TaxTMI Updates e-Newsletter
Sep 17,2021

Pre-show cause consultation - genuine pre-consultation requirement - compliance with para 5 of the Master Circular - accepted minutes do not substitute for consultation - interim restraint on adjudication pending consultation - direction to re-conduct consultation instead of quashing show cause notice

Pre-show cause consultation - compliance with para 5 of the Master Circular - accepted minutes do not substitute for consultation - Whether the notice dated 11.12.2020 and the subsequent proceedings satisfied the requirement of pre-show cause consultation under para 5 of the Master Circular - HELD THAT: - The Court found that the notice dated 11.12.2020, though so dated, was served by e-mail only on 14.12.2020 and scheduled the consultative hearing for 15.12.2020, with the show cause notice also issued on 15.12.2020. This sequence amounted to paying lip service to the pre-consultation requirement and did not evince an intention to genuinely comply with para 5. Further, the mere recording and later acceptance of the petitioner's draft minutes of the pre-consultation held on 28.04.2021 did not convert the interaction into a genuine two-way consultative process; taking the petitioner's submissions on record without back-and-forth deliberation cannot be treated as the consultation envisaged by para 5. The Court relied on the principle articulated in Omaxe Ltd. that voluntary statements or one-way recordings do not fulfil the consultative mandate which requires discussion and deliberation between the parties. [Paras 10, 11, 13, 14, 15]

The notice dated 11.12.2020 and the ensuing steps did not amount to proper compliance with the pre-show cause consultation requirement under para 5 of the Master Circular.

Direction to re-conduct consultation instead of quashing show cause notice - interim restraint on adjudication pending consultation - Whether the show cause notice dated 15.12.2020 should be set aside or other relief granted in view of the inadequate pre-consultation - HELD THAT: - The Court declined to quash the impugned show cause notice on merits. Observing that the respondents had been granted liberty by the High Court to conduct genuine pre-consultation and that both parties had an opportunity to participate, the Court directed that the respondents must once again hold the consultation process in a genuine manner, guided by the observations in Omaxe Ltd. The Court restrained the respondents from proceeding with adjudication under the show cause notice until the re-conducted pre-consultation concluded, and ordered the consultation to be concluded within two months. The Court expressly left all merits contentions open and did not adjudicate substantive liability or limitation, permitting the department to re-initiate steps subject to the consultative requirement and without determining competence or limitation issues. [Paras 17, 18, 19]

The show cause notice is not quashed; instead respondents are directed to re-conduct a genuine pre-consultation within two months and are restrained from proceeding with adjudication under the show cause notice until that consultation concludes, with merits left open.

Final Conclusion: Petition disposed by directing respondents to conduct a genuine pre-show cause consultation in accordance with para 5 of the Master Circular (guided by the Delhi High Court's observations in Omaxe Ltd.), to conclude the process within two months; until that consultation concludes respondents shall not proceed with the show cause notice dated 15.12.2020. Merits and questions of limitation or competence are left open.

Cancellation of GST registration - revocation of cancellation of registration under section 30 - extension of limitation by notification - decision on merits by reasoned and speaking order - non-influence of prior appellate order

Revocation of cancellation of registration under section 30 - extension of limitation by notification - Petitioner's entitlement to file a fresh application for revocation of cancellation of registration pursuant to the extant notification extending the time limit. - HELD THAT: - The Court recorded that the petitioner, whose GST registration was cancelled w.e.f. 14.01.2021, had applied for revocation which was rejected on the ground of limitation. The Government notification dated 29.08.2021 extended the period for filing applications for revocation where the original limitation period fell between 1 March 2020 and 31 August 2021. On consent, the Court permitted the petitioner to file a fresh application under section 30 of the Act in terms of that notification. The Court directed that such application, if filed pursuant to the notification, shall be considered and decided by the assessing authority.

Petitioner may file a fresh application under section 30 pursuant to the notification; the assessing authority is directed to consider and decide it.

Decision on merits by reasoned and speaking order - non-influence of prior appellate order - Standard and scope of consideration to be applied by the assessing authority and the effect of earlier appellate observations. - HELD THAT: - The Court expressed apprehension that the assessing authority might be influenced by the earlier appellate order which affirmed cancellation. The Standing Counsel accepted that any fresh application filed under the notification would be decided on merits. The Court therefore directed the third respondent to decide the fresh revocation application on merits by a reasoned and speaking order and expressly ordered that the third respondent shall not be influenced by observations returned in the earlier appellate order. Further, it was clarified that the earlier appellate order shall abide by the order to be passed by the assessing authority on the fresh application.

Third respondent to decide the fresh revocation application on merits by a reasoned and speaking order without being influenced by the earlier appellate order; the appellate order shall abide by that decision.

Final Conclusion: Writ petition disposed of subject to the directions that the petitioner may file a fresh application for revocation under section 30 in terms of the notification and that the assessing authority shall decide it on merits by a reasoned, speaking order without being influenced by the earlier appellate order; the appellate order shall abide by the outcome.

Provisional release of seized goods under Section 67(6) - bank guarantee as required security under Rule 140 - seizure under Section 67(2) and the meaning of "secreted" - applicability of Section 35(6) read with Sections 73/74 to a registered person - jurisdictional overlap with Directorate General of GST Intelligence under Section 6 - consistency with the Supreme Court's directive in Kay Pan Fragrance regarding statutory procedure

Provisional release of seized goods under Section 67(6) - bank guarantee as required security under Rule 140 - consistency with the Supreme Court's directive in Kay Pan Fragrance regarding statutory procedure - Modification of the interim order which directed release of seized goods without insisting on a bank guarantee - HELD THAT: - The Court held that the interim direction permitting release of goods without insisting on the bank guarantee conflicted with the statutory scheme for provisional release under Section 67(6) read with the Rules (notably Rule 140). Reliance on the Supreme Court's observations in Kay Pan Fragrance establishes that assessees must follow the statutory mechanism for provisional release, including execution of bond and furnishing of security (which may include a bank guarantee) or payment of applicable tax, interest and penalty. The petitioner had itself applied under Section 67(6) and the respondents issued a communication specifying the bond and bank guarantee requirements; therefore the High Court's earlier direction excusing the bank guarantee could not be sustained. Consequently the interim order was modified to require, in addition to a surety bond, furnishing of security by way of bank guarantee in terms of Section 67(6) and Rule 140 for release of the seized goods. The Court confined its observations to disposal of the present application and did not decide the final merits of the writ petition.

Interim order modified to require furnishing of bank guarantee (in addition to surety bond) for provisional release of goods as per Section 67(6) and Rule 140; stay application disposed of.

Seizure under Section 67(2) and the meaning of "secreted" - applicability of Section 35(6) read with Sections 73/74 to a registered person - Whether seizure under Section 67(2) was impermissible because the petitioner is a registered person and the goods/documents were not "secreted" - HELD THAT: - The Court found these contentions premature on the interlocutory application to vacate or modify the interim order. It was held that it cannot be concluded at this stage that Section 35(6) read with Sections 73/74 alone are applicable to a registered person so as to preclude invocation of Section 67. The term 'secreted' is not defined and may cover circumstances where goods, documents or things are concealed or not kept at designated places with an intention to conceal; therefore the petitioner's plea that Section 67(2) cannot be invoked because items were not secreted could not be accepted without full adjudication on facts. These contentions were rejected for the present purpose of deciding the respondents' application under Article 226(3).

Contentions that Section 67(2) is inapplicable and that only Section 35(6)/Sections 73/74 govern the matter were held to be premature and not tenable on the present application; no final adjudication on merits was made.

Jurisdictional overlap with Directorate General of GST Intelligence under Section 6 - Claim that respondents lacked jurisdiction because only DGGI has authority under Section 6 - HELD THAT: - The Court observed that the petitioner's contention regarding lack of jurisdiction due to alleged exclusive jurisdiction of DGGI could not be entertained at the stage of deciding the application to vacate/modify the interim order. The allegation of jurisdictional defect was not accepted for the limited purpose of the present interlocutory proceedings and does not affect the directions given in respect of provisional release procedures.

Jurisdictional challenge based on exclusivity of DGGI under Section 6 was not countenanced for the present application; the contention was left open for final consideration.

Final Conclusion: The respondents' application under Article 226(3) is allowed to the extent that the interim order is modified: release of seized goods shall be subject to the petitioner furnishing, in addition to a surety bond, security by way of bank guarantee in accordance with Section 67(6) and Rule 140. The observations are confined to this interlocutory disposal and do not decide the ultimate merits of the writ petition.

Quashing of seizure order - disposal of writ petitions in light of Supreme Court common order - termination of High Court proceedings by higher court order - statutory appeal remedy

Disposal of writ petitions in light of Supreme Court common order - termination of High Court proceedings by higher court order - Effect of the Supreme Court's common order disposing writ petitions on the present challenge to the seizure order. - HELD THAT: - The Court recorded that the Supreme Court in Special Leave Petition (C) No.25291 of 2019 passed a common order disposing all writ petitions of the class to avoid inconsistent application of law and multiple appeals. Having regard to that order, the High Court held that the present petition challenging the seizure order stands concluded by the Supreme Court's direction and therefore cannot be entertained further in this proceeding. The petition was dismissed for that reason. [Paras 3, 4, 7, 8]

Petition dismissed as concluded by the Supreme Court's common order.

Quashing of seizure order - statutory appeal remedy - Permissibility of instituting or pursuing the statutory remedy of appeal against the impugned seizure order notwithstanding dismissal of the writ petition. - HELD THAT: - Although the writ petition was dismissed as covered by the Supreme Court's common order, the petitioner was granted liberty to institute and/or pursue the statutory remedy of appeal against the impugned order. The State raised no objection to the petitioner availing that remedy provided it is done in accordance with law. The High Court therefore confined its order to dismissal while preserving the petitioner's right to pursue statutory avenues. [Paras 5, 6, 8]

Liberty granted to institute and/or pursue the statutory appeal remedy; no objection by State if done in accordance with law.

Final Conclusion: The writ petition challenging the seizure order is dismissed as the subject matter is concluded by the Supreme Court's common order; the petitioner is granted liberty to pursue the statutory remedy of appeal in accordance with law.

Interest under Section 50 of the Central Goods and Services Tax Act - Retrospective amendment (Finance Act, 2021) with effect from 1st July, 2017 - Interest payable only on tax paid by debiting the electronic cash ledger - Garnishee notice under Section 79 - Recalculation and refund of excess amount collected - Claim for interest on excess collection

Interest under Section 50 of the Central Goods and Services Tax Act - Retrospective amendment (Finance Act, 2021) with effect from 1st July, 2017 - Interest payable only on tax paid by debiting the electronic cash ledger - Validity of the demand for interest under Section 50 for the period July, 2017 to March, 2018 in light of the retrospective amendment - HELD THAT: - The court held that following the amendment effected by Section 112 of the Finance Act, 2021 (deemed to have come into force from 1 July 2017), interest under Section 50 is payable only on that portion of tax which is paid by debiting the electronic cash ledger. Applying this legal position to the petitioner's case, the impugned order dated 14 May 2019 demanding interest for the period July, 2017 to March, 2018 could not be sustained to the extent it sought interest on tax paid by debiting the electronic credit ledger. The petitioner stated in a supplementary affidavit that only a limited amount of interest was payable, and that figure was not controverted in the respondent's reply; accordingly the majority of the earlier demand fell outside what is now payable under the amended provision.

Impugned order dated 14 May 2019 setting out the demand under Section 50 is set aside; interest is payable only on the portion of tax paid by debiting the electronic cash ledger and respondent is directed to recalculate the demand in accordance with the amended law.

Garnishee notice under Section 79 - Recalculation and refund of excess amount collected - Claim for interest on excess collection - Validity of the garnishee notice issued under Section 79 and consequential recovery in light of the recalculated demand - HELD THAT: - Because the principal demand under Section 50 has been set aside insofar as it sought interest beyond that payable under the amended proviso, the garnishee notice dated 27 May 2019 issued to HDFC Bank and the recovery effected thereunder were also rendered unsustainable. The court directed the respondent to recalculate the demand in accordance with law within four weeks, to refund any excess amount collected, and to consider the petitioner's claim for interest on any excess amount recovered in accordance with law.

Garnishee notice dated 27 May 2019 and the recovery under it are set aside; respondent to recalculate, refund excess and consider claim for interest within the stipulated time.

Final Conclusion: The writ petition is disposed of by setting aside the demand under Section 50 to the extent inconsistent with the retrospective amendment, and the garnishee notice and recovery are set aside; respondent must recalculate the demand in accordance with the amended provision within four weeks, refund any excess and consider the petitioner's claim for interest on excess recovery.

Revocation of cancellation of registration - order in appeal - mandamus to implement appellate order - time-bound compliance - consideration of merits by adjudicating authority - application in REG-21

Mandamus to implement appellate order - time-bound compliance - Direction to the respondents to give effect to the Order-in-Appeal dated 26.10.2020 and to decide the pending application for revocation without delay. - HELD THAT: - The Court observed that the petitioner had approached the appellate authority and obtained an Order-in-Appeal dated 26.10.2020 directing the adjudicating officer to pass a fresh order after considering the documents and to submit necessary documents in REG-21. Despite filing REG-21 along with substantive documents on 27.11.2020 and sending reminders, the petitioner had not received any response and the directions of the appellate authority remained unimplemented. Without entering into the merits, the Court deemed it appropriate to issue a direction for compliance with the appellate order and to ensure that the respondent addresses the petitioner's application in a time-bound manner. The Court therefore commanded the respondents to comply with the directions of the Additional Commissioner (Appeals) and decide the matter strictly in accordance with law within six weeks. [Paras 6, 7]

Respondents directed to give effect to the Order-in-Appeal dated 26.10.2020 and decide the revocation application within six weeks.

Revocation of cancellation of registration - consideration of merits by adjudicating authority - application in REG-21 - Requirement that the adjudicating authority consider the merits of the revocation application afresh and without being influenced by extraneous aspects. - HELD THAT: - The Court specifically refrained from adjudicating the merits itself and directed that the adjudicating authority give fresh consideration to the petitioner's submissions and substantive documents filed with REG-21. The authority was directed to address the merits strictly in accordance with law, following the directions contained in the appellate order. This constitutes a remand for fresh decision on merits rather than a determination by the Court. [Paras 6]

Matter remanded to the adjudicating authority to decide the revocation application on merits in accordance with law and the appellate directions.

Final Conclusion: The writ petition is disposed of by directing the respondents to comply with the Order-in-Appeal dated 26.10.2020 and to decide the petitioner's REG-21 application for revocation of cancellation on merits, strictly in accordance with law, within six weeks.

