TaxTMI Updates e-Newsletter
Sep 16,2019

Quashing of appellate order - annulment by Revisional Authority under Section 108 of the Haryana Goods and Services Tax Act, 2017 - remand for adjudication on merits - writ disposed as infructuous

Annulment by Revisional Authority under Section 108 of the Haryana Goods and Services Tax Act, 2017 - remand for adjudication on merits - writ disposed as infructuous - Whether the writ petition seeking quashing of the appellate order required adjudication in view of action taken by the Revisional Authority. - HELD THAT: - The Court recorded the submission of the State that the Revisional Authority, exercising powers under Section 108 of the Haryana Goods and Services Tax Act, 2017, has annulled the impugned appellate order and remitted the matter to the Appellate Authority for fresh adjudication on merits. Given this intervening action by the revisional forum, there remained no live controversy for the writ court to decide on the quashing of the appellate order. The petition therefore became infructuous insofar as it sought the relief of quashing the impugned order, leaving the substantive adjudication of the appeal to the Appellate Authority as directed by the Revisional Authority.

Writ petition disposed of as infructuous; the impugned order stood annulled by the Revisional Authority and the matter remitted to the Appellate Authority for adjudication on merits.

Final Conclusion: The writ was disposed of as infructuous because the Revisional Authority annulled the impugned order and remanded the matter to the Appellate Authority for fresh adjudication on merits; no further relief was granted by the High Court.

Dismissal of appeal for non-appendage of certified copy - annulment of order by revisional authority - remand for adjudication on merits - exercise of powers under Section 108 of the Haryana Goods and Services Tax Act, 2017 - writ disposed of as infructuous

Dismissal of appeal for non-appendage of certified copy - writ disposed of as infructuous - Quash petition challenging order of Additional Commissioner (Appeals) dated 25.6.2019 which dismissed the appeal on the ground of non-appendage of certified copy. - HELD THAT: - The High Court recorded that the Revisional Authority, exercising powers under Section 108 of the Haryana Goods and Services Tax Act, 2017, has subsequently annulled the impugned order of 25.6.2019. In view of that annulment and the remand to the Appellate Authority for adjudication on merits, the challenge to the impugned appellate order has become infructuous. The court therefore declined to adjudicate the writ petition on merits and disposed of it accordingly.

Writ petition disposed of as infructuous; no adjudication on the merits of the challenge to the appellate order.

Annulment of order by revisional authority - remand for adjudication on merits - exercise of powers under Section 108 of the Haryana Goods and Services Tax Act, 2017 - Effect of revisional order annulling the impugned appellate order and remitting the matter to the Appellate Authority. - HELD THAT: - On instructions placed by the State, the Court noted that the Revisional Authority under Section 108 has annulled the impugned appellate order and remanded the matter to the Appellate Authority for adjudication on merits. The consequence of that executive action is that the controversy which formed the subject-matter of the writ is to be considered afresh by the Appellate Authority, rendering the present petition academic. The court recorded the factual position and disposed of the petition without entering into substantive adjudication.

Matter stands remanded to the Appellate Authority for fresh adjudication on merits pursuant to annulment by the Revisional Authority; petition disposed as infructuous.

Final Conclusion: The writ petition challenging the appellate order of 25.6.2019 was disposed of as infructuous because the Revisional Authority under Section 108 annulled that order and remitted the matter to the Appellate Authority for fresh adjudication on merits.

Interim relief - release of detained conveyance and goods - payment under Section 129 of the GST Act

Interim relief - release of detained conveyance and goods - payment under Section 129 of the GST Act - Writ applicant entitled to interim relief in the form of immediate release of the detained conveyance and goods upon production of payment receipt for tax and penalty determined under Section 129 of the GST Act. - HELD THAT: - The Court, having considered the materials on record and the submissions of counsel, noted that the writ applicant had paid the tax and penalty as determined under Section 129 of the GST Act and had placed the payment receipt on record. In view of that payment and the documentary proof thereof, the Court found it appropriate to grant interim relief pending final adjudication of the writ petition. Consequently, the Court directed that the conveyance and the goods, which had been detained, be released forthwith subject to the final outcome of the writ application. The order of release is provisional and conditioned on the ultimate result of the writ proceedings.

Directed immediate release of the conveyance and goods subject to the final outcome of the writ application, on account of payment made under Section 129 of the GST Act and production of the payment receipt.

Final Conclusion: Rule made returnable; interim relief granted by directing forthwith release of the detained conveyance and goods upon production of the payment receipt for tax and penalty paid under Section 129 of the GST Act, subject to the final outcome of the writ petition; direct service permitted.

Provisional attachment under Section 83 - Delegation of statutory power and limits of delegatus non potest delegare - Subjective satisfaction founded on relevant material - Protection of revenue as a condition precedent for provisional attachment - Requirement of show cause and opportunity of hearing under Section 74 - Illegality of administrative blocking of input tax credit by mere computer entry

Provisional attachment under Section 83 - Delegation of statutory power and limits of delegatus non potest delegare - Whether a State Tax Officer could validly exercise the power of provisional attachment vested in the Commissioner under Section 83. - HELD THAT: - Section 83 vests the power to order provisional attachment to protect government revenue in the Commissioner and requires the Commissioner's opinion that attachment is necessary. Although the State Act contains provisions permitting delegation of functions subject to conditions, the court held that the power under Section 83 could not be treated as freely redelegable in the circumstances of this case. Delegation does not amount to abdication of the ultimate power and, where the statute specifically vests the subjective opinion in the Commissioner, the exercise of such drastic power by a subordinate officer (State Tax Officer) cannot be sustained. The Court examined the delegation order dated 15.1.2018 and concluded that the impugned provisional attachment orders issued by the State Tax Officer cannot be justified on that basis and are therefore without jurisdiction. [Paras 16, 35, 53, 55]

Provisional attachment orders passed by the State Tax Officer under Section 83 are quashed as without jurisdiction; the power under Section 83 must be exercised in accordance with the limits on delegation.

Subjective satisfaction founded on relevant material - Protection of revenue as a condition precedent for provisional attachment - Whether the provisional attachment in this case was supported by sufficient material and bona fide formation of opinion that attachment was necessary to protect revenue. - HELD THAT: - The Court reiterated that although the opinion required by Section 83 is subjective, it must be based on credible material and supervening factors; mere initiation of proceedings under Section 67 or reasons to inspect do not automatically justify attachment under Section 83. The existence of relevant material is a precondition to formation of the opinion and the Court may examine whether an honest and reasonable person could have formed the belief on available material. On the facts, the impugned attachment was bereft of reasons and the record did not disclose materials on which the required opinion was formed. Consequently, the attachment was held to be arbitrary and unjustified. [Paras 36, 41, 43, 52, 53]

Attachment was not supported by sufficient material or a lawful formation of opinion and is therefore invalid.

Requirement of show cause and opportunity of hearing under Section 74 - Whether the assessment purportedly made under Section 74 without issuance of a show cause notice and opportunity of hearing was tenable. - HELD THAT: - Section 74 mandates issuance of notice and affords the person charged an opportunity to show cause before determination of tax by reason of fraud or wilful misstatement. The Court found that an assessment under Section 74 was recorded without giving the writ applicant the statutory opportunity of hearing; such an assessment is contrary to the scheme of Section 74 and therefore unsustainable. The assessment order dated 17.6.2019 was quashed but the authority was left free to proceed afresh after issuing an appropriate show cause notice and hearing. [Paras 48, 54]

Assessment order under Section 74 passed without issuing show cause notice and hearing is quashed; authority may proceed only after complying with statutory notice and hearing requirements.

Illegality of administrative blocking of input tax credit by mere computer entry - Whether blocking the assessee's input tax credit by a computer entry (without proper order/procedure) was legal. - HELD THAT: - The Court held that blocking of input tax credit by mere computer entry, without due procedure and without grounding in a valid provisional attachment or order, is not sustainable. Such blocking could at most have been effected by a proper provisional attachment in accordance with law, but the record showed no lawful basis for the computer entry blockage. Accordingly, the blockage was held to be illegal and ordered to be released forthwith. [Paras 48, 55]

Blocking of input tax credit by computer entry is illegal and must be released immediately.

Final Conclusion: Writ allowed. The assessment order dated 17.6.2019 under Section 74 is quashed; the provisional attachment orders dated 20.11.2018 and 27.11.2018 are quashed; the input tax credit blocked by computer entry is ordered released. The revenue may proceed afresh under Section 74 only after issuing appropriate show cause notice and providing opportunity of hearing; provisional attachment powers under Section 83 must be exercised in accordance with the limits and material requirements explained by the Court.

Bail in offences under the CGST Act - Retraction of statement recorded under section 70 of CGST Act - False issuance of invoices leading to wrongful availing of Input Tax Credit or refund - Mastermind / connivance in tax refund fraud - Necessity of custodial interrogation - Conditions of bail: cooperation, non-tampering and appearance

Bail in offences under the CGST Act - Retraction of statement recorded under section 70 of CGST Act - Necessity of custodial interrogation - Mastermind / connivance in tax refund fraud - Conditions of bail: cooperation, non-tampering and appearance - Entitlement of accused Ramesh Wadhera to bail in proceedings under the CGST Act - HELD THAT: - Accused was arrested on allegations under the CGST Act for offences alleged to arise from issuance/usage of invoices and fraudulent IGST refund. The prosecution's case, as per its reply, did not allege that the accused himself issued invoices or availed Input Tax Credit through any firm in which he was proprietor or partner; the primary evidence against him was a statement recorded under section 70 of the CGST Act which the accused retracted on being produced before the Court. The investigation materials on record implicated co-accused as having created fake firms, misused identity proofs, withdrawn refunds in cash and, in the prosecution's separate reply, described one co-accused as the main mastermind. Having regard to the nature of the evidence available at this stage, the relatively short period of custody already undergone by the accused, and the absence of material showing necessity for further custodial interrogation of the accused, the Court concluded that custody is not required and bail is appropriate at this stage. Bail was therefore granted subject to specified conditions to ensure cooperation with investigation, non-tampering with evidence, attendance at proceedings and restriction on leaving the country without permission.

Accused Ramesh Wadhera admitted to bail on furnishing personal bond of Rs. 1 lac with one surety of like amount, subject to conditions restricting tampering, ensuring cooperation with investigation and mandatory appearance.

Final Conclusion: Bail application allowed; accused released on specified bond and conditions, with obligation to join investigation, not tamper with evidence or influence witnesses, and to attend all hearings; custodial interrogation not considered necessary at this stage.

Unexplained cash credit - Assessing Authority creating tax liability was failure on the part of the assessee to produce evidence with regard to some of the investors which was by way of a Bank statement - No question of law as such arises for consideration in the tax appeal, especially when there are concurrent finding of facts by the Income-tax Commissioner (Appeal) as well as the Income-tax Appellate Tribunal [2018 (11) TMI 1687 - CHHATTISGARH HIGH COURT] - HELD THAT:- SLP dismissed.

Scaling down of tax liability - best judgment assessment - miscarriage of justice in assessment proceedings - proportionality principle / Wednesbury principle - nexus between decretal amounts and income assessed - priority of tax liability for the statutory period under section 11(2)(a) - oversold securities - tax treatment - power of the Special Court to examine fraud, collusion or miscarriage of justice

Best judgment assessment - Assessment for the relevant years qualifies as a best judgment assessment. - HELD THAT: - The Court found from the record and the Revenue's affidavits that the assessments were framed under section 144 and proceeded on probabilities and the material available to the Assessing Officer rather than on precise trading accounts. The appellate order and remand report confirm reliance on reworking of oversold positions and on auditors' materials which lacked detailed trading accounts, demonstrating that the assessments were based on best judgment rather than incontrovertible primary material. [Paras 61, 62, 69]

The assessments for the years in question are held to be best judgment assessments.

Miscarriage of justice in assessment proceedings - There was a miscarriage of justice in the assessment proceedings warranting interference by the Special Court in scaling down. - HELD THAT: - The Court concluded that the Assessing Officer and appellate authority accepted reworked figures based on a Remand Report which itself proceeded on probabilities and did not accept the Special Court appointed auditor's conclusion that oversold positions were shown as liabilities. Given that the auditors reported liabilities and no corresponding investments or securities were found with the Custodian, and that a large sum had already been taxed in the prior year, the Court held the assessment process to be susceptible to miscarriage of justice: the tax demands were not shown to be founded on proper materials capable of precise computation. [Paras 64, 65, 66, 72]

Miscarriage of justice is established in the assessment proceedings.

Proportionality principle / Wednesbury principle - scaling down of tax liability - The tax demands were grossly disproportionate to the assets in the hands of the Custodian and should be scaled down applying the principle of proportionality. - HELD THAT: - Applying the tests in Harshad S. Mehta and State Bank of India, the Court examined whether the assessed taxes were disproportionate to the funds available with the Custodian and whether strong reasons existed to reduce payment to the Revenue. Finding the assessments to be best-judgment-based, coupled with the absence of identified securities or investments with the Custodian and the auditors' classification of oversold positions as liabilities, the Court concluded that the tax claims were disproportionately high and that proportionality justified scaling down. [Paras 73, 83, 86]

Tax claims are grossly disproportionate to the assets; scaling down is justified on proportionality grounds.

Nexus between decretal amounts and income assessed - oversold securities - tax treatment - There is sufficient nexus between the decretal amounts (decrees obtained by the applicants) and the amounts included in the income of the notified person; money being fungible, the decretal claims relate to the assessed amounts. - HELD THAT: - The Court rejected the Revenue's argument that nexus required tracing to specific securities listed in the Remand Report. Noting that the applicants' suits and decrees were for money advanced for purchase of securities and that those sums were credited into the notified person's bank account and are fungible, the Court held a nexus exists between the monies advanced (decrees) and the amounts assessed as income. The Court also observed that the Remand Report and assessment did not establish delivery of securities such that the special rule for oversold securities (taxing only the difference if transaction complete) would operate here. [Paras 74, 79, 80, 81]

Nexus between decretal amounts and assessed income is established; the fungibility of money precludes requirement of tracing to particular securities.

Oversold securities - tax treatment - The question whether only the difference (and not gross sale proceeds) is taxable where delivery of oversold securities has occurred does not strictly apply on these facts; the transaction-completion issue is inapplicable because monies were fungible and no delivery was shown. - HELD THAT: - Although the law provides that where oversold securities have been delivered only the difference may be taxable, the Court found that here the Assessing Officer's reworking was based on probabilities and the auditors had treated the oversold position as liabilities; no deliveries or investments were identified with the Custodian. As monies were mixed and fungible in the Bank of Karad account, the Court held that the special rule based on completed delivery was not directly applicable in the manner the Revenue urged. [Paras 59, 71, 81]

Completion-based limitation on taxation of oversold securities does not operate to defeat the finding of nexus or the power to scale down in the present facts.

Scaling down of tax liability - priority of tax liability for the statutory period under section 11(2)(a) - Relief in the form of quantified scaling down and payment directions to Revenue is appropriate; the Court fixed the formula and directed payment. - HELD THAT: - Applying proportionality to the compared amounts (decretal total vis-a -vis total tax claims for the statutory period), the Court adopted a 36:64 ratio and restricted scaling down to 64% of amounts already paid by the Custodian to the Income Tax Department. The Court computed the Custodian disbursements and ordered Revenue to pay Rs. 49,38,00,000 to the Custodian with interest at 6% per annum from 11th June 2008, and reserved liberty for applicants to apply further after deposit. [Paras 86, 87, 88, 89]

Revenue directed to pay Rs. 49,38,00,000 to the Custodian with interest @6% p.a. from 11.6.2008; liberty to applicants to apply after deposit.

Final Conclusion: The Special Court held that the assessments for the statutory period were best-judgment assessments and suffered miscarriage of justice and disproportion; applying the proportionality test and finding nexus between the decretal claims and assessed income, the Court scaled down the tax liability and directed the Revenue to pay Rs. 49,38,00,000 to the Custodian with interest at 6% per annum from 11 June 2008, liberty being reserved to the applicants to apply further after deposit.

High pitched scrutiny assessment - Institutional grievance redressal mechanism - Non speaking order - Appellate remedy - Effect of Local Committee opinion on pending appeals - Opportunity of hearing - Merits adjudication by Appellate Authority

High pitched scrutiny assessment - Institutional grievance redressal mechanism - Effect of Local Committee opinion on pending appeals - Whether the Local Committee's finding that assessments are not 'high pitched' operates as an alternative to or bars the appellate remedy and prejudices the assessee's rights in pending appeals. - HELD THAT: - The Court held that the mechanism under Instruction No.17 of 2015 (the Local Committee) is not in lieu of the appellate remedy. The rejection of the petitioner's complaint by the Local Committee does not operate as a substitute for, nor does it bar, the statutory appeals pending before the First Appellate Authority. The assessee's rights to raise all contentions in the pending appeals remain intact, and the Appellate Authority remains the proper fact finding forum to consider and decide the matters on merits, notwithstanding any opinion formed by the Local Committee. [Paras 8, 9]

The Local Committee's opinion that the assessments are not high pitched will not prejudice the petitioner's rights and does not oust or substitute the appellate remedy; the appeals may be decided on merits by the Appellate Authority.

