescribed form within the stipulated period. The Petitioners were also directed to lodge authenticated copies with the Superintendent of Stamps for adjudication of stamp duty, to publish notices in newspapers as earlier, and to take all consequential and statutory steps under the Act in pursuance of the Scheme. These directions form part of the sanction and are mandatory for giving effect to the Scheme.

Petitioners directed to file certified order and Scheme with Registrar, comply with stamp adjudication, publish notices and take all consequential statutory steps.

Final Conclusion: The Tribunal allowed the company petition, sanctioned the Scheme of Amalgamation (effective from 1st April, 2019), accepted the Petitioners' undertakings and clarifications including those in response to the Regional Director, directed dissolution of the Transferor Company without winding up, and ordered the Petitioners to take the prescribed filing, stamping, publication and other consequential statutory steps to give effect to the Scheme.

Scheme of Amalgamation - sanction under Sections 230 to 232 - Appointed Date deemed effective from such date - acceptance of Regional Director's observations and undertakings - dissolution of transferor companies without winding up - statutory compliances and consequential filings

Scheme of Amalgamation - sanction under Sections 230 to 232 - Sanctioning of the Scheme of Amalgamation between the transferor companies and the transferee company. - HELD THAT: - The Tribunal considered the petitions for sanction under Sections 230 to 232 and the material on record including Board resolutions, affidavits of compliance, the report of the Regional Director and the report of the Official Liquidator. No objector contested the Scheme. The Official Liquidator reported that the affairs of the transferor companies were conducted properly and that dissolution may be ordered. The Tribunal found the Scheme to be fair and reasonable, not violative of law nor contrary to public policy, and that requisite statutory compliances had been fulfilled. On that basis the Company Scheme Petition was made absolute and the Scheme was sanctioned.

The Scheme is sanctioned and the petition allowed.

Appointed Date deemed effective from such date - Fixation and effect of the Appointed Date. - HELD THAT: - The Tribunal accepted the Petitioners' clarification that the Appointed Date is 1st October, 2019 and recorded that the Scheme shall be effective from that Appointed Date. The Regional Director's observation noting that a scheme must clearly indicate an appointed date was considered and the Petitioners' assertion that the Scheme is effective from the appointed date was accepted by the Tribunal.

Appointed Date fixed as 1st October, 2019 and the Scheme deemed effective from that date.

Acceptance of Regional Director's observations and undertakings - statutory compliances and consequential filings - Acceptance of clarifications and undertakings in response to the Regional Director's report and direction to comply with specified requirements. - HELD THAT: - The Regional Director's report contained observations relating to accounting entries under applicable accounting standards, conformity of the Appointed Date, set-off of fees under the proviso to section 232(3)(i), approval by requisite majorities, applicability of RERA, identity of the Scheme documents, and service of notices to concerned authorities. The Petitioners provided clarifications and undertakings addressing each observation (including compliance with AS-14 and other applicable accounting standards, affirmation of the Appointed Date, compliance with the proviso to section 232(3)(i), confirmation of requisite approvals, representation that RERA is not applicable, identity of the Scheme documents, and acceptance that authorities retain jurisdiction). The Tribunal accepted these clarifications and undertakings and directed compliance.

Clarifications and undertakings given by the Petitioners are accepted; Petitioners directed to comply with the undertakings and applicable statutory requirements.

Dissolution of transferor companies without winding up - statutory compliances and consequential filings - Orders consequential to sanction: dissolution of transferor companies and directions for filings, stamp adjudication, publications and further compliance. - HELD THAT: - Following sanction, the Tribunal ordered that the transferor companies be dissolved without being wound up. The Tribunal directed the Petitioners to file a certified copy of the Order and the Scheme with the Registrar of Companies in E-form INC-28 within 30 days, to lodge authenticated copies with the Superintendent of Stamps within 60 days for adjudication of stamp duty, to publish newspaper notices in the same papers as earlier, and to take all consequential and statutory steps under the Act. Liberty was also granted to any interested person to apply for further directions if necessary.

Transferor companies to be dissolved without winding up; Petitioners to carry out the specified filings, stamp adjudication, publications and consequential steps.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation with Appointed Date 1st October, 2019, accepted the Petitioners' clarifications and undertakings in response to the Regional Director's report, ordered dissolution of the transferor companies without winding up, and directed the Petitioners to complete the statutory filings, stamp formalities, publications and other consequential compliances.

Sanction of Scheme of Amalgamation under the Companies Act, 2013 - Appointed Date and retrospective effectiveness of a scheme - dissolution of transferor company without winding up - acceptance of undertakings and compliance with statutory requirements - filing of certified copy with Registrar and Superintendent of Stamps - statutory filings with regulatory authorities including Reserve Bank of India for NBFC - protection of creditors' interests in company arrangements

Sanction of Scheme of Amalgamation under the Companies Act, 2013 - protection of creditors' interests in company arrangements - Tribunal sanctioned the Scheme of Amalgamation between the transferor and transferee companies and found the Scheme to be fair, reasonable and not contrary to law or public policy. - HELD THAT: - Having considered the petition, the reports of the Regional Director and the Official Liquidator, the undertakings and affidavits of compliance filed by the petitioner companies, and noting absence of any objector, the Tribunal held that the Scheme does not prejudice shareholders or public and complies with statutory requirements. The Official Liquidator's report that affairs of the Transferor Company were conducted properly was taken into account. The Tribunal accepted the undertakings furnished by the petitioners and found that requisite statutory compliances had been fulfilled, thereby making the petition absolute and sanctioning the Scheme. [Paras 10, 11, 12, 13, 14]

Scheme of Amalgamation sanctioned; petition allowed.

Appointed Date and retrospective effectiveness of a scheme - The Scheme takes effect from the Appointed Date of 1st April, 2019. - HELD THAT: - The Tribunal recorded the petitioners' confirmation and undertaking that the Appointed Date is 1st April, 2019 and that upon sanction the Scheme shall take effect from that date in terms of the provisions governing appointed dates. The Regional Director's observations about clarity on the Appointed Date and compliance with relevant circular were noted and the petitioners' undertaking to comply was accepted. [Paras 7, 8, 14]

Appointed Date fixed as 1st April, 2019; Scheme deemed effective from that date.

Dissolution of transferor company without winding up - acceptance of undertakings and compliance with statutory requirements - filing of certified copy with Registrar and Superintendent of Stamps - statutory filings with regulatory authorities including Reserve Bank of India for NBFC - Consequential orders and compliance directions were issued: Transferor Company to be dissolved without winding up and petitioners directed to comply with specified filing and other statutory requirements and undertakings. - HELD THAT: - The Tribunal directed dissolution of the Transferor Company without winding up consequent to sanction. It accepted the undertaking that the petitioner companies will comply with all statutory requirements and with specific directions to file the certified copy of the order and Scheme with the Registrar of Companies electronically, to lodge the order and Scheme with the Superintendent of Stamps for adjudication, and for the transferee (being an NBFC) to file a copy of the sanction order with the Reserve Bank of India within the stipulated period. The Tribunal also directed publication and other consequential statutory steps and kept liberty for interested persons to apply for further directions if necessary. [Paras 8, 9, 14, 15]

Transferor Company dissolved without winding up; petitioners directed to comply with undertakings and statutory filing and publication obligations.

Final Conclusion: The Tribunal allowed the company petition, sanctioned the Scheme of Amalgamation effective from 1st April, 2019, ordered dissolution of the transferor company without winding up, accepted the petitioners' undertakings, and directed specified filings and other consequential statutory compliances including lodgement for stamp adjudication and filing with the Registrar and RBI as applicable.

Jurisdiction of a tribunal to direct third parties - power to reverse bank appropriation or entries - appropriation of bank account funds vis-a -vis competing creditor claims - effect of Section 283 of the Companies Act, 2013

Jurisdiction of a tribunal to direct third parties - power to reverse bank appropriation or entries - The NCLT, in proceedings under Section 73(4) of the Companies Act, 2013, lacked jurisdiction to direct Canara Bank to reverse its appropriation of funds and refund the amount to the company's account held with another bank. - HELD THAT: - The Appellate Tribunal held that the order passed by the NCLT directing Canara Bank to refund the amount and to convert the recipient account into a lien/escrow account exceeded the tribunal's jurisdiction in the facts of the case. There was no source of power enabling the NCLT, in the petition filed by fixed deposit holders under Section 73(4), to command a bank to reverse its appropriation when the bank claimed outstanding dues against the company. The tribunal therefore concluded that the impugned directions to the bank were not sustainable and required setting aside. [Paras 5, 7]

Impugned NCLT directions commanding Canara Bank to reverse the appropriation and refund the amount were quashed and set aside.

Appropriation of bank account funds vis-a -vis competing creditor claims - effect of Section 283 of the Companies Act, 2013 - Pending resolution of competing proceedings (including a winding up order and stay proceedings before the High Court), the bank was directed to preserve the disputed funds by holding them in an interest-bearing account, and the parties were left free to seek appropriate directions from the High Court. - HELD THAT: - Although the Appellate Tribunal set aside the NCLT order, it recognised the continuing effect of the winding up proceedings and the operation of Section 283 of the Companies Act, 2013. In order to protect competing interests pending further adjudication, the Tribunal directed Canara Bank to retain the amount said to have been appropriated in an interest-bearing account. The Tribunal also observed that the parties remain at liberty to approach the High Court in the pending winding up proceedings for determination of appropriation and entitlement of the funds. [Paras 6, 7]

Canara Bank directed to hold the amount said to have been appropriated in an interest-bearing account; parties permitted to seek directions from the High Court regarding appropriation.