Validity of provisional attachment under Section 83 of the CGST Act - Requirement of pendency of proceedings under Sections 62, 63, 64, 67, 73 and 74 - Restrictive interpretation of statutory attachment powers - Maintainability of writ petition against provisional attachment where statutory appeal under Section 107 is not available

Validity of provisional attachment under Section 83 of the CGST Act - Requirement of pendency of proceedings under Sections 62, 63, 64, 67, 73 and 74 - Restrictive interpretation of statutory attachment powers - Provisional attachment of the petitioner's bank account was invalid as the statutory pre-condition of pendency of proceedings under the specified provisions was not satisfied. - HELD THAT: - The Court found that the provisional attachment impugned in the petition was effected without there being any pending proceedings against the petitioner under the provisions specified in Section 83. Relying on the reasoning in the cited Supreme Court decision, the Court held that the power of provisional attachment under Section 83 must be exercised only if the statutory pre-condition of pendency of proceedings under the enumerated provisions exists. The Court concluded that expanding the attachment power to situations where proceedings are pending or concluded against a different taxable person would amount to an impermissible extension of a draconian power and must be interpreted restrictively. Applying that principle to the admitted facts of the present case, the Court held the provisional attachment to be ultra vires the statutory scheme and unsustainable. [Paras 3, 4, 8, 9]

The provisional attachment was set aside as it was effected without the required pendency of proceedings under the specified statutory provisions.

Maintainability of writ petition against provisional attachment where statutory appeal under Section 107 is not available - Writ petition challenging the provisional attachment is maintainable where no alternative statutory remedy by way of appeal is available. - HELD THAT: - The Court noted the Supreme Court's authoritative pronouncement that in circumstances where the statutory scheme does not furnish an effective appeal against an order of provisional attachment, a writ petition is maintainable. Given that no appeal under Section 107 lay against the impugned order and the factual position was not in dispute, the Court proceeded to decide the challenge on merits without requiring a formal reply from respondents. [Paras 5, 9]

The writ petition was entertained and decided on merits as a proper remedy to challenge the provisional attachment.

Final Conclusion: Petition allowed; the order of provisional attachment/assessment impugned in the petition is set aside in view of the absence of the statutory pre-condition of pendency of proceedings, and connected applications stand disposed of.

Power to summon in an inquiry under Section 70 of the CGST Act - bar on proceedings by virtue of Section 6(2)(b) of the CGST Act - distinction between an "inquiry" and "proceedings" for adjudication - cross-empowerment of Central and State tax authorities for intelligence-based enforcement action - CBEC clarification on intelligence-based enforcement and completion of proceedings by the initiating authority

Power to summon in an inquiry under Section 70 of the CGST Act - bar on proceedings by virtue of Section 6(2)(b) of the CGST Act - distinction between an "inquiry" and "proceedings" for adjudication - Validity of summons issued by the Central authority under Section 70 of the CGST Act notwithstanding parallel action by State tax authorities and the applicability of Section 6(2)(b) as a bar. - HELD THAT: - The Court examined the scope and object of Section 70 (power to summon in an inquiry) vis-a -vis Section 6(2)(b) (prohibition on initiating proceedings on the same subject-matter). It held that Section 6(2)(b) operates to bar subsequent adjudicatory proceedings on the same subject-matter (assessments, demands, recovery, penalties etc.), whereas Section 70 empowers a proper officer to conduct inquiries and summon persons/documents. The words "inquiry" (Section 70) and "proceedings on the same subject-matter" (Section 6(2)(b)) are distinct in meaning and cannot be conflated; invocation of Section 70 for obtaining statements or documents in an inquiry is not precluded by the bar in Section 6(2)(b). The Court further relied on the CBEC clarification and the concept of cross-empowerment permitting intelligence-based enforcement action by either Central or State authorities, which allows the initiating authority to carry the action to its logical conclusion. Prior decisions addressing cross-empowerment or overlapping actions were considered, but the Court distinguished authorities where factual matrices differed or where the interaction between Section 70 and Section 6(2)(b) was not directly examined. Applying these principles to the facts, the Court found no legal basis to quash the summons issued by the respondent. [Paras 28, 31, 32, 33, 36]

Summons issued under Section 70 of the CGST Act are not barred by Section 6(2)(b) merely because State authorities have initiated proceedings; no ground to quash the summons.

Final Conclusion: The appeal is dismissed; the summons issued by the respondent under Section 70 of the CGST Act are upheld and the writ challenge to quash them fails.

Maintainability of public interest litigation seeking enforcement of higher court directions - compliance with Supreme Court directions - jurisdiction to entertain contempt proceedings - challenge to executive circulars before appropriate forum

Maintainability of public interest litigation seeking enforcement of higher court directions - compliance with Supreme Court directions - jurisdiction to entertain contempt proceedings - challenge to executive circulars before appropriate forum - Whether the PIL seeking a direction to respondents to obey the Supreme Court's order dated 27-4-2021 is maintainable, and whether this Court can entertain contempt-like enforcement in the present proceedings where the respondents assert compliance by issuance of a circular. - HELD THAT: - The petition sought directions to respondents to obey the Supreme Court order dated 27-4-2021 and consequential reliefs. Respondent No.4 produced the Ministry of Finance circular dated 20-7-2021 issued pursuant to the Supreme Court's directions and contended that necessary clarifications have been issued, leaving no basis for the present challenge. The Court observed that it is not competent to effectively entertain a contempt petition in this proceeding brought to agitate compliance with the Supreme Court's order and noted the respondents' assertion of compliance by issuance of the circular. The Court further recorded that if the petitioner intends to challenge the executive circular, the proper course is to approach the appropriate forum for such a challenge rather than pursue the present PIL. Applying these considerations, the Court concluded that the petition is not maintainable and declined to entertain it. [Paras 5, 6]

The PIL is dismissed as not maintainable; the petitioner may seek remedy before the appropriate forum if aggrieved by the circular or compliance assertion.

Final Conclusion: The petition seeking directions to enforce the Supreme Court's order was dismissed for want of maintainability after respondents produced a Ministry of Finance circular dated 20-7-2021 purporting to implement those directions; the petitioner is left to pursue available remedies before the appropriate forum.

Transitional credit under Section 140(3) of the CGST Act - Condition of supplier's ineligibility for abatement under Section 140(3)(v) - Inputs contained in semi-finished or finished goods and definition of "goods" - Admissibility of credit on inputs held in stock as on the appointed day - Recovery proceedings under Section 73 of the CGST Act and applicability of interest and penalty - Statutory service/issuance requirements under Rule 142 for show cause notices and summaries

Transitional credit under Section 140(3) of the CGST Act - Condition of supplier's ineligibility for abatement under Section 140(3)(v) - Admissibility of credit on inputs held in stock as on the appointed day - Whether ITC of Rs. 7,53,571 claimed in TRAN-1 on inputs held in stock as on 30.06.2017 was admissible under Section 140(3) of the CGST Act - HELD THAT: - Section 140(3) permits a registered person to take credit of eligible duties in respect of inputs held in stock on the appointed day subject to specified conditions, including that the supplier of services is not eligible for any abatement under the Act. The appellant was availing abatement resulting in GST being effectively paid at a reduced rate for construction of residential complex; therefore condition (v) of Section 140(3) is not satisfied. In view of the statutory requirement that the supplier must not be eligible for any abatement, the credit carried forward in TRAN-1 on inputs held in stock cannot be allowed. The adjudicator accordingly found the ITC of Rs. 7,53,571 to be wrongly transferred and recoverable. [Paras 6]

ITC of Rs. 7,53,571 on inputs held in stock as on 30.06.2017 is not admissible under Section 140(3) and is recoverable.

Inputs contained in semi-finished or finished goods and definition of "goods" - Transitional credit under Section 140(3) of the CGST Act - Whether ITC of Rs. 7,20,147 on inputs contained in semi-finished and finished goods as on 30.06.2017 was admissible under Section 140(3) - HELD THAT: - Section 2(59) defines 'inputs' as goods other than capital goods used or intended to be used by a supplier; Section 2(52) defines 'goods' as movable property and only includes things attached to or forming part of the land where agreed to be severed before supply. A building under construction, being attached to earth and forming immovable property, does not fall within the ordinary meaning of 'goods' for purposes of inputs contained in semi-finished or finished goods. Reliance on authorities considering work-in-progress that becomes immovable property supports that transitional credit on inputs already used and contained in WIP of building construction is not allowable under Section 140(3). Applying these definitions and precedents, the credit of Rs. 7,20,147 was held inadmissible and recoverable. [Paras 7]

ITC of Rs. 7,20,147 on inputs contained in semi-finished and finished goods as on 30.06.2017 is not admissible under Section 140(3) and is recoverable.

Recovery proceedings under Section 73 of the CGST Act and applicability of interest and penalty - Statutory service/issuance requirements under Rule 142 for show cause notices and summaries - Validity of proceedings initiated under Section 73 read with Rule 142, and entitlement to interest and penalty for irregular/transitional credit carried forward - HELD THAT: - The adjudicator found that the appellant irregularly carried forward transitional ITC with intent to avail inadmissible credit and that the irregularity was detected during departmental audit. Consequently, provisions of Section 73 are invokable for recovery of the wrongly taken credit. Interest under Section 50 and penalty under Section 122 were held applicable. The appellant's contention that issuance/uploading requirements under Rule 142 were not followed was examined; the authority recorded that the show cause notice was issued manually because electronic facility/module was not available at the time, and noted that reference to SGST Act in the impugned order was inadvertent since the credit pertained to central excise duty credited to CGST head. [Paras 9, 12, 13]

Proceedings under Section 73 are valid; wrongly taken transitional credit is recoverable with interest and penalty. Manual issuance of the show cause notice was accepted due to non-availability of electronic module.

Final Conclusion: The appeal is rejected. The Commissioner (Appeals) upheld the impugned order: transitional ITC of Rs. 14,73,718 claimed in TRAN-1 (comprising the amounts disallowed on inputs held in stock and on inputs contained in semi finished/finished goods) is not admissible, is recoverable, and the recovery proceedings under Section 73 with interest and penalty are sustained; procedural issuance of the SCN was accepted as manual due to portal unavailability.

Attachment of bank accounts - objections to attachment - decision by competent authority - speaking order - appearance of authorised representative

Attachment of bank accounts - objections to attachment - decision by competent authority - speaking order - appearance of authorised representative - Direction to the competent authority to adjudicate the petitioner's objections to the attachment of its Cash Credit Account and other bank accounts on the same PAN within a fixed short timeframe - HELD THAT: - The High Court noted that the petitioner had filed objections to the attachment on 07.08.2021 and that the industry was adversely affected by the non-decision. On notice, counsel for the respondent did not dispute that the objections required adjudication by the competent authority. The Court therefore directed that the authorised representative/partner appear before the competent authority on 20.08.2021 at 10:30 AM to represent the petitioner's case, and ordered the competent authority to decide the objections and pass a speaking order thereon immediately but not later than 23.08.2021. The direction requires fresh consideration and a reasoned decision by the authority within the stipulated timeline.

Competent authority directed to decide the objections to the attachment and pass a speaking order after hearing the authorised representative by 23.08.2021; petition disposed in those terms.

Final Conclusion: The petition was disposed by directing the competent authority to hear the authorised representative on 20.08.2021 and to decide the objections to the attachment of the petitioner's bank accounts by a speaking order not later than 23.08.2021.

Revenue expenditure versus capital expenditure - Ownership and capital/revenue characterisation of movable equipment - Allowability of club membership fees vis-a -vis services availed - Depreciation and disallowance in respect of let-out property - Bad debts/advances written off - revenue deduction or capital loss - Application of the Mysore Sugar Company test for distinguishing revenue and capital losses

Revenue expenditure versus capital expenditure - Ownership and capital/revenue characterisation of movable equipment - Treatment of expenditure on wheel balancer/aligner/changer and similar equipment installed at dealers' showrooms as capital expenditure rather than revenue expenditure. - HELD THAT: - The Tribunal's finding that the assets remained the assessee's property and were movable, capable of being removed and reused, warranted treating the expenditure as capital in nature. The Commissioner (Appeals) had allowed the claim as revenue on the premise that ownership passed to dealers upon erection, but the Tribunal examined the record and concluded ownership continued with the assessee. The High Court found no infirmity in the Tribunal's fact-findings, observed that the assessee did not demonstrate transfer of ownership and that spread-over utility of the equipment supports capital character. The court distinguished earlier decisions relied upon by the assessee as factually different and recorded that reappreciation of evidence was not warranted. Consequently the Tribunal's restoration of the Assessing Officer's disallowance was upheld. [Paras 3, 4, 5, 7]

Expenditure on the equipment installed at dealers' showrooms held to be capital expenditure; question answered in favour of the Revenue and against the assessee.

Allowability of club membership fees vis-a -vis services availed - Whether payments described as club membership and service charges are allowable as business expenditure. - HELD THAT: - Relying on this Court's earlier decision in the assessee's own case for AY 2002-03, the court reiterated that only membership fees are claimable; amounts spent for availing services or goods in clubs are not allowable as revenue expenditure. The Tribunal's finding that the payments in the present case did not represent membership fees was accepted. [Paras 8]

Payments were not allowable as revenue expenditure; question answered in favour of the Revenue and against the assessee.

Depreciation and disallowance in respect of let-out property - Validity of disallowance of part depreciation and repair charges in respect of let-out portion of Gurgaon building. - HELD THAT: - The Tribunal applied and followed its earlier consistent view in the assessee's own appeals for preceding years, which the assessee had accepted earlier, and accordingly rejected the claim. The High Court noted no arguable illegality in the Tribunal following its coordinate-bench precedent and upheld the disallowance for the assessment year under consideration. [Paras 9]

Disallowance of depreciation and repair charges relating to the let-out portion upheld; question answered in favour of the Revenue and against the assessee.

Bad debts/advances written off - revenue deduction or capital loss - Application of the Mysore Sugar Company test for distinguishing revenue and capital losses - Whether advances written off in respect of acquisition of capital assets qualify as allowable revenue bad debts under Sections 36/37 (as pleaded) or constitute capital losses outside their scope. - HELD THAT: - The Tribunal applied the test laid down in CIT v. Mysore Sugar Company Ltd to conclude that the write-offs did not meet the criteria for allowance as revenue expenditure/bad debts. The High Court agreed with the Tribunal's reasoning and fact-application, found no basis to disturb the conclusion that the amounts related to capital advances and were not allowable as revenue deduction, and held that no substantial question of law arose for interference under Section 260A. [Paras 10]

Advances written off in relation to acquisition of capital assets held to be capital loss and not an allowable revenue deduction; question answered in favour of the Revenue and against the assessee.

Final Conclusion: All substantial questions raised by the assessee for Assessment Year 2003-04 were answered against the assessee and in favour of the Revenue: the Tribunal's classification of the showroom equipment expenditure as capital, the disallowance of club-related payments (other than membership fees), the disallowance of depreciation/repairs for the let-out portion, and the rejection of the claim for advances written off as revenue bad debts were all upheld; the appeal is dismissed.