Non speaking order - Merits adjudication by Appellate Authority - Opportunity of hearing - Relief to be granted in view of the Local Committee's non speaking communication and pendency of appeals. - HELD THAT: - Without expressing any view on the merits of the assessment orders, the Court directed that the pendency of appeals must be remedied by substantive adjudication. The Appellate Authority (the fifth respondent) was directed to take up the appeals for Assessment Years 2010 2011 to 2015 2016 and decide them on merits and in accordance with law, after affording the petitioner due opportunity of hearing. The Appellate Authority's consideration is to be uninfluenced by any report or opinion communicated by the Local Committee. [Paras 9, 10]

The appeals shall be taken up and disposed of on merits by the Appellate Authority after hearing the petitioner, uninfluenced by the Local Committee's communication.

Final Conclusion: Writ petition disposed by directing the Appellate Authority to decide the appeals relating to Assessment Years 2010-2011 to 2015-2016 on merits and in accordance with law after giving due opportunity of hearing within eight weeks; the Local Committee's communication that the assessments are not high pitched does not prejudice the petitioner's right to pursue the pending appeals.

Reasonable rate of commission - Appellate interference on evaluation of evidence - Substantial question of law

Reasonable rate of commission - Appellate interference on evaluation of evidence - Second round of litigation - Whether the ITAT was justified in reducing the commission rate applied to alleged accommodation entries from 2.25% to 0.5% and whether the High Court should interfere with that factual appraisal. - HELD THAT: - The ITAT reviewed the material including the Assessing Officer's fixation of 2.25% which had been based on certain notings on loose sheets seized during search; the reliability of those notings was questioned. On consideration of the totality of facts and the circumstance that different rates were charged in different transactions, the ITAT exercised its fact finding function and formed the view that 0.5% was a reasonable rate of commission/profit in respect of such activities. The High Court declined to disturb the ITAT's conclusion, observing that no substantial question of law arose from the ITAT's factual appraisal and that this litigation represented a second round which should come to an end. The Court therefore refrained from interfering with the appellate tribunal's evaluation of evidence and the rate it adopted. [Paras 3, 4, 5]

The ITAT's reduction of the commission rate to 0.5% was not interfered with; the Revenue's appeals are dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeals and refused to interfere with the ITAT's factual determination reducing the commission rate to 0.5%, holding that no substantial question of law warranted interference.

Refund of tax/TDS - interest on delayed refund - virtual bank account for refund remittance - requirement of cancelled cheque for crediting refund - alternate modes of remittance (RTGS/NEFT/cheque/demand draft)

Refund of tax/TDS - interest on delayed refund - Petitioner's entitlement to refund of the taxed amount assessed for assessment year 2015-2016 together with interest - HELD THAT: - The Court recorded that assessment for assessment year 2015-2016 concluded under the Act resulted in a refund being due to the petitioner. The respondents had not released the refund despite the portal showing the refund as processed but withheld. On the material before it the Court directed that the amount found refundable be paid to the petitioner along with the interest to which the petitioner is entitled. The direction resolves the petitioner's claim to the refund on the merits insofar as payment and interest are concerned. [Paras 7]

The respondents are directed to refund the amount due for assessment year 2015-2016 to the petitioner along with interest in an expedited manner.

Virtual bank account for refund remittance - requirement of cancelled cheque for crediting refund - alternate modes of remittance (RTGS/NEFT/cheque/demand draft) - Permissibility of remitting the refund notwithstanding the absence of a cancelled cheque for a virtual bank account and the manner of remittance to be adopted by the Revenue - HELD THAT: - The Court noted that the petitioner had furnished virtual bank account details and that a cancelled cheque leaf-sought by the respondents as documentary proof-was not available for such an account. Given the withholding of the refund on that procedural ground and representations by the petitioner, the respondent-Revenue stated that alternative arrangements (RTGS/NEFT or issuance of cheque/demand draft) could be made to effect the refund. The Court accepted that stance and directed the respondents to proceed with remittance by such alternate modes, thereby removing the procedural impediment to payment. [Paras 6, 7]

Respondents shall, without further delay, remit the refund by alternative means (RTGS/NEFT or cheque/demand draft) where a cancelled cheque for the virtual account is not available, and complete the payment expeditiously.

Final Conclusion: Writ petition disposed of by directing the respondents to refund the amount found due for assessment year 2015-2016, with interest, and to effect payment forthwith by alternate modes (RTGS/NEFT or cheque/demand draft) where a cancelled cheque for the virtual account is not available.

Penalty under s.271(1)(c) of the Income Tax Act - addition on account of unexplained cash deposits treated as undisclosed income - onus of furnishing satisfactory explanation for cash deposits - validity of show cause notice where penalty founded on concealment or furnishing inaccurate particulars - reduction of penalty in proportion to reduction in quantum by appellate authority

Penalty under s.271(1)(c) of the Income Tax Act - addition on account of unexplained cash deposits treated as undisclosed income - onus of furnishing satisfactory explanation for cash deposits - validity of show cause notice where penalty founded on concealment or furnishing inaccurate particulars - Sustainability of penalty for AY 2012-13 following partial confirmation of additions on account of unexplained cash deposits. - HELD THAT: - The Tribunal upheld the CIT(A)'s confirmation of penalty under s.271(1)(c) for AY 2012-13 on the basis that the assessee failed to furnish a satisfactory explanation for cash deposits and the co ordinate ITAT in quantum proceedings had sustained 50% of the deposits as unexplained income. The Tribunal accepted the view that the AO had clearly identified the nature of default (concealment of particulars and furnishing of inaccurate particulars) and that the penalty finding was supported by the factual conclusion that explanation was unsatisfactory. The Tribunal rejected the assessee's contention of a defective notice and distinguished the relied authority where third party affidavits supported explanation; no such corroboration existed here. Consequently, penalty was sustained but scaled down in accordance with the quantum upheld in the ITAT's quantum order. [Paras 5, 9, 10, 11]

Appeal for AY 2012-13 dismissed; penalty sustained as reduced by the CIT(A) corresponding to the quantum upheld in quantum proceedings.

Penalty under s.271(1)(c) of the Income Tax Act - addition on account of unexplained cash deposits treated as undisclosed income - reduction of penalty in proportion to reduction in quantum by appellate authority - Whether penalty for AY 2013-14 should be reworked in accordance with the ITAT's reduction of additions in quantum proceedings. - HELD THAT: - The Tribunal observed that the penalty confirmed by the CIT(A) had been based on the full amount of deposits because the ITAT's subsequent quantum decision reducing additions to 50% was not available to the CIT(A) at the time of its appellate penalty order. In view of the ITAT's quantum determination restricting additions to 50% of deposits, the Tribunal directed the AO to re compute the penalty for AY 2013-14 consistent with the amount of additions as quantified by the ITAT, thereby reducing the penalty in tune with the quantum reduction. [Paras 12]

Appeal for AY 2013-14 partly allowed; AO directed to rework penalty in accordance with the quantum fixed by the ITAT.

Final Conclusion: The Tribunal dismissed the appeal for AY 2012-13, sustaining the reduced penalty corresponding to the ITAT's quantum findings, and partly allowed the appeal for AY 2013-14 by directing recomputation of penalty in accordance with the ITAT's reduction of additions.

Speculative business - derivative transactions excluded from speculative transactions - Explanation to section 73 - deeming fiction treating delivery transactions in shares as speculative loss for companies - exceptions to Explanation to section 73 (composition of gross total income; principal business of company) - set-off of speculative loss

Derivative transactions excluded from speculative transactions - set-off of speculative loss - Loss arising from derivative (eligible) transactions is not a speculative loss and is allowable as ordinary business loss for set-off. - HELD THAT: - The Tribunal held, following a Coordinate Bench decision in the assessee's earlier year, that derivative transactions fall within proviso (d) to the definition of speculative transaction in section 43(5) and are therefore excluded from being speculative business. Once so excluded, the Explanation to section 73 - which creates a deeming fiction applicable to companies in respect of purchase and sale of shares - is inapplicable to derivative losses. The question was treated as essentially legal and, in view of the authoritative view taken by the Coordinate Bench and the statutory exclusion, the assessee's claim to treat the derivative loss as ordinary business loss was allowed. [Paras 3]

Allowed: loss from derivative transactions (Rs. 44,46,409/-) treated as ordinary business loss and permitted for set-off.

Explanation to section 73 - deeming fiction treating delivery transactions in shares as speculative loss for companies - exceptions to Explanation to section 73 (composition of gross total income; principal business of company) - Loss from delivery-based trading in shares is a speculative loss for the purposes of section 73 and cannot be set off against non-speculative business income in the facts of the case. - HELD THAT: - The Tribunal analysed the Explanation to section 73 which deems loss arising from any part of a company's business comprising purchase and sale of shares to be speculative regardless of actual delivery. The Explanation contains specified exceptions: (i) where aggregate income under non-business heads exceeds business income and (ii) where principal business is banking or lending, with a later third exception for companies whose principal business is trading in shares inserted w.e.f. 01.04.2015. On facts, the assessee did not satisfy the first exception because business loss exceeded non-business income when compared on the basis of relative figures, following the Calcutta High Court principle that 'income' includes losses for this comparison. The claim of retrospective application of the 2014 amendment (third exception) was rejected in light of the Supreme Court decision in Snowtex Investment Ltd. which held the amendment not clarificatory/retrospective. Consequently, the Explanation applied and the loss from delivery-based share trading (Rs. 22,89,758/-) was held to be speculative and not allowable for set-off against non-speculative profits. [Paras 5, 6]

Dismissed: loss from delivery-based share trading held to be speculative loss and not eligible for set-off against non-speculative business income.

Final Conclusion: Appeal partly allowed: derivative transaction loss allowed as ordinary business loss; loss from delivery-based share trading held to be speculative under Explanation to section 73 and disallowed for set-off.

Transfer pricing adjustment - arm's length price - operating income versus capital receipt - subvention/subsidy treatment - intra-group service charges - Comparable Uncontrolled Price (CUP) vs Transactional Net Margin Method (TNMM) - benchmarking and comparability - profit level indicator (PLI) - proportionate transfer pricing adjustment - depreciation on assets installed at customers' premises

Operating income versus capital receipt - subvention/subsidy treatment - profit level indicator (PLI) - Nature and treatment of subvention received from parent: taxability and inclusion in operating income for PLI - HELD THAT: - Applying the authoritative precedent that voluntary payments by a parent to a loss-making Indian subsidiary can be for protecting capital, the Tribunal held the subvention received from Nalco US to be a capital receipt and therefore not taxable in the hands of the assessee. Separately, on the question whether that (capital) receipt must be treated as operating income for computing the PLI, the Tribunal found that the onetime promotional allowance produced the reported profit for the year and was compensatory for revenue expenses (including relocation) and not an extraordinary item; accordingly the portion of the subvention attributable to the year under consideration must be included in operating receipts for PLI computation. The Tribunal directed the Assessing Officer to include the amount relatable to the instant assessment year and re-compute PLI, rejecting the DRP direction to set off the subsidy against TP adjustment where the receipt is held to be capital and non-taxable. [Paras 16, 18]

Subvention held to be a capital receipt (not taxable) but to be treated as operating income for computing PLI limited to the amount relatable to AY 2012-13; directions given to re-compute PLI.

Depreciation on assets installed at customers' premises - Allowability of depreciation on plant and machinery installed at customers' premises - HELD THAT: - Following the Tribunal's earlier decision in the assessee's own case for an earlier year, the claim for depreciation on plant and machinery installed at customers' premises was allowed. The Tribunal applied the parity of reasoning from the earlier Kolkata Bench order and permitted the depreciation claim. [Paras 20]

Depreciation claim on assets installed at customers' premises allowed.

Intra-group service charges - arm's length price - benchmarking and comparability - Whether intra-group charges for regional management assistance and headquarter common expenses are at arm's length and liable to be benchmarked at Nil - HELD THAT: - The Tribunal examined the agreements, contemporaneous documents, allocation methodology and certificates from an independent accountant and found that the assessee had demonstrated both the receipt of services and benefit therefrom. Relying on precedents it held that the TPO cannot substitute commercial judgment of the assessee by declaring such transactions Nil where evidence of services and an accepted allocation key exist. For US-provided headquarter services the Tribunal additionally noted that the receipts were being treated as fees for included services in the hands of the US entity, which weighs against benchmarking the payment at Nil. Accordingly, the adjustments by TPO/DRP to take the payments at Nil were reversed. [Paras 32, 35]

Adjustments setting intra-group service payments at Nil are reversed; payments held to be at arm's length and no TP adjustment warranted on that account.

Comparable Uncontrolled Price (CUP) vs Transactional Net Margin Method (TNMM) - arm's length price - benchmarking and comparability - Appropriateness of CUP method for benchmarking royalty payments - HELD THAT: - The assessee applied the CUP method using comparable royalty/commission agreements and pointed out prior consistency in earlier years and RBI approval of a 6% rate for part of the period. The Tribunal accepted that where royalty rates had prior approval and comparable CUP data existed, CUP is the most appropriate method; it relied on authority recognizing approved rates as relevant CUP data. Consequently the Tribunal held the royalty payments at the contractual rates (6%/4%) to be at arm's length, directed royalty to be excluded from aggregate benchmarking with manufacturing transactions, and ordered recalculation of PLI accordingly. [Paras 42, 43]

CUP was the appropriate method; royalty payments held to be at arm's length and no adjustment warranted; directed exclusion of royalty from aggregated PLI computation and recalculation.

Profit level indicator (PLI) - benchmarking and comparability - Final selection of comparables and benchmarking for manufacturing segment (direction to rework margins) - HELD THAT: - Because the Tribunal's decisions on subvention, intra-group services and royalty materially affect the assessee's operating margin, the Tribunal declined to decide inclusion/exclusion of disputed comparables at this stage as that would be academic. It directed the Assessing Officer to first re-compute the assessee's PLI/margins in accordance with the Tribunal's directions and then consider the assessee's objections and contemporaneous data to decide final selection of comparables and any consequential adjustments. [Paras 50]

Matter remitted to Assessing Officer to re-work PLI/margins in light of Tribunal's directions and then determine final set of comparables and benchmarking.

Proportionate transfer pricing adjustment - transfer pricing adjustment - Whether TP adjustment must be restricted proportionately to the value of international transactions - HELD THAT: - Applying the law laid down by the Supreme Court and the Bombay High Court, the Tribunal held that any transfer pricing adjustment must be proportionate to the quantum of international transactions with associated enterprises and not applied to the assessee's entire turnover. The AO was directed to verify the assessee's computations of proportionate adjustment and to implement the proportionate adjustment after re-calculating margins in line with the Tribunal's other directions. [Paras 54]

TP adjustment to be proportionately restricted to associated enterprise transactions; Assessing Officer directed to give effect accordingly.

Benchmarking and comparability - transfer pricing adjustment - Miscellaneous contested points disposed of (use of multiple year data; +/-5% range; interest under section 234B; initiation of penalty proceedings) - HELD THAT: - The Tribunal dismissed the assessee's challenge on use of multiple-year data and the claim for the +/-5% range, and found the interest claim consequential and dismissed it. The plea against initiation of penalty proceedings was held premature and dismissed. [Paras 55, 56, 57]

Challenges on multiple-year data and +/-5% benefit dismissed; interest under section 234B and penalty initiation claims dismissed (penalty held premature).

Final Conclusion: The appeal is partly allowed: subvention held capital (not taxable) but to be included as operating income for PLI for the amount relatable to AY 2012-13; depreciation on customer installed assets allowed; intra group service charges and royalty payments held to be at arm's length (no TP adjustments); TP adjustments must be proportionately restricted to international transactions; PLI and comparables remitted to the Assessing Officer for recomputation and final selection in accordance with these directions; several other contested pleas dismissed.

Charitable purpose as defined in Section 2(15) - proviso to Section 2(15) restricting charitable purpose where activity is trade, commerce or business - trade, commerce or business (and activity of rendering service in relation thereto) - exemption under Section 11 - revisionary jurisdiction under Section 263

Charitable purpose as defined in Section 2(15) - proviso to Section 2(15) restricting charitable purpose where activity is trade, commerce or business - trade, commerce or business (and activity of rendering service in relation thereto) - exemption under Section 11 - Whether the society's activity of arranging employment/placement for ex-servicemen constitutes a charitable purpose and is hit by the proviso to Section 2(15), thereby disentitling it from exemption under Section 11. - HELD THAT: - The Tribunal applied the amended scope of Section 2(15) but held that the proviso operates only where the activity is carried on as trade, commerce or business or as a service in relation thereto with the object of earning profit in the assessee's own right. The assessee's principal object is rehabilitation and economic upliftment of financially and educationally weak ex-servicemen by facilitating placements; the activity is an interface to secure employment for such beneficiaries rather than a business enterprise conducted for independent profit. The Tribunal noted the organisational facts: members are low-ranked ex-servicemen lacking technical training, the society merely organizes and places them, and retains only a nominal fee to meet administrative costs while disbursing the bulk of receipts to the ex-servicemen. The Tribunal applied the test of predominant object derived from precedent (profit making versus subserving charitable purpose) and found that the predominant object was charitable rehabilitation and not profit-making; occasional or incidental receipts do not convert the activity into trade or business. Consequently the activity did not fall within the proviso to Section 2(15) and continued to qualify as a charitable purpose entitled to exemption under Section 11. [Paras 5, 6, 7, 8, 9]

The activity of arranging employment/placement for ex servicemen is charitable in nature and does not fall within the proviso to Section 2(15); exemption under Section 11 rightly applies.