Final Conclusion: The appeal was allowed in part: the NCLT order directing the bank to reverse its appropriation and refund the funds was quashed and set aside, but Canara Bank was ordered to retain the disputed amount in an interest-bearing account pending determination of competing claims, with liberty to the parties to approach the High Court for appropriate directions.

Operational debt - default - Section 8(2) - raising existence of dispute within ten days of demand notice - Section 9 - initiation of corporate insolvency resolution process by operational creditor

Section 8(2) - raising existence of dispute within ten days of demand notice - Whether the Corporate Debtor raised a dispute within the period prescribed under Section 8(2) of the IBC in response to the demand notice - HELD THAT: - The Tribunal examined the service and response dates of the demand notice. The tracking report showed delivery to the Corporate Debtor on 04.05.2019, whereas the Corporate Debtor's reply was dated 25.05.2019. The Corporate Debtor alleged receipt on 17.05.2019 but produced no supporting document to contradict the tracking report. In these circumstances the Tribunal held that the Corporate Debtor failed to bring the existence of a dispute to the Operational Creditor's notice within ten days as required by Section 8(2) of the IBC, and therefore the plea of a pre-existing dispute was not validly raised within the statutory period. [Paras 9]

The Corporate Debtor did not raise the dispute within the time prescribed under Section 8(2) and the reply to the demand notice was not within the statutory period.

Operational debt - Section 9 - initiation of corporate insolvency resolution process by operational creditor - Whether liability under the account settlement agreement dated 15.06.2018 qualifies as an "operational debt" permitting initiation of CIRP under Section 9 of the IBC - HELD THAT: - The Tribunal considered the definitions of "operational debt", "debt" and "default" under the IBC and noted that to invoke Section 9 an Operational Creditor must establish a default in respect of an operational debt as defined in Section 5(21). The claim before the Tribunal was founded on breach of the account settlement agreement of 15.06.2018 (i.e., unpaid instalments under a settlement), not on invoices for goods or services under the earlier agreement dated 28.11.2014. The Tribunal applied earlier decisions holding that unpaid instalments under a settlement agreement are not operational debt and that a breach of a settlement agreement is not, by itself, a ground to trigger CIRP. On that basis the Tribunal concluded that the obligation under the settlement agreement did not fall within the definition of operational debt for the purposes of Section 9. [Paras 10, 11, 13, 14]

Default of instalments under the settlement agreement does not constitute "operational debt" under Section 5(21); therefore the Section 9 application is not maintainable and is liable to be dismissed.

Final Conclusion: The application under Section 9 was dismissed: the Corporate Debtor did not validly raise a dispute within the ten day period under Section 8(2), but the claim before the Tribunal arose from breach of a settlement agreement which does not qualify as an "operational debt" under the IBC, and consequently initiation of CIRP under Section 9 was not permissible.

Corporate Insolvency Resolution Process - Corporate Applicant under Section 10 of the Insolvency and Bankruptcy Code, 2016 - debt and default test - loss of substratum - filing requirements under Section 10 including information, documents and shareholders' resolution - consent and eligibility of Resolution Professional - moratorium - application of Innoventive principle to admissions under Section 10

Debt and default test - Corporate Applicant under Section 10 of the Insolvency and Bankruptcy Code, 2016 - application of Innoventive principle to admissions under Section 10 - The Company Petition under Section 10 was complete and admission was justified on proof of debt and default. - HELD THAT: - The Adjudicating Authority found that the petitioner had filed the statutory information, audited financial statements and a shareholders' resolution approving initiation of proceedings. The petition disclosed financial creditors and operational creditors in default and accompanying documents (balance sheets, statement of affairs) established that liabilities exceeded realizable assets and the company had sustained losses such that it had lost its substratum. The Tribunal applied the settled principle that once debt and default are proved to the satisfaction of the Adjudicating Authority, the petition must be admitted under Section 10. Having considered the materials and authorities cited, the petition was held to be maintainable and fit for admission. [Paras 5, 6, 8]

C.P.(IB) No.159/BB/2020 filed under Section 10 was admitted as the petitioner established debt and default.

Consent and eligibility of Resolution Professional - appointment of Interim Resolution Professional - moratorium - Interim Resolution Professional was appointed and moratorium declared with consequential directions under the Code. - HELD THAT: - The petitioner proposed a qualified resolution professional who filed written consent and declared no disciplinary proceedings were pending against him. Exercising powers under Section 10(4)(a), the Tribunal appointed the nominated professional as Interim Resolution Professional to conduct the CIRP in accordance with the Code and IBBI rules. Consequential directions included the statutory moratorium prohibiting institution or continuation of suits, transfer or encumbrance of assets, enforcement of security, recovery of leased property, and interruption of essential supplies, subject to specified exceptions and existing High Court/Supreme Court proceedings. The IRP was directed to comply with extant provisions and file progress reports; the Tribunal posted the matter for the IRP's report. [Paras 9, 10]

Mr. Srinivas Thatikonda was appointed as Interim Resolution Professional and a moratorium was declared; consequential directions were issued and the matter posted for IRP's report.

Final Conclusion: The Company Petition under Section 10 of the IBC, 2016 was admitted on proof of debt and default; an Interim Resolution Professional was appointed and a moratorium declared, with directions to the IRP and the corporate debtor to comply with the Code and for the IRP to file progress reports.

Prior approval of Competition Commission of India under proviso to Section 31(4) - Directory versus mandatory nature of proviso to Section 31(4) - Adjudicating Authority's power to approve a resolution plan under Section 31 - Commercial wisdom of the Committee of Creditors and limited judicial review - Eligibility and accuracy of information under Regulation 39(1)(c) of the CIRP Regulations - Variation or reduction of Performance Bank Guarantee and modification under the RFRP - Requirement to provide to operational creditors not less than amount in liquidation under Section 30(2)(b)

Prior approval of Competition Commission of India under proviso to Section 31(4) - Directory versus mandatory nature of proviso to Section 31(4) - Adjudicating Authority's power to approve a resolution plan under Section 31 - Validity of CoC approval and Adjudicating Authority's approval where CCI approval was obtained after CoC approval but before Adjudicating Authority's sanction. - HELD THAT: - The Tribunal examined whether the proviso to Section 31(4) requiring CCI approval prior to CoC approval is a jurisdictional/mandatory precondition. Applying the view taken in Arcelor and earlier authorities, the proviso is to be treated as directory rather than an absolute bar to approval; what is material is that CCI approval was in fact obtained before the Adjudicating Authority granted final sanction. In the present case CCI clearance was obtained in June 2019 and the Adjudicating Authority approved the plan in April/May 2020; the Adjudicating Authority was conscious of CCI requirements and imposed directions for obtaining approvals within one year. The Tribunal held that the sequence did not vitiate the approval and that the Adjudicating Authority's approach was in order. [Paras 11]

Challenge based on absence of prior CCI approval is rejected and the approval of the Resolution Plan is held not to be vitiated on that ground.

Eligibility and accuracy of information under Regulation 39(1)(c) of the CIRP Regulations - Commercial wisdom of the Committee of Creditors and limited judicial review - Allegation that the successful resolution applicant (Carval) was ineligible under Regulation 39(1)(c) due to false information about a key person and thus the plan should be set aside. - HELD THAT: - The Tribunal considered the contention that Dr. Johannes Sittard had ceased to be associated and that his absence rendered the Resolution Applicant ineligible. The record showed that although Dr. Sittard had resigned as a partner earlier, he continued to be associated in the capacity/designation relied upon in the Resolution Plan and the Adjudicating Authority imposed operational conditions (including appointment of an observer) to ensure implementation. Further, viability and feasibility assessments and related qualifications of the Resolution Applicant fall within the commercial domain of the CoC and are subject to limited judicial review. The Tribunal found no material irregularity warranting setting aside the plan on this ground. [Paras 12]

Allegation of ineligibility under Regulation 39(1)(c) on account of the said representation is rejected and does not invalidate the approved plan.

Variation or reduction of Performance Bank Guarantee and modification under the RFRP - Adjudicating Authority's power to approve a resolution plan under Section 31 - Validity of the reduction/variation of the Performance Bank Guarantee (PBG) from the amount stipulated in the RFRP and whether such reduction vitiates the Resolution Plan. - HELD THAT: - The Tribunal examined the circumstances of the PBG variation. The PBG had initially been provided for the full amount for one year; after exceptional delays caused inter alia by pandemic-related disruptions and in light of commercial negotiations, the CoC considered and accepted a reduced PBG under the contractual rights in the RFRP (Clause 6.4) and as a commercial decision in the context of market exigencies and the withdrawal of competing resolution applicants. The Adjudicating Authority had recorded and considered these facts. The Tribunal held that modification of the PBG in the circumstances was within the CoC's commercial discretion and not a ground to declare the Resolution Plan null and void. [Paras 13]

Reduction/variation of the PBG is not held to vitiate the Resolution Plan; challenge on this ground is rejected.