Admissibility under proviso to section 245R(2) - determination of fair market value - obligation to deduct tax under section 195 - taxability of capital gains under tax treaties (India-Netherlands; India-Switzerland) - arrangement designed for avoidance of tax

Admissibility under proviso to section 245R(2) - determination of fair market value - taxability of capital gains under tax treaties (India-Netherlands; India-Switzerland) - obligation to deduct tax under section 195 - Whether the application involves determination of fair market value of shares and is therefore inadmissible under proviso (ii) to section 245R(2) of the Act. - HELD THAT: - The Authority examined the questions raised and found they are directed to the legal question of taxability of gains under the India-Netherlands and India-Switzerland tax treaties and the obligation to deduct tax under section 195, not to valuation or computation of capital gains. Valuation and computation, if necessary, are matters for the Assessing Officer only after taxability is established. Reliance was placed on the Authority's earlier view in Worldwide Wickets that mere reference to capital gains does not automatically convert the question into one of valuation barred by the proviso. Accordingly, the Revenue's objection that the application was barred as involving determination of fair market value is rejected and the application is admitted for adjudication on the treaty and section 195 issues. [Paras 3]

Objection under proviso (ii) that the questions involve valuation is rejected; application admitted under section 245R(2) for determination of treaty taxability and section 195 liability.

Arrangement designed for avoidance of tax - admissibility under proviso to section 245R(2) - Whether the transactions are prima facie designed for avoidance of tax within the meaning of proviso (iii) to section 245R(2). - HELD THAT: - The Revenue contended that it could not comment on whether the arrangement was prima facie for tax avoidance because all relevant details were not on record. The applicant disputed that contention. Rather than finally adjudicating on this threshold, the Authority chose in the interests of justice to leave the matter open and permitted the Department to place any adverse evidence on record during the merit hearing. Thus the Authority did not decide the avoidance question on merits but allowed the issue to be raised and supported at the substantive hearing. [Paras 4]

Proviso (iii) objection left open for the Department to bring forward any adverse evidence at the merit hearing; no final finding on tax-avoidance design at admission stage.

Final Conclusion: The application of the Swiss resident applicant is admitted under section 245R(2): the Authority rejected the Revenue's contention that the questions are barred as involving valuation under proviso (ii), while the contention that the transactions are prima facie designed for avoidance of tax under proviso (iii) is left open for the Department to support during the merit proceedings; the merits hearing will be scheduled in due course.

Depreciable asset - business asset - block of assets within the meaning of section 2(11) of the Income-tax Act, 1961 - non-user disentitles for depreciation - reclassification as investment to avoid tax on short-term capital gains

Whether a building, acquired in 1974 and on which depreciation was allowed as a business asset for 21 years, ceased to be part of the block of assets and lost its character as a depreciable business asset because it was not used for business for two years before sale? - HELD THAT: - The Court accepted the High Court's reasoning that an asset once forming part of the block of assets does not cease to be part of that block merely because it was not used for business in one or two years prior to sale. Non-use for those years may disentitle the assessee from claiming depreciation for the years of non-use, but it does not alter the intrinsic character of the asset as a business (depreciable) asset so long as the assessee continued the business.

Assessee's unilateral description of the building in the balance-sheet as an investment asset was held to be ineffectual to change its character and was regarded as a device to avoid tax on short-term capital gains.

The High Court therefore rightly concluded that the building remained part of the block of assets and was subject to the tax consequences applicable to such assets, and restored the additions made in the assessment order.

The building retained its character as a part of the block of business assets and as a depreciable asset despite temporary non-use; the High Court's restoration of the assessment and addition was correct.

Final Conclusion: The Supreme Court upheld the High Court's conclusion that the building remained a depreciable business asset forming part of the block of assets notwithstanding two years of non-use, rejected the assessee's reclassification as an investment to avoid tax, and dismissed the appeal.

Benefit under the Direct Tax Vivad Se Vishwas Act, 2020 - Penalty u/s 271D - violation of the provisions of Section 269SS - HELD THAT:- When the present petitions are taken up for further hearing petitioner seeks permission to withdraw the Special Leave Petitions as the petitioner proposes to avail the benefit under the Direct Tax Vivad Se Vishwas Act, 2020.

In that view of the matter, the Special Leave Petitions stand dismissed as withdrawn unconditionally with the above mentioned liberty.

As and when any application is made, the same be considered in accordance with law and on its own merits for which we have not expressed anything in favour of any party.

Judicial review of Settlement Commission orders - scope of interference under Article 226 - decision making process vs merits - presumption of truth of documents impounded in survey under section 292C - acceptance of disclosure in settlement application - adequacy of Report under Rule 9 of Income Tax Settlement Commission (Procedure) Rules, 1997

Judicial review of Settlement Commission orders - scope of interference under Article 226 - decision making process vs merits - Whether the High Court should interfere with the Settlement Commission's order under Article 226 of the Constitution. - HELD THAT: - The Court applied settled principles that judicial review of a Settlement Commission order is concerned with the legality of the decision making process and not with reappraisal of factual findings or merits. Relying on precedents cited by the parties, the Court held that interference is permissible only if the Commission acted contrary to the provisions of the Act, committed legal infirmity, or the decision making process was vitiated by bias, fraud or malice. Absent demonstration of such legal defect or procedural illegality, the High Court will not substitute its own view for that of the Commission even if it might have reached a different conclusion on facts.

No interference; petition dismissed as the petitioner failed to establish any legal infirmity in the Commission's decision making process.

Adequacy of Report under Rule 9 of Income Tax Settlement Commission (Procedure) Rules, 1997 - acceptance of disclosure in settlement application - Whether the Report filed by the Principal Commissioner under Rule 9 warranted rejection of the assessee's settlement application. - HELD THAT: - The Court examined the Report under Rule 9 filed by the petitioner and found it did not contain specific and cogent material sufficient to reject the settlement application. The petitioner itself admitted the assessee had disclosed undisclosed income (albeit allegedly under compulsion) and sought further enquiry rather than producing conclusive material to contradict the assessee's claim. In those circumstances the Settlement Commission was entitled to accept the disclosure and allow the settlement application; the Report lacked substance to impugn the Commission's conclusion.

The Report under Rule 9 was inadequate to justify rejection; the Commission's acceptance of the disclosed income stands.

Presumption of truth of documents impounded in survey under section 292C - acceptance of disclosure in settlement application - Whether the Settlement Commission was justified in treating the contents of documents seized in survey as presumptively true and relying on them to accept the assessee's disclosure. - HELD THAT: - The Settlement Commission recorded that documents impounded during survey are presumed to be true under the statutory scheme and that once the applicant disclosed income consistent with those documents further probing would be futile. The High Court, applying the limited scope of judicial review, did not find that such conclusion by the Commission contravened the Act or suffered from legal infirmity. Absent demonstrable contravention of law or prejudicial procedural defect, the Commission's reliance on impounded documents and consequent acceptance of disclosed income could not be upset.

The Commission's approach in treating impounded survey documents as presumptively true and accepting the disclosure was not liable to interference.

Final Conclusion: The writ petition is dismissed; the Settlement Commission's order allowing the assessee's settlement application for Assessment Year 2012-13 is not shown to be contrary to law or vitiated in its decision making process and therefore will not be interfered with under Article 226.

Characterisation of payments for computer software under EULAs/distribution agreements as royalty or non-royalty - obligation to deduct tax at source under section 195 of the Income Tax Act - application of amended Section 9(1)(vi) with retrospective effect - use of or right to use copyright for purposes of royalty - interpretation of Article 12 of DTAAs in relation to royalties - meaning of 'total turnover' for deduction under section 10A - allowability of expenses (travel and communication) against export turnover and total turnover

Application of amended Section 9(1)(vi) with retrospective effect - obligation to deduct tax at source under section 195 of the Income Tax Act - Whether the retrospective amendment to Section 9(1)(vi) applied so as to require TDS in the facts of this case - HELD THAT: - The Court accepted that the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. governs the matter. That decision held that where distribution agreements/EULAs do not create any interest or right amounting to the use of or right to use copyright, the provisions dealing with royalty (including section 9(1)(vi) as amended) do not apply and consequently persons liable under section 195 are not obliged to deduct tax at source. Applying that precedent, the Tribunal was correct in holding the retrospective amendment did not impose an obligation to deduct TDS in the facts before it.

Answered against the Revenue; no TDS obligation arises from the retrospective amendment in the facts of this case.

Use of or right to use copyright for purposes of royalty - interpretation of Article 12 of DTAAs in relation to royalties - Whether payments to non-resident companies (ACI and IRPL) amounted to royalty because those non-residents had permanent establishments in India through the assessee - HELD THAT: - Following Engineering Analysis, the Court held that the distribution agreements/EULAs did not create an interest or right in the distributors/end-users amounting to use of or right to use copyright; therefore such payments do not constitute royalty under the relevant DTAA Articles or section 9(1)(vi). The existence of a permanent establishment of the non-resident parties in India, as pleaded by Revenue, did not alter the characterisation adopted in the governing precedent, and the Tribunal's finding that no TDS was required stands.

Answered against the Revenue; payments did not constitute royalty and were not chargeable so as to require TDS.

Characterisation of payments for computer software under EULAs/distribution agreements as royalty or non-royalty - obligation to deduct tax at source under section 195 of the Income Tax Act - Whether amounts paid by the assessee for use of the assessee's customers in India of operating network payments/ATMs constituted royalty under Section 9(1)(vi) - HELD THAT: - Relying on the Supreme Court's categorical conclusion in Engineering Analysis, the Court held that payments made under EULAs/distribution agreements for resale/use of computer software do not amount to royalty for use of copyright. The Tribunal's conclusion that such payments were not royalty under section 9(1)(vi) was therefore correct and required no TDS under section 195.

Answered against the Revenue; such payments are not royalty under section 9(1)(vi).

Obligation to deduct tax at source under section 195 of the Income Tax Act - characterisation of payments for computer software under EULAs/distribution agreements as royalty or non-royalty - Whether the Tribunal was correct in holding that no TDS was required to be deducted under Section 195 on payments made to two non-resident companies - HELD THAT: - Given the Supreme Court's ruling that payments by resident end-users/distributors to non-resident software suppliers under EULAs/distribution agreements do not constitute royalty and do not give rise to income taxable in India, the persons liable under section 195 have no obligation to deduct TDS. The Tribunal's holding that no TDS was required is consistent with that binding precedent.

Answered against the Revenue; no requirement to deduct TDS under section 195 in the circumstances.

Meaning of 'total turnover' for deduction under section 10A - allowability of expenses (travel and communication) against export turnover and total turnover - Whether travel and communication expenses could be allowed from both export turnover and total turnover contrary to the statute - HELD THAT: - The Court followed the decision in Commissioner of Income-tax, Central-III v. HCL Technologies Ltd., which held that the definition of 'total turnover' under Sections 80HHC and 80HHE should not be imported into section 10A; the technical meaning of 'total turnover' for section 10A does not envisage reduction of expenses from the total amount. Applying that principle, the Tribunal was correct in its treatment of the expenses in question.

Answered against the Revenue; the Tribunal's allowance of the expenses in the manner adopted is upheld.

Meaning of 'total turnover' for deduction under section 10A - allowability of expenses (travel and communication) against export turnover and total turnover - Whether unrealized foreign exchange was to be allowed from export turnover without making a corresponding deduction from total turnover - HELD THAT: - Applying the HCL Technologies (supra) principle that the statutory meaning of 'total turnover' for section 10A is to be applied without importing definitions from other provisions, the Court held that the Tribunal's treatment of unrealized foreign exchange in computing export and total turnover was in accordance with the applicable legal test and therefore favourable to the assessee.

Answered against the Revenue; the Tribunal's grant of relief on account of unrealized foreign exchange without a corresponding deduction from total turnover is sustained.

Final Conclusion: The Tax Case Appeal is dismissed. All six substantial questions of law raised by the Revenue are answered against the Revenue by applying the decisions of the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. and in HCL Technologies; the Tribunal's order is upheld. No costs.

Faceless assessment - Principles of natural justice - Show-cause notice and draft assessment order under Section 144B(1)(xvi)(b) - Non est assessment if procedure not followed under Section 144B(9) - Maintainability of writ despite alternative appellate remedy

Faceless assessment - Show-cause notice and draft assessment order under Section 144B(1)(xvi)(b) - Non est assessment if procedure not followed under Section 144B(9) - Principles of natural justice - Assessment passed without issuance of the mandatory show-cause notice and draft assessment order under Section 144B(1)(xvi)(b) violated principles of natural justice and the procedural mandate of the Faceless Assessment Scheme, rendering the assessment process flawed. - HELD THAT: - The Court held that where an assessment is carried out by the National Faceless Assessment Centre it must follow the statutory procedure prescribed under Section 144B. Section 144B(1)(xvi)(b) mandatorily requires that, if a proposed variation is prejudicial to the assessee, an opportunity to show cause by serving a notice and issuance of a draft assessment order must precede the final order. Further, Section 144B(9) provides that assessments made on or after 1 April 2021 are non est if not made in accordance with the procedure under Section 144B. In the present case no show-cause notice or draft assessment order was issued prior to the final assessment dated 23 April 2021; this omission amounts to a breach of the mandated procedure and denial of the assessee's right to a personal hearing, thereby violating principles of natural justice. The Court therefore set aside the impugned orders and remanded the matter to the Assessing Officer to issue the requisite show-cause notice and draft assessment order and thereafter pass a reasoned order in accordance with law. [Paras 5, 6, 7, 9]

Impugned Assessment Order, Demand Notice and Notice for Penalty dated 23rd April 2021 set aside; matter remanded for issuance of show-cause notice and draft assessment order and for passing of a reasoned order in accordance with Section 144B and principles of natural justice.

Maintainability of writ despite alternative appellate remedy - Maintainability of the writ petition despite the respondents' contention of availability of alternative appellate remedy. - HELD THAT: - The respondents urged that the writ petition was not maintainable because an alternative effective remedy by way of appeal existed. The Court observed that where there is a violation of principles of natural justice, availability of an appellate remedy does not operate as a bar to maintainability of a writ petition. Applying this settled principle to the facts, the Court entertained the writ despite the existence of appellate remedies because the petition challenged a procedural denial affecting fundamental fairness of the assessment process. [Paras 4, 8]

Writ petition entertained and adjudicated notwithstanding the existence of an alternative appellate remedy.

Final Conclusion: The impugned orders dated 23rd April 2021 under Sections 143(3), 156 and 274 read with Section 271AAC(1) are set aside for non-compliance with the procedural requirements of Section 144B; the matter is remitted to the Assessing Officer to issue a show-cause notice and draft assessment order and thereafter pass a reasoned order in accordance with law. The writ petition is accordingly disposed of.

Duty to dispose of representations - reasoned and speaking order - opportunity of hearing - interim protection from being treated as default - obligation to deduct and deposit TDS under Section 194-O

Duty to dispose of representations - reasoned and speaking order - opportunity of hearing - Respondent No.8 (CBDT) was directed to consider and dispose of the petitioners' representations dated 22nd December, 2020 and 8th June, 2021 by passing a reasoned and speaking order after hearing the petitioner. - HELD THAT: - The High Court found that the petitioner had made specific representations complaining of practical difficulties in complying with Section 194-O. The court held that the CBDT could not sit over those representations and accordingly directed respondent No.8 to consider and decide the representations within six weeks from communication of the order. The directive requires the respondent to deal with the contentions raised, afford an effective opportunity of hearing to the petitioner or its authorised representative, and to communicate the decision within one week after passing the order. The court granted liberty to the petitioner to seek further relief if aggrieved by the decision so rendered.