Revisionary jurisdiction under Section 263 - exemption under Section 11 - Whether the Commissioner (Exemption) was justified in invoking revisionary jurisdiction under Section 263 to revise the assessment for denying the benefit of Section 11. - HELD THAT: - The Tribunal held that the AO had allowed the exemption under Section 11 after applying a view consistent with the assessee's objects and past practice; the view taken by the AO was not shown to be unsustainable in law. The Principal CIT's conclusion that the activities were commercial overlooked the facts and predominant charitable intent; the change of view by the revisional authority substituted his subjective opinion for that of the AO without establishing that the assessment order was erroneous and prejudicial to revenue. Given that identical activities had been consistently treated as charitable in past assessments and the AO's approach was tenable, exercise of revisionary jurisdiction under Section 263 was unjustified. [Paras 8, 9]

The revision under Section 263 was unjustified; the assessment order allowing exemption under Section 11 is restored.

Final Conclusion: The appeal is allowed: the Tribunal holds that the society's placement/rehabilitation activity for ex servicemen is charitable and not caught by the proviso to Section 2(15), and that invocation of revisionary jurisdiction under Section 263 to deny Section 11 exemption was unjustified; the AO's order is restored for AY 2012-13.

Levy of fees under section 234E - processing of TDS statements under section 200A - prospective effect of statutory amendment - appealability of intimation generated after processing of TDS statements

Levy of fees under section 234E - processing of TDS statements under section 200A - Whether the Assessing Officer could charge late filing fees under section 234E by issuing intimations under section 200A in respect of TDS statements filed for periods prior to 01.06.2015. - HELD THAT: - The Tribunal held that although section 234E (levy of fees for late filing of TDS/TCS statements) was inserted w.e.f. 01.07.2012, the power of the prescribed authority to compute and collect such fees while processing TDS statements under section 200A arose only upon substitution of clause (c) to section 200A(1) by the Finance Act, 2015 w.e.f. 01.06.2015. Prior to that substitution the prescribed authority had power to compute sums deductible and interest but did not have enabling statutory power to charge fees under section 234E in the course of section 200A processing. Consequently intimations issued under section 200A seeking to levy section 234E fees for defaults occurring before 01.06.2015 were beyond authority and could not be sustained. [Paras 25, 29, 34]

Intimations under section 200A levying fees under section 234E for periods prior to 01.06.2015 are invalid; such fees are not chargeable by AO while processing TDS statements for periods before 01.06.2015.

Prospective effect of statutory amendment - Whether the insertion of clause (c) to section 200A(1) by the Finance Act, 2015 is clarificatory/retrospective or prospective in nature. - HELD THAT: - Having regard to the memorandum explaining the Finance Bill, 2015 and the text of the amendment, the Tribunal concluded the amendment was procedural and effected an enabling power that did not exist earlier; the Legislature specified the operative date as 01.06.2015 and there is no indication that the amendment was intended to operate retrospectively or as a clarification. Established presumption against retrospectivity therefore applies and the amendment must be given prospective effect from 01.06.2015. [Paras 31, 32, 33]

Insertion of clause (c) to section 200A(1) is prospective with effect from 01.06.2015 and cannot be applied to intimations issued for periods before that date.

Appealability of intimation generated after processing of TDS statements - Whether an intimation issued under section 200A after processing of TDS statements is appealable before the Commissioner (Appeals) under the departmental appellate scheme. - HELD THAT: - The Tribunal referred to the memorandum explaining the Finance Bill, 2015 which treats intimation generated after processing of TDS statements as (i) rectifiable under section 154, (ii) appealable under section 246A, and (iii) deemed to be a notice of payment under section 156. The Tribunal held that an intimation issued under section 200A(1) is therefore appealable under section 246A(1)(a) (and proceedings under section 250/253 follow), and reversed the CIT(A)'s conclusion to the contrary. The Tribunal admitted the appeals and proceeded to decide the merits. [Paras 37]

Intimations issued under section 200A after processing TDS statements are appealable to the Commissioner (Appeals) under section 246A and hence admissible before the Tribunal on further appeal.

Levy of fees under section 234E - Remedial direction as to the fate of demands raised by intimations under section 200A that charged section 234E fees for periods prior to 01.06.2015. - HELD THAT: - Applying the conclusions that (a) the AO lacked power to charge section 234E fees in section 200A intimations for periods prior to 01.06.2015 and (b) the amendment enabling such computation is prospective, the Tribunal set aside the CIT(A)'s orders and remanded the matters to the Assessing Officer with directions to delete the portion of late fee levied for periods prior to 01.06.2015. The Tribunal clarified that the AO remains competent to levy section 234E fees only from 01.06.2015 up to the actual date of filing. [Paras 6]

Matter remanded to AO with direction to delete section 234E late fees levied for periods prior to 01.06.2015; AO may levy such fees only from 01.06.2015 to date of actual filing.

Final Conclusion: The Tribunal allowed the appeals: intimations under section 200A charging late fees under section 234E for defaults prior to 01.06.2015 are invalid; the amendment to section 200A(1) is prospective from 01.06.2015; intimations under section 200A are appealable under section 246A; the matters are remitted to the Assessing Officer with directions to delete late fees for periods before 01.06.2015 while preserving the AO's power to levy section 234E fees from 01.06.2015 onwards.

Additional depreciation under Section 32(1)(iia) - production or manufacture of an article or thing - job work for supply of goods - value addition resulting in a new marketable product - distinction between supply of construction material and civil contract work

Additional depreciation under Section 32(1)(iia) - production or manufacture of an article or thing - job work for supply of goods - distinction between supply of construction material and civil contract work - Claim of additional depreciation on new plant and machinery purchased for production of GSB and aggregate was allowable because the assessee was engaged in manufacturing/production and not merely a civil contractor. - HELD THAT: - The Assessing Officer disallowed additional depreciation on the premise that the assessee was a civil contractor performing contractual work. The Tribunal found that the assessee operated a crusher unit which converted stone blocks into aggregate (GSB) and supplied that aggregate to infrastructure companies. The conversion process produced a new, marketable product distinct from the raw material and involved identifiable machinery and stages of production. The CIT(A) examined the production process, the breakup of machines used, and concluded that the assessee derived income from manufacture on its own and on job-work basis. The Tribunal agreed that the activity was one of production/manufacture, not construction contracting, and held that the conditions for additional depreciation under Section 32(1)(iia) were satisfied.

The order of the CIT(A) allowing additional depreciation on the new plant and machinery is upheld; the Assessing Officer's disallowance is reversed.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal affirms the CIT(A)'s allowance of additional depreciation for plant and machinery used in the manufacture/production of aggregate (GSB) for Assessment Year 2008-09.

Undisclosed income - penalty under section 271AAB - surrender made during search - incriminating material - statement under section 132(4)

Undisclosed income - penalty under section 271AAB - surrender made during search - incriminating material - Validity of levy of penalty under section 271AAB on surrendered amounts during search where no separate asset or document is pointed out by Revenue. - HELD THAT: - The Tribunal held that the assessee's unretracted written surrender made during the search, which specifically admitted discrepancies in books of account, unrecorded entries, and undisclosed income from commission/brokerage (as reproduced in the surrender letter), constituted incriminating material representing "undisclosed income" for the purposes of section 271AAB. The admission covered documents and rough notings found during the search and was not merely a vague or general surrender. Having accepted and filed the surrendered amount in the return and paid tax and interest, the case falls within clause (a) of section 271AAB(1) and attracts penalty at 10% of the undisclosed income. The Tribunal distinguished earlier decisions relied upon by the assessee on the ground that in those cases there was either no specific admission, the surrender was general/nonspecific, or the factual matrix showed the material to be recorded elsewhere; none of those distinguishing features existed here. Accordingly, the Tribunal sustained the findings of the authorities below that the surrender constituted sufficient incriminating material and that penalty under section 271AAB was properly levied. [Paras 10, 11, 13]

The penalty under section 271AAB was validly levied on the surrendered income; the confirmations of penalty by the lower authorities are upheld and the appeals are dismissed.

Final Conclusion: The Tribunal upheld the levy of penalty under section 271AAB on the surrendered amounts for 2014-15, holding that the assessees' specific, unretracted surrender constituted incriminating material amounting to undisclosed income; both appeals are dismissed.

Assessment under Section 153A in case of search or requisition - Reassessment of completed assessments only on basis of incriminating material - Reiteration of completed assessment where no seized or incriminating material exists - Nexus requirement between additions and materials unearthed during search

Assessment under Section 153A in case of search or requisition - Reassessment of completed assessments only on basis of incriminating material - Nexus requirement between additions and materials unearthed during search - Validity of addition of share application money made while framing assessment under Section 153A when the original assessment for the year had attained finality and no incriminating or seized material relating to that addition was found during the search - HELD THAT: - The Tribunal found as a fact that the original assessment for AY 2006-07 had attained finality at the time of search and that the addition of share application money was not based on any incriminating material seized during the search but on the balance sheet already scrutinised in the original assessment. Applying the principle that assessment under Section 153A must have a nexus with incriminating material unearthed by the search, the Tribunal relied on the legal propositions laid down by the High Court in CIT vs. Kabul Chawla and Pr. CIT vs. Meeta Gutgutia , namely that completed assessments can be reopened under Section 153A only if incriminating material justifying such interference is found in the search or on requisition of documents, and that in the absence of such material a completed assessment should be reiterated. On these grounds the Tribunal held that additions made by the AO, being founded on the balance sheet already examined in the original assessment and not on any seized or incriminating material, were beyond the scope of proceedings under Section 153A. [Paras 7, 8, 9, 10, 11]

The addition of the share application money was deleted as beyond the scope of assessment under Section 153A in absence of any incriminating material found during the search.

Final Conclusion: The appeal is allowed; the addition of the share application money for AY 2006-07 is deleted because interference with the completed assessment under Section 153A was not justified in the absence of any incriminating/seized material.

Addition under section 68 - identity, genuineness and creditworthiness of creditors - onus of proof under section 68 - reliance on statements recorded during search/survey - principles of natural justice and right to cross examine / disclosure - need for independent enquiry by Assessing Officer before making additions

Addition under section 68 - identity, genuineness and creditworthiness of creditors - onus of proof under section 68 - reliance on statements recorded during search/survey - need for independent enquiry by Assessing Officer before making additions - principles of natural justice and right to cross examine / disclosure - Whether the addition made under section 68 in respect of unsecured loans of the assessee is sustainable. - HELD THAT: - The Tribunal found that the assessee had produced documentary evidence to establish the identity, genuineness and creditworthiness of the lenders (confirmations, PANs, ITR acknowledgements, bank statements, audited financials, loan confirmations, interest payments with TDS and responses to notices under section 133(6)). Once these primary ingredients were discharged, the burden shifted to the Revenue to disprove the transactions. The Assessing Officer, however, rested the addition solely on statements attributed to persons in the Praveen Kumar Jain group recorded during search/survey and did not furnish those statements to the assessee nor afford an opportunity for cross examination; nor did the AO undertake any independent enquiries or gather corroborative evidence to controvert the documents produced by the assessee. In those circumstances, and following antecedent coordinate decisions and principles that evidence produced by the assessee cannot be brushed aside casually, the Tribunal upheld the CIT(A)'s conclusion that the AO failed to establish the transactions as sham or accommodation entries and therefore the addition under section 68 could not be sustained. [Paras 8, 11, 12, 22]

Addition under section 68 deleted; Assessing Officer directed to withdraw the addition.

Addition under section 68 - need for independent enquiry by Assessing Officer before making additions - Whether the consequential disallowance of commission expenses (made on the assumption of cash payments linked to the impugned loans) survives once the section 68 addition is deleted. - HELD THAT: - The consequential disallowance was founded upon the assumption that the loan transactions were bogus and that commission payments were paid in cash. Having held that the section 68 addition could not be sustained because the AO did not discharge his burden to disprove the documented loan transactions, the Tribunal found that the foundation for the commission disallowance disappeared. Accordingly the consequential disallowance could not survive. [Paras 23]

Consequential disallowance of commission expenses deleted.

Final Conclusion: The Revenue's appeal is dismissed: the additions made under section 68 in respect of unsecured loans for AY 2012-13 and the consequential disallowance of commission expenses are set aside because the assessee discharged the initial onus and the Assessing Officer failed to produce independent corroborative evidence, did not disclose relied upon statements nor afford opportunity of cross examination.

Penalty under section 271(1)(b) - Notice under section 142(1) - Scope of proceedings under section 153C - Failure to sign consent/consent waiver form - Reasonable and bona fide belief under section 273B - Obligation to produce documents for assessment inquiry

Penalty under section 271(1)(b) - Notice under section 142(1) - Failure to sign consent/consent waiver form - Obligation to produce documents for assessment inquiry - Levy of penalty for alleged non compliance with notice u/s.142(1) on account of not signing the consent/waiver form. - HELD THAT: - The Tribunal found that the sole ground for imposing penalty was non signing of a consent waiver form. The assessee repeatedly denied having any HSBC Geneva account, responded to notices, produced sworn statements under summons and identified that the confronted document was unsigned and unclear as to the bank (appearing to relate to LGT rather than HSBC). No incriminating material or specific bank identified document was found or confronted to rebut the assessee's denials, and no substantive or protective additions were made in assessment. Section 142(1) requires production of documents or information that the assessee possesses; where the assessee denies possession and there is no material contradicting that denial, penalising for non compliance is not justified. Applying these facts, the Tribunal held that the levy of penalty under section 271(1)(b) could not be sustained on the basis that the assessee refused to sign the consent form. [Paras 9, 10, 13]

Penalty under section 271(1)(b) quashed; appeals allowed for statistical purposes.

Scope of proceedings under section 153C - Notice under section 142(1) - Penalty under section 271(1)(b) - Reasonable and bona fide belief under section 273B - Whether the Assessing Officer had specific information/documents showing the alleged HSBC Geneva account and whether the assessee acted on reasonable bona fide belief (legal advice) warranting verification before confirming penalty. - HELD THAT: - The Tribunal noted a coordinate bench's decision confirming penalty in a different factual matrix (Sanjay Dalmia) but distinguished it on the absence here of any document clearly identifying HSBC Geneva or any material linking the alleged account to the assessee. The Tribunal accepted the submission that acting on legal advice not to sign a consent form can constitute a reasonable and bona fide belief under section 273B. However, because the record did not clearly show whether the Assessing Officer possessed any specific bank identified document or whether the assessee had asserted the legal advice defence in the proceedings, the Tribunal directed limited verification. The Assessing Officer is to examine the assessment record to ascertain (a) whether any document on record specifically named HSBC Geneva in relation to the assessee, and (b) whether the assessee had pleaded that she acted on legal advice; the AO should then decide further action. [Paras 14, 15, 16, 17]

Matter remanded to the Assessing Officer for verification of (i) existence of any specific document naming HSBC Geneva tied to the assessee, and (ii) whether the assessee had relied on legal advice (reasonable bona fide belief); AO to decide thereafter.

Final Conclusion: The Tribunal set aside the penalty imposed under section 271(1)(b) on the facts that the assessee had responded to notices, denied possession of the alleged HSBC Geneva account supported by sworn statements, and there was no material confronting that denial; additionally, the Tribunal recognised that acting on legal advice can constitute a reasonable and bona fide belief under section 273B and remanded limited factual verification to the Assessing Officer regarding existence of any specific HSBC identified document on record and whether the legal advice plea had been taken, leaving further action to the AO.

Presence of lawyer during interrogation at visible but not audible distance - videography of recording of statement and examination of goods - summons under Section 108 of the Customs Act and right to counsel during interrogation

Presence of lawyer during interrogation at visible but not audible distance - summons under Section 108 of the Customs Act and right to counsel during interrogation - Whether the petitioner is entitled to have an advocate present at a visible but not audible distance during interrogation by DRI officers. - HELD THAT: - The Court examined precedent including the Apex Court's direction in Vijay Sajnani and the decision in Birendra Kumar Pandey where, having regard to facts and earlier authorities, the presence of counsel within sight but beyond hearing distance was held to be an appropriate limited protection to guard against coercion. The High Court noted conflicting treatments by other High Courts and the Apex Court's observations on related pre-arrest relief but found those orders did not decide the precise question before it. Applying the principle recognised by the Supreme Court and Parliamenting the limited protection sought by the petitioner, the Court directed that the petitioner be interrogated in the presence of an advocate who shall be visible to the petitioner but kept beyond hearing distance during the interrogation conducted by DRI officers in relation to F.No.DRI/MZU/E/INT-65/2019. [Paras 7, 11, 14]

The petitioner is permitted to have an advocate present at a visible but not audible distance during interrogation by the DRI, in accordance with the Supreme Court's directions in Vijay Sajnani.

Videography of recording of statement and examination of goods - Whether the interrogation and examination proceedings should be videographed. - HELD THAT: - The Court noted the assurance given by the Department in Rajinder Arora that recording of the statement and examination of goods would be videographed and, having regard to the safeguards and precedents, directed that the proceedings in the present matter be video-graphed. This was ordered as an incident of the limited protective measures granted to ensure transparency of the interrogation process. [Paras 12, 14]

The proceedings shall be videographed in terms of the orders referred to in Rajinder Arora.