Commercial wisdom of the Committee of Creditors and limited judicial review - Requirement to provide to operational creditors not less than amount in liquidation under Section 30(2)(b) - Challenge to the distribution under the approved plan as unfair to operational creditors and whether the Adjudicating Authority erred in approving a plan that gives disparate recoveries to different classes of creditors. - HELD THAT: - The Tribunal noted that allocation among classes of creditors and the commercial decisions of the CoC are subject to the statutory constraint that operational creditors receive not less than the amount payable in liquidation (Section 30(2)(b) read with Section 53). The Adjudicating Authority had applied the settled Supreme Court jurisprudence that limits the extent of judicial intrusion into CoC's commercial decisions. The Tribunal observed that issues of overall fairness and policy consequences fall within the remit of the Supreme Court under Article 142 and do not warrant setting aside the plan where the statutory minimum for operational creditors is satisfied and no other legal infirmity is shown. [Paras 7]

Challenge based on alleged inequitable distribution to operational creditors is not a ground to upset the approved Resolution Plan.

Adjudicating Authority's power to approve a resolution plan under Section 31 - Directory versus mandatory nature of proviso to Section 31(4) - Whether overall procedural or material irregularities alleged (suppression of facts, breaches by Resolution Professional/CoC) rendered the approval by the Adjudicating Authority void. - HELD THAT: - The Tribunal reviewed allegations of suppression, breach of duties by the Resolution Professional and CoC, and other procedural irregularities. Having examined the record and the Adjudicating Authority's order-which included directions to ensure implementation and noted the CCI approval-the Tribunal found no material irregularity that would justify interference. The Tribunal emphasised the Adjudicating Authority's awareness of CCI matters and the measures imposed to secure implementation, and the absence of a demonstrable legal defect that would nullify the approval. [Paras 11, 14]

No material irregularity found; the allegations do not invalidate the Adjudicating Authority's approval and appeal is dismissed on merits.

Final Conclusion: The appeal is dismissed for lack of merit. The Tribunal upholds the Adjudicating Authority's approval of the Resolution Plan, finds no fatal defect in respect of CCI approval timing, eligibility, or PBG variation, and refuses to disturb the commercial decisions of the CoC; pending applications disposed of, interim orders vacated, and no order as to costs.

Failure to implement approved resolution plan - liquidation under Section 33(3) of the Insolvency and Bankruptcy Code - forfeiture of performance security under Regulation 36B(4A) - mandatory time limits and speed of the IBC process - inherent powers / Rule 11 of NCLAT Rules vis a vis specific statutory provisions - opportunity of hearing before passing liquidation order - Section 29A disqualification (limited to bid stage determination) - role and consultative nature of Stakeholders' Consultation Committee in liquidation

Failure to implement approved resolution plan - liquidation under Section 33(3) of the Insolvency and Bankruptcy Code - Validity of the liquidation order passed by the Adjudicating Authority in view of non implementation of the approved resolution plan. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that the approved resolution plan was not implemented by the resolution applicant despite repeated opportunities and extended timelines. In view of the Adjudicating Authority's findings and the Committee of Creditors' resolution (with overwhelming majority) for liquidation, Section 33(3) mandates that liquidation follow on contravention/non implementation of an approved plan. The Tribunal emphasised the mandatory and time sensitive nature of the Code and observed that prolonged delay undermines value preservation; the facts did not constitute an exceptional case to override the statutory scheme. Consequently, the Tribunal found no legal flaw in the liquidation order and dismissed the appeal on this ground. [Paras 86]

The liquidation order was affirmed and the appeal on the ground of non implementation was dismissed.

Forfeiture of performance security under Regulation 36B(4A) - Whether the performance guarantee furnished by the resolution applicant stood forfeited on non implementation of the resolution plan. - HELD THAT: - The Adjudicating Authority applied Regulation 36B(4A) of the CIRP Regulations, which provides for forfeiture of performance security where the resolution applicant fails to implement the approved plan in accordance with its terms and schedule. The Tribunal did not find any illegality in that application of the regulation given the admitted non compliance and delay in infusion of funds, and hence upheld the forfeiture related consequence recorded by the Adjudicating Authority. The Tribunal also noted the Appellant's undertakings regarding additional forfeiture in the event of future non performance but did not disturb the earlier forfeiture. [Paras 15, 86]

Forfeiture of the performance security was treated as justified and was not disturbed.

Inherent powers / Rule 11 of NCLAT Rules vis a vis specific statutory provisions - mandatory time limits and speed of the IBC process - Whether the Tribunal could invoke its inherent powers / Rule 11 to set aside the liquidation order and grant the resolution applicant further opportunity to implement the plan. - HELD THAT: - The Tribunal held that inherent powers or Rule 11 cannot be exercised so as to dilute or override explicit, mandatory provisions of the Code concerning time bound resolution and the consequences of non implementation. Exceptional use of inherent jurisdiction may be permissible only in extraordinary circumstances; the present case did not qualify. The Tribunal emphasised that the statutory scheme gives primacy to timely completion of CIRP and that reopening or extending the process absent exceptional justification would undermine the Code's objectives. On the facts, the Tribunal found no such exceptional justification and therefore refused to exercise inherent powers to revive the resolution process. [Paras 76, 86]

Invocation of inherent powers/Rule 11 to set aside the liquidation order and permit revival was rejected.

Opportunity of hearing before passing liquidation order - Whether the resolution applicant was denied adequate opportunity of hearing before the Adjudicating Authority when the liquidation order was passed. - HELD THAT: - The Tribunal reviewed the procedural record and the Adjudicating Authority's observations that opportunities were afforded to the resolution applicant to file replies and explanations, including specific listings and chances to respond; the resolution applicant nevertheless failed to demonstrate how the plan could be implemented within stipulated timelines. On this basis the Tribunal concluded that adequate opportunity had been afforded and that the Adjudicating Authority's reliance on the applicant's failure to prosecute implementation was justified. There was no finding of denial of hearing warranting interference. [Paras 6, 74, 86]

The plea of denial of opportunity was rejected; no interference with the liquidation order on this ground.

Section 29A disqualification (limited to bid stage determination) - role and consultative nature of Stakeholders' Consultation Committee in liquidation - Scope of challenge based on Section 29A allegations and the role/locus of lenders and stakeholders' consultative committee in the appellate proceedings at liquidation stage. - HELD THAT: - The Tribunal noted the liquidator's allegations regarding potential disqualification under Section 29A arising from conduct of related foreign entities, but treated those as contentions that did not justify reopening the liquidation in the circumstances; the Tribunal observed that Section 29A principally operates to test eligibility at the bid/selection stage. The Tribunal also explained that in liquidation the stakeholders' consultative committee is consultative and its advice is not determinative of the liquidator's duties, although its views are to be considered. On the record before it, and given the absence of proven material irregularity or fraud, the Tribunal found no basis to entertain a substantive re examination of Section 29A disqualification so as to set aside the liquidation order. [Paras 80, 83, 86]

Allegations under Section 29A and submissions about stakeholders' committee did not warrant upsetting the liquidation order.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's order directing liquidation of the corporate debtor and attendant directions, including consequences flowing from non implementation of the approved resolution plan (including forfeiture of performance security), are upheld; the Tribunal declined to invoke inherent powers or Rule 11 to revive the resolution process. The deposit in escrow is to be returned to the resolution applicant as directed.

Moratorium under Section 14 - status quo of assets during CIRP - adjustment of payments received during moratorium against claim - reconsideration of claim by Resolution Professional - preferential treatment - no appeal lies against general directions to the Resolution Professional to reconsider claims - power to seek recovery of preferential transactions (Section 43) by Resolution Professional

Reconsideration of claim by Resolution Professional - no appeal lies against general directions to the Resolution Professional to reconsider claims - The direction of the Adjudicating Authority to the Resolution Professional to reconsider the financial creditor's claim in accordance with the Code and Regulations is not an appealable order. - HELD THAT: - The Adjudicating Authority's first direction merely instructed the Resolution Professional to reconsider the claim as per the Code and Regulations. Such a general direction to the RP to re-examine claims does not constitute a final adjudicatory order giving rise to an appeal. The majority therefore treated that direction as not amenable to interference by this Appellate Tribunal at the interlocutory stage and held that no appeal lies against such a general direction.

Direction to the RP to reconsider the claim is not an appealable order and does not warrant interference; appeal on this ground dismissed.

Adjustment of payments received during moratorium against claim - moratorium under Section 14 - status quo of assets during CIRP - preferential treatment - power to seek recovery of preferential transactions (Section 43) by Resolution Professional - Whether the Adjudicating Authority was justified in directing that payments (EMIs) received from the corporate debtor during the moratorium be treated as adjusted against the creditor's claim, and whether the Appellate Tribunal should interfere at this stage. - HELD THAT: - The moratorium under Section 14 preserves the integrity and status quo of the corporate debtor's assets during CIRP and does not permit transfers or preferential treatment of creditors. The statute does not confer latitude on the RP or the Adjudicating Authority to accord preferential treatment. However, the majority observed that questions arising from deductions/collections during the moratorium can be addressed in the CIRP process, and the RP has the statutory remedy under Section 43 to seek recovery of preferential transactions if applicable. In the majority's view, the present challenge was premature: the appropriate course is for the RP/AA to examine and verify claims in the CIRP and, if preferential treatment or wrongful realisation is found, to pursue recovery by the mechanisms available under the Code rather than for this Tribunal to entertain interlocutory intervention.