Respondent No.8 directed to decide the representations by a reasoned, speaking order after hearing within the stipulated timeframe.

Interim protection from being treated as default - obligation to deduct and deposit TDS under Section 194-O - Interim position regarding compliance with Section 194-O and protection from penal consequences until disposal of the representations. - HELD THAT: - The Court ordered that in the interim the petitioner shall deposit the TDS which it actually receives from e-commerce participants/customers/buyers. Simultaneously, the concerned respondent(s) were directed not to treat the petitioner as being in default in respect of such TDS until the CBDT disposes of the petitioners' representations. This interim arrangement preserves the status of the petitioner pending final administrative decision and does not constitute a final adjudication on the merits of the obligations under Section 194-O.

Petitioner to deposit TDS received; authorities shall not treat petitioner as in default until representations are disposed.

Final Conclusion: The writ petition resulted in a direction to the CBDT to decide the petitioners' representations by a reasoned, speaking order after hearing within the time prescribed, and an interim protective direction that the petitioner may deposit TDS it receives and shall not be treated as in default until disposal of those representations.

Revisionary power under Section 263 of the Income-tax Act - draft assessment under Section 144C of the Income-tax Act - prejudice to the revenue requirement for exercise of revisionary power - Dispute Resolution Panel (alternate dispute resolution under Section 144C)

Draft assessment under Section 144C of the Income-tax Act - revisionary power under Section 263 of the Income-tax Act - prejudice to the revenue requirement for exercise of revisionary power - Dispute Resolution Panel (alternate dispute resolution under Section 144C) - Whether a draft assessment order served under Section 144C is amenable to revision under Section 263 of the Act - HELD THAT: - The court examined the scheme of Section 144C and observed that a draft assessment order is a proposed order served on the assessee to which the assessee may accept or file objections; where objections are filed the matter is referred to the DRP which issues directions and only thereafter a final assessment order is framed. At the draft stage no demand can be raised and the element of prejudice to the revenue, which is a sine qua non for invoking the revisionary jurisdiction under Section 263, does not arise. The Tribunal's conclusion that Section 263 cannot be exercised to interdict a draft assessment proposed under Section 144C was upheld: if the Assessing Officer's draft is objected to and referred to DRP, errors in the draft and any prejudice to revenue are matters for DRP and for the final assessment made in compliance with DRP directions, not for exercise of Section 263 against the draft. The court therefore held that the Principal Commissioner erred in attempting to revise the draft assessment order under Section 263. [Paras 6, 7, 8, 9]

Draft assessment orders served under Section 144C are not amenable to revision under Section 263 because the condition of an order being erroneous and prejudicial to the revenue does not arise at the draft stage.

Final Conclusion: The substantial questions are answered in favour of the assessee: the Principal Commissioner could not invoke Section 263 to interdict the draft assessment under Section 144C; the appeal by Revenue is dismissed.

Set-off of long-term capital loss under Section 70(3) - Exclusion of income under Section 10(38) - Computation of capital gains under Sections 48 to 55 - Homogeneity requirement for inter-source adjustment within the same head - 'Income' as inclusive of losses (principle in Harprasad & Co.)

Capital nature of advances written off - Treatment of advances as capital expenditure - Disallowance of deduction for advances paid to supplier of machinery written off on failure of performance - HELD THAT: - The Court adopted the reasoning recorded in ITA No.26/2013 (Assessment Year 2003-04, question no.4) and applied that reasoning to the instant question. For the reasons set out in the referenced decision, the advances paid to the Continental Group for supply of machinery, written off on account of supplier's failure to perform, were held to be of the nature of capital expenditure and the deduction was therefore disallowed. The Court affirmed the findings recorded by the Assessing Officer, confirmed by the CIT (Appeals) and Tribunal, and answered the substantial question in favour of the Revenue. [Paras 3]

Claim for deduction of the advances written off is disallowed; question answered in favour of the Revenue.

Set-off of long-term capital loss under Section 70(3) - Exclusion of income under Section 10(38) - Computation of capital gains under Sections 48 to 55 - Homogeneity requirement for inter-source adjustment within the same head - 'Income' as inclusive of losses (principle in Harprasad & Co.) - Whether loss on sale of equity shares/units covered by Section 10(38) can be set off under Section 70(3) against long-term capital gain on sale of land - HELD THAT: - The Court examined the interplay between Section 10(38) (which excludes income from specified transfers of equity shares/units) and Section 70(3) (which permits set-off where the result of computation under Sections 48 to 55 in respect of a long-term capital asset is a loss). The Court held that, to attract Section 70(3), the loss must be the result of the computation carried out under Sections 48 to 55. Income or loss excluded under Section 10(38) does not enter that mode of computation and therefore cannot be treated as a loss computed under Sections 48 to 55 for the purposes of Section 70(3). The statutory language was read literally to require homogeneity - only losses and incomes computed under the same statutory computation (Sections 48-55) can be adjusted against each other. While acknowledging the principle in Harprasad & Co. that 'income' may include losses, the Court held that exclusion under Section 10(38) removes the item from the computation regime envisaged by Sections 48 to 55 and hence from the ambit of Section 70(3). Applying these principles, the Court agreed with the Assessing Officer, CIT (Appeals) and Tribunal and rejected the assessee's claim for set-off. [Paras 7, 8]

Loss on sale of shares/units excluded under Section 10(38) cannot be set off under Section 70(3) against long-term capital gain on sale of land; claim rejected.

Final Conclusion: The appeal is dismissed. The disallowance of the advances written off is upheld and the claim to set off losses on shares/units (excluded under Section 10(38)) against long-term capital gains on sale of land under Section 70(3) is rejected in favour of the Revenue.

Simultaneous deduction under Chapter VI-A - exclusion of profits allowed under section 80-IB/80-IA while computing deduction under section 80HHC - deduction under section 80HHC - packing and sterilisation not amounting to manufacture for section 80-IB

Simultaneous deduction under Chapter VI-A - exclusion of profits allowed under section 80-IB/80-IA while computing deduction under section 80HHC - deduction under section 80HHC - Deduction under section 80HHC must be computed after excluding profits and gains on which deduction has been allowed under section 80-IB or section 80-IA; simultaneous full deductions are not permissible. - HELD THAT: - The Court examined the statutory scheme and the language of section 80-IA(9) (as then in force) and held that where profits and gains of an undertaking are claimed and allowed under section 80-IA (or section 80-IB), deduction to that extent cannot be allowed again under other heads of Chapter VI-A, including section 80HHC. The Court agreed with the Appellate Tribunal and followed the earlier decision of this Court in Olam Exports (India) Ltd. v. Commissioner of Income Tax, holding that the profits and gains allowed under section 80-IB must be excluded while computing deduction under section 80HHC. The Court declined to defer consideration pending reference to a Larger Bench, finding no reason to depart from the consistent interpretation that the legislature intended to prevent double allowance of the same profits under different heads of Chapter VI-A. [Paras 14, 15, 16, 18]

Answered for the revenue; deduction under section 80-IB/80-IA must be excluded in computing section 80HHC; appeals dismissed on this ground.

Packing and sterilisation not amounting to manufacture for section 80-IB - Sterilisation and packing of non-sterilised gloves purchased from the market does not amount to manufacture for the purpose of claiming deduction under section 80-IB. - HELD THAT: - On the factual findings recorded by the Tribunal, the gloves were already manufactured and the process carried out by the assessee (sterilisation and packing) did not create a new product or bring into being a distinct article of commerce constituting 'manufacture' under section 80-IB. The Court, as appellate authority on law and fact, found no infirmity in the Tribunal's final fact-finding and declined to interfere with the conclusion that the activities did not amount to manufacture. [Paras 21, 22]

Third question answered against the assessee; claim of manufacture rejected and appeal dismissed for AY 2003-04.

Final Conclusion: All appeals are dismissed: deductions under section 80HHC cannot be claimed to the extent profits have been allowed under section 80-IB/80-IA, and the sterilisation and packing activity in AY 2003-04 does not amount to manufacture for section 80-IB purposes.

Principles of natural justice - revocation of Form 3 under DTVSV Act - rejection of application under the DTVSV Act - eligibility under Section 9 of the DTVSV Act - power of the Designated Authority to rectify apparent errors - remand for fresh consideration and hearing

Principles of natural justice - revocation of Form 3 under DTVSV Act - rejection of application under the DTVSV Act - Revocation of Form 3 and rejection of the petitioner's declaration under the DTVSV Act were set aside for breach of principles of natural justice. - HELD THAT: - The court found that Revenue issued an email on 23rd March 2021 asking for explanation within three days, but recorded rejection of the petitioner's application on 26th March 2021 without awaiting the expiry of the three-day period or the petitioner's reply filed on 30th March 2021. Given that Form 3 had previously been issued on the basis of the petitioner's declarations and undertakings, any adverse action entailing withdrawal of the benefit under the scheme required a fair and reasonable opportunity to be heard. The Designated Authority's conduct in rejecting the application without affording such opportunity amounted to a palpable violation of natural justice and was liable to be set aside. The court therefore quashed the rejection insofar as it was recorded on 26th March 2021 and directed fresh consideration after hearing the petitioner. [Paras 21, 22]

Order of rejection dated 26th March 2021 is set aside for breach of natural justice; petitioner to be afforded a fair and reasonable opportunity of hearing.

Remand for fresh consideration and hearing - power of the Designated Authority to rectify apparent errors - eligibility under Section 9 of the DTVSV Act - Matter remanded to the Designated Authority to decide afresh after affording opportunity of hearing and to pass a reasoned speaking order. - HELD THAT: - The court declined to adjudicate the substantive contentions on applicability of Section 9 or on the correctness of cancellations/revocation under circulars and guidance relied upon by Revenue. Instead, noting the procedural defect, the court remitted the matter to the Designated Authority for fresh decision after giving the petitioner an opportunity to be heard and to make submissions. The Designated Authority is directed to consider the submissions, apply the relevant provisions and clarifications (including any question of rectification of apparent errors) and pass an appropriate reasoned and speaking order within two weeks from pronouncement of the order. All other contentions of the parties remain open for consideration by the Designated Authority. [Paras 22, 23]

Matter remanded to Respondent No.1 to decide afresh after hearing the petitioner and to pass a reasoned speaking order within two weeks; other contentions left open.

Final Conclusion: The rejection of the petitioner's Form 3 dated 26th March 2021 is set aside for breach of natural justice; the matter is remitted to the Designated Authority to hear the petitioner, consider submissions, and pass a reasoned speaking order within two weeks; substantive issues including applicability of Section 9 are left open for fresh consideration.

Faceless Assessment Scheme - reasonable opportunity of hearing - inclusion of unsecured loans and share capital as income - expeditious disposal of statutory appeal - interim protection from recovery of demand

Faceless Assessment Scheme - reasonable opportunity of hearing - expeditious disposal of statutory appeal - interim protection from recovery of demand - Direction for expeditious disposal of the statutory appeal and grant of interim protection from recovery until disposal, ensuring reasonable opportunity to the petitioner. - HELD THAT: - The High Court declined to entertain the writ petition on merits because the Assessment Order is appealable and an appeal had been filed. The court noted the petitioner's contention that the faceless Assessment Scheme contemplates issuance of a draft order and finalisation only after considering objections, and that the assessment had been concluded without affording a reasonable opportunity. In view of these contentions and the appellate remedy available, the court directed the Commissioner of Income Tax (Appeals) to decide the pending appeal expeditiously, preferably within two months from the date of the order, and to afford the petitioner a reasonable opportunity of being heard, including a personal hearing if requested. Pending disposal of the appeal, the respondents were restrained from recovering amounts pursuant to the impugned Assessment Order. The court expressly refrained from adjudicating the merits of the assessment itself. [Paras 5]

The Commissioner of Income Tax (Appeals) is directed to decide the appeal expeditiously, preferably within two months, after providing a reasonable opportunity including personal hearing if requested, and respondents are restrained from recovering amounts under the impugned assessment until such disposal.

Inclusion of unsecured loans and share capital as income - Faceless Assessment Scheme - reasonable opportunity of hearing - Remand for appellate consideration of the inclusion of unsecured loans and share capital in the assessee's total income. - HELD THAT: - The court identified that the main controversy in the appeal concerns the inclusion of unsecured loans and share capital in the assessee's total income as reflected in the Assessment Order. Rather than adjudicating this substantive controversy, the court directed that the Commissioner of Income Tax (Appeals) consider the issue on merits in the appeal, after affording the petitioner the reasonable opportunity of hearing mandated under the faceless Assessment Scheme. The High Court thus left the question of whether those amounts properly constitute taxable income to be examined and decided by the appellate authority. [Paras 2, 5]

The question of inclusion of unsecured loans and share capital as income is to be considered and decided by the Commissioner of Income Tax (Appeals) in the pending appeal after affording a reasonable opportunity to the petitioner.

Final Conclusion: Writ petition disposed by directing the Commissioner of Income Tax (Appeals) to decide the appeal against the Assessment Order dated 26.04.2021 expeditiously (preferably within two months) after providing a reasonable opportunity of hearing, with respondents restrained from recovering amounts under the impugned order until the appeal is disposed; no costs.

Rectification under section 154(1A) of the Income-tax Act (matter considered and decided in appeal) - Mistake apparent from record - Finality of appellate decision - Estimation of income under section 145(3) of the Income-tax Act

Rectification under section 154(1A) of the Income-tax Act (matter considered and decided in appeal) - Mistake apparent from record - Finality of appellate decision - Whether the Assessing Officer could rectify the assessment under section 154 by altering the allowance of depreciation where that matter had been considered and decided by the Commissioner (Appeals). - HELD THAT: - The Tribunal examined section 154(1A) which bars amendment of an order in relation to any matter that "has been considered and decided in any proceeding by way of appeal or revision". In the present case the question of allowance of depreciation in the assessment order dated 26.03.2014 was taken in appeal and was considered and decided by the CIT(A) by order dated 15.05.2015. Given that the depreciation issue had been the subject-matter of appellate consideration and decision, it fell within the prohibition contained in section 154(1A) and therefore could not be amended by rectification under section 154. The Tribunal noted that the rectification order also dealt with other income, but that issue was not before it. Applying the statutory bar and the finality of the appellate decision, the Tribunal accepted the assessee's grievance qua the depreciation issue and reversed the impugned rectification to that extent. [Paras 11, 12, 14]

Rectification under section 154 could not be invoked to alter the allowance of depreciation because that matter had been considered and decided by the CIT(A); the rectification is set aside insofar as it amends the depreciation allowance.

Final Conclusion: Assessee's appeal allowed insofar as the rectification disallowing depreciation is concerned; the assessment as rectified under section 154 cannot be sustained on the depreciation issue because that matter had been considered and decided in appeal.