Final Conclusion: Writ petition allowed to the limited extent that the petitioner shall be interrogated by DRI officers in the presence of an advocate at a visible but not audible distance and the proceedings shall be videographed; the petition is disposed of.

Presence of advocate during interrogation at visible but not audible distance - videography of interrogation as a protective safeguard - protection against coercive methods during custodial interrogation

Presence of advocate during interrogation at visible but not audible distance - protection against coercive methods during custodial interrogation - videography of interrogation as a protective safeguard - Whether the petitioner is entitled to have an advocate present at a visible but not audible distance during interrogation by DRI officers and to have the proceedings videographed. - HELD THAT: - The High Court examined earlier decisions including the Apex Court's directions in Birendra Kumar Pandey and in Vijay Sajnani which recognised limited protection by permitting the presence of an advocate within visible but beyond hearing distance to guard against coercion. The Court noted contrary treatment in a recent Telangana High Court order and subsequent Supreme Court leave-denial in related proceedings, but observed those authorities principally concerned pre-arrest protection and did not address the precise issue before this Court. Having regard to the binding Supreme Court observations permitting counsel's presence at a visible but not audible distance as a limited safeguard, and to the assurance in Rajinder Arora regarding videography of statements and examination of goods, the Court found it appropriate to grant the limited relief sought. The Court therefore directed that the petitioner be interrogated in the presence of an advocate at a visible but not audible distance and that the interrogation be videographed, following the manner indicated in the cited Supreme Court precedents, as a measure to prevent coercive methods while preserving the investigatory process. [Paras 7, 11, 14]

Petitioner entitled to be interrogated in presence of an advocate at a visible but not audible distance and to have the proceedings videographed; writ petition allowed to that limited extent.

Final Conclusion: Writ petition allowed in part: petitioner to be interrogated by DRI officers in the presence of an advocate within visible but beyond hearing distance, and the interrogation proceedings to be videographed, in accordance with the Supreme Court directions relied upon.

Finality of adjudication and redemption - Transfer of residence concession - Possession period for TR entitlement - Undervaluation and burden of proof - Customs valuation hierarchy - transaction value and sequential application of alternate rules - Confiscation of imported goods

Finality of adjudication and redemption - Validity of fresh adjudication proceedings against household goods which had been released on payment of duty, redemption fine and personal penalty. - HELD THAT: - The Tribunal applied the principle that once goods released on payment of duty and redemption fine following adjudication attain finality, initiation of fresh adjudication in respect of the same redeemed goods is not sustainable. Reliance on the Apex Court view in Mohan Meakin Ltd. was accepted to hold that fresh proceedings against the same goods, after redemption, are ab initio void. The adjudicating authority's attempt to re-adjudicate household items already redeemed was therefore held to be legally untenable.

Second adjudication proceedings in respect of the redeemed household goods are not sustainable; such proceedings are set aside.

Transfer of residence concession - Possession period for TR entitlement - Whether the appellant was entitled to claim TR benefit in respect of the imported motor cycle. - HELD THAT: - The Tribunal examined the Import Policy requirement that an NRI transferring residence after the requisite period may import a vehicle subject to conditions including prior possession for the prescribed period. The appellant produced sovereign documents (sale letter, transfer certificate) showing purchase/transfer in March 2017 and import by Bill of Entry dated 31.07.2018, demonstrating possession for more than one year. On the documentary record the Tribunal accepted that the appellant satisfied the possession requirement and was entitled to the TR concession despite the adjudicating authority's note of an earlier import in 2009; the available sovereign documents and possession evidence entitled the appellant to TR.

Appellant entitled to claim the TR benefit for the imported motor cycle on the proved possession facts; vehicle to be released accordingly.

Undervaluation and burden of proof - Customs valuation hierarchy - transaction value and sequential application of alternate rules - Sustainability of the adjudicating authority's re-determination of assessable value of the motor cycle and the charge of undervaluation. - HELD THAT: - The Tribunal applied the established valuation principle that the declared transaction value must be rejected only on proper legal grounds and that, if rejected, valuation must proceed sequentially through the alternate rules. The appellant produced contemporaneous import data and sovereign sale documentation showing the transaction value in AED and a consistent depreciated value when compared to earlier imports; the Department relied on an inflated value derived from insurance documents allegedly filed by mistake. The Tribunal held that the Department failed to discharge the burden of proving undervaluation by lawful methods and could not shift the burden to the importer; consequently the adopted higher value was unsustainable.

Departmental re-determination of value is set aside; assessable value to be the declared transaction value and customs duty to be computed accordingly.

Confiscation of imported goods - Whether the motor cycle was liable to confiscation and, if so, for absolute confiscation. - HELD THAT: - The Tribunal noted that the vehicle was freely importable and that confiscation requires legal justification which was not established by the Department. Given the failure to sustain undervaluation and the acceptance of TR entitlement and declared value, there was no legal basis to order confiscation of the motor cycle. The Tribunal also referenced precedent rejecting confiscation where goods are not prohibited and proper valuation/adjudication has not been lawfully made out.

Confiscation of the motor cycle is not sustainable and cannot be ordered.

Final Conclusion: Impugned order set aside; appeal allowed. Customs directed to release the motor cycle on payment of customs duty computed on the declared value and the second adjudication in respect of redeemed household goods quashed.

Summary order. Delay condoned; no interference with the impugned High Court orders; special leave petitions dismissed; pending applications, if any, disposed of.

Eligibility for payment from Investors Protection Fund - transactions executed on exchange platform - arbitral award not creating automatic entitlement to Fund compensation - discretionary grant of compensation subject to non-arbitrary exercise - clarificatory application of regulatory circular

Eligibility for payment from Investors Protection Fund - transactions executed on exchange platform - arbitral award not creating automatic entitlement to Fund compensation - Petitioner's claim for compensation from the Stock Exchange Investors Protection Fund where the underlying transactions were not executed on the exchange platform. - HELD THAT: - The arbitral tribunal had awarded sums in favour of the petitioner against the defaulting broker, but the court held that an arbitration award between investor and broker does not, by itself, compel payment from the Fund. The SEBI Circular dated 23rd February, 2017 (Paragraph 2, clause (b)) makes admissibility for the Fund dependent on transactions executed on the exchange platform, subject to limits and norms. The petitioner's transactions were found to have no trades executed on the exchange and were therefore treated as loan/off-exchange transactions. Applying the policy in the Circular, the Fund's Defaulters Committee recommended rejection and the Trustees accepted that recommendation. The Court observed that although the Fund's grant remains discretionary, the discretion must not be arbitrary; here the decision followed the declared eligibility criterion and was not vitiated by arbitrariness.

Claim rejected: petitioner not eligible for payment from the Fund because the transactions were not executed on the exchange platform and arbitration award alone did not entitle petitioner to Fund compensation.

Clarificatory application of regulatory circular - discretionary grant of compensation subject to non-arbitrary exercise - Whether the SEBI Circular dated 23rd February, 2017 could be applied to the petitioner's claim arising from events predating the Circular. - HELD THAT: - The Court noted that earlier SEBI circulars did not explicitly state exclusion of off-exchange transactions, but found no precedent of the Fund having admitted such claims. The 23rd February, 2017 Circular was held to make explicit an existing policy and to be clarificatory in nature. Consequently, applying the Circular to the petitioner's claim (considered and disposed of after issuance of the Circular) was proper. The Court recognised the Fund's discretionary character but emphasised that the decisionmaking conformed to the declared policy and was not arbitrary.

Application of the 23rd February, 2017 Circular to the petitioner's claim was upheld as clarificatory and correctly applied; the writ petitions were dismissed.

Final Conclusion: Writ petitions dismissed: claim for compensation from the Investors Protection Fund was rightly rejected because the transactions were not executed on the exchange platform and the SEBI Circular of 23rd February, 2017, held to be clarificatory, was properly applied; the Fund's decision was within its discretionary remit and not arbitrary.

Jurisdiction of SEBI to act against chartered accountants for fraud and conspiracy - requirement of evidence of connivance/knowledge/intent (mens rea) to attract PFUTP against auditors - application of Regulation 3 and Regulation 4 of PFUTP and Section 12A of the SEBI Act to persons not dealing in securities - distinction between professional negligence and fraud under SEBI Act and PFUTP Regulations - use of auditing standards (AAS) for assessment of professional misconduct but not as standalone evidence of fraud - liability of networked firms and limits of vicarious liability under resource sharing/network arrangements - scope of SEBI's remedial powers under Sections 11 and 11B and limits on punitive debarment - disgorgement of wrongful gains as a remedial measure

Jurisdiction of SEBI to act against chartered accountants for fraud and conspiracy - application of Regulation 3 and Regulation 4 of PFUTP and Section 12A of the SEBI Act to persons not dealing in securities - requirement of evidence of connivance/knowledge/intent (mens rea) to attract PFUTP against auditors - SEBI could not sustain directions under the SEBI Act / PFUTP against the auditors and their firms in the absence of cogent evidence of connivance, collusion or intention to fabricate accounts. - HELD THAT: - The Tribunal held that Regulation 3 and 4 of the PFUTP Regulations and Section 12A of the SEBI Act target manipulative or fraudulent conduct in relation to "securities" and persons "dealing in securities" or those who, by their acts, induce dealing in securities. Auditors who do not themselves deal in securities can be subject to SEBI action only if evidence establishes that they were instrumental in fabricating or falsifying accounts with intent, knowledge, connivance or collusion with management so as to induce investors. The Bombay High Court's directions confined SEBI's enquiry to proof of such "jurisdictional facts" and, absent direct and cogent evidence of inducement or collusion, preponderance of probabilities in respect of negligence or lapses in audit procedure cannot be elevated into findings of fraud. Mere non compliance with auditing procedures, without a finding of intention/knowledge or that the auditors were instrumental in fabricating accounts, does not attract PFUTP provisions. [Paras 44, 49, 50, 53]

Directions under the SEBI Act / PFUTP against the auditors were not sustainable in the absence of evidence of connivance, collusion or intent to fabricate the books of account.

Distinction between professional negligence and fraud under SEBI Act and PFUTP Regulations - use of auditing standards (AAS) for assessment of professional misconduct but not as standalone evidence of fraud - Non observance of Auditing and Assurance Standards (AAS) may establish professional lapse or negligence but, without evidence of intent/connivance, cannot be equated to fraud under PFUTP. - HELD THAT: - The Tribunal emphasised the well established role and limits of an audit: auditors provide reasonable, not absolute, assurance and are not expected to perform the functions of a detective. A breach of AAS may constitute negligence or professional misconduct (which falls within the ICAI's domain), but such lapses do not ipso facto establish the elements of fraud required under PFUTP. SEBI could not, by isolating provisions of AAS, convert ordinary audit lapses into conclusive proof of collusion or fabrication. The Tribunal further noted that fraud inference must flow from cogent material proving inducement/connivance and not merely from hindsight appraisal of audit procedures. [Paras 55, 65, 68]

Findings of failure to follow AAS establish lapses and negligence but do not suffice to hold auditors guilty of fraud under SEBI laws absent proof of intent/connivance.

Liability of networked firms and limits of vicarious liability under resource sharing/network arrangements - scope of SEBI's remedial powers under Sections 11 and 11B and limits on punitive debarment - The WTM's approach of treating the Price Waterhouse network and all resource sharing firms as a single culpable entity and debarring those firms was unsustainable; SEBI could not validly debar independent firms/partners on the basis of branding or resource sharing without specific findings of their participation in the fraud. - HELD THAT: - The Tribunal examined the resource sharing agreement, ICAI's Rules on networks, and the legal status of individual partnership firms. The agreement and the Rules show that firms may share resources on a principal to principal basis while remaining distinct legal entities; liability for professional assignments remains with the firm performing the assignment. There was no evidence that the PW firms pooled turnover, created a single consolidated entity, or that the ten firms actively participated in the SCSL audit or in any collusion. Further, many partners in the firms became partners only after the relevant period; Partnership Act principles bar making incoming partners liable for pre existing acts. The Tribunal also held that expansive debarment of auditors for auditing listed companies is punitive in character, goes beyond remedial measures envisaged under Sections 11/11B, and cannot be sustained in the factual matrix where no collusion/intent was found. [Paras 102, 107, 123, 128, 135]

Directions debarring the PW network firms and prohibiting listed companies from engaging any firm forming part of that network were quashed for lack of evidence of their involvement and for transgressing the limits of SEBI's remedial powers.

Disgorgement of wrongful gains as a remedial measure - scope of SEBI's remedial powers under Sections 11 and 11B and limits on punitive debarment - The WTM's directive for disgorgement of the wrongful gains obtained by the auditors was sustained as a permissible remedial measure under SEBI's powers. - HELD THAT: - While the Tribunal rejected the debarment and network liability aspects of the WTM order, it upheld the WTM's exercise of power to disgorge wrongful gains. The finding records that the auditors had benefited from fees in circumstances where there was a professional lapse; the Tribunal concluded that, for the lapse proved, disgorgement of the amount retained by the appellants was a justified remedial measure under Sections 11 and 11B of the SEBI Act. The disgorgement was therefore sustained along with interest as ordered. [Paras 136, 139]

Disgorgement of the wrongful gains by the auditors was justified and the WTM's order in that respect is sustained.

Requirement of evidence of connivance/knowledge/intent (mens rea) to attract PFUTP against auditors - application of Regulation 3 and Regulation 4 of PFUTP and Section 12A of the SEBI Act to persons not dealing in securities - Reliance upon inferences of recklessness or gross negligence alone, without specific evidence of inducement or mens rea, cannot supplant the Bombay High Court's requirement that SEBI prove jurisdictional facts before issuing directions against CAs. - HELD THAT: - The Tribunal reiterated that the Bombay High Court limited SEBI's enquiry to proof of conspiracy/involvement in fraud and that mens rea (in the sense of knowledge/intent/connivance) must be established on the material before SEBI to exercise jurisdiction under SEBI Act against CAs. The Tribunal rejected SEBI's contention that cases (such as Kanaiyalal) that relax mens rea requirements apply wholesale to auditors who do not deal in securities; those judgments operate where the person is linked to securities dealing or where inducement is proved. Absent such proof here, PFUTP provisions could not be invoked against the appellants merely on the basis of audit lapses. [Paras 30, 32, 43, 51]

SEBI could not rely on inferences of negligence/recklessness alone to hold auditors liable under PFUTP; evidence of connivance/inducement was necessary and lacking.

Final Conclusion: The Tribunal quashed SEBI's directions debarring the Price Waterhouse firms and the two individual auditors and set aside the prohibition on listed companies engaging any firm forming part of the PW network, holding that SEBI had not established connivance, collusion or intent required to invoke PFUTP against those appellants; however, the Tribunal sustained the WTM's order for disgorgement of wrongful gains (with interest) as a permissible remedial measure under Sections 11 and 11B of the SEBI Act.

Appeal under Section 23L - appealability of orders of a recognised clearing corporation - annulment of trade on account of alleged fraud - SEBI's power to protect investors and issue directions - breach of principles of natural justice by SEBI

Appeal under Section 23L - appealability of orders of a recognised clearing corporation - Whether an appeal lies under Section 23L of the SCRA Act against an order of NSE Clearing Limited (a recognised clearing corporation). - HELD THAT: - The Tribunal examined the scheme of Section 23L read with the definition of "stock exchange" and Section 8A which permits transfer of certain functions of a recognised stock exchange to a clearing corporation. Having regard to Section 8A(4) which applies provisions relating to a recognised stock exchange to a clearing corporation, the Tribunal held that functions and duties transferred to a clearing corporation cannot be excluded from the appellate mechanism under Section 23L. Consequently, an order of NCL in exercise of such transferred functions is appealable under Section 23L. [Paras 21, 22, 23, 24]

An appeal against the decision/order of NSE Clearing Ltd. is maintainable under Section 23L of the SCRA Act.

Annulment of trade on account of alleged fraud - SEBI's power to protect investors and issue directions - Whether the question of annulment of the NIFTY option trades and return of allegedly misappropriated securities should be decided by the Clearing Corporation or by SEBI, and how the complaints should proceed. - HELD THAT: - The Tribunal noted that NCL declined to decide ISSL's application for annulment on the ground that parallel investigations were being conducted by SEBI and the EOW, and that the clearing corporation had not decided the annulment on merits. The Tribunal observed that SEBI possesses wide powers under the SEBI Act (Sections 11 and 11B) and under the SCRA scheme (including directions under Section 12A) to protect investor interests and to consider applications for annulment. Given that NCL refused to adjudicate the application and the matters of return of securities and annulment had not been considered finally by any authority, the Tribunal directed that the affected parties file/renew their complaints with SEBI and mandated SEBI to hear all interested parties and decide the matters by reasoned and speaking order within the timeline specified by the Tribunal. [Paras 25, 28, 29, 31, 33]

Matter to be considered and decided by SEBI: parties to file applications/complaints with SEBI and SEBI to hear all interested parties and pass a reasoned order within the time directed by the Tribunal.

Breach of principles of natural justice by SEBI - SEBI's power to protect investors and issue directions - Whether SEBI violated principles of natural justice by denying Navjoy (Novjoy) and Dalmia a hearing before modifying its confirmatory order. - HELD THAT: - The Tribunal found that Navjoy and Dalmia specifically requested hearings and were kept outside the hearing room and were not heard before SEBI modified the confirmatory order. The Tribunal referred to its earlier direction that affected persons have a right to apply for modification and to be heard and concluded that SEBI's denial of hearing to these parties amounted to a violation of principles of natural justice. Consequently, SEBI was directed to provide opportunity of hearing to affected parties when reconsidering the complaints and applications. [Paras 30, 31]

SEBI violated principles of natural justice in denying the requested hearings; SEBI must grant hearings to affected parties when considering the matters.