No interference by this Tribunal at the interlocutory stage; appeal dismissed as premature. The AA/RP should deal with claim verification and, if necessary, invoke Section 43 for recovery of preferential transactions.

Adjustment of payments received during moratorium against claim - preferential treatment - moratorium under Section 14 - Whether a prima facie case exists warranting notice and fuller adjudication on the appellant's grievance that the AA's order gave preferential treatment to the respondent creditor. - HELD THAT: - A concurring separate view (dissenting Member) recorded that the statutory scheme and Supreme Court precedents emphasize strict observance of the moratorium and the sanctity of the corporate debtor's assets, and that the appellant's contentions raised a prima facie case that preferential treatment may have been permitted. That Member considered that the appellant should be granted a full hearing after notice to the respondents so that the AA's order and the alleged preferential adjustment could be subjected to detailed adjudication.

Notice to respondents and listing for admission/hearing directed by the dissenting Member; a full hearing recommended. (This view was recorded but did not prevail.)

Final Conclusion: By majority decision the appeal was dismissed at the threshold as premature and no interference was warranted with the Adjudicating Authority's directions; the majority held that the RP/AA should deal with claim verification and, if necessary, pursue recovery of preferential transactions under the Code. A dissenting Member recorded a contrary view that a prima facie case existed and directed issuance of notice and listing for full hearing, but the majority dismissal governs the result.

Pre-existing dispute - operational debt - reconciliation of accounts - credit note and debit note - initiation of Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 - illusory or moonshine dispute - pre-admission stage dismissal

Pre-existing dispute - operational debt - reconciliation of accounts - credit note and debit note - Whether a pre-existing dispute regarding supply and payment, evidenced by a debit note, subsequent credit note and reconciliation, barred initiation of CIRP under the I&B Code. - HELD THAT: - The Tribunal held that the Corporate Debtor had raised a substantive dispute prior to issuance of the demand notice by issuing a debit note and later granting a credit note, and that the parties had engaged in reconciliation which resulted in part-payment by way of cheque and a contention that accounts stood settled. Those facts demonstrate a genuine, antecedent commercial disagreement over quantity/quality/quantum of supply and adjustment of accounts. Such a pre-existing dispute is not a mere sham and, being prior to the demand notice, falls within the bar to initiation of Corporate Insolvency Resolution Process under the Code. Consequently the Adjudicating Authority correctly declined to admit the Section 9 application. [Paras 2, 3]

The Section 9 petition was rightly dismissed at the pre-admission stage because a bona fide pre-existing dispute, involving debit and credit notes and reconciliation, negated the existence of an admitted operational debt.

Illusory or moonshine dispute - filing of complaint with competent authorities - Whether the dispute raised by the Corporate Debtor was illusory or required the Operational Creditor to have filed a separate complaint regarding alleged fabrication of documents and genuineness of payment. - HELD THAT: - The Tribunal observed that the Operational Creditor did not lodge any complaint with competent authorities about alleged fabrication of the debit note or the genuineness of the cheque relied upon by the Corporate Debtor. In the absence of such proceedings and given the contemporaneous commercial documents (debit note, credit note, reconciliation and part-payment), the dispute could not be characterised as illusory or sham. The lack of a separate criminal or quasi-judicial complaint did not convert a genuine pre-existing commercial dispute into one that must be resolved in CIRP proceedings. [Paras 2]

The dispute was not illusory and absence of a complaint did not undermine the conclusion that a bona fide pre-existing dispute barred commencement of CIRP.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority correctly rejected the Section 9 application at the pre-admission stage because a bona fide pre-existing commercial dispute, evidenced by debit and credit notes, reconciliation and part-payment, existed and could not be adjudicated in CIRP proceedings.

Pre-existing dispute - limitation/laches - operational creditor - identity of employer and tripartite adjudication - final payment certificate versus reconciliation statement - summary nature of Section 9 proceedings under IBC

Pre-existing dispute - summary nature of Section 9 proceedings under IBC - Whether the Adjudicating Authority was correct in rejecting the Section 9 application on the ground of a pre-existing dispute. - HELD THAT: - The Tribunal upheld the finding that a real pre-existing dispute existed between the parties concerning the quality of work and other contractual issues. The record includes communications (including an e-mail of 21.01.2016) raising defects and deficiencies in the work, and the respondent had consistently pointed to such disputes. Given these materials, and having regard to the summary character of Section 9 proceedings, the Adjudicating Authority was not obliged to conduct a detailed trial to resolve competing documentary and conduct-based propositions. The Tribunal agreed that the existence of a bona fide dispute justified rejection of the Section 9 application without further factual adjudication in the insolvency forum. [Paras 3, 11, 13]

The finding of a pre-existing dispute was affirmed and the Section 9 application was properly rejected on that ground.

Identity of employer and tripartite adjudication - operational creditor - Whether the Appellant had established that the respondent (and not its subsidiary) was the sole employer liable to pay the claimed operational dues. - HELD THAT: - The Tribunal noted conflicting contractual documents and the parties' conduct showing that the subsidiary transacted with and made payments to the appellant. The Conditions of Contract identify the employer differently in different documents, and the record contained documents and dealings indicating that the question of which entity was the employer could not be resolved summarily. The Tribunal held that resolution of that controversy required tripartite adjudication in an appropriate forum and could not be determined in Section 9 summary proceedings before the Adjudicating Authority. [Paras 7, 8]

The question of employer identity was left to be determined in a proper forum; it was not finally decided in favour of the appellant and militated against admission of the Section 9 application.

Final payment certificate versus reconciliation statement - limitation/laches - Whether the document relied upon by the Appellant constituted a 'Final Payment Certificate' giving rise to a fresh cause of action, and whether the claim was time-barred. - HELD THAT: - The Tribunal accepted that the document relied upon by the appellant was a reconciliation/recommendation prepared by the quantity surveyor/consultant and bore signatures of the subsidiary and the appellant; it was not counter-signed by the respondent and was described as a recommendation. The project completion and taking-over events predated the Section 9 notice, and defects and other communications were in the record from 2014-2016. In these circumstances the Tribunal agreed with the Adjudicating Authority that the claim was susceptible to a limitation objection and that the asserted certificate did not operate to revive a time-barred claim for present purposes of admission under Section 9. [Paras 9, 10, 12]

The reconciliation document was not treated as a binding final payment certificate vis-a -vis the respondent and the claim was held to be liable to be treated as time-barred for purposes of the Section 9 application.

Final Conclusion: The appeal is dismissed. The Tribunal affirmed that the Adjudicating Authority rightly rejected the Section 9 application in view of a pre-existing dispute, unresolved questions as to the employer's identity requiring tripartite adjudication, and the limitation/laches objection.

Withdrawal of insolvency application by settlement - quashing of admission order under Section 9 of the Insolvency and Bankruptcy Code, 2016 - restitution of management to Board of Directors on settlement - setting aside actions taken by Interim Resolution Professional/Resolution Professional - CIRP costs and fees to be placed before and considered by the Adjudicating Authority - exercise of powers under Rule 11 of NCLAT Rules and reliance on Swiss Ribbons precedent

Withdrawal of insolvency application by settlement - quashing of admission order under Section 9 of the Insolvency and Bankruptcy Code, 2016 - setting aside actions taken by Interim Resolution Professional/Resolution Professional - restitution of management to Board of Directors on settlement - exercise of powers under Rule 11 of NCLAT Rules and reliance on Swiss Ribbons precedent - Appeal allowed and impugned order admitting Section 9 application quashed to permit withdrawal of the application on account of settlement; consequent actions taken in the insolvency process set aside and management restored to the corporate debtor's Board. - HELD THAT: - The parties informed the Tribunal that the Operational Creditor and the corporate debtor had settled the dispute and that the Operational Creditor had received all dues. Relying upon the power under Rule 11 of the NCLAT Rules and the approach in Swiss Ribbons, the Tribunal accepted the joint request to permit withdrawal of the Section 9 application. In consequence, the admission order is quashed and actions taken by the IRP/RP in consequence of that admission are set aside. The corporate debtor is released from the rigour of the insolvency process and the IRP/RP is directed to hand back records and management to the Board of Directors so that the company may function independently.

Appeal allowed; impugned order quashed and set aside; Respondent No.1 permitted to withdraw the Section 9 application; actions by IRP/RP consequential to admission quashed; management restored to the Board of Directors and records to be handed back.

CIRP costs and fees to be placed before and considered by the Adjudicating Authority - approval and quantification of CIRP costs including fees - Matter of CIRP costs and remaining fees remitted to the Adjudicating Authority for consideration and approval; mechanism for payment and recourse on default outlined. - HELD THAT: - The Tribunal directed the IRP/RP to place particulars of CIRP costs and the balance of fees incurred before the Adjudicating Authority. The Adjudicating Authority is to consider and approve reasonable CIRP costs including fees and to direct the corporate debtor to pay the same within a time to be specified. The Tribunal left open the remedy that in case of default the parties may approach this Tribunal for recall of the order. This aspect was not adjudicated on the merits but remitted for the Adjudicating Authority's consideration and determination.

IRP/RP to file particulars of CIRP costs and balance fees before the Adjudicating Authority for approval and directions for payment; parties permitted to move the Tribunal in case of non-compliance.