Treatment of stamp duty value as deemed full value of consideration - application of the third proviso to section 50C(1) to section 56(2)(vii)(b)(ii) - harmonious construction of sections 50C, 43CA and 56(2)(vii)/(2)(x) - retrospective operation of beneficial and curative amendments - permissible marginal variance up to ten per cent between agreement value and stamp duty value - capitalization and cost of acquisition versus incidental/maintenance charges - disallowance of unproved interest and non-capital incidental payments - interest under sections 234A, 234B, 234C as consequential

Application of the third proviso to section 50C(1) to section 56(2)(vii)(b)(ii) - permissible marginal variance up to ten per cent between agreement value and stamp duty value - retrospective operation of beneficial and curative amendments - harmonious construction of sections 50C, 43CA and 56(2)(vii)/(2)(x) - Validity of addition under section 56(2)(vii)(b)(ii) by adopting stamp duty value where agreement value is lower - HELD THAT: - The Tribunal examined the legislative scheme under sections 50C, 43CA and section 56(2) and noted that the Finance Act, 2018 introduced an exception (third proviso to section 50C(1)) and parallel exceptions in later amendments to avoid adopting stamp duty value where the stamp duty value does not exceed a specified percentage over the declared consideration. The bench held that section 56(2)(vii)(b)(ii) must be harmoniously construed with these provisions so that a marginal variation between agreement value and stamp duty value (within the permissible limit) does not lead to adoption of stamp duty value as deemed consideration. Relying on Tribunal precedents treating the 2018 amendments as curative and beneficial, the Tribunal applied the exception retrospectively. Applying this principle to the facts, where three properties showed a variation of about 1%-2% and one property showed 9%, the aggregate differential fell within the permissible ten per cent margin and therefore the addition could not be sustained. [Paras 15, 16, 17, 18, 19]

Addition of Rs. 23,30,694 under section 56(2)(vii)(b)(ii) deleted; benefit of the permissible marginal variance (ten per cent) applied retrospectively.

Capitalization and cost of acquisition versus incidental/maintenance charges - disallowance of unproved interest and non-capital incidental payments - Allowability as cost of acquisition/improvement of development charges paid to builder and interest claimed during construction - HELD THAT: - The assessee claimed deduction by treating certain payments to the builder and interest during construction as additions to cost of acquisition. The Tribunal examined the nature of the payments and found them to comprise maintenance, water, electricity connection and similar incidental charges which do not form part of cost of acquisition or cost of improvement. The assessee also failed to furnish details or prove that the interest expenditure was incurred wholly and exclusively for the purpose of transfer or to substantiate capitalization for the tax purpose. On these factual and evidentiary conclusions, the Tribunal rejected the claim for addition to cost and upheld the disallowance. [Paras 20, 21, 22, 23, 24]

Deduction/ capitalization claim of development charges and interest disallowed.

Interest under sections 234A, 234B, 234C as consequential - Challenge to levy of interest under sections 234A, 234B and 234C - HELD THAT: - The Tribunal noted that the levy of interest under the cited sections is consequential to assessment adjustments. As such, no separate adjudication on the interest was required in the appeal once the primary additions/deductions were addressed. [Paras 25]

Interest under sections 234A, 234B and 234C left to be dealt with consequentially.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 23,30,694 under section 56(2)(vii)(b)(ii) is deleted by applying the permissible marginal variance (ten per cent) read into section 56(2)(vii)(b)(ii) and applied retrospectively; the claim to add development/maintenance charges and unsubstantiated interest to cost of acquisition is rejected; interest under sections 234A/234B/234C remains consequential.

Summary order. Civil Appeal dismissed; impugned order of the Customs Excise and Service Tax Appellate Tribunal, West Zone Bench, Ahmedabad dated 29 July 2020 in Final Order A/11132/2020 in Custom Appeal No 10248 of 2020 is affirmed.

Stay pending appeal - balance of convenience - prima facie case - irreparable hardship - protection of the revenue's interest - confiscation of goods - burden of proof in respect of seized goods under Section 123 of the Customs Act - quasi-judicial duty to protect revenue

Stay pending appeal - balance of convenience - prima facie case - irreparable hardship - protection of the revenue's interest - Whether the Tribunal erred in dismissing the Revenue's application for stay of the first Appellate Authority's order and whether an order of stay should be granted until disposal of the appeal before the Tribunal. - HELD THAT: - The court held that while the Tribunal may examine merits to the extent necessary to determine whether a prima facie case is made out, its consideration must focus on the trio of tests for interim relief: balance of convenience, existence of a prima facie case, and irreparable hardship. Where non-grant of stay would result in release of the seized goods and thereby render the appeal infructuous, that consequence constitutes undue hardship to the Revenue and favours grant of interim protection to safeguard the revenue's interest. Applying these principles, the Division Bench found that the Tribunal's dismissal of the stay petition for being purely merit-based overlooked the consequence that allowing return of the seized gold would defeat the object of the appeal. Accordingly, the High Court set aside the Tribunal's order dismissing the stay petition and ordered that the order of the first Appellate Authority dated 14.11.2019 remain stayed until the Tribunal disposes of the Revenue's appeal, directing the Tribunal to consider and dispose of the appeal at the earliest. [Paras 5, 6, 7]

The Tribunal's order dismissing the stay petition is set aside and the First Appellate Authority's order dated 14.11.2019 is stayed until disposal of the appeal by the Tribunal.

Final Conclusion: The Revenue's appeal is allowed insofar as the Tribunal's order dated 03.03.2021 is set aside; the order of the first Appellate Authority dated 14.11.2019 shall remain stayed pending disposal of the appeal before the Tribunal, which is directed to consider and decide the appeal at the earliest.

Proof of export - Bank Realisation Certificate - nominated agency liability for duty - bond cancellation - liability for non-realisation of export proceeds - limitation and allegation of suppression

Proof of export - Bank Realisation Certificate - Whether the nominated agency was obliged to produce Bank Realisation Certificate as part of proof of export for gold jewellery after Public Notice dated 06.09.2013. - HELD THAT: - The Tribunal held that Public Notice No.25/(RE-2013)/2009-2014 dated 06.09.2013 relaxed the requirements of paragraph 4A.8(a) of the Handbook of Procedures so that, for exports of gold jewellery and articles of gold, the bank certificate of realisation in Appendix 22A would not be insisted upon as proof of export. Thereafter an E.P. copy of the shipping bill and customs attested invoice suffice to establish proof of export for such gold exports; the bank realisation certificate is required only where drawback or specific realization proof is necessary. The appellant furnished the EP copy of the shipping bill and customs attested invoice and thereby complied with the proof of export requirements as amended by the public notice and related circulars. [Paras 11, 18]

No obligation on the nominated agency to produce Bank Realisation Certificate as proof of export for gold jewellery under the Public Notice dated 06.09.2013; proof by shipping bill and customs attested invoice is sufficient.

Bond cancellation - nominated agency liability for duty - Whether demand of customs duty could be sustained after the bonds executed by the nominated agency had been cancelled following verification of export documents. - HELD THAT: - The Tribunal found that the bonds were executed to secure compliance with the notification's conditions but were cancelled by the customs authorities after due verification of the export documents submitted by the appellant. Once customs accepted the export documents and cancelled the bonds, the department could not thereafter rely on the cancelled bond to raise a demand for duty alleging breach of its conditions. The department cannot stretch the bond's conditions beyond what the Notification and related export procedures require; having been satisfied and having cancelled the bond, the revenue's subsequent demand on that basis is unsustainable. [Paras 14, 18, 20]

Demand of duty based on the bond after its cancellation is not sustainable; the issue on merits answered in favour of the appellant.

Liability for non-realisation of export proceeds - nominated agency liability for duty - Whether non realisation of export proceeds (non receipt of foreign exchange) renders the nominated agency liable to pay customs duty or whether that liability lies on the exporter and other enforcement fora. - HELD THAT: - Relying on precedent and on a plain reading of the notification and related procedures, the Tribunal held that the notification did not impose an obligation on the nominated agency to ensure realisation of sale proceeds by the exporter. Matters of realisation of foreign exchange fall under FEMA and RBI/regulatory authorities; customs cannot treat non realisation as breach by the nominated agency absent collusion or specific situations under Section 72 of the Customs Act. The Tribunal followed earlier findings that export has physically taken place and liability for foreign exchange realization, if any, is for enforcement under FEMA and not a basis for customs demand or penalty against the nominated agency. [Paras 19]

Non realisation of export proceeds does not render the nominated agency liable to pay customs duty; liability, if any, lies with the exporter and/or enforcement authorities under FEMA.

Limitation and allegation of suppression - Whether the later issued show cause notices alleging suppression and invoking duty were barred or unsustainable in view of earlier submission of export details and cancellation of the bond. - HELD THAT: - The Tribunal observed that the appellant had furnished export particulars and that the customs authority had examined and cancelled the bonds after verification. The subsequent SCNs issued much later alleging suppression of facts and intent to evade duty lacked factual basis. On that score, the Tribunal found the challenge on limitation and the allegation of suppression in favour of the appellant. [Paras 21]

SCNs alleging suppression and seeking duty much later are without factual basis and the issue of limitation/suppression is resolved in favour of the appellant.

Final Conclusion: The Tribunal set aside the impugned orders, holding that (a) Bank Realisation Certificates were not required as proof of export for gold jewellery after the Public Notice of 06.09.2013, (b) customs demands based on cancelled bonds are unsustainable, (c) non realisation of export proceeds does not fasten duty liability on the nominated agency, and (d) the later SCNs alleging suppression were unfounded; the appeals are allowed with consequential reliefs.

Oppression and mismanagement - fraudulent transfer of shares - register of members and statutory filings with Registrar of Companies - invalidity of entries in annual return for Financial year 2014-15 - voidness of alteration of shareholding and change of registered office - direction to Registrar of Companies to file compliance report

Oppression and mismanagement - Findings on whether the respondents' conduct amounted to oppression and mismanagement in the affairs of the company. - HELD THAT: - The Tribunal examined the documentary record including the share transfer form (Annexure P-2), share certificates and statutory filings and found no valid transfer of shares to the respondents on record at the Registrar of Companies. Although the petitioners resigned as directors, there is no evidence of transfer of their shareholding; in contrast, respondents filed returns representing themselves as shareholders. The Tribunal concluded that reducing the petitioners' shareholding from 100% to nil and other acts by respondents constituted manipulation of records and breach of trust. On these facts the Tribunal held that the respondents' acts amounted to oppression and there was mismanagement in the company. [Paras 13, 14, 15]

The allegations of oppression and mismanagement by the respondents are upheld and the petition is allowed on this ground.

Register of members and statutory filings with Registrar of Companies - fraudulent transfer of shares - invalidity of entries in annual return for Financial year 2014-15 - Validity of the annual return and other records filed by the respondents for Financial year 2014-15 and whether entries showing respondents as shareholders are to be set aside. - HELD THAT: - The Tribunal noted absence of any share transfer form or share certificate filed with the Registrar of Companies evidencing transfer in favour of the respondents and observed that the petitioners continue to possess the share certificates. In view of the lack of supporting statutory filings and the finding of oppression and mismanagement, the Tribunal declared the annual report and records submitted by the respondents for Financial year 2014-15, in which respondents are shown as shareholders, to be cancelled and void. [Paras 13, 16]

The annual return and records filed by the respondents for Financial year 2014-15 showing them as shareholders are cancelled.

Voidness of alteration of shareholding and change of registered office - Whether reduction of petitioners' shareholding to nil and changing the registered address of the company without intimation are void and illegal. - HELD THAT: - Having found no lawful transfer of shares and having held that respondents' acts amounted to oppression and mismanagement, the Tribunal declared that the respondents' conduct in reducing the petitioners' shareholding from 100% to nil and altering the registered address without informing the petitioners is void and illegal. The declaration is consequential to the Tribunal's findings on the invalidity of statutory entries and oppressive conduct. [Paras 14, 16]

The reduction of the petitioners' shareholding to nil and the change of the registered address effected by the respondents are declared void and illegal.

Direction to Registrar of Companies to file compliance report - Whether the Registrar of Companies should be directed to take action and report compliance. - HELD THAT: - In view of the declarations setting aside the respondents' filings and entries, the Tribunal directed the Registrar of Companies (Kanpur) to file a compliance report within one month from the date of the order so that the statutory record may be rectified in accordance with the Tribunal's decision. [Paras 17]

Registrar of Companies (Kanpur) is directed to file a compliance report within one month.

Final Conclusion: The petition under Sections 242/244 is allowed: the Tribunal upholds findings of oppression and mismanagement, cancels the annual report and records filed by the respondents for Financial year 2014-15 showing them as shareholders, declares the reduction of the petitioners' shareholding to nil and the change of registered address void and illegal, and directs the Registrar of Companies (Kanpur) to file a compliance report within one month.

Compounding of offences under Section 24A of the Securities and Exchange Board of India Act - Deference to the expert views of SEBI and the High Powered Advisory Committee in compounding applications - Guidelines laid down in Prakash Gupta for adjudication of compounding applications - Court's duty to independently decide compounding applications while taking SEBI's views into account

Compounding of offences under Section 24A of the Securities and Exchange Board of India Act - Deference to the expert views of SEBI and the High Powered Advisory Committee in compounding applications - Guidelines laid down in Prakash Gupta for adjudication of compounding applications - Validity of the Special Judge's order dated 28th August, 2019 refusing to compound the offence and whether that order should be quashed and the application for compounding remitted for fresh decision. - HELD THAT: - The Special Judge declined compounding on the sole ground that SEBI had decided not to compound and therefore consent of SEBI was necessary. The High Court found that the Special Judge had not placed on record or considered material relevant to the compounding application - including the winding up repayment report dated 22nd February, 2019, orders in the Company Petition, SEBI's circular dated 20 April 2007, nor obtained the views of SEBI before refusing compounding. The Court recalled the Apex Court's elucidation in Prakash Gupta that while SEBI does not have a veto, its views and the HPAC recommendation must be elicited and accorded a high degree of deference unless manifestly arbitrary or mala fide, and that courts must apply the non exhaustive factors set out (including investor restitution, gravity of offence, past conduct, and measures to prevent recurrence) before allowing compounding. Applying these principles, the High Court held that the Special Judge had not exercised the jurisdiction vested in the Court under Section 24A by independently assessing the material and by failing to seek or consider SEBI's views and the prescribed factors. Consequently the impugned order was quashed and the matter was directed to be decided afresh by the Special Judge in accordance with the guidelines in Prakash Gupta and by taking into account the relevant material on record. [Paras 16, 17, 18]

Order dated 28th August, 2019 is quashed and set aside; the application for compounding (Exhibit 11) is to be decided afresh by the Special Judge in accordance with the Prakash Gupta guidelines and after obtaining and considering SEBI's views and the relevant records.

Final Conclusion: The High Court allowed the Section 482 petition, quashed the Special Judge's order refusing compounding, and remitted the compounding application for fresh adjudication by the Special Court in accordance with the guidelines of the Supreme Court in Prakash Gupta, with due regard to SEBI's views and the factual material on record.