Final Conclusion: The Tribunal held that appeals lie under Section 23L against decisions of NSE Clearing Ltd. where functions of a recognised stock exchange are transferred to the clearing corporation; it found that NCL had declined to decide the annulment application and directed all affected parties to approach SEBI, ordered SEBI to hear all interested parties and decide by a reasoned order within the time fixed, and held that SEBI had breached natural justice in failing to hear certain claimants; the Nifty option contract was to remain in abeyance for the limited period directed by the Tribunal.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8(1) vis-a -vis particulars in Form-5 - pre-existing dispute / existence of dispute - debt and default

Demand notice under Section 8(1) vis-a -vis particulars in Form-5 - The demand notice relied upon in Form-5 is not different from the demand notice issued under Section 8(1) for the purpose of maintaining the Section 9 application. - HELD THAT: - The Tribunal examined the documents and found that the unpaid amount specified in the demand notice is Rs. 20,58,704.00/- and Part IV of Form-5 records the same principal amount, with interest shown separately, producing an identical claim quantum in the Section 9 application. The purported discrepancy contended by the appellant arose from reference to a different invoice and a debit note addressed to a related entity, which did not pertain to Invoice No. FPS/001/2015-16 dated 22nd April, 2015 that underlies the claim in Form-5. Consequently, there is no material difference between the demand notice under Section 8(1) and the particulars contained in Form-5 that would vitiate the application under Section 9. [Paras 2, 6, 7, 8]

The plea of inconsistency between the Section 8(1) demand notice and Form-5 is rejected.

Pre-existing dispute / existence of dispute - There was no pre-existing dispute between the operational creditor and the corporate debtor in respect of the debt claimed under Invoice No. FPS/001/2015-16 dated 22nd April, 2015. - HELD THAT: - The appellant relied on pleaded contentions and a debit note addressed to a different entity to assert a dispute regarding quality of goods. The Tribunal observed that no documentary material was produced to show that the corporate debtor raised any dispute in respect of the invoice forming the basis of the Section 9 claim. The debit note produced related to an invoice dated 2nd May, 2015 addressed to Metec Asia Limited and therefore did not pertain to the invoice relied upon by the operational creditor. In absence of a demonstrable dispute on the specific operational debt claimed, the allegation of a pre-existing dispute was held to be unestablished. [Paras 3, 4, 5, 7]

The contention of a pre-existing dispute is negatived.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - debt and default - The Adjudicating Authority correctly admitted the Section 9 application on the ground of existence of debt and default. - HELD THAT: - Having found that the demand particulars in Form-5 corresponded to the demand notice and that no pre-existing dispute in relation to the claimed invoice was established, the Tribunal concluded that the statutory threshold for admission under Section 9 - existence of an operational debt and default - was satisfied. On that basis the impugned admission order was affirmed and the appeal dismissed. [Paras 8, 9]

The admission order under Section 9 is affirmed; appeal dismissed.

Final Conclusion: The Tribunal affirmed the NCLT's admission of the Section 9 application, holding that the demand particulars in Form-5 corresponded with the Section 8(1) demand, no pre-existing dispute was substantiated in relation to the claimed invoice, and therefore debt and default were established; the appeal is dismissed.

Allottee as financial creditor - verification and admission of claims by the liquidator - duty of liquidator to explore compromise or arrangement under Section 230 of the Companies Act, 2013 - priority of revival/continuation of corporate debtor over immediate liquidation - liquidator's obligation to preserve going concern and pay operational exigencies during liquidation

Allottee as financial creditor - Whether an allottee of a flat falls within the definition of a "financial creditor" for purposes of the I&B Code. - HELD THAT: - The Appellate Tribunal upheld the admission of the insolvency application by holding that an allottee of a flat comes within the meaning of "financial creditor" as interpreted by this Tribunal and in the explanation to the definition. The appellant's contention to the contrary was rejected on the authority of the Tribunal's earlier decision which treats an allottee as a financial creditor; accordingly the impugned order admitting the application dated 23rd August, 2017 is not interfered with. [Paras 2]

The allottee is a financial creditor and the admission order dated 23rd August, 2017 is sustained.

Fraud plea unsupported by evidence - Whether the appellant's plea that the Agreement dated 26.06.2014 was obtained by fraud justified interference with the admission or continuation of proceedings. - HELD THAT: - The Tribunal found that the allegation of fraud in respect of the 26.06.2014 agreement was not supported by evidence on record and therefore the plea could not be accepted. In the absence of a substantiated case of fraud, the Tribunal declined to set aside the admission and observed that substantial time had lapsed and liquidation proceedings had proceeded. [Paras 3]

The fraud plea was rejected for want of evidence and does not warrant interference with the admission or the subsequent steps.

Verification and admission of claims by the liquidator - duty of liquidator to explore compromise or arrangement under Section 230 of the Companies Act, 2013 - priority of revival/continuation of corporate debtor over immediate liquidation - liquidator's obligation to preserve going concern and pay operational exigencies during liquidation - What steps the liquidator must take during liquidation, including verification of claims and consideration of revival under Section 230, before selling assets. - HELD THAT: - Relying on the Tribunal's earlier exposition of the Code's object to revive and preserve corporate debtors, the Tribunal directed the liquidator to act in accordance with the I&B Code provisions governing liquidation and claims (Sections 35, 37, 38, 39 and 40) and to verify and admit or reject claims after consolidation. Before taking steps to sell assets, the liquidator must take steps under Section 230 of the Companies Act, 2013 to explore compromise or arrangement for revival; the Adjudicating Authority may be approached for appropriate orders and may extend timelines if a viable arrangement is plausible. During the process the liquidator must preserve the corporate debtor as a going concern and meet operational exigencies such as salaries and essential suppliers. [Paras 8, 9, 19]

The liquidator is directed to verify and decide claims under the I&B Code, to initiate or facilitate proceedings under Section 230 where proposals for arrangement are made, to preserve the corporate debtor as a going concern and to seek Adjudicating Authority orders where necessary before proceeding to sell assets.

Final Conclusion: The appeal is disposed of: the admission dated 23rd August, 2017 is upheld; the appellant's fraud contention is rejected for want of evidence; the liquidator is directed to verify claims, preserve the corporate debtor as a going concern, pursue compromise or arrangement under Section 230 of the Companies Act, 2013 where proposals exist and, only on failure of revival, proceed with sale/liquidation; ancillary directions regarding operational payments and return of the deposited bank guarantee are recorded.

Operational debt - acknowledgement of debt - existence of dispute - default - admission of application under Section 9 - appointment of Interim Resolution Professional - public announcement and claims - moratorium

Operational debt - acknowledgement of debt - default - Existence of an operational debt and occurrence of default in favour of the applicant - HELD THAT: - The record includes a deed of assignment and demand notices, and the corporate debtor, by reply dated 22.03.2019 and by affidavit filed by its director, has admitted indebtedness to the operational creditor. The Tribunal examined the documentary material filed with the application and the admissions recorded on the record and concluded that the petitioner established both the existence of the debt and occurrence of default. [Paras 4, 5, 6, 7, 11]

Operational debt is due to the applicant and default has occurred.

Existence of dispute - Whether a dispute exists or there is pendency of suit/arbitration pre-dating the demand notice - HELD THAT: - The Tribunal noted that the respondent did not raise any substantive dispute on the claim and had admitted the debt by way of reply and affidavit. On perusal of the material on record no pre-existing suit or arbitration in relation to the unpaid debt was shown to exist and no bona fide dispute was established. [Paras 7, 8]

No dispute exists and no pre-existing suit or arbitration was shown to bar admission.

Admission of application under Section 9 - Whether the application under Section 9 is complete and liable to be admitted - HELD THAT: - Having found the existence of operational debt, occurrence of default, absence of any dispute, and that the requisite documentary evidence was furnished, the Tribunal held the application to be complete in all respects. Applying the statutory tests for admission under Section 9, the adjudicating authority concluded that the facts justified initiation of the corporate insolvency resolution process. [Paras 6, 11, 12, 15]

The application under Section 9 is admitted and CIRP is initiated.

Appointment of Interim Resolution Professional - Appointment of Interim Resolution Professional - HELD THAT: - The operational creditor proposed a name for the Interim Resolution Professional. The Tribunal considered the proposal and appointed the named professional to act as Interim Resolution Professional under the Code. [Paras 13]

Mr. Narayan Gajanan Vidvans is appointed as Interim Resolution Professional.

Public announcement and claims - moratorium - Imposition of moratorium and requirement for public announcement and call for claims - HELD THAT: - Relying on the mandate of Section 13 to exercise discretion to declare moratorium and on Section 15 for public announcement, the Tribunal directed the Interim Resolution Professional to make the public announcement and call for claims immediately after appointment. The moratorium specified the prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security and recovery of leased property, and provided that essential supplies shall not be terminated during the moratorium. [Paras 14, 16, 17, 18]

Moratorium is declared with directions for public announcement and call for submission of claims.

Final Conclusion: The application under Section 9 is admitted: the Tribunal found an operational debt and default, no pre-existing dispute, appointed the proposed Interim Resolution Professional, directed public announcement and call for claims, and declared moratorium; the petition is disposed of with no order as to costs.

Default - debt - insolvency resolution process triggered by default - corporate insolvency resolution process - financial creditor - Section 7 application - adjudicating authority's satisfaction of default

Section 7 application - default - debt - Admissibility of the application under Section 7 against the corporate debtor and whether the adjudicating authority was justified in admitting the application. - HELD THAT: - The Tribunal applied the settled proposition from M/s. Innoventive Industries Ltd. that the Code is triggered when a debt becomes due and a default (as widely defined) occurs, and that an adjudicating authority must be satisfied that a default has occurred from the records or evidence before it. The Court noted that a financial creditor may file an application in respect of a financial debt owed to any financial creditor and that the adjudicating authority admits the application on satisfaction of default unless the application is incomplete. In the present case no plea was taken by the corporate debtor that no debt was payable in law or fact; the Tribunal found on the record that a debt was payable and a default had occurred. Accordingly the admission under Section 7 was upheld.

The admission of the Section 7 application against the corporate debtor was sustained and the adjudicating authority was justified in admitting the application on the record of debt and default.

Adjudicating authority's satisfaction of default - remand for determination of debt - Whether the matter should be remanded to the adjudicating authority to determine if the debt was payable. - HELD THAT: - The appellant sought remand for the adjudicating authority to determine whether the debt was payable. The Tribunal observed that no specific plea had been raised by the corporate debtor before the adjudicating authority claiming absence of a payable debt; therefore there was no basis to remit the matter for fresh consideration. The Tribunal relied on the principle that the adjudicating authority admits an application when satisfied from records that a default has occurred, and found such satisfaction on the present record.

Prayer for remand was rejected; no remand ordered for fresh determination of payability of the debt.

Delay condonation - Condonation of delay in preferring the appeal. - HELD THAT: - The Tribunal considered the delay of six days in filing the appeal and exercised its discretion to condone the same prior to dealing with the merits. Having condoned the delay, the Tribunal proceeded to dismiss the appeal on merits.

Delay of six days in preferring the appeal was condoned.

Final Conclusion: Delay of six days in preferring the appeal is condoned. On the merits the admission of the Section 7 application was upheld; the request for remand to determine whether any debt was payable was refused and the appeal is dismissed.

Contempt proceedings for non-cooperation with the liquidator - penal action under the Insolvency and Bankruptcy Code - initiation of proceedings under company law for obstruction of liquidation - right to raise defenses and objections before the Adjudicating Authority - referral to Special Court for offences under the I&B Code

Contempt proceedings for non-cooperation with the liquidator - initiation of proceedings under company law for obstruction of liquidation - Appeal against dismissal of applications by the Adjudicating Authority was dismissed and the tribunal declined to adjudicate on removal of the Resolution Professional or handing over of documents. - HELD THAT: - The Appellant, an ex-Director, had not cooperated with the Resolution Professional/Liquidator and the Adjudicating Authority had initiated contempt proceedings and issued non-bailable warrants. The Tribunal refused to entertain substantive determination on removal of the Resolution Professional or on any prayer for handing over documents, noting that it would not go into those questions in the present appeal. Given the conduct of non-cooperation and the pendency of proceedings before the Adjudicating Authority, the appeal was dismissed while leaving contested factual and procedural matters to the Adjudicating Authority for adjudication. [Paras 6, 7]

Appeal dismissed; no adjudication on removal of the Resolution Professional or handover of documents.

Right to raise defenses and objections before the Adjudicating Authority - penal action under the Insolvency and Bankruptcy Code - referral to Special Court for offences under the I&B Code - Appellant permitted to raise all defenses before the Adjudicating Authority and the Authority to determine liability for punishment or referral to Special Court. - HELD THAT: - The Tribunal observed that because contempt proceedings and potential penal consequences under the I&B Code and Companies Act are pending, the Appellant should be allowed to present all issues and file replies before the Adjudicating Authority. The Adjudicating Authority is directed to consider whether the Appellant and other Directors are liable for punishment under the Companies Act provision invoked or whether their case should be referred to the Special Court for action under the I&B Code provisions relied upon. The direction effectively remands contested questions of liability and appropriate forum for penal action to the Adjudicating Authority for fresh consideration. [Paras 7]

Appellant may appear in person, file replies and raise issues before the Adjudicating Authority, which will decide on punishment or referral to the Special Court.

Final Conclusion: The appeal is dismissed; the Tribunal declined to decide on removal of the Resolution Professional or handover of documents and remitted the question of the Appellant's liability to the Adjudicating Authority to consider defenses and decide on penal action or referral to the Special Court.

Regulatory autonomy of the Insolvency and Bankruptcy Board of India - Scope of adjudicating authority under Section 60(5) of the Code - Limits on judicial direction to initiate regulatory action against an insolvency professional - Interference with pending regulatory complaints - Interim restraint on encumbrance or sale of assets in liquidation

Regulatory autonomy of the Insolvency and Bankruptcy Board of India - Scope of adjudicating authority under Section 60(5) of the Code - Limits on judicial direction to initiate regulatory action against an insolvency professional - Whether the Tribunal should issue notice to the IBBI and direct it to take action against the resolution professional/liquidator pursuant to a complaint filed under Section 217 of the Code. - HELD THAT: - The application filed by an ex-director sought an order directing the IBBI to act on a complaint against the insolvency professional. The Bench observed that IBBI, as the statutory regulator, is competent to consider and determine complaints against insolvency professionals within its regulatory remit. Intervening in each complaint brought before the regulator would fall outside the proper scope of the Adjudicating Authority under Section 60(5) of the Code. Absent satisfaction by the Tribunal of misconduct warranting direction, the Tribunal is not inclined to issue notice to or command the IBBI to take action in respect of every complaint made by an ex-director of the corporate debtor. [Paras 2]

Application dismissed; no notice issued to the IBBI and no direction to initiate regulatory action against the insolvency professional.

Interference with pending regulatory complaints - Interim restraint on encumbrance or sale of assets in liquidation - Whether any interim restraint on encumbrance or sale of the corporate debtor's assets should be ordered in the liquidation process pending disposal of related allegations. - HELD THAT: - Noting that allegations had been made and a progress report in the liquidation process was on record, the Bench considered it expedient to preserve the status quo of the corporate debtor's assets until the allegations were examined and disposed of. In the exercise of its supervisory jurisdiction over the liquidation process and to prevent possible prejudice pending further orders, the Tribunal directed that there would be no encumbrance or sale of the assets of the corporate debtor until further orders. [Paras 3]

Interim restraint imposed: no encumbrance or sale of the corporate debtor's assets till further orders.

Final Conclusion: The application under Section 60(5) was dismissed insofar as it sought direction to IBBI to act on the complaint; however, the Tribunal imposed an interim bar on encumbrance or sale of the corporate debtor's assets pending further orders and renotified the matter for a later date.

Non-application of mind - Provisional attachment under PMLA - Supply of "reasons to believe" - Confirmation of provisional attachment - Remand for fresh adjudication - Hearing of reply under Section 8(1) of the PMLA - Decision by Member (Law) within stipulated time

Non-application of mind - Provisional attachment under PMLA - Confirmation of provisional attachment - Impugned order confirming the Provisional Attachment Order set aside for failure to apply independent mind and for absence of legally cogent reasons. - HELD THAT: - The Tribunal found that the Provisional Attachment Order, the original complaint and the Adjudicating Authority's order reproduced material from the CBI chargesheet verbatim, indicating that the author of the PAO and the AA had not applied independent judicial mind. The impugned order merely reproduced pleadings without addressing or deciding the detailed issues raised in the appellant's reply. In light of the absence of assigned reasons and legally cogent findings, the Tribunal concluded that the impugned order was vitiated and could not stand. [Paras 9, 11]

Impugned order set aside; appeal allowed on ground of non-application of mind.