Final Conclusion: The appeal is allowed; the admission under Section 9 is quashed and the Section 9 application is permitted to be withdrawn on settlement; consequential actions of the IRP/RP set aside and management restored to the Board; CIRP costs and remaining fees are remitted to the Adjudicating Authority for approval and directions for payment, with liberty to seek recall from this Tribunal in case of default.

Debt which is admitted and enforceable - default - prima facie evidence of forgery - summary proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 - arbitration clause / reference to arbitration - forfeiture under MOU

Debt which is admitted and enforceable - default - summary proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the Adjudicating Authority was correct in rejecting the Section 7 application filed by the Financial Creditor. - HELD THAT: - The Appellate Tribunal upheld the Adjudicating Authority's conclusion that the Financial Creditor failed to establish a debt that was admitted and enforceable and failed to demonstrate default. The Tribunal noted skepticism at the claim that substantial sums were advanced under an oral arrangement without corporate approvals, security, or documented resolution, and observed that mere allegation of loan disbursement is insufficient in the summary jurisdiction under Section 7. Given the material relied upon by the Corporate Debtor (a loan agreement and an MOU) and the Corporate Debtor's contemporaneous pleadings asserting forfeiture and referring the dispute to arbitration, the Appellate Tribunal held that the Financial Creditor had not made out the prima facie case required for admission of a Section 7 petition. [Paras 7, 8, 9]

The rejection of the Section 7 application was affirmed for want of an admitted and enforceable debt and proof of default.

Prima facie evidence of forgery - forfeiture under MOU - arbitration clause / reference to arbitration - Whether alleged fabrication of documents and claims of forfeiture or arbitration precluded reliance on those documents at the Section 7 stage. - HELD THAT: - The Tribunal held that an allegation that documents are fabricated is not enough, in the summary Section 7 proceedings, to discard those documents unless prima facie evidence establishes falsity. The record showed the Corporate Debtor promptly relied upon the alleged loan agreement and MOU when the recall notice was sent and asserted forfeiture and arbitration rights in its reply. The Appellate Tribunal therefore refused to reject those documents on mere assertion of forgery and recognised that the existence of an arbitration reference and the claim of forfeiture raised disputed questions that could not be resolved in the limited inquiry under Section 7. The Tribunal clarified that parties remain free to pursue their rights before the Arbitrator or other fora, and that its observations would not influence such proceedings. [Paras 7, 8, 10]

Documents relied upon by the Corporate Debtor could not be discarded on mere allegation of forgery at the Section 7 stage; issues of forfeiture and arbitration are matters for the Arbitrator or appropriate forum.

Final Conclusion: The Appeal is dismissed; the Appellate Tribunal affirmed the Adjudicating Authority's rejection of the Section 7 petition for failure to establish an admitted and enforceable debt and default, and left issues concerning alleged forgery, forfeiture under the MOU and arbitration to be decided by the Arbitrator or other competent forum.

Attachment of bank account - freezing of bank account - right to operate bank account - investigation under FEMA - absence of attachment order - direction to decide within time

Absence of attachment order - right to operate bank account - Whether the petitioner can be prevented from operating the bank account in the absence of any order freezing or attaching the account. - HELD THAT: - The Court recorded the respondent's admission that no order freezing or attaching the subject bank account has been issued. In view of that admitted position, the respondent has no justification to continue to prevent operation of the account. The Court observed that, absent a lawful attachment or freezing order, the petitioner cannot be kept in a state where he is neither permitted to operate the account nor faced with a formal attachment. The determinative finding is that either a lawful order must be passed or the petitioner must be allowed to operate the account. [Paras 3, 4, 5, 6]

Since no attachment or freezing order has been issued, the petitioner shall not be prevented from operating the bank account unless the first respondent issues a lawful attachment/freezing order.

Investigation under FEMA - attachment of bank account - direction to decide within time - Whether the first respondent may pass an order to attach/freeze the account and the timeframe for doing so. - HELD THAT: - The Court acknowledged that an investigation under FEMA is pending and that the respondent may consider attachment if warranted by law. However, because no attachment order had been so far issued, the Court directed the first respondent to take a decision: either to pass an order of attachment/freezing in accordance with law or to permit operation of the account. To avoid indefinite inaction, the Court granted a specific timeframe within which the respondent must act. The order leaves the merits of any prospective attachment to the respondent's lawful decision-making and does not express any view on the substance of the investigation. [Paras 5, 6]

The first respondent is permitted to pass any lawful order of attachment/freezing within 30 days from receipt of the order; failing which the petitioner shall be allowed to operate the account.

Final Conclusion: Writ petition disposed: respondent must either pass a lawful order of attachment/freezing within 30 days or, if no such order is passed, the petitioner shall be permitted to operate the bank account; no expression of opinion on merits of the ongoing FEMA investigation.

Exemption from service tax to Special Economic Zone (SEZ) units - refund of service tax under notification issued under section 93(1) of the Finance Act - reverse charge mechanism for import of services - point of taxation - second proviso to Rule 7 of the Point of Taxation Rules (deeming fiction - date of debit in books) - interpretation of Condition 3(f)(ii) of Notification No. 40/2012-ST

Reverse charge mechanism for import of services - point of taxation - second proviso to Rule 7 of the Point of Taxation Rules (deeming fiction - date of debit in books) - exemption from service tax to Special Economic Zone (SEZ) units - Refund admissible where SEZ unit has discharged service tax liability under reverse charge on accrual basis in accordance with Point of Taxation Rules, notwithstanding that payment to the foreign service provider was not made. - HELD THAT: - The Tribunal accepted the appellant's case that services from the associated enterprise abroad were taxable in India because the place of provision is the location of the recipient under the Place of Provision of Service Rules and the Point of Taxation Rules. The second proviso to Rule 7 creates a deeming fiction by treating the date of debit in the recipient's books (or earlier date of payment) as the point of taxation for services from associated enterprises; therefore the appellant was obliged to and did discharge service tax under reverse charge on the basis of entries in its books. Given that the SEZ Act and Rules provide exemption for services used for authorised operations in an SEZ and that the statutory refund mechanism under the notification operates to give effect to that exemption, the fact that the appellant had not remitted the contractual payment to the foreign service provider did not bar refund where service tax had been lawfully paid under reverse charge and evidenced by challans and supporting declarations. [Paras 9, 15, 16]

Appellant entitled to refund to the extent service tax was paid under reverse charge on accrual (as per Point of Taxation Rules); nondisbursement to foreign provider does not defeat refund where tax was lawfully discharged and conditions of the notification are met.

Interpretation of Condition 3(f)(ii) of Notification No. 40/2012-ST - refund of service tax under notification issued under section 93(1) of the Finance Act - Condition 3(f)(ii) does not require actual payment to the service provider as a precondition for refund of service tax paid under reverse charge by an SEZ unit. - HELD THAT: - The Tribunal examined Condition 3(f)(ii) which prescribes documentary and payment-related requirements for grant of refund to SEZ units. The adjudicating authorities had treated non-payment to the overseas service provider as a basis for proportionate disallowance. The Tribunal held that the condition requires that the unit must have paid the service tax (including that payable under reverse charge) and furnished prescribed documents; it does not impose an essential requirement of payment of the invoice amount to the service provider before sanctioning refund. Accordingly, the Commissioner (Appeals) erred in sustaining disallowance on that ground and the refund disallowance was set aside. [Paras 15, 16]

Condition 3(f)(ii) is satisfied by payment of service tax under reverse charge and requisite documentary proof; absence of remittance to the foreign service provider is not an essential bar to refund.

Final Conclusion: The appeal is allowed to the extent of the disputed refund; the impugned order is set aside insofar as it disallowed Rs. 11,23,911/-, and the adjudicating authority is directed to grant the refund with interest within 45 days.

Related persons / inter-connected undertakings - Transaction value under Section 4(1)(a) versus value under Section 4(1)(b) - Application of Rule 10 read with Rule 9 of the Valuation Rules - Inclusion of marketing/advertising and other selling-related expenses as additional consideration in transaction value - Cum duty price benefit - Extended period of limitation under proviso to Section 11A(1)/Section 11A(4) - Penalty under Section 11AC - Penalty under Rule 26 of the Central Excise Rules, 2002 - Remand for redetermination of assessable value under Rule 11

Related persons / inter-connected undertakings - Application of Rule 10 read with Rule 9 of the Valuation Rules - Whether M/s VWIPL and M/s VWGSIPL are related persons and whether valuation must be determined by reference to the price at which VWGSIPL sold to independent dealers under Rule 9 read with Rule 10. - HELD THAT: - The Tribunal held that the manufacturer and the marketing subsidiary are inter-connected undertakings and, on the facts recorded (agreements, planning rounds, pricing controlled by the parent, reimbursement of marketing expenses and financial assistance), are so associated that they have an interest directly or indirectly in each other's business. The adjudicator's findings that the sale from VWIPL to VWGSIPL was not at arm's length and that the price charged was not the sole consideration were upheld. Consequently the proper route for valuation under Section 4(1)(b) is by application of the Valuation Rules, and Rule 10(a) (bringing Rule 9 into play) is applicable so that the sale price at which VWGSIPL sold to dealers is the basis of valuation (subject to other adjustments). The Tribunal rejected the appellants' reliance on authorities distinguishing mutuality where facts differ, and accepted that factual matrix here justified piercing the corporate arrangements to ascertain economic reality.