Withdrawal of CIRP under Section 12A - Approval of ninety per cent voting share of the committee of creditors - Functus officio status of the Resolution Professional and Committee of Creditors upon withdrawal - Objective of the IBC to revive the corporate debtor and make it a going concern - Finality of earlier appellate orders affecting locus and entitlement to challenge

Finality of earlier appellate orders affecting locus and entitlement to challenge - Functus officio status of the Resolution Professional and Committee of Creditors upon withdrawal - Whether the challenge by the erstwhile employee (appellant) to the CoC resolution withdrawing CIRP was maintainable and whether NCLT rightly disposed of his application as infructuous after withdrawal of CIRP. - HELD THAT: - The Court observed that the appellant had not challenged the NCLAT order of 2.8.2017 which had set aside the earlier admission order and that the question in relation to his claim had attained finality. The Corporate Debtor had, in pursuance of assurances recorded before appellate authority, made payment to the appellant. The CoC resolution withdrawing CIRP had the requisite voting majority under Section 12A and NCLT, having considered the resolution, permitted withdrawal and directed restoration of management to the Board of Directors. From the date of withdrawal, the powers of the RP and CoC in relation to the Corporate Debtor became functus officio and the application filed by the appellant was rendered infructuous. The Court declined to examine ancillary academic contentions on composition of CoC where not necessary for decision. [Paras 14, 17, 18, 19, 20]

The appeal filed by D. Ramjee is dismissed; NCLT was right to treat the application as rendered infructuous following valid withdrawal of CIRP and resultant functus officio status of RP and CoC.

Withdrawal of CIRP under Section 12A - Approval of ninety per cent voting share of the committee of creditors - Objective of the IBC to revive the corporate debtor and make it a going concern - Disposition of the appeal filed by the suspended director challenging directions to convene a CoC meeting and related orders in light of subsequent withdrawal of CIRP. - HELD THAT: - In view of the subsequent development that CIRP proceedings were withdrawn by a CoC resolution supported by the requisite majority and permitted by the Adjudicating Authority under Section 12A, the appellant's challenge became academic. The counsel for the appellant circulated a letter seeking withdrawal of the appeal while reserving questions of law. The Court accordingly accepted withdrawal and disposed of the appeal as withdrawn. [Paras 3, 21]

Civil Appeal No.1792 of 2021 stands disposed of as withdrawn.

Final Conclusion: The appeal of the erstwhile employee is dismissed as the issue had attained finality and the application was rendered infructuous following valid withdrawal of CIRP; the appeal by the suspended director is disposed of as withdrawn. All pending applications stand disposed of.

Expungement of judicial observations - Application under Section 9 of the Insolvency and Bankruptcy Code - Pre-existing dispute - Interference with arbitration proceedings

Expungement of judicial observations - Interference with arbitration proceedings - Paras 29 and 34 of the Adjudicating Authority's order were to be expunged. - HELD THAT: - The Appellate Tribunal found that Paras 29 and 34 of the Impugned Order contained observations touching upon the merits of the dispute which could prejudice any subsequent arbitration proceedings. The respondent conceded that those paragraphs did touch the merits and had no objection to their deletion. The Tribunal accordingly expunged Paras 29 and 34 and expressly recorded that it had not gone into the merits of the controversy on the question of any pre-existing dispute. The Registry was directed to upload the judgment and to send a copy to the Adjudicating Authority to carry out the deletion. [Paras 7]

Paras 29 and 34 are expunged from the Impugned Order dated 04.01.2021 and the appeal is disposed of without deciding the merits.

Final Conclusion: The appeal is disposed by expunging the two specified paragraphs from the Adjudicating Authority's order; no adjudication on the substantive merits or existence of any pre-existing dispute was undertaken.

Pre-existing dispute - brokerage entitlement under contract - discrepancy in claimed amount - maintainability of Section 9 petition - operational debt - dismissal of petition under Insolvency and Bankruptcy Code

Pre-existing dispute - operational debt - brokerage entitlement under contract - Existence of a pre-existing dispute between the parties and its effect on admission of the Section 9 petition. - HELD THAT: - The Tribunal found on the material placed that the corporate debtor had, prior to filing of the petition and the demand notice, communicated and particularised a dispute regarding the claimed invoices and entitlement to brokerage. The agreement governing brokerage (including the condition that brokerage accrues only where minimum payments by purchasers are made and adjustment provisions on cancellations) was examined and applied to the facts. The Tribunal accepted the corporate debtor's evidence, including the explanatory Excel sheet and customer call-recording references, which indicated that many bookings arose from sources other than the petitioner and that the claimed brokerage therefore did not arise. Given these conclusions, the dispute is held to be a genuine pre-existing dispute and operates to bar admission of the petition under the Code. [Paras 11, 12, 13, 14]

Pre-existing dispute regarding existence and entitlement to the claimed operational debt established; petition could not be admitted.

Discrepancy in claimed amount - maintainability of Section 9 petition - Effect of discrepancies in the amount claimed and related documents on the petition's maintainability. - HELD THAT: - The Tribunal noted inconsistencies between amounts shown in Part-IV of Form-5, the demand notice, attached invoices and subsequent emails (different figures being stated at different times). These discrepancies and lack of clarity as to the quantum of debt supported the finding of a contested claim and reinforced the view that the claim was not crystallised for the purposes of initiating CIRP under Section 9. The Tribunal treated the inconsistent documentary record as a factor negating the petitioner's entitlement to relief under Section 9. [Paras 13]

Discrepancies in the claimed amount and documents demonstrate lack of crystallisation of the claim and undermine maintainability of the petition.

Final Conclusion: The petition under Section 9 was dismissed: the Tribunal found a bona fide pre-existing dispute on entitlement to brokerage and material discrepancies in the claimed amount, and therefore refused to initiate CIRP.

Liquidation under Section 33 - commercial wisdom of the Committee of Creditors - non-interference with rejection of resolution plan - appointment of liquidator - cessation of moratorium - powers and duties of the liquidator

Liquidation under Section 33 - commercial wisdom of the Committee of Creditors - non-interference with rejection of resolution plan - Whether the Corporate Debtor should be ordered to be liquidated in view of the Committee of Creditors' rejection of resolution plans and its resolution for liquidation. - HELD THAT: - The Tribunal recorded that two resolution plans were placed before the Committee of Creditors and were rejected after deliberation; the CoC resolved with an 81% voting share in favour of liquidation. Relying on the settled principle that the Adjudicating Authority is not to re-examine the commercial decision of the CoC, the Tribunal found no reason to take a contrary view. Having verified that the Resolution Professional complied with the Code and regulations, the Tribunal held that the conditions for initiating liquidation under Section 33(1)(b) were satisfied and that liquidation must follow in the absence of an acceptable resolution plan. [Paras 8, 9, 10]

The Corporate Debtor is to be liquidated under Section 33, the CoC's resolution for liquidation is upheld and the Tribunal will not interfere with the commercial decision rejecting the resolution plans.

Appointment of liquidator - cessation of moratorium - powers and duties of the liquidator - Whether the Resolution Professional should be appointed as Liquidator and what consequential directions should follow from the liquidation order. - HELD THAT: - The Tribunal appointed the incumbent Resolution Professional as Liquidator and directed him to issue the public announcement of liquidation. The moratorium under Section 14 was declared to cease; powers of the board and KMP were vested in the Liquidator; the Liquidator was directed to exercise powers and duties under the Code and the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016, to seek assistance from corporate personnel, and to be entitled to fees as specified by the Board. The order further directed furnishing copies to statutory authorities and treated the order as notice of discharge to officers, employees and workmen except where the business continues under the Liquidator. [Paras 11]

The Resolution Professional is appointed as Liquidator and the specified consequential directions (public announcement, cessation of moratorium, vesting of management powers, duties under the Code and Regulations, cooperation by personnel, entitlement to fees, and requisite communications) are issued.

Final Conclusion: Application allowed; the Tribunal ordered liquidation of M/s. Ind-Barath Power Gencom Limited in accordance with Chapter-III of the Code, appointed the Resolution Professional as Liquidator and issued consequential directions including public announcement, cessation of moratorium, vesting of management powers in the Liquidator, and compliance with statutory duties and communications.

Duty to cooperate with the interim resolution professional - power of the Adjudicating Authority to direct cooperation under Section 19 of the Insolvency and Bankruptcy Code, 2016 - possession of records by the Resolution Professional - liability for punishment for non-compliance under Section 70 of the Insolvency and Bankruptcy Code, 2016

Duty to cooperate with the interim resolution professional - power of the Adjudicating Authority to direct cooperation under Section 19 of the Insolvency and Bankruptcy Code, 2016 - possession of records by the Resolution Professional - Suspended directors, managerial personnel and statutory auditors must furnish information and extend full cooperation to the Resolution Professional and the Adjudicating Authority may direct them to do so under Section 19 of the Code. - HELD THAT: - The Tribunal observed that Section 19 imposes an obligation on personnel of the corporate debtor, its promoters or other persons associated with management to extend all assistance and cooperation to the interim resolution professional. Where such persons do not assist, the interim resolution professional may apply to the Adjudicating Authority which is empowered to direct compliance. Applying these provisions to the facts, the Tribunal found that despite repeated requests, emails and notices, the suspended directors and statutory auditors failed to provide documents and information required for the Corporate Insolvency Resolution Process (CIRP), thereby impeding the RP's statutory duties. In order to give effect to the statutory mandate and to enable expeditious completion of CIRP, the Tribunal directed the suspended directors and managerial persons to furnish all account information and other records and authorised the Resolution Professional to take possession of the records necessary for the CIRP. [Paras 11, 12]

Applications allowed insofar as the Tribunal directs the suspended directors, managerial personnel and statutory auditors to cooperate with the RP and to furnish all information and records, and directs the RP to take possession of the records.

Liability for punishment for non-compliance under Section 70 of the Insolvency and Bankruptcy Code, 2016 - power of the Adjudicating Authority to direct cooperation under Section 19 of the Insolvency and Bankruptcy Code, 2016 - Non-compliance with directions to cooperate under Section 19 attracts penal liability under Section 70 of the Code and concerned persons may be held responsible for failure to submit information. - HELD THAT: - Having found that information and records are within the knowledge and possession of the directors and managerial personnel, the Tribunal held that they would be responsible for non-submission. The order records that continued non-cooperation after being directed to submit information would render such persons liable to punishment under Section 70 of the Code. This serves as a statutory consequence of disobedience to the direction issued under Section 19 and is intended to secure compliance to enable the RP to discharge duties within the prescribed time-frame. [Paras 13, 14]

The Tribunal cautioned that those who do not provide information as directed shall be liable for punishment under Section 70; accordingly the applications are allowed and disposed of.

Final Conclusion: The Tribunal allowed the applications under Section 19(2) read with Section 60(5), directing suspended directors, managerial personnel and statutory auditors to furnish all information and records to the Resolution Professional and authorising the RP to take possession of records; non-compliance was held to attract liability under Section 70 of the Code.

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator and entitlement to fees under Section 34(8) read with Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016 - Ceasing of moratorium and vesting of corporate powers in Liquidator - Public announcement of liquidation - Prohibition on suits and exceptions under Section 52 of the Code - Duties and powers of the Liquidator under Sections 35 to 50 and 52 to 54 of the Code - Notice of discharge to employees upon liquidation - Obligation to notify Registrar of Companies and Insolvency and Bankruptcy Board of India

Liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator and entitlement to fees under Section 34(8) read with Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016 - Application under Section 33(2) of the Code for liquidation of the Corporate Debtor is allowed and a liquidator is appointed with entitlement to fees as provided by statute and regulations. - HELD THAT: - The Committee of Creditors, after considering the state of accounts and concluding that serious fraud had taken place and that the books were manipulated, resolved to liquidate the Corporate Debtor and approved the appointment of a proposed liquidator. The proposed liquidator furnished written consent. The Tribunal examined the records, found the Application to be in accordance with law and, exercising the power under Section 33(2) of the Code, allowed the Application. The appointed liquidator is entitled to fees in terms of Section 34(8) of the Code read with Regulation 4(2) of the IBBI (Liquidation Process) Regulations, 2016.

Application allowed; Corporate Debtor ordered to be liquidated and Mr. Ashish Vyas appointed as Liquidator with statutory entitlement to fees.

Public announcement of liquidation - Ceasing of moratorium and vesting of corporate powers in Liquidator - Prohibition on suits and exceptions under Section 52 of the Code - Duties and powers of the Liquidator under Sections 35 to 50 and 52 to 54 of the Code - Notice of discharge to employees upon liquidation - Obligation to notify Registrar of Companies and Insolvency and Bankruptcy Board of India - Directions for conduct of the liquidation process are issued, including public announcement, cessation of moratorium, vesting of management powers in the Liquidator, limitations on suits, duties of the Liquidator, discharge of employees, and statutory notifications. - HELD THAT: - Consistent with Chapter III of the Code and the Regulations, the Tribunal directed that the Liquidator shall issue a public announcement that the Corporate Debtor is in liquidation and shall exercise the powers and perform duties envisaged under the specified provisions of the Code and the Regulations. The moratorium under Section 14 is ordered to cease to operate from the date of this order. Subject to Section 52, no suit or other legal proceedings shall be instituted by or against the Corporate Debtor, with the statutory exception for transactions notified by the Central Government in consultation with financial sector regulators. All powers of the board, KMP and partners are to vest in the Liquidator; personnel connected with the Corporate Debtor are directed to extend assistance to the Liquidator; the order is to operate as a notice of discharge to officers, employees and workmen except where the business is continued by the Liquidator; and the Liquidator is directed to send a copy of the order to the Registrar of Companies and the IBBI.

Liquidation to be carried out in accordance with Chapter III of the Code with the directed procedural steps and statutory notifications; moratorium ceases and management powers vest in the Liquidator.

Final Conclusion: The Tribunal allowed the Section 33(2) Application and ordered liquidation of Orient Tourism Private Limited, appointed Mr. Ashish Vyas as Liquidator with statutory fees, and issued consequential directions governing the conduct of the liquidation and necessary statutory notifications.

Dissolution of corporate debtor - early dissolution - liquidation process completed - no assets to liquidate - Regulation 14(a) of the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - Section 54 of the Insolvency and Bankruptcy Code, 2016 - Stakeholders Consultation Committee - no intent to defraud

Dissolution of corporate debtor - early dissolution - no assets to liquidate - liquidation process completed - Application by the liquidator under Section 54 of the Code read with Regulation 14(a) for dissolution of the corporate debtor was allowed. - HELD THAT: - The Tribunal found that the corporate debtor had been non-operational for about 15 years, the company's name had been struck off by the Registrar of Companies, and only one claim was filed by the secured financial creditor whose security assets had largely been sold. The liquidator published Form B, constituted the Stakeholders Consultation Committee which resolved to file for winding up, and submitted the Preliminary Report and Assets Memorandum. There were no realizable assets left and no further investigation required. The Tribunal was satisfied from the record that the liquidation process under the Code had been completed without realization of assets and that the dissolution was not sought with intent to defraud any person. Applying Section 54 and Regulation 14(a), and having regard to the stakeholders' resolution and the absence of prejudice to any party, the Tribunal held it was just and equitable to dissolve the corporate debtor. [Paras 12]

Application allowed; corporate debtor ordered to be dissolved and ancillary directions given.