Remand for fresh adjudication - Hearing of reply under Section 8(1) of the PMLA - Decision by Member (Law) within stipulated time - Whether the matter should be remanded for fresh adjudication and the directions to be given for such adjudication. - HELD THAT: - Rather than adjudicating the substantive controversies which were inadequately considered below (including contentions as to reasons to believe, formation of opinion, and other factual and legal defences raised in the reply), the Tribunal remanded the matter to the Adjudicating Authority for fresh adjudication. The AA was directed to consider the reply filed to the notice under Section 8(1) of the Act, hear the parties on all issues raised, and decide the matter on merits. The Tribunal granted a specific timeline and designated the Member (Law) to decide the matter, thereby confining its intervention to correcting the procedural/legal infirmity and ensuring a reasoned decision on the merits by the AA. [Paras 11, 12, 13]

Matter remanded to the Adjudicating Authority for fresh adjudication after hearing the parties and considering the reply; to be decided by the Member (Law) within six months from 21.10.2019; parties to appear on 21.10.2019.

Final Conclusion: The appeal is allowed; the impugned order confirming the provisional attachment is set aside for want of application of mind and inadequate reasons, and the matter is remanded to the Adjudicating Authority for fresh, reasoned adjudication after hearing the parties and considering the reply, to be decided by the Member (Law) within six months from 21.10.2019.

Rectification of mistake apparent on the face of the record - limited scope of rectification application under Section 74 of the Finance Act, 1994 - distinction between rectification and appellate reconsideration - requirement of production of documents and participation in adjudication - penalty for willful suppression and evasion of service tax

Rectification of mistake apparent on the face of the record - requirement of production of documents and participation in adjudication - Application under Section 74 of the Finance Act, 1994 seeking rectification was correctly dismissed by the adjudicating authority. - HELD THAT: - The adjudicating authority considered the petitioner's rectification application in compliance with the High Court's direction and recorded detailed findings. The authority found that the petitioner had not submitted the requisite documents during investigation or adjudication, had either failed to file prescribed returns or shown nil value, and thus did not establish any mistake apparent on the face of the record. Since Section 74 permits rectification only of an apparent error on the face of the record and the documents relied upon were not placed before the authority during the adjudication, the authority was justified in dismissing the rectification application after considering the materials on record and the petitioner's submissions. [Paras 6]

Rectification application dismissed for lack of mistake apparent on the face of the record and for failure to produce documents or participate in adjudication.

Limited scope of rectification application under Section 74 of the Finance Act, 1994 - distinction between rectification and appellate reconsideration - Rectification under Section 74 cannot be used to reopen or rewrite the adjudication order on merits; appellate remedy remains the proper forum for substantive reconsideration. - HELD THAT: - The authority and the Court emphasised that Section 74 is confined to correcting mistakes apparent on the face of the record and does not empower the adjudicating authority to re-adjudicate or rewrite its order under the guise of rectification. The petitioner's submissions before the adjudicating authority were characterized as merits-based challenges tantamount to an appeal, which are beyond the remedial ambit of Section 74. Consequently, the adjudicating authority correctly treated the application as not maintainable for substantive re-adjudication. [Paras 6]

Application under Section 74 is not a substitute for an appeal and cannot be entertained to reopen merits of the Order-in-Original.

Penalty for willful suppression and evasion of service tax - requirement of production of documents and participation in adjudication - Imposition of penalties for suppression, non-furnishing of information, non-appearance and non-filing of returns was sustained as proper by the authority and not interfered with by the Court. - HELD THAT: - The adjudicating authority found that the petitioner suppressed value of taxable services with intent to evade tax and failed to furnish information, appear on summons, or deposit tax by due dates. The authority concluded that penalties under the relevant provisions were justified. The Court, on review of the authority's reasoning and the petitioner's failure to have placed documents before the adjudicating forum, found no reason to interfere with the imposition of penalties. [Paras 6]

Penalties imposed for suppression and procedural defaults upheld as proper.

Final Conclusion: Writ petition dismissed; the adjudicating authority's order dismissing the Section 74 rectification application and upholding penalties is maintained, subject to the petitioner being free to pursue other statutory remedies available to it.

Business Auxiliary Service - subvention income as consideration - taxable service - extended period of limitation - suppression of facts - penalty under Section 78 - penalty under Section 77 - interest under Section 75

Business Auxiliary Service - subvention income as consideration - taxable service - Whether amounts received and accounted as 'subvention income' from vehicle manufacturers/dealers constitute consideration for services taxable as Business Auxiliary Service. - HELD THAT: - The Tribunal held that the bank's arrangement-providing loans at nil or very low interest to customers of manufacturers/dealers and participating in joint promotional activity-operates to promote the sale of vehicles and thereby renders a service to the manufacturers/dealers within the meaning of Business Auxiliary Service. The fact that the amounts are recorded in the bank's books as interest or are computed by reference to interest foregone does not alter their character once they are received as consideration for the facilitation and promotion arrangement. The manner of computation or nomenclature is immaterial where the payment is the consideration for a promotional/auxiliary service. Reliance on precedents dealing with fund based income was considered and distinguished; earlier Tribunal decisions treating similar subvention receipts as taxable were followed. The demand for service tax on the amounts shown as subvention income is sustained on merits. [Paras 5]

Subvention income received from vehicle manufacturers/dealers is consideration for a Business Auxiliary Service and is taxable as a taxable service.

Extended period of limitation - suppression of facts - Whether extended period of limitation (proviso to Section 73(1)) was rightly invoked for demands relating to subvention income. - HELD THAT: - The Tribunal found that the appellants had been aware of the schemes and their tax implications, yet failed to disclose subvention receipts in the prescribed returns. The fact that the appellants availed CENVAT credit on input services used for the special schemes undermined any claim of bona fide belief that no service tax was payable. The nondisclosure in ST-3 returns and withholding of material facts amounted to deliberate suppression, thereby justifying invocation of the extended period of limitation to recover escaped service tax. [Paras 5]

Extended period of limitation was rightly invoked due to suppression of facts and non disclosure of subvention income.

Penalty under Section 78 - penalty under Section 77 - Whether penalties under Section 78 and Section 77 were correctly imposed. - HELD THAT: - Given the Tribunal's conclusion that appellants deliberately withheld information about subvention receipts and that the extended limitation period could be invoked, the imposition of the mandatory penalty under Section 78 was upheld. Separately, civil penalties under Section 77 were sustained for repeated infractions in filing incorrect ST 3 returns and contraventions of Section 70 read with Rule 7, since the record showed improper and incorrect declarations for the period April 2008 to June 2012. [Paras 5]

Penalties under Section 78 and Section 77 are sustained.

Interest under Section 75 - Whether interest on the confirmed demand was correctly levied. - HELD THAT: - Interest under the statute is chargeable for delay in payment of tax. Since the Tribunal upheld the demand for unpaid service tax on subvention income, the consequent demand for accrued interest under Section 75 was also upheld as legally exigible. [Paras 5]

Interest under Section 75 on the confirmed unpaid service tax is sustained.

Final Conclusion: The appeal is dismissed: subvention income is taxable as consideration for Business Auxiliary Service; extended limitation, interest and penalties under the Finance Act were properly invoked and sustained for the periods covered, including April 2008 to June 2012.

Refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - relevant date for export of services - date of Foreign Inward Remittance Certificate (FIRC) and end of the quarter in which FIRC is received - interpretation of time limit for refund claims filed on a quarterly basis - precedential application of Larger Bench decision

Relevant date for export of services - date of Foreign Inward Remittance Certificate (FIRC) and end of the quarter in which FIRC is received - interpretation of time limit for refund claims filed on a quarterly basis - The relevant date for determining the time limit for refund claims under Rule 5 of the CCR in respect of export of services filed on a quarterly basis is the end of the quarter in which the FIRC is received. - HELD THAT: - The Tribunal applied the Larger Bench decision in M/s. Span Infotech (India) Pvt. Ltd., which held that export of services is completed only upon receipt of consideration in foreign exchange and that the FIRC date is relevant. The Larger Bench further concluded that for refund claims filed quarterly the relevant date for the time limit may be taken as the end of the quarter in which the FIRC is received. The Tribunal observed that this binding reasoning settles the controversy and is directly applicable to the present appeals, where the Revenue had adopted a contrary approach limiting consideration to receipts in the particular quarter alone. [Paras 6]

Apply the Larger Bench ruling: take the end of the quarter in which the FIRC is received as the relevant date for time limit purposes for quarterly refund claims under Rule 5 of the CCR.

Refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - precedential application of Larger Bench decision - Whether the impugned orders denying refund should be set aside as contrary to the Larger Bench ruling. - HELD THAT: - Having found the Revenue's denial of refund inconsistent with the Larger Bench's interpretation of the relevant date and time limit, the Tribunal concluded that the impugned Orders in Appeal confirming rejection of the refund claims were not proper. The Tribunal therefore set aside the impugned orders and directed consequential relief as per law, granting the appellant the benefit of the Larger Bench decision in respect of the refund claims for the stated quarterly periods. [Paras 7, 8]

Impugned orders set aside; appeals allowed with consequential benefits in accordance with the law and the Larger Bench ruling.

Final Conclusion: The Tribunal allowed the appeals, applying the Larger Bench precedent that for export of services the relevant date for the time limit under Rule 5 (where claims are filed quarterly) is the end of the quarter in which the FIRC is received, set aside the impugned orders rejecting refunds and granted consequential relief as per law.

Taxability of non refundable capital contribution vis a vis renting of immovable property service - retrospective amendment and temporal scope of levy on renting of vacant land - application of extended period of limitation where no intention to evade is shown - availability of CENVAT credit for services used in relation to setting up/renovation of premises or providing output services - distinction between statutory/mandatory regulatory actions and taxable services - taxability of technical testing and analysis and business auxiliary services

Taxability of non refundable capital contribution vis a vis renting of immovable property service - retrospective amendment and temporal scope of levy on renting of vacant land - Whether amounts collected as non refundable capital contribution from members of the SPV are taxable as renting of immovable property service - HELD THAT: - The Tribunal accepted the appellant's factual case that the SPV and its model agreements were devised and approved well before the introduction of service tax on renting of immovable property and, in particular, before vacant land became taxable only after the Finance Act, 2010 with retrospective effect from specified circumstances. The scheme was implemented under supervision of Ministry appointed PMC and the non refundable contribution was mandated by the scheme to be invested in infrastructure and reflected as capital reserve in accounts. The show cause notice contained no evidence to establish that the non refundable contribution was in reality rent or that the parties had deflated agreed rent; the allegation of a modus operandi to disguise rent was unsubstantiated. Given the timing of the scheme and absence of any intention or material to prove that the receipts were contractual rent, the demand under renting of immovable property service was held unsustainable. [Paras 4]

Demand of service tax on non refundable capital contribution as renting of immovable property service set aside.

Application of extended period of limitation where no intention to evade is shown - Whether invocation of extended period of limitation is sustainable in respect of the allegation that non refundable contribution was disguised rent - HELD THAT: - The Tribunal held that because the scheme, model agreements and first transactions were devised and entered into before the levy on renting of immovable property (and long before the levy on vacant land in the circumstances later specified), and the arrangement was under government supervision through PMC with ministry representatives on the SPV board, there was no basis to infer mens rea to evade tax or manipulate records. In absence of any evidence of concealment or dishonest intention, invocation of extended limitation was not sustainable. [Paras 4]

Extended period of limitation held inapplicable; demand unsustainable on limitation grounds.

Availability of CENVAT credit for services used in relation to setting up/renovation of premises or providing output services - Whether CENVAT credit on service tax paid for construction of compound wall and laying of pipelines is admissible - HELD THAT: - The Tribunal found that construction of the compound wall and laying of pipelines were integral to setting up the taxable park and enabling the appellant to provide infrastructure and other output services to members. Reliance on departmental circulars to deny credit was rejected; the Tribunal applied the principle that services used in relation to setting up, renovation or providing output services qualify as input services for CENVAT purposes (following the reasoning adopted in the cited Tribunal authority). Accordingly, credit taken for the relevant periods was held admissible and the demand on this count was set aside. [Paras 5]

CENVAT credit on construction of compound wall and laying of pipelines allowed; demand set aside.

Distinction between statutory/mandatory regulatory actions and taxable services - taxability of technical testing and analysis and business auxiliary services - Whether amounts recovered as finger analysis fee (technical testing and analysis) and tender/plant evaluation fee (business auxiliary services) are non taxable because they are statutory/mandatory activities - HELD THAT: - The Tribunal rejected the appellant's contention that the testing and evaluation activities were statutory or undertaken by a statutory authority such that they would fall outside service tax. The appellant did not produce evidence to show that it was a statutory authority or that the activities were mandated by law in a manner taking them outside the taxable ambit. Consequently, the sums charged as finger analysis fee and tender/plant evaluation fee were held to be taxable under Technical Testing and Analysis Service and Business Auxiliary Service respectively. VCES declaration filed in respect of technical testing and analysis was rejected by the department and the Tribunal found no merit to disturb that conclusion. [Paras 6, 7]

Demand and penalty in respect of finger analysis fee and tender/plant evaluation fee upheld.

Final Conclusion: The appeal is partly allowed: demands of service tax on the non refundable capital contribution (alleged rent) and demands for reversal of CENVAT credit on construction of compound wall and pipelines are set aside; demands and penalties in respect of finger analysis (technical testing and analysis) and tender/plant evaluation fees (business auxiliary services) are upheld.

Cargo Handling Service - Port Service - CBEC Circular clarifying scope of cargo handling service - twin conditions for cargo handling service (cargo and independent agency) - limitation and extended period for recovery where fraud, collusion, willful misstatement or suppression - bona fide belief as a defence to invocation of extended limitation

Cargo Handling Service - Port Service - CBEC Circular clarifying scope of cargo handling service - twin conditions for cargo handling service (cargo and independent agency) - Whether the stevedoring activity of discharging goods from vessel to wharf at Karwar (a minor) Port during 16.8.2002 to 30.6.2003 fell within Cargo Handling Service or was a Port Service and liable to service tax as cargo handling. - HELD THAT: - The Tribunal applied the interpretation in DCCE v. Sushil & Co. and the CBEC Circular dated 1.8.2002 explaining that cargo handling service requires (i) goods to have attained the character of cargo accepted for carriage and (ii) an independent agency performing loading/unloading or packing/unpacking. It found that the appellant's stevedoring and discharge of goods at the minor port did not constitute cargo handling service for the impugned period but fell within the ambit of Port Service. On that basis, demand framed as service tax on cargo handling for the period 16.8.2002 to 30.6.2003 was held unsustainable in law. [Paras 6]

Demand of service tax as Cargo Handling Service for 16.8.2002 to 30.6.2003 is not sustainable; the services fall in the category of Port Service.

Limitation and extended period for recovery where fraud, collusion, willful misstatement or suppression - bona fide belief as a defence to invocation of extended limitation - Whether the demand for service tax for 16.8.2002 to 30.6.2003 was barred by limitation in the absence of allegation of fraud, collusion, willful misstatement or suppression of facts. - HELD THAT: - The Tribunal noted that the show-cause notice (dated in the record) proposed demand for the period 16.8.2002 to 30.6.2003 but did not allege fraud, collusion, wilful misstatement or suppression with intent to evade tax. Applying the governing limitation principles, and having regard to the appellant's bona fide belief that minor/other ports became leviable only from 1.7.2003 (as clarified subsequently), the Tribunal held that the extended period under the law could not be invoked and the demand was time-barred. [Paras 6, 7]

The demand for the impugned period is barred by limitation and cannot be sustained in the absence of allegations permitting invocation of the extended period; appellant's bona fide belief supports this result.

Final Conclusion: The impugned order confirming demand and penalties (except as noted by lower authorities) is set aside on merits and on limitation; the appellant's appeal is allowed.

Condonation of delay - maintainability of appeal - monetary limit of Rs. 1 Crore for maintainability of departmental appeals - limitation - withdrawal of appeal with liberty to raise questions

Maintainability of appeal - monetary limit of Rs. 1 Crore for maintainability of departmental appeals - withdrawal of appeal with liberty to raise questions - Whether the appeal is maintainable before the High Court in view of departmental instructions limiting entertainability by reason of the demand falling below the prescribed monetary threshold, and the consequence of the appellant's admission. - HELD THAT: - Learned counsel for the appellant conceded that in view of instructions dated 22.8.2019 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Judicial Cell), the present appeal is not maintainable before this Court because the demand sought to be recovered is below the monetary threshold for entertainability. On that admission the appellant sought withdrawal of the appeal while expressly preserving the substantive questions of law. The Court accepted the concession and the prayer for withdrawal, noting the appellant's position on the threshold point and observing that the substantial questions of law would remain open for adjudication elsewhere as appropriate.

Appeal dismissed as withdrawn; maintainability before the High Court not entertained in view of departmental instructions limiting entertainability by reason of the demand being below the prescribed monetary threshold; questions of law left open.

Condonation of delay - limitation - Disposition of the application for condonation of delay under Section 5 of the Limitation Act filed for enabling the delayed appeal. - HELD THAT: - Because the main appeal was dismissed as withdrawn on the basis of the appellant's admission regarding maintainability, the Court did not adjudicate the application seeking condonation of delay. The order records that no orders are being passed on the condonation application consequent to the withdrawal of the appeal.

No order on the condonation application; it was not adjudicated as the appeal was dismissed as withdrawn.

Final Conclusion: The appeal was dismissed as withdrawn following the appellant's concession that, pursuant to the Ministry of Finance/CBIC instructions dated 22.8.2019, the High Court cannot entertain an appeal where the departmental demand is below the prescribed monetary threshold; the substantial questions of law were left open, and no order was made on the application for condonation of delay.