M/s VWIPL and M/s VWGSIPL are related persons; valuation to be determined under Section 4(1)(b) applying Rule 10(a) and Rule 9, treating the marketing company's sale price as the value basis.

Inclusion of marketing/advertising and other selling-related expenses as additional consideration in transaction value - Transaction value under Section 4(1)(a) versus value under Section 4(1)(b) - Whether marketing, promotional and other selling-related expenses borne (or reimbursed) by the marketing company and the parent must be included in the assessable value of cars manufactured by VWIPL. - HELD THAT: - The Tribunal agreed with the adjudicator that promotional and selling-related expenditures borne by VWGSIPL (and reimbursed in part by the parent) enriched the marketable value of the manufactured goods and were therefore components that could not be excluded from assessable value. Given that the price charged by VWIPL did not represent the sole commercial consideration and that the pricing process (Retail Minus fixed by Planning Rounds) excluded such components from the manufacturer's price, those elements should be taken into account when determining value under the valuation rules. The Tribunal noted that the definition of transaction value contemplates inclusion of amounts charged for advertising, marketing and selling organisation expenses as part of value when assessable.

Marketing, promotional and other selling-related expenses attributable to the cars must be included in determining the assessable value; the manufacturer's lower transfer price is not the true transaction value for excise purposes.

Cum duty price benefit - Remand for redetermination of assessable value under Rule 11 - Whether the sale price used for valuation should be treated as cum duty (i.e., include excise duty/cess) and whether the Commissioner properly considered cum duty adjustment. - HELD THAT: - The Tribunal found that entitlement to cum duty treatment depends on whether the price taken for computation is actually inclusive of excise duty and cesses. The adjudicating authority (Commissioner) did not satisfactorily examine the cum duty issue: although the Commissioner corrected certain calculation discrepancies after verification by DGCEI, she did not properly determine entitlement to cum duty benefit. Accordingly, the Tribunal remanded the matter to the Commissioner to re determine the assessable value and recompute the demand after allowing the cum duty benefit where applicable, and directed that the re determination be completed within six months if possible.

Matter remanded to the adjudicating authority for re determination of assessable value and recomputation of duty after allowing cum duty price benefit where applicable.

Extended period of limitation under proviso to Section 11A(1)/Section 11A(4) - Whether the extended period of limitation (proviso to Section 11A) was correctly invoked by the Commissioner. - HELD THAT: - The Tribunal concluded that the Commissioner erred in invoking the extended period. The Tribunal found that the valuation issue was in the knowledge of the department from early correspondence, Central Excise Revenue Audit and the CAG report; a mere change of view, insufficiency of earlier inquiries, or later discovery of some documents during investigation does not amount to the deliberate suppression or fraud envisaged by the proviso. Applying authorities on suppression and the strict construction of the proviso, the Tribunal held that extended limitation could not be invoked in the circumstances of this case.

Extended period of limitation under Section 11A(4) is not invokable; duty demand must be restricted to the normal period under Section 11A(1).

Penalty under Section 11AC - Penalty under Rule 26 of the Central Excise Rules, 2002 - Whether penalties imposed on VWIPL under Section 11AC and on VWGSIPL under Rule 26 were sustainable. - HELD THAT: - Because the Tribunal held that the extended period of limitation could not be invoked (i.e., there was no legally tenable finding of suppression with intent to evade), the statutory predicate for mandatory penalty under Section 11AC fell away and the penalties under Section 11AC were set aside. As to penalties under Rule 26 imposed on VWGSIPL, the Tribunal found that the issues involved complex questions of statutory interpretation on which the revenue itself had earlier held views identical to the appellants; in such circumstances of bona fide dispute, imposition of penalty under Rule 26 was not justified. Accordingly the Tribunal set aside the Rule 26 penalties on VWGSIPL.

Penalty under Section 11AC set aside; penalty under Rule 26 set aside in respect of VWGSIPL.

Adjudication of overlapping show cause notices - Whether the Commissioner could lawfully adjudicate multiple overlapping show cause notices invoking different valuation routes for the same transactions. - HELD THAT: - The Tribunal criticised the Commissioner's approach of adjudicating three different valuation methods simultaneously for identical clearances. It held that an adjudicator should determine the correct valuation approach and not pass multiple, overlapping adjudications on the same transaction; ordinarily one legally sustainable route should be adjudicated and other inconsistent routes should be dismissed. The Tribunal accepted the appellants' preliminary objection and limited the hearing accordingly, and found the Commissioner's simultaneous adoption of three methods to be incorrect.

Commissioner erred in adjudicating multiple conflicting valuation routes for the same transactions; only one sustainable valuation method should be finally adjudicated.

Interest under Section 11AA - Whether interest on the confirmed duty is payable. - HELD THAT: - The Tribunal held that, because the demand for differential duty (as re determined subject to remand on cum duty adjustments and limitation) stands, interest under Section 11AA is payable for delay in payment from the date the duty was due. The established principle that interest follows the tax due was applied.

Interest at applicable rates under Section 11AA is payable on the duty ultimately confirmed.

Final Conclusion: The Tribunal affirmed that VWIPL and VWGSIPL are related inter connected undertakings and that the value of Polo and Vento cars must be determined under Section 4(1)(b) applying Rule 10(a) read with Rule 9 (so as to adopt the marketing company's sale price as the relevant basis), including marketing/selling expenditures; however, the extended period of limitation was held inapplicable and penalties under Section 11AC and Rule 26 were set aside (Rule 26 penalty on VWGSIPL quashed). The matter is remanded to the Commissioner to re determine assessable value (allowing cum duty benefit where appropriate), recompute duty within the normal limitation period and quantify interest, with re determination to be completed after affording hearing and preferably within six months.

Doctrine of mutuality - application to incorporated and unincorporated members' clubs post-46th Amendment - declaratory relief - assessment notices proposing levy of tax

Doctrine of mutuality - application to incorporated and unincorporated members' clubs post-46th Amendment - The doctrine of mutuality applies to incorporated and unincorporated members' clubs even after the 46th Amendment to the Constitution. - HELD THAT: - The Division Bench applied the Larger Bench decision of the Hon'ble Supreme Court in State of West Bengal v. Calcutta Club Limited, which answered that the doctrine of mutuality continues to be applicable to members' clubs after the addition of Article 366(29-A). On that basis the Court held that the legal principle affirmed by the Supreme Court governs the present petitions and will enure in favour of the petitioners' club. [Paras 5, 6]

Doctrine of mutuality continues to apply to both incorporated and unincorporated members' clubs after the 46th Amendment; that principle is applied in favour of the petitioners.

Declaratory relief - assessment notices proposing levy of tax - Whether the writ petitions seeking declaratory relief against proposed tax demand should be disposed of in light of the Supreme Court's decision, and what remains for the Assessing Officer. - HELD THAT: - In view of the settled law by the Larger Bench of the Supreme Court, the Court held that it was constrained to interfere with the show cause notices proposing levy of tax on the petitioners to the extent that the doctrine of mutuality applies. However, the Court recognized that there may be other issues requiring adjudication by the Assessing Officer and therefore permitted the petitioners to file suitable replies to the notices. The matter was disposed of by declaring the applicability of the Supreme Court's law for the petitioners and leaving factual or other legal questions to be considered by the Assessing Authorities. [Paras 7, 8]

Writ petitions disposed declaring the Supreme Court's law applies in favour of the petitioners; petitioners permitted to reply to assessment notices and remaining issues remitted to Assessing Authorities for adjudication.

Final Conclusion: Writ petitions dismissed in terms of the Division Bench judgment applying the Larger Bench decision of the Hon'ble Supreme Court: the doctrine of mutuality remains applicable to members' clubs after the 46th Amendment and this principle operates in favour of the petitioners; petitioners may respond to the assessment notices and any other issues are left to the Assessing Authorities. No order as to costs.

Entitlement to concessional rate under Central Sales Tax Act via 'C' forms - inter-state purchase of High Speed Diesel - registration under the CST Act not contingent on selling the specified goods - binding effect of High Court decisions in rem and applicability to all similarly placed dealers - obligation of revenue authorities to give effect to judicial pronouncements and permit online issuance of 'C' forms

Entitlement to concessional rate under Central Sales Tax Act via 'C' forms - inter-state purchase of High Speed Diesel - Assessees purchasing High Speed Diesel from other States are entitled to the concessional rate of tax by using 'C' forms. - HELD THAT: - The Court applied the reasoning in earlier decisions (including the Division Bench decision upholding the Single Judge in the Ramco Cements matter) that the right of purchasing dealers to claim concessional tax against Declaration in 'C' forms under the CST Act survives the post GST amendments. The liability and registration provisions of the CST Act, read together, permit purchasing dealers to obtain benefits of concessional rate even if they are not the selling dealer of the specified goods. The judicial conclusions that similar issues have been decided in favour of dealers and that such decisions operate in rem were accepted and followed. In consequence, the petitioners seeking concessional treatment for inter state purchase of High Speed Diesel are entitled to that benefit in accordance with law.

The petitioners are entitled to claim concessional rate for inter state purchases of High Speed Diesel by use of 'C' forms.