Final Conclusion: The Tribunal allowed the liquidator's application for dissolution under Section 54 read with Regulation 14(a), directed communication of the order to the Registrar of Companies, discharged the liquidator and closed the company's insolvency proceedings.

Minimum tenure of Director of Enforcement - extension of tenure beyond statutory minimum - effect of superannuation on continuance in office - applicability of Section 21 of the General Clauses Act - role of the Committee constituted under Section 25(a) - malice in law in administrative discretion

Minimum tenure of Director of Enforcement - effect of superannuation on continuance in office - Validity of the initial appointment of the Director of Enforcement for two years which extended beyond his age of superannuation. - HELD THAT: - Section 25(d) of the CVC Act confers a statutory minimum tenure of not less than two years on the Director of Enforcement. A statutory provision fixing a minimum tenure operates notwithstanding contrary provisions in service rules such as Fundamental Rule 56. Following the Court's earlier decision in Uday Babu Khalwadekar (as explained in the judgment), the initial appointment of the second Respondent for two years from 19.11.2018 - though his superannuation fell in May 2020 - was held to be lawful and he was entitled to continue in office until 18.11.2020 in accordance with Section 25(d). [Paras 12, 15]

Initial appointment for two years that extended beyond superannuation was valid and lawful.

Extension of tenure beyond statutory minimum - Whether the Director of Enforcement can be appointed for a period exceeding two years. - HELD THAT: - The Court construed the phrase 'shall continue to hold office for a period of not less than two years' as prescribing a minimum and not a ceiling. The object of Section 25(d) is to secure continuity and insulation from extraneous pressure; reading 'not less than two years' as limiting maximum tenure to two years would be contrary to the statutory purpose and the Independent Review Committee's recommendations. Consequently, the Government may appoint a Director of Enforcement for more than two years provided the procedure under Section 25 is followed. [Paras 14, 20]

Appointment for a period exceeding two years is permissible subject to compliance with Section 25.

Applicability of Section 21 of the General Clauses Act - role of the Committee constituted under Section 25(a) - Whether Section 21 of the General Clauses Act provides the source of power for modifying or extending the tenure of the Director of Enforcement in the absence of an express provision in the CVC Act. - HELD THAT: - Section 21 embodies a rule of construction imported into Central Acts unless specifically excluded. The Court held that the rule in Section 21 can apply to Section 25 of the CVC Act because the subject-matter and context are not inconsistent; thus the power to issue orders includes the power to amend or vary prior orders in the like manner and subject to like sanction and conditions. The modification in the second Respondent's tenure was made on the recommendation of the Committee constituted under Section 25(a) and after satisfying the conditions required by Section 21, so Section 21 supplied the permissible source for the extension in the circumstances of this case. [Paras 16, 17, 18, 20, 22]

Section 21 of the General Clauses Act may be invoked to modify or extend the appointment under Section 25, where the statute's context permits and where the Committee's procedure and conditions are complied with.

Malice in law in administrative discretion - extension of tenure beyond statutory minimum - Whether the impugned order was vitiated by malice in law and the permissible limits on extending tenure after superannuation. - HELD THAT: - No material was shown to establish that the extension was exercised for an unauthorised purpose or with mala fide intent. The record indicates the extension flowed from the Committee's recommendation made under Section 25(a) and not from extraneous considerations. The Court nevertheless emphasised that extensions for officers who have attained superannuation should be exceptional, for short and reasonable periods, supported by recorded reasons of the Committee, and limited to facilitating completion of ongoing investigations. In the present case the Court declined to interfere with the extant extension but directed that no further extension be granted to the second Respondent. [Paras 21, 22, 23, 24]

No malice in law; extension permissible only in rare and exceptional cases, for short periods, with reasons recorded by the Section 25(a) Committee, and no further extension to the second Respondent.

Final Conclusion: The Writ Petition is dismissed. The initial two year appointment of the Director of Enforcement that extended beyond his superannuation was lawful; a Director may be appointed for more than two years; Section 21 of the General Clauses Act may be invoked to modify or extend appointment where Section 25's context permits and the Section 25(a) Committee's procedure and reasons are complied with; extensions after superannuation are permissible only in rare, short, reasoned cases and no further extension shall be granted to the second Respondent.

CENVAT credit on cost sharing/reimbursement - reimbursement versus consideration for taxable service - finality of assessment of service provider and estoppel of revenue - validity of debit notes as documents for availing CENVAT credit - documentary requirements under Rule 9(1) of the CENVAT Credit Rules, 2004

CENVAT credit on cost sharing/reimbursement - reimbursement versus consideration for taxable service - finality of assessment of service provider and estoppel of revenue - Credit availed by the appellant on service tax collected through cost sharing debit notes is admissible where the service provider's liability to service tax has been admitted and taxed. - HELD THAT: - Following the jurisdictional High Court decision in Modular Auto Ltd. (quoted at length), the Tribunal held that where the service provider has been assessed and the service tax collected and paid by that provider is not in dispute, the recipient cannot have the credit denied by recharacterising the transaction as mere reimbursement. The proper test is the character of the payment on which CENVAT credit is claimed; revenue cannot, by adjudicating against the recipient, indirectly re open or sit in judgment over the assessment of the service provider whose tax liability stands unchallenged. Consequently, in identical factual circumstances where the department does not dispute collection of service tax by the provider, the denial of credit on the ground that no service was rendered is unsustainable. [Paras 8, 10]

Demand insofar as it disallowed CENVAT credit on the ground that the amounts were mere reimbursement and no taxable service was rendered is set aside.

Validity of debit notes as documents for availing CENVAT credit - documentary requirements under Rule 9(1) of the CENVAT Credit Rules, 2004 - Debit notes containing all necessary particulars cannot be rejected as a basis for availing CENVAT credit merely because they are not invoices expressly listed in Rule 9(1). - HELD THAT: - The Tribunal observed that Rule 9(1) does not expressly mention debit notes, but when a debit note incorporates the mandatory particulars and the service tax has in fact been collected and paid, credit cannot be denied solely because the document is a debit note. The decision cites precedents where credit on debit notes was upheld and concludes that denial on this ground is not legally sustainable. [Paras 11]

Denial of credit on the sole ground that the document was a debit note is rejected and credit so claimed is held admissible.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal: the CENVAT credit claimed on service tax collected through group cost sharing debit notes is admissible where the service provider's tax liability is not disputed, and debit notes carrying requisite particulars cannot be treated as invalid documents for claiming credit; consequential reliefs, if any, follow.

Cenvat credit on capital goods - definition of capital goods - classification under chapter heading 84 - admissibility of Cenvat credit on capital goods cleared as such under Rule 5(3) of the Cenvat Credit Rules, 2004 - invocation of Section 11D of the Central Excise Act, 1944 where Cenvat credit is utilised for payment of duty on removal

Classification under chapter heading 84 - definition of capital goods - Imported Box Strapping Machines fall under heading 84229090 and accordingly qualify as capital goods. - HELD THAT: - The Tribunal found that the decision of the lower authorities proceeded on an incorrect factual premise that the machines were classifiable under Chapter 39. On examination of the bills of entry the correct chapter heading is 84229090 (Chapter 84). Goods falling under Chapter 84 satisfy the statutory description of capital goods. The Tribunal rejected the contrary conclusion of the lower authorities which was founded on wrong classification and therefore held that the imported Box Strapping Machines are capital goods. [Paras 5]

Imported Box Strapping Machines are capital goods as they are classifiable under Chapter 84 (heading 84229090).

Cenvat credit on capital goods - definition of capital goods - Cenvat credit availed on the imported Box Strapping Machines is admissible as credit on capital goods notwithstanding whether the machines are used in manufacture of the final product. - HELD THAT: - The Tribunal observed that the statutory definition of capital goods does not impose a condition that such goods must be used in the manufacture of the final product; the requirement is that the goods fall within Chapter 84 and are used in the factory of the assessee. Consequently, once the machines are correctly held to be capital goods, Cenvat credit on them is permissible. The appellant's entitlement to credit was therefore upheld. [Paras 5]

The appellant is entitled to Cenvat credit on the imported Box Strapping Machines as capital goods.

Admissibility of Cenvat credit on capital goods cleared as such under Rule 5(3) of the Cenvat Credit Rules, 2004 - invocation of Section 11D of the Central Excise Act, 1944 where Cenvat credit is utilised for payment of duty on removal - Demand under Section 11D and consequential interest and penalty cannot be sustained where Cenvat credit was availed on capital goods and the goods were subsequently cleared as such on payment of duty equivalent to the credit in terms of Rule 5(3). - HELD THAT: - The Tribunal noted that the appellant had cleared the imported Box Strapping Machines as such after availing Cenvat credit, and payment of excise duty on removal was equivalent to the credit taken. Rule 5(3) permits credit consequences where capital goods are cleared as such on payment of duty. Given the machines were capital goods and removed on payment of duty equivalent to the credit, there was no infirmity in availing the credit or in the manner of removal. Therefore invocation of Section 11D to demand duty, interest and penalty was not justified and the demand was set aside. [Paras 6]

Demand under Section 11D and consequential interest and penalty set aside as the credit was legitimately availed on capital goods which were cleared as such on payment of duty in terms of Rule 5(3).

Final Conclusion: The appeal is allowed: the imported Box Strapping Machines are capital goods classifiable under Chapter 84 (heading 84229090); Cenvat credit availed thereon is admissible; and the demand under Section 11D, with consequential interest and penalty, is set aside. Appeal allowed with consequential relief in accordance with law.

Cenvat credit - Goods Transport Agency Service - place of removal - FOR destination - reverse charge

Cenvat credit - Goods Transport Agency Service - FOR destination - place of removal - Entitlement to cenvat credit of service tax paid on GTA service for outward transportation where finished goods are cleared on FOR destination basis. - HELD THAT: - On the admitted facts the appellant paid transportation charges for movement from the factory gate to the buyer's premises and availed cenvat credit of the service tax charged by the transporter on reverse charge basis. Sample sale orders and invoices show pricing described as FOR destination and do not separately charge transportation from factory to buyer's premises, indicating that the sale price (and excise duty paid thereon) included transportation to the buyer's premises. The Revenue relied upon the statutory definition of place of removal and a Board Circular citing earlier Supreme Court decisions, but on the facts of this case the Tribunal found that where goods are cleared on FOR destination basis the place of removal is the premises of the buyer and not the factory gate. Applying that factual conclusion, the appellant was held entitled to cenvat credit of the GTA service used for outward transportation to the buyer's premises. [Paras 9]

Allowed the appeal and held the appellant entitled to cenvat credit on the GTA service for outward transportation of goods cleared on FOR destination basis.

Final Conclusion: The appeals are allowed; the impugned order is set aside and the appellant is entitled to cenvat credit on the GTA service for outward transportation dispatched on FOR destination basis with consequential benefits in accordance with law.

Classification of goods - di-calcium phosphate (animal feed grade) - exemption notification issued under section 11C - applicability of notification to goods of rock phosphate origin - reclassification under Chapter Heading 2835 - demand for excise duty

Classification of goods - di-calcium phosphate (animal feed grade) - reclassification under Chapter Heading 2835 - applicability of notification to goods of rock phosphate origin - exemption notification issued under section 11C - demand for excise duty - Whether the exemption Notification 4/2016-CE (NT) dated 12.2.2016 issued under section 11C applies to di-calcium phosphate (animal feed grade) of rock phosphate origin classified under Heading 2835 and thereby sustains the demand for excise duty. - HELD THAT: - The Tribunal found that Notification 4/2016-CE (NT) dated 12.2.2016, issued under section 11C of the Central Excise Act, 1944, waives levy of excise duty on di-calcium phosphate (animal feed grade) manufactured out of rock phosphate origin falling under Heading 2835 of the First Schedule to CETA, 1985. Having accepted that the product 'PROPHOS' is di-calcium phosphate (animal feed grade) of rock phosphate origin and that the Notification applies to goods falling under Heading 2835, the Tribunal held that any demand for excise duty premised on reclassification under Heading 2835 cannot be sustained to the extent covered by the Notification. On that basis the impugned demand was set aside and the appeal allowed. The Tribunal's decision follows the application of the section 11C Notification in full force to the product in question.

Notification 4/2016-CE (NT) dated 12.2.2016 applies to di-calcium phosphate (animal feed grade) of rock phosphate origin under Heading 2835; the excise demand is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the section 11C exemption notification dated 12.2.2016 covers di-calcium phosphate (animal feed grade) of rock phosphate origin falling under Heading 2835 and therefore the excise duty demand for the period in question cannot be sustained; the impugned order was set aside with consequential reliefs.

Directions for expeditious disposal of appeals - power of appellate tribunal to grant stay - bank account attachment pending appeal - non-interference on merits by High Court

Directions for expeditious disposal of appeals - power of appellate tribunal to grant stay - Direction to the Tribunal to hear and decide the second appeals and the applications for early hearing and stay within a specified time-frame. - HELD THAT: - The High Court directed the Gujarat Value Added Tax Tribunal to take up the pending second appeals (filed within the statutory period and with pre-deposit) and, in particular, to consider the applications for early hearing and for stay. The Tribunal was ordered to decide these matters within two weeks of receipt of the copy of this order. The Court framed this direction as procedural, aimed at expeditious adjudication by the competent appellate forum and did not itself adjudicate the substantive merits of the appeals or stay applications. [Paras 9, 11]

Tribunal to decide the appeals and the applications for early hearing and stay within two weeks of receiving this order.

Bank account attachment pending appeal - non-interference on merits by High Court - adjudication on merits by Tribunal - Merits of the disputes, including the legality of letters directing cessation of bank accounts and any recovery proceedings, to be considered and decided by the Tribunal; the High Court declined to enter into merits. - HELD THAT: - The petition sought quashing of letters issued by the State directing banks to cease the petitioner's accounts and sought interim relief to operate the accounts and restrain recovery. The High Court expressly refused to examine or decide the merits of these contentions, observing that such matters fall for decision by the Tribunal on the strength of the material placed before it and in accordance with law. Consequently, issues concerning the attachment of bank accounts and the initiation of recovery proceedings were left for adjudication by the Tribunal as part of the appeals and any stay applications. [Paras 10, 11]

Issues on merits, including legality of bank-account cessation and recovery proceedings, are remitted to the Tribunal for decision; High Court will not interfere with merits.

Final Conclusion: The petition is disposed of by directing the Tribunal to expeditiously hear and decide the listed second appeals and the applications for early hearing and stay within two weeks; the High Court has declined to decide the merits and left those issues, including contesting the bank-account cessation and recovery, to the Tribunal.