Entitlement to refund for excess provisional reversal under Rule 6(3A)(f) of the CENVAT Credit Rules, 2004 - relevant date for limitation under Section 11B (clause (eb)) of the Central Excise Act - provisional payment and final adjustment of CENVAT credit - limitation for refund claims arising from provisional reversal

Entitlement to refund for excess provisional reversal under Rule 6(3A)(f) of the CENVAT Credit Rules, 2004 - limitation for refund claims arising from provisional reversal - relevant date for limitation under Section 11B (clause (eb)) of the Central Excise Act - Whether the appellant's refund claim for excess provisional reversal under Rule 6(3A)(f) is barred by limitation. - HELD THAT: - The Tribunal found that Clause (f) of Rule 6(3A) contemplates entitlement to take credit where the provisional amount reversed during the year exceeds the amount finally required to be reversed, and that this sub-clause does not itself prescribe any time limit for claiming such credit. The statutory limitation for refund claims is governed by Section 11B of the Central Excise Act, and Clause (eb) of Section 11B treats the "relevant date" as the date of adjustment of duty after final assessment where duty was provisionally paid. In the present case the final adjustment occurred on 30.11.2017; therefore that date is the relevant date for computing the one year limitation under Section 11B. The refund filed on 4.7.2018 was within one year from the relevant date and thus timely. [Paras 6, 7]

Refund claim is not time barred; the final adjustment date 30.11.2017 is the relevant date and the claim filed on 4.7.2018 is within limitation.

Final Conclusion: The appeal is allowed; the impugned order rejecting the refund claim as barred by limitation is set aside and the appellant's claim held to be within time.

Provisional assessment - sanction of refund under Section 11B - erroneous refund under Section 11A - doctrine of unjust enrichment - finality of adjudication/order - appealability of refund order

Sanction of refund under Section 11B - finality of adjudication/order - appealability of refund order - erroneous refund under Section 11A - Whether Revenue can invoke recovery proceedings under Section 11A in respect of a refund that was granted pursuant to and attained finality under an order passed under Section 11B without first preferring an appeal against the refund order. - HELD THAT: - The Tribunal held that an order sanctioning refund under Section 11B which has attained finality cannot be treated as an "erroneous refund" for the purposes of initiating recovery under Section 11A. The Court relied on the distinction between the adjudicatory refund stream under Section 11B and the recovery stream under Section 11A, observing that once adjudication under Section 11B has taken place and no appeal was filed by the Revenue, the refund stands outside the scope of "erroneous refund." The Tribunal noted earlier decisions of High Courts and Division Benches (reproduced and considered) which reason that an authority cannot in collateral proceedings declare an adjudicated refund to be erroneous where the refund order is final and appealable; instead, the correct course would have been for the Revenue to challenge the refund by appeal. Applying those authorities and the appellant's earlier Tribunal decision, the Tribunal concluded that the show cause/recovery proceedings were without jurisdiction and unsustainable. [Paras 6, 7]

The impugned order holding the appellant liable to recover the sanctioned refund was set aside and the appellant's appeal allowed.

Provisional assessment - doctrine of unjust enrichment - Whether the doctrine of unjust enrichment applies to refunds arising from provisional assessments finalised on adjudication. - HELD THAT: - The Tribunal followed prior Division Bench decisions of this Tribunal holding that the test of unjust enrichment does not apply to cases of provisional assessment where refunds have been granted and upheld on adjudication. It distinguished the facts of the Apex Court decision in Addision & Co. as relating to ordinary refund claims and not to adjustments consequent to finalisation of provisional assessments. In view of consistent Tribunal precedents on identical facts, the Tribunal held that invoking unjust enrichment to recover an adjudicated refund in provisional-assessment cases is not permissible. [Paras 6, 7]

Doctrine of unjust enrichment held inapplicable to the adjudicated refund arising from provisional assessment; recovery proceedings based on that doctrine unsustainable.

Final Conclusion: The appeal is allowed; the order directing recovery of the refund sanctioned by the earlier adjudication is quashed on the grounds that a final refund order under Section 11B cannot be treated as an "erroneous refund" under Section 11A and that the doctrine of unjust enrichment does not apply to refunds arising from provisional assessment finalisations.

Clandestine diversion of duty-free raw materials - Reliance on uncorroborated statements as sole evidence - Right to cross-examination under Section 9D of the Central Excise Act - Liability of consignor where goods are certified warehoused by the consignee - Requirement of corroborative evidence for demand and penalty

Reliance on uncorroborated statements as sole evidence - Right to cross-examination under Section 9D of the Central Excise Act - Whether demands based solely on statements of third parties and transporters, recorded during investigation, can sustain adjudication when cross-examination was not permitted. - HELD THAT: - The Tribunal found that the allegation of clandestine diversion of raw material rested primarily on statements of partners of the consignee, the CEO of the appellant and a single tempo-owner; no corroborative material was produced. The CEO's statements were contradictory and some declarants had retracted their earlier statements by affidavit. The adjudicating authority did not permit cross-examination of those whose statements formed the basis of the show cause notice. In these circumstances the Tribunal held that when demands and allegations are founded chiefly upon such statements, it was mandatory to grant cross-examination under Section 9D of the Central Excise Act; absence of cross-examination rendered those statements an insufficient foundation for the demand. [Paras 4]

Statements relied upon by the Revenue could not sustain the demand in absence of cross-examination and corroboration.

Clandestine diversion of duty-free raw materials - Liability of consignor where goods are certified warehoused by the consignee - Requirement of corroborative evidence for demand and penalty - Whether the consignor (appellant) can be held liable for duty and penalty when goods were cleared to a 100% EOU against CT-3/AR-3 documentation and the consignee's warehousing certificate was on record, absent independent corroborative evidence of diversion. - HELD THAT: - The Tribunal observed that the appellants had produced CT-3 certificates, AR-3/D-3 declarations, and maintained the statutory registers and periodical returns as required under the relevant warehouse and removal procedures. Searches at the appellant's factory did not disclose incriminating documents and stocks and records were found to be in order. The Revenue failed to adduce evidence of any buyer, transport, sale or unaccounted receipt showing diversion of raw material by the appellant. Once the goods were certified to be warehoused by the consignee and documentary compliance by the consignor was established, the consignor could not be held liable for contravention merely on allegations unsupported by corroborative evidence. The Tribunal also relied on precedents addressing similar factual matrices to support this legal approach. [Paras 5, 6]

The documentary evidence of lawful clearance to the EOU and absence of corroborative material negated the demand; the consignor could not be held liable for the alleged clandestine diversion.

Final Conclusion: The demands and penalties were held unsustainable. The impugned order was set aside and all appeals allowed, with consequential reliefs as may be applicable.

Set off under Section 4-BB - option to charge full tax instead of deduction - requirement to deduct at time of sale/return - claim for set off at assessment stage - forfeiture of tax under Section 29-A(2)

Set off under Section 4-BB - option to charge full tax instead of deduction - requirement to deduct at time of sale/return - claim for set off at assessment stage - forfeiture of tax under Section 29-A(2) - Whether the assessee was entitled to set off of tax paid on purchase of raw material under Section 4-BB after having charged full tax on sale of notified goods and whether a belated claim at assessment could revive that right, with incidental consequence for forfeiture under Section 29-A(2). - HELD THAT: - Section 4-BB grants set off of tax paid on raw material used in manufacture of notified goods by deducting that amount from the tax payable on sale of such goods, subject to conditions in the relevant notifications. The notifications provided that a manufacturer could, by option, claim such deduction instead of paying full tax on sale; the scheme is optional and does not compel a manufacturer to avail the set off. The tax on sale becomes payable at the time of sale and is reflected in the periodic return; accordingly the statutory scheme contemplates that the deduction (set off) be made at that stage. Where the assessee charged and collected full tax on the sale of tubular poles (notified goods) instead of deducting tax paid on purchases, it effectively opted out of the set off scheme. Once the assessee elected to charge full tax on sale, a subsequent attempt to claim set off during assessment proceedings could not revive the right to deduction because the statutory scheme and the notifications required the deduction to be made at the time of sale/return; the only circumstance permitting a later claim would have been where the assessee had not charged tax on sale but had borne it himself, which did not arise. In that factual matrix the assessing authority and the Tribunal were justified in treating the assessee as having foregone set off; the timing of the claim at assessment was therefore inconsequential and did not entitle the assessee to the claimed adjustment, with the consequence that forfeiture under Section 29-A(2) was not shown to be invalid on the ground of an existing right to set off. [Paras 10, 11, 12, 13, 14]

The assessee lost the right to claim set off under Section 4-BB by opting to charge full tax on sale of tubular poles instead of deducting tax paid on purchase at the time of sale/return; a belated claim at assessment could not revive that right, and the revisions are dismissed.

Final Conclusion: Revisions dismissed; on the merits the Court held that the set off under Section 4-BB is optional and must be exercised by deducting tax at the time of sale/return, and having charged full tax the assessee cannot later claim the set off-the Court dismisses the revisions for reasons different from those of the Tribunal.

Burden of proof in assessment to establish escaped turnover - estimation of turnover/assessment of escaped turnover - confrontation with adverse material and shifting of onus - quantification of undisclosed turnover

Burden of proof in assessment to establish escaped turnover - confrontation with adverse material and shifting of onus - Whether the Department discharged its burden to prove that central sales had escaped assessment and whether the onus shifted to the assessee once confronted with adverse material - HELD THAT: - The Court held that where the revenue confronted the assessee with adverse documentary material (the disputed bill), the burden shifted to the assessee to establish non complicity in the transaction. The assessee did not dispute the handwriting on the bill, did not seek expert opinion during reassessment, and failed to satisfactorily rebut the material when confronted. The decision in Shyam Lal Kamlesh Kumar was distinguished on its facts because there the assessee had not been confronted with the mandi gate pass; in the present case the assessee was confronted with the bill and thus the revenue's onus stood discharged. [Paras 8, 9]

Revenue discharged burden; onus shifted to the assessee and was not discharged; question answered in favour of the revenue.

Estimation of turnover/assessment of escaped turnover - quantification of undisclosed turnover - Whether the Tribunal was justified in enhancing the estimated central sales turnover to the level fixed by it or whether the first appellate estimation should be restored - HELD THAT: - The Court accepted that turnover had escaped assessment but found the Tribunal's enhancement from Rs. 20,00,000 (as fixed by the first appellate authority) to Rs. 30,00,000 was not supported by material or reasoned justification. The first appellate authority had considered the disclosed turnover and the undisclosed transaction and made a considered estimate. Given the absence of fresh material or reasons recorded by the Tribunal to justify a higher estimation, the Tribunal erred in increasing the estimate. Although remand would normally be appropriate, the Court declined remand as more than eighteen years had elapsed, the relevant enactment had been repealed and the assessee had ceased business, and therefore restored the order of the first appellate authority. [Paras 10, 11, 12]

Tribunal's enhancement set aside; assessment quantification restored to the first appellate estimate.

Final Conclusion: Revision partly allowed: the Tribunal's order dated 24.01.2008 is set aside insofar as it enhanced the estimated turnover to the level fixed by it and the order of the first appellate authority is restored; question (i) answered in favour of the revenue and question (ii) answered in favour of the assessee.

Power under Section 4-A(3) to rectify clerical or arithmetical errors - clerical or arithmetical errors patent and apparent on record - eligibility certificate issued by Divisional Level Committee - exemption for a new unit - exemption for inputs manufactured through job work - post grant writing off of machinery and its effect on eligibility - misuse of eligibility certificate

Power under Section 4-A(3) to rectify clerical or arithmetical errors - clerical or arithmetical errors patent and apparent on record - eligibility certificate issued by Divisional Level Committee - Whether the Commissioner could amend or rectify the Eligibility Certificate under his power in Section 4-A(3) where no misuse was alleged and the matter involved debatable legal or factual questions. - HELD THAT: - The Court applied the principle that the Commissioner's power under Section 4-A(3) is confined to correction of clerical or arithmetic mistakes which are patent and apparent on the face of the record and cannot be exercised to resolve legal or factual controversies that admit of debate. Reliance was placed on the reasoning of earlier decisions of this Court to the same effect. Given that the Divisional Level Committee had examined the matter and granted the eligibility certificate, the Commissioner could not assume appellate or adjudicatory powers to re decide disputed questions of fact or law under the guise of rectification when there was no allegation of misuse of the certificate. [Paras 10, 11, 12, 14, 15]

Commissioner had no jurisdiction under Section 4-A(3) to amend the eligibility certificate on debatable legal or factual issues; rectification power is limited to patent clerical/arithmetic errors.

Exemption for inputs manufactured through job work - exemption for a new unit - Whether the exemption granted in respect of value of dyes and moulds given out to job workers (for manufacture of components used in the assessee's new unit) could be denied by the Commissioner under Section 4-A(3). - HELD THAT: - The Court found that it is a debatable question whether investment in dyes and moulds given to job workers is excluded from exemption; absence of any clear disabling clause in the notification and the circular of the Commissioner dated 23.12.1985 prima facie permitted exemption where some manufacturing is done by job work. Because the question is open to rational debate and the Divisional Level Committee had granted the certificate, the Commissioner could not revisit this debatable entitlement by invoking rectification powers. The Court did not decide the substantive legal entitlement finally but held the matter to be non rectifiable by the Commissioner. [Paras 13, 14]

Denial of exemption on dyes and moulds could not be sustained under Section 4-A(3) because the issue was debatable and not a patent error; the Commissioner could not rectify the eligibility certificate on that basis.

Post grant writing off of machinery and its effect on eligibility - eligibility certificate issued by Divisional Level Committee - Whether subsequent writing off of the value of certain machinery after grant of the eligibility certificate could be the basis for rectification of that certificate under Section 4-A(3). - HELD THAT: - The Court observed that the alleged write off of certain machinery occurred after the issuance of the eligibility certificate and therefore, could not constitute a mistake in the certificate at the time it was granted. There was no allegation that the machinery value had been written off as of the date of the eligibility certificate. Consequently, subsequent accounting actions could not be used to impeach the validity of the certificate by way of rectification under Section 4-A(3). [Paras 6, 14]

Post grant write off of machinery does not furnish a ground for rectifying the eligibility certificate under Section 4-A(3); no rectifiable mistake existed in that regard.

Final Conclusion: The revision is allowed: the Commissioner could not, under Section 4-A(3), amend the eligibility certificate on the disputed questions concerning exemption for dyes/moulds used via job work or on account of subsequent write off of machinery; the rectification power is limited to patent clerical/arithmetic errors and cannot be employed to re decide debatable legal or factual issues where no misuse of the certificate is alleged.

Principles of natural justice - opportunity to file objections - notice of proposal - obligation to communicate acceptance or rejection of request for adjournment - remand for fresh assessment

Principles of natural justice - opportunity to file objections - notice of proposal - Assessment orders were passed without giving the assessee sufficient opportunity to file objections in response to notices of proposal. - HELD THAT: - The assessee sent letters dated 15.03.2019 requesting time up to 15.04.2019 to submit replies to the notices of proposal; those letters were received and acknowledged by the Assessing Officer. Despite receipt, the Assessing Officer proceeded to pass assessment orders on 29.03.2019, recording that the assessee failed to file objections. Where a request for time to file objections has been communicated to the authority and acknowledged, the authority must inform the party whether the request is accepted or refused before treating the matter as the party's non-response. Failing to communicate the outcome of the request and proceeding to confirm proposals without giving the assessee an opportunity to be heard amounts to a breach of the principles of natural justice.

Finding of violation of principles of natural justice; the assessments as passed are unsustainable for lack of opportunity to file objections.

Obligation to communicate acceptance or rejection of request for adjournment - remand for fresh assessment - Whether the matters should be remitted for fresh decision after affording the assessee an opportunity to file objections. - HELD THAT: - Given the admitted receipt of the assessee's request for time and the Assessing Officer's failure to communicate acceptance or rejection, the appropriate remedy is to set aside the impugned orders and remit the matters to the Assessing Officer. On remand, the Assessing Officer is to receive the assessee's reply from the date of receipt of this order and thereafter decide the assessments on merits and in accordance with law within the time directed by the Court.

Impugned assessment orders set aside and matters remitted to the Assessing Officer for fresh assessment after receipt of the assessee's reply; Assessing Officer to decide within four weeks of receiving the reply.

Final Conclusion: The writ petitions are allowed: the assessment orders for AYs 2012-13 to 2016-17 are set aside for breach of natural justice and the matters are remitted to the Assessing Officer to receive the assessee's replies and redo the assessments on merits and in accordance with law within four weeks of receipt of such replies.