Binding effect of High Court decisions in rem and applicability to all similarly placed dealers - obligation of revenue authorities to give effect to judicial pronouncements and permit online issuance of 'C' forms - State authorities must apply the High Court's rulings statewide and permit dealers generally to obtain and download 'C' forms online; they cannot confine benefit to parties to the specific litigation. - HELD THAT: - The Court accepted that the impugned Single Judge and Division Bench decisions operate in rem and therefore their rationale must be applied by Assessing Authorities across the State until stayed or reversed. The departmental position that only parties to the litigation could avail the benefit was rejected as inconsistent with the in rem effect of the judgments and with the obligation of revenue authorities to implement judicial pronouncements. The Court directed the department to take necessary action forthwith and to allow online downloading and use of 'C' forms by eligible dealers in accordance with law.

Revenue authorities are directed not to restrict use of 'C' forms to litigants and to permit eligible dealers to obtain and download 'C' forms online.

Inter-state purchase of High Speed Diesel - registration under the CST Act not contingent on selling the specified goods - The petitioners are entitled to inclusion of 'High Speed Diesel Oil' as a commodity in their registration certificates and the department must carry out that exercise within a specified timeframe. - HELD THAT: - Following the Division Bench reasoning that registration under the CST Act may be maintained notwithstanding that a dealer does not sell the specified goods, the Court held that petitioner dealers should have 'High Speed Diesel Oil' included in their registration certificates where appropriate. The order directed the department to effect the inclusion within four weeks from uploading of the order, as a practical consequence of recognizing the entitlement to concessional treatment on inter state purchases.

The petitioners are entitled to inclusion of 'High Speed Diesel Oil' in their registration certificates; the department is directed to effect this within four weeks of uploading the order.

Final Conclusion: Writ petitions allowed: petitioners may claim concessional rate for inter state purchases of High Speed Diesel using 'C' forms; Revenue authorities must apply the High Court rulings statewide, permit online downloading of 'C' forms to eligible dealers, and include High Speed Diesel Oil in the petitioners' registration certificates within four weeks; no costs.

Principles of natural justice - right to personal hearing - speaking order - remand for fresh consideration

Principles of natural justice - right to personal hearing - speaking order - remand for fresh consideration - Whether the assessments dated 31.07.2019 under the Tamil Nadu Value Added Tax Act, 2006 for the periods 2010-11 to 2015-16 were vitiated by denial of effective opportunity of hearing and required to be set aside for fresh adjudication. - HELD THAT: - The Court found that the petitioner had filed a written reply dated 13.08.2018 expressly requesting a personal hearing and that the pre-assessment proposal dated 24.04.2019 did not refer to that communication despite an acknowledgment of filing being on record. A further letter dated 15.06.2019 seeking time to furnish documents was also on record without acknowledgement. The assessments were finalised on 31.07.2019 without reference to these requests for hearing or opportunity to file supporting material. In view of the earlier direction of the Court (11.04.2018) that the petitioner be heard and a speaking order be passed, the absence of any effective opportunity to be heard amounted to a breach of the principles of natural justice. Consequently, the impugned orders were set aside and the matter remanded to the Assessing Officer for personal hearing (by physical hearing or video-conference) and fresh consideration of materials, with a direction to pass a speaking order thereafter within a specified time-frame. The order also provided that if the petitioner fails to appear on the fixed date the original assessments shall revive. [Paras 5, 6, 7, 8]

Impugned assessment orders dated 31.07.2019 are set aside; the petitioner shall be heard in person on 14.09.2020 (physical or by video-conference) and, after considering the materials filed, fresh speaking orders of assessment shall be passed on or before 14.10.2020; failure of the petitioner to appear will revive the original orders.

Final Conclusion: The writ petitions are allowed to the extent that the assessments for 2010-11 to 2015-16 are set aside for want of effective opportunity of hearing; the Assessing Officer is directed to afford personal hearing and pass fresh speaking orders within the stipulated time, failing which the original assessments will be revived if the petitioner does not appear.

Fair investigation - Investigator as complainant - Bias and prejudice in investigation - Reverse burden of proof - Case-by-case assessment of investigative fairness - Investigation under Sections 154, 156 and 157 Cr.P.C. - Scheme of Chapter V of the NDPS Act

Investigator as complainant - Fair investigation - Bias and prejudice in investigation - Case-by-case assessment of investigative fairness - Scheme of Chapter V of the NDPS Act - Whether investigation conducted by the informant/police officer who is also the complainant vitiates the trial and mandates acquittal. - HELD THAT: - The Court examined contrary precedents and the provisions of the Cr.P.C. and the NDPS Act (including the scheme of Chapter V and the procedural provisions permitting entry, search, seizure and the subsequent handover and investigation). Sections 154, 156 and 157 Cr.P.C. permit an officer in charge of a police station to record information and to investigate 'on information or otherwise'; the NDPS Act likewise authorises officers to effect entry, seizure and arrest and provides for forwarding arrested persons/articles for disposal and investigation, and for investing certain officers with the powers of an officer-in-charge for investigation. The Court held that earlier decisions acquitting on the ground that the complainant and investigator were the same (Bhagwan Singh, Megha Singh, Rajangam and Mohan Lal) are to be confined to their facts and do not lay down a universal rule. Factors such as absence of independent witnesses, demonstrable discrepancies, or other indicia of mala fides were the basis of those factual acquittals. The Court emphasised that alleged bias or prejudice arising from an informant-investigator must be established on the facts; investigation carried out by the informant does not ipso facto vitiate the trial. The relevance of reverse burden provisions was considered: presumptions against the accused operate only after prosecution discharges its initial burden, and the fairness of investigation remains a matter for trial where the informant/investigator will be a witness subject to cross-examination. The statute itself contains safeguards (including penal remedy for vexatious action) and procedural protections; hence a categorical rule disqualifying an informant from investigating would improperly amend the statutory scheme. Consequently, whether prejudice has occurred is a factual question to be judged case by case rather than by a blanket legal rule. [Paras 12]

No universal rule that an investigation conducted by the complainant vitiates trial; prejudice or bias must be shown on facts and the matter is to be decided case by case; decisions to the contrary are confined to their facts and Mohan Lal (and similar rulings) are overruled.

Final Conclusion: The Reference is answered: there is no absolute rule disqualifying a complainant from investigating; whether such investigation vitiates trial depends on factual demonstration of bias or prejudice. Earlier decisions holding otherwise are confined to their facts and are overruled. Matters referred back are to be placed before appropriate courts for adjudication on merits in light of these observations.

Admissibility and compliance with procedural safeguards under the NDPS Act (Section 42) - Reliability of police witnesses and sufficiency of police testimony without independent corroboration - Chain of custody and forensic testing of seized narcotics; effect of clerical errors in sample numbering - Ownership of vehicle immaterial to proving possession of contraband found in the vehicle - Non-application of rule against complainant investigating the case where investigation was carried out by a different officer (Mohan Lal issue and overruling by Mukesh Singh) - Discretion on sentencing under the NDPS Act and approach to leniency

Admissibility and compliance with procedural safeguards under the NDPS Act (Section 42) - Compliance with the procedure prescribed under Section 42 of the NDPS Act was established. - HELD THAT: - The Court considered the evidence of PW8 (Ishwar Prasad Verma) and held that the prosecution proved compliance with the procedural safeguards mandated under Section 42. The finding records that necessary precautions and measures required under the statute were complied with and that this aspect has been established by the prosecution. [Paras 9]

Procedure under Section 42 of the NDPS Act was complied with and proved by prosecution.

Reliability of police witnesses and sufficiency of police testimony without independent corroboration - Conviction could legitimately rest upon the testimony of police witnesses despite panchnama witnesses turning hostile. - HELD THAT: - The Court reappreciated the evidence and held that the police witnesses (PW3, PW4, PW5, PW7 and PW8) were reliable and trustworthy after thorough cross-examination and absence of any allegation of enmity. It reiterated settled law that evidence of official witnesses need not be discarded merely because independent witnesses were not supportive, citing precedents that examination of independent witnesses is not an indispensable requirement. [Paras 8]

Evidence of police witnesses was sufficient and appropriately relied upon to convict the accused.

Chain of custody and forensic testing of seized narcotics; effect of clerical errors in sample numbering - Samples seized from the accused were sealed and sent to the FSL; clerical error in sample numbering did not vitiate the prosecution case. - HELD THAT: - The Court found that samples marked as 'B1' and 'B2' (recovered from Rizwan Khan) were sent to the FSL and that treasury records corroborated this. A discrepancy in the memorandum (where a sample was referred to as 'A1') was treated as a clerical error; the trial court had considered and rejected the contention that the samples were not sent for examination. The Court held that the prosecution established transmission and testing of the seized samples. [Paras 9]

Chain of custody and forensic testing established; clerical numbering error was immaterial.

Non-application of rule against complainant investigating the case where investigation was carried out by a different officer (Mohan Lal issue and overruling by Mukesh Singh) - The contention that recording of FIR by PW4 who also seized articles vitiates trial was not attracted on facts; in any event Mohan Lal was not pressed in view of Mukesh Singh overruling. - HELD THAT: - The Court noted that although PW4 recorded the FIR and seized articles, the subsequent investigation was carried out by PW5 (Ashish Shukla), so complainant and investigating officer were different on the facts. Further, counsel did not press the Mohan Lal argument in view of this Court's later decision in Mukesh Singh, which altered the legal position relied upon. Thus no vitiation arose on the ground that the complainant investigated the case. [Paras 10]

No vitiation of trial on the ground that the complainant and investigating officer were the same; Mohan Lal contention not applicable/pressed.