Maintainability of writ under Article 226 despite availability of statutory appeal - statutory limitation under Section 31 and effect on writ entertainability - self-imposed restraint in exercise of Article 226 - exceptional grounds for entertaining writ: unfairness, unreasonableness, perversity, lack of jurisdiction, violation of principles of natural justice - purchasing dealer not required to prove that selling dealer actually paid tax - assessment revision unsustainable for failure of Assessing Officer to verify seller's existence and to consider produced documents

Maintainability of writ under Article 226 despite availability of statutory appeal - statutory limitation under Section 31 and effect on writ entertainability - self-imposed restraint in exercise of Article 226 - exceptional grounds for entertaining writ: unfairness, unreasonableness, perversity, lack of jurisdiction, violation of principles of natural justice - Whether the High Court could entertain the writ petition challenging the assessment order despite the lapse of the statutory limitation for filing an appeal. - HELD THAT: - The Court held that Glaxo Smith Kline does not establish an absolute bar on entertaining writs under Article 226 where alternative statutory remedy exists. Consistent with precedents, the High Court must exercise self imposed restraint and generally defer to the statutory remedy, but may still entertain a writ petition when exceptional circumstances exist - such as unfairness, unreasonableness, perversity, lack of jurisdiction, or violation of natural justice. The writ court must record reasons if it refuses to exercise jurisdiction. Applying these parameters, the petitioner's allegations that the Assessing Officer acted unfairly, violated principles of natural justice and failed to consider documentary evidence rendered the writ maintainable despite the statutory time bar under Section 31. [Paras 11, 12]

The writ petition was maintainable and the Single Judge's observation of an absolute bar was incorrect.

Purchasing dealer not required to prove that selling dealer actually paid tax - Whether the purchasing dealer must prove that the selling dealer had in fact paid tax on the earlier sale. - HELD THAT: - Relying on earlier Division Bench authorities, the Court held that a purchasing dealer is not obliged to prove that the selling dealer actually paid tax; it is sufficient to show that the earlier sales were taxable and that tax was legally payable by the sellers. Given this settled legal position, the Assessing Officer's premise that the purchaser must demonstrate payment by the seller was not tenable. [Paras 14]

The appellant was not required to prove actual payment of tax by the selling dealer.

Assessment revision unsustainable for failure of Assessing Officer to verify seller's existence and to consider produced documents - Whether the revision of assessment was justified where the Assessing Officer did not make enquiries or obtain any report to support the finding that the selling dealer was non existent. - HELD THAT: - The Court found that the appellant produced renewal of the selling dealer's registration, bills and payment details, and the Assessing Officer accepted receipt of those documents but nevertheless maintained that the seller's whereabouts were unknown without producing any supporting enquiry report or other material. Precedents show that where registration certificates were in force and the Department fails to examine or identify sellers, revision on the basis of alleged bogus bills is unsustainable. On the facts, the Assessing Officer's failure to make requisite enquiries rendered the revision improper. [Paras 13, 15]

The revision of assessment was unsustainable and set aside.

Final Conclusion: Writ Appeal allowed. The impugned order dismissing the writ petition is set aside; the Writ Petition is allowed and the revision of assessment dated 02.01.2006 is quashed.

Quashing of tax demand notice - settlement of tax arrears by instalments - undertaking made before court - representation for installment payment - recovery action for non-payment

Quashing of tax demand notice - settlement of tax arrears by instalments - undertaking made before court - recovery action for non-payment - Writ petitions seeking quashing of the notice and the assessment order were disposed of by permitting settlement of the tax arrears by instalments in terms of the petitioner's representation and undertaking. - HELD THAT: - The court recorded that the petitioner had submitted a representation dated 19.11.2014, acknowledged by the respondents, proposing to clear the entire tax arrears by paying ten lakh rupees per month for 17 months due to financial difficulties. On the basis of the representation and the petitioner's undertaking before the court, and noting the petitioner's continuing financial constraints, the court directed that the arrears be paid in 17 monthly instalments of Rs. 10,00,000 each, with the first instalment to commence on 20 September 2021 and subsequent instalments payable on or before the 20th day of each calendar month. The court made clear that in the event of non-payment, the respondents were at liberty to initiate recovery proceedings in accordance with the procedures prescribed by law. The writ petitions were disposed of on these terms and not by adjudicating the merits of the underlying demand. [Paras 2, 3]

Petitions disposed by directing payment of arrears in 17 instalments of Rs. 10,00,000 each commencing 20 September 2021, with non-payment permitting recovery action as per law.

Final Conclusion: Writ petitions disposed of by allowing the petitioner to pay the tax arrears in 17 monthly instalments of Rs. 10,00,000 each beginning 20 September 2021; respondents may initiate recovery proceedings if instalments are not paid as directed.

Speaking order - manufacturing process - Industrial Policy benefits/exemption - in accordance with law - remand for de novo consideration - consequential benefits

Speaking order - in accordance with law - Validity of the order dated 08.03.2017 passed by the Additional Chief Secretary in compliance with the Court's earlier direction to pass a speaking order. - HELD THAT: - The Court examined the order dated 08.03.2017 against the mandate contained in the earlier order dated 09.12.2016 which required disposal of the petitioner's representation by a speaking order 'in accordance with law'. The impugned order records that various documents were perused and that the Additional Chief Secretary agreed with the Taxation Department's view, but fails to state what the material contained or to engage with whether the petitioner's manufacturing procedure satisfies the legal ingredients of a manufacturing process. For these reasons the requirement of the earlier order to pass a reasoned speaking order was not complied with and the impugned order cannot stand. [Paras 5, 6]

Order dated 08.03.2017 set aside for failure to pass a speaking order in accordance with law.

Manufacturing process - Industrial Policy benefits/exemption - remand for de novo consideration - consequential benefits - Procedure to be followed on remand for determining whether the petitioner's process of making fireclay amounts to manufacture and entitlement to benefits under the Industrial Policy of 2008. - HELD THAT: - The matter is remanded for de novo consideration so that the authority may first satisfy itself as to the ingredients of a manufacturing process under the law and then examine whether the procedure adopted by the petitioner for producing fireclay conforms to those ingredients. The authority may refer to relevant statutory provisions, seek advice from other departments including the Taxation Department, and consider submissions and propositions of law put forward by the petitioner. If the Additional Chief Secretary post is not available, any appropriate officer discharging those duties may undertake the exercise. The remand is for fresh adjudication of the entitlement; consequential benefits, if otherwise legally available, shall follow. [Paras 7, 8, 9, 10, 11]

Matter remanded for de novo consideration to determine whether the process constitutes manufacture and whether the petitioner is entitled to Industrial Policy benefits; authority may take assistance and must pass a speaking order within one month, granting consequential benefits if entitled.

Final Conclusion: The impugned order dated 08.03.2017 is set aside for failure to comply with the earlier direction to pass a speaking order; the matter is remanded for fresh, de novo consideration to determine whether the petitioner's process amounts to manufacture for purposes of entitlement under the Industrial Policy of 2008, with the authority to pass a reasoned order within one month and to grant any consequential benefits if otherwise entitled.

Interim measures by Court under Section 9 - interim measures ordered by arbitral tribunal under Section 17 - meaning of 'entertain' in Section 9(3) - efficacy of remedy under Section 17 - negative Kompetenz-Kompetenz / priority of arbitral tribunal

Meaning of 'entertain' in Section 9(3) - The scope and meaning of the expression 'entertain' in Section 9(3) of the Arbitration and Conciliation Act, 1996. - HELD THAT: - The Court held that 'entertain' means to take an application up for consideration and apply the Court's mind to it - i.e., admit to consideration and proceed to consider on merits up to pronouncement. The process of consideration may continue until pronouncement, but the determinative question is whether the Court had taken the application up for consideration and applied its mind before constitution of the Arbitral Tribunal. If so, the application is treated as having been 'entertained' for the purposes of Section 9(3). The Court surveyed earlier authorities (including decisions interpreting 'entertain' as 'admit to consideration' or 'adjudicate upon') and concluded that once the Court has applied its mind and taken the matter up for consideration, it may proceed to adjudicate even if the tribunal is subsequently constituted. [Paras 65, 93, 95]

'entertain' in Section 9(3) means admitting an application to consideration (applying the Court's mind); if this occurred before constitution of the tribunal, the bar in Section 9(3) does not prevent the Court from deciding the application.

Interim measures by Court under Section 9 - interim measures ordered by arbitral tribunal under Section 17 - efficacy of remedy under Section 17 - Whether the Court may entertain or must examine efficacy of the remedy under Section 17 before passing orders under Section 9(1) once an Arbitral Tribunal has been constituted. - HELD THAT: - The Court explained that Section 9(3) contains a two limb prescription: (i) ordinarily the Court shall not entertain a Section 9(1) application once an Arbitral Tribunal is constituted; and (ii) an exception exists where the Court finds circumstances rendering the remedy under Section 17 inefficacious. The legislative amendments of 2015 conferred on tribunals powers equivalent to courts and created a deeming provision making tribunal orders under Section 17 enforceable as court orders, thereby discouraging parallel court applications. Consequently, where a Section 9 application has not been taken up for consideration before constitution of the tribunal, the Court must first consider whether the Section 17 remedy is efficacious; only if it is not, may the Court entertain the Section 9 application. Conversely, where the Section 9 application had already been entertained and substantially considered (hearings concluded and judgment reserved) prior to constitution of the tribunal, the Court need not re examine efficacy of the Section 17 remedy and may proceed to pronounce its order. The Court also recognised exceptions where a tribunal may be temporarily unavailable or otherwise unable to grant urgent relief, in which case the Court may act under Section 9 despite constitution of the tribunal. [Paras 66, 68, 100, 107, 108]

Once an Arbitral Tribunal is constituted, the Court will not entertain a fresh Section 9(1) application unless the remedy under Section 17 is found to be inefficacious; however, if the Court had already entertained and taken up the Section 9 application for consideration before constitution of the tribunal, it need not examine efficacy of Section 17 and may decide the application.

Negative Kompetenz-Kompetenz / priority of arbitral tribunal - The relationship between the Court's power under Section 9 and the tribunal's powers under Section 17 in light of Kompetenz Kompetenz and the 2015 amendments. - HELD THAT: - The Court acknowledged the legislative intent to prioritise the Arbitral Tribunal (negative Kompetenz Kompetenz) and to minimize judicial intervention in interim relief matters once a tribunal is constituted, referencing the 2015 Amendment and relevant reports and precedents. It held that this prioritisation is partial and subject to statutory exception: courts retain power to grant interim measures where the tribunal's remedy is inefficacious, and courts may act where tribunals are nonfunctional or temporarily unavailable. The Court emphasised that the bar in Section 9(3) operates prospectively after constitution of the tribunal and does not retrospectively divest courts of proceedings already entertained. [Paras 67, 101, 103, 104, 107]

The 2015 amendments strengthen the priority of tribunals to grant interim relief, but do not oust court jurisdiction entirely; the court's power remains exercisable where the tribunal's remedy is inefficacious or where the Section 9 application was already entertained prior to constitution.

Final Conclusion: Appeal allowed in part: clarified that 'entertain' in Section 9(3) means taking an application up for consideration (applying the Court's mind); where a Section 9 application was entertained and considered before constitution of the Arbitral Tribunal (as in this case), the Commercial Court need not reassess the efficacy of Section 17 and may proceed to pronounce its order; otherwise, after constitution of the tribunal, the Court should not entertain fresh Section 9 applications unless the remedy under Section 17 is found inefficacious.

Offence under Section 138 of the Negotiable Instruments Act - discharge application - prima facie case - recall of summoning order - summary trial under Section 260 CrPC - Adalat Prasad principle

Offence under Section 138 of the Negotiable Instruments Act - discharge application - prima facie case - Whether the High Court should interfere with the trial court's order rejecting the applicant's discharge application in a complaint under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court examined the stage of proceedings and held that at the stage when a discharge application is considered the court is required to view only whether a prima facie case is made out from the material on record. Disputed factual contentions, including the contention regarding presentation of the cheque within the prescribed period, are matters for trial and cannot be resolved on the limited exercise of considering discharge. Given that the magistrate considered the material and concluded that disputed facts should be examined at trial, there is no basis for upsetting the order refusing discharge at this interlocutory stage.

Application under Section 482 CrPC challenging the rejection of discharge application is dismissed; impugned order refusing discharge is not interfered with.

Recall of summoning order - Adalat Prasad principle - summary trial under Section 260 CrPC - Whether the summoning order can be recalled or the dispute on cheque presentation should be decided at the discharge stage. - HELD THAT: - Relying on the principle in Adalat Prasad, the Court observed that the propriety of the summoning order and factual disputes as to presentation and dishonour of the cheque are not ordinarily susceptible to final adjudication at the interlocutory discharge stage. The Court accepted the position that the offence under Section 138 may be tried summarily under the procedural scheme invoked, but emphasised that recall of the summoning order and resolution of contested facts are matters for trial. Consequently, the trial court's approach of leaving disputed facts for trial was regarded as legally appropriate.

Contentions as to non-presentation or delay in presentation and the recall of the summoning order are to be raised and decided at trial; no interference with the summoning/refusal to discharge.

Final Conclusion: The revision under Section 482 CrPC is dismissed; the High Court declines to interfere with the magistrate's order rejecting discharge and leaves disputed factual issues, including presentation of the cheque and related contentions, to be adjudicated during trial.

Quashing of criminal proceedings under Section 482 of the Code of Criminal Procedure - Distinction between breach of contract and the offences of cheating and criminal breach of trust - Mens rea requirement for offence of cheating - Abuse of process of court - High Court's inherent powers to secure ends of justice

Distinction between breach of contract and the offences of cheating and criminal breach of trust - Mens rea requirement for offence of cheating - Abuse of process of court - Whether the criminal proceedings under Sections 420, 406 and 120B IPC against the petitioners disclose offences or are merely a civil dispute and therefore liable to be quashed under Section 482 CrPC. - HELD THAT: - The Court found that the core dispute arises from sale of goods and non-payment of part of the agreed price, with the petitioners admitting outstanding dues and having made a part payment. Applying the settled principle that mere breach of contract does not, without evidence of fraudulent or dishonest intention at the time of inducement, constitute cheating or criminal breach of trust, the Court held there is no material showing the requisite mens rea at the inception of the transaction. The petitioner's subsequent failure to pay cannot, by itself, be taken to establish a culpable intention from the outset. In those circumstances the continuation of criminal proceedings would amount to abuse of the process of the court and a grave miscarriage of justice. The High Court, exercising its inherent power under Section 482 CrPC to prevent abuse of process and to secure the ends of justice, is therefore entitled to quash the criminal proceeding and leave the complainant free to pursue civil remedies for recovery of money subject to limitation. [Paras 16, 17, 21, 22, 23]

Criminal proceedings being G.R. Case No.1524 of 2015 (Hare Street P.S. Case No.397 dated 3rd July, 2015) under Sections 420, 406 and 120B IPC are quashed under Section 482 CrPC; liberty granted to the complainant to pursue civil remedy for recovery of money.

Final Conclusion: The High Court quashed the criminal prosecution on the ground that the allegations disclose, at best, a civil dispute arising from breach of contract without requisite fraudulent intention at the inception; the petitioner is protected from further criminal proceedings while the complainant remains free to seek recovery in civil court subject to limitation.