Statutory limits of power of checking officer under Section 53 of the Karnataka Value Added Tax Act, 2003 - seizure and custody of goods pending tax proceedings - quashing of administrative transfer of seized goods to another wing - quasi-judicial functions of tax officers - right to release of seized goods or payment of value where goods cannot be returned

Statutory limits of power of checking officer under Section 53 of the Karnataka Value Added Tax Act, 2003 - quashing of administrative transfer of seized goods to another wing - quasi-judicial functions of tax officers - Validity of the Checking Officer's handing over of goods seized under Section 53 to the Vigilance wing and validity of Annexure D dated 15.6.2017 - HELD THAT: - The court held that the scope of the check at the check post is governed by the statutory scheme under Section 53 and that there is no provision permitting the Checking Officer to transfer custody of seized goods to another section (Vigilance) merely to facilitate recovery of other dues. Officers exercising quasi judicial functions under the VAT statute must act within the statutory mandate and cannot effectuate an inter sectional transfer of seized goods in lieu of statutory processes. Consequently, the administrative act of handing over the goods to the Vigilance Department and the consequent order (Annexure D) were found to be beyond the compulsion of the statute and liable to be set aside, while preserving the department's right to take any lawful proceedings against the consignor or petitioners if warranted. [Paras 3, 4]

Annexure D dated 15.6.2017 quashed; liberty reserved to the Commercial Tax Department to proceed in accordance with law.

Seizure and custody of goods pending tax proceedings - right to release of seized goods or payment of value where goods cannot be returned - Relief to petitioners in relation to release of seized goods and alternate relief where goods have been disposed by auction - HELD THAT: - The court directed that the concerned authority must release the goods in accordance with law within four weeks from receipt of the order. Recognising the State's statement that the seized granite slabs had already been auctioned and therefore cannot be physically returned, the court required the Commercial Tax Department to pay the value of the goods in terms of the invoice within four weeks. This direction operates as compensatory relief where return of the specific goods has become impracticable. [Paras 4]

Respondents directed to release the goods in accordance with law within four weeks, and where goods have been disposed, to pay the invoice value within four weeks.

Final Conclusion: Writ petition allowed: Annexure D (15.6.2017) set aside for exceeding the statutory scope of Section 53; respondents directed to release the goods in accordance with law or, if the goods have been auctioned, to pay their invoice value within four weeks; liberty preserved for the department to take lawful action against concerned parties.

Grant of bail - economic offences constitute a class apart - twin mandatory conditions under Section 212(6)(ii) of the Companies Act - bail under Section 439 of the Cr.P.C. - remand for fresh consideration of bail application

Grant of bail - bail under Section 439 of the Cr.P.C. - economic offences constitute a class apart - twin mandatory conditions under Section 212(6)(ii) of the Companies Act - Whether the High Court correctly applied the legal principles governing grant of bail in an economic offences case when it granted bail to Respondent No.1. - HELD THAT: - The Court held that the High Court failed to apply the requisite principles governing grant of bail, particularly in matters of grave economic offences which must be approached with caution. The High Court relied on 'broad probabilities' and did not sufficiently weigh factors identified by this Court for economic offences - nature of accusations, nature of evidence, severity of punishment, character of the accused, likelihood of securing presence at trial, reasonable apprehension of tampering with witnesses, and larger public interest. The judgment emphasises that, in addition to the general principles under Section 439 Cr.P.C., the twin mandatory conditions embodied in Section 212(6)(ii) of the Companies Act must be borne in mind where applicable, and that the High Court ought not to have been influenced by non-arrest of certain co-accused or by earlier interim orders in other proceedings when exercising its discretion. For these reasons the Court found non-application of mind on the part of the High Court and set aside the impugned order. [Paras 13]

Impugned order granting bail is set aside on the ground that the High Court did not apply the proper legal principles for bail in a grave economic offence.

Remand for fresh consideration of bail application - bail under Section 439 of the Cr.P.C. - twin mandatory conditions under Section 212(6)(ii) of the Companies Act - What relief should follow the setting aside of the High Court's bail order. - HELD THAT: - The Court directed that the matter be remitted to the High Court for fresh consideration of Bail Application No. 1971/2019 in accordance with law. The High Court is to reconsider the bail application applying the established principles governing grant of bail under Section 439 Cr.P.C., while keeping in view the scope and effect of the twin mandatory conditions in Section 212(6)(ii) of the Companies Act. Meanwhile, Respondent No.1 shall continue to remain in custody subject to any order that the High Court may pass on reconsideration. [Paras 16]

Matter remanded to the High Court to decide the bail application afresh in accordance with law; Respondent No.1 to remain in custody pending that decision.

Final Conclusion: The High Court's order granting bail to Respondent No.1 is set aside for failure to apply the governing principles for bail in economic offences; the matter is remitted to the High Court for fresh consideration of the bail application under Section 439 Cr.P.C., taking into account the twin mandatory conditions in Section 212(6)(ii) of the Companies Act, and Respondent No.1 shall remain in custody until the High Court decides the application.

Interplay between SARFAESI Act and Rent Control statutes - Overriding effect of a non-obstante clause (Section 35 of SARFAESI Act) - Validity and evidentiary burden of unregistered/oral tenancy vis-a -vis Section 107 of the Transfer of Property Act - Effect of Section 13(2) and Section 13(13) of the SARFAESI Act on creation and continuation of tenancy - Determination of lease in accordance with Section 111 of the Transfer of Property Act

Interplay between SARFAESI Act and Rent Control statutes - Overriding effect of a non-obstante clause (Section 35 of SARFAESI Act) - Effect of Section 13(2) and Section 13(13) of the SARFAESI Act on creation and continuation of tenancy - Reconciliation of rights under the SARFAESI Act, the Transfer of Property Act and Rent Acts and the scope of the non-obstante clause in Section 35 of the SARFAESI Act. - HELD THAT: - The Court held that the SARFAESI Act's objective of efficient recovery must be reconciled with the Transfer of Property Act and Rent Acts. Where a valid tenancy exists prior to creation of a mortgage, the tenant's possession cannot be disturbed by the secured creditor unless the lease is determined in accordance with Section 111 of the T.P. Act; in such cases the bank is presumed to have accepted the risk of pre-existing tenancy. A tenancy created after mortgage but before issuance of notice under Section 13(2) must satisfy Section 65A of the T.P. Act. Irrespective of these reconciliatory principles, Section 13(2) read with Section 13(13) bars the mortgagor from creating encumbrances after receipt of the Section 13(2) notice, and Section 35 confers an overriding effect on the SARFAESI Act over inconsistent laws. The Court rejected the narrower view that the non-obstante clause in Section 35 applies only to laws operating in the same field, holding that Section 35 is couched broadly and must be given full effect in the statutory scheme of recovery under SARFAESI. [Paras 21, 24, 25, 36]

Tenancy rights prior to mortgage are protected unless lease is determined under Section 111 T.P. Act; tenancies created after mortgage must comply with Section 65A T.P. Act; Section 13(13) and Section 35 operate to bar creation/continuation of tenancy after issuance of the Section 13(2) notice and have overriding effect.

Validity and evidentiary burden of unregistered/oral tenancy vis-a -vis Section 107 of the Transfer of Property Act - Determination of lease in accordance with Section 111 of the Transfer of Property Act - Effect of Section 13(2) and Section 13(13) of the SARFAESI Act on creation and continuation of tenancy - Whether the appellant-tenant's claim of tenancy entitled him to protection against delivery of possession to the secured creditor under the SARFAESI Act. - HELD THAT: - The Court examined the materials and found the appellant's claim of tenancy inadequately proved: no registered lease, inconsistent dates of alleged tenancy, only xeroxed rent receipts, and an ex parte interim order from the Small Causes Court. The bank produced contemporaneous documentary evidence (legal scrutiny report, non-encumbrance certificate, and a housing society letter) indicating self-occupation by the mortgagor and absence of third-party rights. The Court treated the tenancy claim as an afterthought aimed at defeating SARFAESI proceedings and held that an unregistered/oral tenancy claiming term exceeding one year must be supported by a registered instrument as required by Section 107 T.P. Act; otherwise the tenant cannot claim possession beyond the statutory period. Further, once Section 13(2) notice had been issued, continuation or creation of tenancy was barred under Section 13(13), rendering continued occupation after determination of tenancy as tenancy in sufferance. [Paras 29, 30, 31, 32, 33]

The appellant-tenant failed to establish a bona fide, legally cognizable tenancy and therefore is not entitled to resist delivery of possession to the bank.

Relief and enforcement of SARFAESI measures - Relief to be granted in view of findings on tenancy and applicability of SARFAESI measures. - HELD THAT: - Having rejected the tenant's claim and found the tenancy determined or barred by Section 13(13), the Court directed surrender of possession. The Court observed that such devious practices to obstruct bank recovery cannot be countenanced and exercised its power to order delivery of possession to the secured creditor. The Court did not decide issues relating to the 2016 amendment or other categories of tenants, reserving those for appropriate cases. [Paras 36, 37, 38]

The appeal is dismissed and the appellant-tenant is directed to hand over possession to the Assistant Registrar within the stipulated period for delivery to the bank.

Final Conclusion: The Court dismissed the appeal, rejecting the appellant's claim of a bona fide tenancy insufficiently proved by unregistered/oral evidence, held that Section 13(2)/13(13) and Section 35 of the SARFAESI Act bar creation/continuation of tenancy after notice and ordered delivery of possession of the secured asset to the secured creditor within the time specified.

Mandatory compliance of Section 42 of the NDPS Act - Mandatory compliance of Section 50 of the NDPS Act - Limited applicability of Section 43 and definition of public place/public conveyance - Non-compliance consequences - vitiation of conviction and acquittal

Mandatory compliance of Section 42 of the NDPS Act - Non-compliance consequences - vitiation of conviction and acquittal - Non-compliance with the requirements of Section 42(1) and Section 42(2) of the NDPS Act was established and vitiated the prosecution case. - HELD THAT: - The Court found that the empowered officer did not reduce the secret information into writing nor forthwith send the same to his superior, contrary to the mandatory scheme of Section 42. The trial court's reliance on subsequent documents or countersignatures (FIR or related entries) did not cure the total non compliance with the requirement to record and transmit the prior information. Because Section 43 was not attracted, the proviso to Section 42(1) and the requirement of sending a copy under Section 42(2) were required to be followed; their non compliance prejudiced the accused and rendered the conviction unsustainable. The Court applied the binding principles laid down by the Supreme Court in precedents emphasising strict compliance with Section 42 and the consequence of vitiation on conviction. [Paras 22, 23, 24, 29, 30]

Non compliance of Section 42(1) and Section 42(2) was proved and vitiated the conviction.

Mandatory compliance of Section 50 of the NDPS Act - Non-compliance consequences - vitiation of conviction and acquittal - Section 50 of the NDPS Act was not complied with and that breach contributed to vitiation of the search and conviction. - HELD THAT: - The Court noted that the accused was not given the statutory, independent option strictly as envisaged by Section 50; the Investigating Officer impermissibly offered or recorded alternatives (including being searched by the Investigating Officer himself) which are not authorised by the provision. The judgment relied on Supreme Court authorities holding that Section 50 is mandatory and that offering a third option or failing to secure independent choice undermines the validity of the search and the reliability of the recovery. [Paras 25, 26]

Breach of Section 50 was established and contributed to setting aside the conviction.

Limited applicability of Section 43 and definition of public place/public conveyance - Section 43 (search/seizure in public place) was not attracted because the vehicle was not shown to be a public conveyance within the meaning of the Act. - HELD THAT: - The Court examined evidence relating to the jeep's use and permit status and accepted the High Court's finding that there was no material to treat the vehicle as a public transport or public conveyance. As Section 43 could not be invoked, the protections and mandatory recording under Section 42 were required and their non compliance could not be excused by treating the occurrence as a public place search. [Paras 17, 18, 19, 20, 21]

Section 43 did not apply; therefore the procedural safeguards of Section 42 had to be observed and their breach prejudiced the prosecution.

Credibility of official witnesses and procedural lapses - Material contradictions and procedural irregularities in the prosecution case (including discrepancies about weighing equipment and malkhana entries) contributed to the conclusion that the prosecution had not established the case beyond reasonable doubt. - HELD THAT: - The Court recorded contradictions in official witnesses' testimonies - for example as to the nature of the weighing scale - and omissions in record keeping (absence of original Form No.29, lack of malkhana numbering/signature). These lapses, taken with the statutory non compliances, reinforced the conclusion that prejudice was caused to the accused and the conviction could not stand. [Paras 7, 8, 27]

Contradictions and procedural defects further supported setting aside the conviction.

Final Conclusion: For failure to comply with the mandatory safeguards of Sections 42 and 50 of the NDPS Act, absence of any valid application of Section 43, and additional procedural contradictions and lapses in the prosecution case, the conviction and sentence dated 28.01.2015 were set aside and the appellant was acquitted and ordered to be released if not required in any other case.

Powers of the Director General under Section 26(1) of the Competition Act, 2002 - prima facie opinion by the Commission as a trigger, not a limit, on investigation - distinction between investigation and inquiry - no mandatory right to notice and hearing at the Section 26(1) stage - DG may include violations emerging during the course of investigation - role of Regulations 18, 20 and 41 of the CCI (General) Regulations, 2009 in directing investigation

Powers of the Director General under Section 26(1) of the Competition Act, 2002 - prima facie opinion by the Commission as a trigger, not a limit, on investigation - DG may include violations emerging during the course of investigation - role of Regulations 18, 20 and 41 of the CCI (General) Regulations, 2009 in directing investigation - Whether the Director General was within his powers to investigate and report a suspected contravention of Section 4 of the Act although the CCI's direction under Section 26(1) referred to information regarding alleged contraventions of Section 3. - HELD THAT: - The Court held that an order under Section 26(1) to the DG 'triggers' a comprehensive investigation and does not rigidly confine the DG to only those provisions mentioned in the information. The statutory scheme and Regulations 18 and 20 require the DG to attach findings and all evidence collected during investigation, and the DG may examine matters that emerge in the course of investigation if they point to other violations. The decision of the Supreme Court in Competition Commission of India v. Steel Authority of India Limited and Excel Crop Care Ltd. was applied to the effect that the CCI's prima facie view is departmental and preliminary and does not fetter the DG from forming a contrary or broader view on the material uncovered. The Court rejected the Single Judge's conclusion that the DG exceeded jurisdiction in reporting a possible abuse of dominance by GIL and held that the language of the CCI's direction in this case was broad enough to permit the DG to investigate conduct attracting Section 4. [Paras 1, 28, 30, 34, 44]

The DG was within his powers to investigate and report the alleged contravention of Section 4 by GIL; the Single Judge's finding to the contrary is set aside and the CCI order dated 30th May 2013 is restored.

No mandatory right to notice and hearing at the Section 26(1) stage - distinction between investigation and inquiry - scope of opportunity at investigation stage versus CCI adjudicatory stage - Whether investigating and reporting on an alleged contravention of Section 4 without prior specific notice to the enterprise before the DG violated principles of natural justice. - HELD THAT: - Relying on the Supreme Court's exposition, the Court observed that the formation of a prima facie view and the direction to investigate under Section 26(1) are preliminary, inquisitorial and departmental in nature and do not attract the same right to notice and hearing as the subsequent adjudicatory inquiry before the CCI. The extent of opportunity to be afforded at the investigation stage depends on facts and the material discovered; it is not mandatory that the DG must always allow full evidentiary hearings or cross-examination in every investigation. GIL had made written submissions to the DG and was afforded a full opportunity before the CCI when the DG's report was considered. Consequently, the Court found no breach of natural justice in the DG's reporting of the Section 4 allegations. [Paras 27, 39, 40, 43]

No violation of principles of natural justice occurred in the DG investigating and reporting the Section 4 allegations; the opportunity available before the DG is different from that before the CCI and was not unlawfully curtailed.

Final Conclusion: The appeal is allowed; the impugned judgment of the Single Judge is set aside and the order dated 30th May, 2013 passed by the CCI is restored. The proceedings before the CCI shall continue from the stage at which they stood on that date, in accordance with law.

Liability to pay interest on delayed payment of penalty - effect of interim stay on interest liability and restitution - merger of interim order with final adjudication - application of Regulation 5 of the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011 - reduction of penalty by appellate tribunal and corresponding adjustment/refund of interest

Liability to pay interest on delayed payment of penalty - effect of interim stay on interest liability and restitution - application of Regulation 5 of the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011 - Whether the petitioner is liable to pay interest on account of delay in payment of penalty despite an interim stay of the demand - HELD THAT: - Regulation 5 of the Recovery Regulations expressly mandates simple interest at 1.5% per month (or part) from the day after expiry of the period specified in a demand notice until payment, subject only to the Commission's power to reduce or waive interest and to adjustment where the penalty is subsequently reduced by an appellate order. The pendency of an appeal or an interim stay does not, by itself, absolve the beneficiary of the stay from liability to pay interest once the interim order is vacated or the final adjudication affirms liability. The court relied on the restitution principle as expounded by the Supreme Court: an interim order in favour of a party that is ultimately reversed requires restitution so as to place the successful party in the position it would have occupied but for the interim order. COMPAT did not disturb the finding of contravention under Section 3; it only reduced the quantum of penalty. That modification relates back to the original CCI order, and the reduced penalty was required to be enforced. Consequently, the demand notice issued earlier became operative to the extent of the affirmed penalty and interest payable under Regulation 5 remained leviable, subject to adjustment for the reduced penalty and refund of any excess interest paid in accordance with the regulations. [Paras 26, 27, 28, 29, 30]

The petitioner is liable to pay interest on the delayed payment of the penalty as levied by the CCI; the demand for interest is sustainable and enforceable, with adjustment to follow for the reduced penalty.

Final Conclusion: The challenge to the demand for interest is rejected; the petitioner is liable to pay the interest demanded under Regulation 5, subject to adjustment in consequence of the reduction of penalty by the appellate tribunal.