Ownership of vehicle immaterial to proving possession of contraband - Non-establishment of ownership or subsequent recovery of the vehicle does not vitiate prosecution where contraband was found with the accused in the vehicle. - HELD THAT: - The Court observed that to prove an offence under the NDPS Act it is unnecessary to prove ownership of the vehicle; it suffices that contraband was recovered from the accused on the spot from the vehicle. Consequently absence of proof of ownership or subsequent recovery of the vehicle does not negate the recovery of contraband and the commission of the offence. [Paras 11]

Ownership of the vehicle is immaterial; prosecution need only prove recovery of contraband from the accused.

Discretion on sentencing under the NDPS Act and approach to leniency - Prayer for reduction of sentence was rejected; trial court's five-year sentence (within statutory range) was not interfered with. - HELD THAT: - The Court considered the statutory purpose and the sentencing range under the NDPS Act and noted that the Special Court had already taken a lenient view by imposing five years' rigorous imprisonment (when the maximum could extend to ten years). Having regard to the object of the legislation and sentence imposed, the Court declined to exercise leniency to reduce the sentence to the period already undergone. [Paras 12]

No interference with sentence; prayer for reduction declined.

Final Conclusion: The appeal is dismissed. The conviction and sentence under Section 20(b)(ii)(B) of the NDPS Act recorded by the Special Court and confirmed by the High Court are upheld, the prosecution having proved procedural compliance, chain of custody and reliable witness testimony sufficient to establish possession of the narcotics.

Quashing of cognizance - Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Representation of a company as de jure complainant through its representative - Examination and signature of complainant under Section 200 CrPC - Limitation under Section 142(1)(b) of the Negotiable Instruments Act - Accused not entitled to hearing prior to issuance of process - Taking of cognizance by a Magistrate - Exercise of inherent jurisdiction under Section 482 CrPC

Taking of cognizance by a Magistrate - Quashing of cognizance - Validity of the trial court's fresh cognizance and summoning order dated 17.12.2018 in the complaints under Section 138 NI Act. - HELD THAT: - The High Court held that after receipt of the record following its earlier order quashing only the original cognizance, the trial court applied its mind to the complaint, the pre-summoning statement and the material on record and validly took cognizance and issued summons on 17.12.2018. The Court relied on the principle that cognizance occurs when the Magistrate judicially takes notice of the offence and noted that taking cognizance does not require any formalistic ritual but an application of mind to the existence of prima facie offence. The earlier quashment related only to the original cognizance and the trial court was directed to pass fresh orders; the fresh cognizance thus stood upheld as legally sustainable. [Paras 12, 23]

Order of cognizance and summoning dated 17.12.2018 was valid and sustainable.

Representation of a company as de jure complainant through its representative - Examination and signature of complainant under Section 200 CrPC - Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Whether a complaint filed by a company through its authorised representative and accompanied by a preliminary statement/affidavit is competent and whether the trial court's orders permitting amendment and taking on record the affidavit had been finally determined. - HELD THAT: - The Court observed that Section 142 read with Section 200 CrPC contemplates the payee (including an incorporeal person such as a company) being represented by a natural person whose sworn deposition may be recorded; a company may act through an authorised representative who becomes the de facto complainant. The trial court's orders allowing the identification of the de facto complainant (Managing Director) and permitting the original preliminary evidence affidavit to be placed on record were not set aside by the High Court in the earlier petitions and thus attained finality. Those interlocutory rulings could not be re-agitated in the present petitions challenging post-remand proceedings. [Paras 21, 22]

The complaints were competent as amended and the interlocutory orders permitting placement of the affidavit and naming the de facto complainant stood final.

Accused not entitled to hearing prior to issuance of process - Taking of cognizance by a Magistrate - Whether the petitioner/accused was entitled to a hearing before the Magistrate recorded the complainant's preliminary statement and issued process. - HELD THAT: - The High Court held that an accused does not have a right to be heard prior to issuance of process; permitting such hearing would convert the pre-process stage into a full-fledged enquiry and frustrate the statutory object of Section 138 NI Act. Reliance was placed on prior High Court authority which observed that an accused is not entitled to hearing before issuance of process and may raise defences only after process is issued and the trial reaches the defence stage. Accordingly, absence of a hearing of the accused before recording the complainant's preliminary statement and passing cognizance did not invalidate the proceedings. [Paras 23, 24]

Denial of hearing to the accused before issuance of process did not vitiate the cognizance or subsequent proceedings.

Limitation under Section 142(1)(b) of the Negotiable Instruments Act - Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Whether the fresh cognizance taken after remand was barred by the time-bar in Section 142(1)(b) because of delay between cause of action and cognizance. - HELD THAT: - The Court held that for complaints under Section 138 NI Act the date of filing of the complaint is the relevant date for limitation, not the date when cognizance is taken or process issued. The complaints were filed on 16.03.2016 and that date governs the question of limitation. The earlier High Court order quashing the original cognizance did not adjudicate the maintainability of the complaint itself, hence the contention of bar under Section 142(1)(b) was rejected. [Paras 26]

The proceedings were not barred by Section 142(1)(b); the filing date 16.03.2016 was the relevant date for limitation.

Exercise of inherent jurisdiction under Section 482 CrPC - Whether the High Court should exercise its inherent jurisdiction under Section 482 CrPC to quash the complaints and related proceedings. - HELD THAT: - Applying established principles that Section 482 should not be used to stifle legitimate prosecution, and having noted that disputed factual contentions (such as genuineness of cheques, allegation of misuse of blank cheques and civil character of the dispute) had either not been decided earlier or were matters for trial, the Court held that exercise of inherent jurisdiction was not warranted. The Court observed that interlocutory errors, if any, in interim steps taken by the trial court were not so fatal as to vitiate subsequent proceedings, and that the petitioner had not shown circumstances justifying quashment at this stage. [Paras 25, 27, 28]

Exercise of inherent jurisdiction to quash the complaints and proceedings was refused; petitions dismissed.

Final Conclusion: The High Court dismissed the petitions under its inherent jurisdiction, upholding the trial court's fresh cognizance and summoning orders dated 17.12.2018, holding the complaints competent as amended and not time-barred, rejecting the contention that the accused was entitled to pre-process hearing, and declining to quash the proceedings under Section 482 CrPC.

Section 138 Negotiable Instruments Act - Section 142 Negotiable Instruments Act - limitation for prosecution under Section 138 - cause of action accrual - requirement of legal notice and 15-day period - prima facie case for issuance of process - scope of Section 482 Cr.P.C.

Scope of Section 482 Cr.P.C. - Whether the application under Section 482 Cr.P.C. is liable to be dismissed for undue delay and laches in filing. - HELD THAT: - The High Court observed that the present petition under Section 482 Cr.P.C. was filed after a delay of about three years from the date of the impugned summoning order dated 16.08.2017 and no satisfactory explanation for the delay was furnished by the applicant. The Court held that undue delay and laches in instituting the present petition render it liable to be dismissed on that ground alone, while nevertheless proceeding to examine the merits.

Application under Section 482 Cr.P.C. dismissed as barred by undue delay and laches.

Section 138 Negotiable Instruments Act - Section 142 Negotiable Instruments Act - limitation for prosecution under Section 138 - cause of action accrual - requirement of legal notice and 15-day period - Whether the complaint under Section 138 N.I. Act was barred by limitation. - HELD THAT: - Applying the law as laid down by the Supreme Court (as summarised from Dashrath Rupsingh Rathod and subsequent authority), the Court examined the timeline pleaded in the complaint: cheque issued on 18.01.2017, presented on 02.02.2017 and dishonoured on 03.02.2017 with memo received on 04.02.2017; notice prepared on 18.02.2017, posted on 20.02.2017 and allegedly received by the drawer on 17.03.2017; failure to pay within 15 days led to cause of action on 15.04.2017 and complaint filed on 19.04.2017. On this factual matrix the Court found that the statutory pre-conditions for institution of proceedings under Section 138 and for taking cognizance under Section 142 stood satisfied and consequently the complaint could not be said to be time-barred.

Complaint under Section 138 N.I. Act is not barred by limitation; statutory requirements for notice and accrual of cause of action are satisfied.

Prima facie case for issuance of process - scope of Section 482 Cr.P.C. - Whether the summoning order was vitiated by mala fide or the complaint contained wholly baseless allegations such that the summoning should be quashed. - HELD THAT: - The Court reiterated the settled principle that at the stage of issuance of process the Magistrate must be satisfied only that there is sufficient ground for proceeding and not whether there is sufficient evidence for conviction. Detailed appreciation of evidence, credibility or reliability of witnesses is for trial. On the material before the Magistrate and placed on record in the petition, the Court found a prima facie case against the applicant and observed that no material illegality or substantive error in the summoning order was made out. The High Court further noted that adjudication of factual disputes does not fall within the ambit of exercise of powers under Section 482 Cr.P.C.

Summoning order is not vitiated; prima facie case exists and the complaint is maintainable, precluding interference under Section 482 Cr.P.C.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed: it is barred by undue delay and laches, and on merits the complaint under Section 138 N.I. Act was held not time-barred and the summoning order sustained as supported by a prima facie case.